AMENDED AND RESTATED BERKSHIRE HATHAWAY INC.
SUBSCRIPTION AGREEMENT
Teton Acquisition Corp.
c/o MidAmerican Energy Holdings Company
000 Xxxxx 00xx Xxxxxx
Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxx
Ladies and Gentlemen:
The undersigned is executing this Agreement in connection with
its subscription for shares of (i) common stock, no par value ("Common Stock"),
and Preferred Stock (as defined below) of Teton Acquisition Corp. (the
"Company"), an Iowa corporation wholly owned by Teton Formation L.L.C. (the
"Parent"), an Iowa limited liability company, and (ii) Trust Securities (as
defined below) of the Trust (as defined below). The undersigned understands that
the Company is relying upon the accuracy and completeness of the information
contained herein in complying with its obligations under federal and state
securities and other applicable laws.
The Company and the Parent are contemplating entering into an
Agreement and Plan of Merger (the "Merger Agreement") with MidAmerican Energy
Holdings Company ("MidAmerican"), pursuant to which, and subject to the terms
and conditions set forth therein, the Company would merge with and into
MidAmerican, with MidAmerican being the surviving corporation (the "Merger").
The undersigned hereby irrevocably agrees with, and represents
and warrants to and for the benefit of, the Company, the Parent and the members
of the Parent, as follows:
1. Subscription.
On the terms and subject to the conditions of this Agreement, the
undersigned hereby irrevocably subscribes for and the Company hereby irrevocably
agrees to sell:
(a) such number of shares of Common Stock representing 9.9% of the
outstanding voting stock of the Company (after giving effect to
the purchases under the other Subscription Agreements (as defined
herein)) for a purchase price of $35.05 per share;
(b) such number of shares of Zero Coupon Convertible Preferred Stock
("Preferred Stock") of the Company (the terms of which are
described on the form of Articles of Amendment to the Amended
and Restated Articles of Incorporation of the Company attached
as Schedule I hereto) equal to the Preferred Stock
Share Amount (as defined below), for a purchase price of
$35.05 (the "Preferred Stock Purchase Price") per share; and
(c) 32,000,000 11% Trust Issued Preferred Securities (liquidation
amount $25 per security) (the "Trust Securities") of MidAmerican
Capital Trust, a statutory business trust to be formed by the
Company under the laws of the State of Delaware (the "Trust"),
having the terms, limitations and relative rights and preferences
described on Schedule II hereto, for an aggregate purchase price
of $800 million.
The "Preferred Stock Share Amount" shall equal the quotient
obtained by dividing (A) the Net Merger Consideration Amount (as defined below)
less (i) $280,400,000, representing the aggregate subscription price for shares
of Common Stock to be paid by Xxxxxx Xxxxx, Xx. pursuant to the Xxxxx
Subscription Agreement (as defined below), (ii) $17,478,900, representing the
aggregate subscription price for shares of Common Stock and options to purchase
shares of Common Stock to be paid by Xxxxx X. Xxxxx pursuant to the Xxxxx
Subscription Agreement (as defined below), (iii) the aggregate subscription
price (up to $12,521,100) for shares of Common Stock and/or options to purchase
Common Stock to be paid by members of management of MidAmerican other than Xxxxx
X. Xxxxx pursuant to the Management Subscription Agreements (as defined below),
(iv) the aggregate purchase price for the shares of Common Stock to be purchased
by the undersigned under Section 1(a) and (v) $800 million, representing the
aggregate purchase price for the Trust Securities to be purchased by the
undersigned under Section 1(c), by (B) the Preferred Stock Purchase Price.
For purposes of the preceding paragraph, (i) the value per share
of MidAmerican common stock paid as part of the purchase price under the
Management Subscription Agreements shall equal the amount per share of
MidAmerican common stock to be paid pursuant to the Merger Agreement (the "Per
Share Amount"), and (ii) the value of the options to purchase MidAmerican common
stock paid as part of the purchase price under the Management Subscription
Agreements shall equal the product of (A) the excess, if any, for each such
option, of the Per Share Amount over the per share exercise price thereof and
(B) the number of shares of MidAmerican common stock subject to the option.
The "Net Merger Consideration Amount" shall equal (A) the sum of
(i) the aggregate cash consideration to be paid to the holders of MidAmerican
common stock and/or options to purchase MidAmerican common stock pursuant to the
Merger Agreement (assuming that all shares of MidAmerican common stock and
options to purchase MidAmerican common stock are cashed out in the Merger), (ii)
the aggregate cash consideration to be paid to holders of trust preferred
securities of MidAmerican Capital Trust II and/or MidAmerican Capital Trust III
(together referred to as "TIDES"), with respect to which securities conversion
rights are exercised, and (iii) other transaction costs of up to $25 million,
less (B) the amount of cash on MidAmerican's balance sheet on the Closing Date
(including cash received by MidAmerican upon the exercise of options and certain
asset sales); provided, that, in no event shall the Net Merger Consideration
Amount exceed $2,352,000,000.
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To the extent that TIDES have not been converted into MidAmerican
common stock as of the Closing Date, the number of shares of Preferred Stock
purchased pursuant to Section 1(b) above at the Closing Date will be reduced,
and additional shares of Preferred Stock will be purchased over the period of up
to 180 days following the Closing Date at the Preferred Stock Purchase Price, as
and to the extent that TIDES are converted, with the total number of shares of
Preferred Stock purchased at the Closing Date and over the succeeding six months
not to exceed the Preferred Stock Share Amount. Following the close of business
on the day that is 180 days after the Closing Date, or the date on which all of
the TIDES have been converted, whichever is earlier, provided all shares of
Preferred Stock required up to that time to be purchased hereunder have been
duly purchased, there shall be no further obligation to purchase shares of
Preferred Stock.
The shares of Common Stock and Preferred Stock to be purchased
pursuant to Sections 1(a) and (b) are herein referred to, collectively, as the
"Shares," and the Shares, together with the Trust Securities to be purchased
pursuant to Section 1(c), are herein referred to, collectively, as the
"Securities." The purchase price for such Securities is payable, at the option
of the undersigned, in cash, in shares of MidAmerican common stock (which shall
be valued at the Per Share Amount), or any combination thereof. The undersigned
may assign its subscription rights hereunder to one or more of its consolidated
subsidiaries; provided, however, that the undersigned shall remain fully liable
for all of its obligations hereunder, including, without limitation, the payment
of the purchase price for all of the Securities. As a condition to such
subscription, each consolidated subsidiary of the undersigned purchasing
Securities shall execute and deliver to the Company a counterpart of this
Agreement, and shall be bound by the terms and conditions of this Agreement (but
with its obligations limited to the Securities being purchased by it) as if such
person was the original signatory hereto.
2. Other Subscription Agreements. The Company is entering into,
concurrently with the execution of this Agreement, (i) a subscription agreement
with Xxxxx X. Xxxxx (the "Xxxxx Subscription Agreement"), pursuant to which
Xxxxx X. Xxxxx has agreed to purchase, on the terms and subject to the
conditions stated therein, shares of Common Stock and/or options to purchase
Common Stock, and (ii) a subscription agreement with Xxxxxx Xxxxx, Xx. (the
"Xxxxx Subscription Agreement"), pursuant to which Xxxxxx Xxxxx, Xx. has agreed
to purchase, on the terms and subject to the conditions stated therein, shares
of Common Stock. The Company may also enter into subscription agreements with
other members or former members of MidAmerican management (any such agreements,
together with the Xxxxx Subscription Agreement, the "Management Subscription
Agreements" and the Management Subscription Agreements, together with this
Agreement and the Xxxxx Subscription Agreement, collectively, the "Subscription
Agreements"), pursuant to which such persons will agree to purchase, on the
terms and subject to the conditions stated therein, shares of Common Stock
and/or options to purchase Common Stock. Each of the Subscription Agreements are
separate and several agreements, and the sales of Securities to the undersigned
and to the other purchasers under the Subscription Agreements are to be separate
and several sales.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants that:
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(a) Organization and Qualification. The Company is duly formed,
validly existing and in good standing under the laws of the State of Iowa. On
the Closing Date (as defined below), the Trust will be a statutory business
trust duly organized, validly existing and in good standing under the laws of
the State of Delaware. The Company was organized solely for the purposes of
consummating the Merger and the other transactions to be contemplated by the
Merger Agreement and taking action with respect thereto. Except for obligations
or liabilities incurred, or to be incurred, in connection with the transactions
to be contemplated by the Merger Agreement (including the Subscription
Agreements) or in connection with their organization, on the Closing Date
neither the Company nor the Trust will have incurred any obligations or
liabilities or engaged in any business activities of any kind.
