EXHIBIT 10.4
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STOCK PURCHASE AGREEMENT
By and Among
NATIONAL EQUIPMENT SERVICES, INC.,
THE 1818 FUND III. L.P.,
CO-INVESTMENT PARTNERS, L.P.,
ERIE INDEMNIFY COMPANY,
and
AQUILA LIMITED PARTNERSHIP
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Dated April 27, 1999
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STOCK PURCHASE AGREEMENT, dated April 27, 1999, by and among National
Equipment Service, Inc., a corporation organized under the laws of Delaware (the
"Company"), The 1818 Fund III, L.P., a Delaware limited partnership (the
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"Fund"), Co-Investment Partners, L.P., a Delaware limited partnership ("CIP"),
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Erie Indemnity Company, a Pennsylvania corporation ("Erie Indemnity"), Erie
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Insurance Exchange, a reciprocal organization ("Erie Exchange"), Aquila Limited
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Partnership, a Connecticut limited partnership ("Aquila", and together with the
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Fund, CIP, Erie Indemnity and Erie Exchange, the "Purchasers")
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The Company proposes that the Company issue to the Purchasers and that
the Purchasers purchase, up to 100,000 shares of the Company's Senior Redeemable
Convertible Preferred Stock, Series A, par value $.01 per share, upon the terms
and subject to the conditions set forth in this Agreement.
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
Article 1
DEFINITIONS
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1.1 Definitions. As used in this Agreement, and unless the context
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requires a different meaning, the following terms have the meanings indicated:
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
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of the General Rules and Regulations under the Exchange Act; provided that none
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of the Purchasers shall be deemed to be an "Affiliate" of the Company.
"Agreement" means this Agreement as the same may be amended,
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supplemented or modified in accordance with the terms hereof.
"BBH&Co." means Xxxxx Brothers Xxxxxxxx & Co., a partnership
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organized under the laws of the State of New York.
"Business Day" means any day other than a Saturday, Sunday or
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other day on which commercial banks in the City of New York, New York are
authorized or required by law or executive order to close.
"Business Plan" has the meaning assigned to that term in Section
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7.26.
"Certificate of Designation" means the Certificate of
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Designation with respect to the Preferred Stock (the form of which is attached
hereto
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as Exhibit A) to be adopted by the Board of Directors of the Company and filed
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with the Secretary of State of the State of Delaware.
"Closing" means, as applicable, the First Closing or the Second
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Closing.
"Closing Date" means, as applicable, the First Closing Date or
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the Second Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Commission" means the Securities and Exchange Commission or any
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similar agency then having jurisdiction to enforce the Securities Act.
"Commission Documents" means all registration statements, proxy
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statements, reports and other documents (and all amendments thereto), required
to be filed by the Company under the Securities Act or the Exchange Act.
"Common Stock" means the common stock, par value $.0l per share,
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of the Company and each other class of capital stock of the Company that does
not have a preference over any other class of capital stock of the Company as to
dividends or upon liquidation, dissolution or winding up of the Company and in
each case, shall include any other class of capital stock of the Company into
which such stock is reclassified or reconstituted.
"Company" means National Equipment Services, Inc., a Delaware
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corporation.
"Condition of the Company" means the assets, business,
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properties or financial condition of the Company and its Subsidiaries taken as a
whole.
"Consolidated Net Worth" means, as of the date of determination
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with respect to any Person, the consolidated stockholders' equity of such Person
and its Subsidiaries, determined in accordance with GAAP.
"Contractual Obligations" means as to any Person, any provision
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of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument to which such
Person is a party or by which it or any of its property is bound.
"Credit Agreement" means the Credit Agreement dated as of July
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17, 1998 by and among the Company, First Union National Bank as Lender and Agent
and the other parties named therein (as amended, modified, supplemented,
replaced or increased).
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"Credit Agreement Amendment" has the meaning assigned that term
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in Section 3.20.
"Documents" has the meaning assigned to that term in Section
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7.20.
"DTC" means the Depositary Trust Company.
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"Environmental Claims" means any written notification, pursuant
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to Environmental Laws or principles of common law relating to pollution, or
protection of the environment or health and safety, that any of the current or
past operations of the Company or any of its Subsidiaries, or any by-product
thereof, or any of the property currently or formerly owned, leased or operated
by the Company or any of its Subsidiaries, or the operations or property of any
predecessor of the Company or any of its Subsidiaries, is or may be implicated
in or subject to any Claim, Requirements of Law, or investigation by any
Governmental Authority or any other Person.
"Environmental Compliance Costs" means any expenditures, costs,
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assessments or expenses (including any expenditures, costs, assessments or
expenses in connection with the conduct of any Remedial Action, as well as
reasonable fees, disbursements and expenses of attorneys, experts, personnel and
consultants), necessary to cause the operations, real property, assets,
equipment or facilities owned, leased, operated or used by the Company or any of
its Subsidiaries to be in material compliance with Environmental Laws,
principles of common law concerning pollution, protection of the environment or
health and safety, or Permits issued pursuant to Environmental Laws; provided,
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however, that Environmental Compliance Costs do not include expenditures, costs,
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assessments or expenses necessary in connection with normal maintenance of such
real property, assets, equipment or facilities or the replacement of equipment
in the normal course of events due to ordinary wear and tear.
"Environmental Laws" means any applicable federal, state,
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territorial, provincial or local law, common law doctrine, rule, order, decree,
judgment, injunction, license, permit or regulation (any of the above having the
force or effect of law) relating to environmental matters, including those
pertaining to land use, air, soil, surface water, ground water (including the
protection, cleanup, removal, remediation or damage thereof), public or employee
health or safety or any other environmental matter, together with any other laws
(federal, state, territorial, provincial or local) relating to emissions,
discharges, releases or threatened releases of any contaminant including,
without limitation, medical, biological, biohazardous or radioactive waste and
materials, into ambient air, land, surface water, groundwater, personal property
or structures, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, discharge or
handling of any contaminant, including, without limitation, the Comprehensive
Environmental
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Response, Compensation, and Liability Act (42 U.S.C. (S) 9601 et seq.), the
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Hazardous Material Transportation Act (49 U.S.C. (S) 1801 et seq.), the Resource
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Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), the Federal Water
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Pollution Control Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C.
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(S) 1251 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et
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seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. (S) 121
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et seq.), the Asbestos Hazard Emergency Response Act (15 U.S.C. (S) et seq.);
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the Safe Drinking Water Act (42 U.S.C. (S) 300F et seq.); the Oil Pollution Act
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of 1990 (33 U.S.C. (S) 2701 et seq.); and the Occupational Safety and Health Act
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(29 U.S.C. (S) 651 et seq.), as such laws have been amended or supplemented and
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any analogous federal, state or local laws, statutes and regulations promulgated
thereunder.
"ERISA" means the Employee Retirement Income Security Act of
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1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
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amended, and the rules and regulations of the Commission thereunder.
"Financial Liabilities" has the meaning assigned that term in
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Section 7.22.
"First Closing" has the meaning assigned to that term in Section
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2.4.
"First Closing Date" means the date specified in Section 2.4.
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"First Preferred Shares" has the meaning assigned to that term in
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Section 2.1(a).
"First Purchase Price" has the meaning assigned to that term in
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Section 2.1(a).
"GAAP" means generally accepted accounting principles in the
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United States in effect from time to time.
"Governmental Authority" means the government of any nation,
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state or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Hazardous Materials" means those substances that are regulated
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by, or form the basis of liability under, any Environmental Laws.
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"Hazardous Substance" means any toxic waste, pollutant,
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contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance or waste, petroleum or petroleum-derived substance
or waste, radioactive substance or waste, or any other substance regulated under
any applicable Environmental Law.
"Holder," with respect to Preferred Shares or Common Stock
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issued upon conversion of the Preferred Shares, means each Purchaser and any
subsequent direct or indirect transferee of such security; provided that the
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term Holder shall not include any Person who owns such security if it has been
registered under the Securities Act or if it has been transferred to such Person
after such security has been transferred pursuant to Rule 144 under the
Securities Act (or any successor provision) or otherwise transferred under
circumstances not requiring a legend.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
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of 1976, as amended, and the rules and regulations of the Federal Trade
Commission thereunder.
"Indebtedness" means as to any Person, without duplication, (a)
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all obligations of such Person for borrowed money (including, without
limitation, reimbursement and all other obligations with respect to surety
bonds, letters of credit and bankers' acceptances, whether or not matured), (b)
all obligations evidenced by notes, bonds, debentures or similar instruments,
(c) all obligations to pay the deferred purchase price of property or services,
except trade accounts payable and accrued liabilities arising in the ordinary
course of business, (d) all interest rate and currency swaps and similar
agreements under which payments are obligated to be made, whether periodically
or upon the happening of a contingency, (e) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), except trade accounts payable and
accrued liabilities arising in the ordinary course of business, (f) all
obligations under leases which have been or should be, in accordance with GAAP,
recorded as capital leases, (g) all indebtedness secured by any Lien (other than
Liens in favor of lessors under leases other than leases included in clause (f))
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is non-
recourse to the credit of that Person, (h) all obligations of such Person to
reimburse or prepay any bank or other Person in respect of amounts paid under a
letter of credit, banker's acceptance or similar instrument and (i) all capital
stock issued by such Person subject to mandatory redemption that is not
contingent upon future events or circumstances.
"Indemnified Party" has the meaning assigned to that term in
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Section 9.1.
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"Liabilities" has the meaning assigned to that term in Section
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9.1.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
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assignment, encumbrance, lien (statutory or other) or preference, priority or
other security interest or preferential arrangement of any kind or nature
whatsoever (including, without limitation, those created by, arising under or
evidenced by, any conditional sale or other title retention agreement, the
interest of a lessor under a capitalized lease obligation, or any financing
lease having substantially the same economic effect as any of the foregoing).
"Market Price" shall mean, per share of the applicable security
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on any date specified herein: (a) the closing price per share of such security
on such date published in The Wall Street Journal or, if no such closing price
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on such date is published in The Wall Street Journal, the average of the closing
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bid and asked prices on such date, as officially reported on the principal
national securities exchange on which such security is then listed or admitted
to trading; (b) if the applicable security is not then listed or admitted to
trading on any national securities exchange but is designated as a national
market system security, the last trading price of such security on such date; or
(c) if there shall have been no trading on such date, the average of the
reported closing bid and asked prices of such security on such date as shown by
NASDAQ and reported by any member firm of the NYSE, selected by the Company.
"1997 Audited Financials" has the meaning assigned to that term
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in Section 7.10.
"1998 Audited Financials" has the meaning assigned to that term
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in Section 7.10.
"1999 Interim Financials" has the meaning assigned to that term
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in Section 7.10.
"NYSE" means the New York Stock Exchange, Inc.
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"Person" means any individual, firm, corporation, partnership,
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limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
"Principal Stockholders" means Golder, Thoma, Xxxxxxx, Xxxxxx
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Fund V, L.P., Xxxx Xxxxx, Xxxxxxx Xxxxxxxxx or any Affiliates of any such
Person.
"PORTAL" means Private Offerings, Resales and Trading through
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Automated Linkages.
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"Preferred Shares" means the First Preferred Shares and, when
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issued and sold pursuant to the terms of this Agreement, the Second Preferred
Shares.
"Preferred Stock" means the Senior Redeemable Convertible
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Preferred Stock, Series A, par value $.01 per share, of the Company.
"Proxy Statement" has the meaning assigned to that term in
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Section 10.15(a).
"Purchasers" has the meaning set forth in the recitals to this
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Agreement.
"Qualified Holder" means any Holder that holds at least 10% of
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the shares of Preferred Stock issued hereunder or the shares of Common Stock
issued upon the conversion of such shares.
"Registration Agreement" means the Registration Agreement, dated
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as of June 4, 1996, as amended as of December 31, 1996 and July 24, 1998, by and
among the Company, Golder, Thoma, Xxxxxxx, Xxxxxx Fund IV, L.P. and R&R Rentals,
Inc.
"Registration Rights Agreement" has the meaning assigned to that
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term in Section 10.16.
"Release" means any release, spill, emission, leaking, pumping,
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injection, deposit, disposal, discharge, dispersal, leaching or migration into
or through the indoor or outdoor environment or into, through or out of any
property, including the movement of Hazardous Substances through or in the air,
soil, surface water, ground water or property.
"Remedial Action" means all actions, whether voluntary or
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involuntary, reasonably necessary to comply with, or discharge any obligation
under, Environmental Laws to (i) clean up, remove, treat, cover or in any other
way adjust Hazardous Substances in the indoor or outdoor environment; (ii)
prevent or control the Release of Hazardous Substances so that they do not
migrate or endanger or threaten to endanger public health or welfare or the
environment; or (iii) perform remedial studies, investigations, restoration and
post-remedial studies, investigations and monitoring on, about or in any real
property.
"Requirements of Law" means as to any Person, the Certificate of
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Incorporation and By-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
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"Second Closing" has the meaning assigned to that term in Section
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2.5.
"Second Closing Date" means assigned the date specified in
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Section 2.5.
"Second Preferred Shares" has the meaning assigned to that term
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in Section 2.1(b).
"Second Purchase Price" has the meaning assigned to that term in
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Section 2.1(b).
"Securities Act" means the Securities Act of 1933, as amended,
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and the rules and regulations of the Commission thereunder.
"Solvent" means, with respect to any Person, that the fair
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saleable value on a going concern basis of the assets and property of such
Person is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature. In computing the amount
of contingent or liquidated liabilities at any time, such liabilities will be
computed as the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that, in the reasonable
determination of the Company's board of directors, is probable to become an
actual or matured liability.
"Stockholders' Meeting" has the meaning assigned to that term in
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Section 10.15.
"Subsidiary" means, with respect to any Person, another Person of
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which 50% or more of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such first-mentioned Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"Trading Days" shall mean a day on which the national securities
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exchanges are open for trading.
"USTs" means any underground storage tanks or related piping or
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dispensers.
"Voting Stock" means, with respect to any Person, any securities
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or similar instruments of such Person whose holders are entitled under ordinary
circumstances to vote for the election of directors of such Person (irrespective
of whether at such time securities or similar instruments of any other
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class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Year 2000 Compliance" has the meaning assigned that term in
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Section 7.21.
1.2 Accounting Terms. All accounting terms used herein not expressly
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defined in this Agreement shall have the respective meanings given to them in
accordance with sound accounting practice. The term "sound accounting practice"
shall mean such accounting practice as, in the opinion of the independent
accountants regularly retained by the Company, conforms at the time to GAAP
applied on a consistent basis except for changes with which such accountants
concur.
Article 2
PURCHASE AND SALE OF PREFERRED STOCK
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2.1 Purchase and Sale of Preferred Stock.
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(a) Subject to the terms and conditions herein set forth, the
Company agrees that it will issue to each of the Purchasers, and each of the
Purchasers, severally but jointly, agrees that it will acquire from the Company,
at the First Closing, 36,000 shares of Preferred Stock in the case of the Fund,
15,000 shares of Preferred Stock in the case of CIP, 1,800 shares of Preferred
Stock in the case of Erie Indemnity, 4,200 shares of Preferred Stock in the case
of Erie Exchange and 3,000 shares of Preferred Stock in the case of Aquila
(collectively, the "First Preferred Shares") for purchase price of $36,000,000
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in the case of the Fund, $15,000,000 in the case of CIP, $1,800,000 in the case
of Erie Indemnity, $4,200,000 in the case of Erie Exchange and $3,000,000 in the
case of Aquila (collectively, the "First Purchase Price"), in cash, by wire
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transfer of immediately available funds to an account designated by the Company
in a notice delivered to each Purchaser one day prior to the First Closing Date.
(b) Subject to the terms and conditions herein set forth, the
Company agrees that it will issue to each of the Purchasers, and each of the
Purchasers, severally but jointly, agrees that it will acquire from the Company,
at the Second Closing, 24,000 shares of Preferred Stock in the case of the Fund,
10,000 shares of Preferred Stock in the case of CIP, 1,200 shares of Preferred
Stock in the case of Erie Indemnity, 2,800 shares of Preferred Stock in the case
of Erie Exchange and 2,000 shares of Preferred Stock in the case of Aquila
(collectively, the "Second Preferred Shares") for a purchase price of
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$24,000,000 in the case of the Fund, $10,000,000 in the case of CIP, $1,200,000
in the case of Erie Indemnity, $2,800,000 in the case of Erie Exchange and
$2,000,000 in the Aquila (collectively, the "Second Purchase Price" and together
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with the First Purchase Price, the
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"Purchase Price"), in cash, by wire transfer of immediately available funds to
an account designated by the Company in a notice delivered to each Purchaser one
day prior to the Second Closing Date.
2.2 Certificate of Designation. The Preferred Shares shall have the
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rights and preferences set forth in the Certificate of Designation.
2.3 Fees. The Company shall pay to the Purchasers at the First
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Closing a facility fee equal to 5% of the aggregate First Purchase Price and at
the Second Closing a facility fee equal to 5% of the aggregate Second Purchase
Price, which shall be paid to each Purchaser as follows: (i) at the First
Closing each Purchaser shall be paid as its facility fee with respect to such
closing the amount set forth opposite such Purchaser's name on Schedule 1 hereto
under the heading "First Closing Facility Fee" and (ii) at the Second Closing
each Purchaser shall be paid as its facility with respect to such closing the
amount set forth opposite such Purchaser's name on Schedule 1 hereto under the
heading "Second Closing Facility Fee." All such payments shall be made in cash,
by wire transfer of immediately available funds.
