EXHIBIT 10.3
Exhibit B
This Note has not been registered under the Securities Act of
1933 and may not be offered or sold except pursuant to an
exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933.
VANGUARD HEALTH SYSTEMS, INC.
8.18% Convertible Subordinated Note due 2012
$17,641,800 Nashville, TN
__________ 1, 2002
VANGUARD HEALTH SYSTEMS, INC. a Delaware corporation (the
"Company"), for value received, promises to pay to Baptist Health
System, or its assigns, the principal sum of Seventeen Million
Six Hundred Forty One Thousand Eight Hundred dollars
($17,641,800) on __________ 1, 2012.
Interest Payment Dates: __________ 1, commencing __________
1, 2003.
Reference is hereby made to the further provisions of this
Note set forth on Annex A attached hereto, which further
provisions (including, without limitation, the subordination
provisions contained in Section 10 hereof) shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed by its duly authorized officer.
VANGUARD HEALTH SYSTEMS, INC.
By:__________________________
Name:
Title:
ANNEX A
to
8.18% Convertible Subordinated Note due 2012
Principal Amount: $17,641,800
1. Principal and Interest.
The Company will pay the principal of this Note on
__________ 1, 2012.
The Company promises to pay interest on the principal amount
of this Note on each Interest Payment Date, as set forth below,
at the rate of 8.18% per annum, for an annual interest payment
amount of $______ $1,443,099.
Interest will be payable annually to the Person (as defined
below), who is the holder of this Note in the records of the
Company (the "Holder") at the close of business on the __________
15 immediately preceding the Interest Payment Date, on each
__________ 1 ("Interest Payment Date"), commencing __________ 1,
2003.
Interest on this Note will accrue from the most recent date
to which interest has been paid or, if no interest has been paid,
from __________ 1, 2002.
The Company shall pay interest on overdue principal, and
interest on overdue installments of interest, to the extent
lawful, at the rate of 10.18% per annum.
The term "Person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint-
stock company, trust or unincorporated organization.
2. Method of Payment.
The Company will pay principal and, as provided above,
interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts.
However, the Company may pay principal and interest by its check
payable in such money. It may mail an interest check to a
Holder's address (as reflected in the records of the Company). If
a payment date is a date other than a business day, payment may
be made at that place on the next succeeding day that is a
business day and no interest shall accrue for the intervening
period.
3. Optional Redemption.
The Company shall not have the option to redeem this Note
prior to __________ 1, 2007. On and after __________ 1, 2007 and
prior to maturity, this Note is redeemable, at the Company's
option, in whole or in part, upon not less than 30 nor more than
60 days' prior notice mailed by first-class mail to the Holder's
last address, as it appears in the Company's records, at the
redemption prices prior to maturity (expressed as percentages of
principal amount) set forth
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below, plus accrued and unpaid interest to the date fixed for such
redemption (the "Redemption Date") if redeemed during the twelve-month
period beginning on __________ 1 of the years indicated below:
If Redeemed During the
12-Month Period Commencing Redemption Price
__________ 1, 2007 102%
__________ 1, 2008 101%
__________ 1, 2009 and 100%
thereafter
On and after the Redemption Date, interest shall cease to
accrue on this Note, or portion thereof called for redemption,
unless the Company defaults in the payment of the redemption
price.
4. Repurchase upon Change of Control.
Within 30 days after the occurrence of a Change of Control
(as defined below), the Company must commence and consummate an
offer to purchase (the "Offer to Purchase") this Note, at a
purchase price equal to 100% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (the
"Payment Date").
The Company will not be required to make an Offer to
Purchase if a third party makes an offer to purchase this Note in
the manner, at the times and at the price otherwise in compliance
with this Note and actually purchases this Note, if validly
tendered and not withdrawn.
Prior to the commencement (or mailing) of the Offer to
Purchase, but in any event within 30 days following the
occurrence of a Change of Control, the Company must either (a)
repay in full and terminate all commitments under Indebtedness
(as defined below) under the Credit Agreement (as defined below),
all other Special Senior Indebtedness (as defined below), the
terms of which require repayment upon a Change of Control, and
repay in full the Public Notes (as defined below) under the
Indenture (as defined below), or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit
Agreement, all other such Special Senior Indebtedness and the
Public Notes under the Indenture and to repay the Indebtedness
owed to, and terminate all commitments of, each lender which has
accepted such offer; or (b) obtain the requisite consents under
the Credit Agreement, all other Special Senior Indebtedness and
the Indenture to permit the repurchase of this Note as provided
above.