(b) Authority. Subject to the filing of the Amendment (as defined
below), the Company has the requisite power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly approved by all
necessary action, and no other proceedings on the part of the Company are
necessary to authorize the execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery of this Agreement by the undersigned, constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). On the Closing Date, the issuance and delivery of the Trust
Securities in accordance with this Agreement will have been authorized by the
Trust.
(c) Issuance of Securities. The Shares to be issued and sold by the
Company pursuant to this Agreement, when issued in accordance with the
provisions hereof, will be validly issued, fully paid and nonassessable stock of
the Company, and no holder of stock of the Company will have any preemptive
rights to subscribe for any such Shares. On the Closing Date, the Trust
Securities to be issued and sold by the Trust pursuant to this Agreement, when
issued in accordance with the provisions hereof, will be validly issued, fully
paid and nonassessable undivided beneficial interests in the assets of the
Trust, and no holder of interests in the Trust will have any preemptive rights
to subscribe for any such Trust Securities. Other than shares of Common Stock,
the only securities authorized for issuance by the Company are the shares of
Preferred Stock to be issued and sold by the Company pursuant to this Agreement.
On the Closing Date, the only securities which will be authorized for issuance
by the Trust are the Trust Securities to be issued and sold by the Company
pursuant to this Agreement.
(d) Approvals and Consents; Non-Contravention. The creation,
authorization, issuance, offer and sale of the Securities do not require any
consent, approval or
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authorization of, or filing, registration or qualification with, any
governmental authority on the part of the Company or the Trust (other than as
will be described in the Merger Agreement, the filing of the Amendment (as
defined below) with the Iowa Secretary of State and filings with the Delaware
Secretary of State with respect to the organization of the Trust) or the vote,
consent or approval in any manner of the holders of any capital stock or other
security of the Company as a condition to the execution and delivery of this
Agreement or the creation, authorization, issuance, offer and sale of the
Securities. The execution and delivery by the Company of this Agreement and the
performance by the Company of its obligations hereunder will not violate (i) the
terms and conditions of the Articles of Incorporation (as amended by the
Amendment) or the Bylaws of the Company, or any agreement to which the Company
is a party or by which it is bound or (ii) subject to the accuracy of the
representations and warranties of the undersigned contained in Section 4 hereof,
any federal or state law.
4. Representations and Warranties of the Undersigned. The undersigned
hereby represents and warrants to the Company that:
(a) Organization and Qualification. The undersigned is duly
organized or formed, validly existing and in good standing under the laws of the
state of its organization or formation.
(b) Authority. The undersigned has the requisite power and authority
to enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by the undersigned and the consummation by the
undersigned of the transactions contemplated hereby have been duly and validly
approved by all necessary action, and no other proceedings on the part of the
undersigned are necessary to authorize the execution, delivery and performance
of this Agreement by the undersigned and the consummation by the undersigned of
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the undersigned and, assuming the due authorization,
execution and delivery of this Agreement by the Company, constitutes a legal,
valid and binding obligation of the undersigned enforceable against the
undersigned in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(c) Approvals and Consents; Non-Contravention. Except as set forth
on Schedule 4(c), or as required under the HSR Act (as defined below), the
execution, delivery and performance of this Agreement by the undersigned and the
consummation by the undersigned of the transactions contemplated hereby do not
require any consent, approval or authorization of, or filing, registration or
qualification with, any governmental authority on the part of the undersigned,
or the vote, consent or approval in any manner of the holders of any capital
stock or other security of the undersigned as a condition to the execution and
delivery of this Agreement or the consummation by the undersigned of the
transactions contemplated hereby. The execution and delivery by the undersigned
of this Agreement and
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the performance by the undersigned of its obligations hereunder will not violate
(i) the terms and conditions of the certificate of incorporation, or other
applicable formation document, or the bylaws of the undersigned, or any
agreement to which the undersigned is a party or by which it is bound or (ii)
any federal or state law. Notwithstanding any other provision of this Section
4(c), no representation or warranty is made as to whether the undersigned or any
of its affiliates, as a result of the transactions contemplated by this
Agreement or the Merger Agreement would be subject to regulation as a registered
holding company under the 0000 Xxx. The undersigned would not intend to register
as such a holding company if that were a required condition of the transaction.
(d) Residence. The principal place of business address set forth on
the signature page hereof is the undersigned's true and correct principal place
of business and is the only jurisdiction in which an offer to sell the
Securities was made to the undersigned and the undersigned has no present
intention of moving its principal place of business to any other state or
jurisdiction.
(e) No Registration. The undersigned understands that the Securities
have not been registered under the Securities Act of 1933, as amended (the
"Act"), or under the laws of any other jurisdiction, and that the Company does
not contemplate and is under no obligation to so register the Securities. The
undersigned understands and agrees that the Securities must be held indefinitely
unless they are subsequently transferred (i) pursuant to an effective
registration statement under the Act and, where required, under the laws of
other jurisdictions or (ii) pursuant to an exemption from applicable
registration requirements. The undersigned recognizes that there is no
established trading market for the Securities and that it is unlikely that any
public market for the Securities will develop for at least five years. The
undersigned will not offer, sell, transfer or assign its Securities or any
interest therein in contravention of this Agreement, the Act or any state or
federal law.
(f) Purchase for Investment. The Securities for which the
undersigned hereby subscribes are being acquired solely for the undersigned's
own account for investment and are not being purchased with a view to or for
resale, distribution or other disposition, and the undersigned has no present
plans to enter into any contract, undertaking, agreement or arrangement for any
such resale, distribution or other disposition.
(g) Information. The undersigned has been granted the opportunity to
ask questions of, and receive answers from, the Company and the officers of the
Company concerning the terms and conditions of the sale of the Securities, the
Merger Agreement and the transactions contemplated thereby, and to obtain any
additional information which the undersigned deems necessary to make an informed
investment decision. The undersigned has received or has had access to other
documents requested from the Company relating to the Securities and the purchase
thereof, and the Company has afforded the undersigned the opportunity to discuss
the undersigned's investment in the Company and to ask and receive answers to
any questions relating to the investment in the Securities, the Merger Agreement
and the transactions contemplated thereby. The undersigned understands and has
evaluated the risks of a purchase of the Securities.
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(h) Accredited Investor. The undersigned has read the text of Rule
501(a)(1) - (8) of Regulation D under the Act and confirms that it is an
"accredited investor" as described thereby.
(i) Plan Assets.
(i) By checking below, the undersigned has indicated whether or not
it is, or is acting on behalf of, a "benefit plan investor", as defined in
29 C.F.R. ss. 2510.3-101. The undersigned acknowledges that (A) a benefit
plan investor includes (x) an "employee benefit plan" within the meaning of
Section 3(3) of the U.S. Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether or not such plan is subject to ERISA, or (y)
a plan or arrangement subject to Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code") or (iii) an entity which is deemed to hold
the assets of any such employee benefit plan, plan or arrangement described
in (x) or (y) above pursuant to 29 C.F.R. ss. 2510.3-101 or otherwise, (B)
a plan which is maintained by a foreign corporation, governmental entity or
church, a Xxxxx plan covering no common-law employees and an individual
retirement account would each be a benefit plan investor for this purpose,
even though they are generally not subject to ERISA and (C) a foreign or
U.S. entity which is not an operating company and which is not publicly
traded or registered as an investment company under the Investment Company
Act of 1940, as amended, and in which 25% or more of the value of any class
of equity interests is held by benefit plan investors, would be deemed to
hold the assets of one or more employee benefit plans pursuant to 29 C.F.R.
