EXHIBIT 2
INVESTMENT AGREEMENT
dated as of February 23, 1998
between
TPG OXFORD LLC
and
OXFORD HEALTH PLANS, INC.
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions......................................2
Section 1.02. General Interpretive Principles............... 11
ARTICLE II
ISSUANCE AND SALE OF SENIOR PREFERRED STOCK AND WARRANTS
Section 2.01. Issuance and Sale of Senior Preferred
Stock and Warrants..............................12
Section 2.02. Closing.........................................12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01. Corporate Organization and Qualification........13
Section 3.02. Authorization of Agreements.....................13
Section 3.03. Consents; No Conflicts..........................13
Section 3.04. Capitalization; Securities......................14
Section 3.05. Subsidiaries....................................15
Section 3.06. Dividends, Stock Repurchases, Etc...............16
Section 3.07. Company Reports; Financial Statements...........16
Section 3.08. Undisclosed Liabilities.........................17
Section 3.09. Absence of Certain Changes......................18
Section 3.10. Property........................................19
Section 3.11. Litigation......................................20
Section 3.12. Compliance with Laws; Regulatory Approvals......20
Section 3.13. Taxes...........................................21
Section 3.14. ERISA and Other Employment Matters..............21
Section 3.15. Contracts.......................................24
Section 3.16. Client and Provider Relations...................24
Section 3.17. Financial Advisors and Brokers..................25
Section 3.18. Exemption from Registration.....................25
Section 3.19. Insurance.......................................25
Section 3.20. Insurance Contracts and Rates; Payment
of Claims.......................................25
Section 3.21. Reinsurance.....................................26
Section 3.22. Disclosure......................................26
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
Section 4.01. Organization....................................26
Section 4.02. Authorization of Agreements.....................26
Section 4.03. Consents; No Conflicts..........................27
Section 4.04. Financial Advisors and Brokers..................27
Section 4.05. Purchase for Purpose of Investment..............27
ARTICLE V
GOVERNANCE
Section 5.01. Board Size......................................27
Section 5.02. Board Representation............................28
Section 5.03. Committees......................................29
Section 5.04. CEO.............................................30
ARTICLE VI
STANDSTILL
Section 6.01. Standstill Agreement............................30
ARTICLE VII
PRE-CLOSING COVENANTS
Section 7.01. Taking of Necessary Action......................32
Section 7.02. Conduct of Business.............................32
Section 7.03. Notifications...................................33
Section 7.04. Alternative Transactions........................33
Section 7.05. Financing.......................................34
Section 7.06. Delivery of 1997 Statements.....................35
Section 7.07. Debenture Indentures............................35
ARTICLE VIII
ADDITIONAL COVENANTS
Section 8.01. Financial and Other Information.................35
Section 8.02. Limitation on Dividend Payments and
Stock Repurchases...............................35
Section 8.03. Organizational Documents........................36
Section 8.04. Limitation on Issuances of Equity Securities....36
Section 8.05. Mergers, Consolidation, etc.....................36
Section 8.06. Publicity.......................................36
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Section 8.07. Status of Dividends.............................37
Section 8.08. Director and Officer Indemnification............37
Section 8.09. Listing; Reservation............................37
Section 8.10. Legend..........................................38
Section 8.11. Limitation on Restrictions on Payment
of Dividends....................................38
Section 8.12. Management Arrangements.........................38
Section 8.13. Stockholders' Meeting...........................39
Section 8.14. Calculations....................................40
ARTICLE IX
CONDITIONS
Section 9.01. Conditions of Investor's Obligations............40
Section 9.02. Conditions of the Company's Obligations.........43
ARTICLE X
TERMINATION
Section 10.01. Termination....................................44
Section 10.02. Effect of Termination..........................44
ARTICLE XI
MISCELLANEOUS
Section 11.01. Fees and Expenses..............................45
Section 11.02. Reserved.......................................46
Section 11.03. Survival of Representations and Warranties.....46
Section 11.04. Specific Performance...........................46
Section 11.05. Indemnification................................46
Section 11.06. Notices........................................47
Section 11.07. Entire Agreement; Amendment....................48
Section 11.08. Counterparts...................................49
Section 11.09. Governing Law..................................49
Section 11.10. Successors and Assigns.........................49
Section 11.11. No Third-Party Beneficiaries...................50
Section 11.12. Termination of Certain Provisions..............50
Section 11.13. Allocation.....................................51
EXHIBIT A Form of Series A Certificate of Designations
EXHIBIT B Form of Series A Warrant
EXHIBIT C Form of Series B Certificate of Designations
EXHIBIT D Form of Series B Warrant
EXHIBIT E Form of Junior Certificate of Designations
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EXHIBIT F Form of Xxxxxxxx & Xxxxxxxx Opinion
EXHIBIT G Form of Xxxxxxx X. Xxxx, Esq. Opinion
EXHIBIT H Form of CEO Employment Agreement
EXHIBIT I Press Release
EXHIBIT J Terms of Management Compensation and Incentive
Arrangements
EXHIBIT K Form of Cleary, Gottlieb, Xxxxx & Xxxxxxxx Opinion
EXHIBIT L Draft 1997 Financial Statements
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INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (the "Agreement"), dated as of
February 23, 1998, by and between TPG Oxford LLC, a Delaware
limited liability company ("TPG" or the "Investor") and Oxford
Health Plans, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, each of the Company and the Investor has
determined to enter into this Agreement pursuant to which the
Investor has agreed to purchase from the Company, and the Company
has agreed to issue and sell to the Investor, (i) 245,000 shares
of the Company's Series A Cumulative Preferred Stock, par value
$0.01 per share (the "Series A Preferred Stock"), having the
rights, preferences, privileges and restrictions set forth in the
form of Certificate of Designations attached hereto as Exhibit A
(the "Series A Certificate of Designations"), together with
detachable Series A Warrants, having the terms set forth in the
form of Warrant attached hereto as Exhibit B (the "Series A
Warrants"), to purchase, subject to adjustment as set forth in
the form of Warrant, 15,800,000 shares of common stock, par value
$0.01 per share (the "Common Stock"), of the Company, and (ii)
105,000 shares of the Company's Series B Cumulative Preferred
Stock, par value $0.01 per share (the "Series B Preferred Stock,"
and together with the Series A Preferred Stock, the "Senior
Preferred Stock"), having the rights, preferences, privileges and
restrictions set forth in the form of Certificate of Designations
attached hereto as Exhibit C (the "Series B Certificate of
Designations," and together with the Series A Certificate of
Designations, the "Senior Certificates of Designations"),
together with detachable Series B Warrants, having the terms set
forth in the form of Warrant attached hereto as Exhibit D (the
"Series B Warrants," and together with the Series A Warrants, the
"Warrants"), to purchase, subject to adjustment as set forth in
the form of Warrant, (A) prior to the Shareholder Approval (as
defined herein), 6,730 shares of the Company's Series C Junior
Participating Preferred Stock, par value $0.01 per share (the
"Junior Preferred Stock"), having the rights, preferences,
privileges and restrictions set forth in the form of Certificate
of Designations attached hereto as Exhibit E (the "Junior
Certificate of Designations," and together with the Senior
Certificates of Designations, the "Certificates of
Designations"), or (B) following the Shareholder Approval,
6,730,000 shares of Common Stock;
WHEREAS, the Series A Preferred Stock is exchangeable
under certain circumstances at the option of the Company into
Series A Junior Subordinated Debentures Due 2008 of the Company
(the "Series A Debentures"), having the terms and conditions
provided for in Section 7.07 hereof, and the Series B Preferred
Stock is exchangeable under certain circumstances at the option
of the Company into Series B Junior Subordinated Debentures Due
2008 of the Company (the "Series B Debentures," and together with
the Series A Debentures, the "Debentures"), having the terms and
conditions provided for in Section 7.07 hereof; and
WHEREAS, the Company and the Investor desire to make
certain representations, warranties, covenants and agreements in
connection with the transactions contemplated herein;
NOW, THEREFORE, in consideration of the premises and
the mutual representations, warranties, covenants and agreements
contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. As used in this Agreement,
the following terms shall have the meanings set forth below:
"Affiliate" has the meaning set forth in Rule 12b-2
under the Exchange Act. The term "Affiliated" has a correlative
meaning. Notwithstanding the foregoing, for all purposes hereof,
TPG, and each Person controlled by, controlling or under common
control with TPG (each, a "TPG Person"), shall not be deemed an
"Affiliate" of any Designated Purchaser Person (as defined
below), and no Designated Purchaser, and no Person controlled by,
controlling or under common control with such Designated
Purchaser (each, a "Designated Purchaser Person"), shall be
deemed an "Affiliate" of any TPG Person or any other Designated
Purchaser Person, in any such case solely as a consequence of
this Agreement or the transactions contemplated hereby.
"Agreement" has the meaning set forth in the preamble
hereto.
"Alternative Transaction Fee" means $30,000,000.