2.4 Closing.
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(a) The purchase and issuance of the First Preferred Shares shall
take place at the closing (the "First Closing") to be held at the offices of
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Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, 1285 Avenue of the Americas, Xxx Xxxx,
Xxx Xxxx 00000-0000 on May 14, 1999, or such later date on or prior to June 18,
1999 as the parties may agree (the "First Closing Date"), at 10:00 a.m., New
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York City time. At the First Closing, subject to the terms and conditions set
forth herein, the Company shall sell the First Preferred Shares to the
Purchasers by delivering to each Purchaser the First Preferred Shares to be
purchased by it registered in the name of such Purchaser or its designees, with
appropriate issue stamps, if any, affixed at the expense of the Company, free
and clear of any Lien, and each Purchaser shall purchase the First Preferred
Shares to be purchased by it.
(b) The purchase and issuance of the Second Preferred Shares
shall take place at the closing (the "Second Closing") to be held at the offices
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of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, 1285 Avenue of the Americas, Xxx
Xxxx, Xxx Xxxx 00000-0000 on the next Business Day after the Stockholders
Meeting or on such later date on or prior to June 18, 1999 (or, in the event the
Commission conducts a review of the Proxy Statement, July 31, 1999) as the
parties may agree (the "Second Closing Date"), at 10:00 a.m., New York City
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time. At the Second Closing, subject to the terms and conditions set forth
herein, the Company shall sell the Second Preferred Shares to the Purchasers by
delivering to each Purchaser the Second Preferred Shares to be purchased by it
registered in the name of such Purchaser or its designees, with appropriate
issue stamps, if any, affixed at the expense of the Company, free and clear of
any Lien, and each Purchaser shall purchase the Second Preferred Shares to be
purchased by it.
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Article 3
CONDITIONS TO THE OBLIGATION OF THE
PURCHASERS TO CLOSE AT THE FIRST CLOSING
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The obligation of each Purchaser to purchase the First Preferred
Shares to be purchased by it, to pay the First Purchase Price to be paid by it
at the First Closing and to perform any obligations hereunder shall be subject
to the satisfaction or waiver of the following conditions on or before the First
Closing Date:
3.1 Representations and Warranties True. The representations and
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warranties of the Company contained in Section 7 hereof shall be true and
correct in all material respects at and as of the First Closing Date as if made
at and as of such date.
3.2 Compliance with this Agreement. The Company shall have performed
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and complied with all of its agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Company on or
before the First Closing Date.
3.3 Officer's Certificate. Such Purchaser shall have received a
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certificate, dated the First Closing Date and signed by the President or a Vice-
President of the Company, certifying that the conditions set forth in Sections
3.1 and 3.2 hereof have been satisfied on and as of such date.
3.4 Secretary's Certificate. Such Purchaser shall have received a
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certificate, dated the First Closing Date and signed by the Secretary or an
Assistant Secretary of the Company, certifying the truth and correctness of
attached copies of the Certificate of Incorporation and By-laws of the Company
and resolutions of the Board of Directors of the Company approving this
Agreement and the transactions contemplated hereby.
3.5 Documents. Such Purchaser shall have received copies of such
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documents as it reasonably may request in connection with the sale of the First
Preferred Shares and the transactions contemplated hereby.
3.6 Purchase Permitted by Applicable Laws; Legal Investment. The
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acquisition of and payment for the First Preferred Shares to be acquired by such
Purchaser hereunder and the consummation of the transactions contemplated hereby
with respect to such Purchaser (a) shall not be prohibited by any applicable law
or governmental regulation, (b) shall not subject such Purchaser to any penalty
or, in its reasonable judgment, other onerous condition under or pursuant to any
applicable law or governmental regulation and (c) shall be permitted by the laws
and regulations of the jurisdictions to which it is subject.
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3.7 Filing of Certificate of Designation. The Certificate of
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Designation shall have been duly filed by the Company with the Secretary of
State of the State of Delaware.
3.8 Opinion of Counsel. Such Purchaser shall have received the
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opinion of Xxxxxxxx & Xxxxx, counsel to the Company, dated the First Closing
Date, with respect to such matters as the Purchasers may reasonably request, in
form and substance reasonably acceptable to the Purchasers.
3.9 Approval of Counsel to the Purchasers. All actions and
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proceedings hereunder and all documents required to be delivered by the Company
hereunder or in connection with the consummation of the transactions
contemplated hereby, shall have been reasonably acceptable to Xxxx, Weiss,
Rifkind, Xxxxxxx & Xxxxxxxx, counsel to such Purchaser, as to their form and
substance.
3.10 Consents and Approvals. All consents, exemptions,
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authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons, including, with respect to
Contractual Obligations of the Company, necessary or required in connection with
the execution, delivery or performance by the Company or enforcement against the
Company of this Agreement, the First Preferred Shares or the Registration Rights
Agreement shall have been obtained and be in full force and effect, and such
Purchaser shall have been furnished with appropriate evidence thereof.
3.11 No Material Adverse Change. Since December 31, 1998, there shall
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have been no material adverse change, nor shall any such change be threatened,
in the Condition of the Company since that date.
3.12 Conduct of Business. The Company shall have conducted its
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business in the ordinary course from the date hereof to the First Closing Date,
and no extraordinary or other material transactions not in the ordinary course
of business shall have occurred without such Purchaser's consent, it being
understood and agreed that the acquisition by the Company of (i) all of the
shares of capital stock of another Person or (ii) all or substantially all of
the assets of another Person shall, if such transaction (or series of
transactions) is approved by the Board of Directors of the Company, be
considered to be a transaction conducted in the ordinary course of business for
the purposes of this Section 3.12.
3.13 Registration Rights Agreement. The Company shall have duly
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executed and delivered to such Purchaser the Registration Rights Agreement.
3.14 Charter and By-Laws of the Company. Except for the Certificate
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of Designation, no amendments to the Certificate of Incorporation or By-Laws of
the Company as in effect on the date hereof shall have been effected.
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3.15 Market Conditions. Between the date hereof and the First Closing
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Date, (a) trading in the Common Stock shall not have been suspended by the
Commission or by the NYSE, (b) trading in securities generally on the NYSE shall
not have been suspended or limited or minimum or maximum prices shall not have
been generally established on such exchange, or additional material governmental
restrictions, not in force on the date of this Agreement, shall not have been
imposed upon trading in securities generally by such exchange or by order of the
Commission or any court or other Governmental Authority, (c) a general banking
moratorium shall not have been declared by either Federal or New York State
authorities and (d) any material adverse change in the financial or securities
markets in the United States or in political, financial or economic conditions
in the United States or, other than relating to Iraq or Kosovo, any outbreak or
material escalation of hostilities or declaration by the United States of a
national emergency or war or other calamity or crisis shall not have occurred.
3.16 No Litigation. No action, suit, proceeding, claim or dispute
-------------
shall have been brought or otherwise arisen at law, in equity, in arbitration or
before any Governmental Authority against the Company or any of its Subsidiaries
which would reasonably be expected to (i) have a material adverse effect on the
Condition of the Company or (ii) have a material adverse effect on the ability
of the Company to perform its obligations under this Agreement, the Preferred
Shares or the Registration Rights Agreement.
3.17 No Default or Breach. Neither the Company nor any of its
--------------------
Subsidiaries shall have been in default under or with respect to any Contractual
Obligation in any respect, which, individually or together with all such
defaults, would be materially adverse to the Condition of the Company or which
could materially adversely affect the ability of the Company to perform its
obligations under this Agreement, the Preferred Shares or the Registration
Rights Agreement.
3.18 HSR Act. The waiting period under the HSR Act with respect to
-------
the First Preferred Shares to be acquired by such Purchaser shall have expired
or been terminated.
3.19 Other Purchaser. The Fund shall simultaneously be purchasing
---------------
all the First Preferred Shares to be purchased by it under this Agreement.
3.20 Amendment to the Credit Agreement. Such Purchaser shall have
---------------------------------
received a copy of an amendment to the Credit Agreement (the "Credit Agreement
Amendment") permitting the issuance of the Preferred Stock and amending the
definition therein of the term "Change of Control," in each case in a manner
reasonably satisfactory to such Purchaser.
14
Article 4
CONDITIONS TO THE OBLIGATION OF THE
PURCHASERS TO CLOSE AT THE SECOND CLOSING
-----------------------------------------
The obligation of each Purchaser to purchase the Second Preferred
Shares to be purchased by it, to pay the Second Purchase Price at the Second
Closing and to perform any obligations hereunder shall be subject to the
satisfaction or waiver of the following conditions on or before the Second
Closing Date:
4.1 Representations and Warranties True. The representations and
-----------------------------------
warranties of the Company contained in Section 7 hereof shall be true and
correct in all material respects at and as of the Second Closing Date as if made
at and as of such date.
4.2 Compliance with this Agreement. The Company shall have performed
------------------------------
and complied with all of its agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Company on or
before the Second Closing Date.
4.3 Officer's Certificate. Such Purchaser shall have received a
---------------------
certificate, dated the Second Closing Date and signed by the President or a
Vice-President of the Company, certifying that the conditions set forth in
Sections 4.1 and 4.2 hereof have been satisfied on and as of such date.
4.4 Documents. Such Purchaser shall have received copies of such
---------
documents as it reasonably may request in connection with the sale of the Second
Preferred Shares and the transactions contemplated hereby.
4.5 Purchase Permitted by Applicable Laws; Legal Investment. The
-------------------------------------------------------
acquisition of and payment for the Second Preferred Shares to be acquired by
such Purchaser hereunder and the consummation of the transactions contemplated
hereby with respect to such Purchaser (a) shall not be prohibited by any
applicable law or governmental regulation, (b) shall not subject such Purchaser
to any penalty or, in its reasonable judgment, other onerous condition under or
pursuant to any applicable law or governmental regulation and (c) shall be
permitted by the laws and regulations of the jurisdictions to which it is
subject.
4.6 Opinion of Counsel. Such Purchaser shall have received the
------------------
opinion of Xxxxxxxx & Xxxxx, counsel to the Company, dated the Second Closing
Date, with respect to such matters as the Purchasers may reasonably request, in
form and substance reasonably acceptable to the Purchasers.
4.7 Approval of Counsel to the Purchasers. All actions and
-------------------------------------
proceedings hereunder and all documents required to be delivered by the Company
15
hereunder or in connection with the consummation of the transactions
contemplated hereby, shall have been reasonably acceptable to Xxxx, Weiss,
Rifkind, Xxxxxxx & Xxxxxxxx, counsel to such Purchaser, as to their form and
substance.
4.8 Consents and Approvals. All consents, exemptions,
----------------------
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons, including, with respect to
Contractual Obligations of the Company, necessary or required in connection with
the execution, delivery or performance by the Company or enforcement against the
Company of this Agreement, the Second Preferred Shares or the Registration
Rights Agreement shall have been obtained and be in full force and effect, and
such Purchaser shall have been furnished with appropriate evidence thereof.
4.9 No Material Adverse Change. Since December 31, 1998, there shall
--------------------------
have been no material adverse change, nor shall any such change be threatened,
in the Condition of the Company since that date.
4.10 Conduct of Business. The Company shall have conducted its
-------------------
business in the ordinary course from the date hereof to the Second Closing Date,
and no extraordinary or other material transactions not in the ordinary course
of business shall have occurred without such Purchaser's consent, it being
understood and agreed that the acquisition by the Company of (i) all of the
shares of capital stock of another Person or (ii) all or substantially all of
the assets of another Person shall, if such transaction (or series of
transactions) is approved by the Board of Directors of the Company, be
considered to be a transaction conducted in the ordinary course of business for
the purposes of this Section 4.10.
4.11 Charter and By-Laws of the Company. Except for the Certificate
----------------------------------
of Designation, no amendments to the Certificate of Incorporation or By-Laws of
the Company as in effect on the First Closing Date shall have been effected.
4.12 Market Conditions. Between the First Closing Date and the Second
-----------------
Closing Date, (a) trading in the Common Stock shall not have been suspended by
the Commission or by the NYSE, (b) trading in securities generally on the NYSE
shall not have been suspended or limited or minimum or maximum prices shall not
have been generally established on such exchange, or additional material
governmental restrictions, not in force on the date of this Agreement, shall not
have been imposed upon trading in securities generally by such exchange or by
order of the Commission or any court or other Governmental Authority, (c) a
general banking moratorium shall not have been declared by either Federal or New
York State authorities and (d) any material adverse change in the financial or
securities markets in the United States or in political, financial or economic
conditions in the United States or, other than relating to Iraq or Kosovo, any
outbreak or material escalation of
16
hostilities or declaration by the United States of a national emergency or war
or other calamity or crisis shall not have occurred.
4.13 No Litigation. No action, suit, proceeding, claim or dispute
-------------
shall have been brought or otherwise arisen at law, in equity, in arbitration or
before any Governmental Authority against the Company or any of its Subsidiaries
which would reasonably be expected to, (i) have a material adverse effect on the
Condition of the Company or (ii) have a material adverse effect on the ability
of the Company to perform its obligations under this Agreement, the Preferred
Shares or the Registration Rights Agreement.
4.14 No Default or Breach. Neither the Company nor any of its
--------------------
Subsidiaries shall have been in default under or with respect to any Contractual
Obligation in any respect, which, individually or together with all such
defaults, would be materially adverse to the Condition of the Company or which
could materially adversely affect the ability of the Company to perform its
obligations under this Agreement, the Preferred Shares or the Registration
Rights Agreement.
4.15 HSR Act. The waiting period under the HSR Act with respect to
-------
the Second Preferred Shares to be acquired by such Purchaser shall have expired
or been terminated.
4.16 Other Purchaser. The Fund shall simultaneously be purchasing
---------------
all the Second Preferred Shares to be purchased by it under this Agreement.
4.17 Credit Agreement Amendment. The Credit Agreement Amendment
--------------------------
shall not have been amended, modified or revoked.
4.18 Stockholder Approval. The stockholders of the Company shall
--------------------
have duly approved at the Stockholders Meeting the issuance of the Second
Preferred Shares pursuant to this Agreement.
Article 5
CONDITIONS TO THE OBLIGATION OF THE
COMPANY TO CLOSE AT THE FIRST CLOSING
-------------------------------------
The obligations of the Company to issue and sell the Preferred Shares
to a Purchaser, and to consummate the transactions contemplated herein on the
First Closing Date with respect to such Purchaser, shall be subject to the
satisfaction or waiver of the following conditions on or before the First
Closing Date:
5.1 Representations and Warranties True. The representations and
-----------------------------------
warranties of such Purchaser contained in Article 8 hereof shall be true and
correct in
17
all material respects at and as of the First Closing Date as if made at and as
of such date.
5.2 Compliance with this Agreement. Such Purchaser shall have
------------------------------
performed and complied with all of its agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Purchasers on or before the First Closing Date.
5.3 Issuance Permitted by Applicable Laws. The issuance of the First
-------------------------------------
Preferred Shares and the consummation of the transactions contemplated hereby by
the Company (a) shall not be prohibited by any applicable law or governmental
regulation, (b) shall not subject the Company to any penalty or, in its
reasonable judgment, other onerous condition under or pursuant to any applicable
law or governmental regulation and (c) shall be permitted by the laws and
regulations of the jurisdictions in which is it subject.
5.4 Approval of Counsel to the Company. All actions and proceedings
----------------------------------
hereunder and all documents required to be delivered by such Purchaser hereunder
or in connection with the consummation of the transactions contemplated hereby,
and all other related matters, shall have been reasonably acceptable to Xxxxxxxx
& Xxxxx, counsel to the Company, as to their form and substance.
5.5 Consents and Approvals. All consents, exemptions,
----------------------
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons necessary or required in connection
with the execution, delivery or performance by such Purchaser or enforcement
against such Purchaser of this Agreement shall have been obtained and be in full
force and effect, and the Company shall have been furnished with appropriate
evidence thereof.
5.6 HSR Act. The waiting period under the HSR Act with respect to
-------
the First Preferred Shares to be acquired by such Purchaser shall have expired
or been terminated.
5.7 Amendment to the Credit Agreement. The parties to the Credit
---------------------------------
Agreement (other than the Company) shall have executed and delivered the Credit
Agreement Amendment.
5.8 Consents and Approvals. All consents, exemptions,
----------------------
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons, including, with respect to
Contractual Obligations of the Company, necessary or required in connection with
the execution, delivery or performance by the Company or enforcement against the
Company of this Agreement, the First Preferred Shares or the Registration Rights
Agreement shall have been obtained and be in full force and effect.
18
Article 6
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE AT THE SECOND CLOSING
---------------------------------------------
The obligations of the Company to issue and sell the Second Preferred
Shares to a Purchaser, and to consummate the transactions contemplated herein on
the Second Closing Date with respect to such Purchaser, shall be subject to the
satisfaction or waiver of the following conditions on or before the Second
Closing Date:
6.1 Representations and Warranties True. The representations and
-----------------------------------
warranties of such Purchaser contained in Article 8 hereof shall be true and
correct in all material respects at and as of the Second Closing Date as if made
at and as of such date.
6.2 Compliance with this Agreement. Such Purchaser shall have
------------------------------
performed and complied with all of its agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Purchasers on or before the Second Closing Date.
6.3 Issuance Permitted by Applicable Laws. The issuance of the
-------------------------------------
Second Preferred Shares and the consummation of the transactions contemplated
hereby by the Company (a) shall not be prohibited by any applicable law or
governmental regulation, (b) shall not subject the Company to any penalty or, in
its reasonable judgment, other onerous condition under or pursuant to any
applicable law or governmental regulation and (c) shall be permitted by the laws
and regulations of the jurisdictions in which is it subject.
