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NOTE PURCHASE AGREEMENT
dated as of April 27, 1999
by and between
BROOKDALE LIVING COMMUNITIES, INC.
and
HEALTHCARE PARTNERS
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TABLE OF CONTENTS
NOTE PURCHASE AGREEMENT
Section Page
1. DEFINITIONS ..........................................................1
2. PURCHASE OF NOTE .....................................................9
2.1 Purchase of Note ............................................9
2.2 Use of Proceeds .............................................9
2.3 Closing .....................................................9
2.4 Indemnity ...................................................9
2.5 Access .....................................................10
3. PURCHASER'S REPRESENTATIONS AND WARRANTIES ..........................11
3.1 Investment Intention .......................................11
3.2 Accredited Investor ........................................11
3.3 Partnership Existence ......................................11
3.4 Partnership Power; Authorization;
Enforceable Obligations .................................11
3.5 Receipt of Information .....................................11
4. COMPANY'S REPRESENTATIONS AND WARRANTIES ............................12
4.1 Authorized and Outstanding Shares of
Capital Stock ............................................12
4.2 Authorization and Issuance of Note .........................12
4.3 Securities Laws ............................................12
4.4 Existence; Compliance with Law .............................13
4.5 Subsidiaries ...............................................13
4.6 Corporate Power; Authorization;
Enforceable Obligations ..................................13
4.7 Financial Statements .......................................14
4.8 Ownership of Property ......................................14
4.9 Material Contracts; Indebtedness ...........................15
4.10 Environmental Protection ...................................15
4.11 Labor Matters ..............................................16
4.12 Other Ventures .............................................17
4.13 Taxes ......................................................17
4.14 No Litigation ..............................................17
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TABLE OF CONTENTS
NOTE PURCHASE AGREEMENT
4.15 Brokers ....................................................18
4.16 Employment and Labor Agreements ............................18
4.17 Patents, Trademarks, Copyrights and Licenses ...............18
4.18 No Material Adverse Effect .................................18
4.19 ERISA ......................................................18
4.20 SEC Documents ..............................................20
4.21 Ordinary Course of Business ................................21
4.22 Insurance ..................................................21
4.23 Accounts Receivable ........................................21
4.24 Minute Books ...............................................21
4.25 Year 2000 Compliance .......................................21
4.26 Full Disclosure ............................................22
4.27 No Stockholder Vote Requirement ............................22
4.28 Delaware Section 203 .......................................22
5. PRE-CLOSING COVENANTS ...............................................22
5.1 Maintenance of Existence and Conduct of Business ...........22
5.2 Access .....................................................22
5.3 Acquisitions and Investments ...............................23
5.4 Sales of Assets; Liquidation ...............................23
5.5 Material Contracts .........................................23
5.6 Securities .................................................23
5.7 Transactions with Affiliates ...............................23
5.8 Indebtedness ...............................................23
5.9 Mergers and Subsidiaries ...................................23
5.10 Management Compensation ....................................24
5.11 Amendments to Certificate of Incorporation
and By-Laws ..............................................24
5.12 Compliance With Covenants .................................24
5.13 Satisfaction of Closing Conditions .........................24
6. CLOSING CONDITIONS ..................................................24
6.1 Conditions to Obligation of Purchaser to Closing ...........24
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TABLE OF CONTENTS
NOTE PURCHASE AGREEMENT
6.2 Conditions to Obligation of Company to Close ...............25
7. TERMINATION .........................................................25
7.1 Termination ................................................25
7.2 Effect of Termination ......................................25
8. MISCELLANEOUS .......................................................26
8.1 Complete Agreement; Modification of Agreement;
Sale of Interest .........................................26
8.2 Fees and Expenses ..........................................26
8.3 No Waiver by Purchaser .....................................27
8.4 Remedies ...................................................28
8.5 Waiver of Jury Trial .......................................28
8.6 Severability ...............................................28
8.7 Binding Effect; Benefits ...................................28
8.8 Conflict of Terms ..........................................28
8.9 Governing Law ..............................................28
8.10 Notices ....................................................28
8.11 Survival ...................................................30
8.12 Section and Other Headings .................................30
8.13 Counterparts ...............................................30
8.14 Publicity ..................................................30
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TABLE OF CONTENTS
NOTE PURCHASE AGREEMENT
SCHEDULES
Schedule 1 - Permitted Liens
Schedule 4.1 - Stock, Warrants and Preemptive Rights
Schedule 4.4 - Material Licenses
Schedule 4.5 - Subsidiaries
Schedule 4.6 - Governmental Consents
Schedule 4.7 - Financial Statements; Other Obligations;
Schedule 4.8 - Ownership and Properties
Schedule 4.9 - Material Contracts and Indebtedness
Schedule 4.10 - Environmental Matters
Schedule 4.11 - Labor and Employment Matters
Schedule 4.13 - Taxes
Schedule 4.14 - Litigation
Schedule 4.15 - Brokers
Schedule 4.16 - Employment Contracts
Schedule 4.17 - Patents, Trademarks, Etc.
Schedule 4.19 - ERISA
Schedule 4.20 - SEC Documents
Schedule 4.22 - Insurance
EXHIBITS
Exhibit A Indenture
Exhibit B Registration Rights Agreement
Exhibit C Stockholders Agreement
Exhibit D Supplemental Indenture
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NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT (this "Agreement"), dated as of April
27, 1999, by and between Brookdale Living Communities, Inc., a Delaware
corporation ("Company"), and Healthcare Partners ("Purchaser"), a general
partnership organized under the laws of Bermuda.
W I T N E S S E T H :
WHEREAS, Company has agreed to issue and sell to Purchaser,
and Purchaser has agreed to purchase or caused to be purchased from Company,
upon the terms and conditions hereinafter provided, one or more 5 1/2%
convertible subordinated promissory notes in the aggregate principal amount of
$100,000,000, and due April 2009 which are initially convertible into 5,479,452
shares of Common Stock (as defined herein) of Company (such notes being referred
to herein collectively as the "Note").
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties and covenants hereinafter contained, it is
agreed as follows:
1. DEFINITIONS
-----------
"Affiliate" shall mean, with respect to any Person, (i) each
Person that, directly or indirectly, owns or controls, whether beneficially, or
as a trustee, guardian or other fiduciary, 5% or more of the Stock having
ordinary voting power in the election of directors of such Person, (ii) each
Person that controls, is controlled by or is under common control with such
Person or any Affiliate of such Person, (iii) each of such Person's officers,
directors, joint venturers and partners, (iv) any trust or beneficiary of a
trust of which such Person is the sole trustee or (v) any lineal descendants,
ancestors, spouse or former spouses (as part of a marital dissolution) of such
Person (or any trust for the benefit of such Person). For the purpose of this
definition, (i) "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise and (ii) limited partners of one or more of Purchaser's Affiliates and
such limited partners' respective officers, directors and joint venture partners
are specifically excluded (unless such Person is otherwise an "Affiliate" in
some other capacity) from the definition of "Affiliate" unless otherwise
specifically indicated.
"Agreement" shall mean this Note Purchase Agreement including
all amendments, modifications and supplements hereto and any appendices,
exhibits and schedules hereto or thereto, and shall refer to the Agreement as
the same may be in effect at the time such reference becomes operative.
"Balance Sheets" shall have the meaning set forth in Section
4.7(a) hereof.
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of New York, in the State of Illinois or in the City of Chicago, Illinois.
"Capital Lease" shall mean, with respect to any Person, any
lease of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, either would be required to be classified and
accounted for as a capital lease on a balance sheet of such Person or otherwise
be disclosed as a capital lease in a note to such balance sheet, other than, in
the case of Company or a Subsidiary of Company, any such lease under which
Company or such Subsidiary is the lessor.
"Capital Lease Obligation" shall mean, with respect to any
Capital Lease, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease or otherwise be disclosed in a note to such balance sheet.
"Certificate of Incorporation" shall mean the Restated
Certificate of Incorporation of Company.
"Charges" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental (including, without limitation,
PBGC) taxes at the time due and payable, levies, assessments, charges, liens,
claims or encumbrances upon or relating to (i) Company's or any of its
Subsidiaries' employees, payroll, income or gross receipts, (ii) Company's or
any of its Subsidiaries' ownership or use of any of its assets, or (iii) any
other aspect of Company's or any of the Subsidiaries' business.
"Closing" shall have the meaning set forth in Section 2.3
hereof.
"Closing Date" shall have the meaning set forth in Section 2.3
hereof.
"COBRA" shall have the meaning set forth in Section 4.19(m)
hereof.
"Common Stock" shall mean the common stock, par value $0.01
per share, of Company.
"Company SEC Documents" shall have the meaning set forth in
Section 4.20 hereof.
"Environmental Laws" shall mean all federal, state and local
laws, statutes, ordinances and regulations, now or hereafter in effect, and in
each case as amended or supplemented from time to time, and any judicial or
administrative interpretation thereof, including, without limitation, any
applicable judicial or administrative order, consent decree or judgment,
relative to the applicable Real Estate, relating to the regulation and
protection of human health, safety, the environment and natural resources
(including, without limitation, ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation). Environmental Laws include but are not limited to the Comprehensive
Environmental
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Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. ss.
9601 et seq.) ("CERCLA"); the Hazardous Material Transportation Act, as amended
(49 U.S.C. ss. 1801 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. ss. 136 et seq.); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. ss. 6901 et seq.) ("RCRA");
the Toxic Substance Control Act, as amended (15 U.S.C. ss. 2601 et seq.); the
Clean Air Act, as amended (42 U.S.C. ss. 740 et seq.); the Federal Water
Pollution Control Act, as amended (33 U.S.C. ss. 1251 et seq.); the Occupational
Safety and Health Act, as amended (29 U.S.C. ss. 651 et seq.) ("OSHA"); and the
Safe Drinking Water Act, as amended (42 U.S.C. ss. 300f et seq.), and any and
all regulations promulgated thereunder, and all analogous state and local
counterparts or equivalents and any transfer of ownership notification or
approval statutes.
"Environmental Liabilities and Costs" shall mean all
liabilities, obligations, responsibilities, remedial actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim,
suit, action or demand by any person or entity, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute or
common law (including, without limitation, any thereof arising under any
Environmental Law, permit, order or agreement with any Governmental Authority)
and which relate to any health or safety condition regulated under any
Environmental Law or in connection with any other environmental matter or Spill
or the presence of a hazardous substance or threatened Spill of any Hazardous
Substance.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974 (or any successor legislation thereto), as amended from time to time and
any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to Company, any
trade or business (whether or not incorporated) under common control with
Company and which, together with Company, are treated as a single employer
within the meaning of Sections 414(b), (c), (m) or (o) of the IRC, excluding
Purchaser and each other person which would not be an ERISA Affiliate if
Purchaser did not own any issued and outstanding shares of Stock of Company.
"Event of Default" shall have the meaning ascribed to it in
the Indenture.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and all rules and regulations promulgated thereunder.
"Financials" shall mean the financial statements referred to
in Section 4.7(a) hereof.
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"Fiscal Year" shall mean the twelve month period ending
December 31. Subsequent changes of the fiscal year of Company shall not change
the term "Fiscal Year," unless the Required Holders shall consent in writing to
such changes.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, and any agency, department,
board, commission or other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any Indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) to indemnify the owner of such
primary obligation against loss in respect thereof.
"Hazardous Substance" shall have the meaning set forth in
Section 4.10(a) hereof.
"Holder" shall have the meaning ascribed to it in the
Indenture.
"Indebtedness" of any Person shall mean (i) all indebtedness
of such Person for borrowed money or for the deferred purchase price of property
or services (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured, but not including obligations to trade
creditors incurred in the ordinary course of business), (ii) all obligations
evidenced by notes, bonds, debentures or similar instruments, (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreements with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (iv)
all Capital Lease Obligations, (v) all Guaranteed Indebtedness, (vi) all
Indebtedness referred to in clause (i), (ii), (iii), (iv) or (v) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness and (vii) all liabilities under Title IV of ERISA.
4
"Indemnified Party" shall have the meaning set forth in
Section 2.4(b) hereof.
"Indenture" shall mean that Indenture to be dated as of the
Closing Date, by and between Brookdale Living Communities, Inc. and State Street
Bank and Trust Company, as Trustee, substantially in the form attached hereto as
Exhibit A.
"IRC" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any
successor thereto.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest as to assets owned by the relevant Person under the Uniform
Commercial Code or comparable law of any jurisdiction).
"Material Adverse Effect" shall mean any event or
circumstance, condition, fact, effect, or other matter which has had or could
reasonably be expected to have a material adverse effect (i) on the business,
assets, results of operations, prospects or financial or other condition of
Company and its Subsidiaries, taken as a whole; (ii) Company's ability to pay
the Obligations in accordance with the terms hereof; or (iii) the ability of
Company and its Subsidiaries to perform on a timely basis any material
obligation under this Agreement or to consummate the transactions contemplated
hereby.
"Material Contracts" means (i) all of Company's and its
Subsidiaries' contracts, agreements, leases or other instruments to which
Company or any of its Subsidiaries is a party or by which Company, its
Subsidiaries or its properties are bound, which involve payments by or to
Company or its Subsidiaries of more than $100,000 or which extend for a term of
more than a year from the date hereof, excluding all residency agreements with a
term of more than one (1) year to which Company or any of its Subsidiaries is a
party, (ii) all of Company's and its Subsidiaries' loan agreements, bank lines
of credit agreements, indentures, mortgages, deeds of trust, pledge and security
agreements, factoring agreements, conditional sales contracts, letters of credit
or other debt instruments, (iii) all material operating or capital leases for
equipment or property to which Company or any of its Subsidiaries is a party
(including without limitation any Sale leaseback or similar arrangements), (iv)
all non-competition and similar agreements to which Company is a party, (v) all
contracts for the employment of any officer or employee, (vi) all consulting
agreements, (vii) any guarantees by Company or any of its Subsidiaries, (viii)
all distributor and sales agency agreements and (ix) all other material
contracts not made in the ordinary course of business.