2510.3-101. The undersigned further understands that for purposes of
determining whether this 25% threshold has been met or exceeded, the value
of any equity interests held by a person (other than a benefit plan
investor) who has discretionary authority or control with respect to the
assets of the entity, or any person who provides investment advice for a
fee (direct or indirect) with respect to such assets, or any affiliate of
such a person, is disregarded:
[ ] Yes [X] No
(ii) By checking below, the undersigned has indicated whether it is,
or is acting on behalf of, such an employee benefit plan, plan or
arrangement described in the preceding question, or is an entity deemed to
hold the assets of any such employee benefit plan, plan or arrangement that
is subject to ERISA and/or Section 4975 of the Code.
[ ] Yes [X] No
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(iii) By checking below, the undersigned has indicated whether it is
an insurance company using assets of its general account.
[ ] Yes [X] No
If the answer to the above question is yes, please indicate the percentage of
the general account that is attributable to benefit plan investors subject to
ERISA and/or Section 4975 of the Code: %.
(j) Holding Company. The undersigned is not a "public utility
company", a "holding company", a "subsidiary company" of a "holding company", or
an "affiliate" of a "holding company" or of a "subsidiary company", as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended,
or a "public utility" as such term is defined in the Federal Power Act.
(k) Ownership. At the Closing Date, the undersigned or any of its
consolidated subsidiaries that subscribe for Securities hereunder will have good
and marketable title to, and own free and clear of any liens, encumbrances,
mortgages, charges, rights or other security interests, the shares of
MidAmerican common stock, if any, to be exchanged for Securities pursuant to
this Agreement.
(l) Assignment. The undersigned will only assign its subscription
rights hereunder to one or more of its consolidated subsidiaries who are capable
of making the representations and warranties contained in this Section 4 and of
performing the obligations they undertake hereunder.
5. Closing. The closing (the "Closing") of the purchase and sale of the
Securities pursuant to this Agreement shall be held at the same place and at the
same time as the closings under the other Subscription Agreements (the "Closing
Date") and immediately prior to the effective time of the Merger, provided that,
as and to the extent set forth in Section 1, additional shares of Preferred
Stock may be purchased and sold hereunder for a period of up to six months
following the Closing Date.
6. Conditions to Closing. (a) The undersigned's obligation to purchase the
Securities under this Agreement at the Closing is subject to the fulfillment on
or prior to the Closing of the following conditions:
(i) Representations and Warranties. Each representation and warranty
made by the Company in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as though such
representation or warranty was made on the Closing Date, and any
representation or warranty made as of a specified date earlier than the
Closing Date shall have been true and correct in all material respects on
and as of such earlier date.
(ii) Performance. The Company shall have performed and complied
with, in all material respects, each agreement, covenant and obligation
required by this
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Agreement to be so performed or complied with by the Company at or
before the Closing Date.
(iii) Merger Agreement. The Merger Agreement shall have been
executed and delivered by the parties thereto in form and substance
reasonably satisfactory to the undersigned. As of the Closing all
conditions to the consummation of the transactions contemplated by the
Merger Agreement shall have been satisfied or waived and the closing of the
transactions contemplated hereunder shall occur immediately prior to the
effective time of the Merger.
(iv) Stockholders Agreement. The Stockholders Agreement (having
terms substantially the same as those set forth on Schedule III hereto)
(the "Stockholders Agreement") shall have been executed and delivered by
the Company and each of the parties to the Subscription Agreements.
(v) Subscription Agreements. The Subscription Agreements shall be in
full force and effect, no cancellation or termination (purported or
otherwise) shall have occurred in respect of any Subscription Agreement, no
material breach or default shall have occurred and be continuing under any
of the Subscription Agreements, and closings under all of the Subscription
Agreements shall be effected concurrently.
(b) The Company's obligation to sell the Securities under this
Agreement at the Closing is subject to the fulfillment on or prior to the
Closing of the following conditions:
(i) Representations and Warranties. Each representation and warranty
made by the undersigned in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as though such
representation or warranty was made on the Closing Date, and any
representation or warranty made as of a specified date earlier than the
Closing Date shall have been true and correct in all material respects on
and as of such earlier date.
(ii) Performance. The undersigned shall have performed and complied
with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by the
undersigned at or before the Closing Date.
(iii) Merger Agreement. The Merger Agreement shall have been
executed and delivered by the parties thereto in form and substance
reasonably satisfactory to the Company. As of the Closing all conditions to
the consummation of the transactions contemplated by the Merger Agreement
shall have been satisfied or waived and the closing of the transactions
contemplated hereunder shall occur immediately prior to the effective time
of the Merger.
(iv) Stockholders Agreement. The Stockholders Agreement shall have
been executed and delivered by the Company and each of the parties to the
Subscription Agreements.
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(v) Subscription Agreements. The Subscription Agreements shall be in
full force and effect, no cancellation or termination (purported or
otherwise) shall have occurred in respect of any Subscription Agreement, no
material breach or default shall have occurred and be continuing under any
of the Subscription Agreements, and closings under all of the Subscription
Agreements shall be effected concurrently.
7. Covenants. Each of the Company and the undersigned covenants and agrees
with the other that, at all times from and after the date hereof until the
Closing Date, it will comply with all covenants and provisions of this Section
7, except to the extent the other party may otherwise consent in writing.
(a) Amendment of Articles of Incorporation and Formation of Trust.
The Company shall take all actions necessary to amend its Articles of
Incorporation to authorize the issuance of the Preferred Stock under this
Agreement (the "Amendment"). The Company shall take all actions necessary to
organize the Trust, to issue its subordinated debentures to the Trust, and to
cause the Trust to perform its obligations in accordance with the terms, and
subject to the conditions, of this Agreement.
(b) Regulatory and Other Approvals. Subject to the terms and
conditions of this Agreement, each of the Company and the undersigned will
proceed diligently and in good faith to, as promptly as practicable (x) obtain
all consents, approvals or actions of, make all filings with and give all
notices to governmental or regulatory authorities or any public or private third
parties required of the Company and the undersigned to consummate the
transactions contemplated hereby and by the Merger Agreement, and (y) provide
such other information and communications to such governmental or regulatory
authorities or other public or private third parties as the other party or such
governmental or regulatory authorities or other public or private third parties
may reasonably request in connection therewith. In addition to and not in
limitation of the foregoing, each of the parties will (1) take promptly all
actions necessary to make the filings required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act") (2) comply at the earliest practicable
date with any request for additional information received from the Federal Trade
Commission (the "FTC") or the Antitrust Division of the Department of Justice
(the "Antitrust Division"), pursuant to the HSR Act, and (3) cooperate with the
other party in connection with such party's filings under the HSR Act and in
connection with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement commenced by either the FTC or the
Antitrust Division or state attorneys general.
(c) Notice and Cure. Each of the Company and the undersigned will
promptly notify the other in writing of, and contemporaneously will provide the
other with true and complete copies of any and all information or documents
relating to, and will use all commercially reasonable efforts to cure before the
Closing Date, any event, transaction or circumstance, occurring after the date
of this Agreement that causes or will cause any covenant or agreement of either
such party under this Agreement to be breached or that renders or will render
untrue any representation or warranty of either such party contained in
-10-
this Agreement as if the same were made on or as of the date of such event,
transaction or circumstance.
(d) Fulfillment of Conditions. Each of the Company and the
undersigned will take all commercially reasonable steps necessary or desirable
and proceed diligently and in good faith to satisfy each condition to the
obligations of such party contained in this Agreement and will not take any
action that could reasonably be expected to result in the nonfulfillment of any
such condition or fail to take any commercially reasonable action that could
reasonably be expected to prevent the nonfulfillment of any such condition.