6.4 Approval of Counsel to the Company. All actions and proceedings
----------------------------------
hereunder and all documents required to be delivered by such Purchaser hereunder
or in connection with the consummation of the transactions contemplated hereby,
and all other related matters, shall have been reasonably acceptable to Xxxxxxxx
& Xxxxx, counsel to the Company, as to their form and substance.
6.5 Consents and Approvals. All consents, exemptions,
----------------------
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons necessary or required in connection
with the execution, delivery or performance by such Purchaser or enforcement
against such Purchaser of this Agreement shall have been obtained and be in full
force and effect, and the Company shall have been furnished with appropriate
evidence thereof.
6.6 HSR Act. The waiting period under the HSR Act with respect to
-------
the Second Preferred Shares to be acquired by such Purchaser shall have expired
or been terminated.
19
6.7 Stockholder Approval. The stockholders of the Company shall have
--------------------
duly approved at the Stockholders' Meeting the issuance of the Second Preferred
Shares pursuant to this Agreement.
6.8 Consents and Approvals. All consents, exemptions,
----------------------
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons, including, with respect to
Contractual Obligations of the Company, necessary or required in connection with
the execution, delivery or performance by the Company or enforcement against the
Company of this Agreement, the Second Preferred Shares or the Registration
Rights Agreement shall have been obtained and be in full force and effect.
Article 7
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
-------------------------
The Company hereby represents and warrants to the Purchasers as
follows:
7.1 Corporate Existence and Power. The Company, and each of its
-----------------------------
Subsidiaries:
(a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization;
(b) has (i) full corporate (or other organizational) power and
authority and (ii) all governmental licenses, authorizations, consents and
approvals to own and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently, or is currently
proposed to be, engaged;
(c) is duly qualified as a foreign person, licensed and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification; and
(d) is in compliance with all Requirements of Law;
except, in the case of (b)(ii), (c) or (d) of this Section 7.1, to the extent
that the failure to do so would not have a material adverse effect on the
Condition of the Company.
7.2 Corporate Authorization; No Contravention. Except as set forth
-----------------------------------------
on Schedule 7.2, the execution, delivery and performance by the Company of this
Agreement, the Registration Rights Agreement and the transactions contemplated
20
hereby and thereby, including without limitation the issuance of the Preferred
Shares and the Common Stock issuable upon the conversion of the Preferred
Shares:
(a) is within the Company's corporate power and authority and has
been duly authorized by all necessary corporate action;
(b) will not violate, conflict with or result in any breach or
contravention of or the creation of any Lien under, any Contractual Obligation
of the Company or any of its Subsidiaries, or any order or decree directly
relating to the Company or any of its Subsidiaries; and
(c) has been duly authorized by the Board of Directors of the
Company and no other corporate proceedings on the part of the Company or its
stockholders are necessary to authorize or approve the Agreement, the
Registration Rights Agreement or the transactions contemplated hereby and
thereby.
7.3 Governmental Authorization; Third Party Consents. No approval,
------------------------------------------------
consent, exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority or any other Person, is necessary or required
in connection with the execution, delivery or performance by the Company or
enforcement against the Company of this Agreement, the Preferred Shares, the
Registration Rights Agreement or the transactions contemplated hereby or
thereby, except for the filing required under the HSR Act.
7.4 Binding Effect. This Agreement has been duly executed and
--------------
delivered by the Company, and at the Closing the Registration Rights Agreement
will be duly executed and delivered by the Company. At the First Closing the
First Preferred Shares will be duly executed and delivered by the Company and at
the Second Closing the Second Preferred Shares shall be duly executed and
delivered by the Company. Assuming it is enforceable against the Purchasers,
this Agreement constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability. At the Closing, the Registration Rights
Agreement and the Preferred Shares will constitute the legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
7.5 No Legal Bar. Neither the execution, delivery and performance of
------------
this Agreement and the Registration Rights Agreement nor the issuance or
performance of the terms of the Preferred Shares will violate any Requirement of
Law
21
or any Contractual Obligation of the Company or any of its Subsidiaries or any
rule or regulation of NYSE.
7.6 Litigation.
----------
(a) Except as set forth on Schedule 7.6, there are no actions,
suits, proceedings, claims or disputes pending, or to the best knowledge of the
Company, threatened, at law, in equity, in arbitration or before any
Governmental Authority against the Company or any of its Subsidiaries:
(i) with respect to this Agreement, the Preferred Shares or
the Registration Rights Agreement or any of the transactions contemplated hereby
or thereby; or
(ii) which would, if adversely determined, (i) have a
material adverse effect on the Condition of the Company or (ii) have a material
adverse effect on the ability of the Company to perform its obligations under
this Agreement, the Preferred Shares or the Registration Rights Agreement.
(b) No injunction, writ, temporary restraining order, decree or
any order of any nature has been issued by any court or other Governmental
Authority purporting to enjoin or restrain the execution, delivery and
performance of this Agreement, the Preferred Shares or the Registration Rights
Agreement.
7.7 No Default or Breach. No event has occurred and is continuing
--------------------
(or will occur as a result of the Company entering into this transaction) under
this Agreement, the Preferred Shares or the Registration Rights Agreement which
constitutes a default under or breach of any of the provisions of Article 10 or
11. Neither the Company nor any of its Subsidiaries is in default under or with
respect to any Contractual Obligation in any respect, which, individually or
together with all such defaults, would have a material adverse effect on the
Condition of the Company or on the ability of the Company to perform its
obligations under this Agreement, the Preferred Shares or the Registration
Rights Agreement.
7.8 Title to Properties. The Company and each of its Subsidiaries
-------------------
have good and defensible title to, or hold leases in full force and effect in
all their real property, except for such defects in title as could not,
individually or in the aggregate, have a material adverse effect on the
Condition of the Company or the ability of the Company to perform its
obligations under this Agreement, the Preferred Shares or the Registration
Rights Agreement.
7.9 Taxes. The Company and its Subsidiaries have filed or caused to
-----
be filed, or have properly filed extensions for, all income tax returns which
are required to be filed and have paid or caused to be paid all taxes as shown
on said returns and on all assessments received by it to the extent that such
taxes have
22
become due, except taxes the validity or amount of which is being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves have been set aside. The Company and its Subsidiaries have paid or
caused to be paid, or have established reserves that the Company reasonably
believes to be adequate for all income tax liabilities applicable to the Company
and its Subsidiaries for all fiscal years which have not been examined and
reported on by the taxing authorities (or closed by applicable statutes).
7.10 Financial Condition. The Company heretofore has delivered to
-------------------
the Purchasers true and correct copies of audited consolidated financial
statements of the Company and its Subsidiaries dated as of December 31, 1997
(the "1997 Audited Financials") and December 31, 1998 (the "1998 Audited
----------------------- ------------
Financials") and the unaudited consolidated financial statements of the Company
----------
and its Subsidiaries dated as of March 31, 1999 (the "1999 Interim
------------
Financials"). The 1997 Audited Financials, 1998 Audited Financials and 1999
----------
Interim Financials have been prepared in accordance with GAAP applied
consistently and present fairly in all material respects the consolidated
financial condition of the Company as of the dates thereof and the consolidated
results of operations of the Company for the period, or portion thereof, then
ended (except in the case of the 1999 Interim Financials, for normal year-end
adjustment and the absence of footnotes).
7.11 No Material Adverse Change. Since December 31, 1998, there has
--------------------------
not been any material adverse change, nor to the knowledge of the Company is any
such change threatened, in the Condition of the Company.
7.12 Commission Documents. The Company has filed all Commission
--------------------
Documents and the Company has furnished the Purchasers correct and complete
copies of the final version of all Commission Documents, each as filed with the
Commission but without exhibits to any of them. Each Commission Document was
true and accurate in all material respects when filed with the Commission and in
compliance in all material respects with the requirements of its respective
report form.
7.13 Environmental Matters. Except as set forth on Schedule 7.13:
---------------------
(a) Neither the Company nor any of its Subsidiaries is in
violation in any material respect of any applicable Environmental Law.
(b) The Company and its Subsidiaries have all Permits required
pursuant to Environmental Laws that are material to the conduct of the business
of the Company or any of its Subsidiaries, and all such Permits are in full
force and effect. The Company and its Subsidiaries have not received notice of
any action, cause of action, suit, claim, complaint, demand, litigation or
legal, administrative or arbitral proceeding or investigation to revoke, limit
or modify any of such Permits. The Company and each of its Subsidiaries is in
compliance in all material respects with all terms and conditions thereof.
23
(c) There is no material Environmental Claim pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries.
(d) The Company and its Subsidiaries have filed all material
notices required under Environmental Laws indicating the past or present
Release, generation, treatment, storage or disposal of Hazardous Substances.
(e) Except for provisions contained in (i) acquisition
agreements entered into by the Company or any of its Subsidiaries or (ii) leases
of real property entered into by the Company or any of its Subsidiaries, neither
the Company nor any of its Subsidiaries has entered into any written agreement
with any Governmental Body or any other Person by which the Company or any of
the Subsidiaries has assumed responsibility, either directly or as a guarantor
or surety, for the remediation of any condition arising from or relating to a
Release or threatened Release of Hazardous Substances into the environment.
(f) To the knowledge of the Company, there is not any current or
future obligation with respect to a Release or threatened Release of Hazardous
Substances for which the Company or any of its Subsidiaries may be directly or
indirectly responsible in an amount in excess of $250,000.
(g) Except in cases which would not give rise to any liability
of the Company or any of its Subsidiaries under any Environmental Law in excess
of $250,000, there is not now and has not been at any time in the past at, on or
in any of the real properties owned, leased or operated by the Company or any of
its Subsidiaries: (i) any generation, use, handling, Release, treatment,
recycling, storage or disposal of any Hazardous Substances; (ii) any UST,
surface impoundment, lagoon, landfill, solid waste disposal area, or other
containment facility (past or present) for the temporary or permanent storage,
treatment or disposal of Hazardous Substances; (iii) any asbestos-containing
material; (iv) any polychlorinated biphenyls (PCBs) used in hydraulic oils,
electrical transformers or other equipment; (v) any Release or threatened
Release, or any visible signs of Releases or threatened Releases, of a Hazardous
Substance in form or quantity requiring Remedial Action under Environmental
Laws; or (vi) any Hazardous Substances present at such property, excepting such
quantities as are handled in accordance with all applicable Environmental Laws.
(h) Except in cases which would not give rise to any liability
of the Company or any of its Subsidiaries under any Environmental Law in excess
of $250,000, neither the Company or any of its Subsidiaries has transported,
stored, treated or disposed, nor has it allowed or arranged for any third
persons to transport, store, treat or dispose, any Hazardous Substance to or at:
(i) any location other than a site lawfully permitted to receive such substances
for such purposes, or (ii) any location designated for Remedial Action pursuant
to Environmental Laws; nor has it
24
performed, arranged for or allowed by any method or procedure such
transportation or disposal in contravention of any Environmental Laws or in any
other manner that may result in Environmental Compliance Costs or in an
Environmental Claim.
(i) The Company and each of its Subsidiaries is in full
compliance with the upgrade requirements for USTs in effect as of December 31,
1998 pursuant to the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901
et seq., except for such noncompliance as would not, individually or in the
-- ---
aggregate, have a material adverse effect on the Condition of the Company or the
ability of the Company to perform its obligations under this Agreement, the
Preferred Shares or the Registration Rights Agreement.
7.14 Investment Company. Neither the Company nor any Person
------------------
controlling the Company is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
7.15 Subsidiaries. Schedule 7.15 sets forth a complete and accurate
------------
list of all of the Subsidiaries of the Company together with their respective
jurisdictions of incorporation or organization. Except as set forth on Schedule
7.15, each such Subsidiary is directly or indirectly wholly owned by the
Company.
7.16 Capitalization. As of the date hereof, the authorized capital
--------------
stock of the Company consists of 100,000,000 shares of Common Stock, par value
$.0l per share, and 10,000,000 shares of preferred stock, par value $.01 per
share, of which as of the date hereof, 24,121,885 shares of Common Stock and no
shares of preferred stock are issued and outstanding. Except as set forth on
Schedule 7.16, there are no shares of capital stock of the Company reserved for
issuance. All of the outstanding shares of capital stock of the Company have
been duly authorized and are fully paid and non-assessable. The Preferred
Shares when issued upon payment of the Purchase Price, and the shares of Common
Stock when issued upon conversion of the Preferred Shares, will be duly
authorized, and, in each case, validly issued, fully paid and nonassessable.
Except as set forth on Schedule 7.16 or in the Certificate of Designation, there
are no options, warrants or other rights to purchase shares of capital stock or
other securities of the Company, nor is the Company obligated in any manner to
issue shares of its capital stock or other securities. Except as contemplated
hereby and for relevant state and federal securities laws, there are no
restrictions on the transfer of shares of capital stock of the Company.
7.17 Solvency. On and as of the Closing Date, after giving effect to
--------
the transactions contemplated in this Agreement, the Company will be Solvent.
7.18 Private Offering. No form of general solicitation or general
----------------
advertising was used by the Company or, to its knowledge, its representatives in
connection with the offer or sale of the Preferred Shares. No registration of
the Preferred Shares pursuant to the provisions of the Securities Act or,
assuming the
25
accuracy of the representations of the Purchasers in Sections 8.5, 8.6 and 8.7,
any state securities or "blue sky" laws will be required by the offer, sale or
issuance of the Preferred Shares pursuant to this Agreement. The Company agrees
that neither it, nor anyone acting on its behalf, will offer or sell the
Preferred Shares or any other security so as to require the registration of the
Preferred Shares pursuant to the provisions of the Securities Act or any state
securities or "blue sky" laws, unless such Preferred Shares are so registered.
7.19 Broker's, Finder's or Similar Fees. Except as set forth herein,
----------------------------------
there are no brokerage commissions, finder's fees or similar fees or commissions
payable in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with the Company or any of its
Subsidiaries, or any action taken by any such entity.
7.20 Full Disclosure. No statement by the Company contained in (i)
---------------
this Agreement or (ii) any Commission Documents or any other documents,
certificates, notices or consents (collectively, "Documents") delivered to any
---------
Purchaser in connection with the purchase and sale of the Preferred Shares at or
prior to the Closing contains (or will contain) an untrue statement of a
material fact or omits (or will omit) to state a material fact required to be
stated therein or necessary to make the statements made, in the light of the
circumstances in which made, not materially false or misleading.
7.21 Year 2000 Compliance. Except as set forth in Schedule 7.21, all
--------------------
computer hardware and software (including all computer hardware and software
contained in imbedded systems) used in the business of the Company and its
Subsidiaries (whether such hardware and software is owned by the Company and its
Subsidiaries or is licensed from third parties) (collectively, the "Technology
----------
Systems") is designed to be used prior to, during and after the calendar year
-------
2000 and such hardware and software will continue to operate during each such
time period to accurately process date data (including, but not limited to
calculating, comparing and sequencing) from, into and between the twentieth and
twenty-first centuries, including leap year calculations (the "Year 2000
---------
Compliance"), except where to the failure to be so designed or to so operate
----------
would not, individually or in the aggregate, have a material adverse effect on
the Condition of the Company. The occurrence of the calendar year 2000 will not
affect the Technology Systems of the Company and its Subsidiaries, except to the
extent that such occurrence would not have a material adverse effect on the
Condition of the Company. To the knowledge of the Company, no material
expenditures in excess of currently budgeted items is necessary to cause
Technology Systems to operate properly prior to, during and after the calendar
year 2000. The Company and its Subsidiaries have taken reasonable steps to
determine whether the failure of any third parties with which the Company and
its Subsidiaries have a material relationship to achieve Year 2000 Compliance
could have a material adverse effect on the Condition of the Company.
26
7.22 No Undisclosed Financial Liabilities. Except as set forth on
------------------------------------
Schedule 7.22, the Company and its Subsidiaries, after giving effect to the
transactions contemplated hereby, will not have any direct or indirect
indebtedness, liability (including, without limitation, product liability or
warranty claim), obligation, whether known or unknown, fixed or unfixed,
contingent or otherwise, and whether or not of a kind required by GAAP to be set
forth on a financial statement (collectively "Financial Liabilities"), other
---------------------
than (i) Financial Liabilities fully and adequately reflected on the 1998
Audited Financials, (ii) those incurred since December 31, 1998 in the ordinary
course of business, (iii) Financial Liabilities incurred pursuant to this
Agreement and (iv) such additional Financial Liabilities that would not,
individually or in the aggregate, have a material adverse effect on the
Condition of the Company.
7.23 Registration Rights Agreement. Schedule 7.23 sets forth all
-----------------------------
agreements to which the Company or any Subsidiary is a party or by which it is
bound relating to the registration of its securities or, in the case of a
Subsidiary, the securities of the Company. None of the agreements listed on
Schedule 7.23 grants any registration rights to any Person which are
inconsistent with the rights to be granted to the Purchasers in the Registration
Rights Agreement.
7.24 Trade Relations. To the best knowledge of the Company, there
---------------
exists no actual or threatened termination, cancellation or limitation of, or
any adverse modification or change in, the business relationship or business of
the Company and its Subsidiaries taken as a whole or their business with any
customer or any group of customers which is individually or in the aggregate
material to the business of the Company and its Subsidiaries taken as a whole,
or with any material supplier.