5
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA, and to which Company, any of its
Subsidiaries or any ERISA Affiliate is making, is obligated to make, has made or
been obligated to make, contributions on behalf of participants who are or were
employed by any of them.
"Note" shall mean the 5 1/2% convertible subordinated
promissory note of Company in the principal amount of $100,000,000, due April
2009, to be issued pursuant to the Indenture and the Supplemental Indenture to
Purchaser hereunder, substantially in the form of Exhibit A to the Supplemental
Indenture.
"Obligations" shall mean all amounts owing by Company to
Purchaser and any of its assignees pursuant hereto or the Note, including,
without limitation, all principal, interest, fees, expenses, attorneys' fees and
any other sum chargeable to Company under any of the Transaction Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"Pension Plan" shall have the meaning set forth in Section
4.19(a) hereof.
"Permitted Indebtedness" means, with respect to Company, (i)
taxes or assessments or other governmental charges or levies, either not yet due
and payable or to the extent that nonpayment thereof is permitted by the terms
of this Agreement; (ii) obligations under workmen's compensation, unemployment
insurance, social security or public liability laws or similar legislation;
(iii) bids, tenders, contracts (other than contracts for the payment of money)
or leases to which Company or any of its Subsidiaries is a party as lessee made
in the ordinary course of business; (iv) public or statutory obligations of
Company or any of its Subsidiaries; (v) all deferred taxes and (vi) all unfunded
pension fund and other employee benefit plan obligations and liabilities but
only to the extent permitted to remain unfunded under applicable law.
"Permitted Liens" shall mean the following: (i) Liens for
taxes or assessments or other governmental charges or levies, either not yet due
and payable or to the extent that nonpayment thereof is permitted by the terms
of this Agreement; (ii) pledges or deposits securing obligations under workmen's
compensation, unemployment insurance, social security or public liability laws
or similar legislation; (iii) pledges or deposits securing bids, tenders,
contracts (other than contracts for the payment of money) or leases to which
Company or any of its Subsidiaries is a party as lessee made in the ordinary
course of business; (iv) Liens arising solely by virtue of any statutory or
common law provision relating to bankers' liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; (v) workers, mechanics, suppliers, carriers,
warehousemen's or other similar liens arising in the ordinary course of business
and securing indebtedness, not yet due and payable; (vi) deposits securing or in
lieu of surety, appeal or customs bonds in proceedings to which Company or any
of its Subsidiaries is a party; (vii) Liens arising in the ordinary course of
business in connection with obligations that are not
6
overdue or which are being contested in good faith and by appropriate
proceedings, including, but not limited to, Liens under bid, performance and
other surety bonds, supersedeas and appeal bonds, landlord Liens arising under
leases of real property, Liens on advance or progress payments received from
customers under contracts for the sale, lease or license of goods, software or
services and upon the products being sold or licensed, in each case securing
performance of the underlying contract or the repayment of such advances in the
event final acceptance of performance under such contracts does not occur, and
Liens upon funds collected temporarily from others pending payment or remittance
on their behalf; (viii) zoning restrictions, easements, licenses, or other
restrictions on the use of real property or other minor irregularities in title
(including leasehold title) thereto and other matters of record, so long as the
same do not materially impair the use, value, or marketability of such real
property, leases or leasehold estates; and (ix) Liens existing on the date
hereof and described on Schedule 1 hereto.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
"Plan" shall have the meaning set forth in Section 4.19(a)
hereof.
"Purchaser" shall have the meaning set forth in the first
paragraph of this Agreement.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement by and between Company and Purchaser, substantially in the form
attached hereto as Exhibit B, as such agreement may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof.
"Retiree Welfare Plan" shall refer to any Welfare Plan
providing for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant's termination of employment,
other than continuation coverage provided pursuant to Section 4980B of the IRC
and at the sole expense of the participant or the beneficiary of the
participant.
"SEC" shall mean the U.S. Securities and Exchange Commission,
or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.
"Spill" shall have the meaning set forth in Section 4.10(a)
hereof.
"Stock" shall mean all shares, options, warrants, general or
limited partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership,
7
limited liability company or equivalent entity whether voting or nonvoting,
including, without limitation, common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the SEC under the Exchange Act).
"Stockholders Agreement" shall mean the Stockholders Agreement
by and among Company, Purchaser, The Prime Group, Inc. and certain Affiliates of
The Prime Group, Inc., substantially in the form attached hereto as Exhibit C,
as such agreement may be amended, supplemented or otherwise modified from time
to time in accordance with the terms thereof.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, and (b) any partnership or other entity in which such Person and/or
one or more Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution) of more than
50%.
"Supplemental Indenture" shall mean the Supplemental
Indenture, to be dated as of the Closing Date, by and between Brookdale Living
Communities, Inc. and State Street Bank and Trust Company, as Trustee, providing
for the issuance of the Notes, substantially in the form attached hereto as
Exhibit D.
"System" shall have the meaning set forth in Section 4.25(a)
hereof.
"Third Party Action" shall have the meaning set forth in
Section 2.4(b) hereof.
"Transaction Documents" shall mean this Agreement, the
Indenture, the Supplemental Indenture, the Note, the Registration Rights
Agreement and the Stockholders Agreement.
"Welfare Plan" shall mean any welfare plan, as defined in
Section 3(1) of ERISA, which is maintained or contributed to by Company, any of
its Subsidiaries or any ERISA Affiliate.
"Withdrawal Liability" means, at any time, the aggregate
amount of the liabilities, if any, pursuant to Section 4201 of ERISA, and any
increase in contributions pursuant to Section 4243 of ERISA with respect to all
Multiemployer Plans.
"Year 2000 Compliant" shall have the meaning set forth in
Section 4.25(a) hereof.
8
References to this "Agreement" shall mean this Purchase
Agreement, including all amendments, modifications and supplements and any
exhibits or schedules to any of the foregoing, and shall refer to the Agreement
as the same may be in effect at the time such reference becomes operative.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole, including the Exhibits and
Schedules hereto, as the same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or clause contained
in this Agreement. Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter.
2. PURCHASE OF NOTE
----------------
2.1 Purchase of Note. Subject to the terms and conditions set
forth in this Agreement, Purchaser concurrently herewith is purchasing from
Company, and Company is issuing and selling to Purchaser the Note for a purchase
price of $100,000,000. The Note will be issued pursuant to, and will contain the
terms set forth in, the Indenture and the Supplemental Indenture and will be
issued to Purchaser in the principal amount of $100,000,000.
2.2 Use of Proceeds. Company shall use the proceeds of the
purchase price hereunder for the repayment of indebtedness and for working
capital and other general corporate purposes.
2.3 Closing. The closing of the purchase and sale of the Note
(the "Closing") shall take place as soon as practicable following Purchaser's
receipt of the requisite funds from its investors, but in no event later than
May 14, 1999, or such other date and time as shall be mutually agreed to by the
parties hereto (the "Closing Date") at the offices of Weil, Gotshal & ▇▇▇▇▇▇
LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, or such other place as shall be
mutually agreed to by the parties hereto. On the Closing Date, Company will
issue and deliver to Purchaser the Note to be purchased by Purchaser against
delivery by Purchaser of the purchase price therefor by wire transfer of funds
to the account of Company.
2.4 Indemnity. (a) Company shall indemnify and hold Purchaser
and each of its officers, directors and Affiliates harmless from and against any
and all suits, actions, proceedings, claims, damages, losses, liabilities and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements, including those incurred upon
9
any appeal) which may be instituted or asserted against or incurred by Purchaser
or such other indemnified person relating to or arising out of any untrue
representation, breach of warranty or failure to perform any covenants or
agreement by Company contained herein or in any Transaction Document or
otherwise relating to or arising out of the transactions contemplated hereby.
(b) Any person entitled to indemnification hereunder (an
"Indemnified Party") shall give prompt written notice to Company of the
commencement or assertion of any action, proceeding, demand or claim by a third
party (collectively, a "Third-party Action") in respect of which such
Indemnified Party shall seek indemnification hereunder. Any failure so to notify
Company shall not relieve Company from any liability that it may have to such
Indemnified Party under this Section 2.4 except to the extent Company is
materially prejudiced thereby. Company shall have the right to assume control of
the defense of, settle, or otherwise dispose of such Third-party Action on such
terms as it deems appropriate; provided, however, that (i) the Indemnified Party
shall be entitled, at his, her or its own expense, to participate in the defense
of such Third-party Action; (ii) unless the Indemnified Party is unconditionally
released, Company shall obtain the prior written approval of the Indemnified
Party before entering into or making any settlement, compromise, admission or
acknowledgment of the validity of such Third-party Action or any liability in
respect thereof, which written approval will not be unreasonably withheld; and
(iii) Company shall not be entitled to control (but shall be entitled to
participate at its own expense in the defense of), and the Indemnified Party
shall be entitled to have sole control over, the defense or settlement,
compromise, admission or acknowledgment of any Third-party Action (x) as to
which Company fails to assume the defense within a reasonable length of time or
(y) to the extent the Third-party Action seeks an order, injunction or other
equitable relief against the Indemnified Party which, if successful, would
materially adversely affect the business, operations, assets or financial
condition of the Indemnified Party; provided, however, that the Company shall
have the right to control its own defense to the extent it is a co-defendant in
any Third-party Action; provided, further, that the Indemnified Party shall make
no settlement, compromise, admission or acknowledgment which would give rise to
liability on the part of Company without the prior written consent of Company,
which consent shall not be unreasonably withheld.
The parties hereto shall extend reasonable cooperation in
connection with the defense of any Third-party Action pursuant to this Section
2.4 and, in connection therewith, shall furnish such records, information and
testimony and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be reasonably requested. Notwithstanding Section 8.8 hereof,
to the extent any provision contained in this Section 2.4 is in conflict with,
or inconsistent with, any indemnification provision in the Registration Rights
Agreement, the provision contained in the Registration Rights Agreement shall
govern and control.
2.5 Access. So long as Purchaser has any representative on the
Board of Directors of Company, Purchaser and any of its officers, employees
and/or agents shall have the right during normal business hours, to visit and
inspect the properties and
10
facilities of Company and its Subsidiaries and to inspect, audit and make
extracts from all of Company's and its Subsidiaries' records, files, corporate
books and books of account and to discuss the affairs, finances and accounts of
Company and its Subsidiaries with the principal officers of Company, all at such
reasonable times, upon reasonable notice and as often as Purchaser may
reasonably request. Company shall deliver to Purchaser any document or
instrument reasonably necessary, as Purchaser may request, for Purchaser to
obtain records from any service bureau maintaining records for Company or its
Subsidiaries. Company shall instruct its and its Subsidiaries' banking and other
financial institutions to make available to Purchaser such information and
records as Purchaser may reasonably request.
3. PURCHASER'S REPRESENTATIONS AND WARRANTIES
------------------------------------------
Purchaser makes the following representations and warranties
to Company as of the date hereof (and as of the Closing Date):
3.1 Investment Intention. Purchaser is purchasing the Note for
its own account, for investment purposes and not with a view to the resale or
distribution thereof. Purchaser will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of the Note or
any shares of Common Stock acquired by it upon the conversion of all or any part
of the Note (or solicit any offers to buy, purchase, or otherwise acquire any of
the Note), except in compliance with the Securities Act.
3.2 Accredited Investor. Purchaser is an "accredited investor"
(as that term is defined in Rule 501 of Regulation D under the Securities Act)
and by reason of its business and financial experience, it has such knowledge,
sophistication and experience in business and financial matters as to be capable
of evaluating the merits and risks of its investment in the Note, is able to
bear the economic risk of such investment and is able to afford a complete loss
of such investment.
3.3 Partnership Existence. Purchaser is a general partnership
duly organized, validly existing and in good standing under the laws of Bermuda.
3.4 Partnership Power; Authorization; Enforceable Obligations.
The execution, delivery and performance by Purchaser of this Agreement and the
other Transaction Documents to be executed by it: (i) have been duly authorized
by all necessary action of Purchaser; (ii) are not in contravention of any
provision of Purchaser's partnership agreement; (iii) will not conflict with or
result in the breach or termination of, constitute a default under or accelerate
any performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which Purchaser is a party or by which
Purchaser or any of its property is bound, except where such conflict, breach,
default or acceleration would not be reasonably likely to result in a material
adverse effect on Purchaser's ability to perform its obligations hereunder; and
(iv) will not violate any law or regulation, or any order or decree of any
Governmental Authority binding on Purchaser. This Agreement and the other
Transaction Documents to which Purchaser is a party have each been duly executed
and delivered by Purchaser
11
and constitute the legal, valid and binding obligations of Purchaser,
enforceable against it in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
3.5 Receipt of Information. Purchaser has been afforded the
opportunity to ask such questions as Purchaser has deemed necessary of, and to
receive answers from, representatives of Company concerning the terms and
conditions of the Note and the merits and risks of investing in the Note.
Purchaser has received all documents and information relating to an investment
in the Note requested by or on behalf of Purchaser, including such information
relating to Company as Purchaser has deemed appropriate in making an investment
decision with respect to the Note.
4. COMPANY'S REPRESENTATIONS AND WARRANTIES
----------------------------------------
Company makes the following representations and warranties to
Purchaser as of the date hereof (and as of the Closing Date):
4.1 Authorized and Outstanding Shares of Capital Stock. After
giving effect to the Closing, the authorized capital stock of Company consists
of 75,000,000 shares of Common Stock of which 11,572,082 shares are issued and
outstanding, and 20,000,000 shares of preferred stock, $.01 par value per share,
of which no shares are issued and outstanding. All of such issued and
outstanding shares are validly issued, fully paid and non-assessable. Except as
set forth on Schedule 4.1, (i) there is no existing option, warrant, call,
commitment or other agreement to which Company is a party requiring, and there
are no convertible securities of Company outstanding which upon conversion would
require, the issuance of any additional shares of Stock of Company or other
securities convertible into shares of equity securities of Company, other than
the Note, (ii) there are no agreements to which Company is a party with respect
to the voting or transfer of the Stock of Company, (iii) there are no preemptive
rights or rights of first refusal or other similar rights with respect to the
issuance of Stock by Company. True and correct copies of the Certificate of
Incorporation and by-laws of Company have been delivered to Purchaser.