"Alternative Transaction" means any (A) direct or
indirect acquisition or purchase of any Equity Securities of the
Company or any of its Subsidiaries or any tender offer or
exchange offer, that if consummated would result in any Person
(other than the Investor or any of its Affiliates or, solely as a
result of an assignment by the Investor pursuant to Section
11.10(b) hereof, a Designated Purchaser or any of its Affiliates)
Beneficially Owning 10% or more of any class of Equity Securities
of the Company or Equity Securities of any of its Subsidiaries,
(B) Business Combination, liquidation, dissolution or similar
transaction involving the Company or any of its Subsidiaries, or
(C) other transaction the consummation of which would prevent or
materially delay the transaction contemplated hereby.
"Beneficially Own" with respect to any securities
means having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act as in
effect on the date hereof, except that a Person shall be deemed
to Beneficially Own all such securities that such Person has the
right to acquire whether such right is exercisable immediately or
after the passage of time). The terms "Beneficial Ownership" and
"Beneficial Owner" have correlative meanings. Notwithstanding the
foregoing, for all purposes hereof, no TPG Person shall be deemed
to Beneficially Own any securities that are held by any
Designated Purchaser Person, and no Designated Purchaser Person
shall be deemed to Beneficially Own any securities that are held
by any TPG Person, in any such case solely as a consequence of
this Agreement or the transactions contemplated hereby.
"Board of Directors" means the board of directors of
the Company.
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"Bridge Agreement" means the Bridge Securities
Purchase Agreement, dated as of February 6, 1998, between the
Company and Oxford Funding, Inc., as in effect on the date
hereof.
"Business Combination" means a merger or consolidation
in which the Company is a constituent corporation and pursuant to
which Voting Securities of the Company are exchanged for cash,
securities or other property, a recapitalization of the Company
or a sale of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole; provided that a
transaction or series of transactions as a result of which the
Beneficial Ownership of the Equity Securities of the Company or
of the surviving entity of the transaction (or of the ultimate
parent of the Company or of such surviving entity) immediately
after the consummation of such transaction is the same (other
than in respect of fractional shares or odd lots) as the
Beneficial Ownership of the Company's Equity Securities
immediately prior to the consummation thereof shall not be deemed
a "Business Combination."
"Business Day" means any day, other than a Saturday,
Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to
close.
"Bylaws" means the Bylaws of the Company, as amended
from time to time.
"Capital Funding Requirements Disclosure" has the
meaning set forth in Section 3.07(d) hereof.
"CEO" means Xxxxxx X. Xxxxxx, M.D. or, if he is not
the chief executive officer of the Company, any other person who
is appointed chief executive officer of the Company; provided,
that a person shall not be the CEO for purposes of this Agreement
if any predecessor CEO shall have been terminated by the Board of
Directors otherwise than in compliance with Section 5.04 hereof.
"CEO Agreement" has the meaning set forth in Section
9.01(c) hereof.
"Certificates of Designations" has the meaning set
forth in the recitals hereto.
"Certificate of Incorporation" means the Second
Amended and Restated Certificate of Incorporation of the Company,
as such may be amended from time to time.
"Class I" means the class of directors of the Board of
Directors with a term expiring at the annual meeting of
stockholders of the Company in 1998 and every third annual
meeting thereafter.
"Class II" means the class of directors of the Board
of Directors with a term expiring at the annual meeting of
stockholders of the Company in 1999 and every third annual
meeting thereafter.
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"Class III" means the class of directors of the Board
of Directors with a term expiring at the annual meeting of
stockholders of the Company in 2000 and every third annual
meeting thereafter.
"Closing" means the closing of the sale and purchase
of the Securities pursuant to Section 2.01 hereof.
"Closing Date" has the meaning set forth in Section
2.02(a) hereof.
"Code" means the Internal Revenue Code of 1986, as
amended, and all regulations promulgated thereunder, as in effect
from time to time.
"Commission" means the U.S. Securities and Exchange
Commission.
"Commitment Letter" has the meaning set forth in
Section 10.01(b) hereof.
"Common Stock" has the meaning set forth in the
recitals hereto.
"Company" has the meaning set forth in the preamble
hereto.
"Company Disclosure Documents" has the meaning set
forth in the definition of "Material Adverse Effect."
"Control Transaction" means any transaction that
involves a (i) merger, consolidation or similar Business
Combination involving the Company or a Significant Subsidiary of
the Company (other than a transaction following which (A) the
shareholders of the Company immediately prior to such transaction
will continue to hold Voting Securities of the Company or the
surviving entity representing a majority of the Voting Power of
the Voting Securities of the Company or the surviving entity and
(B) no Person or Group that did not Beneficially Own Voting
Securities representing a majority of the Voting Power of the
Voting Securities of the Company prior to such transaction will
Beneficially Own Voting Securities of the Company or the
surviving entity representing a majority of the Voting Power of
the Voting Securities of the Company or the surviving entity), or
(ii) sale or issuance of Voting Securities of the Company to a
Person or Group or an acquisition of Equity Securities of the
Company in a transaction approved by the Board of Directors by a
Person or Group which, following the completion of such sale or
issuance, will Beneficially Own Voting Securities of the Company
representing a majority of the Voting Power of the Voting
Securities of the Company.
"Debentures" has the meaning set forth in the recitals
hereto.
"Derivative Securities" means any subscriptions,
options, conversion rights, warrants, or other agreements,
securities or commitments of any kind obligating the Company or
any of its Subsidiaries to issue, grant, deliver or sell, or
cause to be issued, granted, delivered or sold, any Equity
Securities of the Company or any of its Subsidiaries.
"Designated Purchaser" has the meaning set forth in
Section 11.10(b) hereof.
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"Designated Purchaser Person" has the meaning set
forth in the definition of "Affiliate."
"DGCL" means the Delaware General Corporation Law.
"DGCL Section 203" has the meaning set forth in
Section 3.02(a) hereof.
"DLJ" means Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation.
"Draft 1997 Statements" means the February 20, 1998
draft of the Company's consolidated balance sheet and income
statement as of, and for, the year ended December 31, 1997,
attached as Exhibit L hereto.
"Draft Reserve Report" means the draft reserve report
provided to the Investor by the Company on or about February 20,
1998.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and all regulations promulgated
thereunder, as in effect from time to time.
"Employment Agreement" means any employment or
consulting agreement or other similar arrangement between the
Company or any of its Subsidiaries, on the one hand, and any
Representative of the Company or any of its Subsidiaries, on the
other.
"Equity Securities" of any Person means any and all
common stock, preferred stock and any other class of capital
stock of, and any partnership or limited liability company
interests of such Person or any other similar interests of any
Person that is not a corporation, partnership or limited
liability company.
"Exchange Act" means the U.S. Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated
thereunder.
"GAAP" means U.S. generally accepted accounting
principles as in effect at the relevant time or for the relevant
period.
"Governmental Entity" means any government or
political subdivision or department thereof, any governmental or
regulatory body, commission, board, bureau, agency or
instrumentality, or any court or arbitrator or alternative
dispute resolution body, in each case whether federal, state,
local or foreign.
"Grantor Trust" means any trust established to set
aside assets to provide for the payment of obligations to current
or former employees.
"Group" has the meaning set forth in Rule 13d-5 under
the Exchange Act.
"Guarantee" means any direct or indirect obligation,
contingent or otherwise, to guarantee (or having the economic
effect of guaranteeing) Indebtedness in any manner, including,
without limitation, any monetary obligation to purchase or pay
(or advance or supply
5
funds for the purchase or payment of) such Indebtedness or other
obligation of another Person (whether arising by agreement to
purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise).
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the regulations
promulgated thereunder.
"Indebtedness" means, with respect to any Person,
whether recourse is to all or a portion of the assets of such
Person, and whether or not contingent, (i) any obligation of such
Person for money borrowed, (ii) any obligation of such Person
evidenced by bonds, debentures, notes, Guarantees or other
similar instruments, (iii) any reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or
similar facilities issued for the account of such Person, (iv)
any obligation of such Person issued or assumed as the deferred
purchase price of property, assets or services (but excluding
trade accounts payable and other accrued liabilities arising in
the ordinary course of business), (v) any interest rate or
currency swap or similar hedging agreement, and (vi) any capital
lease obligation of such Person.
"Insolvency Event" means (i) the Company or any of its
Significant Subsidiaries commences a voluntary case concerning
itself under Title 11 of the United States Code as now or
hereafter in effect, or under any state insolvency, liquidation,
rehabilitation or similar statute or any successor statutes
thereto ("Insolvency Statutes"); (ii) an involuntary case is
commenced against the Company or any of its Significant
Subsidiaries under an Insolvency Statute; (iii) a custodian is
appointed under any applicable Insolvency Statute for, or takes
charge of, all or any substantial part of the property of the
Company or any of its Subsidiaries; (iv) any other proceeding
under any reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution or similar law of any jurisdiction,
whether now or hereafter in effect, relating to the Company or
any of its Significant Subsidiaries is commenced (a) by the
Company or any of its Significant Subsidiaries or (b) by any
other Person; (v) the Company or any of its Significant
Subsidiaries is adjudicated insolvent or bankrupt; (vi) any order
of relief or other order approving any such case or proceeding is
entered; (vii) the Company or any of its Significant Subsidiaries
makes a general assignment for the benefit of creditors; or
(viii) the Company or any of its Significant Subsidiaries shall
state in writing that it is unable to pay, or shall be unable to
pay, its debts, generally as they become due; provided, however,
in the case of clauses (ii), (iii), (iv)(b) and (vi), an
"Insolvency Event" shall occur only in the event the Company or
any of its Significant Subsidiaries is unable to cause such
involuntary case, appointment, proceeding or action to be
dismissed or withdrawn by the ninetieth day after the
commencement thereof.