7.25 Material Contracts. Neither the Company nor any of its
------------------
Subsidiaries is a party to any Contractual Obligation and is not subject to any
charge, corporate restriction, judgment, injunction, decree or Requirement of
Law materially adversely affecting, or which may adversely affect the Condition
of the Company. Filed as exhibits to the Commission Documents are all contracts,
agreements and commitments of the Company and any Subsidiary, whether written or
oral, including without limitation, any dealer agreements, other than (a) this
Agreement and the Registration Rights Agreement, (b) purchase orders in the
ordinary course of the Company's and any Subsidiary's business, and (c) any
other contracts, agreements and commitments of the Company or any of its
Subsidiaries that (i) do not extend beyond December 31, 2000 and involve the
receipt or payment of not more than $50,000, and (ii) are not material to the
Condition of the Company. All of the contracts, agreements and commitments of
the Company and its Subsidiaries filed as exhibits to the Commission Documents
are in full force and effect and binding upon the parties thereto in accordance
with their terms. Neither the Company nor any of its Subsidiaries, nor, to the
knowledge of the Company or any of its Subsidiaries, any other party to such
contracts, agreements and commitments, is in default thereunder, nor does any
condition exist that with notice or lapse of time, or both would
27
constitute a default thereunder. Neither the Company nor any of its Subsidiaries
has any knowledge of any proposed, pending, or likely cancellation or
termination of any such contract, agreement or commitment. No violations under
dealer agreements exist, including without limitation, with respect to
territorial exclusivity.
7.26 Business Plan. Prior to the date hereof, the Company delivered
-------------
to each Purchaser its business plans for fiscal year 1999 attached as Schedule
7.26 (the "Business Plan"). The assumptions used in preparation of the Business
-------------
Plan were reasonable when made and continue to be reasonable as of the Closing
Date. The Business Plan has been prepared in good faith and the Business Plan
gives effect to the transactions contemplated by this Agreement. Each Purchaser
acknowledges that the Business Plan contains assumptions about future events and
that actual results during the period or periods covered may differ from the
data and results contained in such Business Plan.
7.27 Internal Controls. The Company and the Subsidiaries maintain a
-----------------
system of internal accounting controls sufficient to provide reasonable
assurances that, to the knowledge of the Company, (a) transactions are executed
in accordance with management's general or specific authorization; (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in conformity with generally accepted accounting principles and (ii)
to maintain accountability for assets; (c) access to assets is permitted only in
accordance with management's general or specific authorization; and (d) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
material differences.
7.28 ERISA. Neither the Company nor any of the Subsidiaries has
-----
violated any provisions of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or the rules and regulations promulgated thereunder,
-----
except for such violations which, singly or in the aggregate, would not have a
material adverse effect on the Condition of the Company.
7.29 Labor Relations. (i) Neither the Company nor any of its
---------------
Subsidiaries is in breach of any collective bargaining agreement, (ii) the
Company and each of its Subsidiaries is in substantial compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including but not limited to, the
Workers Adjustment and Retraining Notification Act, and neither the Company nor
any of its Subsidiaries is engaged in any unfair labor practice, (iii) there is
no unfair labor practice complaint against the Company or any of its
Subsidiaries pending before the National Labor Relations Board, (iv) there is no
labor strike, material dispute, slowdown or stoppage actually pending or, to the
best of the Company's or any Subsidiary's knowledge, threatened against or
affecting the Company or any of its Subsidiaries, (v) with respect to the
Company or any of its Subsidiaries, no material grievance or arbitration
proceeding arising out of or under collective bargaining
28
agreements is pending or exists and, to the best of the Company's or any
Subsidiary's knowledge, no claim therefor is threatened, and (vi) neither the
Company nor any of its Subsidiaries (after the date any such Subsidiary became a
Subsidiary of the Company) has experienced any work stoppage since inception.
Article 8
REPRESENTATIONS AND WARRANTIES
AND COVENANTS OF THE PURCHASERS
-------------------------------
Each of the Purchasers represents and warrants (as to itself only) to,
and covenants and agrees (as to itself only) with, the Company as follows:
8.1 Existence and Power. Such Purchaser:
-------------------
(a) is duly organized and validly existing under the laws of the
jurisdiction of its organization; and
(b) has the power and authority to own and operate its property,
to lease the property it operates as lessee and to conduct the business in which
it is currently, or is currently proposed to be, engaged.
8.2 Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by such Purchaser of this Agreement:
(a) is within such Purchaser's power and authority and has been
duly authorized by all necessary action;
(b) does not contravene the terms of such Purchaser's Agreement
of Limited Partnership or other organizational document, or any amendment
thereof or any other Requirement of Law; and
(c) will not violate, conflict with or result in any breach or
contravention of or the creation of any Lien under, any Contractual Obligation
of such Purchaser, or any order or decree directly relating to such Purchaser.
8.3 Binding Effect. This Agreement and, when executed by the Company
--------------
on the First Closing Date, the Registration Rights Agreement has been duly
executed and delivered by such Purchaser, constitutes the legal, valid and
binding obligation of such Purchaser enforceable against it in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability.
29
8.4 No Legal Bar. The execution, delivery and performance of this
------------
Agreement will not violate any Requirement of Law or any Contractual Obligation
of such Purchaser.
8.5 Investment Representations. Such Purchaser understands that
--------------------------
neither the Preferred Shares nor any Common Stock issuable upon conversion of
the Preferred Shares has been registered under the Securities Act and that the
certificates for such securities will bear a legend to that effect.
8.6 Purchase for Own Account. The Preferred Shares (including, for
------------------------
purposes of this Section 8.6, the Common Shares issuable upon conversion of the
Preferred Shares) to be acquired by such Purchaser pursuant to this Agreement
are being acquired for its own account and with no intention of distributing or
reselling such securities or any part thereof in any transaction that would be
in violation of the securities laws of the United States of America, or any
state, without prejudice, however, to the rights of such Purchaser at all times
to sell or otherwise dispose of all or any part of the Preferred Shares under an
effective registration statement under the Securities Act, or under an exemption
from such registration available under the Securities Act, and subject,
nevertheless, to the disposition of such Purchaser's property being at all times
within its control. If such Purchaser should in the future decide to dispose of
any Preferred Shares, such Purchaser understands and agrees that it may do so
only in compliance with the Securities Act and applicable state securities laws,
as then in effect, and that stop-transfer instructions to that effect, where
applicable, will be in effect with respect to such Preferred Shares. If such
Purchaser should decide to dispose of any Preferred Shares, other than pursuant
to the provisions of the Registration Rights Agreement, such Purchaser, if
requested by the Company, will have the obligation in connection with such
disposition, at such Purchaser's expense, of delivering an opinion of counsel of
recognized standing in securities law, in connection with such disposition to
the effect that the proposed disposition of the Preferred Shares would not be in
violation of the Securities Act or any applicable state securities laws and,
assuming such opinion is required and is otherwise appropriate in form and
substance under the circumstances, the Company will accept, and will recommend
to any applicable transfer agent or trustee for any of the Preferred Shares that
it accept, such opinion. Such Purchaser agrees to the imprinting, so long as
required by law, of a legend on certificates representing all of the Preferred
Shares and the shares of Common Stock issued on conversion thereof to the
following effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS."
30
8.7 Accredited Investor. Such Purchaser is an "accredited investor"
-------------------
as that term is defined in Regulation D promulgated under the Securities Act.
8.8 Broker's, Finder's or Similar Fees. There are no brokerage
----------------------------------
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement or
understanding with such Purchaser or any action taken by such Purchaser.
8.9 Standstill. Each Purchaser agrees that, unless otherwise agreed
----------
by the Company in writing, for a period of three years from the First Closing
Date it will not acquire any Voting Stock of the Company if as a result of such
acquisition, the Purchasers and their Affiliates will beneficially own in the
aggregate in excess of 49% of the Voting Stock of the Company. Notwithstanding
anything to the contrary in the immediately preceding sentence, BBH&Co. shall be
entitled to process any unsolicited orders to buy any Voting Stock of the
Company and BBH&Co. shall be entitled to solicit orders to purchase or recommend
that Persons purchase Voting Stock of the Company.
8.10 Additional Representations. (a) With respect to any Closing that
--------------------------
occurs prior to June 30, 1999, the Fund hereby represents and warrants to the
Company that the "person", as defined in Section 801.1(a)(1) of the Rules (the
"Rules") promulgated under the HSR Act, within which the Fund is included, does
not have annual net sales or total assets of $10,000,000 or more as determined
in accordance with the HSR Act and Rules.
(b) CIP hereby represents and warrants to the Company that no
filing is required under the HSR Act in connection with its purchase of the
First Preferred Shares and Second Preferred Shares to be purchased by it.
Article 9
INDEMNIFICATION
---------------
9.1 Indemnification by the Company. In addition to all other sums
------------------------------
due hereunder or provided for in this Agreement, the Company agrees to indemnify
and hold harmless each Purchaser and its Affiliates (including, without
limitation, Xxxxx Brothers Xxxxxxxx & Co. and Lexington Partners, Inc. ) and
their respective officers, directors, agents, employees, subsidiaries, partners
and controlling persons (each, an "Indemnified Party") to the fullest extent
-----------------
permitted by law from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel) or other
liabilities ("Liabilities") resulting from any breach of any covenant,
-----------
agreement, representation or warranty of the Company in this Agreement or any
legal, administrative or other actions
31
(including actions brought by the Company or any equity holders of the Company
or derivative actions brought by any Person claiming through the Company or in
the Company's name), proceedings or investigations (whether formal or informal),
or written threats thereof, based upon, relating to or arising out of this
Agreement, the Preferred Shares, the Registration Rights Agreement, the
transactions contemplated hereby or thereby, or any indemnified person's role
therein or in the transactions contemplated hereby or thereby as long as a
written claim thereof is made before the expiration of the relevant survival
period set forth in Section 12.1 below; provided, however, that the Company
-------- -------
shall not be liable under this Section 9.1: (a) for any amount paid in
settlement of claims without the Company's consent (which consent shall not be
unreasonably withheld) or (b) to the extent that it is finally judicially
determined that such Liabilities resulted primarily from the willful misconduct,
bad faith or gross negligence of such Indemnified Party or any Affiliate
thereof; provided, further, that if and to the extent that such indemnification
-------- -------
is unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of such indemnified liability which shall be
permissible under applicable laws. In connection with the obligation of the
Company to indemnify for expenses as set forth above, the Company further agrees
to reimburse each Indemnified Party for all such expenses (including reasonable
fees, disbursements and other charges of counsel) as they are incurred by such
Indemnified Party; provided, however, that if an Indemnified Party is reimbursed
-------- -------
hereunder for any expenses, such reimbursement of expenses shall be refunded to
the extent it is finally judicially determined that the Liabilities in question
resulted primarily from the willful misconduct, bad faith or gross negligence of
such Indemnified Party or any Affiliate thereof.
9.2 Notification. Each Indemnified Party under this Article 9 will,
------------
promptly after the receipt of notice of the commencement of any action or other
proceeding against such Indemnified Party in respect of which indemnity may be
sought from the Company under this Article 9, notify the Company in writing of
the commencement thereof. The omission of any Indemnified Party so to notify
the Company of any such action shall not relieve the Company from any liability
which it may have to such Indemnified Party (i) other than pursuant to this
Article 9 or (ii) under this Article 9 unless, and only to the extent that, such
omission results in the Company's forfeiture of substantive rights or defenses.
In case any such action or other proceeding shall be brought against any
Indemnified Party and it shall notify the Company of the commencement thereof,
the Company shall be entitled to participate therein and, to the extent that it
may wish, to assume the defense thereof, with counsel reasonably satisfactory to
such Indemnified Party; provided, however, that any Indemnified Party may, at
-------- -------
its own expense, retain separate counsel to participate in such defense.
Notwithstanding the foregoing, in any action or proceeding in which both the
Company and an Indemnified Party is, or is reasonably likely to become, a party,
such Indemnified Party shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Party, (a) there
are or may be legal defenses available to such Indemnified Party or to other
indemnified parties that
32
are different from or additional to those available to the Company or (b) any
conflict or potential conflict exists between the Company and such Indemnified
Party that would make such separate representation advisable; provided, however,
-------- -------
that in no event shall the Company be required to pay fees and expenses under
this Article 9 for more than one firm of attorneys in any jurisdiction in any
one legal action or group of related legal actions. The Company agrees that the
Company will not, without the prior written consent of such Purchaser, settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated hereby (if any
Indemnified Party is a party thereto or has been actually threatened to be made
a party thereto) unless such settlement, compromise or consent includes an
unconditional release of such Purchaser and each other Indemnified Party from
all liability arising or that may arise out of such claim, action or proceeding.
The rights accorded to Indemnified Parties hereunder shall be in addition to any
rights that any Indemnified Party may have at common law, by separate agreement
or otherwise.
9.3 Registration Rights Agreement. Notwithstanding anything to the
-----------------------------
contrary in this Article 9, the indemnification and contribution provisions of
the Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or sales made thereunder.
Article 10
AFFIRMATIVE COVENANTS
---------------------
The Company hereby covenants and agrees (a) with each Purchaser, with
respect to all of this Article 10, and (b) with any other Qualified Holder, with
respect to all of this Article 10 except Sections 10.1(c),(d) and (e), 10.9,
10.10 and 10.12:
10.1 Financial Statements. The Company shall promptly deliver to such
--------------------
Purchaser and (except with respect to Section 10.1(c),(d) and (e)) any other
Qualified Holder:
(a) as soon as available, but not later than ninety (90) days
after the end of each fiscal year of the Company, a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such year and the related consolidated statements of income and cash flows for
such fiscal year, setting forth in each case in comparative form the figures for
the previous year, all in reasonable detail and accompanied by a management
discussion and analysis of the operations of the Company and its Subsidiaries
for such fiscal year and by the opinion of PricewaterhouseCoopers LLP (or any
successor thereto) or another nationally recognized independent public
accounting firm which report shall state that such consolidated financial
statements present fairly in all material respects the financial
33
position for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except for changes with respect to which such
accounting firm concurs); provided, however, that the delivery of a copy of the
-----------------
Company's Annual Report on Form 10-K shall satisfy the requirements of this
Section 10.1(a);
(b) commencing with the fiscal period ending on June 30, 1999,
as soon as available, but in any event not later than forty-five (45) days after
the end of each of the first three fiscal quarters of each year, the unaudited
consolidated balance sheet of the Company and its Subsidiaries, and the related
consolidated statements of income and cash flow for such quarter and for the
period commencing on the first day of the fiscal year and ending on the last day
of such quarter, all certified by an appropriate officer of the Company;
provided, however that the delivery of a copy of the Company's Quarterly Report
-------- -------
on Form 10-Q shall satisfy the requirements of this Section 10.1(b);
(c) commencing with the month ending on April 30, 1999, as
soon as available, but in any event not later than thirty (30) days after the
end of each month, the unaudited monthly and year-to-date financial statements
setting forth in each case, in comparative form, the figures for the previous
year and the budget figures, all certified by an appropriate officer of the
Company;
(d) as soon as available and in any event not later than thirty
(30) days prior to the end of each fiscal year, the financial plan of the
Company and its Subsidiaries for the next succeeding fiscal year, including cash
flow projection and operating budget, calculated monthly, and as soon as
available any updates or revisions to such financial plan;
(e) annual budgets and such other financial and operating data
of the Company and its Subsidiaries, as any Purchaser reasonably may request, to
the extent that such information is formally prepared for the Company's
Chairman, President, Board of Directors, banks, other lenders, security holders,
the SEC or the financial community;
(f) at any time when it is not subject to Section 13 or 15(d)
of the Exchange Act, upon request, to such Purchaser and prospective purchasers
of the Preferred Shares, information of the type that would satisfy the
requirement of subsection (d)(4)(i) of Rule 144A (or any similar successor
provision) under the Securities Act; and
(g) except as otherwise provided in Section 10.1(a) and (b),
promptly after the same are filed, copies of all Commission Documents.
10.2 Certificates; Other Information. The Company shall furnish to
-------------------------------
such Purchaser and to any other Qualified Holder:
34
(a) concurrently with the delivery of the financial statements
referred to in Section 10.1(a) or 10.1(b), a certificate of the Company's Chief
Financial Officer stating that to the best of knowledge of such officer there is
no default under or breach of Articles 10 and 11, except as specified in such
certificates; and
(b) promptly upon receipt, copies of all accountants'
management letters and all certificates relating to compliance, defaults,
material litigation, and other material adverse changes.
10.3 Preservation of Corporate Existence. Except in connection with a
-----------------------------------
Change of Control, the Company shall, and shall cause each of its Subsidiaries
to:
(a) preserve and maintain in full force and effect its
corporate or organizational existence and good standing under the laws of its
jurisdiction of incorporation or organization except as permitted by Section
11.2;
(b) preserve and maintain in full force and effect all material
rights, privileges, qualifications, licenses and franchises necessary in the
normal conduct of its business; and
(c) use its reasonable efforts to preserve its business
organization.
10.4 Payment of Obligations. The Company shall, and shall cause its
----------------------
Subsidiaries to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including without limitation:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which the Company and each of its
Subsidiaries is obligated to pay, which are due and which, if unpaid, might by
law become a Lien upon its property, unless the same are being contested in good
faith by appropriate proceedings and adequate reserves in accordance with GAAP
are being maintained by the Company or such Subsidiary; and
(c) all payments of principal of and interest on Indebtedness
when due (giving effect to any grace periods relating thereto);
except, in the case of (a), (b) and (c) of this Section 10.4, to the extent that
the failure to do so would not, individually or in the aggregate, have a
material adverse effect on the Condition of the Company.