4.2 Authorization and Issuance of Note. The issuance of the
Note has been duly authorized by all necessary corporate action on the part of
Company and, upon the execution and authentication of the Note in accordance
with the provisions of the Indenture and the Supplemental Indenture and delivery
to Purchaser of the Note against payment in accordance with the terms hereof,
the Note will have been validly issued, free and clear of all pledges, liens,
encumbrances and preemptive rights and will be entitled to the benefits of the
Indenture and the Supplemental Indenture. The issuance of shares of Common Stock
upon conversion of the Note has been duly authorized by all necessary corporate
action on the part of Company and, when issued upon conversion of the Note, such
Common Stock will have been validly issued and fully paid and non-assessable.
12
Company has duly reserved 5,479,452 shares of Common Stock for issuance pursuant
to the terms of the Note.
4.3 Securities Laws. In reliance on the investment
representations contained in Sections 3.1, 3.2 and 3.5, the offer, issuance,
sale and delivery of the Note, as provided in this Agreement, are exempt from
the registration requirements of the Securities Act. Neither Company nor any
Person acting on its behalf has taken or will take any action (including,
without limitation, any offering of any securities of Company under
circumstances which would require the integration of such offering with the
offering of the Note under the Securities Act and the rules and regulations of
the SEC thereunder) which might subject the offering, issuance or sale of the
Note, to the registration requirements of Section 5 of the Securities Act.
4.4 Existence; Compliance with Law. Company and each of its
Subsidiaries, (i) is a corporation or partnership, as applicable, duly
organized, validly existing and in good standing under the laws of the State of
Delaware in the case of Company and as set forth on Schedule 4.5 in the case of
its Subsidiaries; (ii) is duly qualified as a foreign corporation or
partnership, as applicable, and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification (except for jurisdictions in which such
failure to so qualify or to be in good standing would not have a Material
Adverse Effect); (iii) has the requisite corporate or partnership power and
authority, as applicable, and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it operates
under lease, and to conduct its business as now being conducted; (iv) has, or
has applied for, all material licenses, permits, consents or approvals (a list
of such material licenses are set forth on Schedule 4.4 hereto) from or by, and
has made all material filings with, and has given all material notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct; (v) is in compliance with its certificate or
articles of incorporation, by-laws, partnership agreement or certificate of
limited partnership, as applicable; and (vi) is in compliance with all
applicable provisions of law (including, but not limited to, the anti-kick back
provisions of the Social Security Act and the Health Insurance Portability and
Accountability Act of 1996), except for such non-compliance which would not have
a Material Adverse Effect.
4.5 Subsidiaries. There currently exist no Subsidiaries of
Company other than as set forth on Schedule 4.5 hereto, which sets forth such
Subsidiaries, together with their respective jurisdictions of organization, and
the authorized and outstanding Stock of each such Subsidiary, by class and
number and percentage of each class owned by Company or a Subsidiary of Company
or any other Person. There are no options, warrants, rights to purchase or
similar rights covering capital Stock for any such Subsidiary.
4.6 Corporate Power; Authorization; Enforceable Obligations.
The execution, delivery and performance by Company of this Agreement, the other
Transaction Documents to which it is a party and all instruments and documents
to be
13
delivered by Company, the issuance and sale of the Note (and the underlying
Common Stock to be issued upon conversion of the Note) and the consummation of
the other transactions contemplated by any of the foregoing: (i) are within
Company's corporate power and authority; (ii) have been duly authorized by all
necessary corporate action; (iii) are not in contravention of any provision of
the Certificate of Incorporation or by-laws of Company; (iv) will not violate
any law or regulation, or any order or decree of any court or governmental
instrumentality; (v) will not conflict with or result in the breach or
termination of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which Company or any of its Subsidiaries is a party or by which
Company, any of its Subsidiaries or any of their property is bound, except where
any such conflict, breach, default or acceleration would not be reasonably
likely to result in a Material Adverse Effect; (vi) will not result in the
creation or imposition of any Lien upon any of the property of Company or any of
its Subsidiaries; and (vii) except as set forth on Schedule 4.6 with respect to
filings and/or approvals required for the conversion of the Note in connection
with certain permits maintained by Company and certain Subsidiaries, do not
require the consent or approval of, or any filing with, any Governmental
Authority or any other Person that has not been received or will not be received
prior to Closing, except those filings or approvals which the failure to make or
obtain will not result in a loss of, loss of benefit under or a material
liability to the Company or any of its Subsidiaries with respect to any of the
licenses set forth on Schedule 4.4 or would otherwise result in a Material
Adverse Effect. Each of this Agreement and the other Transaction Documents have
been duly executed and delivered by Company and each constitutes a legal, valid
and binding obligation of Company, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
4.7 Financial Statements. (a) The audited consolidated balance
sheets (the "Balance Sheets") of Company as at December 31, 1998 and 1997, and
the related consolidated statements of operations, stockholders equity and cash
flows for the year ended December 31, 1998, the period from May 7, 1997 to
December 31, 1997 and the combined statements of operations, changes in
partners' capital (deficit) and cash flows of the "Predecessor Properties" for
the period January 1, 1997 to May 6, 1997, with the opinions thereon of Ernst &
Young LLP, copies of which have previously been delivered or made available to
Purchaser, have been prepared in conformity with GAAP consistently applied
throughout the periods involved and present fairly the consolidated financial
position of Company as at the dates thereof, and the consolidated results of its
operations and cash flows for the periods then ended.
(b) Except as set forth on Schedule 4.7, neither Company nor
any of its Subsidiaries has any material obligations, contingent or otherwise,
including, without limitation, liabilities for Charges, long-term leases or
unusual forward or long-term
14
commitments which are not reflected in the Balance Sheets, other than those
incurred since December 31, 1998, in the ordinary course of business.
(c) No dividends or other distributions have been declared,
paid or made upon any shares of Stock of Company, nor have any shares of Stock
of Company been redeemed, retired, purchased or otherwise acquired for value by
Company since December 31, 1998.
4.8 Ownership of Property. (a) Except as set forth on Schedule
4.8, neither Company nor any of its Subsidiaries owns any real estate. Each of
Company and its Subsidiaries has good and marketable and insurable fee simple
title to its owned real property, free and clear of all Liens other than
Permitted Liens. Each of Company and its Subsidiaries has valid and marketable
leasehold interests in the leases of real estate described in Schedule 4.8
hereto, and, except as set forth on Schedule 4.8, good and marketable title to,
or valid leasehold interests in, all of its other properties and assets free and
clear of all Liens, except Permitted Liens.
(b) All real property leased by Company and its Subsidiaries
is set forth on Schedule 4.8. Each of such leases is valid and enforceable in
accordance with its terms (subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity)) and is in full force and effect. Company has
delivered or made available to Purchaser true and complete copies of each of
such leases set forth on Schedule 4.8 and all documents affecting the rights or
obligations of Company or any of its Subsidiaries, including, without
limitation, any non-disturbance and recognition agreements, subordination
agreements, attornment agreements and agreements regarding the term or rental of
any of the leases. Except as set forth on Schedule 4.8, none of Company, any of
its Subsidiaries nor, to its knowledge, any other party to any such lease is in
default of its obligations thereunder or has delivered or received any notice of
default under any such lease, nor has any event occurred which, with the giving
of notice, the passage of time or both, would constitute a default under any
such lease.
(c) Except as disclosed on Schedule 4.8, neither Company nor
any of its Subsidiaries is obligated under or a party to, any option, right of
first refusal or any other contractual right to purchase, acquire, sell, assign
or dispose of any real property owned or leased by Company or such Subsidiary,
except with respect to real property leased or being developed by Company or any
of its Subsidiaries with respect to which the Company or such Subsidiary has the
right or option to purchase.
4.9 Material Contracts; Indebtedness. Schedule 4.9 contains a
true, correct and complete list or description of all Material Contracts. Each
Material Contract is a valid and binding agreement of Company or its
Subsidiaries (as the case may be) enforceable against Company or such Subsidiary
in accordance with its terms (subject to
15
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity) and
neither Company nor any of its Subsidiaries has any knowledge that any Material
Contract is not a valid and binding agreement against the other parties thereto.
Company and each of its Subsidiaries has fulfilled in all material respects all
obligations required pursuant to the Material Contract to have been performed by
Company or such Subsidiary on its part to the extent required to have been
performed on or prior to the date hereof or the Closing Date. Except as set
forth in Schedule 4.9, neither Company nor any of its Subsidiaries is in default
or breach, nor to Company's or such Subsidiary's knowledge is any third party in
default or breach, under or with respect to any Material Contract. Except as set
forth on Schedule 4.9, neither Company nor any of its Subsidiaries has any
Indebtedness except Permitted Indebtedness.
4.10 Environmental Protection. (a) Except as set forth on
Schedule 4.10, to Company's and its Subsidiaries' knowledge, there has been no
disposal or release of Hazardous Substances on any real property owned, leased
or otherwise operated by Company and its Subsidiaries (each, a "Facility") which
is reasonably likely to have a Material Adverse Effect. "Hazardous Substance"
means any substance, waste or material (i) currently identified to be toxic or
hazardous pursuant to, or which could reasonably be expected to result in
liability under, any Environmental Law in existence as of the date hereof or
(ii) defined as toxic or hazardous under any Environmental Law in existence as
of the date hereof, including, without limitation, any asbestos, pcb,
radioactive substance, methane, volatile hydrocarbons, industrial solvents, oil
or petroleum or chemical liquids or solids, liquid or gaseous products, or any
other material or substance which has in the past caused or constituted a
health, safety, or environmental hazard to any Person or property or result in
any Environmental Liabilities and Costs. Except as set forth on Schedule 4.10,
neither Company nor any of its Subsidiaries has caused or suffered to occur any
release, spill, migration, leakage, discharge, spillage, uncontrolled loss,
seepage, or filtration of Hazard Substances at or from the Facility (a "Spill")
which could result in Environmental Liabilities and Costs reasonably likely to
have a Material Adverse Effect.
(b) Company and each Subsidiary has generated, treated, stored
and disposed of any Hazardous Substances in compliance with applicable
Environmental Laws in effect on the relevant date, except for such
non-compliances which would not have a Material Adverse Effect.
(c) Company and each Subsidiary has obtained, or has applied
for, and is in compliance with and in good standing under all permits required
under Environmental Laws (except for such failures which would not have a
Material Adverse Effect) and neither Company nor any of its Subsidiaries has any
knowledge of any proceedings to substantially modify or to revoke any such
permit.
16
(d) Except as set forth on Schedule 4.10, there are no
investigations, proceedings or litigation pending or, to Company's or its
Subsidiaries' knowledge, threatened, affecting or against Company, any of its
Subsidiaries or the Facilities relating to Environmental Laws or Hazardous
Substances which is reasonably likely to have a Material Adverse Effect.
(e) Since January 1, 1997, except for communications in
connection with the matters listed on Schedule 4.10, neither Company nor any of
its Subsidiaries has received any communication or notice (including, without
limitation, requests for information) indicating the potential of Environmental
Liabilities and Costs against Company or its Subsidiaries which is reasonably
likely to have a Material Adverse Effect.
4.11 Labor Matters. (a) Except as set forth in Schedule 4.11,
there are no strikes or other labor disputes against Company or any of its
Subsidiaries pending or, to Company's or its Subsidiaries' knowledge,
threatened. Hours worked by and payment made to employees of Company and its
Subsidiaries have not been in violation of the Fair Labor Standards Act or any
other applicable law dealing with such matters. All payments due from Company
and each of its Subsidiaries on account of employee health and welfare insurance
have been paid or accrued as a liability on the books of Company or such
Subsidiary. Except as set forth in Schedule 4.11, there is no organizing
activity involving Company or any of its Subsidiaries pending or, to Company's
or its Subsidiaries' knowledge, threatened by any labor union or group of
employees. Except as set forth in Schedule 4.11, there are no representation
proceedings pending or, to Company's or its Subsidiaries' knowledge, threatened
with the National Labor Relations Board, and no labor organization or group of
employees of Company or its Subsidiaries has made a pending demand for
recognition. Except as set forth in Schedule 4.11, there are no complaints or
charges against Company or any of its Subsidiaries pending or, to Company's or
its Subsidiaries' knowledge, threatened to be filed with any federal, state,
local or foreign court, governmental agency or arbitrator based on, arising out
of, in connection with, or otherwise relating to the employment or termination
of employment by Company or any of its Subsidiaries of any individual.
(b) Except as set forth in Schedule 4.11, neither Company nor
any of its Subsidiaries is, or during the five years preceding the date hereof
was, a party to any labor or collective bargaining agreement and there are no
labor or collective bargaining agreements which pertain to employees of Company
or its Subsidiaries.
4.12 Other Ventures. Neither Company nor any of its
Subsidiaries is engaged in any joint venture or partnership with any other
Person.
4.13 Taxes. Except as set forth on Schedule 4.13, all material
federal, state, local and foreign tax returns, reports and statements required
to be filed by Company and its Subsidiaries have been timely filed with the
appropriate Governmental Authority and all such returns, reports and statements
are true, correct and complete in all material respects. All material Charges
and other impositions due and payable for the
17
periods covered by such returns, reports and statements have been paid prior to
the date on which any fine, penalty, interest or late charge may be added
thereto for nonpayment thereof, or any such fine, penalty, interest, late charge
or loss has been paid. Proper and accurate amounts have been withheld by Company
and its Subsidiaries from its employees for all periods in compliance, in all
material respects, with the tax, social security and unemployment withholding
provisions of applicable federal, state, local and foreign law and such
withholdings have been timely paid to the respective governmental agencies. No
tax audits or other administrative or judicial proceedings are pending or
threatened with regard to any Charges for which Company or any Subsidiary may be
liable and no assessment of Charges is proposed against Company or any
Subsidiary. Except as set forth on Schedule 4.13, neither Company nor any of its
Subsidiaries has agreed or has been requested to make any adjustment under IRC
Section 481(a) by reason of a change in accounting method or otherwise. Neither
Company nor any of its Subsidiaries has any obligation under any written tax
sharing agreement.