"Intellectual Property" means all intellectual
property rights including, but not limited to, patents, patent
rights, trade secrets, know-how, trademarks, service marks, trade
names, copyrights, licenses and proprietary processes and
formulae.
"Investor" has the meaning set forth in the preamble
hereto.
"Investor Group" means, collectively, the Investor,
the Designated Purchasers, if any, and the respective Affiliates
of such Persons.
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"Investor Nominee" has the meaning set forth in
Section 5.02(c) hereof.
"Investor Original Warrant Shares" has the meaning set
forth in Section 5.02(e) hereof. For the purposes of determining
the percentage of Investor Original Warrant Shares that is
Beneficially Owned by the Investor or any of its Affiliates, such
calculation shall be made assuming all conditions precedent to
receipt of Warrant Shares have occurred including, without
limitation, exercise of the Warrants and, in the case of the
Series B Warrants, receipt by the Company of the Shareholder
Approval.
"Investor Placement Fee" means $9,500,000.
"Investor Purchase Price" has the meaning set forth in
Section 2.01 hereof.
"Junior Certificate of Designations" has the meaning
set forth in the recitals hereto.
"Junior Preferred Stock" has the meaning set forth in
the recitals hereto.
"Junior Shares" means the shares of Junior Preferred
Stock issued or issuable upon exercise of the Series B Warrants.
"Law" means any law, treaty, statute, ordinance, code,
rule or regulation of a Governmental Entity or judgment, decree,
order, writ, award, injunction or determination of an arbitrator
or court or other Governmental Entity.
"Lien" means any mortgage, pledge, lien, security
interest, claim, voting agreement, conditional sale agreement,
title retention agreement, restriction, option or encumbrance of
any kind, character or description whatsoever.
"Limited Stock" means any class or series of Equity
Securities of the Company that ranks, with respect to preference
on payment of dividends or payment upon liquidation, dissolution
or winding-up of the Company, junior to the Senior Preferred
Stock.
"Losses" has the meaning set forth in Section 11.05(a)
hereof.
"Material Adverse Effect" means a material adverse
effect on the financial condition, results of operations,
business or regulatory condition of the Company and its
Subsidiaries taken as a whole; provided, however, that any
adverse effect on the financial condition, results of operations,
business or regulatory condition of the Company and its
Subsidiaries taken as a whole that is described in the SEC
Reports, the Draft 1997 Statements, the Draft Reserve Report, the
Capital Funding Requirements Disclosure, the Schedules hereto or
the February 24, 1998 press release of the Company (a definitive
copy which is attached as Exhibit I hereto), other than the
general statements therein that begin with the fourth complete
paragraph on page 3 of such press release and end immediately
following point 9 on page 4 of such press release regarding
forward-looking statements (collectively, the "Company Disclosure
Documents"), or that can be reasonably foreseen to arise out of
any of the matters described in
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the Company Disclosure Documents shall not be considered to be a
Material Adverse Effect; and provided, further, that
notwithstanding the preceding proviso: (i) any material
exacerbation of the matters described in such press release, (ii)
any material deterioration in the relationship of the Company and
its Subsidiaries with their brokers or providers, (iii) other
than with respect to the Medicaid business of the Company and its
Subsidiaries, any material increase in the rate of disenrollment
from the Company's historic disenrollment experience, or (iv) any
material adverse effect on the ability of any Significant
Subsidiary to conduct its business on a basis consistent with
past practices shall be deemed not to be reasonably foreseen to
arise out of any of the matters described in the Company
Disclosure Documents.
"NASD" has the meaning set forth in Section 3.03(c)
hereof.
"NASD Rules" has the meaning set forth in Section
3.03(c) hereof.
"1997 Statements" means the Company's consolidated
financial statements (including the footnotes thereto) as of, and
for, the year ended, December 31, 1997, as audited by KPMG Peat
Marwick LLP.
"Nasdaq" means The Nasdaq Stock Market's National
Market.
"Option Plans" means the Company's 1991 Stock Option
Plan and Nonemployee Directors Stock Option Plan, 1997
Independent Contractor Stock Option Plan, Oaktree Health Plans,
1992 Incentive and Non-Qualified Stock Option Plan, Oxford
Specialty Holdings, Inc. 1996 Equity Incentive Compensation Plan,
and Oxford Specialty Management, Inc. 1997 Equity Incentive
Compensation Plan.
"Original Number" means the number of Warrant Shares
as of the Closing (assuming that all conditions precedent to
receipt of Warrant Shares has occurred, including, without
limitation, exercise of the Warrants and, in the case of the
Series B Warrants, receipt by the Company of the Shareholder
Approval), which number shall be adjusted in accordance with any
adjustment made to the number of Warrant Shares issuable upon
exercise of the Warrants pursuant to the provisions set forth in
Section 9 of each Warrant. For the purposes of determining the
percentage of the Original Number of Warrant Shares that is
Beneficially Owned by the Investor, any Designated Purchaser or
any of their respective Affiliates, such calculation shall be
made assuming all conditions precedent to receipt of Warrant
Shares have occurred including, without limitation, exercise of
the Warrants and, in the case of the Series B Warrants, receipt
by the Company of the Shareholder Approval.
"Person" means any individual, corporation, company,
association, partnership, joint venture, trust or unincorporated
organization, or Governmental Entity.
"Preferred Stock" means the Junior Preferred Stock and
the Senior Preferred Stock.
"Proceeding" has the meaning set forth in Section
3.11.
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"Proposal" means any inquiry, proposal or offer from
any person relating to an Alternative Transaction.
"Qualified Offering" means a bona fide, underwritten
offering of securities for cash pursuant to an effective
registration statement or Rule 144A under the Securities Act;
provided, that no offering shall constitute a Qualified Offering
unless the Company uses its reasonable best efforts to ensure
that immediately following the completion of such offering, no
purchaser in such offering Beneficially Owns (on an individual
basis or, to the knowledge of the Company, as a member of a
Group) in excess of 5% of the Voting Power of the outstanding
Voting Securities of the Company (other than (i) any underwriter
of such offering or (ii) any Person described in Rule
13d-1(b)(1)(ii) under the Exchange Act which is eligible to
report its Beneficial Ownership of Common Stock on Schedule 13G
under the Exchange Act). For purposes of this definition,
Beneficially Own shall mean having "beneficial ownership" as
determined pursuant to Rule 13d-3 under Exchange Act as in effect
on the date hereof.
"Registration Rights Agreement" means the Registration
Rights Agreement of even date herewith between the Company and
the Investor.
"Regulated Subsidiary" means each of the following
Subsidiaries of the Company: Oxford Health Plans (PA), Inc.,
Oxford Health Plans (NH), Inc., Oxford Health Plans (NJ), Inc.,
Oxford Health Plans (NY), Inc., Oxford Health Plans (FL), Inc.,
Oxford Health Insurance, Inc., Oxford Health Plans (CT), Inc.,
Oxford Health Plans (IL), Inc. and Compass PPA, Inc.
"Regulatory Approvals" means (i) any and all
certificates, permits, licenses, franchises, concessions, grants,
consents, approvals, orders, registrations, authorizations,
waivers, variances or clearances from, or filings or
registrations with, Governmental Entities, and (ii) any and all
waiting periods imposed by applicable laws.
"Representatives" means, with respect to any Person,
any of such Person's officers, directors, employees, agents,
attorneys, accountants, actuaries, consultants, equity financing
partners or financial advisors or other Person associated with,
or acting on behalf of, such Person.
"Required Regulatory Approvals" means Regulatory
Approvals (i) necessary under the HSR Act; (ii) required for or
in connection with the consummation by the parties thereto of the
transactions contemplated by the Registration Rights Agreement
(including the effectiveness of a registration statement and
applicable "Blue Sky" clearance); (iii) consisting of the filing
by the Company of the Certificates of Designations with the
Secretary of State of the State of Delaware; and (iv) set forth
on Schedule 1.01 hereto.
"SEC Reports" has the meaning set forth in Section
3.07(a) hereof.
"Securities" means the Senior Preferred Stock and the
Warrants issued pursuant to this Agreement.
9
"Securities Act" means the U.S. Securities Act of
1933, as amended, and the rules and regulations promulgated
thereunder.
"Senior Financing Arrangements" means at least
$350,000,000 in senior debt financing to be obtained by the
Company as contemplated by Section 9.01(e) hereof.
"Senior Preferred Stock" has the meaning set forth in
the recitals hereto.
"Series A Certificate of Designations" has the meaning
set forth in the recitals hereto.