The term "Change of Control" means such time as one of the
following shall occur:
(i) the consummation of any transaction, including,
without limitation, any merger or consolidation, the result
of which is that any "Person" or "group" (within the meaning
of Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934), other
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than (A) any of the officers of the
Company on __________ 1, 2002 holding the office of
Executive Vice President or a higher office or (B) Xxxxxx
Xxxxxxx Capital Partners III, L.P., MSCP III 892 Investors,
L.P., Xxxxxx Xxxxxxx Capital Investors, L.P., Xxxxxx Xxxxxxx
Xxxx Xxxxxx Capital Partners IV, L.P., MSDW IV 892
Investors, L.P. and Xxxxxx Xxxxxxx Xxxx Xxxxxx Capital
Investors IV, L.P., or any other merchant banking or similar
fund under common control with any of the aforementioned
entities (such Persons defined in the foregoing clauses (A)
and (B) being referred to hereinafter as "Existing
Shareholders"), becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of
1934) of shares of capital stock of any class or kind
ordinarily having the power to vote for the election of
directors of the Company representing more than 50% of the
total voting power of all such shares of capital stock on a
fully diluted basis;
(ii) the direct or indirect sale, transfer, conveyance
or other disposition, not including a merger or
consolidation, in one or a series of related transactions,
of all or substantially all of the properties or assets of
the Company and its subsidiaries taken as a whole to any
"Person" or "group" (as those terms are defined in clause
(i) above), other than to the Existing Stockholders;
(iii) the adoption of a plan relating to the
liquidation or dissolution of the Company; or
(iv) during any consecutive two year period,
individuals who at the beginning of such period constituted
the Board of Directors (together with any new directors (a)
appointed or nominated by one or more Existing Stockholders
or (b) whose election by the Board of Directors or whose
nomination by the Board of Directors for election by the
Company's stockholders was approved by a vote of at least a
majority of the members of the Board of Directors then in
office who either were members of the Board of Directors on
__________ 1, 2002 or whose election or nomination for
election was previously so approved) cease for any reason
during such period to constitute a majority of the members
of the Board of Directors then in office.
The term "Common Stock" means the Company's common stock,
$.01 par value.
The term "Credit Agreement" means the Credit Agreement among
the Company, the lenders, agents and co-agents (and joint lead
arrangers and book managers) from time to time party thereto and
Bank of America, N.A., as Administrative Agent, dated as of July
30, 2001, together with all agreements, notes, instruments and
documents executed or delivered pursuant thereto and in
connection therewith, including, without limitation, all
mortgages, other security documents and guarantees, in each case
as amended (including any amendment and restatement),
supplemented, extended, renewed, replaced (by one or more credit
facilities, debt instruments and/or related documentation) or
otherwise modified from time to time including, without
limitation, any agreement increasing the amount of, extending the
maturity of or refinancing (in whole or in part) (including, but
not limited to, by the inclusion of additional or different
lenders thereunder or additional borrowers or guarantors thereof)
all or any portion of the Indebtedness (as defined below) under
such agreement or any successor agreement or agreements and
whether by the same or any other agent, lender or group of
lenders.
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The term "Indebtedness" means, with respect to any Person at
any date of determination (without duplication):
(i) all indebtedness of such Person for borrowed money;
(ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(iii) all obligations of such Person in respect of letters of
credit or other similar instruments (including reimbursement
obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit)
securing obligations (other than obligations described in (i) or
(ii) above or (v) or (vi) below) entered into in the ordinary
course of business of such Person to the extent such letters of
credit are not drawn upon or, if drawn upon, to the extent such
drawing is reimbursed no later than the 15th day following
receipt by such Person of a demand for reimbursement);
(iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services, which purchase
price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the
completion of such services if, and to the extent that, such
amount would appear as a liability on the balance sheet of such
Person, except trade payables and other accrued expenses arising
in the ordinary course of business and payable within one year of
the incurrence thereof;
(v) all capitalized lease obligations;
(vi) all Indebtedness of other Persons secured by a lien on any
asset of such Person, whether or not such Indebtedness is assumed
by such Person; provided that the amount of such Indebtedness
shall be the lesser of (a) the fair market value of such asset at
such date of determination and (b) the amount of such
Indebtedness;
(vii) all Indebtedness of other Persons guaranteed by such
Person to the extent such Indebtedness is guaranteed by such
Person; and
(viii) to the extent not otherwise included in this
definition, obligations under commodity agreements, currency
agreements and interest rate agreements (other than, [except for
the purposes of the definition of Special Senior Indebtedness,]
commodity agreements, currency agreements and interest rate
agreements designed to protect the Company or its subsidiaries
against fluctuations in commodity prices, foreign currency
exchange rates or interest rates and that do not increase the
Indebtedness of the obligor outstanding at any time other than as
a result of fluctuations in commodity prices, foreign currency
exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder).