4.14 No Litigation. Except as disclosed on Schedule 4.14, no
action, claim or proceeding is now pending or, to the knowledge of Company or
its Subsidiaries, threatened against Company or any of its Subsidiaries, at law,
in equity or otherwise, before any court, board, commission, agency or
instrumentality of any federal, state, or local government or of any agency or
subdivision thereof, or before any arbitrator or panel of arbitrators, except
any such action, claim, proceeding which, if adversely determined, is reasonably
likely to have a Material Adverse Effect.
4.15 Brokers. Except as set forth on Schedule 4.15, no broker
or finder acting on behalf of Company or any of its Subsidiaries brought about
the consummation of the transactions contemplated pursuant to this Agreement and
neither Company nor any of its Subsidiaries has any obligation to any Person in
respect of any finder's or brokerage fees (or any similar obligation) in
connection with the transactions contemplated by this Agreement. Except as
otherwise set forth herein, Company is solely responsible for the payment of all
such finder's or brokerage fees.
4.16 Employment and Labor Agreements. Except as set forth on
Schedule 4.16, there are no written (or material non-written) employment,
consulting or management agreements (other than letters offering employment)
covering management of Company or any of its Subsidiaries providing for payments
in excess of $150,000 in any year.
4.17 Patents, Trademarks, Copyrights and Licenses. Company and
each of its Subsidiaries owns all licenses, patents, patent applications,
copyrights, service marks, trademarks and registrations and applications for
registration thereof, and trade names necessary to continue to conduct its
business as heretofore conducted by it and now being conducted by it, each of
which is listed, together with Patent and Trademark Office or Copyright Office
application or registration numbers, where applicable, on Schedule 4.17 hereto.
To Company's knowledge, Company and each of its Subsidiaries conducts its
businesses without infringement or claim of infringement of any license, patent,
copyright, service ▇▇▇▇, trademark, trade name, trade secret or other
intellectual
18
property right of others. To Company's knowledge, there is no infringement by
others of any license, patent, copyright, service ▇▇▇▇, trademark, trade name,
trade secret or other intellectual property right of Company or any of its
Subsidiaries.
4.18 No Material Adverse Effect. Since December 31, 1998 no
Material Adverse Effect has occurred.
4.19 ERISA. (a) Schedule 4.19 sets forth: (i) all material
"employee benefit plans", as defined in Section 3(3) of ERISA, and any other
material severance pay, deferred compensation or employee stock purchase plans,
programs or arrangements (the "Plans") maintained by Company and any of its
Subsidiaries or to which Company or any its Subsidiaries contributed or is
obligated to contribute thereunder, and (ii) all "employee pension plans", as
defined in Section 3(2) of ERISA (the "Pension Plans"), maintained by Company,
any of its Subsidiaries or any of its ERISA Affiliates to which Company, any of
its Subsidiaries or any of its ERISA Affiliates contributed or is obligated to
contribute thereunder.
(b) Purchaser will not have (i) any obligation to make any
contribution to any Multiemployer Plan or (ii) any withdrawal liability from any
such Multiemployer Plan under Section 4201 of ERISA which it would not have had
if it had not purchased the Note from Company at the Closing in accordance with
the terms of this Agreement.
(c) The Pension Plans intended to be qualified under Section
401 of the IRC are so qualified and the trusts maintained pursuant thereto are
exempt from federal income taxation under Section 501 of the IRC, and nothing
has occurred with respect to the operation of the Pension Plans which could
cause the loss of such qualification or exemption or the imposition of any
liability, penalty, or tax under ERISA or the IRC.
(d) All contributions required by law or pursuant to the terms
of the Plans (without regard to any waivers granted under Section 412 of the
IRC) to any funds or trusts established thereunder or in connection therewith
have been made by the due date thereof (including any valid extension) and no
accumulated funding deficiencies exist in any of the Pension Plans.
(e) There is no "amount of unfunded benefit liabilities" as
defined in Section 4001(a)(18) of ERISA in any of the respective Pension Plans.
Each of the respective Pension Plans are fully funded in accordance with the
actuarial assumptions used by the PBGC to determine the level of funding
required in the event of the termination of the Pension Plan and all benefit
liabilities do not exceed the assets of such Pension Plans.
(f) There has been no "reportable event" as that term is
defined in Section 4043 of ERISA and the regulations thereunder with respect to
the Pension Plans which would require the giving of notice, or any event
requiring disclosure under Sections 4041(c)(3)(C), 4063(a) or 4068(f) of ERISA.
19
(g) There is no material violation of ERISA with respect to
the filing of applicable reports, documents, and notices regarding the Plans
with the Secretary of Labor and the Secretary of the Treasury or the furnishing
of such documents to the participants or beneficiaries of the Plans.
(h) True, correct and complete copies of the following
documents, with respect to each of the Plans, have been made available or
delivered to Purchaser by Company: (A) any plans and related trust documents,
and amendments thereto, (B) the most recent Forms 5500 (including any schedules
thereto) and the most recent actuarial valuation report, if any, (C) the last
IRS determination letter, (D) summary plan descriptions and (E) written
communications to employees relating to the Plans.
(i) There are no pending actions, claims or lawsuits which
have been asserted or instituted against the Plans, the assets of any of the
trusts under such Plans or the Plan sponsor or the Plan administrator, or
against any fiduciary of the Plans with respect to the operation of such Plans
(other than routine benefit claims), nor does Company or any of its Subsidiaries
have knowledge of facts which could form the basis for any such claim or
lawsuit.
(j) All amendments and actions required to bring the Plans
into conformity in all material respects with all of the applicable provisions
of ERISA and other applicable laws have been made or taken except to the extent
that such amendments or actions are not required by law to be made or taken
until a date after the Closing Date.
(k) The Plans have been maintained, in all material respects,
in accordance with their terms and with all provisions of ERISA (including rules
and regulations thereunder) and other applicable Federal and state law, and
neither Company nor any of its Subsidiaries or "party in interest" or
"disqualified person" with respect to the Plans has engaged in a "prohibited
transaction" within the meaning of Section 4975 of the IRC or Section 406 of
ERISA which is reasonably likely to have a Material Adverse Effect.
(l) None of Company, any of its Subsidiaries or any ERISA
Affiliate has terminated any Pension Plan, or incurred any outstanding liability
under Section 4062 of ERISA to the PBGC, or to a trustee appointed under Section
4042 of ERISA.
(m) None of Company, any of its Subsidiaries or any ERISA
Affiliate maintains retired life and retired health insurance plans which are
Welfare Plans and which provide for continuing benefits or coverage for any
participant or any beneficiary of a participant except as may be required under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA")
and at the expense of the participant or the participant's beneficiary. Company,
all of its Subsidiaries and all ERISA Affiliates which maintains a Welfare Plan
has materially complied with the notice and continuation requirements of COBRA
and the regulations thereunder.
20
(n) Except as set forth on Schedule 4.19, none of Company, any
of its Subsidiaries or any ERISA Affiliate has contributed or been obligated to
contribute to a Multiemployer Plan as of the Closing.
(o) None of Company, any of its Subsidiaries or any ERISA
Affiliate has withdrawn in a complete or partial withdrawal from any
Multiemployer Plan prior to the Closing Date, nor has any of them incurred any
liability due to the termination or reorganization of a Multiemployer Plan.
(p) None of Company, any of its Subsidiaries, any ERISA
Affiliate or any organization to which Company is a successor or parent
corporation, within the meaning of Section 4069(b) of ERISA, has engaged in any
transaction, within the meaning of Section 4069 of ERISA.
4.20 SEC Documents. Company has made available to Purchaser a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by Company with the SEC since January 1, 1998
and prior to the date of this Agreement (the "Company SEC Documents"), which are
all the documents (other than preliminary material) that Company was required to
file with the SEC since such date, except as set forth on Schedule 4.20. Except
as set forth on Schedule 4.20, as of their respective dates, Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Company SEC Documents, and
none of Company SEC Documents contained any untrue statement of a material fact
or omitted 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. None of the matters described on Schedule 4.20 will
adversely impact in any significant respect the ability of Company to maintain
the effectiveness of the shelf registration provided for in the Registration
Rights Agreement for the periods provided therein or to otherwise fulfill any of
its obligations under the Registration Rights Agreement.
4.21 Ordinary Course of Business. Except as set forth on
Schedule 4.7 or in response to the events described therein, since December 31,
1998, Company and each of its Subsidiaries has conducted its operations only in
the ordinary course of business consistent with past practice.
4.22 Insurance. Schedule 4.22 hereto contains a complete and
correct list of all policies of insurance of any kind or nature covering Company
and its Subsidiaries, including, without limitation, policies of life, fire,
theft, employee fidelity and other casualty and liability insurance, indicating
the type of coverage, name of insured, the insurer, the premium, the expiration
date of each policy and the amount of coverage, and such policies are in full
force and effect. Complete and correct copies of each such policy have been
furnished or made available to Purchaser. Such policies are in amounts customary
for the industry in which Company or such Subsidiary operates.
21
4.23 Accounts Receivable. Substantially all accounts
receivable of Company and its Subsidiaries as shown on the Balance Sheet are
collectible in the ordinary course of business by Company or such Subsidiary.
4.24 Minute Books. The minute books of Company and each
Subsidiary of Company, as previously made available to Purchaser accurately
reflect all formal corporate action of the stockholders and Board of Directors
of Company and each Subsidiary of Company.
4.25 Year 2000 Compliance. (a) To the Company's best
knowledge, after due inquiry, each system comprised of software, hardware,
databases or embedded control systems (microprocessor controlled or controlled
by any robotic or other device) (collectively, a "System") that constitutes any
material part of, or is used in connection with the use, operation or enjoyment
of, any material tangible or intangible asset or real property of Company or any
of its Subsidiaries will not be materially adversely affected by the advent of
the year 2000, the advent of the twenty-first century or the transition from the
twentieth century through the year 2000 and into the twenty-first century ("Year
2000 Compliant"). Company has no reason to believe that it or any of its
Subsidiaries may incur material expenses arising from or relating to the failure
of any of their Systems as a result of the advent of the year 2000, the advent
of the twenty-first century or the transition from the twentieth century through
the year 2000 and into the twenty-first century. Each System of Company and its
Subsidiaries is able to accurately process date, including, but not limited to,
calculating, comparing and sequencing from, into and between the twentieth
century (through year 1999), the year 2000 and the twenty-first century,
including leap year calculations.
(b) (1) All material vendors of products or services to
Company or any of its Subsidiaries, and their respective products, services and
operations, are, to the knowledge of Company, Year 2000 Compliant. To the
knowledge of Company after a reasonably diligent investigation, each such
material vendor will continue to furnish its products or services to Company or
its Subsidiaries, as applicable, without interruption or material delay, on and
after January 1, 2000.
(2) Company and its Subsidiaries have entered into
agreements with each of its material vendors certifying that all hardware,
software or firmware, and any other products and services furnished by such
vendor, including any and all enhancements, upgrades, customizations,
modifications, maintenance and the like, are Year 2000 Compliant. Either (i) all
such vendor agreements contain representations from such vendors that such
vendors or their products, services or operations are Year 2000 Compliant or
(ii) Company will have a valid claim for breach of contract if any such vendor
or its products, services or operations are not Year 2000 Compliant.
4.26 Full Disclosure. No information contained in this
Agreement, any other Transaction Document, the Financial Statements or any
written statement furnished by or on behalf of Company pursuant to the terms of
this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the
22
statements contained herein or therein not misleading in light of the
circumstances under which made.
4.27 No Stockholder Vote Requirement. No vote, consent or
other approval of Company's stockholders is, or will be, required by the rules
and regulations of NASDAQ or otherwise in connection with any of the
transactions contemplated the Transaction Documents, including the sale and
issuance of the Note to Purchaser and any conversion of the Note into shares of
Common Stock in accordance with the terms of the Note.
4.28 Delaware Section 203. The Company and its Board of
Directors have taken all the necessary actions to render inapplicable to the
transactions contemplated by the Transaction Documents (including, but not
limited to, the issuance of Common Stock upon conversion of the Note) the
provisions of Section 203 of the General Corporation Law of the State of
Delaware.
5. PRE-CLOSING COVENANTS
---------------------
Company covenants and agrees that from and after the date
hereof (except as otherwise provided herein, or unless Purchaser has given its
prior written consent) until the Closing:
5.1 Maintenance of Existence and Conduct of Business. Company
shall, and shall cause each of its Subsidiaries to: (i) do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
or partnership existence, as applicable, and its rights and franchises; (ii) at
all times maintain, preserve and protect all of its material assets, and keep
the same in good repair, working order and condition (taking into consideration
ordinary wear and tear) and from time to time make, or cause to be made, all
needful and proper repairs, renewals and replacements, betterments and
improvements thereto consistent with industry practices and (iii) continue to
conduct its businesses in the ordinary course consistent with past practices.
5.2 Access. Company shall permit representatives of Purchaser
to visit and inspect any of the properties of Company and its Subsidiaries, to
examine the corporate or partnership books and make copies or extracts therefrom
and to discuss the affairs, finances and accounts of Company and its
Subsidiaries with the principal officers of Company, all at such reasonable
times, upon reasonable notice and as often as Purchaser may reasonably request.