"Series A Debentures" has the meaning set forth in the
recitals hereto.
"Series A Preferred Stock" has the meaning set forth
in the recitals hereto.
"Series A Warrants" has the meaning set forth in the
recitals hereto.
"Series B Certificate of Designations" has the meaning
set forth in the recitals hereto.
"Series B Debentures" has the meaning set forth in the
recitals hereto.
"Series B Preferred Stock" has the meaning set forth
in the recitals hereto.
"Series B Warrants" has the meaning set forth in the
recitals hereto.
"Shareholder Approval" means the approval by the
shareholders of the Company, in accordance with and in
satisfaction of Rule 4460(i)(D) of the NASD Rules and
interpretations thereunder, of the vesting of voting rights in
respect of the Series B Preferred Stock and the issuance of
Warrant Shares upon exercise of the Series B Warrants, each in
accordance with the terms thereof.
"Shareholder Approval Proposal" has the meaning set
forth in Section 8.13(b) hereof.
"Significant Designated Purchaser" has the meaning set
forth in Section 11.10(b) hereof.
"Significant Regulated Subsidiary" means each of the
following Subsidiaries of the Company: Oxford Health Plans (PA),
Inc., Oxford Health Plans (NJ), Inc., Oxford Health Plans (NY),
Inc., Oxford Health Insurance, Inc. and Oxford Health Plans (CT),
Inc.
"Significant Subsidiary" means any Subsidiary of the
Company that (i) had $100,000,000 in total assets as of December
31, 1997, (ii) had $10,000,000 in revenues for the year ended
December 31, 1997, or (iii) is subject to regulation by an
insurance or health regulatory body of any Governmental Entity.
10
"Standstill Period" has the meaning set forth in
Section 6.01(a) hereof.
"Subsequent Reports" has the meaning set forth in
Section 3.07(a) hereof.
"Subsidiary" means, as to any Person, any other Person
of which more than 50% of the shares of the voting stock or other
voting interests are owned or controlled, or the ability to
select or elect 50% or more of the directors or similar managers
is held, directly or indirectly, by such first Person or one or
more of its Subsidiaries or by such first Person and one or more
of its Subsidiaries.
"Tax" or "Taxes" means all taxes, including any
interest, liabilities, fines, penalties or additions to tax that
may become payable in respect thereof, imposed by any
Governmental Entity, which taxes shall include, without limiting
the generality of the foregoing, income taxes (including, but not
limited to, United States federal income taxes and state income
taxes), payroll and employee withholding taxes, unemployment
insurance, social security, sales and use taxes, excise taxes,
franchise taxes, gross or net receipts taxes, occupation taxes,
real and personal property taxes, ad valorem taxes, stamp taxes,
transfer taxes, capital taxes, import duties, withholding taxes,
workers' compensation taxes, and other obligations of the same or
of a similar nature whether arising before, on or after the
Closing Date.
"TPG Person" has the meaning set forth in the
definition of "Affiliate."
"Transaction Agreements" means this Agreement and the
Registration Rights Agreement.
"Voting Power" means, with respect to any Voting
Securities, the aggregate number of votes attributable to such
Voting Securities that could generally be cast by the holders
thereof for the election of directors at the time of
determination (assuming such election were then being held).
"Voting Securities" means, (i) with respect to the
Company, the Equity Securities of the Company entitled to vote
generally for the election of directors of the Company, and (ii)
with respect to any other Person, any securities of or interests
in such Person entitled to vote generally for the election of
directors or any similar managing person of such Person.
"Warrant Shares" means the shares of Common Stock
issued, or issuable upon, exercise of the Warrants.
"Warrants" has the meaning set forth in the recitals
hereto.
"Wholly-Owned Subsidiary" means, as to any Person, a
Subsidiary of such Person of which 100% of the Equity Securities
(other than directors' qualifying shares or similar shares) is
owned, directly or indirectly, by such Person.
Section 1.02. General Interpretive Principles.
Whenever used in this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, any noun or
11
pronoun shall be deemed to include the plural as well as the
singular and to cover all genders. The name assigned this
Agreement and the section captions used herein are for
convenience of reference only and shall not be construed to
affect the meaning, construction or effect hereof. Unless
otherwise specified, the terms "hereof," "herein" and similar
terms refer to this Agreement as a whole (including the exhibits
and schedules hereto), and references herein to Articles or
Sections refer to Articles or Sections of this Agreement.
ARTICLE II
ISSUANCE AND SALE OF SENIOR PREFERRED STOCK AND WARRANTS
Section 2.01. Issuance and Sale of Senior Preferred
Stock and Warrants. Upon the terms and subject to the conditions
set forth in this Agreement, and in reliance upon the
representations and warranties hereinafter set forth, at the
Closing, the Company will issue, sell and deliver to the
Investor, and the Investor will purchase from the Company, (i)
245,000 shares of Series A Preferred Stock, together with Series
A Warrants to purchase, subject to adjustment as set forth in the
forms of Warrants, 15,800,000 shares of Common Stock, and (ii)
105,000 shares of Series B Preferred Stock, together with Series
B Warrants to purchase, subject to adjustment as set forth in the
forms of Warrants, (A) prior to the occurrence of Shareholder
Approval, 6,730 shares of Junior Preferred Stock, and (B)
following the occurrence of Shareholder Approval, 6,730,000
shares of Common Stock, in each case, free and clear of all
Liens, for an aggregate purchase price of $350,000,000 (the
"Investor Purchase Price").
Section 2.02. Closing. (a) Subject to the satisfaction
or, if permissible, waiver of the conditions set forth in
Sections 9.01 and 9.02 hereof, the Closing shall take place at
the offices of Cleary, Gottlieb, Xxxxx & Xxxxxxxx, Xxx Xxxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m., New York City time, on
the fifth Business Day following satisfaction or, if permissible,
waiver of the conditions set forth in Sections 9.01(e), 9.01(i)
and 9.02(d) hereof, or at such other time and place as the
parties may agree (the date on which the Closing occurs, the
"Closing Date").
(b) At the Closing, (i) the Company will deliver to
the Investor certificates representing the Securities to be
purchased by, and sold to, the Investor pursuant to Section 2.01
hereof (registered in the names and in the denominations
designated by the Investor at least two Business Days prior to
the Closing Date), together with the other documents,
certificates and opinions to be delivered pursuant to Section
9.01 hereof, and (ii) the Investor, in full payment for the
Securities to be purchased by, and sold to, the Investor pursuant
to Section 2.01 hereof, will deliver to the Company an amount
equal to the Investor Purchase Price, against which the Investor
Placement Fee payable to the Investor or its Affiliates and any
amounts due to the Investor for expenses pursuant to Section
11.01(a) hereof shall be netted (provided, that the Investor
shall continue to be entitled to seek reimbursement after the
Closing for other expenses that are properly reimbursable
pursuant to Section 11.01(a) hereof), in immediately available
funds by wire transfer to the account designated by the Company
at least two Business Days prior to the Closing Date, or by such
other means as may be agreed upon by the parties hereto, together
with the other documents, certificates and opinions to be
delivered pursuant to Section 9.02 hereof.
12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to, and
agrees with, the Investor as follows:
Section 3.01. Corporate Organization and
Qualification. Each of the Company and its Subsidiaries is a
corporation or partnership duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
organization and has all requisite power and authority to own or
lease and operate its properties and to conduct its business in
all material respects as it is currently being conducted and is
proposed to be conducted. Each of the Company and its
Subsidiaries is duly licensed, authorized or qualified as a
foreign corporation or partnership for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which its ownership, lease or operation of
property or conduct of business requires such qualification,
except where the failure to be so licensed, authorized or
qualified and in good standing would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has made
available to the Investor a complete and correct copy of the
Certificate of Incorporation and the Bylaws of the Company and
each of its Subsidiaries, each as amended to date and each of
which as so made available is in full force and effect. The
Company has made available to the Investor a complete and correct
copy of the minute books of the Company and each of its
Subsidiaries, and each such minute book includes minutes of the
meetings of, and resolutions adopted by, the board of directors
of such entity and the committees thereof to date.
Section 3.02. Authorization of Agreements. (a) The
Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the
Transaction Agreements, the Certificates of Designations and the
Warrants. The execution, delivery and performance of the
Transaction Agreements, the Certificates of Designations and the
Warrants, and the consummation by the Company at the Closing of
the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action on the part of the
Company. The Board of Directors has approved the entry by the
Company and the Investors into this Agreement and the
consummation of the transactions contemplated hereby (including
the issuance to the Investor of the Preferred Stock and Warrants
and the issuance of Common Stock upon exercise of the Warrants)
for purposes of paragraph (a)(1) of Section 203 of the DGCL
("DGCL Section 203") and Article Eleventh of the Certificate of
Incorporation.
(b) This Agreement and the Registration Rights
Agreement have been duly executed and delivered by the Company,
and each such agreement constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally
and to general principles of equity.