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The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the
obligation; provided that
(A) the amount outstanding at any time of any Indebtedness
issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as
determined in conformity with generally accepted accounting
principles,
(B) money borrowed and set aside at the time of the incurrence
of any Indebtedness in order to pre-fund the payment of the
interest on such Indebtedness shall not be deemed to be
"Indebtedness" so long as such money is held to secure the
payment of such interest,
(C) the amount of any Indebtedness secured by a lien on an asset
of such Person but not otherwise the obligation, contingent or
otherwise, of such Person, shall be the lesser of (x) the fair
market value of such asset on the date the lien attached and (y)
the amount of such Indebtedness,
(D) the amount of any Indebtedness under any commodity
agreement, currency agreement or interest rate agreement that is
Indebtedness shall be the net amount payable by such Person if
such agreement were terminated at that time, and
(E) Indebtedness shall not include:
(x) liability for federal, state, local or other
taxes,
(y) performance, surety or appeal bonds provided
in the ordinary course of business or
(z) agreements providing for indemnification,
adjustment of purchase price or similar obligations, or
guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the
Company or any of its subsidiaries pursuant to such
agreements, in any case incurred in connection with the
disposition of any business, assets or subsidiary
(other than guarantees of Indebtedness Incurred by any
Person acquiring all or any portion of such business,
assets or subsidiary for the purpose of financing such
acquisition), so long as the principal amount does not
exceed the gross proceeds actually received by the
Company or any of its subsidiaries in connection with
such disposition.
The term "Indenture" means the Indenture dated as of July
30, 2001, in respect of the Public Notes.
The term "Public Notes" means the Company's 9 3/4% Senior
Subordinated Notes due 2011, originally issued in $300 million
principal amount.
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The term "Special Senior Indebtedness" means the following
obligations of the Company or any of its subsidiaries, whether
outstanding on __________ 1, 2002 or thereafter incurred: (i) all
Indebtedness and all other monetary obligations (including,
without limitation, expenses, fees, principal, premium, interest
(in each case, including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law), reimbursement
obligations under letters of credit and indemnities payable in
connection therewith) under (or in respect of) the Credit
Agreement or any commodity agreement, interest rate agreement or
currency agreement and (ii) all Indebtedness and all other
monetary obligations of the Company or any subsidiary of the
Company (other than the Public Notes and any guarantee thereof),
including principal, premium, and interest (in each case,
including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest
is an allowed claim under applicable law) on such Indebtedness,
unless such Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is
issued, is expressly made pari passu with, or subordinated in
right of payment to, the Public Notes or any guarantee thereof;
provided that the term "Special Senior Indebtedness" shall not
include (a) any Indebtedness of the Company or any subsidiary of
the Company to a subsidiary of the Company, or to a joint venture
in which the Company or any subsidiary of the Company has an
interest, (b) any repurchase, redemption or other obligation in
respect of Disqualified Stock (as defined in the Indenture), (c)
any Indebtedness to any employee of the Company or any of its
subsidiaries, (d) any liability for taxes owed or owing by the
Company or any of its subsidiaries or (e) any trade payables.
5. Offer to Purchase in Connection with Asset Sales.
If, as of the last day of any calendar month, the Company
has Excess Proceeds (as defined below) not theretofore subject to
an Offer to Purchase pursuant to this Section 5 totaling at least
$10 million, the Company must commence, not later than 30 days
after such date, and consummate an Offer to Purchase from the
Holder of this Note (and if required by the terms of any
Indebtedness that is pari passu with this Note, from the holders
thereof, on a pro rata basis), an aggregate principal amount of
this Note (and such pari passu Indebtedness) equal to the Excess
Proceeds on such date, at a purchase price equal to 100% of their
principal amount, plus accrued interest (if any) to the Payment
Date.
The term "Excess Proceeds" means the Company has Net Cash
Proceeds (as defined in the Indenture) from its Asset Sales (as
defined in the Indenture) after utilizing such proceeds (1) to
permanently repay its Special Senior Indebtedness, if any, within
12 months of the receipt of such Net Cash Proceeds, (2) to invest
such Net Cash Proceeds within such 12 months in Replacement
Assets (as defined in the Indenture) or (3) to fund an offer to
purchase the Public Notes (and if required by the terms of any
Indebtedness that is pari passu with the Public Notes, from the
holders thereof), if any.