5.3 Acquisitions and Investments. Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, make any
investment or acquire any assets except in the ordinary course of business
consistent with past practices, or acquire any security of another Person except
in connection with the formation of any Subsidiary in the ordinary course
consistent with past practices.
5.4 Sales of Assets; Liquidation. Company shall not, and shall
not permit any Subsidiary of Company to, (i) sell, transfer, convey or otherwise
dispose of
23
any assets or properties or (ii) liquidate, dissolve or wind up Company, or any
of its Subsidiaries, except for transfers to Company, whether voluntary or
involuntary; provided, however, that the foregoing shall not prohibit (i) the
sale of inventory in the ordinary course of business, (ii) the sale of surplus
or obsolete equipment and fixtures or (iii) transfers resulting from any
casualty or condemnation of assets or properties.
5.5 Material Contracts. Company shall not and shall not permit
any Subsidiary of Company to enter into, modify or terminate any Material
Contract.
5.6 Securities. Company shall not, and shall not permit any
subsidiary of Company to, issue any Stock or other security except for the
issuance to Purchaser contemplated by the Transaction Documents or the issuance
of securities by a Subsidiary to the Company.
5.7 Transactions with Affiliates. Company shall not and shall
not permit any Subsidiary of Company to enter into or be a party to any
transaction with any Affiliate of Company or such Subsidiary, except (i)
transactions expressly contemplated hereby, (ii) transactions in the ordinary
course of and pursuant to the reasonable requirements of Company's or such
Subsidiary's business and upon fair and reasonable terms that are fully
disclosed to Purchaser and are no less favorable to Company or such Subsidiary
than would be obtained in a comparable arm's-length transaction with a Person
not an Affiliate of Company or such Subsidiary, (iii) transactions between
Company and its wholly-owned Subsidiaries or between such Subsidiaries and (iv)
payment of compensation to employees and directors' fees.
5.8 Indebtedness. Company shall not and shall not permit any
Subsidiary of Company to incur any additional Indebtedness in any material
amount.
5.9 Mergers and Subsidiaries. Neither Company nor any
Subsidiaries of Company shall directly or indirectly, by operation of law or
otherwise, merge with, consolidate with, or otherwise combine with any Person,
nor shall Company create any Subsidiary, other than (i) the creation of
wholly-owned Subsidiaries or (ii) mergers of wholly-owned Subsidiaries of
Company into Company or any other of its wholly-owned Subsidiaries.
5.10 Management Compensation. Company shall not and shall not
permit any Subsidiary of Company to, increase the salary, bonus or other
compensation of any officers or employees of Company and its Subsidiaries,
except to the extent as (i) is in the ordinary course of business consistent
with prior practice and (ii) has been disclosed by Company to Purchaser prior to
the date hereof.
5.11 Amendments to Certificate of Incorporation and By-Laws.
Company shall not, and shall not permit any Subsidiary of Company to, authorize,
adopt or approve an amendment to the certificate or articles of incorporation,
by-laws, partnership agreement or certificate of limited partnership, as
applicable, of such entity.
24
5.12 Compliance With Covenants. The Company shall not take any
action which would have constituted a violation of any covenant in the Indenture
or Supplemental Indenture if the Indenture or Supplemental Indenture were in
effect at such time.
5.13 Satisfaction of Closing Conditions. Company shall use
commercially reasonable efforts to satisfy all conditions to the obligations of
the parties hereto to effect the Closing.
6. CLOSING CONDITIONS
------------------
6.1 Conditions to Obligation of Purchaser to Closing. The
obligation of Purchaser to purchase the Note pursuant to Section 2.1 hereof, is
subject to the satisfaction of the following conditions unless waived by
Purchaser:
(a) The Indenture, the Supplemental Indenture, the
Registration Rights Agreement and the Stockholders Agreement shall have been
duly executed and delivered by the parties thereto (other than Purchaser).
(b) All of the representations and warranties of Company
contained herein shall be true and correct (except that representations and
warranties that are not qualified by materiality or Material Adverse Effect
shall be true and correct in all material respects) on and as of the Closing
Date as if made on such date and no breach of any covenant contained in Article
V hereof shall have occurred or would result from the Closing hereunder, and
Purchaser shall have received a certificate of Company to such effect.
(c) Company shall have performed and complied in all material
respects with its covenants and agreements hereunder to be performed or complied
with prior to the Closing, and Purchaser shall have received a certificate of
Company to such effect.
(d) There shall not have occurred any event or condition since
December 31, 1998 which has had or which would be reasonably likely to have a
Material Adverse Effect. For the purposes of this Section 6.1(d) only, the
definition of "Material Adverse Effect" shall not include a decrease in the
market price of the Common Stock unless one or more of the factors causing such
decrease would, individually or in the aggregate, result in a Material Adverse
Effect.
(e) The Prime Group, Inc. and each of its Affiliates that has
been granted any registration rights by Company shall have executed and
delivered to Purchaser a waiver in form and substance reasonably satisfactory to
Purchaser of the applicability of such registration rights to the shelf
registration to be effected pursuant to the Registration Rights Agreement.
25
6.2 Conditions to Obligation of Company to Close. The
obligation of Company to issue and sell to Purchaser the Note pursuant to
Section 2.1 hereof, is subject to the satisfaction of the following conditions
unless waived by Company:
(a) The Indenture, the Supplemental Indenture, the
Registration Rights Agreement and the Stockholders Agreement shall have been
duly executed and delivered by the parties thereto (other than Company).
(b) All of the representations and warranties of Purchaser
contained herein shall be true and correct (except that representations and
warranties that are not qualified by materiality or material adverse effect
shall be true and correct in all material respects) on and as of the Closing
Date as if made on such date, and Company shall have received a certificate of
Purchaser to such effect.
(c) Purchaser shall have performed and complied in all
material respects with its covenants and agreements hereunder to be performed or
complied with prior to the Closing, and Company shall have received a
certificate of Purchaser to such effect.
7. TERMINATION.
------------
7.1 Termination. This Agreement may be terminated and
abandoned at any time (a) by mutual written consent of Purchaser and Company or
(b) if the Closing shall not have been consummated on or before the eleventh
Business Day after the date hereof; provided, however, that no party shall have
the right to terminate this Agreement pursuant to this clause (b) if such
party's breach of this Agreement is a cause for the Closing not having occurred.
7.2 Effect of Termination. In the event of termination of this
Agreement by either Purchaser or Company as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of any party hereto (or of any of its directors,
officers, employees, agents, legal and financial advisors or Affiliates).
Nothing contained in this Section 7.2 shall (i) relieve any party from any
liability resulting from any breach of this Agreement prior to such termination
or (ii) relieve Company of its expense reimbursement obligations under that
certain Letter Agreement, dated as of March 18, 1999, between Company and
Capital Z Financial Services Fund II, L.P., which obligation shall survive the
execution, delivery and termination of this Agreement.
8. MISCELLANEOUS
-------------
8.1 Complete Agreement; Modification of Agreement; Sale of
Interest. (a) Subject to the provisions of Section 7.2, the Transaction
Documents constitute the complete agreement between the parties with respect to
the subject matter hereof and may not be modified, altered or amended except as
provided therein. Company hereby consents to Purchaser's sale of participations,
assignment, transfer or other disposition, at any time or times, of any of the
Transaction Documents or of any portion thereof or
26
interest therein, including, without limitation, Purchaser's rights, title,
interests, remedies, powers or duties thereunder, whether evidenced by a writing
or not.
(b) In the event Purchaser assigns or otherwise transfers all
or any part of the Note, Company shall, upon the request of Purchaser issue new
Notes to effectuate or evidence such assignment or transfer.
(c) Purchaser may sell, assign, transfer or negotiate to one
or more other lenders, commercial banks, insurance companies, other financial
institutions or any other Person acceptable to Purchaser all or a portion of its
rights and obligations under the Note held by Purchaser and this Agreement;
provided, however, that acceptance of such assignment by any assignee shall
constitute the agreement of such assignee to be bound by the terms of this
Agreement applicable to Purchaser. From and after the effective date of such an
assignment, (x) the assignees thereunder shall, in addition to the rights and
obligations hereunder held by it immediately prior to such effective date, have
the rights and obligations hereunder that have been assigned to it pursuant to
such assignment and (y) the assignor thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such assignment,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an assignment and acceptance covering all or the remaining
portion of an assignor's rights and obligations under this Agreement, such
assignor shall cease to be a party hereto).
(d) No amendment or waiver of any provision of this Agreement
shall in any event be effective unless the same shall be in writing and signed
by Purchaser, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
8.2 Fees and Expenses. (a) Subject to the provisions of
Section 8.2(b) hereof, Company shall pay all reasonable out-of-pocket expenses
of Purchaser in connection with the preparation of the Transaction Documents and
the transactions contemplated thereby, including all reasonable legal fees and
expenses, accounting fees and expenses and fees and expenses of consultants. If,
at any time or times, regardless of the existence of an Event of Default (except
with respect to paragraph (iii) below, which shall be subject to an Event of
Default having occurred and be continuing), Purchaser shall employ counsel or
other advisors for advice or other representation or shall incur reasonable
legal or other costs and expenses in connection with:
(i) any amendment, modification or waiver, or consent with
respect to, any of the Transaction Documents or advice in connection with the
administration of the loans made pursuant hereto or its rights hereunder or
thereunder;
(ii) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Purchaser, Company, any Subsidiary of Company or
any other Person) in any way relating to any of the Transaction Documents or any
other agreements to be executed or delivered in connection herewith; or
27
(iii) any attempt to enforce any rights of Purchaser
against Company, any Subsidiary of Company or any other Person, that may be
obligated to Purchaser by virtue of any of the Transaction Documents;
then, and in any such event, the reasonable attorneys' and other parties'
reasonable fees arising from such services, including those of any appellate
proceedings, and all reasonable expenses, costs, charges and other fees incurred
by such counsel and others in any way or respect arising in connection with or
relating to any of the events or actions described in this Section 8.2 shall be
payable, on demand, by Company to Purchaser and shall be additional Obligations
under this Agreement and the other Transaction Documents; provided, however,
that Purchaser will repay Company for such amounts reimbursed by Company
resulting from any action or proceeding instituted by Purchaser against Company
in which Company ultimately prevails on the merits and all applicable periods
for appeal have expired. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: paralegal fees, costs and
expenses; accountants' and investment bankers' fees, costs and expenses; court
costs and expenses; photocopying and duplicating expenses; court reporter fees,
costs and expenses; long distance telephone charges; air express charges;
telegram charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal
services. Notwithstanding anything in this Section 8.2(a), Purchaser shall
reimburse Company for all reasonable attorneys' fees and expenses and other
reasonable out-of-pocket expenses incurred by Company in connection with (i) any
action or proceeding instituted by Purchaser against Company in which Company
ultimately prevails on the merits and all applicable periods for appeal have
expired or (ii) any declaratory judgment action instituted by Company against
Purchaser as a result of any declaration by Purchaser of any default under the
Note if Company ultimately prevails on the merits and all applicable periods of
appeal have expired.
(b) At the Closing, Company shall reimburse Capital Z
Financial Services Fund II, L.P. for fees and expenses, if any, owed to
Prudential Securities, Inc. in connection with the transactions contemplated by
this Agreement (provided, however, that the amount so reimbursed shall in no
event exceed $1,500,000 in the aggregate).
8.3 No Waiver by Purchaser. Purchaser's failure, at any time
or times, to require strict performance by Company of any provision of this
Agreement and any of the other Transaction Documents shall not waive, affect or
diminish any right of Purchaser thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by Purchaser of an Event of
Default by Company under the Transaction Documents shall not suspend, waive or
affect any other Event of Default by Company under this Agreement and any of the
other Transaction Documents whether the same is prior or subsequent thereto and
whether of the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of Company contained in
this Agreement or any of the other Transaction Documents and no Event of Default
by Company under this Agreement and no defaults by Company under any of the
other Transaction Documents shall be deemed to have been suspended or waived by
28
Purchaser, unless such suspension or waiver is by an instrument in writing
signed by an officer of Purchaser and directed to Company specifying such
suspension or waiver.
8.4 Remedies. Purchaser's rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
which Purchaser may have under any other agreement, including without
limitation, the Transaction Documents, the other Transaction Documents, by
operation of law or otherwise.
8.5 Waiver of Jury Trial. The parties hereto waive all right
to trial by jury in any action or proceeding to enforce or defend any rights
under the Transaction Documents.
8.6 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
8.7 Binding Effect; Benefits. This Agreement and the other
Transaction Documents shall be binding upon, and inure to the benefit of, the
successors of Company and Purchaser and the assigns, transferees and endorsees
of Purchaser.
8.8 Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Transaction Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of the
other Transaction Documents, the provision contained in this Agreement shall
govern and control.
8.9 Governing Law. Except as otherwise expressly provided in
any of the Transaction Documents, in all respects, including all matters of
construction, validity and performance, this Agreement and the Obligations
arising hereunder shall be governed by, and construed and enforced in accordance
with, the laws of the State of Delaware applicable to contracts made and
performed in such state, without regard to the principles thereof regarding
conflict of laws, and any applicable laws of the United States of America.
Service of process on Purchaser or Company in any action arising out of or
relating to any of the Transaction Documents shall be effective if mailed to
such party at the address listed in Section 8.10 hereof. Nothing herein shall
preclude Purchaser or Company from bringing suit or taking other legal action in
any other jurisdiction.
8.10 Notices. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by another, or whenever any of the parties desires to give or
serve upon another any such communication with respect to this Agreement, each
such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall
29
be delivered in person with receipt acknowledged, by nationally known commercial
courier service providing next day delivery service, by registered or certified
mail, return receipt requested, postage prepaid or by telecopy and confirmed by
telecopy answerback addressed as follows:
If to Company:
Brookdale Living Communities, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Brookdale Living Communities, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Winston & ▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser:
Healthcare Partners
One Chase ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the
30
date on which personally delivered, with receipt acknowledged, telecopied and
confirmed by telecopy answerback, one (1) Business Day after the same shall have
been deposited with a nationally known commercial courier service providing next
day delivery service or three (3) Business Days after the same shall have been
deposited with the United States mail. Failure or delay in delivering copies of
any notice, demand, request, consent, approval, declaration or other
communication to the Persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.