Section 3.03. Consents; No Conflicts. (a) Except for
the Required Regulatory Approvals and Regulatory Approvals the
failure of which to be made or obtained would not prevent or
materially delay the consummation of the transactions
contemplated by the Transaction Agreements, the Certificates of
Designations and the Warrants or have a Material
13
Adverse Effect, no Regulatory Approval from, or registration,
declaration or filing with, any Governmental Entity is required
to be made or obtained by the Company or any of its Subsidiaries
in connection with the execution, delivery and performance of the
Transaction Agreements, the Certificates of Designations and the
Warrants and the consummation of the transactions contemplated
hereby and thereby.
(b) The execution and delivery of each of this
Agreement and the Registration Rights Agreement does not, and of
the Warrants will not, and, subject to the receipt of the
Required Regulatory Approvals, the performance of the obligations
set forth herein, therein and in the Certificates of Designations
and the consummation of the transactions contemplated hereby and
thereby will not, (i) violate any provision of the Certificate of
Incorporation or the Bylaws of the Company or the comparable
governing instruments of any of its Subsidiaries; (ii) give rise
to any preemptive rights, rights of first refusal or other
similar rights on behalf of any Person under any applicable Law
or any provision of the Certificate of Incorporation or Bylaws of
the Company or any agreement or instrument applicable to the
Company; (iii) conflict with, contravene or result in a breach or
violation of any of the terms or provisions of, or
constitute a default (with or without notice or the passage of
time) under, or result in or give rise to a right of termination,
cancellation, acceleration or modification of any right or
obligation under, or give rise to a right to put or to compel a
tender offer for outstanding securities of the Company or any of
its Subsidiaries under, or require any consent, waiver or
approval under, any note, bond, debt instrument, indenture,
mortgage, deed of trust, lease, loan agreement, joint venture
agreement, Regulatory Approval, contract or any other agreement,
instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any property of the Company or any of its
Subsidiaries is bound; (iv) result in the creation or imposition
of any Lien upon any assets or properties of the Company or any
of its Subsidiaries; or (v) violate any Law applicable to the
Company or any of its Subsidiaries, other than in the case of
clauses (iii) through (v) above, such exceptions as would not
have, individually or in the aggregate, a Material Adverse
Effect.
(c) Other than the Shareholder Approval, no consent or
approval of the Company's stockholders is required by Law, the
Company's Certificate of Incorporation or Bylaws, the rules (the
"NASD Rules") of the National Association of Securities Dealers,
Inc. (the "NASD") relating to the quotation of the Common Stock
on Nasdaq, or otherwise, for the execution, delivery and
performance by the Company of the Transaction Agreements and the
consummation of the transactions contemplated hereby and thereby.
Section 3.04. Capitalization; Securities. (a) As of
the date hereof, the authorized capital stock of the Company
consists of (i) 400,000,000 shares of Common Stock, of which
79,490,249 shares are outstanding, 3,614,621 are reserved for
issuance under the Option Plans, and 22,530,000 are reserved for
issuance pursuant to the Warrants, and (ii) 2,000,000 shares of
preferred stock, par value $0.01 per share, of which no shares
are outstanding, no shares have been designated and no shares are
reserved for issuance. All of such outstanding shares of Common
Stock were duly authorized and validly issued and are fully paid
and non-assessable.
14
(b) Except for the Warrants and options to purchase in
the aggregate 10,257,314 shares of Common Stock with an average
exercise price of $22.25 per share pursuant to the Option Plans
and the options to purchase Common Stock granted to Xx. Xxxxxx X.
Xxxxxx pursuant to the CEO Agreement, there are no authorized or
outstanding (or any obligations to authorize or issue) Derivative
Securities.
(c) The Company and its Subsidiaries have no
outstanding Indebtedness other than $100,000,000 of Indebtedness
outstanding pursuant to the Bridge Agreement. A true, complete
and correct copy of the Bridge Agreement, including the exhibits
and schedules thereto and any other documents executed in
connection therewith, has been made available to the Investor.
(d) Subject to the filing of the Certificates of
Designations with the Secretary of State of the State of
Delaware, the shares of Preferred Stock to be issued pursuant to
this Agreement and issuable pursuant to the Series B Warrants
have been duly and validly authorized and, when issued as
contemplated by this Agreement or upon exercise of the Series B
Warrants, as the case may be, will have been validly issued and
will be fully paid and non-assessable. The Warrant Shares have
been duly and validly authorized and validly reserved for
issuance and, when issued upon exercise of the Warrants, will
have been validly issued and will be fully paid and
non-assessable. The registration of Securities, Junior Shares,
Warrant Shares or Debentures pursuant to the Registration Rights
Agreement will not give rise to any registration rights on behalf
of any Person (other than the CEO as described in Exhibit H
hereto) under any agreement or instrument applicable to the
Company (other than the Registration Rights Agreement). Other
than pursuant to the Registration Rights Agreement, no Person has
any right to require the Company to register securities of the
Company under the Securities Act, and there are no shareholder or
similar agreements to which the Company is a party, except as
disclosed on Schedule 3.04(d) hereto. To the Company's knowledge,
there are no securities that the Company is required to register
pursuant to any agreement listed on Schedule 3.04(d) hereto. The
Warrants have been duly and validly authorized by the Company
and, when issued as contemplated by this Agreement, will
constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms,
subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general principles
of equity.
Section 3.05. Subsidiaries. (a) Schedule 3.05(a)
lists, for each Significant Subsidiary of the Company, the name
of such Significant Subsidiary, together with (i) the
jurisdiction and nature (e.g., corporation, partnership, limited
liability company) of its organization, (ii) the number and
percentage of shares of each class of Equity Securities owned by
the Company or any of its Wholly-Owned Subsidiaries, (iii) the
identity of the record holder(s) and the name and number of
shares of each class of Equity Securities owned by any Person
other than the Company or its Wholly-Owned Subsidiaries, and (iv)
the identity of any Person other than the Company or its
Wholly-Owned Subsidiaries that has the right (including upon the
passage of time or upon the occurrence of specified events) to
acquire any of its Equity Securities. Such list is true, correct
and complete in all material respects as of the date hereof. The
Equity Securities of each such Significant Subsidiary owned,
directly or indirectly, by the
15
Company are held free and clear of all Liens (other than those
arising pursuant to the Bridge Agreement), and all such Equity
Securities have been duly authorized and validly issued and are
fully paid and non-assessable.
(b) Except for Equity Securities of the Subsidiaries
of the Company, as set forth on Schedule 3.05(b) hereto or
investment securities of any Person held by Subsidiaries of the
Company in the ordinary course of business (provided the Company
and its Significant Subsidiaries Beneficially Own (and, after
giving effect to such transactions, would Beneficially Own), in
the aggregate, less than 5% of the Voting Power of the Voting
Securities of such Person), the Company does not, directly or
indirectly, (i) Beneficially Own or own of record any Equity
Securities of, or any other equity interest in, any other Person
or (ii) have any other equity investment or other ownership
interest in any other Person other than, in each case, such
investments or other ownership interests valued at less than
$1,000,000 individually and $10,000,000 in the aggregate.
(c) Other than investments made in Significant
Subsidiaries pursuant to undertakings given by the Company or its
Subsidiaries prior to the date hereof to Governmental Entities as
set forth on Schedule 3.05(c) hereof, and similar undertakings
given by the Company or its Subsidiaries to Governmental Entities
after the date hereof, or as otherwise set forth on Schedule
3.05(c) hereof, neither the Company nor any of its Subsidiaries
is obligated, pursuant to any agreement or instrument applicable
to the Company or such Subsidiary, to purchase any Equity
Securities of, or make any other equity investment in, any
Person.
Section 3.06. Dividends, Stock Repurchases, Etc. Other
than pursuant to this Agreement, the Senior Financing
Arrangements or the Bridge Agreement, or as restricted or limited
by applicable Law, there are no contractual or other restrictions
or limitations on the ability of the Company or any of its
Subsidiaries to pay any dividends or make any other distributions
on, or to purchase, redeem or otherwise acquire, any of its
Equity Securities.
Section 3.07. Company Reports; Financial Statements.
(a) The Company has made available to the Investor a true and
complete copy of (i) the Company's Annual Report on Form 10-K for
the years ended December 31, 1996 and 1995; (ii) the Company's
Quarterly Report on Form 10-Q for the periods ended March 31,
June 30 and September 30, 1997 and (iii) each registration
statement, report on Form 8-K, proxy statement, information
statement or other report or statement filed by the Company with
the Commission since December 31, 1995 and prior to the date
hereof, in each case in the form (including exhibits and any
amendments thereto) filed with the Commission (collectively, the
"SEC Reports"). As of their respective dates, the SEC Reports and
any registration statement, report, proxy statement, information
statement or other statement filed by the Company with the
Commission before the Closing Date ("Subsequent Reports") (i)
was, or will be, as the case may be, timely filed with the
Commission; (ii) complied, or will comply, as the case may be, in
all material respects, with the applicable requirements of the
Exchange Act and the Securities Act, and (iii) did not, or will
not, as the case may be, contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. The Company has filed all reports
16
and statements with the Commission required to have been filed as
of the date hereof for the Company to register securities for
sale on Form S-3 under the Securities Act or any successor form
thereto.
