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EXHIBIT 10.1
CHAMPION HEALTHCARE CORPORATION
1995 RECAPITALIZATION AGREEMENT
This 1995 Recapitalization Agreement (the"Agreement"), dated as of
December 31, 1995 by and among CHAMPION HEALTHCARE CORPORATION, a Delaware
corporation (the "Company"), and the respective parties whose names and
signatures appear on Schedule 1 of this Agreement (individually, a
"Participant" and collectively, the "Participants").
Witnesseth:
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that the Agreement would be in the best interests of the Company;
WHEREAS, pursuant to the Agreement (i) the holders of the Company's Series A
Convertible Preferred Stock ("Series A"), Series A-1 Convertible Preferred
Stock ("Series A-1") , and Series BB Cumulative Convertible Preferred Stock
("Series BB") will convert those shares pursuant to the existing terms thereof
into shares of the Company's common stock $.01 par value ("Common Stock"),
(ii) the holders of the Series A, A-1, and BB Preferred Stock will receive
shares of Common Stock in full payment of all accrued dividends through
December 31, 1995 and a stated additional amount of Common Stock as
consideration for their converting such preferred shares and taking shares of
Common Stock in payment of accrued dividends, (iii) the holders of Series C
Cumulative Convertible Preferred Stock ("Series C") and Series D Cumulative
Convertible Preferred Stock ("Series D") will receive shares of Common Stock
in full payment of all accrued dividends through December 31, 1995 and a stated
additional amount of Common Stock as consideration for their agreeing to
receive shares of Common Stock in payment of accrued dividends and waiving the
accrual of all future dividends on their preferred stock, (iv) the shareholders
of the Company will be asked to approve amendments to the Company's Certificate
of Incorporation giving further effect to certain of the above actions, and (v)
the holders of (a)warrants currently exercisable to purchase 680,102 shares of
Common Stock issued pursuant to the Note and Stock Purchase Agreement dated May
27, 1992, as the same have been amended and reissued as Replacement Warrants
pursuant to the Agreement to Exchange and Amend Warrants dated April 29, 1993
as amended ("Replacement Warrants"), (b) warrants issued pursuant to the Series
D Note and Stock Purchase Agreement dated December 31, 1993 as amended ("Series
D Warrants"), and (c) warrants issued pursuant to the Series E Note Purchase
Agreement dated May 1, 1995 , as amended ("Series E Warrants")(the Replacement
Warrants, Series D Warrants and Series E Warrants collectively the "Warrants")
will have the right to exercise their warrants at reduced exercise prices for
the period beginning December 31, 1995 and ending on the ninetieth (90) day
after adoption of amendments to the Certificate of Incorporation giving effect
to certain of the matters described above; and
WHEREAS, the Board has retained Jefferies & Company, Inc. to render its opinion
as to the overall fairness from a financial perspective of the Agreement to the
Company's Common Stock holders;
1995 Recapitalization Agreement Page 1
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NOW, THEREFORE, with the following terms, conditions and covenants, the Company
and the Participants hereby agree as follows:
1 CLOSING. The Closing of the transactions called for in this Agreement
shall occur on December 31, 1995 (the "Closing Date"). The Closing
shall occur at the offices of Michener, Larimore, Swindle, Whitaker,
Flowers, Sawyer, Xxxxxxxx & Chalk, L.L.P., 000 Xxxxxxxx Xxxxxx, Xxxxx
0000, Xxxx Xxxxx, Xxxxx 00000, or such other place and time as the
Company may determine.
2 TRANSACTIONS RELATING TO SERIES A, A-1 AND BB PREFERRED STOCK. At the
Closing and subject to the terms and conditions stated herein:
2.1 ADDITIONAL CONSIDERATION. The Company will issue to the
Participants set forth in Schedule 2 that number of shares of
Common Stock as set forth in Schedule 2 under the column
"Series A, A-1 and BB Additional Consideration".
2.2 FUTURE DIVIDEND WAIVER. The Participants who hold any shares
of Series A, A-1 and BB Preferred Stock hereby irrevocably
waive, forgive and discharge the Company from any and all
obligations arising on and after January 1, 1996 for the
accrual and payment of dividends on the Series A, A-1 and BB
Preferred Stock they own, directly or indirectly.
2.3 CONVERSION OF SERIES A, A-1 AND BB PREFERRED STOCK. The
Participants who hold any shares of Series A, A-1 and BB
Preferred Stock will at Closing convert all shares of such
stock into Common Stock according to the terms of such shares
set forth in the Company's Certificate of Incorporation, as
amended. The amounts to be issued to the Participants upon
such conversion is set forth in Schedule 2 under the column
"Conversion Shares".
2.4 PAYMENT OF ACCRUED DIVIDENDS. The Company will, in full and
complete payment, satisfaction and discharge of all dividends
accrued and accruing on or by reason of the Series A, A-1 and
BB Preferred Stock through December 31, 1995, issue to the
Participants who convert their shares of Series A, A-1 and BB
Preferred Stock, that number of shares of Common Stock as set
forth in Schedule 2 under the column "Dividend Payment
Shares".
3 TRANSACTIONS RELATING TO SERIES C AND D PREFERRED STOCK. At Closing
and subject to the terms and conditions stated herein:
3.1 ADDITIONAL CONSIDERATION. The Company will issue to the
Participants set forth in Schedule 3 that number of shares of
Common Stock as set forth in Schedule 3 under the column
"Series C and D Additional Consideration".
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3.2 FUTURE DIVIDEND WAIVER. The Participants who hold any shares
of Series C and D hereby irrevocably waive, forgive and
discharge the Company from any and all obligations arising on
and after January 1, 1996 for the accrual and payment of
dividends on the Series C and D Preferred Stock they own,
directly or indirectly, except for the right to participate in
dividends as may be declared on Common Stock as provided for
in the amendment to the Certificate of Incorporation referred
to in Section 4.1 until such amendment is adopted, and
thereafter the Series C and D Preferred Stock shall have the
rights set forth therein, and as in effect from time to time
thereafter.
3.3 PAYMENT OF ACCRUED DIVIDENDS. The Company will, in full and
complete payment, satisfaction and discharge of all dividends
accrued and accruing on or by reason of the Series C and D
Preferred Stock through December 31, 1995, issue to the
Participants who hold shares of Series C and D Preferred
Stock, that number of shares of Common Stock as set forth in
Schedule 3 under the column "Dividend Payment Shares".
4 OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS AMONG THE COMPANY AND
THE PARTICIPANTS. Subject to the terms and conditions stated herein:
4.1 AMENDING CERTIFICATE OF INCORPORATION. The Company will
promptly submit to its stockholders for approval an amendment
to the Certificate of Incorporation in substantially the form
attached hereto as Exhibit 4, and each Participant hereby
agrees, whether individually or as part of a class, to vote or
give its consent regarding, all shares of Series X, X-0, XX, X
and D Preferred Stock, and any shares of Common Stock which
may be received upon conversion of any such shares and any
shares of Common Stock received under Sections 2.1,2.3, 2.4,
3.1, and 3.4, in favor of the adoption of such amendment to
the Certificate of Incorporation
4.2 PARTICIPANT SHARE OWNERSHIP. Each Participant represents and
warrants to the Company and each other that they have the
right to vote not less than the number of the shares of
Series A, A-1, BB, C and D Preferred Stock and Common Stock
set forth beside their name on Schedule 4. Nothing herein
shall prevent a Participant from transferring or otherwise
disposing of any of such share holdings provided any
transferee agrees in writing to be bound by the terms hereof.
5 WARRANT EXERCISE PRICE REDUCTION. In accordance with the terms of the
Second Amendment to Replacement Warrant, Amendment No. 3 to Series D
Warrant and Amendment No. 1 to Series E Warrant, effective at Closing
the Company will for the period from Closing to and ending on the
ninetieth (90) day after adoption of the amendment to the Certificate
of Incorporation referred to in Section 4.1, allow the holders of the
warrants subject to such amendments to exercise such warrants at an
exercise price of $5.25, $7.00, $7.00 per share, respectively.
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6 CONDITIONS TO OBLIGATIONS OF PARTICIPANTS. Each Participants
obligation contained in Sections 2, 3 and 4 is subject to the
satisfaction, on or before the Closing Date, of the following
conditions:
6.1 REPRESENTATIONS OF COMPANY TRUE AND CORRECT. The
representations and warranties contained in Section 8 hereof
shall be true and correct on and as if made on the Closing
Date, all conditions to the Closing set forth in this Section
6 shall have been met; and the Company shall have delivered to
the Participants an Officer's Certificate, dated the Closing
Date, to such effects;
6.2 COMPLIANCE WITH THIS AGREEMENT. The Company and all other
Participants shall have performed and complied in all material
respects with all agreements, covenants and conditions
contained herein and in any other document contemplated hereby
or thereby which are required to be performed or complied with
by the Company and all other Participants on or before the
Closing Date.
6.3 PROCEEDINGS. On the Closing Date, all corporate and other
proceedings taken or to be taken in connection with the
transactions contemplated hereby other than Section 4, and all
documents incident thereto shall be satisfactory in form and
substance to the Participants, and the Participants shall have
received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
6.4 FAIRNESS OPINION The Company shall have received an opinion
dated not later than the Closing from Jefferies & Company.,
Inc. that the terms of the Agreement are overall fair from a
financial perspective to the Company's Common Stockholders;
6.5 OPINION OF COUNSEL. The Participants shall have received an
opinion of Michener, Larimore, Swindle, Whitaker, Flowers,
Sawyer, Xxxxxxxx & Chalk, L.L.P. in substantially the form
attached hereto as Exhibit 6.5;
7 CONDITIONS TO OBLIGATIONS OF PARTICIPANTS AND THE COMPANY. The
obligations of the Participants and the Company contained in Sections
2, 3 and 4 are conditioned on the following being met on or before the
Closing Date:
7.1 SECOND AMENDMENT TO SERIES E NOTE PURCHASE AGREEMENT. The
Second Amendment to Series E Note Purchase Agreement
substantially in the form attached hereto as Exhibit 7.1 shall
be effective as of the Closing Date;
7.2 ELEVENTH WAIVER TO SERIES D NOTE AND STOCK PURCHASE AGREEMENT.
The Eleventh Waiver to Series D Note and Stock Purchase
Agreement substantially in the form attached hereto as Exhibit
7.2 shall be effective as of the Closing Date;
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7.3 AMENDMENT NO. 1 TO SERIES E WARRANTS. All holders of the
Series E Warrants and the Company shall have executed the
Amendment No.1 to Series E Warrants substantially in the form
attached hereto as Exhibit 7.3;
7.4 AMENDMENT NO. 3 TO SERIES D WARRANTS. Except for Xxxxxx X
Xxxxxxx, Xx., all holders of the Series D Warrants and the
Company shall have executed the Amendment No. 3 to Series D
Warrants substantially in the form attached hereto as Exhibit
7.4;
7.5 SECOND AMENDMENT TO REPLACEMENT WARRANT. All holders of
Replacement Warrants and the Company shall have executed the
Second Amendment to Replacement Warrant substantially in the
form attached hereto as Exhibit 7.5;
7.6 WAIVER BY HOLDERS OF TERM NOTE AND REVOLVING NOTE WARRANTS.
The holders of warrants to purchase Company Common Stock
issued pursuant to the Term Loan Agreement dated December 31,
1990 and the Revolving Loan Agreement dated December 31, 1990
shall have executed waivers effective as of the Closing Date,
of restrictions on the Company amending its Certificate of
Incorporation, substantially in the form attached hereto as
Exhibit 7.6 .
7.7 AMENDMENT NO. 7 TO D STOCKHOLDERS AGREEMENT. The D
Stockholders Agreement dated December 31,1993 as amended,
shall have been amended to waive the right by the parties
thereto to acquire Common Stock to be issued pursuant to the
1995 Recapitalization Agreement substantially in the form
attached hereto as Exhibit 7.7.
7.8 WAIVER TO SERIES E STOCK REGISTRATION AGREEMENT. The Waiver
to Series E Stock Registration Agreement substantially in the
form attached hereto as Exhibit 7.8 shall be effective as of
the Closing Date;
7.9 AMENDMENT NO. 4 TO SERIES D STOCK REGISTRATION AGREEMENT. The
Amendment No. 4 to Series D Stock Registration Agreement
substantially in the form attached hereto as Exhibit 7.9 shall
be effective as of the Closing Date;
7.10 AMENDMENT NO. 1. TO SERIES B AND SERIES C STOCK REGISTRATION
AGREEMENT. The Amendment No. 1 to Series B and Series C Stock
Registration Agreement substantially in the form attached
hereto as Exhibit 7.10 shall be effective as of the Closing
Date;
7.11 CONSENT RE STOCK REGISTRATION AGREEMENT. The consent required
by the Stock Registration Agreement dated December 31, 1990,
as amended, for the Company to include in existing
registration rights agreements, shares of Common Stock to be
issued pursuant to the Agreement, substantially in the form
attached hereto as Exhibit
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7.6, shall be effective as of the Closing Date.
8 REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE COMPANY. The Company
represents, covenants and warrants as of the Closing Date to the
Participants the following:
8.1 ORGANIZATION The Company is a corporation duly organized and
existing in good standing under the laws of the State of
Delaware; each subsidiary having assets in excess of $100,000
or annual revenues in excess of $100,000 in any of its last
two fiscal years, is duly organized and existing in good
standing under the laws of the jurisdiction in which it is
incorporated; and the Company has and each subsidiary has the
corporate power to own its respective property and to carry on
its respective business as now being conducted. The Company
has duly executed and delivered this Agreement and, as of the
Closing Date, the other agreements required herein. As used in
this agreement, the term "subsidiary" shall include any
corporation which the Company owns directly or indirectly more
than 50% of the stock thereof.
8.2 QUALIFICATION. The Company is and each of its subsidiaries
are duly qualified and in good standing as a foreign
corporation to do business in every jurisdiction where the
character of the properties owned or leased by it or the
nature of any business transacted by it makes such
qualification necessary and where such nonqualification or
lack of good standing would have a material adverse effect on
the business of the Company and its consolidated subsidiaries
taken as a whole.
8.3 AUTHORIZATION AND POWER. The Company has taken all actions
necessary to authorize it to enter into and perform its
obligations under this Agreement and the other agreements
referenced herein and to consummate the transactions
contemplated hereby and thereby. The Company has full right,
power and authority to execute and perform its obligations
under the Agreement and the other agreements referenced herein
and the Agreement and such agreements constitute the legal,
valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms.