35
10.5 Compliance with Laws. The Company shall comply, and shall cause
--------------------
each Subsidiary to comply, in all material respects with all Requirements of Law
and with the directions of any Governmental Authority having jurisdiction over
it or its business, except such as to which such failure to comply would not
have a material adverse effect on the Condition of the Company.
10.6 Notices. Upon knowledge of the Chief Executive Officer, the
-------
President or the Chief Financial Officer of the Company of the events described
in this Section 10.6, the Company shall give written notice within 15 days to
each Purchaser of any (i) material default or event of default under any
material Contractual Obligation of the Company or any of its Subsidiaries, or
(ii) material dispute, litigation, investigation, proceeding or suspension
which may exist at any time against the Company, or any of its Subsidiaries or
its assets, each accompanied by a statement setting forth details of the
occurrence referred to therein and stating what action the Company proposes to
take with respect thereto.
10.7 Issue Taxes. The Company shall pay, or cause to be paid, all
-----------
documentary and similar taxes levied under the laws of any applicable
jurisdiction in connection with the issuance of the Preferred Shares and the
execution and delivery of the other agreements and documents contemplated hereby
and any modification of the Preferred Shares or such other agreements and
documents and will hold such Purchaser harmless, without limitation as to time,
against any and all Liabilities with respect to all such taxes.
10.8 Reservation of Shares. The Company shall at all times reserve
---------------------
and keep available out of its authorized Common Stock, solely for the purpose of
issue or delivery upon conversion of the Preferred Shares as provided in the
Certificate of Designation, such number of shares of Common Stock as shall then
be issuable or deliverable upon the conversion of all outstanding Preferred
Shares. Such shares of Common Stock shall, when issued or delivered in
accordance with the Certificate of Designation, be duly and validly issued and
fully paid and non-assessable. The Company shall issue the Common Stock into
which the Preferred Shares are convertible upon the proper surrender of the
Preferred Shares in accordance with the provisions of the Certificate of
Designation and shall otherwise comply with the terms thereof.
10.9 Inspection.
----------
(a) The Company will permit, and will cause each of its
Subsidiaries to permit, representatives of each of the Purchasers to visit and
inspect any of its properties, to examine its corporate, financial and operating
records and make copies thereof or abstracts therefrom, and to discuss its
affairs, finances and accounts with their respective directors, officers and
independent public accountants, all at such reasonable times during normal
business hours and as often as may be reasonably requested, upon reasonable
advance notice to the Company.
36
(b) Each Purchaser will utilize reasonable good faith efforts
to maintain as confidential any information obtained from the Company or its
Subsidiaries (to the extent such Purchaser is advised by the Company that such
information is confidential) pursuant to Sections 10.1, 10.2, 10.6, 10.9 and
10.10 (other than information which (i) at the time of disclosure or thereafter
is generally available to and known by the public (other than as a result of a
disclosure directly or indirectly by such Purchaser or any of its
representatives), (ii) is available to such Purchaser on a non-confidential
basis from a source other than the Company or its Subsidiaries; provided that
--------
such source was not known by such Purchaser to be bound by a confidentiality
agreement with the Company or any of its Subsidiaries, (iii) has been
independently developed by such Purchaser or (iv) which was obtained more than
one year prior to such disclosure); provided, however, each Purchaser may
-------- -------
disclose information (a) to its advisors, representatives, agents, partners (and
their representatives and advisors) and employees, (b) to any prospective
transferee of the Preferred Shares or the Common Shares issuable on the
conversion of the Preferred Shares or of an interest in such Purchaser or in a
successor fund sponsored by the general partner of such Purchaser, (c) as may be
required by law (including a court order, subpoena or other administrative order
or process) or applicable regulations to which such Purchaser is or becomes
subject, (d) in connection with any litigation arising out of or related to this
Agreement, (e) to the executive officers of the Company or any of its
Subsidiaries, or (f) with the consent of the Company.
10.10 Board Representation.
--------------------
(a) The Company shall, at or prior to the First Closing Date,
cause one vacancy to be created on its Board of Directors (by increasing the
number of members of the Board of Directors or otherwise) and at such date shall
cause one person designated by the Fund to be elected to its Board of Directors.
Such designee shall serve until the next succeeding annual meeting of
stockholders of the Company to be held after such election.
(b) Commencing with such next succeeding annual meeting of
stockholders of the Company referred to in Section 10.10(a), and at each annual
meeting of stockholders of the Company thereafter, so long as the Fund holds 20%
of the shares of Common Stock issued or issuable upon conversion of the
Preferred Shares (whether or not the Preferred Shares have been converted)
acquired by the Fund on the First Closing Date and Second Closing Date, if any,
the Fund shall be entitled to designate one director to the Company's Board of
Directors. The Company shall cause such designee of the Fund to be included in
the slate of nominees recommended by the Board to the Company's stockholders for
election as directors, and the Company shall use its reasonable best efforts to
cause the election of such designee, including voting all shares for which the
Company holds proxies (unless otherwise directed by the stockholder submitting
such proxy) or is otherwise entitled to vote, in favor of the election of such
person. Notwithstanding the foregoing, if the Fund has not designated a person
pursuant to Section 10.10(a) and is
37
entitled to do so, the Fund shall be entitled to receive all notices and
materials distributed to the members of the Board of Directors of the Company,
and to designate one person who shall be entitled to attend all meetings of the
Board of Directors and committees thereof and to receive minutes of all such
meetings upon preparation thereof.
(c) In the event such designee of the Fund shall cease to serve
as a director for any reason, other than by reason of the Fund not being
entitled to designate a designee as provided in Section 10.10(b), the Company
shall use its reasonable best efforts to cause the vacancy resulting thereby to
be filled by a designee of the Fund.
(d) In addition to the rights granted pursuant to Sections
10.10(a), (b) and (c) above, (i) so long as the Fund holds 20%of the shares of
Common Stock issued or issuable upon conversion of the Preferred Shares (whether
or not the Preferred Shares have been converted) acquired by the Fund on the
First Closing Date and the Second Closing Date, if any, the Fund shall have the
right to have a representative attend all regular and special meetings of the
Board of Directors of the Company and (ii) so long as CIP holds 20%of the shares
of Common Stock issued or issuable upon conversion of the Preferred Shares
(whether or not the Preferred Shares have been converted) acquired by CIP on the
First Closing Date and the Second Closing Date, if any, CIP shall have the right
to have a representative attend all regular and special meetings of the Board of
Directors of the Company. These visitation rights shall include the right to
receive the same notice and materials provided to the Board at the same time as
provided to the Board.
10.11 Registration and Listing. If any shares of Common Stock required
------------------------
to be reserved for purposes of conversion of the Preferred Shares as provided in
the Certificate of Designation require registration with or approval of any
Governmental Authority under any Federal or state or other applicable law before
such Common Stock may be issued or delivered upon conversion, the Company will
endeavor in good faith and as expeditiously as possible to cause such Common
Stock to be duly registered or approved, as the case may be, unless such
registration or approval is required solely because of a breach of such
Purchaser's representation contained in Section 8.6. So long as the Common Stock
is quoted on the NYSE or listed on any national securities exchange, the
Company, if permitted by the rules of such system or exchange, will quote or
list and keep quoted or listed on such system or exchange, upon official notice
of issuance, all Common Stock issuable or deliverable upon conversion of the
Preferred Shares. In addition, at the request of such Purchaser, the Company
will endeavor in good faith and as expeditiously as possible to obtain private
placement numbers for the Preferred Shares and the Common Stock issued upon
conversion of the Preferred Shares, assigned by the CUSIP Service Bureau of
Standard & Poors' ratings group and make such securities PORTAL and DTC
eligible.
38
10.12 HSR Act Filing. The Company shall prepare and file, and
--------------
cooperate with each Purchaser so that it may prepare and file, in each case
within five Business Days of a request by such Purchaser, notification and
report forms in compliance with the HSR Act, and shall otherwise fully comply
with the requirements of the HSR Act. The Company shall bear all of its own
expenses and all out-of-pocket expenses (including filing fees and reasonable
attorneys' fees, charges and expenses) of each Purchaser in connection with any
such preparation and filing.
10.13 Additional Registration Rights. The Company shall not provide
------------------------------
any registration rights with respect to its securities which are inconsistent
with those granted under the Registration Rights Agreement or grant rights with
respect to its securities for a "shelf" registration if similar rights are not
then provided to the Purchasers in the Registration Rights Agreement.
10.14 Change of Control Offer.
-----------------------
(a) If a Change of Control (as defined below) occurs, then the
Company shall within 5 Business Days thereafter offer to purchase from each
Holder of Preferred Shares (a "Change of Control Offer"), and thereafter shall
----------------------
purchase from each Holder which accepts such Change of Control Offer, all (but
not less than all) outstanding Preferred Shares then held by such Holder
pursuant to such Change of Control Offer at a purchase price equal to the
greater of: (A) the amount, if any, that each Holder of shares of Preferred
Stock would be entitled to receive per share of Common Stock in connection with
such Change of Control if such Holder of Preferred Stock had converted its
shares immediately prior to any relevant record date or payment in connection
with such Change of Control, or (B) $20.00 in cash per share of Common Stock
assuming such Holder of Preferred Stock had converted its shares of Preferred
Stock immediately prior to any relevant record date or payment in connection
with such Change of Control or otherwise immediately prior to the occurrence of
such Change of Control, not sooner than 20 days and not later than 40 days after
the date of such notice (subject to compliance with applicable securities laws);
provided, that notwithstanding anything to the contrary contained herein, any
--------
payment required to be made in connection with the approval by the stockholders
of the Company of a transaction described in clauses (iv) and (v) of the
definition of "Change of Control" shall be made simultaneously with the
consummation of such transaction and any such payment shall not be required to
be made if such transaction does not occur. For the purposes of clause (A) of
the preceding sentence, if, in connection with a Change of Control, the holders
of shares of Common Stock are to receive securities of another Person that are
listed or admitted to trading on a national securities exchange or quoted in the
over-the-counter market, the amount that a Holder of shares of Preferred Stock
would be entitled to receive per share of Common Stock in connection with such
Change of Control shall be deemed to be equal to an amount which is 95% of the
Market Price of the securities to be received per share of Common Stock
calculated as of the Trading Day immediately preceding the occurrence of the
transaction contemplated by such Change of Control.
39
A "Change of Control" of the Company shall be deemed to have occurred:
-----------------
(i) At such time as any Person or "group" (within the meaning
of Section 13(d)(3) of the Exchange Act) other than the Principal
Stockholders is or becomes the beneficial owner, directly or indirectly, of
outstanding shares of stock of the Company entitling such Person or Persons
to exercise 50% or more of the total votes entitled to be cast at a regular
or special meeting, or by action by written consent, of the stockholders of
the Company in the election of directors (the term "beneficial owner" shall
----------------
be determined in accordance with Rule 13d-3 of the Exchange Act);
(ii) If a majority of the Board of Directors of the Company
shall consist of Persons other than Continuing Directors. The term
"Continuing Director" shall mean any member of the Board of Directors on
--------------------
the First Closing Date, any director elected pursuant to Section 10.10 and
any other member of the Board of Directors who shall be recommended or
elected to succeed a Continuing Director by a majority of Continuing
Directors who are the members of the Board of Directors;
(iii) If immediately after any merger, consolidation,
combination, reclassification or recapitalization or similar transaction,
the Principal Stockholders shall be the beneficial owner (as such term is
defined in clause (i) above), directly or indirectly, of outstanding shares
of stock of the Company (or any Person surviving such transaction)
entitling the Principal Stockholders to exercise 50% or more of the total
voting power of all classes of stock of the Company (or the surviving
Person in such transaction) entitled to vote in the elections of the
directors and, in anticipation of, in connection with or as a result of,
such transaction, the Company (or such surviving Person) shall have
incurred or issued additional Indebtedness such that the total Indebtedness
so incurred or issued equals at least 50% of the consideration payable in
such transaction; provided, however, that any such transaction shall not be
-------- -------
considered a Change of Control if the Holders shall have participated
therein on no less than a pari passu basis (assuming conversion of all of
---- -----
the Holders' Preferred Shares into Common Stock) with the Principal
Stockholders;
(iv) At such time as the stockholders of the Company shall have
approved a reorganization, merger or consolidation or similar transaction,
in each case, with respect to which all or substantially all the Persons
who were the beneficial owners of the outstanding shares of capital stock
of the Company immediately prior to such reorganization, merger or
consolidation, beneficially own, directly or indirectly, less than 50% of
the Voting Stock of the Company (excluding the Voting Stock that the
Holders of Preferred Shares
40
shall be entitled to receive as a result of such reorganization, merger or
consolidation) resulting from such reorganization, merger or consolidation;
(v) At such time as the stockholders of the Company shall have
approved the sale or other disposition of all or substantially all the
assets of the Company in one transaction or in a series of related
transactions; or
(vi) If any transaction occurs, the result of which is that the
Common Stock is not required to be registered under Section 12 of the
Exchange Act and that the holders of Common Stock do not receive common
stock of the Person surviving such transaction which is required to be
registered under Section 12 of the Exchange Act.
(b) The Change of Control Offer shall remain open from the time
of mailing until the purchase date set forth in the Notice of Offer. The Notice
of Offer shall be accompanied by a copy of the information most recently
required to be supplied under Section 10.1(a) and Section 10.1(b). The Notice of
Offer shall contain all instruments and materials necessary to enable the
Holders to tender Preferred Shares pursuant to the Change of Control Offer. The
Notice of Offer, which shall govern the terms of the Change of Control Offer,
shall state:
(i) that the Change of Control Offer is being made
pursuant to this Section 10.12 and that tendered Preferred Shares will be
purchased;
(ii) the purchase price and the date designated for
purchase;
(iii) that the Change of Control Offer is being made for all
(but not less than all) Preferred Shares held by a Holder;
(iv) that the Preferred Shares purchased pursuant to the
Change of Control Offer shall cease to accrue dividends or interest after
the date designated for purchase;
(v) such other information respecting the procedures for
accepting the Change of Control Offer as the Company shall include and such
other information as may be required by law; and
(vi) that (unless otherwise required by law) any Holder
will be entitled to withdraw its election if the Company receives, not
later than the close of business on the third Business Day next preceding
the date scheduled for purchase, facsimile transmission or letter setting
forth the name of the Holder, the number of Preferred Shares owned by such
Holder
41
(all of which shall have been delivered for purchase) and a statement that
such Holder is withdrawing its election to have such Preferred Shares
purchased.
(c) The Purchasers understand that the Credit Agreement may
not permit certain payments with respect to the Preferred Stock.
10.15 Proxy Statement and Meeting of Company's Stockholders.
-----------------------------------------------------
(a) The Company shall call a meeting of its stockholders (the
"Stockholders' Meeting") as soon as reasonably practicable after the date of
----------------------
this Agreement, for the purpose of voting upon approval of the sale of the
Second Preferred Shares pursuant to this Agreement and such other related
matters as it deems appropriate. In connection with the Stockholders' Meeting,
(i) the Company shall prepare and file with the Commission a Proxy Statement and
mail such Proxy Statement to its stockholders, (ii) the Board of Directors of
the Company shall recommend to its stockholders the approval of the sale of the
Second Preferred Shares pursuant to this Agreement and (iii) the Board of
Directors and officers of the Company shall use their reasonable efforts to
obtain such stockholders' approval. Each Purchaser agrees to assist and
cooperate with the Company in the preparation of the Proxy Statement with
respect to information therein concerning any such Purchaser.
(b) The Company hereby represents, warrants and agrees with the
Purchasers that the Proxy Statement will not, at the time the Proxy Statement is
mailed, and at the date 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 to make the statements therein, in light of the
circumstances under which they are made, not misleading, or to correct any
statement made in any earlier communication with respect to the solicitation of
any proxy or approval of the transactions contemplated by this Agreement in
connection with which the Proxy Statement shall be mailed. The Company further
represents, warrants and agrees that the Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act. The letter to
stockholders, notice of meeting, proxy statement and form of proxy, or any
information statement filed under the Exchange Act, as the case may be, that may
be provided to stockholders of the Company in connection with the transactions
contemplated by this Agreement (including any supplements), and any schedules
required to be filed with the Commission in connection therewith, as from time
to time amended or supplemented, are collectively referred to as the "Proxy
Statement."
(c) The Company shall take all actions necessary in accordance
with the Delaware General Corporation Law and the bylaws of the Company to duly
call, give notice of, convene and hold the Stockholders' Meeting within forty-
five (45) calendar days after the date hereof.
42
(d) Each Purchaser hereby represents, warrants and agrees with
the Company that, solely with respect to information supplied in writing by such
Purchaser for inclusion in the Proxy Statement, the Proxy Statement will not, at
the time the Proxy Statement is mailed, and at the date 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 to make the statements
therein, in light of the circumstances under which they are made, not
misleading, or to correct any such information previously supplied to the
Company.
10.16 Registration Rights Agreement. Prior to the First Closing Date,
-----------------------------
the Registration Agreement as in effect on the date hereof shall have been
modified to incorporate the Purchasers on the terms set forth on Exhibit B
hereto and on such other terms as the Purchasers may reasonably request (as so
modified, the Registration Agreement shall be referred to herein as the
"Registration Rights Agreement").