(b) Each of the consolidated balance sheets
(including, where applicable, the related notes and schedules)
included in or incorporated by reference into the SEC Reports,
any Subsequent Reports, the Draft 1997 Statements and the 1997
Statements fairly presents, or will fairly present, as the case
may be, in all material respects, the consolidated financial
position of the Company and its Subsidiaries as of the date
thereof, and each of the consolidated statements of income (or
statements of results of operations), stockholders' equity and
cash flows (including the related notes and schedules) included
in or incorporated by reference into the SEC Reports, any
Subsequent Reports, the Draft 1997 Statements or the 1997
Statements, fairly presents or will fairly present as the case
may be, in all material respects, the results of operations,
retained earnings and cash flows, as the case may be, of the
Company and its Subsidiaries (on a consolidated basis) for the
periods or as of the dates, as the case may be, set forth
therein, in each case in accordance with GAAP applied on a
consistent basis throughout the periods covered (except as stated
therein or, where applicable, in the notes thereto, except in
each of the foregoing instances in the case of interim statements
and the Draft 1997 Statements for the lack of footnote
disclosure, and except with respect to the footnote disclosure
contained in the 1997 Statements but not contained in the Draft
1997 Statements to the extent that the information contained
therein is consistent with the information contained in the
Company Disclosure Documents) and in compliance with the rules
and regulations of the Commission.
(c) The Annual Statements and Quarterly Statements of
each Significant Regulated Subsidiary, as filed with the
Department of Insurance, Superintendent of Insurance or similar
insurance regulatory authority of the state of domicile of such
Significant Regulated Subsidiary (with respect to each
Significant Regulated Subsidiary, its "Applicable Insurance
Department") for the year ended December 31, 1996 and the
quarters ended March 31, 1997, June 30, 1997 and September 30,
1997, respectively, together with any notes, exhibits and
schedules thereto, have been prepared in accordance with the
accounting practices prescribed or permitted by the Applicable
Insurance Department for purposes of financial reporting to the
applicable state's insurance regulators ("State Statutory
Accounting Practices"), and such accounting practices have been
applied on a basis consistent with State Statutory Accounting
Practices throughout the periods involved, except as expressly
set forth in any notes, exhibits and schedules thereto.
(d) The regulatory capital funding requirements of the
Regulated Subsidiaries as of December 31, 1997 are, in all
material respects, as previously disclosed by the Company to the
Investor (the "Capital Funding Requirements Disclosure").
Section 3.08. Undisclosed Liabilities. Except as
disclosed in the Company Disclosure Documents, at December 31,
1997, there were no liabilities or obligations of any nature
(whether accrued, absolute, fixed, contingent, liquidated,
unliquidated or otherwise and whether due or to become due)
required by GAAP to be set forth on the Balance Sheet (as defined
below) of the Company and its Subsidiaries taken as a whole
except as reflected or
17
reserved against on the balance sheet at December 31, 1997
included in the Draft 1997 Statements (the "Balance Sheet").
Since December 31, 1997, the Company has not incurred any such
liabilities or obligations except such as would not, individually
or in the aggregate, have a Material Adverse Effect.
Section 3.09. Absence of Certain Changes. Except for
transactions contemplated by the Transaction Agreements
(including, for the period from the date hereof to the Closing,
transactions expressly permitted pursuant to Section 7.02 hereof
or with respect to which the Investor shall have given its
written consent), or as disclosed in the SEC Reports, the Draft
1997 Statements or on Schedules 3.09 and 3.11 hereto, since
December 31, 1997 the Company and its Subsidiaries have conducted
their consolidated business in the ordinary and usual course, and
there has not been any of the following:
(i) any change or amendment to the certificate or
articles of incorporation, bylaws or other organizational
documents of the Company or any of its Subsidiaries;
(ii) any issuance or sale or purchase or redemption of
any shares of their respective Equity Securities or of any
Derivative Securities, other than pursuant to this
Agreement, the Option Plans and the CEO Agreement;
(iii) any dividend or other distribution declared, set
aside, paid or made with respect to their respective Equity
Securities or any direct or indirect redemption, purchase
or other acquisition of such Equity Securities by the
Company or any of its Subsidiaries, except dividends or
other distributions made to the Company or to any
Wholly-Owned Subsidiary of the Company;
(iv) any acquisition or disposition of assets by the
Company and its Subsidiaries having a fair value or for a
purchase price in excess of $5,000,000, in the aggregate,
other than acquisitions or dispositions made in the
ordinary course of business (including acquisitions and
dispositions by Subsidiaries of the Company of investment
securities of any Person, provided the Company and its
Subsidiaries Beneficially Own (and, after giving effect to
such transactions would Beneficially Own), in the
aggregate, less than 5% of the Voting Power of the Voting
Securities of such Person) and acquisitions or dispositions
among the Company and its Wholly-Owned Subsidiaries or
among such Wholly-Owned Subsidiaries;
(v) except for borrowings under the Bridge Agreement
up to $200,000,000, any increase in excess of $10,000,000
in the Indebtedness of the Company and its Subsidiaries,
taken as a whole, other than repayments at stated maturity
and any change in intra-Company Indebtedness among the
Company and its Wholly-Owned Subsidiaries or among such
Wholly-Owned Subsidiaries;
(vi) except pursuant to the Bridge Agreement and
related instruments, any material amendment of any
mortgage, Lien, lease, agreement, Regulatory Approval, loan
agreement, indenture or other instrument or document;
18
(vii) any default, event of default or breach (or any
event which, with notice or the passage of time or both,
would constitute a default, event of default or breach) by
the Company or any of its Subsidiaries of any credit,
financing or other agreement or instrument relating to any
material Indebtedness;
(viii) any material damage, destruction, theft or
other casualty loss (whether or not covered by insurance);
(ix) except pursuant to the Bridge Agreement, any
material commitment, agreement or transaction entered into,
amended, or terminated (or any waiver of any rights or
remedies under any of the foregoing) by the Company or any
of its Subsidiaries (including any agreement with respect
to any ongoing or threatened litigation), other than in the
ordinary course of business;
(x) any entry into or amendment of any material
employment or severance compensation agreement or
consulting or similar agreement with, or any material
increase in the compensation or benefits payable or to
become payable by the Company or any of its Subsidiaries to
any employee of the Company or any of its Subsidiaries
(other than agreements terminable without penalty or
similar payment by the Company or such Subsidiary, as the
case may be, on not more than 30 days' notice and any other
increases in compensation payable or to become payable to
employees (other than directors or officers) in the
ordinary course of business);
(xi) any change in the financial accounting methods,
principles or practices of the Company and its Subsidiaries
for financial accounting purposes, taken as a whole, except
as required by GAAP or applicable law;
(xii) any adoption of a plan of or any agreement or
arrangement with respect to or resolutions providing for
the liquidation, dissolution, merger, consolidation or
other reorganization of the Company or any of its
Significant Subsidiaries;
(xiii) any settlement or compromise of any Proceeding
other than those in which the amount paid does not exceed
$5,000,000 individually or in the aggregate;
(xiv) any change, condition, occurrence, circumstance
or other event that, individually or in the aggregate, has
had or is reasonably likely to have a Material Adverse
Effect; or
(xv) any commitment or agreement to do any of the
foregoing, except as otherwise required or expressly
permitted by this Agreement.
Section 3.10. Property. (a) Except in each case as is
not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect, each of the Company and its
Subsidiaries has good and marketable title to all property owned
by each of them, in each case free and clear of any Liens, except
such as do not materially and adversely affect the value of such
property and do not interfere with the use made or proposed to be
made of such property by
19
the Company or such Subsidiary, and any real property and
buildings held under lease by the Company or any such Subsidiary
is held under a valid, subsisting and enforceable lease, with
such exceptions as are not material and do not interfere with the
use made or proposed to be made of such property and buildings by
the Company or such Subsidiary.
(b) Except as disclosed on Schedule 3.10(b) hereto and
except in each case as is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect, each
of the Company and its Subsidiaries owns or possesses the rights
to use, and is in compliance with, all Intellectual Property that
is used or required by it in the conduct of its business and all
such Intellectual Property is in full force and effect and will
not cease to be in full force and effect in accordance with its
terms by virtue of the consummation of the transactions
contemplated by the Transaction Agreements. Except as disclosed
on Schedule 3.10(b) hereto and except in each case as is not
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect, neither the Company nor any of its
Subsidiaries has received any notice of, and they have no
knowledge of, (i) any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property owned
or used by the Company or any of its Subsidiaries, (ii) any
challenge to the ownership of or validity or effectiveness of any
license for the use of any Intellectual Property owned or used by
the Company or any of its Subsidiaries, or (iii) any claim
against the use by the Company or any of its Subsidiaries of any
Intellectual Property owned or used by it.