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6. Mandatory Redemption.
Except as described in Sections 4 and 5 above, the Company
is not required to make mandatory redemption of, or sinking fund
payments with respect to, this Note.
7. Successor Persons.
When a successor Person assumes all the obligations of its
predecessor under this Note, the successor Person shall succeed
to and be substituted for the predecessor Person.
8. Defaults and Remedies.
Any of the following events constitutes an "Event of
Default" under this Note:
(a) default in the payment of principal of this Note when the
same becomes due and payable at maturity, upon acceleration,
redemption or otherwise;
(b) default in the payment of interest on this Note when the
same becomes due and payable, and such default continues for a
period of 30 days;
(c) the failure by the Company to make or consummate an Offer to
Purchase in accordance with Section 4 or 5 above 30 days after
notice of the Holder to the Borrower of such failure;
(d) any final judgment or order for the payment of money in
excess of $10 million in the aggregate for all such final
judgments or orders (not covered by insurance or indemnity
provided by a reputable and creditworthy Person, but treating any
deductibles, self-insurance or retention, or in the case of
indemnity, amounts excluded by baskets, caps, thresholds or
similar limitations, as not so covered) shall be rendered against
the Company or any subsidiary of the Company, and shall not be
paid or discharged, and there shall be any period of 60
consecutive days following entry of the final judgment or order
that causes the aggregate amount for all such final judgments or
orders outstanding and not paid or discharged against the Company
or any subsidiary of the Company to exceed $10 million during
which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect;
(e) a court having jurisdiction in the premises enters a decree
or order for (A) relief in respect of the Company, in an
involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, (B) appointment of
a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company, for all or
substantially all of the property and assets of the Company, or
(C) the winding up or liquidation of the affairs of the Company,
and such decree or order shall remain unstayed and in effect for
a period of 60 consecutive days; or
(f) the Company (A) commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consents to the
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entry of an order for relief in an involuntary case under any such law,
(B) consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company, or for all or substantially all of the
property and assets of the Company, or (C) effects any general
assignment for the benefit of creditors.
If an Event of Default occurs and is continuing, the
Holder may declare this Note to be due and payable unless
there are any amounts outstanding under the Credit
Agreement, in which case the same shall become immediately
due and payable upon the first to occur of an acceleration
under the Credit Agreement or the payment in full of all
loans, reimbursement obligations and all other obligations
and the termination of all commitments and letters of credit
thereunder (but only if such Event of Default is then
continuing). Upon a declaration of acceleration, such
principal of, premium, if any, and accrued interest shall be
immediately due and payable. If a bankruptcy or insolvency
default with respect to the Company occurs, this Note
automatically becomes immediately due and payable.
9. No Recourse Against Others.
No incorporator or any past, present or future partner,
stockholder, other equityholder, officer, director, employee or
controlling Person, as such, of the Company, shall have any
liability for any obligations of the Company under this Note, or
for any claim based on, in respect of or by reason of, such
obligations or their creation. The Holder by accepting this Note
waives and releases all such liability. The waiver and release
are part of the consideration for this issuance of the Note.
10. Subordination of this Note.
10.1. Agreement to Subordinate. The Company covenants and
agrees, and the Holder of this Note, by its acceptance hereof,
likewise covenants and agrees, (i) that this Note shall be issued
subject to the provisions of this Section 10, and each Person
holding this Note, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that the
payment of all obligations on this Note by the Company shall, to
the extent and in the manner herein set forth, be subordinated
and junior in right of payment to the prior payment in full in
cash or cash equivalents of all existing and future Senior
Indebtedness (as defined in Section 10.11(b) below), including,
without limitation, the Company's obligations under the Credit
Agreement and (ii) that the subordination is for the benefit of,
and shall be enforceable directly by, the holders of Senior
Indebtedness, and that each holder of Senior Indebtedness whether
now outstanding or hereafter created, incurred, assumed or
guaranteed shall be deemed to have acquired Senior Indebtedness
in reliance upon the covenants and provisions contained in this
Note.