8. Indemnification. The undersigned agrees to indemnify and hold harmless
the Company, the Parent, or any member, officer, director or control person
(within the meaning of Section 15 of the Act) of any such entity from and
against any and all loss, damage or liability due to or arising out of a breach
of any representation or warranty of the undersigned contained in any document
furnished by the undersigned in connection with the offering and sale of the
Securities, including, without limitation, this Agreement, or failure by the
undersigned to comply with any covenant or agreement made by the undersigned
herein or in any other document furnished by the undersigned to any of the
foregoing in connection with this transaction.
9. Survival; Binding Effect. All covenants, agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement and delivery of the Securities and payment therefor and,
notwithstanding any investigation heretofore or hereafter made by the
undersigned or on the undersigned's behalf, shall continue in full force and
effect. Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party and all covenants, promises and agreements in this Agreement by or on
behalf of the Company, or by or on behalf of the undersigned, shall bind and
inure to the benefit of the successors and assigns of such parties hereto.
10. Termination.
(a) This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned (i) at any time before the Closing, by
mutual written agreement of the Company and the undersigned or (ii) at any time
before the Closing, by the Company or the undersigned, in the event that any
order or law becomes effective restraining, enjoining or otherwise prohibiting
or making illegal the consummation of any of the transactions contemplated by
this Agreement or the Company, upon notification of the non-terminating party by
the terminating party.
(b) This Agreement shall terminate, with no further action being
required on the part of either party hereto, (i) automatically, if the Merger
Agreement is not executed and delivered by the parties hereto on or before 11:59
p.m., October 24, 1999 or (ii) automatically, once the Merger Agreement has been
executed and delivered, upon any termination of the Merger Agreement in
accordance with its terms by MidAmerican or (with
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the requisite Member vote under the Parent's Operating Agreement or the
requisite two-thirds vote of the Company's Board of Directors) by the Parent or
the Company, as applicable.
(c) If this Agreement is validly terminated pursuant to this Section
10, this Agreement will forthwith become null and void, and there will be no
liability or obligation on the part of the undersigned or the Parent or the
Company (or any of their respective members, officers, directors, employees,
agents or other representatives or affiliates). Notwithstanding the foregoing,
no such termination shall affect the obligations of the undersigned pursuant to
Section 8, which shall survive any such termination.
11. Notices. All notices, statements, instructions or other documents
required to be given hereunder shall be in writing and shall be given either
personally, by overnight courier or by facsimile, addressed to the Company at
its principal offices and to the other party at its addresses or facsimile
number reflected on the signature page hereto. The undersigned, by written
notice given to the Company in accordance with this Section 11 may change the
address to which notices, statements, instructions or other documents are to be
sent to the undersigned. All notices, statements, instructions and other
documents hereunder that are mailed shall be deemed to have been given on the
date of delivery.
12. Complete Agreement; Counterparts. This Agreement constitutes the entire
agreement and supersedes all other agreements and understandings, both written
and oral, between the parties hereto, with respect to the subject matter hereof.
This Agreement may be executed by any one or more of the parties hereto in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.
13. Assignment. Without the prior written consent of each of the parties
hereto, neither this Agreement nor any right, interest or obligation hereunder
may be assigned by any party hereto and any attempt to do so will be void;
provided, however, that, notwithstanding any other provisions of this Agreement,
this Agreement and all rights, interests and obligations of the undersigned
hereunder (or, at the option of the undersigned, the right and obligation to
purchase some, but not all, of the Securities) may be assigned by the
undersigned to one or more subsidiaries of the undersigned which are
consolidated with the undersigned for financial accounting purposes, without
obtaining the consent of any other party hereto. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and
shall be enforceable by the parties hereto and their respective successors and
assigns.
14. Amendment and Waiver. This Agreement may be amended or modified only by
an instrument signed by the parties hereto. A waiver of any provision of this
Agreement must be in writing, designated as such, and signed by the party
against whom enforcement of that waiver is sought. The waiver by a party of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent or other breach thereof.
15. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York.
-12-
16. Standby Credit Commitment. The undersigned will, subject to the terms
and conditions set forth below, lend the Company an amount equal to the
difference, if any, between (i) $2,351,524,400 and (ii) the sum of (x) the
investments by Xxxxxx Xxxxx, Xx., Xxxxx X. Xxxxx and management of MidAmerican
under their respective subscription agreements and (y) the investment made on
the Closing Date by the undersigned (or its subsidiaries) pursuant to this
Subscription Agreement; provided, however, that the amount outstanding under
such loan will not in any event exceed $180,000,000, and such loan will be
subject to the following terms and conditions:
(a) Such loan will be drawable only on the Closing Date, immediately
prior to the effective time of the Merger, and subject to fulfillment of all the
conditions set forth in Section 6(a) hereof;
(b) MidAmerican's existing revolving credit agreement shall not
permit borrowing for the purpose that this loan would be made;
(c) The obligations of the surviving corporation in the Merger in
connection with this loan will rank pari passu with all of its public debt;
(d) This loan will be due and payable on that date which is 180 days
after the Closing Date, or if such date is not a business day, on the next
business day, and shall be required to be paid before that date as and to the
extent cash is available for payment;
(e) This loan will be prepayable at any time without penalty, and
amounts prepaid may not be reborrowed;
(f) The interest rate for such loan will be determined from the
formula identified by Xxxxx X. Xxxxx to the undersigned no later than October
26, 1999, with Xxxxx X. Xxxxx specifying either the formula applicable to
"Eurodollar Rate Loans" or the formula applicable to "Base Rate Loans" as
provided in the credit agreement for MidAmerican's current revolving credit
facility led by Credit Suisse First Boston;
(g) The loan shall be documented and evidenced by a note, all in
accordance with normal commercial practice for loans of this type, and the loan
documents and note, in addition to the terms set forth herein, shall contain
such other commercially reasonable terms and provisions, not inconsistent with
those specified herein, as would accord with normal commercial practice for
loans of this type.
-13-
IN WITNESS WHEREOF, the undersigned has executed this Amended and
Restated Subscription Agreement on this 24th day of October 1999.
BERKSHIRE HATHAWAY INC. ---------------------------
Mailing Address
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------- ---------------------------
Name: Xxxxxx X. Xxxxxxx City State Zip Code
Title: Chairman
---------------------------
Tax Identification Number
SUBSCRIPTION ACCEPTED AS OF THE ABOVE DATE
TETON ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxx
----------------------------------
Name: Xxxxx X. Xxxxx
Title: Chairman, Chief Executive
Officer and President
-14-
Schedule 4(c)
Although the transactions contemplated by the Agreement may require
the consent, approval and/or authorization of, or filings with, certain state
insurance regulatory authorities, the failure to obtain any such consent,
approval or authorization or to make any such filing would not materially affect
the ability of the undersigned to consummate such transactions.
Schedule I
FORM OF
ARTICLES OF AMENDMENT
to
AMENDED AND RESTATED ARTICLES OF INCORPORATION
of
TETON ACQUISITION CORP.
(Pursuant to Section 490.602 of the Iowa Business Corporation Act)
Teton Acquisition Corp., a corporation organized and existing
under the Iowa Business Corporation Act (hereinafter called the "Corporation")
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section490.602 of the Iowa Business
Corporation Act at a meeting duly called and held on
, .
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of the Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Articles of
Incorporation, the Board of Directors hereby creates a series of preferred
stock, no par value (the "Preferred Stock"), of the Corporation and hereby
states the designation and number of shares, and fixes the relative rights,
preferences, and limitations thereof as follows:
ZERO COUPON CONVERTIBLE PREFERRED STOCK
I. DESIGNATION AND AMOUNT
The shares of such series (the "Preferred Shares") shall be designated
as "Zero Coupon Convertible Preferred Stock" and the number of shares
constituting such Preferred Stock shall be .