------------------------------
Article 11
NEGATIVE COVENANTS
------------------
The Company hereby covenants and agrees with each Purchaser and each
Holder that so long as any Preferred Shares are outstanding:
11.1 Consolidations and Mergers. Except in connection with a Change
--------------------------
of Control, the Company shall not merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whenever
acquired), except the Company may consolidate or merge with or into, or sell all
or substantially all of its assets to, any Person if:
(a) The corporation or partnership formed by such consolidation
or surviving such merger or the Person which acquires all or substantially all
of the assets of the Company shall be (after giving effect to such transaction)
a Solvent corporation or partnership organized or formed, as the case may be,
and existing under, the laws of the United States, any state thereof, or the
District of Columbia and shall expressly assume in writing all of the
obligations of the Company under this Agreement, the Preferred Shares and the
Registration Rights Agreement;
(b) immediately after giving effect to such transaction, no
default under, or breach of, provisions of Articles 10 and 11 exists;
(c) the corporation or partnership formed by or surviving any
such transaction or the Person which acquires all or substantially all of the
assets
43
of the Company shall have a Consolidated Net Worth at least equal to 90% of the
Consolidated Net Worth of the Company immediately prior to such transaction; and
(d) the Company shall have furnished to the Holders (i) an
opinion of counsel satisfactory to a majority in interest of the Holders
addressing the matters (other than Solvency) set forth in clause (a) above and
(ii) the certificate of the Chief Financial Officer of the Company to the effect
that such transaction has been consummated in compliance with the foregoing
requirements; provided that nothing in this Section 11.1 shall affect the rights
--------
of any Holder under this Agreement, the Preferred Shares or the Registration
Rights Agreement.
11.2 Transactions with Affiliates. The Company shall not, and shall
----------------------------
not permit any of its Subsidiaries to, enter into any transaction with any
Affiliate of the Company or of any such Subsidiary, unless approved by a
majority of the independent directors of the Company or is otherwise on arm's-
length terms.
11.3 No Inconsistent Agreements. Neither the Company nor any of its
--------------------------
Subsidiaries shall enter into any loan or other agreement, or enter into any
amendment or other modification to any currently existing agreement, which by
its terms restricts or prohibits the ability of the Company to issue Common
Stock upon conversion of the Preferred Stock in accordance with the Certificate
of Designation and this Agreement or to perform its obligations under this
Agreement or the Registration Rights Agreement; provided, that it will not be
--------
considered to be a breach of this Section 11.3 if the Credit Agreement restricts
dividends on or the redemption of the Preferred Shares issued pursuant to this
Agreement.
Article 12
MISCELLANEOUS
-------------
12.1 Survival of Provisions. All warranties, representations and
----------------------
covenants made by the Company in or under this Agreement shall be considered to
have been relied upon by each Purchaser and shall survive the execution and
delivery of this Agreement and the issuance to such Purchaser of the Preferred
Shares, regardless of any investigation made by or on behalf of such Purchaser.
All warranties, representations and covenants made by a Purchaser or on its
behalf shall survive the execution and delivery of this Agreement and the
issuance to such Purchaser of the Preferred Shares. Except as otherwise set
forth in Article 10 or 11, all of the representations and warranties made herein
and each of the provisions of Articles 7, 8, 9 and 12 shall survive the
execution and delivery of this Agreement, any investigation by or on behalf of a
Purchaser or any Affiliate, acceptance of the Preferred Shares and payment
therefor, payment or prepayment of the Preferred Shares upon redemption or
otherwise, conversion of the Preferred Shares or termination of this Agreement;
provided that the representations and warranties set
--------
44
forth in Articles 7 and 8 shall expire and terminate upon the earlier of (i) the
conversion of all of the Preferred Shares into Common Stock and (ii) ninety (90)
days after the filing of the Company's Form 10-K for the fiscal year ended
December 31, 1999.
12.2 Notices. All notices, demands and other communications provided
-------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
(a) if to the Fund at the following address:
The 1818 Fund III, L.P.
c/o Brown Brothers Xxxxxxxx & Co.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xx. Xxxxxxxx X. Xxxxxx
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
(b) if to CIP at the following address:
Co-Investment Partners, L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.:
Attention: Xxxxxx X. Xxxx
with a copy to:
Kramer, Levin, Naftalis & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
45
(c) if to Erie Indemnity or Erie Exchange at the following
address:
c/o Erie Insurance Group
000 Xxxx Xxxxxxxxx Xxxxx
Xxxx, Xxxxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
(d) if to Aquila at the following address:
Aquila Limited Partnership
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx
(e) if to the Company at the following address:
National Equipment Services, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxx Xxxxxxx
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Perl, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
12.3 Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. Each Purchaser may assign any of its rights under this
Agreement, the Preferred Shares or the Registration Rights Agreement to any of
its Affiliates. Subject to the restrictions of this Agreement, each Purchaser
may assign any of its rights under this Agreement (other than those set forth in
Section 10.1(c), (d) or (e),
46
10.2(b), 10.6, 10.9, 10.10 or 10.12), or the Preferred Shares, or a portion
thereof to any other Holder. Notwithstanding anything to the contrary contained
herein, each Purchaser may assign its rights to purchase shares of Preferred
Stock at the Second Closing pursuant to Section 2.1(b) (and the right to receive
any fees pursuant to Section 2.3); provided, that in no event shall such
--------
Purchaser be relieved of its obligation hereunder to purchase any such shares of
Preferred Stock at the Second Closing; provided, further, that any such assignee
--------- -------
of such rights shall be deemed to be a "Purchaser" for all purposes of this
Agreement. The Company may not assign any of its rights under this Agreement
without the written consent of each Purchaser. Except as provided in Article 9,
no Person other than the parties hereto is intended to be a beneficiary of this
Agreement, the Preferred Shares or the Registration Rights Agreement.
12.4 Amendment and Waiver. No failure or delay on the part of the
--------------------
Company or any Purchaser in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to the Company or any Purchaser at law, in equity or otherwise. Any
amendment, supplement, modification or termination of or to any provision of
this Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by the Company from the terms of any provision of this
Agreement, shall be effective only in the specific instance and for the specific
purpose for which made or given and shall be effective only when signed in
writing by or on behalf of holders of at least 51% of the Common Stock issued
and issuable upon conversion of the Preferred Shares (whether or not converted)
it being understood that the terms of this Agreement may be waived or amended
with the written consent of holders of at least 51% of the Common Stock issued
and issuable upon conversion of the Preferred Shares (whether or not converted).
Except where notice is specifically required by this Agreement, no notice to or
demand on the Company in any case shall entitle the Company to any other or
further notice or demand in similar or other circumstances.
12.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
12.6 Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
12.7 Determinations. Except where any provision expressly requires
--------------
that a determination be reasonable or a consent not be unreasonably withheld, or
be subject to qualifications to similar effect, all determinations to be made by
the
47
Company, any Purchaser or any Holder hereunder in its opinion or judgment or
with its approval or otherwise shall be made by it in its sole discretion.
12.8 Governing Law. This Agreement has been negotiated, executed and
-------------
delivered in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
12.9 Jurisdiction. Each party to this Agreement hereby irrevocably
------------
agrees that any legal action or proceeding arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby may be brought
in the courts of the State of New York located in New York City or of the United
States of America for the Southern District of New York and hereby expressly
submits to the personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an inconveni ent forum. Each party hereby irrevocably consents to
the service of process of any of the aforementioned courts in any such suit,
action or proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to the address set forth in Section 12.2, such service to
become effective 10 days after such mailing.
12.10 Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions hereof.
12.11 Rules of Construction. Unless the context otherwise requires,
---------------------
"or" is not exclusive, and references to Sections or subsections refer to
Sections or subsections of this Agreement.
12.12 Remedies. If a breach of this Agreement or the Certificate of
--------
Designation by the Company or any of the Purchasers occurs and is continuing,
the Company or any Holder, as the case may be, may pursue any available remedy
by proceeding at law or in equity to enforce the performance (including, without
limitation, the specific performance) of any provision of this Agreement or the
Certificate of Designation. A Holder may maintain a proceeding even if it does
not possess any of the Preferred Shares or does not produce any of them in the
proceeding. Except as otherwise provided by law, a delay or omission by the
Company or any Holder, as the case may be, in exercising any right or remedy
accruing upon any such breach shall not impair the right or remedy or constitute
a waiver of or acquiescence in any such breach. No remedy is exclusive of any
other remedy. All available remedies are cumulative.
48
12.13 Entire Agreement. This Agreement, together with the Exhibits and
----------------
Schedules hereto, the Certificate of Designation and the Registration Rights
Agreement, is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the Exhibits and Schedules hereto, the Certificate of
Designation, the Registration Rights Agreement supersede all prior agreements
and understandings between the parties with respect to such subject matter.
12.14 Attorneys' Fees. In any action or proceeding brought to enforce
---------------
any provision of this Agreement, the Certificate of Designation or the
Registration Rights Agreement or any other document or instrument contemplated
hereby or thereby, or where any provision hereof or thereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonable
attorneys' fees, charges and disbursements in addition to any other available
remedy.
12.15 Publicity. Except as may be required by applicable law or
---------
regulation, no party hereto shall issue a publicity release or announcement or
otherwise make any public disclosure concerning this Agreement or the
transactions contemplated hereby, without prior approval by the other parties
hereto. If any announcement is required by law to be made by any party hereto,
prior to making such announcement such party will deliver a draft of such
announcement to the other parties and shall give the other parties an
opportunity to comment thereon.
12.16 Expenses. The Company acknowledges and agrees that if the
--------
transactions contemplated hereby are consummated, the Company shall reimburse
such Purchaser for all (i) reasonable out-of-pocket expenses and all consulting
and legal fees and expenses and other charges of such Purchaser in connection
with the negotiation, execution and delivery of this Agreement, the Preferred
Shares and the Registration Rights Agreement (including, without limitation, all
fees, disbursements and related charges of Xxxx, Weiss, Rifkind, Xxxxxxx &
Xxxxxxxx) and (ii) reasonable fees and expenses of accountants for the
Purchasers in connection with accounting due diligence, and (iii) the reasonable
expenses incurred by the Purchasers, in connection with consulting services.
All such out-of-pocket fees and expenses incurred by the Purchasers prior to or
in connection with the Closing shall be paid at the Closing, and the Purchasers
may in their discretion offset the amount of such fees and expenses against the
Purchase Price of the Preferred Shares. Notwithstanding the foregoing, the
maximum amount of expenses to be reimbursed by the Company pursuant to this
Section 12.16 shall not exceed $250,000. The Company shall pay the reasonable
fees, out of pocket expenses and all expenses and other charges of each
Purchaser incurred in connection with any amendment to this Agreement, the
Certificate of Designation or the Registration Rights Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective representatives hereunto duly
authorized as of the date first above written.
NATIONAL EQUIPMENT SERVICES, INC.
By:/s/ Xxxxx X. Xxxxxxx
____________________
Name:Xxxxx X.Xxxxxxx
Title:CEO
THE 1818 FUND III, L.P.
By: Xxxxx Brothers Xxxxxxxx & Co.,
General Partner
By:/s/ Xxxxxxxx X. Xxxxxx
_______________________
Name:Xxxxxxxx X. Xxxxxx
Title: General Partner
CO-INVESTMENT PARTNERS, L.P.
By: CIP Partners, LLC, its
General Partner
By:/s/ Xxxxxx X Xxxx
__________________
Name: Xxxxxx X Xxxx
Title: Individual Managing Member
ERIE INDEMNITY COMPANY
By:/s/ Xxxxxxx X. Xxxxxxx
_______________________
Name:Xxxxxxx X. Xxxxxxx
Title:Senior Vice President,
Treasurer & Chief Investment
Officer
ERIE INSURANCE EXCHANGE
By: Erie Indemnity Company,
its attorney-in-fact
By:/s/ Xxxxxxx X. Xxxxxxx
______________________
Name:Xxxxxxx X. Xxxxxxx
Title: Senior Vice President,
Treasurer & Chief Investment
Officer
AQUILA LIMITED PARTNERSHIP
By: Xxxxxxxx Management Company, LLC,
By:/s/ Xxxxxxx X. Xxxxxxxx
________________________
Name:Xxxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
SCHEDULE 1
First Closing Second Closing
Facility Fee Facility Fee
-------------------------------------------------------------------
The 1818 Fund III, L.P. $2,520,000 $1,680,000
-------------------------------------------------------------------
Co-Investment Partners, L.P. $ 300,000 $ 200,000
-------------------------------------------------------------------
Erie Indemnity Company $ 36,000 $ 24,000
-------------------------------------------------------------------
Erie Insurance Exchange $ 84,000 $ 56,000
-------------------------------------------------------------------
Aquila Limited Partnership $ 60,000 $ 40,000
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Exhibit A
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NATIONAL EQUIPMENT SERVICES, INC.
CERTIFICATE OF DESIGNATION OF
SENIOR REDEEMABLE CONVERTIBLE
PREFERRED STOCK, SERIES A, SETTING FORTH THE POWERS,
PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS OF SUCH SERIES OF PREFERRED STOCK
Pursuant to Section 151 of the Delaware General Corporation Law,
National Equipment Services, Inc., a Delaware corporation (the "Corporation"),
DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
of the Corporation by the Certificate of Incorporation of the Corporation (the
"Charter"), the Board of Directors of the Corporation on ________, 1999 duly
adopted the following resolution creating a series of Preferred Stock designated
as Senior Redeemable Convertible Preferred Stock, Series A, and such resolution
has not been modified and is in full force and effect on the date hereof:
RESOLVED that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the Charter, a
series of the class of authorized Preferred Stock, par value $0.01 per share, of
the Corporation is hereby created and that the designation and number of shares
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof are as follows:
Section 1. Designation and Number.
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(a) The shares of such series shall be designated as Senior
Redeemable Convertible Preferred Stock, Series A (the "Preferred Stock"). The
number of shares initially constituting the Preferred Stock shall be 100,000,
which number may be decreased (but not increased) by the Board of Directors
without a vote of stockholders; provided, however, that such number may not be
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decreased below the number of then outstanding shares of Preferred Stock.
(b) The Preferred Stock shall, with respect to rights on
liquidation, dissolution or winding up, rank prior to all other classes and
series of Junior Stock (as defined below) of the Corporation now or hereafter
authorized including, without limitation, the Common Stock.
(c) Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Section 11 below.
Exhibit A
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NATIONAL EQUIPMENT SERVICES, INC.
CERTIFICATE OF DESIGNATION OF
SENIOR REDEEMABLE CONVERTIBLE
PREFERRED STOCK, SERIES A, SETTING FORTH THE POWERS,
PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS OF SUCH SERIES OF PREFERRED STOCK
Pursuant to Section 151 of the Delaware General Corporation Law,
National Equipment Services, Inc., a Delaware corporation (the "Corporation"),
DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
of the Corporation by the Certificate of Incorporation of the Corporation (the
"Charter"), the Board of Directors of the Corporation on ________, 1999 duly
adopted the following resolution creating a series of Preferred Stock designated
as Senior Redeemable Convertible Preferred Stock, Series A, and such resolution
has not been modified and is in full force and effect on the date hereof:
RESOLVED that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the Charter, a
series of the class of authorized Preferred Stock, par value $0.01 per share, of
the Corporation is hereby created and that the designation and number of shares
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof are as follows:
Section 1. Designation and Number.
----------------------
(a) The shares of such series shall be designated as Senior
Redeemable Convertible Preferred Stock, Series A (the "Preferred Stock"). The
number of shares initially constituting the Preferred Stock shall be 100,000,
which number may be decreased (but not increased) by the Board of Directors
without a vote of stockholders; provided, however, that such number may not be
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decreased below the number of then outstanding shares of Preferred Stock.
(b) The Preferred Stock shall, with respect to rights on
liquidation, dissolution or winding up, rank prior to all other classes and
series of Junior Stock (as defined below) of the Corporation now or hereafter
authorized including, without limitation, the Common Stock.
(c) Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Section 11 below.
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Section 2. Dividends and Distributions.
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Each holder of shares of Preferred Stock, shall be entitled to
receive, when, as and if declared by the Board of Directors, dividends and other
distributions (including, without limitation, any options, warrants or other
rights to acquire capital stock of the Corporation whether or not pursuant to a
shareholder rights plan, "poison pill" or similar arrangement, or other property
or assets) on a parity with each holder of Common Stock. Such dividends and
distributions shall be payable on each share of Preferred Stock in an amount
equal to the dividends per share payable on the number of shares of Common Stock
into which such share of Preferred Stock would be convertible under Section 8 on
the record date for determining eligibility to receive such dividends, or if no
record date is established, on the date such dividends are actually paid.
Section 3. Voting Rights.
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In addition to any voting rights provided by law, the holders of
shares of Preferred Stock shall have the following voting rights:
(a) So long as the Preferred Stock is outstanding, each share of
Preferred Stock shall entitle the holder thereof to vote, in person or by proxy,
at a special or annual meeting of stockholders, on all matters voted on by
holders of Common Stock voting together as a single class with other shares
entitled to vote thereon. With respect to any such vote, each share of
Preferred Stock shall entitle the holder thereof to cast that number of votes
per share as is equal to the number of votes that such holder would be entitled
to cast had such holder converted his shares of Preferred Stock into Common
Stock pursuant to Section 8 on the record date for determining the stockholders
of the Corporation eligible to vote on any such matters.