8.11 Survival. The representations and warranties of Company
in this Agreement shall survive the execution, delivery and acceptance hereof by
the parties hereto and the closing of the transactions described herein or
related hereto.
8.12 Section and Other Headings. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
8.13 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
8.14 Publicity. Neither Purchaser nor Company shall issue any
press release or make any public disclosure regarding the transactions
contemplated hereby, if such press release or public disclosure is disapproved
by the other party within two (2) Business Days after its receipt of written
notice from the disclosing party of such contemplated disclosure.
Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with the SEC or other regulatory bodies, make such
statements with respect to the transactions contemplated hereby or file any of
the Transaction Documents as each may be advised by counsel is legally necessary
or advisable, and may make such disclosure as it is advised by its counsel is
required by law, subject to advance consultation with Purchaser.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
31
IN WITNESS WHEREOF, Company and Purchaser have executed this
Agreement as of the day and year first above written.
COMPANY:
BROOKDALE LIVING COMMUNITIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
PURCHASER:
HEALTHCARE PARTNERS
By: Capital Z Financial Services Fund II, L.P.,
its general partner
By: Capital Z Partners, L.P., its general partner
By: Capital Z Partners, Ltd., its general partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
Each of the undersigned, by its execution below, hereby agrees
that, at the Closing, it will execute and deliver the Stockholders Agreement and
the waiver of certain registration rights referred to herein. None of the
undersigned are obligated with respect to any other provision of this Agreement.
THE PRIME GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
PRIME GROUP II, L.P.
By: PGLP, Inc., its Managing General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
PRIME GROUP III, L.P.
By: PGLP, Inc., its Managing General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
PRIME GROUP VI, L.P.
By: PGLP, Inc., its Managing General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
PRIME GROUP LIMITED PARTNERSHIP
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Managing General Partner
DISCLOSURE SCHEDULES
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
FORM OF
SUPPLEMENTAL INDENTURE
Dated as of May [__], 1999
----------
BROOKDALE LIVING COMMUNITIES, INC.
TO
STATE STREET BANK AND TRUST COMPANY,
as Trustee under the Indenture
dated May [__], 1999
----------
Providing for Issuance of
5 1/2% Convertible Subordinated Notes Due 2009
SUPPLEMENTAL INDENTURE, dated as of May [__], 1999, between
Brookdale Living Communities, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company"), having
its principal office at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, and State Street Bank and Trust Company (herein called the "Trustee"),
Trustee under the Indenture dated as of May [__], 1999, between the Company and
the Trustee (herein called the "Original Indenture").
RECITALS OF THE COMPANY
WHEREAS, the Original Indenture provides for the issuance from
time to time of its subordinated unsecured debentures, notes or other evidences
of indebtedness, to be issued in one or more series as provided therein;
WHEREAS, the Company desires, by this Supplemental Indenture,
to create a series of 5 1/2% convertible subordinated notes to be issuable under
the Original Indenture and to be known as the Company's "5 1/2% Convertible
Subordinated Notes due 2009" (herein called the "5 1/2% Convertible Subordinated
Notes"), and the terms and provisions thereof to be as hereinafter set forth;
WHEREAS, the general forms of the 5 1/2% Convertible
Subordinated Notes and the Trustee's certificate of authentication to be borne
by the 5 1/2% Convertible Subordinated Notes are to be in the respective forms
established pursuant to or set forth in the Original Indenture, with such
insertions, omissions and variations as the Board of Directors of the Company
may determine to be appropriate in accordance with the provisions of this
Supplemental Indenture; and
WHEREAS, all things necessary to make the 5 1/2% Convertible
Subordinated Notes, when executed and duly issued by the Company and
authenticated and delivered by the Trustee, the valid obligations of the
Company, and to make this Supplemental Indenture a valid agreement of the
Company, in accordance with their respective terms, have been done.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the 5 1/2% Convertible Subordinated Notes by the Holders thereof, it is mutually
agreed, for the equal and proportionate benefit of such Holders, as follows:
Section 1. Additional Defined Terms Applicable to the 5 1/2%
Convertible Subordinated Notes.
"Accretive" means, with respect to a Merger, that diluted
earnings per share or the After Tax Cash Flow of the Person surviving the
Merger, as presented in the pro forma consolidated or combined income statements
for such surviving Person, prepared on a reasonable basis (which may include
certain adjustments for revenues and expenses), must exceed the Company's
diluted earnings per share or After Tax Cash Flow for the period used for such
determination. Such pro
1
forma presentation shall be opined on by a nationally recognized investment
banking firm separately or as part of its fairness opinion with respect to the
Merger in question.
"Affiliate" means with respect to any Person, (i) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 5% or more of the Stock having ordinary
voting power in the election of directors of such Person, (ii) each Person that
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person, (iii) each of such Person's officers, directors, joint
venturers and partners, (iv) any trust or beneficiary of a trust of which such
Person is the sole trustee or (v) any lineal descendants, ancestors, spouse or
former spouses (as part of a marital dissolution) of such Person (or any trust
for the benefit of such Person). For the purpose of this definition, (i)
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise and (ii)
limited partners of Purchaser or of one or more of Purchaser's Affiliates and
such limited partners' respective officers, directors and joint venture partners
are specifically excluded (unless such person is otherwise an "Affiliate" in
some other capacity) from the definition of "Affiliate" unless otherwise
specifically indicated.
"After Tax Cash Flow" of a Person means, on a per diluted
share basis, net income plus depreciation, amortization and deferred taxes of
such Person.
"Capital Lease" means with respect to any Person, any lease of
any property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise be
disclosed as a capital lease in a note to such balance sheet, other than, in the
case of the Company or a Subsidiary of the Company, any such lease under which
Company or such Subsidiary is the lessor.
"Capital Lease Obligation" means with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that, in accordance
with GAAP, would appear on a balance sheet of such lessee in respect of such
Capital Lease or otherwise be disclosed in a note to such balance sheet.
"Designated Merger" has the meaning specified in Section 5(a).
"Fiscal Year" means the twelve-month period ending December
31. Subsequent changes of the fiscal year of the Company shall not change the
meaning of the term "Fiscal Year" unless the Holders of at least a majority in
principal amount of the 5 1/2% Convertible Subordinated Notes shall consent in
writing to such changes.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time.
2
"Guaranteed Indebtedness" means as to any Person, any
obligation of such Person guaranteeing any Indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) to indemnify the owner of such
primary obligation against loss in respect thereof.
"Indebtedness" of any Person means (i) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (including, without limitation, reimbursement and all other obligations
with respect to surety bonds, letters of credit and bankers' acceptances,
whether or not matured, but not including obligations to trade creditors
incurred in the ordinary course of business), (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments, (iii) all indebtedness created
or arising under any conditional sale or other title retention agreements with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (iv) all Capital Lease Obligations,
(v) all Guaranteed Indebtedness, (vi) all Indebtedness referred to in clause
(i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for payment of such Indebtedness and (vii) all liabilities
under title IV of ERISA.
"H-S-R Act" has the meaning specified in Section 7(n).
"Material Adverse Effect" means any event or circumstance,
condition, fact, effect, or other matter which has had or could reasonably be
expected to have a material adverse effect (i) on the business, assets, results
of operations, prospects or financial or other condition of the Company and its
Subsidiaries, taken as a whole; (ii) the Company's ability to pay the
Obligations in accordance with the terms hereof; or (iii) the ability of the
Company and its Subsidiaries to perform on a timely basis any material
obligation under the Transaction Documents or to consummate the transactions
contemplated thereby.
"Merger" has the meaning specified in Section 7(m).
"Note Purchase Agreement" means the Note Purchase Agreement,
dated as of April 27, 1999, by and between the Company and Healthcare Partners
and shall refer to such agreement as the same may be in effect at the time such
reference becomes operative.
3
"Obligations" mean all amounts owing by the Company under the
Transaction Documents, including without limitation, all principal, interest,
fees, expenses, attorneys' fees and any other sum chargeable to the Company
under any of the Transaction Documents.
"Purchaser" has the meaning given to such term in the Note
Purchase Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of May ___, 1999, by and between the Company and the
Purchaser and shall refer to such agreement as the same may be in effect at the
time such reference becomes operative.
"Restricted Payment" means (i) the declaration of any dividend
or the incurrence of any liability to make any other payment or distribution of
cash or other property or assets in respect of the Company's capital stock
(other than stock splits or stock dividends) or (ii) any payment on account of
the purchase, redemption or other retirement of the Company's capital stock or
any other payment or distribution made in respect of any capital stock of the
Company, either directly or indirectly.
"Stock" shall mean all shares, options, warrants, general or
limited partnership interests, limited liability company membership interests,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the SEC under the Exchange
Act).
"Stockholders Agreement" means the Stockholders Agreement,
dated as of May __, 1999, by and among the Company and the other signatories
thereto and shall refer to such agreement as the same may be in effect at the
time such reference becomes operative.
"Transaction Documents" mean the 5 1/2% Convertible
Subordinated Notes, this Supplemental Indenture, the Original Indenture, the
Note Purchase Agreement, the Stockholders Agreement and the Registration Rights
Agreement.
All terms used in this Supplemental Indenture that are defined
in the Original Indenture have the meanings assigned to them in the Original
Indenture unless such terms have been otherwise defined in this Supplemental
Indenture.
Section 2. Designation and Terms of the 5 1/2% Convertible
Subordinated Notes. The series of Securities created by this Supplemental
Indenture shall be known and designated as the "5 1/2% Convertible Subordinated
Notes due 2009" of the Company and, subject to the provisions of Section 306 of
the Original Indenture, shall be limited in aggregate principal amount to One
Hundred Million Dollars ($100,000,000).
The Stated Maturity of the 5 1/2% Convertible Subordinated
Notes shall be May [__], 2009. The 5 1/2% Convertible Subordinated Notes shall
bear interest from May [__], 1999, or from
4
the most recent Interest Payment Date to which interest on the 5 1/2%
Convertible Subordinated Notes then outstanding has been paid or duly provided
for, at the rate of five and one-half percent (5 1/2%) per annum. Interest shall
be payable semi-annually on June 30 and December 31 of each year, commencing
June 30, 1999, until the principal amount thereof is paid (including payment
through conversion pursuant to the terms of the 5 1/2% Convertible Subordinated
Notes) or made available for payment and (to the extent that the payment of such
interest shall be legally enforceable) at the rate of ten percent (10%) per
annum on any overdue principal and premium and on any overdue installment of
interest.
Payment of principal of (and premium, if any, on) the 5 1/2%
Convertible Subordinated Notes and, unless otherwise paid as hereinafter
provided, the interest thereon will be made at the office or agency of the
Company maintained for such purpose pursuant to Section 1002 of the Original
Indenture; provided, however, that at the option of the Company, interest on the
5 1/2% Convertible Subordinated Notes may be paid (i) by check mailed to the
address of the Person entitled thereto as it shall appear on the Security
Register or (ii) by wire transfer to an account maintained by the Person
entitled thereto as specified in the Security Register; provided, that such
Person shall have given the Trustee written wire instructions at least five
Business Days prior to the applicable Interest Payment Date; provided, further,
and notwithstanding any other provision of this Supplemental Indenture or the
Original Indenture to the contrary, that with respect to a Holder of Securities
of this series that, together with such Holder's Affiliates, holds an aggregate
principal amount of 5 1/2% Convertible Subordinated Notes equal to or in excess
of $5,000,000, at the request of such Holder in writing to the Company, interest
on, and any Redemption Price or Repurchase Payment with respect to, such
Holder's Securities shall be paid, on the applicable Interest Payment Date,
Redemption Date or Repurchase Date, by wire transfer in immediately available
funds in accordance with wire transfer instructions supplied by such Holder to
the Trustee and the Paying Agent (if different from the Trustee), which
instructions such Holder shall have given to the Trustee and the Paying Agent at
least five Business Days prior to the applicable Interest Payment Date,
Redemption Date or Repurchase Payment Date.
The Regular Record Date referred to in Section 301 of the
Original Indenture for the payment of the interest on the 5 1/2% Convertible
Subordinated Notes payable, and punctually paid or duly provided for, on any
Interest Payment Date shall be the fifteenth day (whether or not a Business Day)
of the month in which such Interest Payment Date occurs.
The 5 1/2% Convertible Subordinated Notes may be issued in
denominations of $1,000 and any integral multiple thereof authorized by the
Company, such authorization to be conclusively evidenced by the execution
thereof.
Section 305(a)(v) of the Original Indenture shall not apply to
the 5 1/2% Convertible Subordinated Notes.
Notwithstanding the provisions of Section 401 of the Original
Indenture, the satisfaction and discharge of the Indenture with respect to the 5
1/2% Convertible Subordinated Notes pursuant to Section 401(1)(B)(ii) or (iii)
of the Original Indenture shall not impair the effect of
5
Section 5 or of Section 7(m) concerning Mergers unless and until all of the
outstanding 5 1/2% Convertible Subordinated Notes have been (x) repaid in full,
whether by payment of cash or through conversion, (y) redeemed by the Company in
accordance with their terms or (z) repurchased by the Company in accordance with
Section 5 (provided that the foregoing provisions of this paragraph shall no
longer apply with respect to any 5 1/2% Convertible Subordinated Notes not
tendered for payment pursuant to a Repurchase Offer).
In accordance with Sections 201, 202 and 203 of the Original
Indenture, the 5 1/2% Convertible Subordinated Notes shall be substantially in
the form attached hereto as Exhibit A.
The Purchaser acknowledges that each 5 1/2% Convertible
Subordinated Note and any stock certificate representing shares of Common Stock
issued upon conversion of any of the 5 1/2% Convertible Subordinated Notes will
be endorsed with a legend substantially similar to the following:
THE SECURITIES REPRESENTED BY THIS [NOTE] [CERTIFICATE] HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT
TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT
TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144
UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT.