II. DIVIDENDS AND DISTRIBUTIONS
In case the Corporation shall at any time or from time to time declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of stock or other securities or property or rights
or warrants to subscribe for securities of the Corporation or any of its
subsidiaries by way of a dividend, distribution or spin-off) on its Common
Stock, other than (i) a distribution made in compliance with the provisions of
Section VI or (ii) a dividend or distribution made in Common Stock, the holders
of the Preferred Shares shall be entitled (unless such right shall be waived by
the affirmative vote or consent of the holders of at least two-thirds
of the number of the then outstanding Preferred Shares) to receive from the
Corporation with respect to each Preferred Share held, any dividend or
distribution that would be received by a holder of the number of shares
(including fractional shares) of Common Stock into which such Preferred Share is
convertible on the record date for such dividend or distribution, with
fractional shares of Common Stock deemed to be entitled to the corresponding
fraction of any dividend or distribution that would be received by a whole
share. Any such dividend or distribution shall be declared, ordered, paid or
made at the same time such dividend or distribution is declared, ordered, paid
or made on the Common Stock.
III. CONVERSION RIGHTS
Each Preferred Share is convertible at the option of the holder thereof
into one Conversion Unit at any time upon the occurrence of a Conversion Event.
A Conversion Unit will initially be one share of Common Stock of the Corporation
adjusted as follows:
(i) Stock splits, combinations, reclassifications etc. In case
the Corporation shall at any time or from time to time declare a
dividend or make a distribution on the outstanding shares of Common
Stock payable in Common Stock or subdivide or reclassify the outstanding
shares of Common Stock into a greater number of shares or combine or
reclassify the outstanding shares of Common Stock into a smaller number
of shares of Common Stock, then, and in each such event, the number of
shares of Common Stock into which each Preferred Share is convertible
shall be adjusted so that the holder thereof shall be entitled to
receive, upon conversion thereof, the number of shares of Common Stock
which such holder would have been entitled to receive after the
happening of any of the events described above had such share been
converted immediately prior to the happening of such event or the record
date therefor, whichever is the earlier. Any adjustment made pursuant to
this clause (i) shall become effective (I) in the case of any such
dividend or distribution on the record date for the determination of
holders of shares of Common Stock entitled to receive such dividend or
distribution, or (II) in the case of any such subdivision,
reclassification or combination, on the day upon which such corporate
action becomes effective.
(ii) Issuances of Additional Shares below Fair Value Price. In
case the Corporation shall issue shares of Common Stock (or rights or
warrants or other securities exercisable or convertible into or
exchangeable (collectively, a "conversion") for shares of Common Stock)
(collectively, "convertible securities") (other than in Permitted
Transactions) at a price per share (or having a conversion price per
share) less than the Fair Value Price as of the date of issuance of such
shares (or of such convertible securities), then, and in each such
event, the number of shares of Common Stock into which each Preferred
Share is convertible shall be adjusted so that the holder thereof shall
be entitled to receive, upon conversion thereof, the number of shares of
Common Stock determined by multiplying the number of shares of Common
Stock into which such share was convertible immediately prior to such
date of issuance by a fraction, (I) the numerator of which is the sum of
(1) the number of shares of Common Stock outstanding on such date and
(2) the number of additional shares of Common Stock issued (or into
which the
-2-
convertible securities may convert), and (II) the denominator of
which is the sum of (1) the number of shares of Common Stock
outstanding on such date and (2) the number of shares of Common
Stock which the aggregate consideration receivable (including any
amounts payable upon conversion of convertible securities) by the
Corporation for the total number of additional shares of Common
Stock so issued (or into which the convertible securities may
convert) would purchase at the Fair Value Price on such date. For
purposes of the foregoing, "Permitted Transactions" shall include
issuances (i) as consideration for the acquisition of businesses
and/or related assets, and (ii) in connection with employee benefit
plans and any other transaction approved by the Board of Directors
of the Corporation (including the approval of the directors elected
by the holders of the Preferred Shares), and "Fair Value Price"
shall mean the average of the closing prices on the principal stock
exchange or over-the-counter quotation system on which the Common
Stock is then listed or quoted, or if not then listed or quoted, the
fair value of the Corporation's Common Stock as determined in good
faith by the Board of Directors. Although Permitted Transactions do
not require adjustment of a Conversion Unit, the issuance of equity
and equity-linked securities in a Permitted Transaction remains
subject to the vote of the Preferred Shares as provided in Section
IV. Any adjustment made pursuant to this clause (ii) shall become
effective immediately upon the date of such issuance.
(iii) Mergers, Consolidations, Sales of Assets etc. In case the
Corporation shall be a party to any transaction (including a merger,
consolidation, sale of all or substantially all of the Corporation's
assets, liquidation or recapitalization of the Corporation, but
excluding any transaction described in clause (i) or (ii) above) in
which the previously outstanding Common Stock shall be changed into or,
pursuant to the operation of law or the terms of the transaction to
which the Corporation is a party, exchanged for different securities of
the Corporation or common stock or other securities or interests in
another Person or other property (including cash) or any combination of
the foregoing, then, as a condition of the consummation of such
transaction, lawful and adequate provision shall be made so that each
holder of Preferred Shares shall be entitled, upon conversion, to an
amount per share equal to (A) the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or
exchanged times (B) the number of shares of Common Stock into which such
share was convertible immediately prior to the consummation of such
transaction. Any adjustment made pursuant to this clause (iii) shall
become effective immediately upon the consummation of such transaction.
In calculating the adjustments provided in clauses (i), (ii) and (iii)
above, a Conversion Unit shall include any fractional share resulting from the
calculation.
A "Conversion Event" includes (i) any conversion of Preferred Shares
that would not cause the holder of the shares of Common Stock issued upon
conversion (or any affiliate of such holder) or the Corporation to become
subject to regulation as a registered holding company, or as a subsidiary of a
registered holding company, under the Public Utility Holding Company Act of 1935
("PUHCA") either as a result of the repeal or amendment of PUHCA, the number of
shares involved or the identity of the holder of such shares and (ii) a Company
Sale. A Company Sale
-3-
includes any involuntary or voluntary liquidation, dissolution,
recapitalization, winding-up or termination of the Corporation and any merger,
consolidation or sale of all or substantially all of the assets of the
Corporation.
The holder of any Preferred Shares may exercise such holder's right to
convert each such share into a Conversion Unit by surrendering for such purpose
to the Corporation, at its principal office or at such other office or agency
maintained by the Corporation for that purpose, a certificate or certificates
representing the Preferred Shares to be converted accompanied by a written
notice stating that such holder elects to convert all or a specified whole
number of such shares in accordance with the provisions of this Section III and
specifying the name or names in which such holder wishes the certificate or
certificates for securities included in the Conversion Unit or Units to be
issued. In case such notice shall specify a name or names other than that of
such holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of securities included in the Conversion Unit or Units
in such name or names. Other than such taxes, the Corporation will pay any and
all issue and other taxes (other than taxes based on income) that may be payable
in respect of any issue or delivery of the securities and other property then
included in a Conversion Unit or Units upon conversion of Preferred Shares
pursuant hereto. As promptly as practicable, and in any event within three
Business Days after the surrender of such certificate or certificates and the
receipt of such notice relating thereto and, if applicable, payment of all
transfer taxes (or the demonstration to the satisfaction of the Corporation that
such taxes have been paid), the Corporation shall deliver or cause to be
delivered (i) certificates representing the number of validly issued, fully paid
and nonassessable shares of Common Stock (or other securities included in the
Conversion Unit or Units) to which the holder of Preferred Shares so converted
shall be entitled and (ii) if less than the full number of Preferred Shares
evidenced by the surrendered certificate or certificates are being converted, a
new certificate or certificates, of like tenor, for the number of shares
evidenced by such surrendered certificate or certificates less the number of
shares converted. Such conversion shall be deemed to have been made at the close
of business on the date of giving of such notice and such surrender of the
certificate or certificates representing the Preferred Shares to be converted so
that the rights of the holder thereof as to the shares being converted shall
cease except for the right to receive the securities and other property included
in the Conversion Unit or Units in accordance herewith, and the Person entitled
to receive the securities and other property included in the Conversion Unit or
Units shall be treated for all purposes as having become the record holder of
such securities and other property included in the Conversion Unit or Units at
such time. No holder of Preferred Shares shall be prevented from converting
Preferred Shares, and any conversion of Preferred Shares in accordance with the
terms of this Section III shall be effective upon surrender, whether or not the
transfer books of the Corporation for the Common Stock are closed for any
purpose.