(b) Unless the consent or approval of a greater number of shares
shall then be required by law, the affirmative vote of the holders of at least
51% of the outstanding shares of Preferred Stock, voting separately as a single
class, in person or by proxy, at a special or annual meeting of stockholders
called for the purpose, shall be necessary to:
(i) increase the authorized number of shares of Preferred
Stock; and
(ii) authorize, adopt or approve an amendment to the Charter
that would increase or decrease the par value of the shares of Preferred Stock,
or alter or change the powers, preferences or special rights of the shares of
Preferred Stock, or otherwise affect the rights of the shares of the Preferred
Stock adversely, including, without limitation, the liquidation preference
provisions.
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(c)(i) At each meeting of stockholders at which the holders of
shares of Preferred Stock shall have the right, voting separately as a single
class, to take any action, the presence in person or by proxy of the holders of
record of one-third of the total number of shares of Preferred Stock then
outstanding and entitled to vote on the matter shall be necessary and sufficient
to constitute a quorum. At any such meeting or at any adjournment thereof:
(A) the absence of a quorum of the holders of shares
of Preferred Stock shall not prevent the election of directors, and the absence
of a quorum of the holders of shares of any other class or series of capital
stock shall not prevent the taking of any action as provided in this Section 3;
and
(B) in the absence of a quorum of the holders of
shares of Preferred Stock, a majority of the holders of such shares present in
person or by proxy shall have the power to adjourn the meeting as to the actions
to be taken by the holders of shares of Preferred Stock from time to time and
place to place without notice other than announcement at the meeting until a
quorum shall be present.
(ii) For taking of any action as provided in Section 3(b) by the
holders of shares of Preferred Stock, each such holder shall have one vote for
each share of such stock standing in his name on the transfer books of the
Corporation as of any record date fixed for such purpose or, if no such date be
fixed, at the close of business on the Business Day next preceding the day on
which notice is given, or if notice is waived, at the close of business on the
Business Day next preceding the day on which the meeting is held; provided,
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however, that shares of Preferred Stock held by the Corporation or any Affiliate
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of the Corporation shall not be deemed to be outstanding for purposes of taking
any action as provided in this Section 3.
Section 4. Certain Restrictions.
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(a) Whenever the Corporation shall not have converted Preferred
Stock at a time required by Section 8 or 10, at such time and thereafter until
all conversion obligations provided in Section 8 or 10 that have come due shall
have been satisfied, or whenever the Corporation shall not have redeemed shares
of Preferred Stock at a time required by Section 5, at such time and thereafter
until all redemption obligations provided in Section 5 that have come due shall
have been satisfied or all necessary funds have been set apart for payment, the
Corporation shall not: (A) declare or pay dividends, or make any other
distributions, on any shares of Junior Stock (other than Common Stock) or (B)
declare or pay dividends, or make any other distributions, on any shares of
Parity Stock.
(b) Whenever the Corporation shall not have converted shares of
Preferred Stock at a time required by Section 8 or 10, at such time and
thereafter until all conversion obligations provided in Section 8 or 10 that
have come due shall
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have been satisfied, or whenever the Corporation shall not have redeemed shares
of Preferred Stock at a time required by Section 5, at such time and thereafter
until all redemption obligations provided in Section 5 that have come due shall
have been satisfied or all necessary funds have been set apart for payment, the
Corporation shall not redeem, purchase or otherwise acquire for consideration
any shares of Junior Stock or Parity Stock; provided, however, that (A) the
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Corporation may accept shares of any Senior Stock, Parity Stock or Junior Stock
for conversion into Junior Stock and (B) the Corporation may at any time redeem,
purchase or otherwise acquire shares of any Parity Stock pursuant to any
mandatory redemption, put, sinking fund or other similar obligation contained in
such Parity Stock, pro rata with the Preferred Stock in proportion to the total
amount then required to be applied by the Corporation to redeem, repurchase, or
otherwise acquire shares of Preferred Stock and shares of such Parity Stock.
(c) The Corporation shall not permit any Subsidiary of the
Corporation, or cause any other Person, to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation unless the
Corporation could, pursuant to Section 4(b), purchase such shares at such time
and in such manner.
Section 5. Redemption.
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(a) On April 30, 2009 (the "Redemption Date"), the Corporation
shall redeem all of the shares of Preferred Stock then outstanding, at a price
per share (the "Redemption Price") equal to (A) the Stated Value, plus (B) an
amount per share equal to all declared and unpaid dividends thereon, to the
Redemption Date, in immediately available funds.
(b) Notice of any redemption of shares of Preferred Stock pursuant
to Section 5(a) shall be given by publication in a newspaper of general
circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), not less than 30, nor more than 60, days prior to the
date fixed for redemption. In any case, a similar notice shall be mailed at
least 30, but not more than 60, days prior to the date fixed for redemption to
each holder of shares of Preferred Stock to be redeemed, at such holder's
address as it appears on the transfer books of the Corporation. In order to
facilitate the redemption of shares of Preferred Stock, the Board of Directors
may fix a record date for the determination of shares of Preferred Stock to be
redeemed, or may cause the transfer books of the Corporation for the Preferred
Stock to be closed, not more than 60 days or less than 30 days prior to the date
fixed for such redemption.
(c) At any time after a notice of redemption shall have been mailed
and before the Redemption Date, the Corporation shall deposit for the benefit of
the holders of shares of Preferred Stock to be redeemed the funds necessary for
such
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redemption with a bank or trust company in the Borough of Manhattan, The
City of New York, having a capital and surplus of at least $500,000,000. Any
moneys so deposited by the Corporation and unclaimed at the end of two years
from the date designated for such redemption shall revert to the general funds
of the Corporation. After such reversion, any such bank or trust company, upon
demand, shall pay over to the Corporation such unclaimed amounts and thereupon
such bank or trust company shall be relieved of all responsibility in respect
thereof and any holder of shares of Preferred Stock to be redeemed shall look
only to the Corporation for the payment of the Redemption Price. In the event
that moneys are deposited pursuant to this Section 5(c) in respect of shares of
Preferred Stock that are converted in accordance with the provisions of Section
8, such moneys shall, upon such conversion, revert to the general funds of the
Corporation and, upon demand, such bank or trust company shall pay over to the
Corporation such moneys and shall be relieved of all responsibilities to the
holders of such converted shares in respect thereof. Any interest accrued on
funds deposited pursuant to this Section 5(c) shall be paid from time to time to
the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid, upon the
deposit of funds pursuant to Section 5(c) in respect of shares of Preferred
Stock to be redeemed pursuant to Section 5(a), notwithstanding that any
certificates for such shares shall not have been surrendered for cancellation,
from and after the Redemption Date (i) the shares represented thereby shall no
longer be deemed outstanding, (ii) the rights to receive dividends thereon shall
cease to accrue and (iii) all rights of the holders of shares of Preferred Stock
to be redeemed shall cease and terminate, excepting only the right to receive
the Redemption Price therefor and the right to convert such shares into shares
of Common Stock until the close of business on the Redemption Date, in
accordance with Section 8; provided, however, that if the Corporation shall
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default in the payment of the Redemption Price, the shares of Preferred Stock
that were to be redeemed shall thereafter be deemed to be outstanding and the
holders thereof shall have all of the rights of a holder of Preferred Stock
until such time as such default shall no longer be continuing or shall have been
waived by holders of at least 51% of the then outstanding shares of Preferred
Stock.
Section 6. Reacquired Shares.
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Any shares of Preferred Stock converted, exchanged, redeemed,
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares of Preferred Stock shall upon their cancellation become authorized but
unissued shares of preferred stock, par value $.01 per share, of the Corporation
and, upon the filing of an appropriate Certificate of Designation with the
Secretary of State of the State of Delaware, may be reissued as part of another
series of preferred stock, par value $.01 per share, of the Corporation, but in
any event may not be reissued as shares of Preferred Stock unless all of the
shares of Preferred Stock issued on the Issue Date shall have already been
redeemed or converted.
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Section 7. Liquidation, Dissolution or Winding Up.
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(a) If the Corporation shall commence a voluntary case under the
United States bankruptcy laws or any applicable bankruptcy, insolvency or
similar law of any other country, or consent to the entry of an order for relief
in an involuntary case under any such law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due or if a decree or order
for relief in respect of the Corporation shall be entered by a court having
jurisdiction in the premises in an involuntary case under the United States
bankruptcy laws or any applicable bankruptcy, insolvency or similar law of any
other country, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and on account of any such event the Corporation shall liquidate,
dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve
or wind up (any such event, a "Liquidation"), no distribution shall be made to
the holders of shares of Junior Stock unless, prior thereto, the holders of
shares of Preferred Stock shall have received an amount per share of Preferred
Stock equal to the greater of (A) the Stated Value, plus all declared and unpaid
dividends to the date of distribution, or (B) the proceeds in Liquidation that
the holders of Preferred Stock would have received in respect of all shares of
Common Stock issuable to such holders upon conversion of a share of Preferred
Stock owned by such holders, assuming that such share of Preferred Stock owned
by such holders had been converted into shares of Common Stock in accordance
with Section 8 immediately prior to the Liquidation (such greater amount being
the "Preferred Stock Liquidation Amount").
(b) Notwithstanding the foregoing, if the assets distributable upon
a Liquidation shall be insufficient to pay in full the Preferred Stock
Liquidation Amount on all shares of Preferred Stock outstanding and any amount
payable to the holders of Parity Stock, then all of the assets available after
payment of any amounts payable on the Senior Stock shall be distributed among
the holders of the Preferred Stock and the Parity Stock ratably in proportion to
the respective amounts of the assets to which they would otherwise be entitled.
(c) Neither the consolidation or merger of the Corporation with or
into any other Person nor the sale or other distribution to another Person of
all or substantially all the assets, property or business of the Corporation,
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation for purposes of this Section 7.
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succeeding day on which such share transfer books are open, and such conversion
shall be deemed to have been made at, and shall be made at the Conversion Price
in effect at, such time on such next succeeding day.
(c) To the extent permitted by law, when shares of Preferred Stock
are converted, all dividends which have been declared and are unpaid on the
Preferred Stock so converted to the date of conversion shall be immediately due
and payable and must accompany the shares of Common Stock issued upon such
conversion.
(d) The Conversion Price shall be subject to adjustment as follows:
(i) If the Corporation shall at any time or from time to time
(A) pay a dividend or make a distribution (other than a dividend or distribution
paid to holders of Preferred Stock in the manner provided in Section 2) on the
outstanding shares of Common Stock in capital stock (which, for purposes of this
Section 8(d) shall include, without limitation, any options, warrants or other
rights to acquire capital stock) of the Corporation, (B) subdivide the
outstanding shares of Common Stock into a larger number of shares, (C) combine
the outstanding shares of Common Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Common Stock,
then, and in each such case, the Conversion Price in effect immediately prior to
such event shall be adjusted (and any other appropriate actions shall be taken
by the Corporation) so that the holder of any share of Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other securities of the Corporation that such holder
would have owned or would have been entitled to receive upon or by reason of any
of the events described above, had such share of Preferred Stock been converted
immediately prior to the occurrence of such event. An adjustment made pursuant
to this Section 8(d)(i) shall become effective retroactively (A) in the case of
any such dividend or distribution, to a date immediately following the close of
business on the record date for the determination of holders of Common Stock
entitled to receive such dividend or distribution or (B) in the case of any such
subdivision, combination or reclassification, to the close of business on the
day upon which such corporate action becomes effective.
(ii) If the Corporation shall at any time or from time to time
issue shares of Common Stock (or securities convertible into or exchangeable for
Common Stock, or any options, warrants or other rights to acquire shares of
Common Stock) for a consideration per share less than the Conversion Price per
share of Common Stock then in effect at the record date or issuance date, as the
case may be (the "Date"), referred to in the following sentence (treating the
price per share of any security convertible or exchangeable or exercisable into
Common Stock as equal to (A) the sum of the price for such security convertible,
exchangeable or exercisable into Common Stock plus any additional consideration
payable (without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security
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succeeding day on which such share transfer books are open, and such conversion
shall be deemed to have been made at, and shall be made at the Conversion Price
in effect at, such time on such next succeeding day.
(c) To the extent permitted by law, when shares of Preferred Stock
are converted, all dividends which have been declared and are unpaid on the
Preferred Stock so converted to the date of conversion shall be immediately due
and payable and must accompany the shares of Common Stock issued upon such
conversion.
(d) The Conversion Price shall be subject to adjustment as follows:
(i) If the Corporation shall at any time or from time to time
(A) pay a dividend or make a distribution (other than a dividend or distribution
paid to holders of Preferred Stock in the manner provided in Section 2) on the
outstanding shares of Common Stock in capital stock (which, for purposes of this
Section 8(d) shall include, without limitation, any options, warrants or other
rights to acquire capital stock) of the Corporation, (B) subdivide the
outstanding shares of Common Stock into a larger number of shares, (C) combine
the outstanding shares of Common Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Common Stock,
then, and in each such case, the Conversion Price in effect immediately prior to
such event shall be adjusted (and any other appropriate actions shall be taken
by the Corporation) so that the holder of any share of Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other securities of the Corporation that such holder
would have owned or would have been entitled to receive upon or by reason of any
of the events described above, had such share of Preferred Stock been converted
immediately prior to the occurrence of such event. An adjustment made pursuant
to this Section 8(d)(i) shall become effective retroactively (A) in the case of
any such dividend or distribution, to a date immediately following the close of
business on the record date for the determination of holders of Common Stock
entitled to receive such dividend or distribution or (B) in the case of any such
subdivision, combination or reclassification, to the close of business on the
day upon which such corporate action becomes effective.
(ii) If the Corporation shall at any time or from time to time
issue shares of Common Stock (or securities convertible into or exchangeable for
Common Stock, or any options, warrants or other rights to acquire shares of
Common Stock) for a consideration per share less than the Conversion Price per
share of Common Stock then in effect at the record date or issuance date, as the
case may be (the "Date"), referred to in the following sentence (treating the
price per share of any security convertible or exchangeable or exercisable into
Common Stock as equal to (A) the sum of the price for such security convertible,
exchangeable or exercisable into Common Stock plus any additional consideration
payable (without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security
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into Common Stock divided by (B) the number of shares of Common Stock initially
underlying such convertible, exchangeable or exercisable security), then, and in
each such case, the Conversion Price then in effect shall be adjusted by
dividing the Conversion Price in effect on the day immediately prior to the Date
by a fraction (x) the numerator of which shall be the sum of the number of
shares of Common Stock outstanding on the Date plus the number of additional
shares of Common Stock issued or to be issued (or the maximum number into which
such convertible or exchangeable securities initially may convert or exchange or
for which such options, warrants or other rights initially may be exercised) and
(y) the denominator of which shall be the sum of the number of shares of Common
Stock outstanding on the Date plus the number of shares of Common Stock which
the aggregate consideration for the total number of such additional shares of
Common Stock so issued or be issued upon the conversion, exchange or exercise of
such convertible or exchangeable securities or options, warrants or other rights
(plus the aggregate amount of any additional consideration initially payable
upon such conversion, exchange or exercise of such security) would purchase at
the Conversion Price on the Date.
Such adjustment shall be made whenever such shares, securities, options,
warrants or other rights are issued, and shall become effective retroactively to
a date immediately following the close of business (1) in the case of issuance
to stockholders of the Corporation, as such, on the record date for the
determination of stockholders entitled to receive such shares, securities,
options, warrants or other rights and (2) in all other cases, on the date
("issuance date") of such issuance; provided that:
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(A) the determination as to whether an adjustment is
required to be made pursuant to this Section 8(d)(ii) shall be made upon the
issuance of such shares or such convertible or exchangeable securities, options,
warrants or other rights;
(B) if any convertible or exchangeable securities, options,
warrants or other rights (or any portions thereof) which shall have given rise
to an adjustment pursuant to this Section 8(d)(ii) shall have expired or
terminated without the exercise thereof and/or if by reason of the terms of such
convertible or exchangeable securities, options, warrants or other rights there
shall have been an increase or increases, with the passage of time or otherwise,
in the price payable upon the exercise or conversion thereof, then the
Conversion Price hereunder shall be readjusted (but to no greater extent than
originally adjusted) on the basis of (x) eliminating from the computation any
additional shares of Common Stock corresponding to such convertible or
exchangeable securities, options, warrants or other rights as shall have expired
or terminated, (y) treating the additional shares of Common Stock, if any,
actually issued or issuable pursuant to the previous exercise of such
convertible or exchangeable securities, options, warrants or other rights as
having been issued for the consideration actually received and receivable
therefor and
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(z) treating any of such convertible or exchangeable securities, options,
warrants or other rights which remain outstanding as being subject to exercise
or conversion on the basis of such exercise or conversion price as shall be in
effect at this time; and
(C) no adjustment in the Conversion Price shall be made
pursuant to this Section 8(d)(ii) as a result of any issuance of securities by
the Corporation in respect of which an adjustment to the Conversion Price is
made pursuant to Section 8(d)(i).