Section 3.11. Litigation. Except as expressly
disclosed in the SEC Reports or on Schedule 3.11 hereto, there
are no claims, suits, actions, proceedings, arbitrations or
investigations (each, a "Proceeding") pending or, to the
knowledge of the Company, threatened, against or affecting the
Company or any of its Subsidiaries, that involve a claim against
the Company or any of its Subsidiaries in an amount in excess of
$1,000,000, or that, individually or in the aggregate, are
reasonably likely to have a Material Adverse Effect; and except
as so disclosed, there are no judgments, decrees, injunctions,
rules, stipulations or orders outstanding against or applicable
to the Company or any of its Subsidiaries or against or
applicable to any of their respective properties or businesses
that, individually or in the aggregate, are reasonably likely to
have a Material Adverse Effect.
Section 3.12. Compliance with Laws; Regulatory
Approvals. Except in each case as is not reasonably likely to
have, individually or in the aggregate, a Material Adverse
Effect, and except as disclosed in the SEC Reports or as alleged
to the date hereof in connection with or relating to the
Proceedings referred to in Schedule 3.11 hereto, the businesses
of the Company and its Subsidiaries currently are being conducted
in compliance with all applicable Laws. Except in each case as is
not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect, all Regulatory Approvals required by
the Company and its Subsidiaries to conduct their respective
business as now conducted by them have been obtained and are in
full force and effect. Except in each case as is not reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect, and except as alleged to the date hereof in
connection with or relating to the Proceedings referred to in
Schedule 3.11 hereto, the Company and its Subsidiaries are in
compliance with the terms and requirements of such Regulatory
Approvals. Except in each case as is not reasonably likely to
have, individually or in the aggregate, a
20
Material Adverse Effect, and except in connection with the
matters disclosed on Schedules 3.11 and 3.12 hereto, since
December 31, 1996, none of the Company or any of its Subsidiaries
has received any written notice or other written communication
from any Governmental Entity regarding (i) any revocation,
withdrawal, suspension, termination or modification of, or the
imposition of any material conditions with respect to, any
Regulatory Approval, (ii) any violation of any Law by the Company
or any of its Subsidiaries or (iii) any other limitations on the
conduct of business by the Company or any of its Subsidiaries.
Section 3.13. Taxes. Except as disclosed on Schedule
3.13 hereto: (a) The Company and its Subsidiaries have duly filed
all U.S. federal, state, local, foreign and other tax returns
(including any information returns), reports and statements that
are required to have been filed with the appropriate taxing
authority and have paid all Taxes shown to be due on such
returns, reports or statements. All information provided in such
returns, reports and statements is complete and accurate in all
material respects.
(b) No audits or investigations relating to any Taxes
for which the Company or its Subsidiaries may be liable are
pending or threatened in writing by any taxing authority. There
are no agreements or applications by the Company or any of its
Subsidiaries for the extension of the time for filing any tax
return or paying any Tax nor have there been any waivers of any
statutes of limitation for the assessment of any Taxes. Schedule
3.13 hereto lists the audit status of each of the Company's tax
returns.
(c) Neither the Company nor any of its Subsidiaries
are parties to any agreements relating to the sharing or
allocation of Taxes.
(d) As of January 1, 1997 for U.S. federal income tax
purposes, the Company had no net operating loss carryforwards.
There has not been an ownership change of the Company within the
meaning of Section 382 of the Code during the five years
preceding the date of this Agreement.
(e) The Company or its Subsidiaries have withheld from
its employees and timely paid to the appropriate taxing authority
proper and accurate amounts in all material respects through all
periods in compliance in all material respects with all employee
Tax withholding provisions of all applicable Laws.
Section 3.14. ERISA and Other Employment Matters. (a)
Except for the Option Plans or as set forth on Schedule 3.14(a)
hereto, neither the Company nor any of its Subsidiaries maintains
or contributes to or has any obligation to contribute to, or has
any liability with respect to, any plan, program, arrangement,
agreement or commitment which is an employment, consulting or
deferred compensation agreement, or an executive compensation,
incentive bonus or other bonus, employee pension, profit-sharing,
savings, retirement, stock option, stock purchase, severance pay,
life, health, disability or accident insurance plan, or vacation,
or other employee benefit plan, program, arrangement, agreement
or commitment, including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of ERISA (individually,
a "Plan", and collectively, the "Plans").
21
(b) With respect to each employee benefit plan
(including, without limitation, the Plans) that is subject to the
provisions of Title IV of ERISA and with respect to which the
Company or any of its Subsidiaries, or any Person that would be
treated as a single employer with the Company or any of its
Subsidiaries pursuant to Section 414(b), (c), (m) or (o) of the
Code (collectively, the "Principal Corporations") may, directly
or indirectly, incur any liability (whether by reason of the
complete or partial termination of any such plan, any "complete
withdrawal" (as defined in Section 4203 of ERISA) or "partial
withdrawal" (as defined in Section 4205 of ERISA) by any Person,
whether or not such Person is one of the Principal Corporations,
from any such plan, or otherwise):
(i) no such plan has been terminated so as to result,
directly or indirectly, in any liability, contingent or
otherwise, of any of the Principal Corporations under Title
IV of ERISA;
(ii) no complete or partial withdrawal from such plan
has been made by a Principal Corporation, or by any other
Person, so as to result in a liability to a Principal
Corporation, whether such liability is contingent or
otherwise;
(iii) no proceeding has been initiated by any Person
(including the Pension Benefit Guaranty Corporation
("PBGC")) to terminate any such plan;
(iv) no condition or event currently exists or
currently is expected to occur that is likely to result,
directly or indirectly, in any liability of any of the
Principal Corporations under Title IV of ERISA (except for
required premium payments under Title IV of ERISA, which
payments have been or will be made when due) on account of
the termination of any such plan;
(v) no "reportable event" (as defined in Section 4043
of ERISA) has occurred with respect to any such plan within
the preceding three years, other than a reportable event
for which the applicable notice requirement has been waived
by the PBGC; and
(vi) no such plan which is subject to Section 302 of
ERISA or Section 412 of the Code has incurred any
"accumulated funding deficiency" (as defined in Section 302
of ERISA and Section 412 of the Code, respectively),
whether or not waived.
(c) Except as described in Schedule in 3.14(c), no
event has occurred with respect to any Plan in connection with
which the Company or any of its Subsidiaries or any Plan,
directly or indirectly, could be subject to any material
liability under ERISA, the Code or any other Law, applicable to
any Plan, including, without limitation, Section 406, 409,
502(i), 502(l) or 4069 of ERISA, or Section 4971, 4975 (assuming
for the purpose of such Section that the "taxable period" of any
"prohibited transaction" (as such terms are defined in such
Section) had expired three years from the date hereof) or 4976 of
the Code, or under any agreement or instrument pursuant to or
under which the Company or any of its Subsidiaries has agreed to
indemnify any Person against liability incurred under, or for a
violation or failure to satisfy the requirement of, any such Law.
22
(d) Other than as set forth in Schedule 3.14(d)
hereto, with respect to each Plan (i) all payments due from each
of the Company or any of its Subsidiaries to date have been made
when due and all amounts properly accrued to date or as of the
Closing Date as liabilities of the Company or any of its
Subsidiaries which have not been paid have been properly recorded
on the books of the Company or any of its Subsidiaries; (ii) the
Company and each of its Subsidiaries have complied with, and each
such Plan conforms in form and operation to, all applicable laws
and regulations, including, but not limited to, ERISA and the
Code, in all material respects; (iii) except as described in
Schedule 3.14(d) hereto, each such Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) and
intended to qualify under Section 401 of the Code has received a
favorable determination letter from the Internal Revenue Service
with respect to such qualification, its related trust has been
determined to be exempt from taxation under Section 501(a) of the
Code, and nothing has occurred since the date of such letter that
has or is likely to adversely affect such qualification or
exemption; and (iv) there are no actions, suits or claims pending
(other than routine claims for benefits) or threatened with
respect to such Plan or against the assets of such Plan.
(e) Except as described on Schedule 3.14(e) hereto,
neither the execution and delivery of the Transaction Agreements
nor the consummation of the transactions contemplated by this
Agreement will (i) accelerate the time of the payment, vesting or
funding of, or increase the amount of, compensation due to any
employee or former employee or (ii) constitute a "Change of
Control" within the meaning of the Employment Agreements. Except
as described on Schedule 3.14(e) hereto, during the one year
preceding the date hereof, neither the Board of Directors nor any
committee thereof has taken any action that would, in connection
with the execution and delivery of the Transaction Agreements or
the consummation of the transactions contemplated by this
Agreement, result in an acceleration of the time of the payment,
vesting or funding of, or increase the amount of, compensation
due to any employee or former employee, including any
determination to contribute assets to any Grantor Trust.
(f) There has been made available to the Investor,
with respect to each Plan, a copy of all material employee
communications relating to such Plan since January 1, 1995 and a
copy of (or description of) any communication (other than routine
forms required to be filed by the Company) between the Company
and the IRS, the U.S. Department of Labor or the PBGC since
January 1, 1995 concerning the Plan.
(g) None of the Company or any of its Subsidiaries has
any announced plan or commitment (whether or not legally binding)
to create any additional Plans or to amend or modify any existing
Plan, or to increase benefits payable pursuant to any Plan.