Notwithstanding the provisions of Section 305 of the Original Indenture to the
contrary, (x) no Opinion of Counsel shall be required in order for a Holder to
transfer its 5 1/2% Convertible Subordinated Notes, and (y) the legend set forth
above shall be the only legend applicable to the 5 1/2% Convertible Subordinated
Notes.
Upon the execution of this Supplemental Indenture, the 5 1/2%
Convertible Subordinated Notes may be executed by the Company and delivered to
the Trustee for authentication, and the Trustee shall, upon receipt of the
documents specified in Section 303 of the Original Indenture, thereupon
authenticate and deliver said 5 1/2% Convertible Subordinated Notes to or upon a
Company Order.
Subject to Section 5 hereof, the Company may not, without the
prior written consent of the holders of a majority of the then outstanding
principal amount of the 5 1/2% Convertible Subordinated Notes, effect any Change
of Control.
Section 3. Redemption of 5 1/2% Convertible Subordinated
Notes. Subject to the provisions of Section 6(n), the 5 1/2% Convertible
Subordinated Notes are subject to redemption upon not less than 20 Business Days
nor more than 60 calendar days' notice by mail, such 20 Business Days or 60
calendar days, as the case may be, to be counted from the date notice is mailed,
at any
6
time on or after May [__], 2002, as a whole, but not in part, at the election of
the Company, at the following Redemption Prices (expressed as percentages of the
principal amount): If redeemed during the 12-month period beginning May [__] of
the years indicated,
Year Redemption
Price
2002 ........... 103.0%
2003 ........... 101.5%
2004 and
thereafter .... 100.0%
, together, in the case of any such redemption, with accrued interest to but not
including the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be payable to the Holders of such 5
1/2% Convertible Subordinated Notes of record at the close of business on the
relevant Regular Record Dates or Special Record Dates, all as provided in the
Original Indenture.
The 5 1/2% Convertible Subordinated Notes do not have the
benefit of any sinking fund obligations.
The 5 1/2% Convertible Subordinated Notes are not subject to
the provisions of Article Fifteen of the Original Indenture concerning
defeasance and covenant defeasance of Securities.
Section 4. Conversion of 5 1/2% Convertible Subordinated
Notes. Subject to and upon compliance with the provisions of the Original
Indenture, the Holders of the 5 1/2% Convertible Subordinated Notes are
entitled, at their option, at any time, or in case the 5 1/2% Convertible
Subordinated Notes are called for redemption, then in respect of the 5 1/2%
Convertible Subordinated Notes until and including, but (unless the Company
defaults in making the payment due upon redemption) not after, the close of
business on the Redemption Date, to convert the 5 1/2% Convertible Subordinated
Notes (or any portion of the principal amount thereof which is $1,000 or an
integral multiple thereof), at 100% of the principal amount thereof, or of such
portion, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100 of a share) of Common Stock of the Company at a
conversion price equal to $18.25 aggregate principal amount of the 5 1/2%
Convertible Subordinated Notes for each share of Common Stock (or at the current
adjusted conversion price if an adjustment has been made as provided in the
Original Indenture, as such conversion price adjustment provisions are
supplemented by the last paragraph of this Section 4) by surrender of the 5 1/2%
Convertible Subordinated Notes duly endorsed or assigned to the Company or in
blank, to the Company at its office or agency in ______________________,
accompanied by written notice to the Company that the Holder thereof elects to
convert its 5 1/2% Convertible Subordinated Notes, or if less than the entire
principal amount thereof is to be converted. Subject to the right of the Holder
of this Security (or any Predecessor Security) to receive an installment of
interest on the principal amount of such Security or portion thereof so
converted for the period from the first day of the then current semi-annual
interest period to but not including the effective date of
7
such conversion, no payment or adjustment is to be made on conversion for
interest accrued thereon or for dividends on the Common Stock issued on
conversion. No fractions of shares or scrip representing fractions of shares
will be issued on conversion, but instead of any fractional interest the Company
shall pay a cash adjustment as provided in the Original Indenture.
In addition to the conversion price adjustments set forth in
Section 1405 of the Original Indenture, in case at any time after the date of
the issuance of the 5 1/2% Convertible Subordinated Notes, the Company shall
issue and sell shares of its Common Stock at a price per share less than the
current market price per share (determined as provided in paragraph (8) of
Section 1405 of the Original Indenture) of the Common Stock on the date such
shares of Common Stock are issued (other than pursuant to a dividend
reinvestment plan, any employee benefit plan of the Company or any obligation of
the Company existing as of the original date of issuance of the 5 1/2%
Convertible Subordinated Notes), the conversion price in effect at the opening
of business on the day following the date fixed for such determination shall be
reduced by multiplying such conversion price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination plus the number of shares
of Common Stock which the aggregate of the sale price of the total number of
shares of Common Stock so issued and sold would purchase at such current market
price and the denominator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination
plus the number of shares of Common Stock so issued and sold or to be issued and
sold, such reduction to become effective immediately after the opening of
business on the day following the date fixed for such determination. For the
purposes of this paragraph, the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock.
Section 5. Repurchase Upon a Designated Merger.
(a) In the event that a proposed Merger not otherwise
permitted by the terms of the 5 1/2% Convertible Subordinated Notes has been
approved by the requisite vote of the Company's stockholders entitled to vote
thereon (a "Designated Merger"), and the Holders of less than a majority of the
outstanding principal amount of the 5 1/2% Convertible Subordinated Notes have
consented to such Designated Merger, the Company may nevertheless consummate
such Merger to the extent and only to the extent that it repurchases, on the
effective date of such Designated Merger (the "Repurchase Payment Date"), all of
the 5 1/2% Convertible Subordinated Notes tendered for such repurchase by the
Holders thereof, at a purchase price equal to 110% of the principal amount
thereof plus accrued and unpaid interest thereon to but not including the
Repurchase Payment Date. To effect such repurchase, the Company shall give or
cause to be given written notice in the form of an Officer's Certificate (the
"Repurchase Notice") to all Holders of the 5 1/2% Convertible Subordinated
Notes, the Trustee and the Paying Agent of such Designated Merger and shall make
an offer to purchase (as the same may be extended in accordance with applicable
law, the "Repurchase Offer") all then outstanding 5 1/2% Convertible
Subordinated Notes at a purchase price equal to 110% of the principal amount
thereof plus accrued and unpaid interest thereon to but not including the
Repurchase Payment Date. The Repurchase Notice shall be given in accordance with
Section 106
8
of the Original Indenture and the Repurchase Offer shall, subject to Section
6(n), be made not less than 21 Business Days prior to the Repurchase Payment
Date. The Repurchase Notice shall set forth:
(i) a description of the Designated Merger and that the
Company is offering to repurchase all of the outstanding 5 1/2%
Convertible Subordinated Notes upon consummation of the Designated
Merger;
(ii) the repurchase price (the "Repurchase Payment");
(iii) the expiration date of the Repurchase Offer, which
shall be not less than 20 Business Days following the date the
Repurchase Notice is mailed;
(iv) the Repurchase Payment Date;
(v) that, unless the Company defaults in the payment of
the Repurchase Payment, all 5 1/2% Convertible Subordinated Notes or
portions thereof accepted for payment pursuant to the Repurchase Offer
shall cease to accrue interest on and after the Repurchase Payment
Date;
(vi) the Conversion Price;
(vii) the name and address of the Paying Agent;
(viii) that the 5 1/2% Convertible Subordinated Notes
(duly endorsed for transfer to the Company), together with the form of
"Option of Holder to Elect Repurchase" thereon completed and signed,
must be surrendered to the Paying Agent prior to the expiration of the
Repurchase Offer to collect the Repurchase Payment; and
(ix) any other information required by applicable law to
be included therein and any other procedures that a Holder must follow
in order to have 5 1/2% Convertible Subordinated Notes repurchased.
(b) The Repurchase Offer shall remain open until the close of
business on the expiration date of the Repurchase Offer. Each Holder shall have
the right to withdraw its tender in accordance with applicable rules promulgated
by the SEC under the Exchange Act.
(c) In the event that the Company makes a Repurchase Offer,
the Company will comply with any applicable securities laws and regulations,
including, to the extent applicable, Section 14(e) of, and Rule 14e-1 under, the
Exchange Act.
(d) On the Repurchase Payment Date, the Company shall, to the
extent lawful and only if the Designated Merger is consummated on such date:
9
(i) accept for payment all 5 1/2% Convertible
Subordinated Notes or portions thereof tendered pursuant to the
Repurchase Offer;
(ii) irrevocably deposit with the Paying Agent in
immediately available funds an amount equal to the Repurchase Payment
with respect to all 5 1/2% Convertible Subordinated Notes or portions
thereof so accepted; and
(iii) deliver or cause to be delivered to the Trustee the
5 1/2% Convertible Subordinated Notes so accepted together with an
Officers' Certificate stating the 5 1/2% Convertible Subordinated
Notes or portions thereof tendered to the Company.
(e) The Paying Agent shall promptly (but in any case not later
than five Business Days after the Repurchase Payment Date) mail (unless paid by
wire transfer, if applicable, pursuant to the provisions of Section 2) to each
Holder of 5 1/2% Convertible Subordinated Notes so accepted payment in an amount
equal to the Repurchase Payment for such 5 1/2% Convertible Subordinated Notes,
and the Trustee shall as soon as practicable authenticate and mail to each
Holder new 5 1/2% Convertible Subordinated Notes equal in principal amount to
any unpurchased portion of the 5 1/2% Convertible Subordinated Notes surrendered
by such Holder, if any; provided, that such new 5 1/2% Convertible Subordinated
Notes shall be in the principal amount of $1,000 or an integral multiple
thereof. The Company shall publicly announce the results of all repurchases
pursuant to this Section 5 on or as soon as practicable after the Repurchase
Payment Date.
Section 6. Additional Events of Default Applicable to the 5
1/2% Convertible Subordinated Notes. In addition to the Events of Default set
forth in Section 501 of the Original Indenture, the following events shall also
be Events of Default with respect to the 5 1/2% Convertible Subordinated Notes:
(a) The Company shall default in the payment of any amount
owing in respect of the 5 1/2% Convertible Subordinated Notes other than
principal or interest, or owing in respect of any of the other Obligations
(other than principal or interest), when due and payable or declared due and
payable, and continuance of such default for a period of 30 days after there has
been given, by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least a majority in principal
amount of the 5 1/2% Convertible Subordinated Notes, a written notice specifying
such default and requiring it to be remedied and stating that such notice is a
"Notice of Default" under the Indenture; or
(b) The Company shall fail or neglect to perform, keep or
observe any provision of any of the Transaction Documents, and continuance of
such failure or neglect for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least a majority in principal amount of the
5 1/2% Convertible Subordinated Notes, a written notice specifying such default
and requiring it to be remedied and stating that such notice is a "Notice of
Default" under the Indenture; provided, that if such default is susceptible to
being cured and at the expiration of such 60 day period the Company
10
is attempting in good faith to cure such default, such 60 day period may be
extended for an additional 30 days; or
(c) The Company shall default under any other agreement,
document or instrument to which the Company or any Subsidiary is a party or by
which the Company or any of its Subsidiaries or any of their property is bound,
and such default (i) involves the failure to make any payment (whether of
principal, interest or otherwise) due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise, after applicable notices have
been given and cure periods have elapsed) in respect of any Indebtedness of the
Company or any of its Subsidiaries in an aggregate amount exceeding $1,750,000,
or (ii) causes (or permits any holder of such Indebtedness or a trustee to
cause) such Indebtedness or a portion thereof in an aggregate amount exceeding
$1,750,000, to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, without such Indebtedness having been discharged, or
such acceleration having been rescinded or annulled, within a period of 30 days
after there has been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the Holders of at least a
majority in principal amount of the 5 1/2% Convertible Subordinated Notes, a
written notice specifying such default and requiring it to be remedied and
stating that such notice is a "Notice of Default" under the Indenture; provided,
however, that if, prior to the entry of judgment in favor of the Trustee, such
acceleration, if any, shall be rescinded or annulled, or such default under such
agreement, document or instrument shall be remedied or cured by the Company or
waived by the holders of such Indebtedness, or if any amounts due and payable as
a result of maturity or such acceleration are paid in full, then the Event of
Default hereunder by reason thereof shall be deemed likewise to have been
thereupon remedied, cured or waived without further action upon the part of
either the Trustee or any of the Holders of the 5 1/2% Convertible Subordinated
Notes; or
(d) Any representation or warranty of the Company in the Note
Purchase Agreement or in any other Transaction Document or in any written
statement pursuant thereto, report, financial statement or certificate made or
delivered to the Purchaser by the Company pursuant thereto shall be untrue, or
incorrect in any material respect, as of the date when made; or
(e) Any asset of the Company or any of its Subsidiaries which
is material to the Company and its Subsidiaries, taken as a whole, shall be
attached, seized, levied upon or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors of the Company or any of its Subsidiaries and shall
remain unstayed or undismissed for ninety (90) consecutive days; or the Company
or any of its Subsidiaries shall have concealed, removed or permitted to be
concealed or removed, any part of its property, with intent to hinder, delay or
defraud its creditors or any of them or made or suffered a transfer of any of
its property or the incurring of an obligation which may be fraudulent and or
any bankruptcy, fraudulent conveyance or other similar law; or
(f) Final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of $2,000,000 in
the aggregate shall be rendered against the Company or any of its Subsidiaries
and the same shall not be (i) fully covered by insurance, or (ii) vacated,
stayed, bonded, paid or discharged for a period of thirty (30) days; provided,
however, that
11
if, prior to the entry of judgment in favor of the Trustee, such judgment or
judgments are vacated, stayed, bonded, paid or discharged, then the Event of
Default hereunder by reason thereof shall be deemed likewise to have been
thereupon remedied, cured or waived without further action upon the part of
either the Trustee or any of the Holders of the 5 1/2% Convertible Subordinated
Notes.