8.4 CAPITAL STOCK.
8.4.1 As of the Closing Date the Company has authorized a
total of 40,400,000 shares of its capital stock of
all classes, consisting of 25,000,000 shares of
Common Stock, 15,400,000 shares of Preferred Stock
divided into the following classes: 3,500,000 shares
of Series A Preferred Stock, 6,500,000 shares of
Series A-1 Preferred Stock, 2,300,000 shares of
Series BB Preferred Stock, 500,000 shares of Series C
Preferred Stock, 2,200,000 shares of Series D
Preferred Stock and 400,000 shares of Series B $2.125
Increasing Rate Cumulative Convertible Preferred
Stock ("Series B Preferred Stock" ). As of December
1, 1995, 4,243,647 shares of Common Stock are issued
and outstanding, 3,500,000 shares of Series A
Preferred Stock are issued and
1995 Recapitalization Agreement Page 6
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outstanding, 2,769,109 shares of Series A-1 Preferred
Stock are issued and outstanding 1,577,546 shares of
Series BB Preferred Stock are issued and outstanding,
448,811 shares of Series C Preferred Stock are issued
and outstanding, 2,156,903 shares of Series D
Preferred Stock are issued and outstanding, and no
shares of Series B Preferred Stock are outstanding.
The Company holds no shares of its capital stock in
its treasury. Since December 1, 1995 and except for
conversions of the Series A, A-1 and BB and exercises
(if any) of warrants outstanding on December 1, 1995
the Company has not issued any shares of capital
stock. All of such outstanding shares have been
validly issued and are fully paid and nonassessable.
The Company has reserved such number of shares of
Common Stock for issuance pursuant to such
instruments or agreements as are set forth in
Schedule 8.4 hereto. Set forth in Schedule 8.4 are
(i) pro forma balance sheet information for the
Company as of December 31, 1995 based upon giving
effect to the terms of this Agreement and the
exercise of certain warrants, and (ii) certain share
data for the Series X, X-0, XX, X and D Preferred
Stock, which in each case reflects in all material
respects the effects of the transactions contemplated
herein as of December 31, 1995, the exercise of
certain warrants and the assumptions therein
referenced.
8.4.2 None of the shares of the Company's capital stock
outstanding at Closing (i) were subject to preemptive
rights when issued or (ii) provide the holders
thereof with any preemptive rights with respect to
any capital stock of the Company or any capital stock
referred to in the immediately following subsection
hereof.
8.4.3 Except as otherwise stated in this section or
disclosed on Schedule 8.4 and except for shares
reserved for issuance in connection with options and
warrants outstanding on the date hereof, the Company
has not granted or issued, or agreed to grant or
issue, any options, warrants or similar rights to
acquire or receive any of the authorized but unissued
shares of its capital stock of any class or any
securities convertible into shares of its capital
stock of any class. As of the date hereof, no person
holds of record or beneficially owns 5% or more of
the outstanding shares of any class of the capital
stock of the Company except as set forth in Schedule
8.4hereto. Schedule 8.4 sets forth as of Closing the
exercise price or the conversion price, after taking
into account any adjustments to such exercise price
or conversion price required by the terms thereof
prior to Closing, of the Series X, X-0, XX, X, and D
Preferred Stock and the Replacement Warrants, Series
D Warrants and Series E Warrants.
8.4.4 All shares of Common Stock issued and outstanding
immediately prior to Closing are listed for trading
on the American Stock Exchange,
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Inc.("AMEX"), and all shares of Common Stock (i) to
be issued at Closing pursuant to Sections 2 and 3 and
(ii) issuable upon the exercise of the Replacement
Warrants, as amended, Series D Warrants, as amended
and Series E Warrants, as amended will be when
issued, listed for trading on the American Stock
Exchange, Inc.
8.5 VALID ISSUANCE. All shares of Common Stock (i) issued and
outstanding immediately prior to Closing are validly issued
and fully paid and nonassessable, (ii) issuable in accordance
with the Agreement will, when issued, be validly issued and
fully paid and nonassessable.
8.6 ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries
before any court, arbitrator or administrative or governmental
body that (i) questions the validity of this Agreement, the
shares of Common Stock issuable pursuant to this Agreement,
the Replacement Warrants, as amended, Series D Warrants, as
amended or the Series E Warrants, as amended, or any action
taken or to be taken pursuant hereto or thereto or (ii) might
adversely affect the right, title or interest of any
Participant to the shares of Common Stock issuable pursuant to
this Agreement or (iii) except as disclosed in Schedule 8.6,
that materially and adversely affects, or as to which there is
a reasonable possibility of an adverse decision that would
materially and adversely affect, either individually or
collectively, the business, property, assets or condition of
the Company and its consolidated subsidiaries taken as a
whole. Neither the Company nor any subsidiary is in violation
of any judgment, order, writ, injunction, decree, rule or
regulation of any court or governmental department,
commission, board, bureau, agency or instrumentality, the
violation of which might, either individually or collectively,
materially and adversely affect the business, property, assets
or financial position of the Company and its consolidated
subsidiaries taken as a whole. No action or determination is
pending, or threatened with the AMEX with respect to the
authority of the Common Stock to be listed for trading
thereon. To the knowledge of the Company no action is pending
or threatened against any Participant which relates to this
Agreement or the transactions contemplated herein.
8.7 OUTSTANDING DEBT; NO DEFAULT. Neither the Company nor any of
its subsidiaries has outstanding any indebtedness except as
set forth in the consolidated balance sheet of the Company and
its consolidated subsidiaries as at September 30, 1995 or
incurred since then in the normal course of business or as set
forth in Schedule 8.7. There exists no monetary event of
default and there exists no other event of default by the
Company or any subsidiary under the provisions of any
instrument evidencing indebtedness the effect of which would
have a material adverse effect on the Company and its
subsidiaries taken as a whole.
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8.8 TITLE, LIENS. The Company has, and each of its subsidiaries
has, good and marketable title to its respective properties
and assets reflected in the consolidated balance sheet of the
Company and its consolidated subsidiaries as at September 30
1995(other than properties and assets disposed of in the
ordinary course of business, equity interests owned by others
in subsidiaries of the Company, the pending transfer of
Autauga Medical Center and Autauga Health Care Center in
exchange for Jordan Valley Hospital, and as set forth on
Schedule 8.8) and except for property purchased under title
retention transactions or capitalized leases. Neither the
Company nor any subsidiary has pledged or mortgaged its assets
to secure any indebtedness other than (i) to Banque Paribas,
Agent under an amended and restated loan agreement dated as
of May 31, 1995, as amended, (ii) to Health Care REIT, Inc.
that was assumed with the acquisition of Psychiatric
Healthcare Corporation, (iii) purchase money indebtedness,
(iv) mortgages to secure the assets being acquired, (v)
capital leases, (vi) deposits in the ordinary course or (vii)
as otherwise disclosed to the Participants in any exhibit or
schedule hereto.
8.9 TAXES. The Company has, and each of its subsidiaries has
timely, filed all Federal, State and other income and payroll
tax returns that, to the knowledge of the Company, are
required to be filed, and each has paid all taxes as shown on
said returns and on all assessments received by it to the
extent that such taxes have become due except for taxes or
assessments the payment of which is being contested in good
faith by proper action and against which adequate accounting
reserves are being maintained. The Company is not aware of
any proposed tax assessment against it or any subsidiary and
all tax liabilities are provided for with adequate reserves.
8.10 GOVERNMENTAL CONSENT. Except for the filing and clearance of
the Company's proxy statement with the Securities and Exchange
Commission in connection with seeking the approval of the
Amendment to the Certificate of Incorporation, neither the
nature of the Company or of any subsidiary, nor any of their
respective businesses or properties, nor any relationship
between the Company or any subsidiary and any other person,
nor any circumstance in connection with the consummation of
the terms of this Agreement and the other agreements referred
to herein, is such as to require any consent, approval or
authorization of, or any notice to, or filing, registration or
qualification with, any court or administrative or
governmental body in connection with the execution and
delivery of this Agreement),
8.11 HOLDING COMPANY STATUS. Neither the Company nor any
subsidiary is a "holding company," or a subsidiary or
affiliate of a "holding company," or a "subsidiary company" of
a "holding company," or a "public utility," within the meaning
of the Public Utility Holding Company Act of 1935, as amended,
or a "public utility" within the meaning of the Federal Power
Act, as amended.
1995 Recapitalization Agreement Page 9
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8.12 INVESTMENT COMPANY STATUS. Neither the Company nor any
subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or an
"investment adviser" within the meaning of the Investment
Advisers Act of 1940, as amended.
8.13 ERISA. All of the "employee pension benefit plans" within the
meaning of Section 3(2) of ERISA which are maintained by or
contributed to by the Company, any of its Subsidiaries or any
ERISA Affiliate and which are intended to meet the
requirements of Section 401(a) of the Code are disclosed in
the Company's financial statements. Any such plan intending
to qualify under Section 401(a) or 401(k) of the Code does so
qualify. Neither the Company nor any of its subsidiaries nor
any ERISA Affiliate maintains, contributes to or has
contributed to a Multiemployer Plan or any other plan subject
to Title IV of ERISA or Section 412 of the Code. All material
employee benefit plans and arrangements covered by ERISA,
maintained by or contributed to by the Company, any of its
subsidiaries or any ERISA Affiliate are in substantial
compliance with all applicable law, including any reporting
requirements. Except as disclosed on Schedule 8.13, neither
the Company nor any subsidiary has any liability with respect
to retiree medical or death benefits or other benefits payable
after termination of employment. Neither the Company, nor any
of its subsidiaries nor any other person, including any
fiduciary, has engaged in any transaction prohibited by
Section 4975 of the Code or Section 406 of ERISA which could
subject the Company or any of its subsidiaries or any person
the Company or any of its subsidiaries have an obligation to
indemnify to any material tax or penalty imposed under Section
4975 of the Code or Section 502 of ERISA.
8.14 FINANCIAL STATEMENTS. (i)The Company has previously furnished
the Participants the consolidated balance sheets of the
Company and its consolidated subsidiaries as at December 31,
1994 and the related consolidated statements of income,
stockholders' equity and cash flows of the Company and its
consolidated subsidiaries for the fiscal year ended December
31, 1994, all certified by Coopers & Xxxxxxx, including in
each case the related schedules and notes, and the unaudited
consolidated balance sheets of the Company and its
consolidated subsidiaries as at September 30, 1995 and the
unaudited consolidated statements of income, stockholders'
equity and cash flows of the Company and its consolidated
Subsidiaries for the period ended on such date, prepared by
the Company.
(ii) Except as disclosed on Schedule 8.14, all such financial
statements (including any related schedules and/or notes) have
been prepared in accordance with generally accepted accounting
principles consistently applied, except to the extent set
forth in the notes to such financial statements, throughout
the periods involved and to the extent required by such
principles show all liabilities, direct and contingent, of the
Company and its consolidated subsidiaries. Except as
disclosed on Schedule 8.14,
1995 Recapitalization Agreement Page 10
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the balance sheets and the related schedules and notes fairly
present on a consolidated basis the financial condition of the
Company and its consolidated subsidiaries as at the respective
dates thereof; and the statements of income and stockholders'
equity and the related schedules and notes and the key
operating indicators fairly present on a consolidated basis
the results of the operations of the Company and its
consolidated subsidiaries for the respective periods
indicated.
(iii) Except as disclosed on Schedule 8.14, there have been
no material adverse changes in the business, operations,
property, assets, prospects, condition, financial or other, of
the Company and its subsidiaries, on a consolidated basis,
since December 31, 1994.
8.15 BROKER'S OR FINDER'S COMMISSIONS. No broker's, finder's,
advisor's or placement fee or commission will be payable with
respect to the transactions contemplated hereby, and the
Company will hold the Participants harmless from any claim,
demand or liability for broker's, finder's, advisor's or
placement fees or commissions alleged to have been incurred in
connection with the transactions contemplated hereby.
8.16 SEC FILINGS. The Company has timely filed all reports and
schedules required to be filed by it pursuant to the
Securities Exchange Act of 1934, as amended.
8.17 COMPLIANCE WITH OUTSTANDING AGREEMENTS. The execution,
delivery and performance by the Company of this Agreement and
any other document contemplated hereby or thereby, and the
issuance of the Common Stock and amendments to the Warrants as
herein provided, will (i) not conflict with, or result in a
breach of the terms, conditions or provisions of, or
constitute a default under, or result in the creation of any
lien upon any of the properties or assets of the Company or
any subsidiary pursuant to, or otherwise violate, any (a)
instrument evidencing any indebtedness of the Company or any
of its subsidiaries or any agreement relating thereto, or (b)
any other agreement to which the Company or any of its
subsidiaries is a party, or (ii) result in any adjustment to
the conversion price, exercise price or the number of shares
of Common Stock receivable upon the conversion or exercise of
any instrument that is exercisable, convertible or
exchangeable into shares of Common Stock (except (i) as
specifically contemplated by the terms of the Restructure
Agreement and (ii) for the 4,925 Series D shares and 3,960
Series D Warrants held by Xxxxxx X. Xxxxxxx, Xx.).
8.18 DISCLOSURE. Neither this Agreement and the Schedule and
Exhibits attached hereto nor any other document, certificate
or statement furnished to any Participant by or on behalf of
the Company in connection herewith, contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the
1995 Recapitalization Agreement Page 11
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statements contained herein and therein, in the light of the
circumstances under which made, not misleading. There is no
fact peculiar to the Company or its subsidiaries and known to
the Company which materially adversely affects or in the
future may (so far as the Company can now foresee) materially
adversely affect the business, operations, property, assets,
prospects, or condition, financial or other, of the Company
and its subsidiaries, taken as a whole, which has not been set
forth in this Agreement and the Schedules and Exhibits
attached hereto or in the other documents described herein and
furnished to each of the Participants by or on behalf of the
Company prior to the Closing Date in connection with the
transactions contemplated hereby.
9 COVENANTS OF THE PARTICIPANTS
9.1 INVESTMENT PURPOSE Each Participant who will receive Common
Stock pursuant to the provisions of Section 2 or 3, as to
itself, represents and warrants that (i) it is acquiring the
Common Stock to be received by it hereunder for its own
general account and/or one or more separate accounts
maintained by it for investment and not with a view to any
distribution of the Common Stock to be received by it
hereunder, but subject, nevertheless, to the disposition of
the Common Stock being at all times within its control, and
(ii) it is an "accredited investor" as defined in Rule 501
under the Securities Act or is sophisticated enough in
business matters to adequately evaluate the risks and merits
of the transaction.
9.2 AUTHORITY. Each Participant as to itself represents and
warrants that it has the power, is authorized or otherwise
duly qualified to execute this Agreement.
9.3 WAIVE OF ANTI-DILUTION ADJUSTMENT PENDING AMENDMENT OF
CERTIFICATE OF INCORPORATION. During the period from Closing
until the stockholders of the Company adopt the Amendment to
the Certificate of Incorporation referred to herein, the
Participants waive any provision in the Certificate of
Incorporation as in effect at Closing that would result in an
adjustment of the conversion price of the Series C or D
Preferred Stock as a result of the issuances of Common Stock
pursuant to Sections 2 and 3 or the amendments to the Warrants
referred to in Section 5 hereof.