10.2. Liquidation; Dissolution; Bankruptcy. (a) Upon any
payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors
upon any total or partial liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors or
marshaling of assets of the Company or in a bankruptcy,
reorganization, insolvency, receivership or other similar
proceeding relating to the
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Company or its property, whether voluntary or involuntary, all amounts
due or to become due upon all Senior Indebtedness (including any interest
accruing subsequent to the filing of a petition for bankruptcy at the rate
provided for in the documentation with respect thereto, whether
or not such interest is an allowed claim under applicable law)
shall first be paid in full in cash or cash equivalents, before
any payment or distribution of any kind or character is made on
account of this Note, or for the acquisition of this Note for
cash, property, securities or otherwise or any distribution with
respect to this Note, whether of cash, property, securities or
otherwise. Before any payment may be made by, or on behalf of,
the Company on this Note upon any such dissolution, winding up,
liquidation or reorganization, all Senior Indebtedness (including
any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim
under applicable law) must be paid in full in cash or cash
equivalents.
(b) To the extent any payment of Senior Indebtedness
(whether by or on behalf of the Company, as proceeds of
security or enforcement of any right of setoff or otherwise)
is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person under any
bankruptcy, insolvency, receivership, fraudulent conveyance
or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person, the
Senior Indebtedness or part thereof originally intended to
be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred. To the
extent that the obligation to repay any Senior Indebtedness
is declared to be fraudulent, invalid, or otherwise set
aside under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then the obligation so
declared fraudulent, invalid or otherwise set aside (and all
other amounts that would come due with respect thereto had
such obligation not been so affected) shall be deemed to be
reinstated and outstanding as Senior Indebtedness for all
purposes hereof as if such declaration, invalidity or
setting aside had not occurred.
(c) In the event that, notwithstanding the foregoing,
any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property,
securities or otherwise, to which the Holder of this Note
would be entitled, but for Section 10.2(a) or Section
10.2(b), shall be made by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other
similar Person making such payment or distribution for the
Holder of this Note prior to payment in full in cash or cash
equivalents of all Senior Indebtedness, such payment or
distribution shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior
Indebtedness (proportionately to such holders on the basis
of the respective amount of Senior Indebtedness held by such
holders) or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which
any of such Senior Indebtedness may have been issued, as
their respective interests may appear, to the extent
necessary to pay all such Senior Indebtedness in full in
cash or cash equivalents, after giving effect to any
concurrent payment, distribution or provision therefor to or
for the holders of such Senior Indebtedness.
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(d) The consolidation of the Company with, or the
merger of the Company with or into, another corporation or
the liquidation or dissolution of the Company
following the conveyance or transfer of all or substantially all
of its assets, to another corporation and as long as permitted
under the terms of the Senior Indebtedness shall not be
deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section 10.2 if such
other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, assume the Company's
obligations hereunder.
10.3. Default on Senior Indebtedness. (a) No direct or
indirect payment by or on behalf of the Company of this Note
whether pursuant to the terms of this Note or upon acceleration
or otherwise shall be made if, at the time of such payment, there
exists a default or an event of default under any Senior
Indebtedness and such default or event of default, as the case
may be, shall not have been cured or waived or the benefits of
this sentence waived by or on behalf of the holders of such
Senior Indebtedness, and to the extent that any payment under
this Note would otherwise be required pursuant to the terms
hereof, such payment shall be deferred until such time as such
payment may be made under the terms of this Annex A and the
failure to make any such payment shall not give rise to an Event
of Default under this Note.
(b) In the event that, notwithstanding the foregoing,
any payment shall be received by the Holder when such
payment is prohibited by Section 10.3(a), such payment shall
be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Indebtedness
(proportionately to such holders on the basis of the
respective amount of Senior Indebtedness held by such
holders) or their respective representatives, as their
respective interests may appear.
10.4. Acceleration of this Note. If payment of this Note is
accelerated because of an Event of Default, the Company shall
promptly notify holders of Senior Indebtedness of the
acceleration (although the failure to give any such notice shall
not affect the subordination provisions of this Section 10).
10.5. Notice by Company. The Company shall give prompt
written notice to the Holder of any fact known to the Company
which would prohibit the making of any payment to the Holder in
respect of this Note pursuant to the provisions of this Section
10 (although the failure to give any such notice shall not affect
the subordination provisions of this Section 10). Regardless of
anything to the contrary contained in this Section 10 or
elsewhere in this Note, the Holder shall not be charged with
knowledge of the existence of any default or event of default
with respect to any Senior Indebtedness or of any other facts
which would prohibit the making of any payment to the Holder
unless and until the Holder shall have received notice in writing
from the Company, or from a holder of Senior Indebtedness or a
representative therefor and, prior to the receipt of any such
written notice, the Holder shall be entitled to assume (in the
absence of actual knowledge to the contrary) that no such facts
exist.