Notwithstanding the reference to "Holders of at least 25% in
principal amount of the Outstanding Securities" set forth in Section 501(4) of
the Original Indenture, Holders of at least a majority in principal amount of
the 5 1/2% Convertible Subordinated Notes shall be required for Holders of the 5
1/2% Convertible Subordinated Notes to declare an Event of Default pursuant to
such Section 501(4) of the Original Indenture.
Notwithstanding the reference to "Holders of not less than 25%
in principal amount of the Outstanding Securities" set forth in Section 502 of
the Original Indenture, Holders of not less than a majority in principal amount
of the 5 1/2% Convertible Subordinated Notes shall be required for Holders of
the 5 1/2% Convertible Subordinated Notes to declare the principal amount of the
5 1/2% Convertible Subordinated Notes due and payable immediately pursuant to
such Section 502 of the Original Indenture.
Notwithstanding the reference to "Holder of not less than 25%
in principal amount of the Outstanding Securities" set forth in Section 507(2)
of the Original Indenture, Holders of not less than a majority in principal
amount of the 5 1/2% Convertible Subordinated Notes shall be required for
Holders of the 5 1/2% Convertible Subordinated Notes to institute proceedings
with respect to an Event of Default pursuant to such Section 507(2) of the
Original Indenture.
Section 7. Additional Covenants Applicable to the 5 1/2%
Convertible Subordinated Notes. In addition to the covenants set forth in
Article Ten of the Original Indenture, the 5 1/2% Convertible Subordinate Notes
shall also be subject to the following covenants:
(a) Books and Records. The Company shall, and shall cause its
Subsidiaries to, keep adequate records and books of account with respect to
their business activities, in which proper entries, reflecting all of their
financial transactions, are made in accordance with GAAP.
(b) Financial and Business Information.
(i) Quarterly Information. Subject to the last sentence
of this Section 7(b)(i), the Company will deliver to the Purchaser as
soon as practicable after the end of each of the first three quarterly
fiscal periods in each Fiscal Year of the Company, but in any event
within 45 days thereafter, (A) an unaudited consolidated balance sheet
of the Company and its Subsidiaries, if any, as at the end of such
quarter, and (B) unaudited consolidated statements of operations,
retained earnings and cash flows of the Company and its Subsidiaries,
if any, for such quarter and (in the case of the second and third
quarters) for the portion of the Fiscal Year ending with such quarter,
setting forth in comparative form in each case the projected
consolidated figures for such period and the actual consolidated
figures for the
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comparable period of the prior Fiscal Year. Such statements shall be
(1) prepared in accordance with GAAP consistently applied, (2) in
reasonable detail and (3) certified by the principal financial or
accounting officer of the Company. So long as the Company complies
with Section 7(c), the requirements of this Section 7(b)(i) shall be
deemed to be satisfied in every respect with no further action,
report, delivery or presentation on the part of the Company being
necessary.
(ii) Annual Information. Subject to the last sentence of
this Section 7(b)(ii), the Company will deliver to the Purchaser as
soon as practicable after the end of each Fiscal Year of the Company,
but in any event within 90 days thereafter, (A) an audited
consolidated balance sheet of the Company and its Subsidiaries, if
any, as at the end of such year, and (B) audited consolidated
statements of operations, retained earnings and cash flows of the
Company and its Subsidiaries, if any, for such year; setting forth in
each case in comparative form the figures for the previous year. Such
statements shall be (1) prepared in accordance with GAAP consistently
applied, (2) in reasonable detail and (3) certified by Ernst & Young
LLP or such other firm of independent certified public accountants of
recognized national standing selected by the Company and reasonably
acceptable to the Purchaser. So long as the Company complies with
Section 7(c), the requirements of this Section 7(b)(ii) shall be
deemed to be satisfied in every respect with no further action,
report, delivery or presentation on the part of the Company being
necessary.
(c) Filings. The Company will deliver to the Purchaser,
promptly upon their becoming available, one copy of each report, notice or proxy
statement sent by the Company to its stockholders generally, and of each regular
or periodic report (pursuant to the Exchange Act) and any registration
statement, prospectus or other writing (other than transmittal letters)
(including, without limitation, by electronic means) pursuant to the Securities
Act filed by the Company with (i) the Securities and Exchange Commission or (ii)
any securities exchange on which shares of Common Stock of the Company are
listed.
(d) Budgets. Company will deliver to Purchaser within 15 days
prior to the beginning of each Fiscal Year:
(A) budgeted consolidated balance sheets of the
Company and its Subsidiaries, if any, for such Fiscal Year, on
a monthly basis;
(B) budgeted consolidated cash flow statements of the
Company and its Subsidiaries, if any, including summary
details of cash disbursements, for such Fiscal Year, on a
monthly basis; and
(C) budgeted consolidated statements of operation of
the Company and its Subsidiaries, if any, for such Fiscal
Year, on a monthly basis;
in each case together with appropriate supporting details.
13
(e) Compliance with Law. The Company shall, and shall cause
each of its Subsidiaries to, comply with all laws applicable to it, except,
where the failure to comply would not be reasonably likely to result in a
Material Adverse Effect.
(f) Conduct of Business. The Company shall, and shall cause
each of its Subsidiaries to, continue to conduct business solely in its existing
lines of business and businesses related thereto.
(g) Amendments to Basic Documents. The Company shall not, and
shall not permit any of its Subsidiaries to, amend, alter or repeal, including
by merger consolidation or otherwise, any provision of the Company's Restated
Certificate of Incorporation (including the filing of any certificate of
designation(s)) or bylaws of the Company or any Subsidiary, in any manner that
could reasonably be anticipated to have a material negative impact on the
Purchaser (or any Holder) or the Purchaser's rights hereunder or a Material
Adverse Effect.
(h) Sales of Assets; Liquidation. The Company shall not, and
shall not permit any Subsidiary of the Company to, (A) sell, transfer, convey or
otherwise dispose of any assets or properties or (B) liquidate, dissolve or wind
up the Company, except for transfers to the Company, whether voluntary or
involuntary; provided, however, that the foregoing, shall not prohibit (i) the
sale of inventory in the ordinary course of business, (ii) the sale of surplus
or obsolete equipment and fixtures, (iii) transfers resulting from any casualty
or condemnation of assets or properties, (iv) sales as to which the net proceeds
are either (1) reinvested in the Company's or, if sold by a Subsidiary, such
Subsidiary's or the Company's existing or related lines of business or (2)
applied to repay Indebtedness, within 180 days after such sale and (v) sales as
to which the aggregate net proceeds do not exceed $1,000,000 in any calendar
year.
(i) Employee Loans. The Company shall not and shall not permit
any Subsidiary of the Company to make or accrue any loans or other advances of
money to any employee of the Company or such Subsidiary, other than in the
ordinary course of business in an aggregate amount outstanding not to exceed
$1,000,000 at any one time.
(j) Transactions with Affiliates. The Company shall not and
shall not permit any Subsidiary of the Company to enter into or be a party to
any transaction with any Affiliate of the Company or such Subsidiary, except (i)
transactions expressly permitted hereby, (ii) transactions which are approved by
a disinterested majority of the members of the Company's Board of Directors,
(iii) transactions between the Company and its wholly-owned Subsidiaries or
between such Subsidiaries and (iv) payment of compensation to employees and
directors' fees.
(k) Indebtedness. The Company shalt not incur or suffer to
exist any Indebtedness directly or indirectly convertible into or exchangeable
for any class of equity security of the Company which ranks senior to the
Indebtedness evidenced by the 5 1/2% Convertible Subordinated Notes.
15
(l) Restricted Payments. The Company shall not and shall not
permit any Subsidiary of the Company to make any Restricted Payments nor shall
the Company permit any Subsidiary to make such payments with respect to the
Company's stock.
(m) Mergers and Subsidiaries. Without the consent of Holders
of at least a majority of the outstanding principal amount of the 5 1/2%
Convertible Subordinated Notes, neither the Company nor any Subsidiaries of the
Company shall directly or indirectly, by operation of law or otherwise, merge
with, consolidate with, or otherwise combine with any Person ("Merger") nor
shall the Company create any Subsidiary, other than (i) the creation of
wholly-owned Subsidiaries; (ii) mergers of wholly-owned Subsidiaries of the
Company into the Company or any other of its wholly-owned Subsidiaries; (iii)
the formation of joint ventures with third parties for the ownership, operation,
leasing or development of specific faculties or for conduct of business related
to the Company's primary business; and (iv) any Merger, (A) in which the
stockholders of the Company immediately prior to the Merger (x) own immediately
following the Merger over 50% of the equity value of the surviving entity (on a
fully diluted basis) or (y) are entitled to elect at least a majority of the
directors of the surviving entity and (B) which is Accretive.
(n) H-S-R Act. To the extent the Company proposes to engage in
any transaction (other than the annual election of directors, approval of
employee benefit or incentive plans, ratification of the appointment of
independent auditors and similar matters described in any proxy statement of the
Company for annual meetings of its stockholders) that requires the prior
approval of the Company's stockholders, the Company will, to the extent
permitted by applicable law, delay the date set for the stockholder vote on such
proposed transaction (and, as necessary, the record date for determination of
stockholders entitled to vote on such proposed transaction), by that number of
days such that the number of days between the date such stockholders' meeting
was first publicly announced by the Company and such delayed date for the
stockholders' meeting shall not be less than 40 calendar days; provided, that
the Purchaser desires to convert all or a portion of its 5 1/2% Convertible
Subordinated Notes in order to vote in such stockholders' meeting and that the
Purchaser is required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended (the "HSR Act"), to file a Notification and Report Form under
the HSR Act in order to convert such 5 1/2% Convertible Subordinated Notes (and
enable the Purchaser to vote in such stockholders' meeting); provided, further,
that the Purchaser provide the Company with written notice stating the
circumstances set forth in the immediately preceding proviso not less than 10
Business Days following the Company's first public announcement of the
stockholders' meeting; and provided, further, that the Company shall be required
to comply with this Section 7(n) only once. The Company hereby agrees to
reasonably cooperate with the Purchaser in order to facilitate a prompt and
proper filing of the Purchaser's Notification and Report Form described above.
In the event that the Company elects to redeem the 5 1/2%
Convertible Subordinated Notes pursuant to Section 3 hereof or repurchase the 5
1/2% Convertible Subordinated Notes upon a Designated Merger pursuant to Section
5 hereof and has mailed notice of such redemption or repurchase in accordance
with the applicable provisions of the Original Indenture and this Supplemental
Indenture, to the extent the Holder of 5 1/2% Convertible Subordinated Notes is
then required to file a Notification and Report Form pursuant to the H-S-R Act
in order to convert its
15
5 1/2% Convertible Subordinated Notes into Common Stock in accordance with their
terms, then to the extent that such Holder (x) notifies the Company in writing
within ten (10) Business Days from the Company's mailing of the redemption or
repurchase notice that it wishes to convert its 5 1/2% Convertible Subordinated
Notes prior to the Redemption Date and that it is required to file a Notice and
Report Form pursuant to the H-S-R Act in order to convert its 5 1/2% Convertible
Subordinated Notes and (y) files its Notification and Report Form with the
applicable governmental authorities within ten (10) Business Days from the
Company's mailing of the redemption or repurchase notice, the Company will
extend the Redemption Date or the Repurchase Payment Date, as applicable, for
such redemption or repurchase, as applicable, for such reasonable number days
requested by such Holder to enable such Holder to obtain any necessary approvals
or for the applicable waiting period under the H-S-R Act to expire in order to
convert its 5 1/2% Convertible Subordinated Notes; provided, that the Company
shall not be required to extend the Redemption Date or the Repurchase Payment
Date, as applicable, for such redemption or repurchase beyond 90 calendar days
from the date that the Company's original redemption or repurchase notice was
mailed to Holders; provided, further, that if the Holder exercises its rights
under this paragraph, it thereby covenants and agrees to use its best efforts to
obtain necessary approvals or achieve early termination of applicable waiting
periods under the H-S-R Act as soon as practicable. The Company hereby agrees to
reasonably cooperate with the Holder in order to facilitate a prompt and proper
filing of the Holder's Notification and Report Form described above.
(o) Actions to Permit Conversions. In connection with any
conversion of the 5 1/2% Convertible Subordinated Notes, the Company shall make
or cause its Subsidiaries, as applicable, to make, in a timely manner, all
necessary material filings with and notices to all governmental authorities
having jurisdiction over the Company or its applicable Subsidiaries (including
but not limited to all filings and notices necessary to satisfy any "change of
ownership" requirements with respect to any facility or any license or permit
relating thereto, to the extent that the failure to do so would reasonably be
likely to have a Material Adverse Effect).
The Company may omit in any particular instance to comply with
any covenant or condition set forth in this Section 7, with respect to the 5
1/2% Convertible Subordinated Notes if before or after the time for such
compliance the Holders of at least a majority in principal amount of the
outstanding 5 1/2% Convertible Subordinated Notes shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance with
such covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
force and effect.
The terms and conditions of this Supplemental Indenture shall
modify, and shall be deemed to be a part of, the terms and conditions of the
Indenture for any and all purposes. To the extent any provisions of this
Supplemental Indenture are inconsistent with any provision of the Original
Indenture, such provision contained in this Supplemental Indenture shall govern.
The Original Indenture, as modified by this Supplemental Indenture, is in all
respects hereby ratified and confirmed.
16
Although this Supplemental Indenture is dated May [__], 1999,
it shall be effective only from and after the actual time of its execution and
delivery by the Company and the Trustee on the date indicated by their
respective acknowledgments attached hereto.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
17
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the day and year first above
written.
BROOKDALE LIVING COMMUNITIES, INC.
By: ------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By: ------------------------------------
Name:
Title:
18