10 RESTRICTIONS OF TRANSFER. The Common Stock issued pursuant to
Sections 2 and 3 ("Restricted Securities") shall not be transferable
except upon the conditions specified in this Section 10, which
conditions are intended to insure compliance with the provisions of
the Securities Act and state securities laws in respect of the
transfer of any such securities.
10.1 RESTRICTIVE LEGENDS. (a) Unless and until otherwise permitted
by this Section, each certificate for any Restricted
Securities issued to a Participant, a nominee thereof, or to
any subsequent transferee of such certificate shall be stamped
or otherwise imprinted with a legend in substantially the
following form:
1995 Recapitalization Agreement Page 12
13
"The securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended, and thus may not be offered for sale,
sold, transferred or otherwise disposed of unless
registered under the Securities Act of 1933, as
amended, or unless an exemption from such
registration is available. Further, such transfer is
subject to the conditions specified in the 1995
Recapitalization Agreement dated December 31, 1995
pursuant to which such securities were issued by
Champion Healthcare Corporation (the "Company") and
the D Stockholders Agreement dated December 31, 1993,
as amended, copies of which agreements are on file
and may be inspected at the principal office of the
Company. A copy of each agreement will be furnished
by the Company to the holder hereof upon request and
without charge. Under certain circumstances
specified in such 1995 Recapitalization Agreement,
the Company has agreed to deliver to the holder
hereof a new certificate, not bearing this legend,
for all or part of the number of the securities
evidenced hereby, as the case may be, registered in
the name of such holder or its designated nominee."
(b) The Company may order its transfer agents for Restricted
Securities to stop the transfer of any Restricted Securities
bearing the legend set forth in Subparagraph (a) of this
Section 10 until the conditions of this Section 10 with
respect to the transfer of such securities have been
satisfied.
10.2 NOTICE OF PROPOSED TRANSFER If, prior to any transfer or sale of any
Restricted Securities, the holder desiring to effect such transfer or
sale shall deliver a written notice to the Company describing briefly
the manner of such transfer or sale and a written opinion of counsel
for such holder (who may be counsel employed by any institutional
holder) (provided that such counsel (if other than counsel for the
Company or for the Participants in connection with the issuance of the
Restricted Securities hereunder), and the form and substance of such
opinion, are reasonably satisfactory to the Company) to the effect
that such transfer or sale may be effected without the registration of
such securities under the Securities Act, the Company shall thereupon
permit or cause its transfer agent (if any) to permit such transfer or
sale to be effected; provided, however, that if in such written notice
the transferring holder represents and warrants to the Company that
the transfer or sale is to a purchaser or transferee whom the
transferring holder knows or reasonably believes to be a "qualified
institutional buyer", as that term is defined in Rule 144A promulgated
by the Securities and Exchange Commission under the Securities Act
("Rule 144A"), no opinion shall be required.
10.3 TERMINATION OF RESTRICTIONS. (a) Notwithstanding the foregoing
provisions of this Section 10, the restrictions imposed by this
Section 10, upon the transferability of Restricted Securities shall
not apply and shall terminate as to any particular Restricted
Securities if (1) such security is effectively registered under the
Securities Act and sold by the holder thereof
1995 Recapitalization Agreement Page 13
14
in accordance with such registration, or (2) a written opinion to the
effect that such restrictions are no longer required or necessary
under any federal or state securities law or regulation have been
received from counsel for the holder thereof (who may be counsel
employed by any institutional holder) or counsel for the Company, or
(3) such security is sold without registration under the Securities
Act in compliance with Rule 144 promulgated by the Securities and
Exchange Commission under the Securities Act ("Rule 144") or Rule
144A, or (4) the Company is reasonably satisfied that the holder of
such security shall, in accordance with the terms of Subsection (k) of
Rule 144, be entitled to sell such security pursuant to such
Subsection, or (5) a letter or an order shall have been issued to the
holder thereof by the staff of the Securities and Exchange Commission
or stating that no enforcement action shall be recommended by such
staff or taken by such Commission, as the case may be, if such
security is transferred without registration under the Securities Act
in accordance with the conditions set forth in such letter or order
and such letter or order specifies that no subsequent restrictions on
transfer are required.
(b) Whenever the restrictions imposed by this Section 10 shall
terminate, as hereinabove provided, the holder of any particular
Restricted Securities then outstanding as to which such restrictions
shall have terminated shall be entitled to receive from the Company,
without expense to such holder, one or more new certificates for any
Restricted Securities not bearing the restrictive legend set forth in
Section 10 hereof.
10.4 COMPLIANCE WITH RULE 144 AND RULE 144A. At the written request of any
holder of any Restricted Securities who proposes to sell any
Restricted Securities in compliance with Rule 144, the Company shall
furnish to such holder, within ten days after receipt of such request,
a written statement as to whether or not the Company is in compliance
with the filing requirements of the Securities and Exchange Commission
as set forth in such Rule. For purposes of effecting compliance with
Rule 144A, in connection with any resales of any Restricted Securities
that hereafter may be effected pursuant to the provisions of Rule
144A, any holder of any Restricted Securities desiring to effect such
resale and each prospective institutional purchaser of any such
Restricted Securities designated by such holder shall have the right,
at any time the Company is not subject to Section 13 or 15(d) of the
Securities and Exchange Act, to obtain from the Company, upon the
written request of such holder and at the Company's expense the
documents specified in Section (d)(4)(i) of Rule 144A, as such rule
may be amended from time to time.
10.5 NON-APPLICABILITY OF RESTRICTIONS ON TRANSFER. Notwithstanding the
provisions of Section 10 hereof, any record owner of any Restricted
Securities may from time to time transfer all or any part of such
record owner's Restricted Securities (i) to a nominee identified in
writing to the Company as being the nominee of or for such record
owner, and any nominee of or for a beneficial owner of any Restricted
Securities identified in writing to the Company as being the nominee
of or for such beneficial owner may from time to time transfer all or
part of any Restricted Securities registered in the name of such
nominee but held as nominee on behalf of such beneficial owner, to
such beneficial owner, (ii) to an Affiliate, (iii) with
1995 Recapitalization Agreement Page 14
15
respect to Bank of America Illinois and its employees, any transfer by
and between Bank of America Illinois, its affiliates and employees, or
(iv) if such record owner is a partnership or the nominee of a
partnership, to a partner, retired partner, or estate of a partner or
retired partner, of such partnership, so long as such transfer is in
accordance with the transferee's interest in such partnership and is
without consideration; provided, however, that each such transferee
shall remain subject to all restrictions on the transfer of securities
herein contained.
11 TERMINATION. The Company may terminate this Agreement at anytime for
any reason on or before the Closing Date.
12 MISCELLANEOUS.
12.1 WAIVER OF NOTICE AND CONSENT TO TRANSACTIONS. The Company and
the Participants, as to those agreements to which each may be
a party, hereby (i) waive any notice provision in any of the
agreements the amendment or waiver with respect thereto is
referenced in Section 7 that would otherwise be required in
respect of the transactions contemplated by this Agreement and
the Exhibits hereto and (ii) subject to the accuracy at
Closing of the representations, covenants and warranties of
the Company contained in Section 8, give their consent, to the
extent any such agreements require such consent or would be
breached without such consent, to the transactions
contemplated by this Agreement and the Exhibits hereto.
12.2 TRANSACTION EXPENSES. The Company agrees, whether or not the
transactions hereby contemplated shall be consummated, to pay,
and save the Participants harmless against liability for the
payment of, all out-of-pocket expenses arising in connection
with the execution and delivery of this Agreement and the
other agreements, amendments, waivers and consents
contemplated herein, limited to the reasonable fees and
expenses of (i) Xxxxxxx and Xxxxxx as counsel to the holders
of the Series E Warrants and the Series E 11% Senior
Subordinated Debt due December 31, 2003, (ii) Xxxxxxx & Xxxxx,
as counsel to the holders of the Series D 11% Senior
Subordinated Debt due December 31, 2003; and (iii)
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx, as counsel to the holders of
the Series D Preferred Stock and Series D Warrants.
12.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made in
writing by the Company and the Participants in connection
herewith shall survive the execution and delivery of this
Agreement.
12.4 SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement contained by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so
expressed or not; provided, that the Company may not assign
any of its rights, duties or obligations under this Agreement,
except with the Participants' written consent.
1995 Recapitalization Agreement Page 15
16
12.5 NOTICES. All notices and other communications provided for or
given or made hereunder shall be in writing and shall be
effective when received upon the earlier of: (i) by hand or by
first class mail (or registered mail, if required), (ii) by
electronic facsimile transmission, (iii) by courier or (iv)
actual receipt if to the Participants at their address set
forth on Schedule 1 hereto, to transferees of the Participants
at their address set forth in the records of the Company or
the transfer agent of the Company, and if to the Company, at
Champion Healthcare Corporation, 00000 Xxxxxx Xxxxx, Xxxxx
000, Xxxxxxx, Xxxxx 00000, or to such other address with
respect to any such party as such party shall give notice in
writing.
12.6 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be
governed by, the laws of the State of Delaware without regard
to its conflict of law provisions. This Agreement may not be
changed orally, but only by an agreement in writing signed by
the party against whom enforcement is sought.
12.7 HEADINGS; TABLE OF CONTENTS. The descriptive headings of the
several sections of this Agreement and the table of contents
are inserted for convenience only and do not constitute a part
of this Agreement.
12.8 GENDER AND NUMBER. Whenever the context of this Agreement
requires, the gender of all words herein shall include the
masculine, feminine and neuter, and the number of all such
words herein shall include the singular and plural.
12.9 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, all of which shall be deemed but one
and the same instrument and each of which shall be deemed an
original, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one such
counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CHAMPION HEALTHCARE CORPORATION
----------------------------------------
Xxxxx X. XxxXxxxxxxx,
Executive Vice President
[Remaining signatures appear on the following pages]
1995 Recapitalization Agreement Page 16
17
FRONTENAC VI LIMITED PARTNERSHIP
By: Frontenac Company,
its General Partner
By:
---------------------------------
Xxxxx X. Pearl
Title: General Partner
FRONTENAC DIVERSIFIED III LIMITED
PARTNERSHIP
By: Frontenac Company,
its General Partner
By:
---------------------------------
Xxxxx X. Pearl
Title: General Partner
EQUITY-LINKED INVESTORS, L.P.
By: Xxxxx X. Xxxxx Associates
its General Partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
EQUITY-LINKED INVESTORS-II
By: Xxxxx X. Xxxxx Associates-II
its General Partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
1995 Recapitalization Agreement
18
OLYMPUS PRIVATE PLACEMENT FUND, L.P.
By: OGP Partners, L.P.
Its General Partner
By:
---------------------------------
Xxxxx X. Xxxxxx
Title: General Partner of the
General Partner
EQUUS II INCORPORATED
By:
---------------------------------
Xxxxx Xxxxxxx, President
EQUUS CAPITAL PARTNERS
By:
---------------------------------
Its General Partner
By:
---------------------------------
Xxxxx Xxxxxxx, President
WPG CORPORATE DEVELOPMENT
ASSOCIATES III, L.P.
By: WPG CDA III, L.P.
By:
---------------------------------
Xxxxx X. Xxxxxxx
Title: General Partner
1995 Recapitalization Agreement
19
WPG CORPORATE DEVELOPMENT
ASSOCIATES III (OVERSEAS), LIMITED
By:
---------------------------------
Xxxxx Xxxxxx
Title: Director
RFE CAPITAL PARTNERS, L.P.
By: Norcon Associates
its General Partner
By:
---------------------------------
Xxxxxxx X. Xxxxxx
Title: General Partner
RFE INVESTMENT PARTNERS IV, L.P.
By: RFE Associates IV, L.P.
Its General Partner
By:
---------------------------------
Xxxxxxx X. Xxxxxx
Title: General Partner
XXXXXXX XXXXX VENTURE PARTNERS III
By: Xxxxxxx Xxxxx Venture
Management, its General Partner
By:
---------------------------------
Xxxxx X. Xxxxxxx
Title: General Partner
1995 Recapitalization Agreement
20
XXXXX X. XXXXX LIVING TRUST dated
December 9, 1993
-------------------------------------
By: Xxxxx X. Xxxxx, Trustee
XXXX XXXXXXX VENTURE CAPITAL
FUND LIMITED PARTNERSHIP II
By: Back Bay L.P.
its General Partner
By: Xxxx Xxxxxxx Venture Capital
Management, Inc.
By:
---------------------------------
Xxxxx Xxxxxxxx
Its: Authorized Officer
XXXXXXX VENTURE PARTNERS III L.P.
By: Back Bay Partners V L.P.
its General Partner
By: Xxxx Xxxxxxx Venture Capital
Management, Inc.
By:
---------------------------------
Xxxxx Xxxxxxxx
Its: Authorized Officer
XXXXX, XXXXXXXX & COMPANY
By:
---------------------------------
Xxxxx X. Xxxxx
Title: Vice President
1995 Recapitalization Agreement
21
ORACLE PARTNERS, L.P.
By:
---------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: General Partner
BAHRAIN INTERNATIONAL BANK E.C.
By:
---------------------------------
Name: Xxxxxxx Xxxxxx
Title: Assistant General Manager
BANK OF AMERICA ILLINOIS
By:
---------------------------------
Ford X. Xxxxxxxxx
Title: Managing Director
----------------------------------------
Xxxxxxxxxxx X. Xxxxx
----------------------------------------
Xxxxxx X. Xxxxxxx
----------------------------------------
M. Xxx X'Xxxxx
1995 Recapitalization Agreement
22
----------------------------------------
Ford X. Xxxxxxxxx
----------------------------------------
Xxxxxxx X. Xxxx
----------------------------------------
Xxxxxxx X. Xxxxx
----------------------------------------
Xxxxxx X. Xxx Xxxx, Xx.
VIRGINIA RETIREMENT SYSTEM
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
--------------------------- -------------------------------------
XXXXXX X. XXXXXX, Spouse of XXXXXXX X. XXXXXX
XXXXXXX X. XXXXXX
--------------------------- -------------------------------------
XXXXXXXX X. XXXXXXXXXXX, XXXXX X. XXXXXXXXXXX
Spouse of XXXXX X.
XXXXXXXXXXX
1995 Recapitalization Agreement
23
--------------------------- -------------------------------------
XXXX XXXXXX, Spouse of XXXXXXX XXXXXX
XXXXXXX XXXXXX
--------------------------- -------------------------------------
XXX XXXXXXXXX, Spouse of XXXXXX X. XXXXXXXXX
XXXXXX X. XXXXXXXXX
--------------------------- -------------------------------------
XXXX X. XXXX, Spouse of XXXXXX X. XXXX, XX.