10.6. Subrogation. (a) Subject to the payment in full in
cash or cash equivalents of all Senior Indebtedness, the Holder
of this Note shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Company applicable to the Senior
Indebtedness until this Note shall be paid in full; and, for the
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purposes of such subrogation, no such payments or distributions
to the holders of the Senior Indebtedness by or on behalf of the
Company or by or on behalf of the Holder by virtue of this
Section 10 which otherwise would have been made to the Holder
shall, as between the Company and the Holder of this Note, be
deemed to be a payment by the Company to or on account of the
Senior Indebtedness, it being understood that the provisions of
this Section 10 are and are intended solely for the purpose of
defining the relative rights of the Holder of this Note, on the
one hand, and the holders of the Senior Indebtedness, on the
other hand.
(b) If any payment or distribution to which the Holder
would otherwise have been entitled but for the provisions of
this Section 10 shall have been applied, pursuant to the
provisions of this Section 10, to the payment of all amounts
payable under Senior Indebtedness, then in such case, the
Holder shall be entitled to receive from the holders of such
Senior Indebtedness any payments or distributions received
by such holders of Senior Indebtedness in excess of the
amount required to make payment in full, in cash or cash
equivalents, of such Senior Indebtedness of such holders.
10.7. Relative Rights. Nothing contained in this Section 10
or elsewhere in this Note is intended to or shall impair, as
between the Company and the Holder, the obligation of the
Company, which is absolute and unconditional, to pay to the
Holder the principal of and interest on this Note as and when the
same shall become due and payable in accordance with its terms,
or is intended to or shall affect the relative rights of the
Holder and creditors of the Company other than the holders of the
Senior Indebtedness, nor, except as specifically provided herein,
shall anything herein or therein prevent the Holder from
exercising all remedies otherwise permitted by applicable law
upon default under this Note, subject to the rights, if any,
under this Section 10 of the holders of Senior Indebtedness in
respect of cash, property or securities of the Company received
upon the exercise of any such remedy. Upon any payment or
distribution of assets or securities of the Company referred to
in this Section 10, the Holder shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in
which any liquidation, dissolution, winding-up or reorganization
proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee or agent or other
Person making any payment or distribution to the Holder for the
purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of Senior Indebtedness
and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Section
10. The Holder shall be entitled to rely on the delivery to it
of a written notice by a Person representing himself or itself to
be a holder of any Senior Indebtedness (or a trustee on behalf
of, or other representative of, such holder) to establish that
such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such
holder.
In the event that the Holder of this Note determines in good
faith that any evidence is required with respect to the right of
any Person as a holder of Senior Indebtedness to participate in
any payment or distribution pursuant to this Section 10, the
Holder may request such Person to furnish evidence to the
reasonable satisfaction of the Holder as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person
is entitled to participate in such payment or distribution and
any other facts pertinent to the rights of such Person under this
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Section 10, and if such evidence is not furnished, the Holder may
defer any payment to such Person pending judicial determination
as to the right of such Person to receive such payment.
10.8. Subordination May Not Be Impaired by Company. (a) No
right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on
the part of the Company or by any act or failure to act by any
such holder, or by any non-compliance by the Company with the
terms, provisions and covenants of this Note, regardless of any
knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting the generality of subsection (a)
of this Section 10.8, the holders of Senior Indebtedness
may, at any time and from time to time, without the consent
of or notice to the Holder of this Note, without incurring
responsibility to the Holder of this Note and without
impairing or releasing the subordination provided in this
Section 10 or the obligations hereunder of the Holder of
this Note to the holders of Senior Indebtedness, do any one
or more of the following: (1) change the manner, place,
terms or time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding;
(2) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior
Indebtedness; (3) release any Person liable in any manner
for the collection or payment of Senior Indebtedness; and
(4) exercise or refrain from exercising any rights against
the Company and any other Person.
10.9. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior
Indebtedness, the distribution may be made and the notice given
to their representative (if any).
Upon any payment or distribution of assets of the Company
referred to in this Section 10, the Holder of this Note shall be
entitled to rely upon any order or decree made by any court of
competent jurisdiction or upon any certificate of such
representative or of the liquidating trustee or agent or other
Person making any distribution to the Holder of this Note for the
purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and
all other facts pertinent thereto or to this Section 10.