The Corporation shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Preferred Shares, such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all then
outstanding Preferred Shares. The Corporation shall from time to time, subject
to and in accordance with the Iowa Business Corporation Act, increase the
authorized amount of Common Stock if at any time the number of authorized shares
of Common Stock
-4-
remaining unissued shall not be sufficient to permit the conversion at such time
of all then outstanding Preferred Shares.
The Corporation at all times shall maintain stated capital allocated to
the Preferred Shares sufficient in amount such that the shares of Common Stock
issuable upon conversion of all outstanding Preferred Shares pursuant to the
terms of this Section III shall be upon issuance lawfully issued, fully paid and
nonassessable under the Iowa Business Corporation Act.
Whenever the number of shares of Common Stock and other property
comprising a Conversion Unit into which each Preferred Share is convertible is
adjusted as provided in this Section III, the Corporation shall promptly mail to
the holders of record of the outstanding Preferred Shares at their respective
addresses as the same shall appear in the Corporation's stock records a notice
stating that the number of shares of Common Stock and other property comprising
a Conversion Unit into which each Preferred Share is convertible has been
adjusted and setting forth the new number of shares of Common Stock (or
describing the new stock, securities, cash or other property) into which each
Preferred Share is convertible, as a result of such adjustment, a brief
statement of the facts requiring such adjustment and the computation thereof,
and when such adjustment became effective.
IV. VOTING RIGHTS
The holders of the Preferred Shares shall have the following voting
rights:
(A) The holders of the then-outstanding Preferred Shares shall be
entitled to elect, as a class, two (out of a total of ten) directors to the
Corporation's Board of Directors, to elect the replacement for any director
elected by them who for any reason ceases to serve as a director and to vote, as
a separate class, on any amendment of the provisions of the Articles of
Incorporation of the Corporation in any manner which would alter or change the
powers, preferences or special rights of the Preferred Shares or that would
otherwise adversely affect the rights of the holders of the Preferred Shares. In
addition the Corporation will not effect any Fundamental Transaction without
first obtaining the consent or approval of the holders of a majority of the
then-outstanding Preferred Shares. A "Fundamental Transaction" includes the
following (in each case referring to a single transaction or series of related
transactions): (i) the sale, lease, exchange, mortgage or other disposition
(including any spin-off or split-up) of any business or assets having a fair
market value of 25% or more of the fair market value of the business or assets
of the Corporation and its subsidiaries taken as a whole, the merger or
consolidation of the Corporation with any other Person, a Liquidation of the
Corporation or any recapitalization or reclassification of the securities of the
Corporation; (ii) the acquisition of any business or assets (by way of merger,
acquisition of stock or assets or otherwise) or the making of capital
expenditures not included in the applicable annual budget approved by the
Corporation's Board of Directors, in each case for a consideration or involving
expenditures in excess of $50,000,000; (iii) the issuance, grant or sale, or the
repurchase, of any equity securities (or any equity linked securities or
obligations) of the Corporation (or securities convertible into or exchangeable
or exercisable for any such equity securities); (iv) transactions with officers,
directors, stockholders and affiliates of the Corporation except (x) to the
extent effectuated on terms no less favorable to the Corporation than those
-5-
obtainable in an arms' length transaction with an unaffiliated Person or (y) in
the case of cash compensation arrangements, which are approved by the entire
Board of Directors of the Corporation (without regard to the directors elected
by the holders of the Preferred Shares); (v) the removal as chief executive
officer of the Corporation of the person occupying that position on the date of
original issuance of the Preferred Shares (the "Initial CEO") and (vi) the
appointment or removal of any person as chief executive officer of the
Corporation after the removal, resignation, death or disability of the Initial
CEO (the consent of the holders of the Preferred Stock as to the matters set
forth in this clause (vi) not to be unreasonably withheld).
(B) Except as set forth herein, or as otherwise provided by law, holders
of the Preferred Shares shall have no voting rights.
V. REACQUIRED SHARES
Any Preferred Shares converted, purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Articles of Incorporation, or
in any other Articles of Amendment creating a series of Preferred Stock or any
similar stock or as otherwise required by law.
VI. LIQUIDATION, DISSOLUTION OR WINDING UP
Upon any involuntary or voluntary liquidation, dissolution,
recapitalization, winding-up or termination of the Corporation, the assets of
the Corporation available for distribution to the holders of the Corporation's
capital stock shall be distributed in the following priority, with no
distribution pursuant to the second priority until the first priority has been
fully satisfied and no distribution pursuant to the third priority until the
first and second priorities have both been fully satisfied, First, to the
holders of the Preferred Shares for each Preferred Share, a liquidation
preference of $1.00 per share, Second, to the holders of Common Stock, ratably,
an amount equal to (i) $1.00 divided by the number of shares of Common Stock
then comprising a Conversion Unit, multiplied by (ii) the number of shares of
Common Stock then outstanding, and Third, to the holders of the Preferred Shares
and the Common Stock (ratably, on the basis of the number of shares of Common
Stock then outstanding and, in the case of the Preferred Shares, the number of
shares of Common Stock then comprising a Conversion Unit multiplied by the total
number of Preferred Shares outstanding), all remaining assets of the Corporation
available for distribution to the holders of the Corporation's capital stock.
Neither the consolidation, merger or other business combination of the
Corporation with or into any other Person or Persons nor the sale, lease,
exchange or conveyance of all or any part of the property, assets or business of
the Corporation to a Person or Persons, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this Section VI.
-6-
VII. REDEMPTION
The Preferred Shares are not subject to redemption at the option of the
Corporation nor subject to any sinking fund or other mandatory right of
redemption accruing to the holders thereof.
VIII. DEFINED TERMS
"Business Day" means any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York or the State of Iowa
are authorized or obligated by law or executive order to close.
"Person" shall mean any person or entity of any nature
whatsoever, specifically including an individual, a firm, a company, a
corporation, a partnership, a trust or other entity.
-7-
IN WITNESS WHEREOF, these Articles of Amendment are executed on
behalf of the Corporation by its Secretary this day of , .
--------------------------------
Xxxxx X. Xxxxx
Secretary
-8-
Schedule II
TETON
TRUST PREFERRED SECURITIES TERM SHEET
Securities....................... [32,000,000] 11% Trust Issued Preferred
Securities (liquidation amount $25 per
Security) (the "Trust Securities").
Issuer........................... Monarch Capital Trust, a statutory business
trust formed under the laws of the State of
Delaware (the "Trust").
Issue Price...................... [$800,000,000] ($25 per Trust Security).
Distributions.................... Holders of the Trust Securities will be
entitled to receive cumulative cash
distributions at an annual rate of 11% of
the liquidation amount of $25 per Trust
Security, accumulating from the date of
original issuance and payable semi-annually
in arrears (on the 6-month and 12-month
anniversary dates of the date of issuance),
commencing on the first such date after
issuance ("Payment Dates").
Guarantee........................ The payment of distributions out of moneys
held by the Trust and payments on
liquidation of the Trust or the redemption
of Trust Securities are guaranteed (the
"Guarantee") by Monarch Holdings Company
(the "Company"), but only to the extent that
the Trust has funds available therefor,
which will not be the case unless the
Company has made payments of principal,
interest or other payments on the
Subordinated Debentures held by the Trust as
its sole asset. The obligations of the
Company under the Guarantee will be
subordinate and junior in right of payment
to all liabilities of the Company (other
than any similar guarantees) and rank pari
passu with the most senior preferred stock
issued, from time to time, if any, by the
Company and such similar guarantees. The
Guarantee, when taken together with the
Company's obligations under the Subordinated
Debentures, the Indenture and the
Declaration forming the Trust, including its
covenant in the Indenture to pay costs,
expenses, debts and obligations (including
taxes and other governmental charges) of the
Trust (other than with respect to the Trust
Securities), will provide a full and
unconditional guarantee of amounts due on
the Trust Securities.