XXXXXX X. XXXX, XX.
--------------------------- -------------------------------------
XXXXXX XXXXXX, Spouse of XXXXXXX X. XXXXXX
XXXXXXX X. XXXXXX
--------------------------- -------------------------------------
XXXX XXXXXXXX, Spouse of XXXXXXX X. XXXXXXXX
XXXXXXX X. XXXXXXXX
--------------------------- -------------------------------------
XXXXX XXXXXX, Spouse of XXXXX X. XXXXXX
XXXXX X. XXXXXX
-------------------------------------
XXXXXXXX XXXXXXXX
1995 Recapitalization Agreement
24
--------------------------- -------------------------------------
XXXXX X. XXXXX, Spouse XXXXX X. XXXXX
of XXXXX X. XXXXX
-------------------------------------
XXXXX XXXXXXXXXX
-------------------------------------
XXXXXXX X. XXXXXX
-------------------------------------
XXXXXXX X. XXXXXXXX, XX.
-------------------------------------
C. XXXXX XXXXXX
-------------------------------------
XXXXX X. XXXXXX
-
XXXXXX GROWTH II, L.P.
By: DLJ CAPITAL CORPORATION
its Managing General Partner
By:
---------------------------------
Xxxx X. Xxxxxxx
Title:
1995 Recapitalization Agreement
25
SPROUT CAPITAL VI, L.P.
By: DLJ CAPITAL CORPORATION
its Managing General Partner
By:
---------------------------------
Xxxx X. Xxxxxxx
Title:
SPROUT GROWTH, L.P.
By: DLJ Growth Associates,
Its General Partner
By:
---------------------------------
Xxxx X. Xxxxxxx
Title:
VENTURTECH II LIMITED PARTNERSHIP
By:
---------------------------------
Xxxx X. Xxxxxxxx
Title: Managing Director
-------------------------------------
XXXXXX X. XXXXXXX, XX.
DLJ FIRST ESC L.L.C.
By: DLJ LBO Plans Management
Corporation Its Manager
By:
---------------------------------
Xxxxxx X. Xxxxxx, Xx.
Title:
1995 Recapitalization Agreement
26
XXXXXXXXX, XXXXXX & XXXXXXXX, INC.
By:
---------------------------------
Xxxxxx X. Xxxxxx, Xx.
Title:
DLJ SECURITIES CORPORATION
By:
---------------------------------
Xxxxxx X. Xxxxxx, Xx.
Title:
DLJ CAPITAL VENTURE FUND II, L.P.
By: DLJ Fund Associates II
Its General Partner
By:
---------------------------------
Xxxxxx X. Xxxxxx, Xx.
Title:
DLJ CAPITAL CORPORATION
By:
---------------------------------
Xxxxxx X. Xxxxxx, Xx.
Title:
Xxxxxx X. Xxxxxx, Xx.
*W. Xxxxxxx XxXxxxxx
*Xxxxxxx X. Xxxxxxx
*Xxxxxxx X. Xxxxxxx
*Xxxx X. Xxxxxx
*Xxxxxxx X. Xxxxxx
*Xxxxx X. Xxxx & Xxxxxx X. Xxxx
XX Ten
*Xxxx Xxxxxxxx
*Xxxxxx X. Xxxxxxxx
*Xxxxxxx Xxxxxxxx
*Xxxxxx Xxxxx Xxxxxxxxx & Xxx Xxxxx
Xxxxxxxxx, III
*Xxxx X. Xxxxxxx
*Xxxxx X. Xxxxxxxx
1995 Recapitalization Agreement
27
*Xxxx X. Xxxxxx, Xx.
*Xxxxx X. Xxxxxxx
*Xxx Xxxxx
*Xxxxx X. Xxxxx
*Xxxxxx Xxxxx
*J. Xxxx Xxxxxxx
*Xxxxx X. Xxxxxx
*Xxxxxx X. Xxx
*Xxxxxxx X. Xxxxx
*Xxxx Xxxxx
*Xxxxx X. Xxxxxx
*Xxxxx X. Xxxxxxx
*Xxxxx X. Xxxxxxx
*J. Xxxxx Xxxxxx & Xxxxxxxxx X.
Xxxxxx XX Ten
*Xxxxx X. XxXxxxx, Xx.
*Xxxxxx X. XxXxxxxxx
*By:
--------------------------------
Xxxxxx X. Xxxxxx, Xx.
Pursuant to Irrevocable Proxy
and Power of Attorney
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
By Lincoln National Investment
Management Company, Its Attorney-
In-Fact
By:
---------------------------------
Its: Vice President
1995 Recapitalization Agreement
28
SECURITY-CONNECTICUT LIFE INSURANCE
COMPANY
By Lincoln National Investment
Management Company, Its Attorney-
In-Fact
By:
---------------------------------
Its Vice President
LINCOLN NATIONAL INCOME FUND, INC.
By:
---------------------------------
Its President
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By:
---------------------------------
Its:
INDOSUEZ CAPITAL FUNDING I, LIMITED
By:
---------------------------------
Xxxx X. Xxxx, Its Collateral
Manager
INDOSUEZ HIGH YIELD PARTNERS
By:
---------------------------------
Xxxx X. Xxxx, Its Partner
1995 Recapitalization Agreement
29
VOTING TRUSTEE:
FIRST INTERSTATE BANK OF CALIFORNIA,
Trustee,
-------------------------------------
By: Xxxxxxxx Xxxxxx
Title:
XXXX & CO.
By:
---------------------------------
Texas Commerce Bank NA
Trust Department
1995 Recapitalization Agreement
30
CHAMPION HEALTHCARE CORPORATION
1995 RECAPITALIZATION AGREEMENT
Schedules and Exhibits
31
Schedule 2
Series A, A-1 and BB Additional Consideration
Conversion Shares Dividend Payment Shares
32
CHAMPION HEALTHCARE CORPORATION
1995 Recapitalization
Schedule 2
Shares Series A Shares Series A-1 Shares Series BB Dividend
Owned Accrued Owned Accrued Owned Accrued Payment
Stockholder Series A Dividends Series A-1 Dividends Series BB Dividends Shares
Equus Capital
Partners, L.P. 464,000 $116,198.33 367,177 $88,863.19 10,538 $33,598.01 34,092
Equus II
Incorporated 1,286,000 $322,049.56 1,017,380 $246,223.94 29,202 $93,106.00 94,481
First Interstate
Bank, Trustee 1,735,298 $434,566.16 1,383,809 $334,899.70 224,476 $705,461.73 210,700
Xxxxxxx Venture
Partners III, L.P. 94,609 $296,409.21 42,344
Lang Jr.,
Xxxxxx X. 946 $2,963.93 000
Xxxxxx,
Xxxxxxx X. 946 $2,963.93 423
Olympus Private
Placement Fund L.P. 533,229 $1,650,544.64 235,792
Xxxxxxxxx,
Xxxxxx X. 14,702 $3,681.72 743 $186.14 67 $227.86 583
RFE Capital
Partners, L.P. 16,949 $33,314.78 4,759
Xxxxxxxx,
X. Xxxxxxxx 2,206 $6,912.45 987
Xxxxxxx Retirement
System 380,237 $1,082,074.33 154,582
Xxxxx, Xxxxx X. 1,262 $3,953.56 000
Xxxxxxxxxx,
Xx. David 3,153 $9,878.23 1,411
Xxxxxxx Xxxxx Venture
Partners III 157,681 $494,013.35 70,573
WPG Corp. Dev.
(Overseas) 21,358 $66,914.15 9,559
WPG Corp.
Development III 100,687 $315,451.86 45,064
3,500,000 $876,495.77 2,769,109 $670,172.97 1,577,546 $4,797,788.02 906,337
Series A, A-1, $ Value of Total Total
BB Additional Additional Conversion Shares Fractional
Stockholder Consideration Consideration Shares Issued Cash
(2) (1)
Equus Capital
Partners, L.P. 7,161 $57,288 238,785 280,038 $27.44
Equus II
Incorporated 19,848 $158,784 661,731 776,060 $18.71
First Interstate
Bank, Trustee 43,170 $345,360 1,265,811 1,519,681 $69.59
Xxxxxxx Venture
Partners III, L.P. 8,337 $66,696 189,218 239,899 $4.56
Lang Jr.,
Xxxxxx X. 83 $664 1,892 2,398 $5.86
Xxxxxx,
Xxxxxxx X. 83 $664 1,892 2,398 $5.86
Olympus Private
Placement Fund L.P. 46,990 $375,920 1,066,458 1,349,240 $7.09
Xxxxxxxxx,
Xxxxxx X. 120 $960 4,308 5,011 $28.65
RFE Capital
Partners, L.P. 1,493 $11,944 33,898 40,150 $6.83
Xxxxxxxx,
X. Xxxxxxxx 194 $1,552 4,412 5,593 $6.68
Xxxxxxx Retirement
System 33,508 $268,064 760,474 948,564 $3.42
Xxxxx, Xxxxx X. 111 $888 2,524 3,199 $7.27
Xxxxxxxxxx,
Dr. David 277 $2,216 6,306 7,994 $8.09
Xxxxxxx Xxxxx Venture
Partners III 13,895 $111,160 315,362 399,830 $7.45
WPG Corp. Dev.
(Overseas) 1,882 $15,056 42,716 54,157 $2.54
WPG Corp.
Development III 8,873 $70,984 201,374 255,311 $4.20
186,025 $1,488,200 4,797,161 5,889,523 $214.24
(1) This schedule does not include fractional cash due upon the conversion
of Series A or A-1 Preferred Stock since the computation is based upon the
market share of date of conversion in accordance with the certificate of
incorporation.
(2) Excludes fractional shares amount that are included in total fractional
cash column.
33
Schedule 3
Series C and D Additional Consideration
34
CHAMPION HEALTHCARE CORPORATION
1995 Recapitalization
Schedule 3
Shares Series C Shares Series D Dividend
Owned Accrued Owned Accrued Payment
Stockholder Series C Dividends Series D Dividends Shares
Bahrain International Bank E.C. 111,111 $267,560.84 38,222
Xxxxx, Xxxxxxxx & Company 111,111 $267,560.84 38,222
Xxxxxx, Xxxxx X. 1,231 $1,473.39 210
Xxxxx, Xxxxx X. Living Trust 12/9/93 5,556 $15,935.56 2,276
DLJ First ESC L.L.C. 633 $1,152.85 164
DLJ Securities Corp 32,597 $59,366.97 8,480
Equity-Linked Investors II 116,226 $279,878.97 39,982
Equity-Linked Investors LP 161,552 $389,025.94 55,575
Equus Capital Partners, L.P. 1,300 $3,897.82 556
Equus II Incorporated 3,601 $10,797.12 83,333 $200,669.90 30,209
First Interstate Bank, Trustee 33,616 $100,792.70 246,311 $593,131.47 99,131
Frontenac VI Limited Partnership 55,556 $166,576.66 388,889 $936,465.65 157,576
Frontenac Diversified III L.P. 83,333 $200,671.29 28,667
Xxxxxx, Xxxx 5,848 $8,420.53 1,202
Xxxxxxx Venture Partners III, 20,874 $62,587.73 111,111 $267,562.25 47,164
Xxxx Xxxxxxx Venture Capital Fund LP 111,111 $267,560.84 38,222
Lang Jr., Xxxxxx X. 147 $440.80 62
Xxxxxxxx, Xxx 24,466 $34,966.61 4,995
Xxxxxx, Xxxxxxx X. 147 $440.80 62
Olympus Private Placement Fund 103,773 $311,148.37 83,334 $200,672.74 73,116
Oracle Partners, L.P. 41,666 $100,334.93 14,333
Xxxxxxxxx, Xxxxxx X. 1,847 $2,210.09 315
RFE Capital Partners, L.P.
RFE Investment Partners, L.P. 148,413 $213,679.30 30,525
Xxxxxx, Xxxxx 9,850 $12,985.27 1,855
Xxxxxxx Jr., Xxxxxx X. 4,925 $7,091.70 1,013
Xxxxxxxx, X. Xxxxxxxx 343 $1,028.48 146
Venturetech II, L.P. 67,726 $97,509.31 13,929
Virginia Retirement System 172,956 $518,583.75 74,083
Xxxxx, Xxxxx X. 196 $587.68 00
Xxxxxxxxxx, Xx. David 490 $1,469.19 209
Xxxxxxx Xxxxx Venture Partners 30,675 $91,974.56 83,334 $200,672.74 41,806
WPG Corp Development (Overseas) 4,399 $13,189.73 19,445 $46,824.49 8,573
WPG Corporate Development III 20,738 $62,179.97 91,666 $220,737.74 40,415
Diemar Jr., Xxxxxx X. 444 $1,273.46 000
XxXxxxxx, X. Xxxxxxx 444 $1,273.46 181
Xxxxxxx, Xxxxxxx X. 444 $1,273.46 181
Xxxxxxx, Xxxxxxx X. 444 $1,273.46 181
Xxxxxx, Xxxx X. 444 $1,273.46 181
Xxxxxx, Xxxxxxx X. 444 $1,273.46 181
Xxxx XX Ten, Xxxxx X. & Xxxxxx X. 278 $797.34 113
Xxxxxxxx, Xxxx 278 $797.34 000
Xxxxxxxx, Xxxxxx X. 112 $321.25 45
Xxxxxxxx, Xxxxxxx 112 $321.25 45
Series C and D $ Value of Total Total
Additional Additional Shares Fractional
Stockholder Consideration Consideration Issued Cash
(1)
Bahrain International Bank E.C. 34,999 $279,992 73,221 $14.56
Xxxxx, Xxxxxxxx & Company 34,999 $279,992 73,221 14.56
Xxxxxx, Xxxxx X. 387 $3,096 597 9.51
Xxxxx, Xxxxx X. Living Trust 12/9/93 1,750 $14,000 4,026 4.68
DLJ First ESC L.L.C. 199 $1,592 363 8.01
DLJ Securities Corp 10,268 $82,144 18,748 7.41
Equity-Linked Investors II 36,611 $292,888 76,593 6.49
Equity-Linked Investors LP 50,888 $407,104 106,463 7.98
Equus Capital Partners, L.P. 409 $3,272 965 9.82
Equus II Incorporated 27,383 $219,064 57,592 13.70
First Interstate Bank, Trustee 88,175 $705,400 187,306 23.21
Frontenac VI Limited Partnership 140,000 $1,120,000 297,576 11.71
Frontenac Diversified III L.P. 26,249 $209,992 54,916 9.45
Xxxxxx, Xxxx 1,842 $14,736 3,044 7.49
Xxxxxxx Venture Partners III, 41,574 $332,592 88,738 12.18
Xxxx Xxxxxxx Venture Capital Fund LP 34,999 $279,992 73,221 14.56
Lang Jr., Xxxxxx X. 46 $368 108 9.24
Xxxxxxxx, Xxx 7,706 $61,648 12,701 7.93
Xxxxxx, Xxxxxxx X. 46 $368 108 9.24
Olympus Private Placement Fund 58,938 $471,504 132,054 14.75
Oracle Partners, L.P. 13,124 $104,992 27,457 10.25
Xxxxxxxxx, Xxxxxx X. 581 $4,648 896 11.53
RFE Capital Partners, L.P. $0 0 0.00
RFE Investment Partners, L.P. 46,750 $374,000 77,275 5.06
Xxxxxx, Xxxxx 3,102 $24,816 4,957 6.27
Xxxxxxx Jr., Xxxxxx X. 1,551 $12,408 2,564 3.70
Xxxxxxxx, X. Xxxxxxxx 108 $864 254 6.84
Venturetech II, L.P. 21,333 $170,664 35,262 11.83
Virginia Retirement System 54,481 $435,848 128,564 3.87
Xxxxx, Xxxxx X. 61 $488 144 12.60
Xxxxxxxxxx, Dr. David 154 $1,232 363 8.99
Xxxxxxx Xxxxx Venture Partners 35,912 $287,296 77,718 11.98
WPG Corp Development (Overseas) 7,510 $60,080 16,083 10.10
WPG Corporate Development III 35,406 $283,248 75,821 22.79
Diemar Jr., Xxxxxx X. 139 $1,112 320 13.34
XxXxxxxx, X. Xxxxxxx 139 $1,112 320 13.34
Xxxxxxx, Xxxxxxx X. 139 $1,112 320 13.34
Xxxxxxx, Xxxxxxx X. 139 $1,112 320 13.34
Xxxxxx, Xxxx X. 139 $1,112 320 13.34
Xxxxxx, Xxxxxxx X. 139 $1,112 320 13.34
Xxxx XX Ten, Xxxxx X. & Xxxxxx X. 87 $696 200 10.90
Xxxxxxxx, Xxxx 87 $696 200 10.90
Xxxxxxxx, Xxxxxx X. 35 $280 80 8.49
Xxxxxxxx, Xxxxxxx 35 $280 80 8.49
35
Xxxxxxxxx, Xxxxxx X. & Xxx X. III 168 $481.86 68
Xxxxxxx, Xxxx X. 444 $1,273.46 181
Xxxxxxxx, Xxxxx X. 444 $1,273.46 181
Xxxxxx Jr., Xxxx X. 444 $1,273.46 181
Xxxxxxx, Xxxxx X. 444 $1,273.46 181
Xxxxx, Xxx 444 $1,273.46 181
Xxxxx, Xxxxx X. 444 $1,273.46 000
Xxxxx, Xxxxxx 444 $1,273.46 181
Xxxxxxx, X. Xxxx 444 $1,273.46 181
Xxxxxx, Xxxxx X. 444 $1,273.46 000
Xxx, Xxxxxx X. 278 $797.34 113
Xxxxx, Xxxxxxx X. 168 $481.86 68
Xxxxx, Xxxx 112 $321.25 45
Xxxxxx, Xxxxx X. 444 $1,273.46 181
Xxxxxxx, Xxxxx X. 278 $797.34 113
Xxxxxxx, Xxxxx X. 444 $1,273.46 181
Xxxxxx XX Ten, J. Xxxxx & Xxxxxxxxx X. 444 $1,273.46 181
XxXxxxx Jr., Xxxxx X. 334 $957.97 136
XxXxxxxxx, Xxxxxx X. 168 $481.86 68
448,811 $1,345,695.36 2,156,903 $4,923,601.15 895,563
Xxxxxxxxx, Xxxxxx X. & Xxx X. III 52 $416 120 13.22
Xxxxxxx, Xxxx X. 139 $1,112 320 13.34
Xxxxxxxx, Xxxxx X. 139 $1,112 320 13.34
Xxxxxx Jr., Xxxx X. 139 $1,112 320 13.34
Xxxxxxx, Xxxxx X. 139 $1,112 320 13.34
Xxxxx, Xxx 139 $1,112 320 13.34
Xxxxx, Xxxxx X. 139 $1,112 320 13.34
Xxxxx, Xxxxxx 139 $1,112 320 13.34
Xxxxxxx, X. Xxxx 139 $1,112 320 13.34
Xxxxxx, Xxxxx X. 139 $1,112 320 13.34
Xxx, Xxxxxx X. 87 $696 200 10.90
Xxxxx, Xxxxxxx X. 52 $416 120 13.22
Xxxxx, Xxxx 35 $280 80 8.49
Xxxxxx, Xxxxx X. 139 $1,112 320 13.34
Xxxxxxx, Xxxxx X. 87 $696 200 10.90
Xxxxxxx, Xxxxx X. 139 $1,112 320 13.34
Xxxxxx XX Ten, J. Xxxxx & Xxxxxxxxx X. 139 $1,112 320 13.34
XxXxxxx Jr., Xxxxx X. 105 $840 241 7.65
XxXxxxxxx, Xxxxxx X. 52 $416 120 13.22
820,757 $6,566,056 1,716,320 $698.79
(1) Excludes fractional shares amount that are included in total fractional
cash column.
36
Schedule 4
Participant Share Ownership
37
CHAMPION HEALTH CARE CORPORATION
PREFERRED SHAREHOLDER SCHEDULE
SCHEDULE 4
SERIES OF NUMBER NUMBER
SHAREHOLDER NAME PREFERRED OF SHARES OF VOTES
---------------------------------------------------------------------------
Xxxxxx Xxxxx Xxxxxxxxx &
Xxx Xxxxx Xxxxxxxxx, III D 168 336
Bahrain International Bank, E.C. D 111,111 222,222
Xxxxx, Xxxxxxxx & Company D 111,111 222,222
Xxxxxxx X. Xxxxxxx D 444 888
Xxxxx X. Xxxxxx D 1,231 2,462
Xxxxx X. Xxxxx, Trustee
Xxxxx X. Xxxxx Living Trust
dtd 12/09/93 D 5,556 11,112
Xxxx Xxxxxxxx D 278 556
Xxxxx X. Xxxxxxx, Xx. D 334 668
Xxxxx X. Xxxxxx D 444 888
Xxxx Xxxxx D 112 224
Xxxxxx X. Xxxxxx, Xx. X 000 000
XXX First ESC L.L.C. D 633 1,266
DLJ Securities Corporation D 32,597 65,194
Equity-Linked Investors II D 116,226 232,452
Equity-Linked Investors, L.P. D 161,552 323,104
Equus Capital Partners, L.P. A 464,000 125,916
A-1 367,177 91,794
BB 10,538 21,076
C 1,300 2,600
Equus II Incorporated A 1,286,000 348,982
A-1 1,017,380 254,345
BB 29202 58,404
C 3,601 7,202
D 83,333 166,666
Xxxxxx Xxxxx D 444 000
Xxxxx Xxxxxxxxxx Xxxx xx Xxxxxxxxxx A 1,735,298 470,908
A-1 1,383,809 345,952
BB 224,476 448,952
C 33,616 67,232
D 246,311 492,622
Frontenac Diversified III
Limited Partnership D 83,333 166,666
Frontenac VI Limited Partnership C 55,556 111,112
D 388,889 777,778
38
Xxxxx X. Xxxxxxx D 444 888
Xxxxxxx X. Xxxxxx D 5,848 11,696
Xxxxxxx Venture Partners III, L.P. BB 94,609 189,218
C 20,874 41,748
D 111,111 222,222
Xxxx Xxxxxxx Venture Capital
Fund Limited Partnership II D 111,111 222,222
Xxxxx X. Xxxx &
Xxxxxx X. Xxxx XX TEN D 278 556
Xxxxxxx X. Xxxxx D 168 336
Xxxxxxx X. Xxxxxxx D 444 888
Xxxxx X. Xxxxxxx X 000 000
Xxxxxx X. Xxxx, Xx. XX 946 1,892
C 147 294
Xxxxxxx X. Xxxxxxxx, Xx. D 24,466 48,932
Xxxxxx X. XxXxxxxxx D 168 336
W. Xxxxxxx XxXxxxxx D 444 888
Xxxxxxx X. Xxxxxx BB 946 1,892
C 147 294
J. Xxxxx Xxxxxx &
Xxxxxxxxx X. Xxxxxx XX TEN D 444 888
Olympus Private Placement Fund, L.P BB 533,229 1,066,458
C 103,773 207,546
D 83,334 166,668
Oracle Partners, L.P. D 41,666 83,332
Xxxxxx X. Xxxxxxxxx A 14,702 3,990
A-1 000 000
XX 00 000
D 1,847 3,694
Xxxx X. Xxxxxxx D 444 888
Xxxx X. Xxxxxx X 000 000
Xxxxx X. Xxxxxx X 444 888
RFE Capital Partners, L.P. BB 16,949 33,898
RFE Investment Partners IV,
Limited Partnership D 148,413 296,826
C. Xxxxx Xxxxxx D 9,850 19,700
Xxxxxx X. Xxxxxxxx D 112 224
Xxxxxx X. Xxxxxx, Xx. D 4,925 9,850
Xxxxx X. Xxxxxxx D 278 556
39
Xxxxxxx Xxxxxxxx X 000 000
X. Xxxxxxxx Xxxxxxxx XX 2,206 4,412
C 343 686
Xxx Xxxxx D 444 888
Xxxxx X. Xxxxxxxx D 444 888
J. Xxxx Xxxxxxx D 444 888
Xxxxx X. Xxxxx D 444 888
Xxxxxxx X. Xxxxxx D 444 888
Xxxx X. Xxxxxx, Xx. X 000 000
Xxxxxxxxxx II Limited Partnership D 67,726 135,452
Virginia Retirement System BB 380,237 760,474
C 172,956 345,912
Xxxxx X. Xxxxx BB 1,262 2,524
C 196 392
Xxxxx Xxxxxxxxxx BB 3,153 6,306
C 490 980
Xxxxxxx Xxxxx Venture Partners III, BB 157,681 315,362
C 30,675 61,350
D 83,334 166,668
WPG Corporate Development
Associates III, L.P. BB 100,687 201,374
C 20,738 41,476
D 91,666 183,332
WPG Corporate Development
Associates III (Overseas) BB 21,358 42,716
C 4,399 8,798
D 19,445 38,890
Xxxxxx X. Xxx D 278 556
-------------------------
10,452,369 10,008,593
=========================
Total Series A 3,500,000 949,796
Total Series A-1 2,769,109 692,277
Total Series BB 1,577,546 3,155,092
Total Series C 448,811 897,622
Total Series D 2,156,903 4,313,806
-------------------------
10,452,369 10,008,593
=========================
40
Exhibit 4
Amendment to Certificate of Incorporation
41
RESTATED CERTIFICATE OF INCORPORATION
OF
CHAMPION HEALTHCARE CORPORATION
================================================================================
PURSUANT TO SECTIONS 242 AND 245 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
================================================================================
CHAMPION HEALTHCARE CORPORATION, a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Champion Healthcare
Corporation (the "Corporation"). The Corporation was originally incorporated
under the name AmeriHealth, Inc. The original Certificate of Incorporation of
the Corporation was filed with the Secretary of State of the State of Delaware
on November 27, 1985.
2. This Restated Certificate of Incorporation restates
and integrates and further amends the Certificate of Incorporation of the
Corporation and has been adopted and approved in accordance with Sections 242
and 245 of the General Corporation Law of the State of Delaware.
3. The text of the Certificate of Incorporation as
heretofore amended or supplemented is hereby amended and restated to read in
its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is:
CHAMPION HEALTHCARE CORPORATION
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The registered office of the Corporation in the State of
Delaware is located at Corporation Trust Center, 0000 Xxxxxx Xxxxxx, in the
city of Xxxxxxxxxx, Xxxxxx xx Xxx Xxxxxx, 00000. The name of the registered
agent of the Corporation at such address is The Corporation Trust Company.
ARTICLE III
CORPORATE PURPOSE
-1- ATTACHMENT II
42
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may now or hereafter be organized under the
General Corporation Law of the State of Delaware.
ARTICLE IV
CAPITAL STOCK
1. SHARES AND CLASSES AUTHORIZED. The total number of shares of
all classes of capital stock which the Corporation shall have authority to
issue is 27,700,000 shares, which shall include:
(a) 25,000,000 shares of common stock of the par value of $.01
each (hereinafter referred to as "Common Stock"); and
(b) 2,700,000 shares of Preferred Stock, which shall be
divided into the following two series:
(i) 500,000 shares of the par value of $.01
each, which are to be designated Series C Cumulative Convertible Preferred
Stock (the "Series C Preferred Stock"); and
(ii) 2,200,000 shares of the par value of $.01
each, which are to be designated Series D Cumulative Convertible Preferred
Stock (the "Series D Preferred Stock").
The Series C Preferred Stock and Series D Preferred Stock are sometimes
collectively referred to herein as the "Preferred Stock". The voting powers,
designations, preferences, and relative, participating, optional or other
special rights and qualifications, limitations or restrictions in respect of
the shares of each series of Preferred Stock of the Corporation are as follows:
1.A. RANKING OF PREFERENCE OF PREFERRED STOCK. Without
limiting any other provision herein, the Series C Preferred Stock and Series D
Preferred Stock shall have the preferences to and the benefit of the
restrictions on each other series of Preferred Stock and the Common Stock as
to (a) Dividends as set forth in Paragraph 2, (b) Redemption as set forth in
Paragraph 3, (c) Liquidation as set forth in Paragraph 4, and (d) Voting as set
forth in Paragraphs 6 and 7.
1.B. DEFINITIONS. The following terms shall have the
following definitions or shall be subject to the following rules of
construction.
A. "DGCL" means the General Corporation Law of
the State of Delaware.
B. "Board of Directors" means the Board of
Directors of the Corporation.
C. "Change in Control Event" shall mean (i) the
acquisition in one or more transactions not
involving a public offering of Common Stock
by any Person or group (within the meaning of
Section 13(d)(3) of the Exchange Act)
together with any Affiliate of such Person or
member of such group of beneficial ownership,
direct or indirect, of securities of the
Corporation representing 50% or more of the
combined voting power of the Corporation's
then outstanding voting securities, or (ii)
the sale, transfer or other disposition in
one or more transactions of all or
substantially all of the assets of the
Corporation or (iii) the merger or
consolidation of the Corporation with or into
another Person, other than a wholly-owned
subsidiary, unless such merger or
consolidation does not result in a
reclassification, conversion, exchange or
cancellation of any
-2- Attachment II
43
outstanding shares of Common Stock of the
Corporation, or (iv) the Corporation proceeds
to acquire its Common Stock (or undertakes a
corporate reorganization or recapitalization
or other action) if the effect of such
acquisition (or other action) would be either
(1) to reduce substantially or to eliminate
any public market for the shares of the
Corporation's Common Stock or (2) to remove
the Corporation from registration with the
Securities and Exchange Commission under the
Exchange Act or (3) to require the
Corporation to make a filing under Section
13(e) of the Exchange Act or (4) to cause a
delisting of the Corporation's Common Stock
from the National Association of Securities
Dealers, Inc. Automated Quotation System
(unless such stock is delisted as a result of
being listed on a national securities
exchange) or to cause a delisting of the
Corporation's Common Stock from a national
securities exchange, or (v) either the
Corporation and/or one or more Subsidiaries
of the Corporation is materially or
completely liquidated or is the subject of
any voluntary or involuntary dissolution or
winding up except as to any Subsidiary, as
may be otherwise permitted under the terms of
the Series D Senior Subordinated Agreement
and Series E Senior Subordinated Agreement.
D. "Common Stock" means shares of the
Corporation's Common Stock, $.01 par value.
E. "Conversion Date" as used herein shall have
the meaning set forth in paragraph 5(b).
F. "Conversion Price" as used herein shall mean
as to the Series C Preferred Stock or Series
D Preferred Stock that price determined in
accordance with paragraph 5(a)(1) and as
further adjusted as herein provided.
G. "Default Event" shall have the meaning set
forth in paragraph 6(b)(4).
H. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
I. "Fiscal Year" means the fiscal year of the
Corporation determined from time to time by
the Board of Directors for financial
reporting purposes.
J. "Market Price" shall mean, for any day, the
average of the final sale prices of the
Common Stock on all exchanges on which the
Common Stock may at the time be listed or the
final bid prices on the NASDAQ National
Market System or NASDAQ over-the-counter
market if the Common Stock is not so listed
on an exchange.
K. "Preferred Stock" means shares of any class
of the Corporation's Preferred Stock.
L. "Purchase Rights" shall have the meaning set
forth in paragraph 5(e).
M. "Securities Act" shall mean the Securities
Act of 1933, as amended.
N. "Series D Senior Subordinated Agreement"
shall mean the Series D Note and Stock
Purchase Agreement dated December 31, 1993 as
it may be amended from time to time.
-3- Attachment II
44
O. "Series E Senior Subordinated Agreement"
shall mean the Series E Note Purchase
Agreement dated May 1, 1995, as it may be
amended from time to time.
P. "Series C Preferred Stock" means shares of
the Corporation's Series C Cumulative
Convertible Preferred Stock, $0.01 par value.
Q. "Series D Preferred Stock" means shares of
the Corporation's Series D Cumulative
Convertible Preferred Stock, $0.01 par value.
R. "Series C Stated Value" means an assigned
value of the Series C Preferred Stock, being
$18.00 per share.
S. "Series D Stated Value" means an assigned
value of the Series D Preferred Stock, being
$18.00 per share.
T. The term "outstanding", when used with
reference to shares of capital stock, shall
mean issued shares, excluding shares held by
the Corporation or a subsidiary of the
Corporation.
U. All accounting terms used herein and not
expressly defined herein shall have the
meanings given to them in accordance with
generally accepted accounting principles
consistently applied and in effect as of the
date of the relevant calculation.
2. DIVIDENDS.
(a) RIGHT TO DIVIDENDS WITH COMMON STOCK. Subject to paragraphs
2(b)(3) and 2(c)(3) any dividend or distribution declared and
paid on Common Stock shall be declared and paid on the Series
C Preferred Stock and Series D Preferred Stock in such amounts
determined as though the Series C Preferred Stock and Series D
Preferred Stock had, immediately prior to the time used to
determine those holders of Common Stock entitled to such
dividend, fully converted into Common Stock in accordance with
the terms hereof.
(b)(1) SERIES C PREFERRED STOCK. The holders of Series C Preferred
Stock shall not be entitled to receive any preferential
dividends and any dividends thereon that shall have accrued
from January 1, 1996 in accordance with any prior provisions
of this Article IV are waived and canceled.
(2) SERIES C DIVIDEND RESTRICTIONS. Notwithstanding the
foregoing, the declaration and payment of cash
dividends on the Series C Preferred Stock shall be
subject to any restrictions imposed under the DGCL,
herein, or by any financial covenants contained in a
credit, loan or other similar agreement between the
Corporation and its senior secured lender or lenders
as may from time to time be in effect, the Series D
Senior Subordinated Agreement, or the Series E Senior
Subordinated Agreement. Subject to the foregoing,
the Corporation may pay dividends on Series C
Preferred Stock when and as declared by the
Corporation.
(3) PRIORITY OF SERIES C DIVIDENDS TO COMMON STOCK. So
long as any of the Series C Preferred Stock remains
outstanding, no dividends or distributions (other
than dividends or distributions on Common Stock
payable in Common Stock) shall be paid upon, or
declared or set apart for the Common Stock nor Common
Stock be purchased, redeemed,
-4- Attachment II
45
retired or otherwise acquired by the Corporation
except if approved by the vote of the holders of not
less than two-thirds (2/3) of all outstanding Series
C Preferred Stock, voting as a class.
(c)(1) SERIES D PREFERRED STOCK. The holders of Series D Preferred
Stock shall not be entitled to receive, preferential
dividends, and any dividends thereon that shall have accrued
from January 1, 1996 in accordance with any prior provisions
of this Article IV are waived and canceled.
(2) SERIES D DIVIDEND RESTRICTIONS. Notwithstanding the
foregoing, the declaration and payment of cash
dividends on the Series D Preferred Stock shall be
subject to any restrictions imposed under the DGCL,
herein, or by any financial covenants contained in a
credit, loan or other similar agreement between the
Corporation and its senior secured lender or lenders
as may from time to time be in effect, the Series D
Senior Subordinated Agreement, or the Series E Senior
Subordinated Agreement. Subject to the foregoing,
the Corporation may pay dividends on Series D
Preferred Stock when and as declared by the
Corporation.
(3) PRIORITY OF SERIES D DIVIDENDS TO SERIES C AND COMMON
STOCK. So long as any of the Series D Preferred
Stock remains outstanding, no dividends or
distributions (other than dividends or distributions
on Common Stock payable in Common Stock) shall be
paid upon, or declared or set apart for the Series C
Preferred Stock or Common Stock, nor shall any Series
C Preferred Stock or Common Stock be purchased,
redeemed, retired or otherwise acquired by the
Corporation except if approved by the vote of the
holders of not less than two-thirds (2/3) of the
Series D Preferred Stock.
(d) COMMON STOCK. Subject to paragraphs 2(a), 2(b) and 2(c) above
and the other provisions of this Article IV, (i) dividends may
be declared and paid on the Common Stock, and (ii) the Common
Stock may be purchased, retired or otherwise acquired, when
and as determined by the Board of Directors, out of any funds
legally available for such purposes.
3. REDEMPTION.
(a) SERIES C AND SERIES D PREFERRED STOCK.
(1) NO OPTIONAL REDEMPTION. Except as provided in
subparagraph 3(a)(3), the Corporation shall not have
the right or option to call or redeem any of the
shares of Series C Preferred Stock or Series D
Preferred Stock.
(2) CERTAIN RESTRICTIONS ON SERIES C AND SERIES D. The
Corporation shall in no event redeem any shares of
Series C Preferred Stock or Series D Preferred Stock
under subparagraph (3), (i) if funds are not legally
available therefor under the DGCL, or (ii) if and to
the extent such redemption would violate any
financial covenants contained in a credit, loan or
other similar agreement between the Corporation and
its senior secured lender or lenders as may from time
to time be in effect, the Series D Senior
Subordinated Agreement or the Series E Senior
Subordinated Agreement; provided, however, that if at
any time the Corporation is unable to redeem the full
number of shares of Series C Preferred Stock and
Series D Preferred Stock on any date called for as
provided above, whether due to any restrictions
imposed by the DGCL, herein, or such financial
covenants, then the Corporation (x) shall on such
date redeem such number of shares of Series C
Preferred Stock and Series D Preferred Stock to the
maximum extent permitted by the
-5- Attachment II
46
DGCL and under such covenants, and (y) shall
thereafter redeem the balance of the shares of Series
C Preferred Stock and Series D Preferred Stock not so
redeemed on such date, at such intervals, which shall
be no less often than quarterly, to the maximum
extent funds are available therefor under the DGCL
and such covenants. In case of any Series C
Preferred Stock or Series D Preferred Stock which is
required to be redeemed but which is not redeemed as
a result of the restrictions provided above, such
unredeemed Series C Preferred Stock or Series D
Preferred Stock shall continue to be outstanding.
(3) COMPLETE REDEMPTION DATE. The Corporation shall
redeem all outstanding Series C Preferred Stock and
Series D Preferred Stock on June 1, 2000 at a
redemption price equal to the Series C Stated Value
as to the Series C Preferred Stock and the Series D
Stated Value as to the Series D Preferred Stock.
(4) PRIORITY OF SERIES C AND SERIES D REDEMPTION. If any
Series C Preferred Stock or Series D Preferred Stock
is required to be redeemed pursuant to subparagraph
(3) above, no shares of Common Stock shall be
purchased, redeemed, retired or otherwise acquired by
the Corporation, unless and until funds necessary for
redemption of the Series C Preferred Stock and Series
D Preferred Stock have been set aside in the manner
prescribed in subparagraph (5) below.
(5) GENERAL. From and after the setting aside of the
funds necessary for redemption pursuant to
subparagraph (3) above, notwithstanding that any
certificate for shares of Series C Preferred Stock or
Series D Preferred Stock so called for redemption
shall not have been surrendered for cancellation, the
shares to be redeemed shall no longer be deemed
outstanding, and the holders of certificates
representing such shares shall have with respect to
such shares no rights in or with respect to the
Corporation except the right to receive, upon the
surrender of such certificates, the redemption price
therefor, plus an amount equal to accrued and unpaid
dividends thereon to the date of redemption without
interest. Notwithstanding the foregoing and
providing the holders of the shares of Series C
Preferred Stock and Series D Preferred Stock called
for redemption shall have delivered such shares to
the Corporation for redemption, until the holders of
any such shares of Series C Preferred Stock or Series
D Preferred Stock shall have received in cash the
redemption price therefor, without interest, (i) such
shares shall continue to be convertible, in whole or
in part, pursuant to paragraph 5 of this Article IV
and (ii) such holders shall continue to have the
voting and other rights set forth in paragraphs 6 and
7 of this Article IV. Shares of Series C Preferred
Stock and shares of Series D Preferred Stock redeemed
by the Corporation pursuant to this paragraph 3(a),
or shares of Series C Preferred Stock or Series D
Preferred Stock otherwise purchased by the
Corporation, shall not be reissued and shall be
canceled and retired in the manner provided by the
laws of the State of Delaware.
(6) PRIORITY BETWEEN SERIES C AND SERIES D UPON
REDEMPTION. If at any time the Corporation is unable
to redeem the full amount of Series D Preferred Stock
and Series C Preferred Stock on any date as provided
in subparagraph (3) above, whether due to any
restrictions imposed by law, herein, or such
financial covenants referred to in subparagraph (2),
or otherwise, then the Corporation shall on such
date, first redeem from the holders of the Series D
Preferred Stock an amount equal to 80% of the
outstanding Series D Preferred Stock, thereafter next
redeem from the holders of the Series C Preferred
Stock an amount equal to 80% of the outstanding
Series C Preferred Stock, thereafter next redeem from
the holders of the
-6- Attachment II
47
Series D Preferred Stock the remaining amount of
Series D Preferred Stock, and thereafter next redeem
from the holders of the Series C Preferred Stock the
remaining amount of Series C Preferred Stock
requested to be redeemed pursuant to whichever of
such subparagraphs is applicable; in each instance
from such holders pro rata, to the greater of the
maximum amount permitted by the DGCL, herein, or
under such covenants. Any amount not so paid on the
date of redemption as provided in subparagraph (3)
above (whether such amount is restricted from being
paid, pursuant to subparagraph (2) above or
otherwise), together with interest thereon at the
rate of 10% per annum, at such intervals, which shall
be no less often than quarterly, shall thereafter be
paid in satisfaction of such unpaid amounts according
to and in the order of the priorities set forth above
to the maximum extent funds are available therefor
under the DGCL and such covenants.
4. PREFERENCE ON LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) DEFINITION. A consolidation or merger of the Corporation, a
sale or transfer of substantially all of its assets as an
entirety, or any purchase or redemption of capital stock of
the Corporation of any class shall not be regarded as
"liquidation, dissolution or winding up of the affairs of the
Corporation" within the meaning of this paragraph 4.
(b) SERIES C AND SERIES D PREFERRED STOCK. During any proceedings
for the voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, the holders of
the Series C Preferred Stock shall be entitled to receive
$18.00 in cash for each share of Series C Preferred Stock and
the holders of the Series D Preferred Stock shall be entitled
to receive $18.00 in cash for each share of Series D Preferred
Stock, before any distribution of the assets of the
Corporation shall be made to the holders of the outstanding
Common Stock, or funds necessary for such payment shall have
been set aside in trust for the account of the holders of the
outstanding Series C Preferred Stock and Series D Preferred
Stock so as to be and continue to be available therefor. If
upon such liquidation, dissolution or winding up, the assets
distributable to the holders of the Series C Preferred Stock
and Series D Preferred Stock shall be insufficient to permit
the payment in cash of $18.00 per share to the holders of
Series C Preferred Stock and $18.00 per share to the holders
of Series D Preferred Stock, the assets of the Corporation
shall be distributed first to the holders of Series D
Preferred Stock in an amount equal to 80% of the outstanding
Series D Stated Value, thereafter next to the holders of
Series C Preferred Stock in an amount equal to 80% of the
outstanding Series C Stated Value, thereafter next to the
holders of the Series D Preferred Stock in an amount equal to
the remaining amount of Series D Stated Value, and thereafter
next to the holders of Series C Preferred Stock in an amount
equal to the remaining amount of Series C Stated Value; in
each instance among such holders pro rata. Any amount not so
paid in distribution on such date shall thereafter be paid in
satisfaction of such unpaid amounts according to and in the
order of the priorities set forth above to the maximum extent
funds are available therefor under the DGCL and such
covenants. If the assets of the Corporation are sufficient to
permit the payment of such amounts to the holders of the
Series D Preferred Stock and Series C Preferred Stock, the
remainder of the assets of the Corporation, if any, after the
distributions as aforesaid shall be distributed and divided
ratably among the holders of Common Stock then outstanding
according to their respective shares.
5. CONVERSION.
(a) SERIES C AND SERIES D PREFERRED STOCK. The Series C Preferred
Stock and Series D Preferred Stock shall be convertible into
Common Stock in accordance with the following provisions of
this paragraph 5(a).
-7- Attachment II
48
(1) OPTIONAL CONVERSION OF SERIES C AND SERIES D
PREFERRED STOCK. The holder of any shares of Series C
Preferred Stock and Series D Preferred Stock shall
have the right, at such holder's option, at any time
or from time to time to convert any or all of such
holder's shares of Series C Preferred Stock or Series
D Preferred Stock into fully paid and nonassessable
shares of Common Stock (the "Conversion Shares") in
accordance with subparagraph 5(a)(5) below at a
conversion price initially equal to $9.00 per share
for the Series C Preferred Stock and Series D
Preferred Stock (as to each of the Series C Preferred
Stock and Series D Preferred Stock the "Conversion
Price"). The Conversion Shares and the Conversion
Price are subject to certain adjustments as set forth
herein, and the terms Conversion Shares and
Conversion Price as used herein shall as of any time
be deemed to include all such adjustments to be given
effect as of such time in accordance with the terms
hereof.
Upon the exercise of the option of the holder of any
shares of Series C Preferred Stock or Series D
Preferred Stock to convert such Preferred Stock into
Common Stock, the holder of such shares of Series C
Preferred Stock or Series D Preferred Stock to be
converted shall surrender the certificates
representing the shares of Series C Preferred Stock
or Series D Preferred Stock so to be converted in the
manner provided in paragraph 5(b) below.
(2) MANDATORY CONVERSION OF SERIES C. Notwithstanding
anything to the contrary contained in this Article
IV, the Corporation shall have the right and option
to cause all of the shares of Series C Preferred
Stock then outstanding to be converted into the
number of shares of Common Stock calculated in
accordance with paragraph (a)(1) above, upon the
completion of a successful secondary public offering
of the Common Stock of the Corporation yielding net
proceeds to the Corporation of not less than
$25,000,000 at a public offering price per share of
at least $10.00.
(3) MANDATORY CONVERSION OF SERIES D. Notwithstanding
anything to the contrary contained in this Article
IV, the Corporation shall have the right and option
to cause all of the shares of Series D Preferred
Stock then outstanding to be converted into the
number of shares of Common Stock calculated in
accordance with paragraph (a)(1) above, upon the
completion of a successful secondary public offering
of the Common Stock of the Corporation yielding net
proceeds to the Corporation of not less than
$25,000,000 at a public offering price per share of
at least $10.00. The Corporation shall not exercise
the option referred to in this sub-paragraph (3)
until or unless it has exercised in full the similar
option referenced in paragraph 5(a)(2) above.
(4) EXERCISE OF MANDATORY CONVERSION OPTION. In order to
exercise the option referred to in subparagraphs (2)
and (3) above, the Corporation shall deliver to each
holder of then outstanding Series C Preferred Stock
or Series D Preferred Stock, not less than 30 days
nor more than 60 days preceding the anticipated
closing date of such public offering, a written
notice setting forth the fact of such conversion, the
anticipated closing date of such public offering, the
number of shares of Common Stock into which such
holder's shares of Series C Preferred Stock, or
Series D Preferred Stock will be converted in
accordance with this paragraph 5(a), and a statement
that such holder will be entitled to receive a new
certificate representing such number of shares of
Common Stock in exchange for the certificates
representing such holder's shares of Series C
Preferred Stock or Series D Preferred Stock.
Notwithstanding that any certificates for shares of
Series C Preferred Stock or Series D Preferred Stock
shall not have been surrendered for cancellation,
-8- Attachment II
49
following the delivery of such notice referred to
above and from and after the closing of any such
public offering, the shares of Series C Preferred
Stock or Series D Preferred Stock shall no longer be
deemed outstanding and the holders of certificates
representing such shares of Series C Preferred Stock
or Series D Preferred Stock shall have, from and
after such date, the same rights in or with respect
to the Corporation as holders of shares of Common
Stock and each such holder shall have the right, upon
surrender of such certificates, to receive from the
Corporation a certificate or certificates
representing the number of shares of Common Stock
calculated as provided above registered in the name
of such holder.
(5) CONVERSION PROCEDURE. Each share of Series C
Preferred Stock and Series D Preferred Stock shall be
converted into the number of shares of Common Stock
as is determined by multiplying each such share of
Series C Preferred Stock or Series D Preferred Stock
to be converted times a fraction, the numerator of
which is the Series C Stated Value as to each such
share of Series C Preferred Stock being converted and
the Series D Stated Value as to each such share of
Series D Preferred Stock being converted and the
denominator of which is the appropriate Conversion
Price. The Conversion Price shall be subject to
adjustment as set forth in subparagraph (d) below.
(b) DELIVERY OF STOCK CERTIFICATES; NO FRACTIONAL SHARES. The
holder of any shares of Series C Preferred Stock or Series D
Preferred Stock may exercise the conversion right pursuant to
paragraph 5(a) above respectively by delivering to the
Corporation during regular business hours at the principal
executive offices of the Corporation the certificate or
certificates for the shares to be converted, duly endorsed or
assigned either in blank or to the Corporation (if required by
it), accompanied by written notice stating that such holder
elects to convert such shares. Conversion shall be deemed to
have been effected on the date when the aforesaid delivery is
made, and such date is referred to herein as the "Conversion
Date." As promptly as practicable thereafter, the Corporation
shall issue and deliver to or upon the written order of such
holder, to the place designated by such holder, a certificate
or certificates for the number of full shares of Common Stock
to which such holder is entitled and a check or cash in
respect of any fractional interest in a share of Common Stock,
as provided below, payable with respect to the shares of
Series C Preferred Stock or Series D Preferred Stock so
converted; provided, however, that in the case of a conversion
in connection with liquidation, no such certificates need be
issued. The person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed
to have become the stockholder of record in respect of such
Common Stock on the applicable Conversion Date. Upon
conversion of only a portion of the number of shares covered
by a certificate representing shares of Series C Preferred
Stock or Series D Preferred Stock surrendered for conversion,
the Corporation shall issue and deliver to or upon the written
order of the holder of the certificate so surrendered for
conversion, at the expense of the Corporation, a new
certificate covering the number of shares of Series C
Preferred Stock or Series D Preferred Stock as appropriate,
representing the unconverted portion of the certificate so
surrendered. If the new certificate or certificates are to be
issued to a person who is not the registered holder of the
certificate delivered for conversion, any transfer taxes
applicable to the transaction shall be paid by such
transferee.
(c) NO FRACTIONAL SHARES OF COMMON STOCK. No fractional shares of
Common Stock shall be issued upon conversion of shares of
Preferred Stock. Instead of any fractional share of Common
Stock which would otherwise be issuable upon conversion of any
shares of Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fractional interest in an amount
equal to the then current Market Price of a share of Common
Stock multiplied by such fractional interest. The holders of
fractional interests shall not be entitled to any rights as
stockholders of the
-9- Attachment II
50
Corporation in respect of such fractional interests. In
determining the number of shares of Common Stock and the
payment, if any, in lieu of fractional shares that a holder of
Preferred Stock shall receive, the total number of shares of
Preferred Stock surrendered for conversion by such holder
shall be aggregated.
(d) DIVIDENDS; PURCHASE RIGHTS. In case at any time after
December 31, 1995 the Corporation shall declare a dividend or
make any other distribution upon the shares of Common Stock of
any class, the Corporation shall pay on the dividend payment
date to each holder of Series C and Series D, but not in
duplication of payments provided by paragraph 2(a) above, the
securities and other property (including cash) which such
holder would have received (together with all distributions
thereon) if such holder had converted the Preferred Stock held
by it on the record date fixed in connection with such
dividend, and the Corporation shall take whatever steps are
necessary or appropriate to keep in reserve at all times such
securities and other property as shall be required to fulfill
its obligations hereunder in respect of the shares issuable
upon the conversion of all Series C Preferred Stock and Series
D Preferred Stock.
(e) PURCHASE RIGHTS. If at any time or from time to time on or
after December 31, 1995 the Corporation shall grant, issue or
sell any options or rights to purchase stock, warrants,
securities or other property pro rata to the holders of Common
Stock of all classes ("Purchase Rights"), then each holder of
Preferred Stock shall be entitled, at such holder's option, to
acquire (whether or not such holder's Preferred Stock shall
have been converted), upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number
of shares of Common Stock issuable upon the conversion of such
Preferred Stock, immediately prior to the time or times at
which the Corporation granted, issued or sold such Purchase
Rights.
(f) SUBDIVISION OR COMBINATION OF STOCK. In case the Corporation
shall at any time subdivide its outstanding shares of Common
Stock into a greater number of shares, the Conversion Price in
effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Corporation shall be
combined into a smaller number of shares, the Conversion Price
in effect immediately prior to such combination shall be
proportionately increased.
(g) CHANGES IN COMMON STOCK. If any capital reorganization or
reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with another
corporation, or sale, transfer or other disposition of all or
substantially all of its properties to another corporation,
shall be effected, then, as a condition of such
reorganization, reclassification, consolidation, merger, sale,
transfer or other disposition, lawful and adequate provision
shall be made whereby each holder of Preferred Stock shall
thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions herein specified and
in lieu of the shares of the Common Stock of the Corporation
immediately theretofore issuable upon the conversion of the
Preferred Stock, such shares of stock, securities or
properties, if any, as may be issuable or payable with respect
to or in exchange for a number of outstanding shares of such
Common Stock equal to the number of shares of such Common
Stock immediately theretofore issuable upon the conversion of
the Preferred Stock had such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition not
taken place, and in any such case appropriate provisions shall
be made with respect to the rights and interests of each
holder of Preferred Stock to the end that the provisions
hereof (including without limitation provisions for adjustment
of the Conversion Price) shall thereafter be applicable, as
nearly equivalent as may be practicable in relation to any
shares of stock, securities or properties thereafter
deliverable upon the conversion thereof. The Corporation
shall not effect any such consolidation, merger, sale,
transfer or other disposition, unless prior to or
simultaneously
-10- Attachment II
51
with the consummation thereof the successor corporation (if
other than the Corporation) resulting from such consolidation
or merger or the corporation purchasing or otherwise acquiring
such properties shall assume, by written instrument executed
and mailed or delivered to the holders of Preferred Stock at
the last address of such holders appearing on the books of the
Corporation, the obligation to deliver to such holders such
shares of stock, securities or properties as, in accordance
with the foregoing provisions, such holders may be entitled to
acquire. The above provisions of this subparagraph shall
similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers,
or other dispositions.
(h) NOTICE OF ADJUSTMENT. Upon any adjustment of the Conversion
Price, then and in each such case the Corporation shall
promptly certify, or if requested by a majority of the
outstanding shares of Series D Preferred Stock, obtain a
certificate of a firm of independent public accountants of
recognized national standing selected by the Board of
Directors of the Corporation (who may be the regular auditors
of the Corporation) certifying, the Conversion Price resulting
from such adjustment and the increase or decrease, if any, in
the number of shares of Common Stock issuable upon the
conversion of the Preferred Stock held by each holder of
Preferred Stock, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is
based. The Corporation shall promptly mail a copy of such
certification to each holder of Preferred Stock.
(i) CERTAIN EVENTS. If any event occurs as to which in the opinion
of the Board of Directors of the Corporation the other
provisions of this paragraph 5 are not strictly applicable or
if strictly applicable would not fairly protect the conversion
rights of the holders of the Preferred Stock in accordance
with the essential intent and principles of such provisions,
then such Board of Directors shall appoint a firm of
independent certified public accountants (which may be the
regular auditors of the Corporation) of recognized national
standing, which shall give their opinion upon the adjustment,
if any, on a basis consistent with such essential intent and
principles, necessary to preserve, without dilution, the
rights of the holders of the Series C Preferred Stock and
Series D Preferred Stock. Upon receipt of such opinion by the
Board of Directors, the Corporation shall forthwith make the
adjustments described therein; provided, however, that no such
adjustment pursuant to this paragraph 5(i) shall have the
effect of increasing the Conversion Price as otherwise
determined pursuant to this paragraph 5 except in the event of
a combination of shares of the type contemplated in paragraph
5(f) and then in no event to an amount larger than the
Conversion Price as adjusted pursuant to paragraph 5(j).
(j) PROHIBITION OF CERTAIN ACTIONS. The Corporation will not (a)
authorize or issue, or agree to authorize or issue, any shares
of its capital stock of any class preferred as to dividends or
as to the distribution of assets upon voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation
unless the rights of the holders thereof shall be limited to a
fixed sum or percentage of par value in respect of
participation in dividends and in the distribution of such
assets or (b) take any action which would result in any
adjustment of the Conversion Price if the total number of
shares of Common Stock issuable after such action upon
conversion of all of the Preferred Stock would exceed the
total number of shares of Common Stock then authorized by the
Corporation's Articles of Incorporation or (c) authorize more
than one class of Common Stock.
(k) STOCK TO BE RESERVED. The Corporation will at all times
reserve and keep available out of its authorized Common Stock,
solely for the purpose of issue upon the conversion of
Preferred Stock as herein provided, such number of shares of
Common Stock as shall then be issuable upon the conversion of
all outstanding Preferred Stock, and the Corporation will
maintain at all times all other rights and privileges
sufficient to enable it to fulfill all its obligations
hereunder. The Corporation covenants that all shares of
Common Stock which shall be so issuable shall, upon issuance,
be duly authorized, validly issued, fully paid and
nonassessable, free from preemptive or
-11- Attachment II
52
similar rights on the part of the holders of any shares of
capital stock or securities of the Corporation, and free from
all liens and charges with respect to the issue thereof; and
without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all
such action as may be required to assure that the par value,
if any, per share of the Common Stock is at all times equal to
or less than the then effective and applicable Conversion
Price. The Corporation will take all such action as may be
necessary to assure that such shares of Common Stock may be so
issued without violation by the Corporation of any applicable
law or regulation, or of any requirements of any domestic
securities exchange upon which the Common Stock may be listed.
Without limiting the foregoing, the Corporation will take all
such action as may be necessary to assure that upon conversion
of any of the Preferred Stock, an amount equal to the lesser
of (a) the par value of each share of Common Stock outstanding
immediately prior to such conversion, or (b) the Conversion
Price, shall be credited to the Corporation's stated capital
account for each share of Common Stock issued upon such
conversion, and that the balance of the principal amount of
the Preferred Stock converted shall be credited to the
Corporation's capital surplus account.
(l) REGISTRATION AND LISTING OF COMMON STOCK. If any shares of
Common Stock required to be reserved for the purpose of the
conversion of the Preferred Stock hereunder require
registration with or approval of any governmental authority
under any Federal or state law (other than the Securities Act)
before such shares may be issued upon such conversion, the
Corporation will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be duly
registered or approved, as the case may be. Shares of Common
Stock issuable upon the conversion of the Preferred Stock
shall be registered by the Corporation under the Securities
Act or similar statute then in effect if required by (1) the
Stock Registration Agreement dated December 31, 1990, as
amended, (2) the Series B and Series C Stock Registration
Agreement dated December 2, 1993, as amended, (3) the Series D
Stock Registration Agreement dated December 31, 1993, as
amended, and (4) the Series E Stock Registration Agreement, as
amended, and subject to the conditions stated in such
Agreements. If and so long as the Common Stock is listed on
any national securities exchange, the Corporation will, at its
expense, obtain promptly and maintain the approval for listing
on each such exchange upon official notice of issuance, of
shares of Common Stock issuable upon the conversion of the
then outstanding Preferred Stock and maintain the listing of
such shares after their issuance; and the Corporation will
also list on such national securities exchange, will register
under the Exchange Act and will maintain such listing of, any
other securities that at any time are issuable upon the
conversion of the Preferred Stock, if and at the time that any
securities of the same class shall be listed on such national
securities exchange by the Corporation or shall require
registration under the Exchange Act.
(m) TAXES. The Corporation shall pay all documentary, stamp or
other transactional taxes attributable to the issuance or
delivery of shares of capital stock of the Corporation upon
conversion of any shares of Preferred Stock.
(n) CLOSING OF BOOKS. The Corporation will at no time close its
transfer books against the transfer of any Preferred Stock or
of any shares of Common Stock issued or issuable upon the
conversion of any Preferred Stock in any manner which
interferes with the timely conversion of such Preferred Stock.
6. VOTING RIGHTS.
(a) SERIES C PREFERRED STOCK, AND SERIES D PREFERRED
STOCK. Each holder of Series C Preferred Stock, and
Series D Preferred Stock shall be entitled to vote
for each share of such Preferred Stock (standing in
his, her or its name on the books of the Corporation
on
-12- Attachment II
53
the record date for determination of stockholders
entitled to notice of and to vote) that number of
votes determined as if such stock had been converted
to Common Stock at the then applicable Conversion
Price on any matter to be voted on by the holders of
the Corporation's Common Stock (whether at any annual
or special meeting or otherwise and when exercising
any other voting rights provided for by law or
herein).
(b) SPECIAL VOTING RIGHTS.
(1) ELECTION OF DIRECTORS. Notwithstanding the
other provisions of this Article IV, upon the
occurrence of a Default Event (hereafter
defined) and for the duration of the Default
Period (hereafter defined) the number of
positions on the Board of Directors shall be
increased as follows and the manner of
election of the new additional Directors
shall be as follows: the holders of the
outstanding Series C Preferred Stock and D
Preferred Stock, voting together as a class
by a majority of the votes which they are
eligible to cast as such holders, shall be
entitled to increase the size of the Board of
Directors so that the size thereof shall
consist of, and shall be entitled to elect,
(i) six new additional Directors if the
existing number of Directors at the time a
Default Event occurs is eleven or less, and
(ii) one additional Director for each
Director that exceeds eleven at the time a
Default Event occurs. In case the holders of
the Series C Preferred Stock and D Preferred
Stock become entitled to exercise such
special voting rights, they may during the
Default Period call a special meeting of
stockholders, in the manner provided herein
or in the by-laws or otherwise as provided by
law, for the purpose of increasing or
decreasing the number of positions on the
Board of Directors, electing such members to
the Board of Directors and (if deemed
necessary) removing any incumbent directors
in order to achieve the proportion described
above. In addition, the holders of the
Series C Preferred Stock and D Preferred
Stock shall have such special voting rights
at any annual or regular meeting of
stockholders (or any other special meeting
not called by the holders of Series C
Preferred Stock and D Preferred Stock) held
during the Default Period. In lieu of the
foregoing, the holders of the Series C
Preferred Stock and D Preferred Stock may
take any of such action by a written consent
in accordance with the DGCL.
(2) REMOVAL; VACANCIES. During the Default
Period, each director elected by the holders
of Series C Preferred Stock and Series D
Preferred Stock may be removed only by the
vote of the holders of the outstanding shares
of Series C Preferred Stock and Series D
Preferred Stock, voting together as a class,
by a majority of the votes which they are
entitled to cast as such holders, at a
meeting of the stockholders, or of the
holders of shares of Preferred Stock called
for that purpose. During the Default Period,
any vacancy in the office of a director
elected by the holders of the Series C
Preferred Stock and Series D Preferred Stock
may be filled by a vote of the remaining
directors then in office elected by the
holders of such series of Preferred Stock,
or, if not so filled, by the holders of such
series of Preferred Stock at any meeting,
annual or special, for the election of
directors held thereafter. A special meeting
of stockholders, or of the holders of shares
of Series C Preferred Stock and Series D
Preferred Stock, may be called for the
purpose of filling any such vacancy. In the
case of removal of any such director, the
vacancy may be filled at the same meeting at
which such removal shall be voted. Holders
of such Preferred Stock shall be entitled to
-13- Attachment II
54
notice of each meeting of stockholders at
which they shall have any right to vote or
notice of which is otherwise required by law.
(3) EXPIRATION OF RIGHT. Upon termination of the
Default Period, the special voting rights of
the holders of the Series C Preferred Stock
and Series D Preferred Stock provided under
this paragraph 6(b) shall be immediately
divested, but always subject to the revesting
of such right in the holders of such
Preferred Stock upon the occurrence of any
subsequent Default Event. In the event that
such rights of the holders of Series C
Preferred Stock and Series D Preferred Stock
under this paragraph 6(b) shall cease as
provided above, then the directors elected to
the Board of Directors by the holders of such
Preferred Stock under this paragraph 6(b)
shall at such time be automatically removed
from office, and their respective positions
terminated and the number of positions on the
Board of Directors shall return to the number
prior to the exercise of the rights provided
in this paragraph 6(b), without further
action on the part of the holders of the
Series C Preferred Stock and Series D
Preferred Stock, the holders of the Common
Stock or the Board of Directors.
(4) DEFAULT EVENT. For purposes hereof, "Default
Event" means the occurrence or continuance of
any of the following:
a. failure by the Corporation to redeem
the full number of shares of
Preferred Stock on any date called
for under paragraphs 3(a)(3) subject
to the limitations set forth in
paragraphs 3(a)(2) or the breach or
failure to perform by the
Corporation of any of its covenants
contained in paragraph 7 of this
Article IV;
b. any payment default (beyond any
applicable grace period) under any
material loan agreement, bond, note,
indenture, debenture or other
evidence of indebtedness of the
Corporation;
c. the acceleration of the indebtedness
due under any material loan
agreement, bond, note, indenture,
debenture or other evidence of
indebtedness of the Corporation,
regardless of whether such
acceleration relates to a payment
default or any other kind of default
if the effect of such acceleration
is to render the Corporation
insolvent;
d. the breach or failure to perform by
the Corporation of any of its
covenants not exclusively applicable
to Noteholders set forth in Article
V of the Note and Stock Purchase
Agreement dated May 27, 1992 among
the Corporation, Olympus Private
Placement Fund, L.P., Equus
Investments II, L.P. and Equus
Capital Partners, L.P., Sprout
Growth, L.P., Sprout Capital VI,
L.P. and DLJ Venture Capital Fund
II, L.P., Virginia Retirement System
and certain parties named therein,
and the continuance without cure of
such breach or failure for 15 days
following written notice thereof by
any Purchaser (as defined in such
agreement) or its transferees;
e. a Change in Control Event shall
occur;
-14- Attachment II
55
f. an Event of Default, as defined in
the Amended and Restated Loan
Agreement dated as of May 31, 1995
by and among the Corporation and
Banque Paribas, as Agent and the
Banks named therein, as the same may
be amended, exists and such Event of
Default continues for 15 days
without cure and any remedy as
provided for in such Loan Agreement
is taken by the lenders;
g. the breach or failure to perform by
the Corporation of any of its
covenants not exclusively applicable
to Noteholders set forth in Article
V of the Series D Senior
Subordinated Agreement, and the
continuance without cure of such
breach or failure for 15 days
following written notice thereof by
any Purchaser (as defined in such
agreement) or its transferees; and
h. if the Corporation commences any
proceedings under any bankruptcy,
reorganization, insolvency,
readjustment of debts, dissolution
or other liquidation law of any
jurisdiction; or the Corporation
makes an assignment for the benefit
of creditors or applies to any
tribunal for the appointment of a
trustee or receiver of a substantial
part of the assets of the
Corporation; or any such proceedings
are commenced, or any such
application is filed, against the
Corporation and the Corporation
indicates its consent to such
proceedings, or an order is entered
appointing such trustee or receiver
or adjudicating the Corporation
bankrupt or insolvent, or approving
the petition in any such
proceedings, and such order remains
in effect for sixty (60) days.
i. DEFAULT PERIOD. For purposes
hereof, "Default Period" means a
period commencing on the date a
Default Event occurs and ending, as
the case may be: (a) upon redemption
of the full number of shares of
Preferred Stock required under
paragraphs 3(a)(3) and payment of
the full redemption price therefor;
(b) upon the cure and irrevocable
waiver of the payment default
referred to in clause (b) of
paragraph 6(b)(4) above; (c) upon
the cure or irrevocable waiver of
the default referred to in clause
(c) of paragraph 6(b)(4) above,
provided that the indebtedness so
accelerated has been reinstated to
previously-stated maturities and the
Corporation's lenders have ceased to
exercise control over any material
assets of the Corporation; (d) upon
the cure or irrevocable waiver of
the default referred to in clause
(d), (f) or (g) of paragraph 6(b)(4)
above; (e) upon the cure or
irrevocable waiver of the default
referred to in clause (e) of
paragraph 6(b)(4) above; or (f) the
dismissal, revocation or termination
of the proceedings described in
clause (h) of paragraph 6(b)(4)
above.
(c) COMMON STOCK. Each holder of Common Stock shall be
entitled to one vote for each share of such Common
Stock standing in his or her name on the books of the
Corporation on the record date for the determination
of stockholders entitled to notice of and to vote at
any annual or special meeting of stockholders.
7. ADDITIONAL CAPITAL STOCK, ETC. The Corporation shall not, (A)
without the affirmative consent or approval of the holders of
shares representing at least 75% of the Series C Preferred
Stock then outstanding, together voting as a class (i)
authorize the issuance of any new, or increase the
-15- Attachment II
56
authorized number of shares of any existing, class of capital
stock of the Corporation (or any other series of Preferred
Stock) which would be senior or superior as to dividends,
redemption or upon liquidation to any of the Series C
Preferred Stock or (ii) increase the number of shares of
Preferred Stock authorized in the Certificate of Incorporation
or create any other class of stock (or any other series of
Preferred Stock) ranking on a parity with any of the Series C
Preferred Stock as to redemption or upon liquidation, or (B)
without the affirmative consent or approval of the holders of
shares representing at least 90% of the Series C Preferred
Stock then outstanding, together voting as a class,(x) amend
the voting powers, designations, preferences, or relative,
participating, optional or other special rights or
qualifications, limitations or restrictions in respect of the
Series C Preferred Stock; (y) reissue any shares of Series C
Preferred Stock that have been redeemed or repurchased; or (z)
take any action to cause any amendment, alteration or repeal
of any of the provisions of the Certificate of Incorporation
or the by-laws that would materially adversely affect the
rights of holders of Series C Preferred Stock, or (C) without
the affirmative consent or approval of the holders of shares
representing at least 75% of the Series D Preferred Stock then
outstanding, (i) authorize the issuance of any new, or
increase the authorized number of shares of any existing,
class of capital stock of the Corporation (or any other series
of Preferred stock) which would be senior or superior as to
dividends, redemption or upon liquidation to the Series D
Preferred Stock, or (ii) increase the number of shares of
Preferred Stock authorized in the Certificate of Incorporation
or create any other class of stock (or any other series of
Preferred Stock) ranking on a parity with the Series D
Preferred Stock as to dividends, redemption or upon
liquidation, or (D) without the affirmative consent or
approval of the holders of shares representing at least 90% of
the Series D Preferred Stock then outstanding (x) amend the
voting powers, designations, preferences, or relative,
participating, optional or other special rights or
qualifications, limitations or restrictions in respect of the
Series D Preferred Stock, or (y) reissue any shares of Series
D Preferred Stock that have been redeemed or repurchased, or
(z) take any action to cause any amendment, alteration or
repeal of any of the provisions of the Certificate of
Incorporation or the by-laws that would materially adversely
affect the rights of the holders of Series D Preferred Stock.
8. EXCLUSION OF OTHER RIGHTS. Unless otherwise required by law,
neither the shares of Preferred Stock nor the shares of Common
Stock shall have any voting powers, preferences, or relative,
participation, optional or other special rights other than
those specifically set forth herein.
ARTICLE V
The provisions for the regulation of the internal affairs of the
Corporation will include the following, but such enumeration is not in
limitation of the power of the stockholders or the Board of Directors to
formulate in the Bylaws, by resolution, or any other proper manner any other
lawful provision not inconsistent with law or these articles:
1. CUMULATIVE VOTING. The right of stockholders to cumulate
votes in the election of directors is expressly denied.
2. BYLAWS. The Board of Directors will adopt the initial
Bylaws, and from time to time may, except as otherwise provided herein, alter,
amend or repeal the Bylaws or adopt new Bylaws; but the stockholders from time
to time may alter, amend or repeal any Bylaws adopted by the Board of Directors
or may adopt new Bylaws.
3. DENIAL OF PREEMPTIVE RIGHTS. The stockholders of the
Corporation will not have the preemptive right to acquire additional, unissued
or treasury shares of the Corporation, or securities of the Corporation
convertible into or carrying a right to subscribe to or acquire shares.
-16- Attachment II
57
4. NUMBER AND QUALIFICATION OF DIRECTORS. The number and
qualifications of directors constituting the Board of Directors of the
Corporation will be fixed and determined in the manner provided in the Bylaws
of the Corporation. The number of directors may be increased or decreased from
time to time in the manner set forth in the Bylaws of the Corporation and
herein.
ARTICLE VI
LIABILITY OF DIRECTORS
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach by the
director of his duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for
any transaction from which the director derived an improper personal benefit.
No repeal, modification or amendment of, or adoption of any provision
inconsistent with this Article VI nor, to the fullest extent permitted by law,
any modification of law shall adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal, amendment,
adoption or modification or affect the liability of any director of the
Corporation for any action taken or any omission that occurred prior to the
time of such repeal, amendment, adoption or modification.
If the DGCL shall be amended after the date hereof to authorize
corporate action further eliminating or limiting the liability of directors,
then a director of the Corporation, in addition to the circumstances in which
he is not liable immediately prior to such amendment, shall be free of
liability to the fullest extent permitted by the DGCL, as so amended.
IN WITNESS WHEREOF, Champion Healthcare Corporation has caused this
Restated Certificate of Incorporation to be executed by its President this
________________ day of _________________________________, 1996.
By:
------------------------------------
Xxxxxxx X. Xxxxxx, President
-17- Attachment II