10.10. Authorization to Effect Subordination. The Holder of
this Note by the Holder's acceptance hereof authorizes and
expressly directs the Company on such Xxxxxx's behalf to take
such action as may be necessary or appropriate to effect the
subordination provisions contained in this Section 10, and
appoints the Company such Xxxxxx's attorney-in-fact for such
purpose, including, in the event of any liquidation, dissolution,
winding-up, reorganization, assignment for the benefit of
creditors or marshaling of assets of the Company tending towards
liquidation or reorganization of the business and assets of the
Company, the immediate filing of a claim for the unpaid balance
of the Holder's Note in the form required in said proceedings and
cause said claim to be approved. If the Company does not file a
proper claim or proof of debt in the form required in any
judicial proceeding related to the Company prior to 30 days
before the expiration
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of the time to file such claim or claims,
then any of the holders of the Senior Indebtedness or their
representative is hereby authorized to file an appropriate claim
for and on behalf of the Holder of this Note. Nothing herein
contained shall be deemed to authorize the Company or the
holders of Senior Indebtedness or their representative to authorize or
consent to or accept or adopt on behalf of the Holder any plan of
reorganization, arrangement, adjustment or composition affecting
this Note or the rights of the Holder, or to authorize the
Company or the holders of Senior Indebtedness or their
representative to vote in respect of the claim of the Holder in
any such proceeding.
10.11. Certain Defined Terms.
The term "Senior Indebtedness" means (i) Special Senior
Indebtedness, (ii) the Public Notes and any Indebtedness
that is pari passu with the Public Notes, (iii) any monetary
obligation of the Company, whether outstanding at
__________, 2002 or thereafter incurred, for the payment of
principal or interest which obligation (a) is for money
borrowed or is evidenced by notes, bonds, debentures or
similar instruments, (b) arises under a capital lease, (c)
is a guarantee of an obligation which, if incurred directly
by the Company, would constitute Senior Indebtedness, (d)
arises under commodity agreements, currency agreements and
interest rate agreements (other than, except for the
purposes of the definition of Special Senior Indebtedness,
commodity agreements, currency agreements and interest rate
agreements designed to protect the Company or its
subsidiaries against fluctuations in commodity prices,
foreign currency exchange rates or interest rates and that
do not increase the Indebtedness of the obligor outstanding
at any time other than as a result of fluctuations in
commodity prices, foreign currency exchange rates or
interest rates or by reason of fees, indemnities and
compensation payable thereunder), (e) is a reimbursement
obligation in respect of any letter of credit or other
similar instrument; (f) represents the deferred and unpaid
purchase price of property or services, which purchase price
is due more than six months after the date of placing such
property in service or taking delivery and title thereto or
the completion of such services if, and to the extent that,
such amount would appear as a liability on the balance sheet
of such Person; or (g) is an amendment, extension, renewal,
restructuring or refinancing of Senior Indebtedness; and
(iv) interest that would accrue but for the filing of a
petition under any bankruptcy law on any obligation
described in clause (i), (ii) or (iii) above, unless the
instrument creating such obligation expressly provides that
it is not senior in right of payment to this Note.
Notwithstanding the foregoing, Senior Indebtedness does not
include (a) accounts payable or other indebtedness to trade
creditors created in the ordinary course of business, or (b)
any liability for federal, state, local or other taxes owed
or owing by the Company.
11. Conversion Rights. The Holder of this Note shall be subject
to the following with respect to the conversion of this Note into
shares of the Common Stock of the Company (the "Conversion
Rights"):
(a) Conversion. The Holder of this Note is entitled, at his
option, at any time on or before the close of business on the
business day prior to __________ 1, 2012, or in case this Note or
a portion hereof is called for redemption or the Holder hereof has
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exercised his right to require the Company to repurchase this
Note or such portion hereof, then in respect of this Note until
and including, but (unless the Company defaults in making the
payment due upon redemption or repurchase, as the case may be)
not after, the close of business on the business day prior to the
Redemption Date or such repurchase date, as the case may be, to
convert this Note (or any portion of the principal amount hereof
that is an integral multiple of $1,000, provided that the
unconverted portion of such principal amount is $1,000 or any
integral multiple of U.S. in excess thereof) into fully paid and
nonassessable shares of Common Stock of the Company at a
Conversion Rate of shares of Common Stock of the Company which is
set forth in Section 11(c) below for each $1,000 principal amount
of this Note, by surrender of this Note, duly endorsed or
assigned to the Company or in blank.
(b) Lock-Up. Notwithstanding anything to the contrary set forth
herein, as a condition to the Company's obligation to issue to
the Holder of this Note a certificate or certificates for the
number of shares of Common Stock to which the Holder is entitled,
the Holder (by acceptance of this Note) agrees, in connection
with the Company's Qualifying IPO (as defined in this Section
11(b) below), to enter into a written agreement not to effect any
public sale or distribution of any shares of Common Stock
issuable to the Holder, if and to the extent requested by the
managing underwriter for the Qualifying IPO as to the Notes and
substantially all parity or junior securities and substantially
all equity securities of the Company during the 14 days prior to,
and during an up to 180-day period beginning on, the effective
date of the registration statement relating to the Qualifying IPO
without the written consent of such managing underwriter;
provided that the Holder of this Note has received written notice
of such registration at least 5 business days prior to the
anticipated beginning of the 14-day period referred to above.
The term "Qualifying IPO means a firmly underwritten public
offering pursuant to an effective registration statement under
the Securities Act of 1933 covering the offer and sales of shares
of Common Stock for the account of the Company in which the gross
cash proceeds to the Company (before underwriting discounts,
commissions and fees) are not less than $50,000,000.
(c) Conversion Rate. The Conversion Rate shall be 0.2857142
shares of Common Stock for each $1,000 principal amount of this
Note. In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Rate in effect at the opening of business on the day
following the day upon which such subdivision becomes effective
shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Conversion Rate in
effect at the opening of business on the day following the day
upon which such subdivision or combination becomes effective
shall be proportionately reduced, such increase or reduction, as
the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) Mechanics of Conversion. Upon conversion of this Note, the
Holder of this Note shall surrender the original executed Note,
duly endorsed, at the office of the Company or its transfer
agent. Thereupon, the Company shall promptly issue and deliver
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at such office to the Holder a certificate or certificates for
the number of shares of Common Stock to which the Holder is
entitled and shall promptly pay in cash or in
additional shares of Common Stock, any accrued and unpaid interest
on this Note being converted.
(e) Fractional Shares. At the option of the Company, no
fractional shares of Common Stock shall be issued upon conversion
of this Note and all shares of Common Stock (including fractions
thereof) issuable upon conversion of this Note by the Holder
shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share.
If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company may
at its option, in lieu of issuing any fractional share, pay cash
equal to the product of such fraction multiplied by the Current
Market Price (as defined below) of the Common Stock. "Current
Market Price" means, in the event the Common Stock is publicly
traded, the average of the daily closing prices per share of
Common Stock for 30 consecutive trading days ending no more than
15 business days before the conversion date (as adjusted for any
stock dividend, split, combination or reclassification that took
effect during such period). The closing price for each day shall
be the last reported sale price regular way or, in case no such
reported sale takes place on such day, the average of the last
closing bid and asked prices regular way, in either case on the
principal national securities exchange on which the Common Stock
is listed or admitted to trading, or if not listed or admitted to
trading on any national securities exchange, the closing sale
price for such day reported by NASDAQ, if the Common Stock is
traded over-the-counter and quoted in the National Market System,
or if the Common Stock is so traded, but not so quoted, the
average of the closing bid and asked prices of the Common Stock
as reported by NASDAQ or any comparable system or, if the Common
Stock is not listed on NASDAQ or any comparable system, the
average of the closing bid and asked prices as furnished by two
members of the National Association of Securities Dealers, Inc.
selected from time to time by the Corporation for that purpose.
If the Common Stock is not traded in such manner that the
quotations referred to above are available for the period
required hereunder, Current Market Price per share of Common
Stock shall be deemed to be the fair value as determined by the
Board of Directors, irrespective of any accounting treatment.
(f) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of this Note, such number of
its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all of the principal
amount of this Note. If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect
the conversion of all principal amount of this Note, the Company
will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
(g) Notices. Any notice to the Holder of this Note pursuant to
the provisions of this Section 11 shall be in writing and shall
be deemed effectively given: (i) upon
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Personal delivery to the party to be notified, (ii) when sent by
confirmed facsimile if sent during normal business hours of the
recipient; if not, then on the next business day, (iii)
five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after
deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All notices
shall be addressed to the Holder of this Note at the address of
the Holder appearing on the books of the Company.
12. Sale or Assignment of this Note. The Holder of this Note
may not sell or assign this Note except in a transaction which is
entitled to an exception from, or is not subject to the
registration requirements of, the Securities Act of 1933 and,
before making a sale or assignment of this Note, the Holder of
this Note agrees, by its acceptance hereof, to provide the
Company with an opinion of counsel satisfactory to the Company
that such registration is not required.
13. Reports. So long as this Note is outstanding, the Company
will furnish the Holder hereof with the quarterly and annual
financial reports that the Company is required to file with the
Securities and Exchange Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934.
14. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS NOTE WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
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