Subordinated Debentures.......... The Trust will invest the proceeds of the
Trust Securities in an equivalent amount of
the Company's 11% Junior Subordinated
Deferrable Interest Debentures (the
"Subordinated Debentures"). The Subordinated
Debentures will mature in ten equal
semi-annual principal installments payable
on the Payment Date which is 5 1/2 years
after the date of issue and on each Payment
Date thereafter ("Mandatory Redemption
Dates") and at maturity (the tenth
anniversary of the date of issuance -
"Stated Maturity"). The obligations of the
Company under the Subordinated Debentures
will be subordinate and junior in right of
payment to all present and future Senior
Indebtedness of the Company (i.e.,
indebtedness for money borrowed, evidenced
by notes or similar obligations,
reimbursement obligations, deferred purchase
price of property or services (other than
trade payables), capital leases and
guaranties of similar obligations of and
dividends of others) and rank pari passu
with other junior subordinated debt
securities of the Company and obligations
to, or rights of, the Company's other
general unsecured creditors. No payments of
principal or interest on the Subordinated
Debentures may be made if, at the time of
such payment, a payment default exists on
any Senior Indebtedness or if the maturity
of any Senior Indebtedness has been
accelerated as a consequence of a default
thereon. Under the Indenture the Company
will agree to certain dividend and
distribution limitations in respect of its
capital stock during an Extension Period or
if an Indenture Event of Default exists.
(see Interest Deferral, below) The Company
will also agree to pay costs, expenses,
debts and obligations (including taxes and
other governmental charges) of the Trust
(other than with respect to the Trust
Securities). No provisions of the Indenture
will limit or restrict the business or
operations of the Company and its
subsidiaries, the pledging of their assets
or the incurrence of indebtedness or other
liabilities.
Interest Deferral; Interest Rate
Increases........................ So long as no Indenture Event of Default (a
payment default on the Subordinated
Debentures, bankruptcy events affecting the
Company, a liquidation of the Trust except
where Subordinated Debentures are
distributed in connection therewith, failure
to perform other covenants after notice) has
occurred and is continuing, the Company has
the right under the Indenture to defer
payments of interest on the Subordinated
Debentures by extending the interest payment
period on the Subordinated Debentures at any
time for up to 10 consecutive six-month
payment periods (an "Extension Period"),
provided that an Extension Period may not
extend
-2-
beyond the Stated Maturity of the
Subordinated Debentures or, as to any
Subordinated Debentures redeemed, beyond the
Mandatory Redemption Date or Special Event
redemption date for such Subordinated
Debentures. If interest payments are so
deferred, distributions on the Trust
Securities will also be deferred. During
such Extension Period, or during any period
when redemption payments on the Subordinated
Debentures have not been made as provided,
interest on the Subordinated Debentures and
distributions on the Trust Securities will
continue to accumulate with interest thereon
(to the extent permitted by applicable law)
at an annual rate of 13% per annum
compounded semi-annually to the date of
payment. During any Extension Period,
holders of Trust Securities will be required
to accrue deferred interest as OID, and to
include such OID in their gross income from
United States federal income tax purposes in
advance of the receipt of the cash
distributions with respect to such deferred
interest payments. There could be multiple
Extension Periods of varying lengths
throughout the term of the Subordinated
Debentures.
If the Company exercises the right to extend
an interest payment period, the Company
shall not during such Extension Period (i)
declare or pay any dividends or
distributions on, or redeem, purchase,
acquire or make a liquidation payment with
respect to, any of its capital stock or (ii)
make any payment of principal of, or
interest or premium, if any, on or repay,
repurchase or redeem, or make any sinking
fund payment with respect to, any
indebtedness for money borrowed of the
Company (including other junior subordinated
debt securities) that ranks pari passu with
or junior in right of payment to the
Subordinated Debentures or make any
guarantee payments with respect to the
foregoing.
Relationship Among the Trust
Securities, the Subordinated
Debentures and the Guarantee..... The distribution rate and the distribution
and other payment dates for the Trust
Securities will correspond to the interest
rate and the interest and other payment
dates on the Subordinated Debentures, which
will be the sole assets of the Trust. As a
result, if principal or interest is not paid
on the Subordinated Debentures, no amounts
will be paid on the Trust Securities. If the
Company does not make principal or interest
payments on the Subordinated Debentures, the
Trust will not have sufficient funds to make
distributions on the Trust Securities, in
which event the Guarantee will not apply
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to such distributions until the Trust has
sufficient funds available therefor. In such
event, the remedy of a holder of Trust
Securities is to enforce the Subordinated
Debentures.
Redemption of the Subordinated
Debentures and the Trust
Securities ....................... The Subordinated Debentures will be redeemed
in ten equal semi-annual principal
installments to be paid on each Mandatory
Redemption Date and at Stated Maturity at a
price equal to the principal amount thereof
to be redeemed, plus accrued and unpaid
interest thereon to the date of payment (the
"Debenture Redemption Price"). The
Subordinated Debentures are redeemable at
the option of the Company at any time in
whole upon the occurrence of a Special Event
(see Special Event, below) at the Debenture
Redemption Price. The Subordinated
Debentures are not otherwise redeemable at
the option of the Company. When the Company
redeems Subordinated Debentures, the Trust
must redeem Trust Securities having an
aggregate liquidation amount equal to the
aggregate principal amount of the
Subordinated Debentures so redeemed at a
price of $25 per Trust Security plus
accumulated and unpaid distributions thereon
(including interest thereon) to the date
fixed for redemption (the "Redemption
Price").
Distribution of the Subordinated
Debentures....................... The Company will have the right at any time
to liquidate the Trust and cause the
Subordinated Debentures to be distributed to
the holders of the Trust Securities.
Liquidation of the Trust......... In the event of any involuntary or voluntary
liquidation, dissolution, winding-up or
termination of the Trust (each, a
"Liquidation"), the holders of the Trust
Securities will be entitled to receive for
each Trust Security, after satisfaction to
creditors of the Trust, if any, a
liquidation amount of $25 plus accumulated
and unpaid distributions thereon (including
interest thereon) to the date of payment,
unless, in connection with such Liquidation,
the Subordinated Debentures are distributed
to the holders of the Trust Securities.
Transfer Restrictions............ The Trust Securities (and any Subordinated
Debentures distributed in a Liquidation)
will not be transferable except within the
Teton group (i.e., Teton and its
consolidated subsidiaries), and except that
transfer will be permitted following an
Indenture Event of Default.
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Voting Rights.................... The holders of the Trust Securities will
not have any voting rights.
Special Event.................... A "Special Event" is the occurrence of an
Investment Company Act Event or a Tax Event.
An "Investment Company Act Event" means
receipt by the Trust or the Company of an
opinion of a nationally recognized
independent counsel experienced in such
matters to the effect that, as a result of a
change in law or regulation or a written
change in interpretation or application of
law or regulation by any legislative body,
court, governmental agency or regulatory
authority after the date of issuance of the
Trust Securities, there is more than an
insubstantial risk that the Trust is or will
be considered an investment company under
the Investment Company Act of 1940, as
amended.
A "Tax Event" means receipt by the Trust or
the Company of an opinion of a nationally
recognized independent counsel experienced
in such matters to the effect that, as a
result of (i) any amendment to, or change
(including any announced prospective change)
in, the laws (or any regulations thereunder)
of the United States or any political
subdivision or taxing authority thereof or
therein, (ii) any amendment to or change in
an interpretation or application of such
laws or regulations by any legislative body,
court, governmental agency or regulatory
authority (including the enactment of any
legislation and the publication of any
judicial decision or regulatory
determination on or after the date of
issuance of the Trust Securities), (iii) any
interpretation or pronouncement by any such
body, court, agency or authority that
provides for a position with respect to such
laws or regulations that differs from the
theretofore generally accepted position or
(iv) any action taken by any governmental
agency or regulatory authority, which
amendment or change is enacted, promulgated
or effective, or which interpretation or
pronouncement is issued or announced, or
which action is taken, in each case on or
after the date of issuance of the Trust
Securities, there is more than an
insubstantial risk that (a) the Trust is, or
within 90 days of the date thereof will be,
subject to United States federal income tax
with respect to income accrued or received
on the Subordinated Debentures, (b) interest
payable by the Company on the Subordinated
Debentures would not be deductible by the
Company for United States federal income tax
purposes or (c) the Trust is, or within 90
days of the date thereof will be, subject to
more than a de minimis amount of other
taxes, duties or other governmental charges.