(iii) If the Corporation shall at any time or from time to time
distribute to all holders of shares of its Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the resulting or surviving corporation and the Common Stock is
not changed or exchanged) cash, evidences of indebtedness of the Corporation or
another issuer, securities of the Corporation or another issuer or other assets
(excluding (A) dividends or distributions paid or made in the manner provided in
Section 2, and (B) dividends payable in shares of Common Stock for which
adjustment is made under Section 8(d)(i)) or rights or warrants to subscribe for
or purchase securities of the Corporation (excluding those referred to in
Section 8(d)(ii) or those in respect of which an adjustment in the Conversion
Price is made pursuant to Section 8(d)(i) or (ii)), then, and in each such case,
the Conversion Price then in effect shall be adjusted by dividing the Conversion
Price in effect immediately prior to the date of such distribution by a fraction
(x) the numerator of which shall be the Market Price of the Common Stock on the
record date referred to below and (y) the denominator of which shall be such
Market Price of the Common Stock less the then Fair Market Value (as determined
by the Board of Directors of the Corporation) of the portion of the cash,
evidences of indebtedness, securities or other assets so distributed or of such
subscription rights or warrants applicable to one share of Common Stock (but
such denominator not to be less than one). Such adjustment shall be made
whenever any such distribution is made and shall become effective retroactively
to a date immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iv) If the Corporation, at any time or from time to time, shall
take any action affecting its Common Stock similar to or having an effect
similar to any of the actions described in any of Section 8(d)(i) through
Section 8(d)(iii), inclusive, or Section 8(h) (but not including any action
described in any such Section) and the Board of Directors of the Corporation in
good faith determines that it would be equitable in the circumstances to adjust
the Conversion Price as a result of such action, then, and in each such case,
the Conversion Price shall be adjusted in such manner and at such time as the
Board of Directors of the Corporation in good faith determines would be
equitable in the circumstances (such determination to be evidenced in a
resolution, a certified copy of which shall be mailed to the holders of the
Preferred Stock).
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(v) Notwithstanding anything herein to the contrary, no
adjustment under this Section 8(d) need be made to the Conversion Price unless
such adjustment would require an increase or decrease of at least 1% of the
Conversion Price then in effect. Any lesser adjustment shall be carried forward
and shall be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least 1% of such
Conversion Price. Any adjustment to the Conversion Price carried forward and not
theretofore made shall be made immediately prior to the conversion of any shares
of Preferred Stock pursuant hereto.
(vi) Notwithstanding anything herein to the contrary, no
adjustment under this Section 8(d) shall be made (x) upon the sale or grant of
shares of Common Stock or options with respect to Common Stock in an aggregate
amount not to exceed 3,181,419 shares of Common Stock (assuming the exercise of
all such options) to employees or directors of the Corporation or to other
service providers, or upon the issuance of shares of Common Stock upon exercise
of any such options, if the sales price or exercise price thereof was not less
than the Market Price of the Common Stock on the date such shares of Common
Stock or options were sold or granted; provided, that in the case of options,
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Market Price shall be measured as of the time any such option was granted, not
at the time of exercise, or (y) upon any adjustment in the Conversion Price
itself; provided, that the number set forth in clause (x) shall be equitably
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adjusted for subsequent stock splits, stock combinations, stock dividends and
recapitalizations.
(e) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Conversion Price, then, and
in each such case, the Corporation promptly shall deliver to each registered
holder of Preferred Stock at least 5 Business Days prior to effecting any of the
foregoing transactions a certificate, signed by the President or a Vice-
President and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Conversion Price then in
effect following such adjustment.
(g) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any shares of Preferred Stock. If more
than one share of Preferred Stock shall be surrendered for conversion at one
time by the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate Stated Value
of the shares of
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Preferred Stock so surrendered. If the conversion of any share or shares of
Preferred Stock results in a fraction, an amount equal to such fraction
multiplied by the Current Market Price of the Common Stock on the Business Day
preceding the day of conversion shall be paid to such holder in cash by the
Corporation.
(h) In case of any capital reorganization or reclassification or
other change of outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value), or
in case of any consolidation or merger of the Corporation with or into another
Person (other than a consolidation or merger in which the Corporation is the
resulting or surviving Person and which does not result in any reclassification
or change of outstanding Common Stock), (any of the foregoing, a "Transaction"),
the Corporation, or such successor or purchasing Person, as the case may be,
shall execute and deliver to each holder of Preferred Stock at least 10 Business
Days prior to effecting any of the foregoing Transactions a certificate that the
holder of each share of Preferred Stock then outstanding shall have the right
thereafter to convert such share of Preferred Stock into the kind and amount of
shares of stock or other securities (of the Corporation or another issuer) or
property or cash receivable upon such Transaction by a holder of the number of
shares of Common Stock into which such share of Preferred Stock could have been
converted immediately prior to such Transaction. Such certificate shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 8. If, in the case of any such
Transaction, the stock, other securities, cash or property receivable thereupon
by a holder of Common Stock includes shares of stock or other securities of a
Person other than the successor or purchasing Person and other than the
Corporation, which controls or is controlled by the successor or purchasing
Person or which, in connection with such Transaction, issues stock, securities,
other property or cash to holders of Common Stock, then such certificate also
shall be executed by such Person, and such Person shall, in such certificate,
specifically acknowledge the obligations of such successor or purchasing Person
and acknowledge its obligations to issue such stock, securities, other property
or cash to the holders of Preferred Stock upon conversion of the shares of
Preferred Stock as provided above. The provisions of this Section 8(h) and any
equivalent thereof in any such certificate similarly shall apply to successive
Transactions.
(i) In case at any time or from time to time:
(i) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock;
(ii) the Corporation shall authorize the granting to the holders
of its Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or of any other rights or warrants;
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(iii) there shall be any reclassification of the Common Stock, or any
consolidation or merger to which the Corporation is a party and for which
approval of any shareholders of the Corporation is required, or any sale or
other disposition of all or substantially all of the assets of the Corporation;
or
(iv) there shall be any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall mail to each holder of shares of Preferred Stock at
such holder's address as it appears on the transfer books of the Corporation, as
promptly as possible but in any event at least 10 days prior to the applicable
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution or rights or warrants
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution or rights are to
be determined, or (y) the date on which such reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding up is expected to
become effective. Such notice also shall specify the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for shares of stock or other securities or property or cash
deliverable upon such reclassification, consolidation, merger, sale, conveyance,
dissolution, liquidation or winding up.
(j) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Preferred Stock pursuant to Section 8(a) or
10(a), such number of its authorized but unissued shares of Common Stock as will
from time to time be sufficient to permit the conversion of all outstanding
shares of Preferred Stock, and shall take all action required to increase the
authorized number of shares of Common Stock if at any time there shall be
insufficient authorized but unissued shares of Common Stock to permit such
reservation or to permit the conversion of all outstanding shares of Preferred
Stock.
(k) The issuance or delivery of certificates for Common Stock upon the
conversion of shares of Preferred Stock pursuant to Section 8(a) or 10(a) shall
be made without charge to the converting holder of shares of Preferred Stock for
such certificates or for any tax in respect of the issuance or delivery of such
certificates or the securities represented thereby, and such certificates shall
be issued or delivered in the respective names of, or (subject to compliance
with the applicable provisions of federal and state securities laws) in such
names as may be directed by, the holders of the shares of Preferred Stock
converted; provided, however, that the Corporation shall not be required to pay
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any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificate in a name other than that of the holder of
the shares of Preferred Stock converted, and the Corporation shall not be
required to issue or deliver such certificate unless or until the Person or
Persons requesting the issuance or delivery thereof shall have paid to the
Corporation the
15
Persons entitled to receive such Common Stock as the record holder or holders
thereof for all purposes immediately prior to the close of business on the next
succeeding day on which such share transfer books are open, and such conversion
shall be deemed to have been made at, and shall be made at the Conversion Price
in effect at, such time on such next succeeding day.
(c) To the extent permitted by law, when shares of Preferred Stock
are converted, all dividends declared and unpaid on the Preferred Stock so
converted to the date of conversion shall be immediately due and payable and
must accompany the shares of Common Stock issued upon such conversion.
(d) Notice of a conversion of shares of Preferred Stock pursuant to
Section 10(a) shall be given by publication in a newspaper of general
circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), not less than 30, nor more than 60, days prior to the
Mandatory Conversion Date and a similar notice shall be mailed at least 30, but
not more than 60 days prior to the Mandatory Conversion Date to each holder at
such holder's address as it appears on the transfer books of the Corporation. In
order to facilitate the conversion of shares of Preferred Stock hereunder the
Board of Directors may fix a record date for the determination of shares of
Preferred Stock to be converted, or may cause the transfer books of the
Corporation for the Preferred Stock to be closed, not more than 60 or less than
30 days prior to the Mandatory Conversion Date.
(e) Unless otherwise agreed, on or prior to the Mandatory Conversion
Date, the Corporation shall deposit for the benefit of the holders of shares of
Preferred Stock to be exchanged the shares of Common Stock and cash in the
amount of declared and unpaid dividends (the "Dividends") necessary for such
exchange with a bank or trust company in the Borough of Manhattan, The City of
New York, having a capital and surplus of at least $500,000,000. Any shares of
Common Stock and Dividends so deposited by the Corporation and unclaimed at the
end of two years from the date designated for such exchange shall revert to the
Corporation. After such reversion, any such bank or trust company shall, upon
demand, return to the Corporation such unclaimed shares of Common Stock and
Dividends and thereupon such bank or trust company shall be relieved of all
responsibility in respect thereof and any holder of shares of Preferred Stock to
be converted shall look only to the Corporation for the delivery of the shares
of Common Stock and Dividends. In the event that shares of Common Stock and
Dividends are deposited pursuant to this Section 10(e) in respect of shares of
Preferred Stock that are converted prior to the Mandatory Conversion Date in
accordance with the provisions of Section 8, such shares of Common Stock and
Dividends shall, upon such conversion, revert to the Corporation and, upon
demand, such bank or trust company shall return to the Corporation such shares
of Common Stock and Dividends and shall be relieved of all responsibilities to
the holders of such converted shares in respect thereof. Any dividends accrued
on shares of Common Stock deposited
16
pursuant to this Section 10(e) shall accrue for the accounts of, and be payable
to, the holders of shares of Preferred Stock to be exchanged therefor. Any
interest accruing on the Dividends shall be for the benefit and be payable to
the Corporation.
(f) Notice of Mandatory Conversion having been given as aforesaid,
upon the deposit of shares of Common Stock and Dividends pursuant to Section
10(e) in respect of shares of Preferred Stock to be converted pursuant to
Section 10(a), notwithstanding that any certificates for such shares shall not
have been surrendered for cancellation, from and after the Mandatory Conversion
Date (i) the shares represented thereby shall no longer be deemed outstanding,
(ii) the rights to receive dividends thereon shall cease to accrue, and (iii)
all rights of the holders of shares of Preferred Stock to be converted shall
cease and terminate, excepting only the right to receive the shares of Common
Stock and Dividends and the right to convert such Preferred Stock into shares of
Common Stock until the close of business on the Mandatory Conversion Date, in
accordance with Section 8; provided, however, that if the Corporation shall
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default in the execution and delivery of the shares of Common Stock or
Dividends, the shares of Preferred Stock that were to be converted shall
thereafter be deemed to be outstanding and the holders thereof shall have all of
the rights of a holder of Preferred Stock until such time as such default shall
no longer be continuing or shall have been waived by holders of at least 51% of
the then outstanding shares of Preferred Stock.
Section 11. Definitions.
-----------
For the purposes of this Certificate of Designation of Preferred
Stock, the following terms shall have the meanings indicated:
"Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act; provided that
--------
"Affiliate" shall not include any purchaser under the Stock Purchase Agreement
or any Affiliate of any such purchaser.
"Business Day" shall mean any day other than a Saturday, Sunday
or other day on which commercial banks in The City of New York, New York are
authorized or required by law or executive order to close.
"Common Stock" shall mean the common stock, par value $.01 per
share, and each other class of capital stock, of the Corporation that does not
have a preference over any other class of capital stock of the Corporation as to
dividends or upon liquidation, dissolution or winding up of the Corporation and,
in each case, shall include any other class of capital stock of the Corporation
into which such stock is reclassified or reconstituted.
"Current Market Price" per share shall mean, on any date
specified herein for the determination thereof, (a) the average daily Market
Price of the
16
pursuant to this Section 10(e) shall accrue for the accounts of, and be payable
to, the holders of shares of Preferred Stock to be exchanged therefor. Any
interest accruing on the Dividends shall be for the benefit and be payable to
the Corporation.
(f) Notice of Mandatory Conversion having been given as aforesaid,
upon the deposit of shares of Common Stock and Dividends pursuant to Section
10(e) in respect of shares of Preferred Stock to be converted pursuant to
Section 10(a), notwithstanding that any certificates for such shares shall not
have been surrendered for cancellation, from and after the Mandatory Conversion
Date (i) the shares represented thereby shall no longer be deemed outstanding,
(ii) the rights to receive dividends thereon shall cease to accrue, and (iii)
all rights of the holders of shares of Preferred Stock to be converted shall
cease and terminate, excepting only the right to receive the shares of Common
Stock and Dividends and the right to convert such Preferred Stock into shares of
Common Stock until the close of business on the Mandatory Conversion Date, in
accordance with Section 8; provided, however, that if the Corporation shall
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default in the execution and delivery of the shares of Common Stock or
Dividends, the shares of Preferred Stock that were to be converted shall
thereafter be deemed to be outstanding and the holders thereof shall have all of
the rights of a holder of Preferred Stock until such time as such default shall
no longer be continuing or shall have been waived by holders of at least 51% of
the then outstanding shares of Preferred Stock.
Section 11. Definitions.
-----------
For the purposes of this Certificate of Designation of Preferred
Stock, the following terms shall have the meanings indicated:
"Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act; provided that
--------
"Affiliate" shall not include any purchaser under the Stock Purchase Agreement
or any Affiliate of any such purchaser.
"Business Day" shall mean any day other than a Saturday, Sunday
or other day on which commercial banks in The City of New York, New York are
authorized or required by law or executive order to close.
"Common Stock" shall mean the common stock, par value $.01 per
share, and each other class of capital stock, of the Corporation that does not
have a preference over any other class of capital stock of the Corporation as to
dividends or upon liquidation, dissolution or winding up of the Corporation and,
in each case, shall include any other class of capital stock of the Corporation
into which such stock is reclassified or reconstituted.
"Current Market Price" per share shall mean, on any date
specified herein for the determination thereof, (a) the average daily Market
Price of the
17
Common Stock for those days during the period of 40 days, ending on such date,
which are Trading Days, and (b) if the Common Stock is not then listed or
admitted to trading on any national securities exchange or quoted in the over-
the-counter market, the Market Price on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
thereunder.
"Fair Market Value" shall mean the amount which a willing buyer,
under no compulsion to buy, would pay a willing seller, under no compulsion to
sell, in an arm's-length transaction (assuming in the case of Common Stock (i)
that the Common Stock is valued "as if fully distributed" and (ii) no
consideration is given for minority investment discounts, or discounts related
to illiquidity or restrictions on transferability).
"Issue Date" shall mean the original date of issuance of shares
of Preferred Stock to the holders pursuant to the Stock Purchase Agreement.
"Junior Stock" shall mean any capital stock of the Corporation
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Preferred Stock including, without limitation, the Common
Stock.
"Market Price" shall mean, per share of Common Stock on any date
specified herein: (a) the closing price per share of the Common Stock on such
date published in The Wall Street Journal or, if no such closing price on such
-----------------------
date is published in The Wall Street Journal, the average of the closing bid and
-----------------------
asked prices on such date, as officially reported on the principal national
securities exchange on which the Common Stock is then listed or admitted to
trading; (b) if the Common Stock is not then listed or admitted to trading on
any national securities exchange but is designated as a national market system
security, the last trading price of the Common Stock on such date; or (c) if
there shall have been no trading on such date or if the Common Stock is not so
designated, the average of the reported closing bid and asked prices of the
Common Stock on such date as shown by NASDAQ and reported by any member firm of
the NYSE, selected by the Corporation. If neither (a), (b) or (c) is applicable,
Market Price shall mean the Fair Market Value per share determined in good faith
by the Board of Directors of the Corporation which shall be deemed to be Fair
Market Value unless holders of at least 51% of the outstanding shares of
Preferred Stock request that the Corporation obtain an opinion of a nationally
recognized investment banking firm chosen by such holders (at the Corporation's
expense), in which event Fair Market Value shall be as determined by such
investment banking firm.
"NASDAQ" shall mean the National Market System of the NASDAQ
Stock Market.
18
"NYSE" shall mean the New York Stock Exchange, Inc.
"Parity Stock" shall mean any capital stock of the Corporation,
including the Preferred Stock, ranking on a par (either as to dividends or upon
liquidation, dissolution or winding up) with the Preferred Stock.
"Person" shall mean any individual, firm, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or an agency or political subdivision thereof)
or other entity of any kind, and shall include any successor (by merger) of such
entity.
"Senior Stock" shall mean any capital stock of the Corporation
ranking senior (either as to dividends or upon liquidation, dissolution or
winding up) to the Preferred Stock.
"Stated Value" shall mean $1000 per share of Preferred Stock
"Stock Purchase Agreement" shall mean the Stock Purchase
Agreement, dated ________, 1999 between the Corporation, The 1818 Fund III, L.P.
and the other parties signatory thereto, as the same may be amended from time to
time.
"Subsidiary" shall mean, with respect to any Person, a
corporation or other entity of which 50% or more of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly, by
such Person.
"Trading Days" shall mean a day on which the national securities
exchanges are open for trading.
Section 12. Modification or Amendment.
-------------------------
Except as specifically set forth herein, modifications or
amendments to this Certificate of Designation may be made by the Corporation
with the consent of the holders of at least 51% of the outstanding shares of
Preferred Stock.
IN WITNESS WHEREOF, National Equipment Services, Inc. has caused
this Certificate to be duly executed in its corporate name on this ____ day of
_________, 1999.
NATIONAL EQUIPMENT SERVICES, INC.
By: ___________________________________
Name:
Title:
