EXHIBIT 2.1
EXECUTION COPY
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RECAPITALIZATION AGREEMENT
This RECAPITALIZATION AGREEMENT (the "Agreement") is made and entered
into as of this 15th day of October, 2002, by and among the XxXxxx
Xxxxxxx-Reader's Digest Fund, Inc., a New York not-for-profit corporation (the
"XxXxxx Xxxxxxx Fund"), the Xxxx Xxxxxxx-Reader's Digest Fund, Inc., a New York
not-for-profit corporation (the "Xxxx Xxxxxxx Fund;" each of the XxXxxx Xxxxxxx
Fund and the Xxxx Xxxxxxx Fund is hereinafter referred to as a "Fund" and,
together are hereinafter referred to as the "Funds"), and The Reader's Digest
Association, Inc., a Delaware corporation (the "Company").
WHEREAS, the Company and the Funds entered into a Recapitalization
Agreement, dated as of April 12, 2002 (the "April Agreement"), providing for a
recapitalization of the Company.
WHEREAS, pursuant to an order of the Supreme Court of the State of
Delaware, the Delaware Chancery Court preliminarily enjoined the
recapitalization contemplated by the April Agreement.
WHEREAS, the Company and the Funds have renegotiated the terms of the
recapitalization originally contemplated by the April Agreement. Accordingly,
the Company and the Funds are hereby terminating the April Agreement and
entering into this Agreement that supersedes the April Agreement in all
respects.
WHEREAS, pursuant to this Agreement the Company and the Funds have
agreed to effect a series of transactions pursuant to which, as provided herein:
(1) all shares of voting and nonvoting common stock of the Company will be
recapitalized (the "Recapitalization") into one class of voting stock by means
of a merger of a wholly-owned subsidiary of the Company into the Company, which
merger the Funds have agreed to support, (2) in consideration for the
recapitalization, the Company has agreed to repurchase certain of the shares of
voting stock held by the Funds for cash, at a premium, (3) all remaining shares
of voting stock will be converted in the merger at a premium and (4) the Company
will grant registration rights to the Funds.
WHEREAS, as of September 12, 2002, the Company had issued and there
were outstanding: 12,432,164 shares of Class B Voting Common Stock, par value
$.0l per share (the "Class B Stock"), and 88,296,559 shares of Class A Nonvoting
Common Stock, par value $.0l per share (the "Class A Stock").
WHEREAS, the XxXxxx Xxxxxxx Fund owns 3,108,041 shares of Class B
Stock (constituting approximately 25.0%) of the outstanding Class B Stock; the
Xxxx Xxxxxxx Fund owns 3,108,041 shares of Class B Stock (constituting
approximately 25.0%) of the outstanding Class B Stock; the XxXxxx Xxxxxxx Fund
owns 6,693,094 shares of Class A Stock (constituting approximately 7.6%) of the
outstanding Class A Stock and the Xxxx Xxxxxxx Fund owns 3,970,969 shares of
Class A Stock (constituting approximately 4.5%) of the outstanding Class A
Stock.
WHEREAS, the Company has formed a wholly-owned subsidiary ("Merger
Sub") with which it shall enter into a merger agreement the ("Merger Agreement")
substantially
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in the form attached as Exhibit A hereto, pursuant to which, among other things,
Merger Sub shall merge with and into the Company with the Company surviving (the
"Merger").
WHEREAS, immediately prior to the Merger, the Company will purchase
and the XxXxxx Xxxxxxx Fund will sell to the Company 2,298,851 shares of Class B
Stock (the "DWF Sale Shares") for an aggregate of $50,000,009.25, and the
Company will purchase and the Xxxx Xxxxxxx Fund will sell to the Company
2,298,850 shares of Class B Stock (the "LWF Sale Shares," and together with the
DWF Sale Shares, the "Sale Shares") for an aggregate of $49,999,987.50, in each
case on the basis of $21.75 for each Sale Share, in accordance with the terms
of, and subject to the conditions set forth in, this Agreement (collectively,
the "Share Purchase").
WHEREAS, in the Merger each issued and outstanding share of Class B
Stock outstanding immediately prior to the Effective Time will be converted into
1.22 shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock"), with each share of Common Stock being entitled to one vote per
share, and each share of Class A Stock outstanding immediately prior to the
Effective Time will be converted into one share of Common Stock in accordance
with the terms of the Merger Agreement.
WHEREAS, in connection with the Merger, the Company's Restated
Certificate of Incorporation, as amended, will be amended to reflect the
reclassification of Class B Stock and Class A Stock into shares of Common Stock
and to provide for the classification of the Company's Board of Directors into
three classes, and the elimination of action by written consent of the
stockholders without a meeting, as well as certain related matters.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth in this
Agreement, the Company and the Funds agree as follows:
ARTICLE I
THE CLOSING
1.1 Closing. Subject to the fulfillment or waiver of the conditions
set forth in Article V, the closing of the Share Purchase and the
Recapitalization (the "Closing") shall take place (a) at the offices of
Wachtell, Lipton, Xxxxx & Xxxx, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx,
commencing at 9:00 a.m. local time on the earliest practicable date (but no
later than the fifth business day) following satisfaction or waiver of the
conditions set forth in Article V or (b) at such other place and/or time and/or
on such other date as the Company and the Funds may agree. The date on which the
Closing occurs shall be the "Closing Date." The Closing will consist of the
following steps:
(a) The Share Purchase. Immediately prior to the filing and
effectiveness of the certificate of merger effecting the Merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware,
the Company shall purchase for an aggregate cash purchase price of
$99,999,996.75 (the "Purchase Price") the Sale Shares and the Funds shall
transfer and deliver to the Company, free and clear of all liens, claims,
security interests, pledges, charges and other encumbrances (collectively,
"Encumbrances"), the Sale Shares. The Funds shall deliver to the
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Company share certificates representing all of the Sale Shares, fully endorsed
or with appropriate stock powers in form sufficient for transfer of such shares
to the Company, and a true and complete copy of the resolutions duly and validly
adopted by the Board of Directors and the Members of each Fund authorizing the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. The Company shall pay to the Funds the
Purchase Price by wire transfer of immediately available funds to an account or
accounts designated by the Funds in writing at least two business days prior to
the Closing Date.
(b) The Merger. (i) Immediately following the consummation of the
Share Purchase, the Company shall file the Certificate of Merger with the
Secretary of State of the State of Delaware and the Merger shall become
effective on the date and at the time (the "Effective Time") that the
Certificate of Merger shall have been accepted by the Secretary of State of the
State of Delaware.
(ii) Upon the Effective Time, each share certificate representing
shares of Class A Stock shall represent the same number of shares of Common
Stock as the certificate representing Class A Stock.
(iii) Promptly following the Effective Time, the Company shall make
available, and each holder of Class B Stock will be entitled to receive, upon
surrender to the Company's transfer agent of one or more certificates
representing Class B Stock ("Class B Certificates") for cancellation,
certificates representing a number of shares of Common Stock equal to the number
of shares of Class B Stock represented by the Class B Certificate multiplied by
1.22. No dividends or other distributions that are declared or made on Common
Stock will be paid to former holders of Class B Stock entitled to receive
certificates representing Common Stock until such persons surrender their Class
B Certificates. Upon such surrender, there shall be paid to the person in whose
name the certificates representing such Common Stock shall be issued any
dividends or other distributions which shall have become payable with respect to
such Common Stock in respect of a record date after the Effective Time. In no
event shall the person entitled to receive such dividends be entitled to receive
interest on such dividends. In the event that any certificates for any shares of
Common Stock are to be issued in a name other than that in which the Class B
Certificates surrendered in exchange therefor are registered, it shall be a
condition of such exchange that the person requesting such exchange shall pay to
the Company's transfer agent any transfer or other taxes required by reason of
the issuance of certificates for such shares of Common Stock in a name other
than that of the registered holder of the Class B Certificate surrendered, or
shall establish to the satisfaction of the Company's transfer agent that such
tax has been paid or is not applicable. Notwithstanding the foregoing, neither
the Company's transfer agent nor any party hereto shall be liable to a former
holder of Class B Stock for any shares of Common Stock or dividends thereon
delivered to a public official pursuant to any applicable escheat laws.
Notwithstanding anything to the contrary contained herein, no fractional shares
of Common Stock shall be issued to any holder of shares of Class B Stock.
Instead of issuing fractional shares of Common Stock, the Company shall arrange
for the disposition of fractional interests by those entitled thereto by the
mechanism of having (1) the transfer agent or other agent of the Company
aggregate such fractional interests, (2) the shares resulting from the
aggregation sold and (3) the net proceeds received from the sale allocated and
distributed among the holders of the fractional interests as their respective
interests appear.
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(c) Alternative Structure. Notwithstanding the foregoing, in the event
that holders of more than $5 million in the aggregate of stated or liquidation
value of the Company's preferred stock shall have properly made a demand for
appraisal rights with respect to the Merger under applicable law, the
Recapitalization shall be effected through two certificates of amendment (the
"Certificates of Amendment") to the Company's Restated Certificate of
Incorporation, as amended (the "Charter Amendments"), rather than through the
Merger and the "Effective Time" shall be the date and time that the second
certificate of amendment shall have been accepted by the Secretary of State of
the State of Delaware. All references herein to the "Recapitalization" shall
include the Merger and the Charter Amendments, as applicable.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Funds to enter into this Agreement, the Company
hereby represents and warrants to each Fund as follows:
2.1 Corporate Power and Authority. The Company is duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company has all requisite corporate power and authority to enter into and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated by this Agreement. The execution, delivery and
performance of this Agreement by the Company have been duly authorized by all
necessary corporate action on the part of the Company, subject to receipt of the
requisite approval of the Merger Agreement, the Merger and the transactions
contemplated thereby or, alternatively, the Charter Amendments by the holders of
a majority of the outstanding shares of Class B Stock (the "Requisite
Stockholder Approval"). This Agreement has been duly executed and delivered by
the Company and (assuming due authorization, execution and delivery by each
Fund) constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms subject to (a)
applicable bankruptcy, insolvency, fraudulent conveyance and other similar laws
and (b) general principles of equity, including equitable defenses and limits as
to the availability of equitable remedies, whether such principles are
considered in a proceeding at law or in equity.
2.2 Capitalization of the Company. As of the date of this Agreement,
the Company's authorized capital stock consists solely of (a) 200,000,000 shares
of Class A Stock, (b) 25,000,000 shares of Class B Stock, (c) 40,000 shares of
Preferred Stock, par value $1.00 per share (the "First Preferred Stock"), (d)
120,000 shares of Second Preferred Stock, par value $1.00 per share (the "Second
Preferred Stock"), (e) 230,000 shares of Third Subordinated Preferred Stock, par
value $1.00 per share (the "Third Preferred Stock"), and (f) 25,000,000 shares
of Preference Stock, par value $.0l per share (the "Preference Stock"). As of
September 12, 2002, (a) 88,296,559 shares of Class A Stock were issued and
outstanding and 31,131,913 shares of Class A Stock were issued and held in
treasury, and (b) 12,432,164 shares of Class B Stock were issued and outstanding
and 9,283,893 shares of Class B Stock were issued and held in treasury. As of
the date of this Agreement, (a) 29,720 shares of First Preferred Stock are
issued and outstanding, (b) 103,720 shares of Second Preferred Stock are issued
and outstanding, (c) 155,022 shares of Third Preferred Stock are issued and
outstanding and (d) no shares of Preference Stock are issued and outstanding.
Upon consummation of the Recapitalization, each of the shares of Common Stock
issued to the Funds in the Merger or, if applicable, by virtue of
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the Charter Amendments will be duly authorized, validly issued and fully paid
and nonassessable and will not have been issued in violation of any preemptive
or similar rights.
2.3 Conflicts; Consents and Approvals. The execution and delivery of
this Agreement and the consummation of the transactions contemplated by this
Agreement do not and will not (a) violate, conflict with, or result in a breach
of any provision of, or constitute a default under, the Company's Restated
Certificate of Incorporation, as amended, or Amended and Restated By-laws; (b)
subject to receipt of the Required Waivers (as defined herein), if any, violate,
or conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with the giving of notice or lapse of time or both,
would become a default) under, or entitle any party to terminate, accelerate,
modify or call a default under, or result in the creation of any Encumbrance
upon any of the properties or assets of the Company under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, contract, undertaking, agreement, lease or other instrument or
obligation to which the Company is a party; (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company; or
(d) other than the Requisite Stockholder Approval, the filing of the Certificate
of Merger or, if applicable, the Certificates of Amendment with the Secretary of
State of the State of Delaware, required filings with the Securities and
Exchange Commission (the "Commission") or pursuant to state securities or "blue
sky" laws, and the approval by the New York Stock Exchange of the shares of
Common Stock for listing upon notice of issuance, require any action or consent
or approval of, or review by, or registration or material filing by the Company
with, any third party or any local, state or federal court, arbitral tribunal,
administrative agency or commission or other governmental or regulatory body,
agency, instrumentality or authority, except, with respect to clauses (b), (c)
and (d), as would not have a material adverse effect on the Company.
2.4 Board Recommendation. In accordance with the applicable provisions
of the Delaware General Corporation Law and the Company's Restated Certificate
of Incorporation, as amended, and Amended and Restated By-laws, the Board of
Directors of the Company, at a meeting duly called and held at which a quorum
was present throughout, upon the recommendation of a special committee of the
Board of Directors, has adopted a resolution proposing and declaring the
advisability of this Agreement and the transactions contemplated hereby,
including the Merger Agreement, the Merger and, in the alternative, the Charter
Amendments.
2.5 Financing. The Company has entered into financing arrangements
(the "May Financing Arrangements") with various lending institutions pursuant to
which, on May 20, 2002, the Company borrowed funds which include an amount
sufficient to complete the Share Purchase (such amount sufficient to complete
the Share Purchase, the "Recapitalization Funds"). The Company will seek waivers
(the "Required Waivers") from such lending institutions that may be required to
permit the Recapitalization Funds to be used to complete the Recapitalization in
light of the changes in the terms of the Recapitalization from those contained
in the April Agreement. Pursuant to the May Financing Arrangements, if the
Recapitalization is not completed by December 31, 2002, the Company is required
to repay such lending institutions the Recapitalization Funds.
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2.6 Litigation. As of the date immediately preceding the date hereof,
to the Company's knowledge and except as set forth on Schedule 2.6, there are no
actions, suits or proceedings pending against the Company (or any of its
properties, rights or franchises), at law or in equity, or before any federal or
state commission, board, bureau, agency, regulatory or administrative
instrumentality or other governmental authority or any arbitrator or arbitration
tribunal, that would reasonably be expected to, individually or in the
aggregate, prevent, materially impair or materially delay the consummation of
the transactions contemplated hereby.
2.7 Registration Statement/Proxy Statement. (a) The Post-Effective
Amendment to the Company's Registration Statement on Form S-4 (File No.
333-90576) to be filed with the Commission by the Company, as further amended or
supplemented from time to time (as so amended and supplemented, the
"Registration Statement Amendment"), which shall include a proxy statement in
connection with the Stockholders' Meeting (as herein defined) (the "Proxy
Statement") will comply as to form, in all material respects, with the
requirements of the Securities Exchange Act of 1934, as amended and the rules
and regulations promulgated thereunder (the "Exchange Act"), and the Securities
Act of 1933, as amended and the rules and regulations promulgated thereunder
(the "Securities Act"), as the case may be, and will not, on the date of its
filing or at the time it becomes effective under the Securities Act or on the
date the Proxy Statement is mailed to stockholders of the Company and at the
time of the Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
(b) Notwithstanding paragraph (a) of this Section 2.7, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference in the Registration Statement Amendment or the
Proxy Statement based on information supplied by the Funds expressly for
inclusion or incorporation by reference therein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE FUNDS
In order to induce the Company to enter into this Agreement, each Fund
represents and warrants to the Company as follows:
3.1 Title to Shares. The XxXxxx Xxxxxxx Fund owns 6,693,094 shares of
Class A Stock and owns and has the power to vote 3,108,041 shares of Class B
Stock. The Xxxx Xxxxxxx Fund owns 3,970,969 shares of Class A Stock and owns and
has the power to vote 3,108,041 shares of Class B Stock. Each such Fund has good
title, free and clear of all Encumbrances, to all of its shares of Class A Stock
and Class B Stock.
3.2 Corporate Power and Authority. Such Fund is duly organized and
validly existing under the laws of the State of New York. It has all requisite
corporate power and authority to enter into and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated by this Agreement. The execution, delivery and performance of this
Agreement by it has been duly authorized by all necessary corporate action on
its part. This Agreement has been duly executed and delivered by such Fund and
(assuming due authorization, execution and delivery by the Company) constitutes
the legal, valid and
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binding obligation of such Fund, enforceable against it in accordance with its
terms subject to (a) applicable bankruptcy, insolvency, fraudulent conveyance
and other similar laws and (b) general principles of equity, including equitable
defenses and limits as to the availability of equitable remedies, whether such
principles are considered in a proceeding at law or in equity.
3.3 Conflicts; Consents and Approvals. The execution and delivery of
this Agreement and the consummation of the transactions contemplated by this
Agreement do not and will not (a) violate, conflict with, or result in a breach
of any provision of or, constitute a default under, its Certificate of
Incorporation or Amended and Restated By-laws or other governing or
organizational documents; (b) violate, or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which, with the giving
of notice or lapse of time or both, would become a default) under, or entitle
any party to terminate, accelerate, modify or call a default under, or result in
the creation of any Encumbrance upon any of its properties or assets under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, contract, undertaking, agreement, lease or other
instrument or obligation to which it is a party; (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to it; or (d) require
any action or consent or approval of, or review by, or registration or material
filing by it with, any third party or any local, state or federal court,
arbitral tribunal, administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority except, with respect to
clauses (b), (c) and (d), as would not have a material adverse effect on such
Fund.
3.4 Litigation. As of the date immediately preceding the date hereof,
to the knowledge of the Funds and except as set forth on Schedule 3.4, there are
no actions, suits or proceedings pending against either of the Funds (or any of
such Fund's properties, rights or franchises), at law or in equity, or before
any federal or state commission, board, bureau, agency, regulatory or
administrative instrumentality or other governmental authority or any arbitrator
or arbitration tribunal, that would reasonably be expected to, individually or
in the aggregate, prevent, materially impair or materially delay the
consummation of the transactions contemplated hereby.
ARTICLE IV
ADDITIONAL COVENANTS
4.1 Stockholders' Meeting. The Company shall call and hold a meeting
of stockholders (the "Stockholders' Meeting") as promptly as practicable for the
purpose of seeking the Requisite Stockholder Approval, and the Company shall use
its reasonable best efforts to hold the Stockholders' Meeting as soon as
practicable following the filing of a definitive proxy statement relating to
such meeting. The Board of Directors of the Company shall recommend approval of
the Merger Agreement, the Merger and the other transactions contemplated thereby
and, in the alternative, the Charter Amendments to the holders of Class B Stock.
4.2 Registration Statement Amendment; Proxy Materials. The Company
shall prepare and file as soon as practicable the Registration Statement
Amendment which shall include the Proxy Statement. The Proxy Statement shall
include the recommendation of the Board of Directors of the Company to the
holders of Class B Stock that they vote in favor of the Merger Agreement, the
Merger and the other transactions contemplated thereby and, in the
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alternative, the Charter Amendments. The Company agrees that it shall give the
Funds and their counsel a reasonable opportunity to review and provide comments
on any description of or reference to the Funds, or any description of the
reasons for and consequences of the transactions contemplated by this Agreement
(including, without limitation, the Merger and, in the alternative, the Charter
Amendments), set forth in any notice, consent solicitation or proxy statement
distributed to the stockholders in connection with the Stockholders' Meeting,
prior to any such distribution.
4.3 Voting; Transfer; Irrevocable Proxy. Each Fund agrees to vote all
shares of Class B Stock owned by it in favor of the Merger Agreement, the Merger
and the other transactions contemplated thereby and, in the alternative, the
Charter Amendments at the Stockholders' Meeting and not to, directly or
indirectly, cause or encourage any other person or entity to vote against the
Merger Agreement, the Merger and the other transactions contemplated thereby or,
if applicable, the Charter Amendments. Without the prior written consent of the
Company, the Funds shall not, directly or indirectly (a) grant any proxies or
enter into any voting trust or other agreement or arrangement with respect to
the voting of any shares of Class B Stock or (b) acquire, sell, assign,
transfer, encumber or otherwise dispose of, or enter into any contract, option
or other arrangement or understanding with respect to the direct or indirect
acquisition or sale, assignment, transfer, Encumbrance or other disposition of,
any shares of Class B Stock or, other than transactions which comply with Rule
144 of the Securities Act, Class A Stock, during the term of this Agreement or
solicit or encourage any such transaction or a proposal or offer for any such
transaction. Each of the Funds hereby grants to the Company an irrevocable
proxy, coupled with an interest, with respect to the matters subject to the
Requisite Stockholder Approval and hereby appoints and constitutes the Company
its true and lawful attorney-in-fact and agent, with respect to such matters,
with full power of substitution and resubstitution.
4.4 Registration Rights. Effective as of the Closing, the Company and
each Fund shall each have the rights and obligations set forth in Exhibit B.
4.5 Transfer Taxes. The Funds shall be responsible for the payment of
any stock transfer taxes in connection with the Share Purchase and the
conversion of any shares of Class B Stock or Class A Stock owned by the Funds
into shares of Common Stock.
4.6 Listing of Shares of Common Stock. The Company will use its
reasonable best efforts to cause the shares of Common Stock issued in the
Recapitalization to be listed for trading on the New York Stock Exchange,
subject to official notice of issuance, prior to the Closing.
4.7 Financing. The Company will use its reasonable best efforts to
secure the Required Waivers, if any, to complete the Recapitalization and to
maintain the availability of the Recapitalization Funds. In the event that the
Recapitalization Funds become unavailable for any reason, including, without
limitation, by reason of the Closing occurring after December 31, 2002, the
Company will use its reasonable best efforts to obtain alternative financing on
and subject to substantially the same terms and conditions as the May Financing
Arrangements. The Company shall use its reasonable best efforts to satisfy on or
before the Closing all requirements of the definitive agreements pursuant to
which the alternative financing will be obtained which are conditions to the
closing of the alternative financing necessary to consummate the Share
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Purchase and to drawing down the cash proceeds thereunder necessary to
consummate the Share Purchase. Notwithstanding the foregoing, the Company shall
not be required to (1) pay costs and expenses in connection with arranging the
alternative financing or obtaining the Required Waivers, if any, materially in
excess of the costs and expenses contemplated by the May Financing Arrangements
or agree to financing terms that differ in a manner materially adverse to the
Company from those contemplated by the May Financing Arrangements or (2) breach
or violate any covenants or obligations contained in any agreements binding the
Company, including without limitation any agreements relating to the May
Financing Arrangements.
4.8 Funds Designee. Effective as of the Closing, and until the earlier
of (a) the Company's 2004 annual meeting of stockholders and (b) such time as
the Funds jointly own less than 10% of the issued and outstanding shares of
Common Stock, the Company will use its reasonable best efforts to cause one
designee of the Funds to be nominated and elected as a member of the Company's
Board of Directors.
4.9 Section 16 Matters. Prior to the Closing, the Company shall take
all such steps as may be required to cause the transactions contemplated by this
Agreement, including any dispositions of the shares of Class A Stock and Class B
Stock and acquisitions of Common Stock by each individual that is or will be
subject to the reporting requirements of Section 16(a) of the Exchange Act with
respect to the Company to be exempt under Rule 16b-3 promulgated under the
Exchange Act.
4.10 The Merger Agreement. Immediately following execution of this
Agreement, the Company and Merger Sub shall terminate the Agreement and Plan of
Merger, dated as of June 28, 2002, by and between the Company and Merger Sub
(the "June Merger Agreement"). Subject to Section 1.1(c), the Company shall,
prior to the mailing of the Proxy Statement, enter into, and cause Merger Sub to
enter into, the Merger Agreement.
4.11 Further Assurances. (a) Each of the parties hereto shall use all
reasonable best efforts to take, or cause to be taken, all appropriate action,
do or cause to be done all things necessary, proper or advisable under
applicable law, and to execute and deliver such documents and other papers, as
may be required to carry out the provisions of this Agreement and to consummate
and make effective the transactions contemplated by this Agreement.
(b) Each of the Company and each of the Funds agrees to cooperate and
use its reasonable best efforts to contest and resist any action, including
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) that is in effect that restricts, prevents or
prohibits the consummation of any of the transactions contemplated by this
Agreement or the approval and consummation of any settlement of any litigation
relating to this Agreement or the transactions contemplated hereby, including,
without limitation, by pursuing all reasonably available avenues of
administrative and judicial appeal.
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ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligation. The respective obligation
of each party to effect the Share Purchase and the Recapitalization shall be
subject to the satisfaction prior to the Closing of the following conditions:
(a) Requisite Stockholder Approval. The Requisite Stockholder Approval
shall have been obtained.
(b) Registration Statement Amendment. The Registration Statement
Amendment shall have been declared effective and shall be effective at the
Effective Time, and no stop order suspending effectiveness shall have been
issued, no action, suit, proceeding or investigation by the Commission to
suspend the effectiveness thereof shall have been initiated and be continuing,
and all necessary approvals under state securities laws or the Securities Act or
the Exchange Act related to the issuance or trading of the Common Stock shall
have been received.
(c) No Injunctions or Restraints. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
governmental entity or other legal restraint or prohibition preventing the
consummation of the Share Purchase, the filing of the Certificate of Merger or,
if applicable, the Certificates of Amendment with the Secretary of State of the
State of Delaware or the Merger or, if applicable, the Charter Amendments shall
be in effect; provided, however, that each of the parties shall have used
reasonable efforts to prevent the entry of any such injunction or other order
and to appeal as promptly as possible any injunction or other order that may be
entered.
(d) Listing of Shares of Common Stock. The shares of Common Stock to
be issued in the Recapitalization shall have been approved for listing on the
New York Stock Exchange, subject only to official notice of issuance.
5.2 Conditions to the Company's Obligation. The obligation of the
Company to effect the Share Purchase and the Recapitalization shall be subject
to the satisfaction at or prior to the Closing Date of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. (1)
Each of the Funds shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed at or prior to
the Closing Date and (2) each of the representations and warranties of each of
the Funds contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of such date (other
than to the extent that any such representation and warranty, by its terms, is
expressly limited to a specific date, in which case such representation and
warranty shall be true and correct in all material respects as of such date).
(b) Financing. (1) The Company shall have obtained the Required
Waivers, if any, to complete the Recapitalization and (2) in the event the
Closing occurs after December 31, 2002, the Company shall have available the
Recapitalization Funds or shall have obtained
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alternative financing consistent with the provisions of Section 4.7 hereof or
otherwise reasonably acceptable to the Company.
5.3 Conditions to the Funds' Obligation. The obligation of the Funds
to effect the Share Purchase and the Recapitalization shall be subject to the
satisfaction at or prior to the Closing Date of the following additional
conditions: (a) The Company shall have performed in all material respects each
of its agreements contained in this Agreement required to be performed at or
prior to the Closing Date and (b) each of the representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as if made on and as of such
date (other than to the extent that any such representation and warranty, by its
terms, is expressly limited to a specific date, in which case such
representation and warranty shall be true and correct in all material respects
as of such date).
ARTICLE VI
TERMINATION
6.1 Bases for Termination. Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:
(a) by mutual written consent of the Company (which consent shall have
been given by the directors of the Company who are unaffiliated with the Funds)
and each of the Funds;
(b) by the Company if any of the conditions set forth in Section 5.2
shall have become incapable of fulfillment, and shall not have been waived by
the Company;
(c) by the Funds if any of the conditions set forth in Section 5.3
shall have become incapable of fulfillment, and shall not have been waived by
the Funds; and
(d) by the Company or the Funds if the Closing does not occur on or
prior to March 31, 2003;
provided, however, that the party seeking termination pursuant to clause (b),
(c), or (d) is not in breach of any of its representations, warranties,
covenants or agreements contained in this Agreement.
6.2 Notice of Termination. In the event of termination by the Company
or the Funds pursuant to this Article VI, written notice thereof shall forthwith
be given to the other party or parties and the transactions contemplated by this
Agreement shall be terminated, without further action by any party.
6.3 Effect of Termination. If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in this Article VI,
this Agreement shall become void and of no further force and effect. Nothing in
this Article VI shall be deemed to release any party from any liability for any
breach by such party of the terms and provisions of
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this Agreement or to impair the right of any party to compel specific
performance by another party of its obligations under this Agreement.
ARTICLE VII
MISCELLANEOUS
7.1 Counterparts. This Agreement may be executed in any number of
counterparts, which together shall constitute one and the same Agreement. The
parties may execute more than one copy of the Agreement, each of which shall
constitute an original.
7.2 Entire Agreement. This Agreement (including the exhibits attached
hereto) constitutes the entire agreement among the parties and supersedes all
prior agreements, understandings, arrangements or representations by or among
the parties, written and oral, with respect to the subject matter hereof,
including, without limitation, the April Agreement and the June Merger
Agreement. The parties hereby agree that they shall have no further rights,
obligations, liabilities or claims under or relating to any such other
agreement, including, without limitation, the April Agreement and the June
Merger Agreement.
7.3 Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended or shall be construed to create any third party
beneficiaries.
7.4 Governing Law; Jurisdiction. This Agreement shall be governed by
the laws of the State of Delaware, without giving effect to the conflict of laws
principles thereof. Each party irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the courts of the State of Delaware and
of the United States of America, in each case located in the State of Delaware,
for any action or proceeding arising out of or relating to this Agreement and
the transactions contemplated by this Agreement (and agrees not to commence any
action except in any such court). Each party irrevocably and unconditionally
waives any objection to the laying of venue of any action or proceeding in the
courts of the State of Delaware or of the United States of America, in each case
located in the State of Delaware, and further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any action or
proceeding brought in any such court has been brought in an inconvenient forum.
Each party irrevocably and unconditionally waives any right it may have to a
trial by jury in connection with any action or proceeding arising out of or
relating to this Agreement and the transactions contemplated by this Agreement.
7.5 Specific Performance. The transactions contemplated by this
Agreement are unique. Accordingly, each of the parties acknowledges and agrees
that, in addition to all other remedies to which it may be entitled, each of the
parties hereto is entitled to a decree of specific performance and injunctive
and other equitable relief.
7.6 Amendment. This Agreement may not be altered, amended or
supplemented except by an agreement in writing signed by each of the parties
hereto and, in the case of the Company, approved by the directors of the Company
who are unaffiliated with the Funds.
7.7 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly
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given or made upon receipt) by delivery in person, by facsimile, by courier
service or by registered or certified mail (postage prepaid, return receipt,
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 7.7):
If to the Funds, to:
Xxxx Xxxxxxx-Reader's Digest Fund, Inc.
XxXxxx Xxxxxxx-Reader's Digest Fund, Inc.
Xxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: M. Xxxxxxxxx XxXxxx
Facsimile No.: (000) 000-0000
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
if to the Company, to:
The Reader's Digest Association, Inc.
Reader's Xxxxxx Xxxx
Xxxxxxxxxxxxx, Xxx Xxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
7.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
(whether by operation of law or otherwise) without the prior written consent of
the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
7.9 Fees and Expenses. Except as otherwise provided in this Agreement,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be the responsibility of and
shall be paid by the party
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incurring such fees or expenses, whether or not the transactions contemplated by
this Agreement are consummated.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be executed by its officer thereunto duly authorized as of the date first
written above.
XXXXXX XXXXXXX-READER'S
DIGEST FUND, INC.
By: /s/ M. Xxxxxxxxx XxXxxx
---------------------------------------------
Name: M. Xxxxxxxxx XxXxxx
Title: President
XXXX XXXXXXX-READER'S
DIGEST FUND, INC.
By: /s/ M. Xxxxxxxxx XxXxxx
---------------------------------------------
Name: M. Xxxxxxxxx XxXxxx
Title: President
THE READER'S DIGEST ASSOCIATION, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
and General Counsel
[SIGNATURE PAGE TO RECAPITALIZATION AGREEMENT]
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
______ __, 2002, is by and between The Reader's Digest Association, Inc., a
Delaware corporation (the "Company"), and RDA Merger Corp., a Delaware
corporation and a wholly owned subsidiary of the Company ("Merger Sub").
RECITALS
WHEREAS, pursuant to the Recapitalization Agreement (the
"Recapitalization Agreement"), dated as of October 15, 2002, by and among the
Company, the XxXxxx Xxxxxxx-Reader's Digest Fund, Inc. and the Xxxx
Xxxxxxx-Reader's Digest Fund, Inc. (together, the "Funds") and this Agreement,
the parties hereto desire to merge Merger Sub with and into the Company with the
Company surviving (the "Merger");
WHEREAS, pursuant to the Merger, among other things, each share of
Class B Voting Common Stock, par value $.01 per share, of the Company ("Class B
Stock") outstanding immediately prior to the Merger will be converted into 1.22
shares of Common Stock, par value $.01 per share, of the Company ("Common
Stock") and each share of Class A Nonvoting Common Stock, par value $.01 per
share, of the Company ("Class A Stock") outstanding immediately prior to the
Merger will be converted into one share of Common Stock;
WHEREAS, the respective Boards of Directors of the Company and
Merger Sub have determined that the Merger, in the manner contemplated herein,
is advisable and in the best interests of their respective corporations and
stockholders, and, by resolutions duly adopted, have approved and adopted this
Agreement and the Merger;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained herein, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms of this Agreement, at the Effective
Time (as defined below), Merger Sub shall be merged with and into the Company in
accordance with this Agreement, and the separate corporate existence of Merger
Sub shall thereupon cease. The Company shall be the surviving corporation in the
Merger (sometimes hereinafter referred to as the "Surviving Corporation"). The
Merger shall have the effects specified in the General Corporation Law of the
State of Delaware (the "DGCL").
1.2 Effective Time. Immediately following the consummation of the
Share Purchase (as defined in the Recapitalization Agreement), if this Agreement
shall not have been terminated as provided herein, Merger Sub and the Company
shall cause a certificate of merger (the "Certificate of Merger") in accordance
with the requirements of the DGCL to be properly executed and filed in
accordance therewith. The Merger shall become effective at the time of
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filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the DGCL (the "Effective Time").
ARTICLE II
CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Company's Restated Certificate
of Incorporation, as amended, as in effect immediately prior to the Effective
Time, shall be amended at the Effective Time as set forth in Annex A hereto,
and, as so amended, shall be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended in accordance with the
provisions thereof and applicable law.
2.2 Bylaws. The Amended and Restated By-Laws of the Company in effect
immediately prior to the Effective Time shall be the by-laws of the Surviving
Corporation, until thereafter changed or amended in accordance with the
provisions thereof and applicable law.
ARTICLE III
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
3.1 Directors of Surviving Corporation. The directors of the Company
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation as of the Effective Time, until the earlier of their death,
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
3.2 Officers of Surviving Corporation. The officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation as of the Effective Time, until the earlier of their death,
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
ARTICLE IV
EFFECT OF THE MERGER ON THE
CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
4.1 Effect of Merger on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof:
(a) Each share of Class B Stock either issued and outstanding or held
by the Company as treasury stock immediately prior to the Effective Time shall
automatically be converted into 1.22 fully-paid and nonassessable shares of
Common Stock; provided that no fractional shares shall be issued to any holder,
and that instead of issuing such fractional shares, the Company shall arrange
for the disposition of fractional interests by those entitled thereto, by the
mechanism of having (1) the transfer agent or other agent of the Company
aggregate such fractional interests, (2) the shares resulting from the
aggregation sold and (3) the net proceeds
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received from the sale allocated and distributed among the holders of the
fractional interests as their respective interests appear.
(b) Each share of Class A Stock either issued and outstanding or held
by the Company as treasury stock immediately prior to the Effective Time shall
automatically be converted into one fully-paid and nonassessable share of Common
Stock.
(c) Each share of preferred stock of the Company either issued and
outstanding or held by the Company as treasury stock immediately prior to the
Effective Time shall remain issued and outstanding or held as treasury stock, as
the case may be, and shall be unaffected by the Merger.
(d) Each share of common stock, par value $.01 per share, of Merger
Sub shall automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered or deliverable in exchange therefor.
4.2 Certificates Representing Class A Stock and Class B Stock. (a)
From and after the Effective Time, each share certificate representing shares of
Class A Stock shall represent the same number of shares of Common Stock.
(b) Promptly following the Effective Time, the Company shall make
available, and each holder of Class B Stock to be converted pursuant to Section
4.1 will be entitled to receive, upon surrender to the Company's transfer agent
of one or more certificates representing Class B Stock ("Class B Certificates")
for cancellation, certificates representing the number of shares of Common Stock
into which such shares are converted in the Merger. No dividends or other
distributions that are declared or made on Common Stock will be paid to former
holders of Class B Stock entitled to receive certificates representing Common
Stock pursuant to this Merger Agreement until such persons surrender their Class
B Certificates. Upon such surrender, there shall be paid to the person in whose
name the certificates representing such Common Stock shall be issued any
dividends or other distributions which shall have become payable with respect to
such Common Stock in respect of a record date after the Effective Time. In no
event shall the person entitled to receive such dividends be entitled to receive
interest on such dividends. In the event that any certificates for any shares of
Common Stock are to be issued in a name other than that in which the Class B
Certificates surrendered in exchange therefor are registered, it shall be a
condition of such exchange that the person requesting such exchange shall pay to
the Company's transfer agent any transfer or other taxes required by reason of
the issuance of certificates for such shares of Common Stock in a name other
than that of the registered holder of the Class B Certificate surrendered, or
shall establish to the satisfaction of the Company's transfer agent that such
tax has been paid or is not applicable. Notwithstanding the foregoing, neither
the Company's transfer agent nor any party hereto shall be liable to a former
holder of Class B Stock for any shares of Common Stock or dividends thereon
delivered to a public official pursuant to any applicable escheat laws.
4.3 Dissenters' Rights. Notwithstanding the foregoing, to the extent
that holders of preferred stock are entitled to appraisal rights under Section
262 of the DGCL, shares of preferred stock issued and outstanding immediately
prior to the Effective Time and held by a holder who has properly exercised and
perfected his demand for appraisal rights under Section
A-3
262 of the DGCL (the "Dissenting Shares"), shall not be treated in accordance
with Section 4.1(c) hereof, but rather the holders of Dissenting Shares shall be
entitled to receive from the Company such consideration as shall be determined
pursuant to Section 262 of the DGCL; provided, however, that if any such holder
shall have failed to perfect or shall effectively withdraw or lose his right to
appraisal and payment under the DGCL, each of such holder's shares of preferred
stock shall thereupon be treated in accordance with Section 4.1(c) hereof, and
such shares shall not be deemed to be Dissenting Shares.
ARTICLE V
TERMINATION
5.1 Termination. This Agreement may be terminated at any time after
either (a) the termination of the Recapitalization Agreement or (b) the
alternative structure becomes applicable under Section 1.1(c) of the
Recapitalization Agreement and in each case prior to the Effective Time by
action of the Board of Directors of the Company.
5.2 Effect of Termination. In the event of termination of this
Agreement, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of the Company or Merger Sub.
5.3 Waiver. At any time prior to the Effective Time, each party may,
to the extent legally allowed, waive compliance with any of the agreements for
the benefit of such party contained herein. Any agreement on the part of a party
hereto to any such waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VI
GENERAL PROVISIONS
6.1 Counterparts. This Agreement may be executed in any number of
counterparts, which together shall constitute one and the same Agreement. The
parties may execute more than one copy of the Agreement, each of which shall
constitute an original.
6.2 Entire Agreement. This Agreement and the Recapitalization
Agreement (including the exhibits attached hereto and thereto) constitute the
entire agreement between the parties and supersede all prior agreements,
understandings, arrangements or representations by or between the parties,
written and oral, with respect to the subject matter hereof, including, without
limitation, the April Agreement and the June Merger Agreement. The parties
hereby agree that they shall have no further rights, obligations, liabilities or
claims under or relating to any such other agreement, including, without
limitation, the April Agreement and the June Merger Agreement.
6.3 Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended or shall be construed to create any third party
beneficiaries.
6.4 Governing Law; Jurisdiction. This Agreement shall be governed by
the laws of the State of Delaware, without giving effect to the conflict of laws
principles thereof.
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6.5 Amendment. This Agreement may not be altered, amended or
supplemented except by an agreement in writing signed by each of the parties
hereto and, in the case of the Company, approved by directors of the Company who
are unaffiliated with the Funds.
6.6 Assignment. This Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
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IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be executed by its officer thereunto duly authorized as of the date
first written above.
THE READER'S DIGEST ASSOCIATION, INC.
By: /s/
---------------------------------------------
Name:
Title:
RDA MERGER CORP.
By: /s/
---------------------------------------------
Name:
Title:
A-6
ANNEX A
[FORM OF AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION]
At the Effective Time, Article IV shall be amended and restated in its
entirety as set forth below:
ARTICLE IV
AUTHORIZED SHARES
The total number of shares which the Corporation shall be
authorized to issue is two hundred twenty-five million three hundred
ninety thousand (225,390,000) shares, of which forty thousand
(40,000) shares shall be Preferred Stock of the par value of One
Dollar ($1.00) per share, one hundred twenty thousand (120,000)
shares shall be Second Preferred Stock of the par value of One
Dollar ($1.00) per share, two hundred thirty thousand (230,000)
shares shall be Third Subordinated Preferred Stock of the par value
of One Dollar ($1.00) per share, twenty-five million (25,000,000)
shares shall be Preference Stock of the par value of One Cent ($.01)
per share, issuable in series and two hundred million (200,000,000)
shares shall be Common Stock of the par value of One Cent ($.01) per
share. The designations and the powers, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations and restrictions of the shares of each
such class of the capital stock of the Corporation are as follows:
(a) The holders of shares of Preferred Stock (sometimes called
"First Preferred Stock") shall be entitled to receive, when and as
declared by the Board of Directors, dividends thereon at the rate of
Four Dollars ($4.00) per share per annum and no more, payable in
cash quarterly on the first days of January, April, July and October
in each year, accruing from the date of issue of such shares. Such
dividends shall be cumulative, so that if dividends on all issued
and outstanding shares of Preferred Stock (First Preferred Stock) at
the rate of Four Dollars ($4.00) per share per annum shall not have
been paid or set apart for payment for the current and all past
quarterly dividend periods, the deficiency shall be paid or set
apart for payment before any distribution, whether by way of
dividends or otherwise, on the Second Preferred Stock or the Third
Subordinated Preferred Stock or the Preference Stock or the Common
Stock of the Corporation shall be declared or paid upon or set apart
for payment and before any Second Preferred Stock or any Third
Subordinated Preferred Stock or any Preference Stock or any Common
Stock of the Corporation shall be purchased by or for the account of
the Corporation.
(b) After all dividends on the Preferred Stock (First
Preferred Stock) for all past quarterly dividend periods have been
paid or declared and a sum sufficient for the payment thereof set
apart, the holders of shares of Second Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors,
dividends thereon at the rate of Four Dollars ($4.00) per share per
annum and no more, payable in
AA-1
cash quarterly on the first days of January, April, July and October
in each year, accruing from the date of issue. Such dividends shall be
cumulative so that if dividends on all issued and outstanding shares
of Second Preferred Stock at the rate of Four Dollars ($4.00) per
share per annum shall not have been paid or set apart for payment for
the current and all past quarterly dividend periods, the deficiency
shall be paid or set apart for payment before any distribution,
whether by way of dividends or otherwise, on the Third Subordinated
Preferred Stock or the Preference Stock or the Common Stock of the
Corporation shall be declared or paid upon or set apart for payment,
and before any Third Subordinated Preferred Stock or any Preference
Stock or any Common Stock of the Corporation shall be purchased by or
for the account of the Corporation.
(c) After all dividends on the Second Preferred Stock for all
past quarter dividend periods have been paid or declared and a sum
sufficient for the payment thereof set apart, the holders of shares
of Third Subordinated Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, dividends thereon at
the rate of Five Dollars ($5.00) per share per annum and no more,
payable in cash quarterly on the first days of January, April, July
and October in each year, accruing from the record date, in the case
of a stock dividend, and the date of issue in all other cases. Such
dividends shall be cumulative so that if dividends on all issued and
outstanding shares of Third Subordinated Preferred Stock at the rate
of Five Dollars ($5.00) per share per annum shall not have been paid
or set apart for payment for the current and all past quarterly
dividend periods, the deficiency shall be paid or set apart for
payment before any distribution, whether by way of dividends or
otherwise, on the Preference Stock or the Common Stock shall be
declared or paid upon or set apart for payment, and before any
Preference Stock or any Common Stock of the Corporation shall be
purchased by or for the account of the Corporation.
(d) In the event of any liquidation, dissolution or winding-up
of the Corporation (whether voluntary or involuntary) the holders of
the Preferred Stock (First Preferred Stock) shall be entitled to
receive and be paid the sum of One Hundred Dollars ($100.00) for
each share of such Preferred Stock together with an amount equal to
all accrued and unpaid dividends thereon before any sum shall be
paid to or any assets distributed among the holders of the Second
Preferred Stock or the Third Subordinated Preferred Stock or the
Preference Stock or the Common Stock and after the payment to the
holders of the Preferred Stock (First Preferred) of the sums stated,
the remaining assets and funds of the Corporation shall be divided
among and paid to the holders of the Second Preferred Stock and the
Third Subordinated Preferred Stock and the Preference Stock and the
Common Stock of the Corporation.
(e) In the event of any liquidation, dissolution or winding-up
of the Corporation (whether voluntary or involuntary) the holders of
the Second Preferred Stock shall be entitled to receive and be paid the
sum of One Hundred Dollars ($100.00) for each share of such Second
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Preferred Stock, together with an amount equal to all accrued and
unpaid dividends thereon before any sum shall be paid to or any assets
distributed among the holders of the Third Subordinated Preferred
Stock or the Preference Stock or the Common Stock of the Corporation;
provided, however, that no such payments shall be made unless the
holders of any shares of Preferred Stock (First Preferred Stock) which
may be outstanding at the time shall have received any sums to which
they may be entitled in such event. After payment to the holders of
the Preferred Stock (First Preferred Stock) of the sums stated in
subparagraph (d) hereof, and payment to the holders of the Second
Preferred Stock of the sums stated in this subparagraph (e) the
remaining assets and funds of the Corporation shall be divided among
and paid to the holders of the Third Subordinated Preferred Stock and
the Preference Stock and the Common Stock of the Corporation.
(f) In the event of any liquidation, dissolution or winding-up
of the Corporation (whether voluntary or involuntary) the holders of
the Third Subordinated Preferred Stock shall be entitled to receive
and to be paid the sum of One Hundred Dollars ($100.00) for each
share of such Third Subordinated Preferred Stock, together with an
amount equal to all accrued and unpaid dividends thereon before any
sum shall be paid to or any assets distributed among the holders of
the Preference Stock or the Common Stock of the Corporation;
provided, however, that no such payments shall be made unless the
holders of any shares of Preferred Stock (First Preferred Stock) or
Second Preferred Stock which may be outstanding at the time shall
have received any sums to which they may be entitled in such event.
After payment of the holders of the Preferred Stock (First Preferred
Stock) of the sums stated in subparagraph (d) hereof, and payment to
the holders of the Second Preferred Stock of the sums stated in
subparagraph (e) and payment to the holders of the Third
Subordinated Preferred Stock of the sums stated in subparagraph (f),
the remaining assets and funds of the Corporation shall be divided
among and paid to the holders of the Preference Stock and the Common
Stock of the Corporation.
(g) The Corporation, at the option of the Board of Directors,
may redeem the whole or any part of the issued and outstanding
Preferred Stock (First Preferred Stock) at any time, or from time to
time, at the redemption price of One Hundred and Five Dollars
($105.00) per share together with an amount equal to all unpaid
accrued dividends thereon computed to the date of redemption. In the
event that less than all the issued and outstanding shares of
Preferred Stock are to be redeemed, the amount to be redeemed and
the method of effecting such redemption, whether by lot or pro rata,
may be determined by the Board of Directors. Notice of such
redemption, stating the date upon which, and the place at which
certificates representing the shares to be redeemed shall be
surrendered, shall be mailed not less than fifteen (15) days prior
to the redemption date to each holder of such shares at his address
as it appears on the books of the Corporation. From and after the
redemption date, unless default shall be made by the Corporation in
providing the funds for redemption, all rights of the holders in
respect of such shares
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shall cease except the right to receive the redemption price payable
upon surrender of certificates representing such shares, together with
any amount equal to all unpaid accrued dividends thereon.
(h) The Corporation, at the option of the Board of Directors,
may redeem the whole or any part of the issued and outstanding
Second Preferred Stock at any time, or from time to time, at the
redemption price of One Hundred and Five Dollars ($105.00) per share
together with an amount equal to all unpaid accrued dividends
thereon computed to the date of redemption; provided, however, that
so long as any shares of the Preferred Stock (First Preferred Stock)
are outstanding the Board of Directors may not redeem any shares of
the Second Preferred Stock unless all dividends on the Preferred
Stock (First Preferred Stock) for all past quarterly dividend
periods shall have been paid or declared and a sum sufficient for
the payment thereof set apart. In the event that less than all the
issued and outstanding shares of Second Preferred Stock are to be
redeemed, the amount to be redeemed and the method of effecting such
redemption, whether by lot or pro rata, may be determined by the
Board of Directors. Notice of such redemption, stating the date upon
which, and the place at which certificates representing the shares
to be redeemed shall be surrendered, shall be mailed not less than
fifteen (15) days prior to the redemption date to each holder of
such shares at his address as it appears on the books of the
Corporation. From and after the redemption date, unless default
shall be made by the Corporation in providing the funds for
redemption, all rights of the holders in respect of such shares
shall cease except the right to receive the redemption price payable
upon surrender of certificates representing such shares, together
with an amount equal to all unpaid accrued dividends thereon.
(i) The Corporation, at the option of the Board of Directors,
may redeem the whole or any part of the issued or outstanding Third
Subordinated Preferred Stock at any time, or from time to time, at
the redemption price of One Hundred and Five Dollars ($105.00) per
share together with an amount equal to all unpaid accrued dividends
thereon computed to the date of redemption; provided, however, that
so long as any shares of the Preferred Stock (First Preferred Stock)
and the Second Preferred Stock are outstanding the Board of
Directors may not redeem any shares of the Third Subordinated
Preferred Stock unless all dividends on the Preferred Stock (First
Preferred Stock) and Second Preferred Stock for all past quarterly
dividend periods shall have been paid or declared and a sum
sufficient for the payment thereof set apart. In the event that less
than all the issued and outstanding shares of Third Subordinated
Preferred Stock are to be redeemed, the amount to be redeemed and
the method of effecting such redemption, whether by lot or pro rata,
may be determined by the Board of Directors. Notice of such
redemption, stating the date upon which, and the place at which
certificates representing the shares to be redeemed shall be
surrendered, shall be mailed not less than fifteen (15) days prior
to the redemption date to each holder of such shares at his address
as it appears on the books of the Corporation. From and after the
redemption date, unless default shall be made by the Corporation in
providing the funds for
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redemption, all rights of the holders in respect of such shares shall
cease except the right to receive the redemption price payable upon
surrender of certificates representing such shares, together with an
amount of all unpaid accrued dividends thereon.
(j) Except as expressly otherwise provided by law, the holders
of the Preferred Stock (First Preferred Stock) and the holders of
the Second Preferred Stock and the holders of the Third Subordinated
Preferred Stock shall not be entitled to vote at any meeting of the
stockholders or to receive notice of such meeting.
(k) (A) The Preference Stock may be issued, from time to time,
by the Board of Directors as shares of one or more series of
Preference Stock. The Board of Directors is expressly authorized to
fix, by resolution or resolutions, the powers, designations,
preferences and relative, participating, optional or other special
rights, if any, or the qualifications, limitations or restrictions
thereof, pertaining to each series of Preference Stock, including,
without limitation:
(i) the distinctive serial designation of such series which shall
distinguish it from other series;
(ii) the number of shares included in such series, which number
may be increased or decreased from time to time unless otherwise
provided by the Board of Directors in creating the series;
(iii) the annual dividend rate or rates (or method of determining
such rate or rates, including the date or dates, if any, upon which
and the terms and conditions under which, such dividend rate or rates
may be reset or otherwise modified) for shares of such series and the
date or dates upon which such dividends shall be payable;
(iv) whether dividends on the shares of such series shall be
cumulative, and, in the case of shares of any series having cumulative
dividend rights, the date or dates or method of determining the date
or dates from which dividends of the shares of such series shall be
cumulative;
(v) the amount or amounts which shall be paid out of the assets
of the Corporation to the holders of the shares of such series upon
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation;
(vi) the price or prices at which, the period or periods within
which and the terms and conditions upon which the shares of such
series may be redeemed, in whole or in part, at the option of the
Corporation;
(vii) the obligation, if any, of the Corporation to purchase or
redeem, in whole or in part, shares of such series pursuant to a
sinking fund or redemption or purchase account, at the option of the
holders of such shares, upon the happening of a specified event or
otherwise and the
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price or prices at which, the period or periods within which and the
terms and conditions upon which the shares of such series shall be
purchased or redeemed, in whole or in part, pursuant to such
obligation;
(viii) whether the shares of such series shall be convertible
into, or exchangeable for, at the option of either the holder or the
Corporation or upon the happening of a specified event or otherwise,
shares of any other class or classes or any other series of the same
or any other class or classes of capital stock of the Corporation, or
any other securities of the Corporation or any shares of stock or
securities of any other corporation or other entity, and the terms and
conditions of any such conversion or exchange, including (without
limitation) the price or prices or the rate or rates of conversion or
exchange and the terms and conditions of any adjustments thereof, and
the period or periods within which such conversion or exchange may
occur;
(ix) the voting rights, if any, of the shares of such series in
addition to those required by law, including the number of votes per
share and any requirement for the approval by the holders of all
Preference Stock, or of the shares of one or more series, or of both,
in an amount greater than a majority, up to such amount as is in
accordance with applicable law, as a condition to specified corporate
action or amendments to the certificate of incorporation;
(x) the ranking of the shares of the series as compared with
shares of other series of the Preference Stock in respect of the right
to receive dividends and the right to receive payments out of the
assets of the Corporation upon voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation;
(xi) whether there shall be any limitations applicable, while
shares of such series are outstanding, upon the payment of dividends
or the making of distributions on, or the acquisition of, or the use
of moneys for purchase or redemption of, any capital stock of the
Corporation, or upon any other action of the Corporation, and if so,
the terms and conditions thereof; and
(xii) any other powers, preferences and relative, participating,
optional or other rights and any qualifications, limitations or
restrictions not inconsistent herewith or with applicable law.
All shares of any one series of Preference Stock shall be
alike in every particular except as to the dates from and after
which dividends thereon shall be cumulative.
(B) Notwithstanding the provisions of the foregoing paragraph
(k)(A) of this Article IV, the authority of the Board of Directors to
fix the powers, designations, preferences, rights, qualifications,
limitations and restrictions pertaining to the shares of Preference
Stock or any series thereof shall be subject to the limitation that
all shares of Preference Stock shall be subject to the rights and
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preferences of the Preferred Stock (First Preferred Stock), Second
Preferred Stock and Third Subordinated Preferred Stock.
(C) All shares of Preference Stock shall rank senior to the
Common Stock in respect of the right to receive dividends and the
right to receive payments out of the assets of the Corporation upon
the voluntary or involuntary liquidation, dissolution or winding-up of
the Corporation, except as set forth in the resolution or resolutions
of the Board of Directors creating and designating any series of
Preference Stock. All shares of Preference Stock redeemed, purchased
or otherwise acquired by the Corporation (including shares surrendered
for conversion or exchange) shall be cancelled and thereupon restored
to the status of authorized but unissued shares of Preference Stock
undesignated as to series, unless otherwise provided in the resolution
or resolutions of the Board of Directors creating and designating the
series of Preference Stock of which the shares that are redeemed,
purchased or otherwise acquired by the Corporation are a part.
(l) Subject to the rights and preferences of the First Preferred
Stock, Second Preferred Stock, Third Subordinated Preferred Stock and
Preference Stock, as set forth in paragraphs (a) through (k) of this
Article IV, the Common Stock shall participate share and share alike
in all dividends and distributions of assets upon liquidation or
otherwise and the holders of the Common Stock of the Corporation shall
have full voting power for all purposes, with each share of Common
Stock entitled to one vote per share, save as otherwise required by
law.
(m) None of the holders of capital stock of any class shall be
entitled as of right to purchase or subscribe for any unissued stock
of the Corporation of any class or any additional shares of any class
to be issued by reason of any increase of the authorized stock of the
Corporation, or any other securities convertible into or exchangeable
for stock of the Corporation or carrying any right to purchase such
stock.
At the Effective Time, Article V shall be amended and restated in its
entirety as set forth below:
(a) The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors. The number of
Directors of the Corporation shall be fixed by the Board of Directors
in the manner provided in the By-Laws, but in no case shall the number
be less than three (3) nor more than twelve (12). The Directors need
not be stockholders. The election of the Directors of the Corporation
need not be by written ballot unless the By-Laws so require. The
Directors of the Corporation, other than those who may be elected by
the holders of any series of Preferred Stock or Preference Stock under
specific circumstances, shall be divided into three classes as nearly
equal in number as is reasonably possible. Xxxxxxxx X. Xxxxxxxx,
Xxxxxx Xxxx, and Xxxxx X. Xxxxxx shall be members of the first class
of directors with terms expiring at the 2003 annual meeting of
stockholders. Xxxxxxxx X. Xxxxxxxxx, Xxxxxxx X. Xxxxx and Xx Xxxxxx
shall be
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members of the second class of directors with terms expiring at the
2004 annual meeting of stockholders. M. Xxxxxxxxx XxXxxx, Xxxxx X.
Xxxxxxx, and Xxxxxx X. Xxxxx shall be members of the third class of
directors with terms expiring at the 2005 annual meeting of
stockholders. At each subsequent annual meeting of stockholders, the
successors to the directors whose terms shall expire that year shall
be elected to hold office for the term of three years, so that the
term of office of one class of directors shall expire in each year. In
any event, each director of the Corporation shall hold office until
that director's successor is duly elected and qualified.
(b) In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is
expressly authorized and empowered:
(1) To adopt, amend or repeal the By-Laws of the
Corporation; provided, that such action shall require the affirmative
vote of a majority of the total number of Directors. Nothing herein
shall limit the power of the holders of shares of Common Stock of the
Corporation to adopt, amend or repeal the By-Laws of the Corporation.
(2) To provide for the issuance, from time to time, of the
shares of stock of the Corporation, whether now or hereafter
authorized, for such consideration and on such terms and conditions as
it may lawfully fix from time to time; and all shares so issued, the
full consideration for which has been paid, shall be deemed fully paid
and nonassessable.
(c) A Director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent that such exemption
from liability or limitation thereof is not permitted under Title 8,
Chapter 1 of the Delaware Code as currently in effect or as the same
may hereafter be amended. No amendment, modification or repeal of this
paragraph shall adversely affect any right or protection of a Director
that exists at the time of such amendment, modification or repeal.
At the Effective Time, the following new article shall be added immediately
after Article VIII:
ARTICLE IX
ACTION BY WRITTEN CONSENT
No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting and the power of stockholders to consent in
writing is specifically denied.
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EXHIBIT B
REGISTRATION RIGHTS
(a) From and after the Closing, and following January 2, 2003 (or, if
the Closing occurs after December 31, 2002, following the Closing Date), and
until the earliest of (1) the second anniversary of the Closing Date, (2) such
time as the Funds do not own collectively more than 2,250,000 shares of Common
Stock and (3) such time as the Funds are able to sell all of their remaining
shares of Common Stock under Rule 144 promulgated under the Securities Act
within a three month period (the earliest of such dates, the "Termination
Date"), the Funds shall have the right to make two requests (the "Requests") of
the Company in writing for registration under the Securities Act of shares of
Common Stock owned by the Funds (it being understood that a request hereunder by
either one or both of the Funds shall count as a Request); provided that the
Funds shall not have the right to exercise their second Request prior to 180
days following completion of an offering pursuant to the first Request. In order
to best facilitate an orderly process, each of the Funds will use its reasonable
best efforts to informally advise the Company as promptly as possible in advance
of submitting a Request that it is contemplating submitting a Request. In the
event the Company determines that it desires to conduct an underwritten public
offering for the account of the Company of Common Stock (other than a
registration relating to the sale of securities to participants in a dividend
reinvestment plan, a registration on Form S-4 relating to a business combination
or similar transaction, a registration on Form S-8 or a registration permitted
under Rule 462 of the Securities Act) after January 15, 2003 and prior to March
15, 2003 (or, if the Closing occurs after December 31, 2002, (1) after the later
of (A) the Closing Date and (B) January 15, 2003 and (2) prior to the 60th day
after the date in clause (1) of this parenthetical) (the "BLACKOUT PERIOD"), the
Company will notify the Funds in writing and if within 5 business days of
receipt of such notice the Funds submit a Request to the Company, the Company
shall refrain from conducting any public offering of Common Stock during the
Blackout Period.
(1) The Company shall use its reasonable best efforts to cause the
shares of Common Stock to be registered under the Securities Act as soon as
reasonably practicable after receipt of such Requests so as to permit promptly
the sale thereof in accordance with paragraph (b) hereof.
(2) Each Fund hereby undertakes to provide all such information and
materials and take all such action as may be required in order to permit the
Company to comply with all applicable requirements of the Commission and to
obtain any desired acceleration of the effective date of such registration
statement.
(3) Any registration statement filed at the Funds' request hereunder
will not count as a Request unless effectiveness is maintained until the earlier
of the completion of the offering and the date that is three months following
the effective date of such registration statement.
(4) Notwithstanding the foregoing, the Company shall be entitled to
postpone for a reasonable period of time (not to exceed 60 days in the case of
any given postponement, and not to exceed 120 days in any twelve month period in
the case of more than one
B-1
postponement) the filing of any registration statement otherwise required to be
prepared and filed by the Company if (A) the Company is, at such time,
conducting, or proposing to file with the Commission within 30 days a
registration statement with respect to an underwritten public offering for the
account of the Company of equity securities (or securities convertible into
equity securities) and is advised in writing by its managing underwriter or
underwriters (with a copy to the Funds) that such offering would, in its or
their opinion, be materially and adversely affected by the registration so
requested (provided that the Company may not exercise its right to so postpone
pursuant to this clause (A) during the Blackout Period), or (B) the Company
determines, in good faith, that effecting the registration at such time would
reasonably be expected to (i) adversely affect a pending or contemplated
acquisition, disposition of assets or stock, merger or other significant
transaction or (ii) require the Company to make public disclosure of information
the public disclosure of which, at such time, is not then otherwise required by
law and which at such time the Company in good faith believes would be adverse
in a material respect to the Company's interest to disclose.
(5) No securities may be registered on a registration statement
requested by the Funds pursuant to this paragraph (a) without the Funds' express
written consent, unless the amount of such securities is subject to reduction
prior to any reduction in the number of shares of Common Stock originally
requested by the Funds to be registered in the event that the managing
underwriters of the related offering advise the Funds in writing (with a copy to
the Company) that they believe that the success of such offering would be
materially and adversely affected by inclusion of all of the securities
requested to be included therein. If the managing underwriters so advise that
they believe that the success of such offering would be materially and adversely
affected by inclusion of all the shares of Common Stock requested to be
registered by the Funds, then the number of shares of Common Stock to be
included in such registration by each Fund shall be reduced pro rata, on the
basis of the number of shares of Common Stock each Fund requested to be included
in such registration.
(b) If the Company is required by the provisions of paragraph (a) to
use its reasonable best efforts to effect the registration of shares of Common
Stock under the Securities Act, the Company will:
(1) as expeditiously as possible, but in any event not later than 30
days after receipt of a Request, prepare and file with the Commission a
registration statement, on such form as the Company in its reasonable discretion
shall determine, with respect to such shares of Common Stock and use its
reasonable best efforts to cause such registration statement promptly to become
and remain effective for a period of time required for the disposition of such
shares of Common Stock by the Fund or Funds registering shares (the "Selling
Stockholders") but not to exceed 90 days, provided, however, that before filing
such registration statement or any amendments thereto, the Company shall furnish
to the representatives of the Selling Stockholders copies of all documents
proposed to be filed and counsel to the Selling Stockholders shall have a
reasonable opportunity to comment thereon;
(2) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of the shares of Common Stock
B-2
covered by such registration statement until the earlier of such time as all of
such shares have been disposed of in a public offering or the expiration of 90
days from the date of initial effectiveness;
(3) furnish to such Selling Stockholders such number of conformed
copies of the applicable registration statement and each such amendment and
supplement thereto (including in each case all exhibits), and of a summary
prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such Selling Stockholders may reasonably request;
(4) use its reasonable best efforts to register or qualify the shares
of Common Stock covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States and
Puerto Rico as each Selling Stockholder shall reasonably request, to keep such
registration or qualification in effect for so long as such registration
statement remains in effect, and to take any other action which may be
reasonably necessary to enable such Selling Stockholder to consummate the
disposition in such jurisdictions of the shares of Common Stock owned by such
Selling Stockholder (provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do business,
subject itself to taxation in or to file a general consent to service of process
in any jurisdiction wherein it would not but for the requirements of this
paragraph (4) be obligated to do so), and do such other reasonable acts and
things as may be required of it to enable such Selling Stockholder to consummate
the disposition in such jurisdiction of the shares of Common Stock covered by
such registration statement;
(5) use its reasonable best efforts to furnish, at the request of any
Selling Stockholder requesting registration of shares of Common Stock pursuant
to paragraph (a) if the method of distribution is by means of an underwriting,
on the date that the shares of Common Stock are delivered to the underwriters
for sale pursuant to such registration, or if such shares of Common Stock are
not being sold through underwriters, on the date that the registration statement
with respect to such shares of Common Stock becomes effective, (A) a signed
opinion, dated such date, of the legal counsel representing the Company for the
purpose of such registration (who may be inside counsel), addressed to the
underwriters, if any, and to the Selling Stockholders making such request, as to
such matters as such underwriters or the Selling Stockholders holding a majority
of the shares of Common Stock included in such registration, as the case may be,
may reasonably request and as would be customary in an underwritten public
offering, (B) letters dated such date and the date the offering is priced from
the independent certified public accountants of the Company, addressed to the
underwriters, if any, and (if permissible under the policies of such independent
certified public accountants) to the Selling Stockholders making such request
(i) stating that they are independent certified public accountants within the
meaning of the Securities Act and that, in the opinion of such accountants, the
financial statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereto, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and (ii) covering such other
financial matters (including information as to the period ending not more than
five (5) business days prior to the date of such letters) with respect to the
registration in respect of which such letter is being given as such underwriters
or the Selling Stockholders holding a majority of the shares of Common Stock
included in such registration, as the case may
B-3
be, may reasonably request and as would be customary in an underwritten public
offering (it being understood that the language and content of the accountants'
letters with respect to clauses (i) and (ii) of this paragraph shall be subject
to the policies applicable to "comfort letters" of such accountants) and (C) a
certificate of an officer of the Company certifying that the representations and
warranties contained in the underwriting agreement are true and correct in all
material respects;
(6) if the method of distribution is by means of an underwriting,
enter into customary agreements (including an underwriting agreement in
customary form) with two underwriters, one selected by the Selling Stockholders
and one selected by the Company, which underwriters shall be co-book running
managers, and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such shares of Common Stock;
(7) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make earnings statements
satisfying the provisions of Section 11(a) of the Securities Act generally
available to the Selling Stockholders no later than 45 days after the end of any
twelve-month period (or 90 days, if such period is a fiscal year) (A) commencing
at the end of any fiscal quarter in which shares of Common Stock are sold to
underwriters in an underwritten public offering, or (B) if not sold to
underwriters in such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
registration statement, which statements shall cover said twelve-month period;
(8) use its reasonable best efforts to cause all such shares of Common
Stock to be listed on each securities exchange or quotation system on which
similar securities issued by the Company are listed or traded;
(9) give written notice to the Selling Stockholders;
(A) when such registration statement or any amendment thereto
has been filed with the Commission and when such
registration statement or any post-effective amendment
thereto has become effective;
(B) of any request by the Commission for amendments or
supplements to such registration statement or the prospectus
included therein or for additional information;
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement
or the initiation of any proceeding for that purpose;
(D) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the
qualification of the Common Stock for sale in any
jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
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(E) of the happening of any event that requires the Company to
make changes in such registration statement or the
prospectus in order to make the statements therein not
misleading (which notice shall be accompanied by an
instruction to suspend the use of the prospectus until the
requisite changes have been made);
(10) use its reasonable best efforts to prevent the issuance or obtain
the withdrawal of any order suspending the effectiveness of such registration
statement at the earliest possible time;
(11) make reasonably available for inspection by the representatives
of the underwriters participating in any disposition pursuant to such
registration statement relevant financial and other records, pertinent corporate
documents and properties of the Company in connection with customary due
diligence relating to such registration;
(12) in connection with any underwritten offering, to the extent
reasonably required and at such times as are not inconsistent with the other
obligations of senior executives of the Company, make such senior executives
available to the Selling Stockholders for meetings with prospective purchasers
of the shares of Common Stock and prepare and present to potential investors
customary "road show" material, in each case in accordance with the reasonable
recommendations of the underwriters and in all respects in a manner consistent
with other new issuances of securities in an offering of a similar size to such
offering of the shares of Common Stock, in connection with any proposed sale of
the shares of Common Stock in an aggregate offering of at least $50 million; and
(13) use reasonable best efforts to procure the cooperation of the
Company's transfer agent in settling any offering or sale of Common Stock,
including with respect to the transfer of physical stock certificates into
book-entry form in accordance with any procedures reasonably requested by the
Selling Stockholders or the underwriters.
(c) From and after the Closing and until the Termination Date, if the
Company proposes to register for its own account any shares of Common Stock or
securities convertible into Common Stock under the Securities Act (other than a
registration relating to the sale of securities to participants in a dividend
reinvestment plan, a registration on Form S-4 relating to a business combination
or similar transaction, a registration on Form S-8 or a registration permitted
under Rule 462 of the Securities Act), the Company shall give each Fund written
notice of such proposed registration. Upon the written request of a Fund given
within 10 days of receipt of such notice by such Fund, the Company shall seek to
include in such proposed registration such shares of Common Stock owned by such
Fund as such Fund shall request. The Company shall be under no obligation to
complete an offering of securities it proposes to make under this paragraph and
shall incur no liability to the Funds for its failure to do so. If, at any time
after giving notice of its intention to register securities and prior to the
effective date of the applicable registration statement, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company shall give notice to the Funds thereof and the Company
shall be under no obligation to register any shares of the Funds in connection
with such registration. If a registration pursuant to this paragraph involves an
underwritten offering and the managing underwriters of such offering believe
that the success of the offering would be
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materially and adversely affected by inclusion of all or part of the shares of
Common Stock which the Funds have requested to be included, then the shares
requested by the Funds for inclusion shall be subject to reduction prior to any
reduction in the securities to be registered by the Company. If a public
offering in which the Funds are offering shares of Common Stock pursuant to this
paragraph (c) includes more than $50 million of shares of Common Stock of the
Funds (after giving effect to any reduction pursuant to the immediately
preceding sentence), then the Funds shall have the right to appoint a co-book
running manager in connection with such offering.
(d) In connection with a requested registration pursuant to paragraph
(a) or paragraph (c) of this Exhibit B, the Selling Stockholders shall pay (on a
pro rata basis, based upon the number of shares of Common Stock being offered by
each Selling Stockholder compared to the total number of shares being offered)
all underwriting discounts and commissions relating to the shares of the Funds
being so registered, filing fees, printing fees, fees and expenses of complying
with "blue sky" or state securities laws and reasonable fees and expenses
relating to "road show" investor presentations (including the costs of any
aircraft chartered in connection therewith). All fees and expenses of legal
counsel, accountants and other advisors incurred in connection with such a
registration statement shall be borne by the party incurring such fees and
expenses.
(e) In the case of each offering registered pursuant to this Exhibit
B, the Company agrees to indemnify and hold each Selling Stockholder, each
underwriter of Common Stock under such registration and each person who controls
any of the foregoing within the meaning of Section 15 of the Securities Act, and
the directors, officers and members of the Selling Stockholders, harmless
against any and all losses, claims, damages, liabilities or actions, joint or
several, to which they or any of them may become subject under the Securities
Act or any other statute or common law or otherwise, and to reimburse them for
any legal or other expenses reasonably incurred by them in connection with
investigating any claims and defending any actions, insofar as any such losses,
claims, damages, liabilities or actions shall arise out of or shall be based
upon (1) any untrue statement or alleged untrue statement of a material fact
contained in the registration statement relating to the sale of such Common
Stock, or the omission or alleged omission to state therein 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 or (2) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus (as amended or supplemented if the Company shall have
filed with the Commission any amendment thereof or supplement thereto), if used
prior to the effective date of such registration statement, or contained in the
prospectus (as amended or supplemented if the Company shall have filed with the
Commission any amendment thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the indemnification agreement contained
in this paragraph (e) shall not apply to such losses, claims, damages,
liabilities or actions which shall arise from the sale of shares of Common Stock
by the Selling Stockholders if such losses, claims, damages, liabilities or
actions shall arise out of or shall be based upon any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, (i) made in
reliance upon and in conformity with information furnished in writing to the
Company by the Selling Stockholders or any such underwriter expressly for use in
connection with the preparation of the
B-6
registration statement or any preliminary prospectus or prospectus contained in
the registration statement or any such amendment thereof or supplement thereto
or (ii) in the case of any underwriters (and each person who controls any
underwriters within the meaning of Section 15 of the Securities Act) and in the
case of the Selling Stockholders in offerings in which the Company has not
appointed a co-managing book runner, made in any preliminary prospectus, and the
prospectus contained in the registration statement in the form filed by the
Company with the Commission pursuant to Rule 424(b) under the Securities Act
shall have corrected such statement or omission and a copy of such prospectus
shall not have been sent or given to such person at or prior to the confirmation
of such sale to him.
(f) In the case of each offering registered pursuant to this Exhibit
B, the Selling Stockholders and each underwriter participating therein agrees,
in the same manner and to the same extent as set forth in paragraph (e) of this
Exhibit B, severally to indemnify and hold harmless (1) the Company and each
person, if any, who controls the Company (other than the Funds) within the
meaning of Section 15 of the Securities Act, and the directors and officers of
the Company, (2) in the case of each such underwriters, the Selling
Stockholders, each person, if any, who controls a Selling Stockholder within the
meaning of Section 15 of the Securities Act and the directors, officers and
members of the Selling Stockholders and (3) in the case of the Selling
Stockholders, the underwriters, each person, if any, who controls an underwriter
within the meaning of Section 15 of the Securities Act and the directors and
officers of the underwriters, with respect to any statement in or omission from
such registration statement or any preliminary prospectus (as amended or as
supplemented, if amended or supplemented as aforesaid) or prospectus contained
in such registration statement (as amended or as supplemented, if amended or
supplemented as aforesaid), if such statement or omission shall have been made
in reliance upon and in conformity with information furnished in writing to the
Company by the Selling Stockholders or such underwriter (as the case may be)
expressly for use in connection with the preparation of such registration
statement or any preliminary prospectus or prospectus contained in such
registration statement or any such amendment thereof or supplement thereto.
(g) Each party indemnified under paragraph (e) or (f) of this Exhibit
B shall, promptly after receipt of notice of the commencement of any action
against such indemnified party in respect of which indemnity may be sought
hereunder, notify the indemnifying party in writing of the commencement thereof.
The failure of any indemnified party to so notify an indemnifying party of any
such action shall not relieve the indemnifying party from any liability in
respect of such action which it may have to such indemnified party on account of
the indemnity agreement contained in paragraph (e) or (f) of this Exhibit B,
unless and only to the extent that the indemnifying party was prejudiced by such
failure, and in no event shall relieve the indemnifying party from any other
liability which it may have to such indemnified party. In case any such action
shall be brought against any indemnified party and it shall notify an
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it may desire, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under paragraph (e) or (f) of this
Exhibit B for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation; provided, however, that (1) if there exists or is
reasonably likely to exist a conflict of interest that would make it
inappropriate in the
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judgment of the indemnified party, in its sole and absolute discretion, for the
same counsel to represent both the indemnified party and the indemnifying party,
or (2) the indemnifying party fails to assume the defense of such action, then
the indemnified party shall be entitled to retain its own counsel (it being
understood that the Selling Stockholders shall collectively be entitled to only
one counsel), in each jurisdiction for which the indemnified party determines
counsel is required, at the expense of the indemnifying party. No such third
party claim may be settled by the indemnifying party or the indemnified party
(unless such settlement includes an unconditional release of the indemnified
party from all liability arising out of such claim or proceeding and does not
include any relief other than the payment of monetary damages) without the prior
written consent of the other, which consent shall not be unreasonably withheld.
(h) If the indemnification provided for under paragraph (e) or (f) of
this Exhibit B shall for any reason be held by a court to be unavailable to an
indemnified party under paragraph (e) or (f) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under paragraph (e) or (f) hereof, the indemnified
party and the indemnifying party under paragraph (e) or (f) hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (1) in such proportion as is appropriate to reflect the relative fault of
the Company and the prospective seller of securities covered by the registration
statement which resulted in such loss, claim, damage or liability, or action in
respect thereof, with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations or (2) if the allocation provided by
clause (1) above is not permitted by applicable law, in such proportion as shall
be appropriate to reflect the relative benefits received by the Company and such
prospective seller from the offering of the securities covered by such
registration statement. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this paragraph (h) were determined by pro
rata allocation or by any other method of allocation which does not take account
the equitable considerations referred to in this paragraph. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In addition, no person shall be
obligated to contribute hereunder any amounts in payment for any settlement of
any action or claim effected without such person's consent, which consent shall
not be unreasonably withheld.
(i) From and after the Closing, and until the earlier of such time as
(1) the Funds have no right to further Requests or (2) the Funds together own
less than 5% of the outstanding shares of Common Stock, the Company shall not,
without the prior written consent of the Funds, enter into any agreement with
any holder or prospective holder of any Common Stock or securities convertible
into Common Stock giving such holder or prospective holder any registration
rights the terms of which would restrict or interfere in any material respect
with the registration rights granted to the Funds hereunder.
(j) There are no contractual obligations of the Company not to engage
in a public offering.
(k) Capitalized terms used and not defined in this Exhibit B shall
have the meanings set forth in the Agreement.
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