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Schedule III
PROJECT TETON
SUMMARY OF TERMS FOR SHAREHOLDERS' AGREEMENT
AND MANAGEMENT EQUITY PARTICIPATION
BACKGROUND
o In order to encourage equity participation in NewCo by Management, DLS
will be required to roll over (tax free) 100% of his total current
equity in Monarch (both shares directly owned and those subject to
options), and up to three additional Management participants may be
offered the opportunity to rollover (tax free) up to 100%, but not less
than 65%, of such person's total current equity in Monarch (both shares
directly owned and those subject to options), into NewCo's voting
common stock or options, as applicable. Management's contribution will
be valued on the basis of the price paid to the public stockholders of
Monarch in the Merger (the "Merger Price") less any applicable option
exercise price.
o Walter and/or his children and their respective personal trusts will
invest a total of $280.4 million in voting common stock of NewCo, with
such investment achieved through a roll-over of certain of their
present Monarch holdings and through cash investments at the closing.
At least 5 million shares (or approximately $175 million in value) of
such common shares will be directly owned by Xxxxxx or his personal
trusts.
o Teton will acquire NewCo voting common stock, convertible preferred
stock and trust preferred stock in separately agreed amounts through
cash investments or through contributions of Monarch common stock
valued at the Merger Price at the closing.
OPTION TERMS
o The number of existing shares subject to options and the exercise price
per share will remain unchanged.
o As per the terms of the existing option plan, all existing options will
be fully vested as of the closing date.
o Subject to review of accounting implications, in order to encourage
retention of existing options and avoid the need to finance early
option exercises, all outstanding options will have their exercise
terms extended until
eight years after the closing date. Options with current exercise terms
of greater than eight years from the closing date will not be affected.
ADDITIONAL OPTIONS
o As an additional incentive for Management to rollover a higher
proportion of their equity into NewCo, if DLS or any other Management
participant rolls over 100% of his common stock and stock options, then
for each ten shares rolled over (whether directly owned or subject to
options), DLS and each such other Management participant will receive
an option to purchase three additional shares of NewCo at an exercise
price equal to the per share Merger Price. These additional options
will vest in increments of 1/3 per year over the three years following
the closing date. All options will contain various other customary
terms, including anti-dilution provisions.
MANAGEMENT EQUITY -- TRANSFERABILITY; PUT AND CALL RIGHTS, ETC.
o All Management shares and options will be nontransferable for a period
of three years following the closing date (subject to exceptions for
transfers to immediate family members and personal trusts for their
benefit or management's benefit). After three years, transfer
restrictions will be lifted (subject to customary plan limitations as
to options); however, such shares and options will be subject to both
put and call rights (described below).
o At any time after the third anniversary of the closing, management will
be allowed one opportunity per year to put their shares and options to
NewCo for cash in increments of not less than 25% of their total equity
holdings as of the closing date, at a price to be agreed upon. If the
parties cannot agree on a price for the shares or options, the option
to put will be based on an "appraised value" to be determined by an
independent appraiser mutually acceptable to Management and NewCo. The
option to put at appraised value may be made by any management
stockholder at any time within 30 days after the appraised value has
been finally determined. The purchase price for the options will be
equal to the agreed or appraised value, as applicable, of the
underlying common shares less an amount equal to the applicable option
exercise price.
o NewCo will be required to have an appraisal of the common shares made
on the third anniversary of the closing date. Thereafter, NewCo will be
required to have an appraisal
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made at the request of a selling Management shareholder, but not more
frequently than once per calendar year.
o In determining appraised value, the third party appraiser will value
Management shares based on their percentage of the total equity value
of NewCo as a going concern, and will value the shares as though NewCo
were a publicly traded company, with reasonable liquidity and without a
controlling block of shares and with no sell-out premium (as might
exist in a change of control or sale of the company transaction).
o At any time after the third anniversary of the closing, NewCo will be
allowed one opportunity per year to call Management shares and options
for cash in increments of not less than 25% of their total equity
holdings at a price to be agreed upon, or, failing agreement, at the
appraised value, determined in the same manner.
o Since all currently-owned management shares and options will be fully
vested on the closing date, those shares and options will not be
affected by any termination of employment. For example, if a Management
shareholder's employment is terminated prior to the end of the
three-year period, the put and call rights described above will mature
beginning at the end of the three-year period and will be exercisable
by both parties in the same manner as if the Management shareholder had
still been employed.
o With respect to additional option grants subject to vesting, in the
event a Management shareholder's employment is terminated without
"cause," or by the Management shareholder for "good reason," or by
reason of his or her death or disability, such additional options will
become fully vested and (after three years) subject to the put and call
provisions. If a Management shareholder's employment is terminated
within the three-year period by the NewCo for cause or by him without
good reason, any unvested additional option shares will be forfeited.
XXXXXX AND XXXXXX FAMILY SHARES -- TRANSFERABILITY,
PUTS AND CALLS, ETC.
o 5 million of the voting common shares owned by Xxxxxx and/or his
personal trusts will not be transferable except in "Permitted
Transfers". "Permitted Transfers" will include (a) transfers by and
among Xxxxxx, his personal trusts and any foundation or foundation
created by Xxxxxx where the voting of such common shares is directed by
Xxxxxx, (b) provided Teton is an "Eligible Purchaser" as defined below,
transfers to third parties
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made after compliance with the right of first refusal provisions in
favor of Teton described below, (c) transfers made at any time after
the earlier of Walter's death or the third anniversary of the closing
date pursuant to a put by Xxxxxx or his personal trusts or his estate
of some or all of such shares to Teton for cash or Teton common stock
(at the election of Xxxxxx or his personal trusts or estate), with such
put exercisable only if Teton is an Eligible Purchaser, i.e., purchase
by Teton would not cause Teton to become - - subject to regulation as a
registered holding company under the Public Utility Holding Company Act
of 1935 ("PUHCA")due to the repeal or amendment of PUHCA or otherwise
and (d) such other transfer arrangements as may be agreed by and among
Xxxxxx and Teton promptly following the signing of a definitive merger
agreement which would not cause Teton or Xxxxxx to become subject to
regulation as a registered holding company under PUHCA. Any put
pursuant to clause (c) above shall be at agreed or appraised value
determined in the same manner as applies to management's puts.
o Such 5 million shares shall also be subject to a right of first refusal
in favor of Teton if a transfer of any such shares is proposed to be
made to a third party at any time.
o The balance of the voting common shares (i.e. the excess over 5 million
shares) owned by Xxxxxx or his children or any of their respective
personal trusts shall not be subject to any contractual transfer
restrictions and shall not be subject to any puts, calls or rights of
first refusal.
TETON'S HOLDINGS
o Pursuant to the terms thereof, the Trust Preferred shall be
non-transferable.
o Teton's Convertible Preferred and voting common stock shall be freely
transferable (subject to PUHCA and other applicable legal constraints).
To the extent that Teton transfers (other than transfers to any of its
consolidated subsidiaries) 5% or more of its common stock or
Convertible Preferred, all transfer restrictions, rights of first
refusal and puts in respect of common stock owned by Xxxxxx or his
personal trusts shall immediately lapse. In addition, if any such
transfer by Teton represents more than 50% of the voting power or 50%
of the combined equity value of NewCo (exclusive of Trust Preferred),
then Xxxxxx, Xxxxxx'x children and their respective personal trusts
shall have the right on a
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proportional basis to tag-along in connection with such sale on the
same terms and conditions as apply to Teton's sale.
o No puts, calls or rights of first refusal shall apply to any of Teton's
holdings.
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