(h) Except for the agreements set forth on Schedule
3.14(h), none of the Company or any of its Subsidiaries are
parties to any collective bargaining agreements and there are no
labor unions or other organizations representing, purporting to
represent, or attempting to represent, any employee of the
Company or any of its Subsidiaries.
(i) Neither the Company nor any of its Subsidiaries
has violated any provision of Law regarding the terms and
conditions of employment of employees, former employees or
23
prospective employees or other labor related matters, including,
without limitation, Laws relating to discrimination, fair labor
standards and occupational health and safety, wrongful discharge
or violation of the personal rights of employees, former
employees or prospective employees which is reasonably likely to
have, individually or in the aggregate, a Material Adverse
Effect.
(j) Except as set forth on Schedule 3.14(j), to the
best knowledge of the Company, there exists no limitation on the
ability of the Company or any of its Subsidiaries to modify or
terminate any Plan providing medical or life insurance benefits
to current or former employees of the Company.
Section 3.15. Contracts. (a) Except as set forth on
Schedule 3.15(a) hereto, neither the Company nor any of its
Subsidiaries is a party or subject to any of the following
(whether written or oral, express or implied): (i) any Employment
Agreement or understanding or obligation, with respect to
severance or termination, to pay liabilities or fringe benefits
with any present or former officer or director of the Company or
with any consultant of the Company or any of its Subsidiaries,
who is or may be entitled to receive pursuant to the terms
thereof, compensation in excess of $250,000 upon termination of
such Person's employment or engagement; or (ii) any plan,
contract or understanding providing for bonuses, pensions,
options, deferred compensation, retirement payments, royalty
payments, profit sharing or similar understanding with respect to
any present or former officer or director of the Company or with
any consultant of the Company or any of its Subsidiaries, who is
or may be entitled to receive pursuant to the terms thereof,
compensation in excess of $250,000 in any single year.
(b) Except as set forth on Schedule 3.15(b) hereto,
none of the Company, any of its Subsidiaries, or to the knowledge
of the Company, any other party is in breach or violation or in
default in the performance or observance of any term or provision
of any contract, agreement, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Company or any such
Subsidiary is a party or by which the Company or any such
Subsidiary is bound or to which any of the properties of the
Company or any such Subsidiary is subject, which breach,
violation or default is reasonably likely to, individually or in
the aggregate, involve a claim against the Company or any of its
Subsidiaries in an amount in excess of $25,000,000 or have a
Material Adverse Effect.
Section 3.16. Client and Provider Relations. Schedule
3.16 hereto contains for the Company and its Subsidiaries, taken
as a whole, a listing that is accurate and complete in all
material respects of (i) the twenty-five largest clients
(excluding brokers) (measured by revenues) and the revenues for
each such client and (ii) the twenty-five largest physician
providers (measured by amounts reimbursed or paid to such
providers) and the amounts reimbursed or paid to such providers,
in each case for the year ended December 31, 1997. Except as set
forth on Schedule 3.16 hereto, as of the date of this Agreement,
to the Company's knowledge none of the Company's twenty-five
largest clients (excluding brokers), twenty-five largest
physician providers or twenty-five largest non-physician
providers has advised the Company or any of its Subsidiaries that
it is not continuing, or is terminating, or is making a material
adverse change with respect to, its business with the Company or
any of its Subsidiaries. As of the date of this Agreement, to the
Company's knowledge and except as would not, individually or in
the
24
aggregate, have a Material Adverse Effect, none of the Company's
twenty-five largest clients (including brokers) has advised the
Company or any of its Subsidiaries that it is not continuing, or
is terminating, or is making an adverse change with respect to,
its business with the Company or any of its Subsidiaries.
Section 3.17. Financial Advisors and Brokers. (a)
Except for DLJ and Xxxxxxx Xxxxx Xxxxxx, no Person has acted,
directly or indirectly, as a broker, finder or financial advisor
of the Company in connection with the Transaction Agreements or
the transactions contemplated thereby, and no Person is entitled
to receive any broker's, finder's or similar fee or commission in
respect thereof based in any way on any agreement, arrangement or
understanding made by or on behalf of the Company, any of its
Subsidiaries or any of their respective directors, officers or
employees. True and correct copies of all agreements between the
Company, on the one hand, and DLJ (or any of its Affiliates) or
Xxxxxxx Xxxxx Barney (or any of its Affiliates), on the other,
have been made available to the Investor.
(b) The Board of Directors has received an opinion of
Xxxxxxx Xxxxx Xxxxxx to the effect that the consideration to be
received by the Company for the Securities pursuant to the terms
hereof is fair, from a financial point of view, to the Company.
Section 3.18. Exemption from Registration. Assuming
the representations and warranties of the Investor set forth in
Article IV hereof are true and correct in all material respects,
the offer and sale of the Securities made pursuant to this
Agreement and the acquisition of the Warrant Shares upon exercise
of the Warrants will be in compliance with the Securities Act and
any applicable state securities laws and will be exempt from the
registration requirements of the Securities Act and such state
securities laws.
Section 3.19. Insurance. Set forth on Schedule 3.19
hereto is a description that is correct and complete in all
material respects (specifying the insurer, the policy number or
covering note number with respect to binders and amount of
coverage) of insurance policies, binders, contracts or
instruments (collectively, the "Policies") to which the Company
or any of its Subsidiaries is a party or by which any of their
assets or any of their employees, officers or directors (in such
capacity) are covered by property, fire, professional liability,
fiduciary and other insurance. True and complete copies of all
such Policies have been made available to the Investor. Except as
set forth on Schedule 3.19 hereto, all such Policies are in full
force and effect in accordance with their respective terms and
will remain in full force and effect after the Closing. Except as
set forth on Schedule 3.19 hereto, neither the Company nor any of
its Subsidiaries has received any notice of default with respect
to any provision of any such Policies. With respect to its
directors' and officers' liability insurance policies, neither
the Company nor any of its Subsidiaries has failed to give any
notice or present any claim thereunder in due and timely fashion
or as required by any such policies so as to jeopardize full
recovery under such Policies.
Section 3.20. Insurance Contracts and Rates; Payment
of Claims. Except in each case as is not reasonably likely to
have, individually or in the aggregate, a Material Adverse
Effect, all insurance contracts written or issued by the Company
or any of its Subsidiaries, as
25
now in force, are in all material respects, to the extent
required by Law, on forms approved by applicable Governmental
Entities or have been filed with, and not objected to by, such
Governmental Entities within the period provided for objection,
and such forms comply in all material respects with the insurance
statutes, regulations and rules applicable thereto. Complete and
correct copies of such forms have been made available to the
Investor. Except in each case as is not reasonably likely to
have, individually or in the aggregate, a Material Adverse
Effect, premium rates established by the Company or its
Subsidiaries which are required to be filed with or approved by
Governmental Entities have been so filed or approved; the
premiums charged by the Company and its Subsidiaries conform
thereto in all material respects; and such premiums comply in all
material respects with the insurance statutes, regulations and
rules applicable thereto.
Section 3.21. Reinsurance. There are no defaults,
lapses or impairments under any reinsurance or coinsurance
treaties or agreements, including retrocessional agreements,
pursuant to which the Company or any Regulated Subsidiary has any
existing rights, obligations or liabilities, which would,
individually or in the aggregate, have a Material Adverse Effect.
Section 3.22. Disclosure. The representations and
warranties made by the Company in this Agreement, and the
exhibits, documents, statements, certificates or schedules
furnished or to be furnished to the Investor pursuant to the
terms hereof or expressly referenced herein or therein, taken as
a whole, do not and will not contain any untrue statement of a
material fact, or omit to state a material fact necessary to make
the statements or facts contained herein or therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to, and agrees
with, the Company as follows:
Section 4.01. Organization. The Investor is a limited
liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all
requisite power and authority to own or lease and operate its
properties and to conduct its business as it is now being
conducted and is proposed to be conducted.
Section 4.02. Authorization of Agreements. (a) The
Investor has all requisite power as a limited liability company
and authority to execute, deliver and perform its obligations
under the Transaction Agreements. The execution, delivery and
performance of this Agreement and the Registration Rights
Agreement, and the consummation by the Investor at the Closing of
the transactions contemplated hereby and thereby, have been duly
authorized by all other necessary action on the part of the
Investor.
(b) This Agreement and the Registration Rights
Agreement have been duly executed and delivered by the Investor,
and each such agreement constitutes a legal, valid and binding
obligation of the Investor, enforceable against the Investor in
accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally
and to general principles of equity.
26
Section 4.03. Consents; No Conflicts. (a) Except for
the Required Regulatory Approvals, no Regulatory Approval from,
or registration, declaration or filing with, any Governmental
Entity is required to be made or obtained by the Investor in
connection with the execution, delivery and performance of this
Agreement and the Registration Rights Agreement and the
consummation of the transactions contemplated hereby and thereby.
(b) The execution and delivery of this Agreement does
not, and the execution and delivery of the Registration Rights
Agreement will not, and the performance of the obligations set
forth herein and therein and the consummation of the transactions
contemplated hereby and thereby will not, (i) violate any
provision of the organizational documents of the Investor; (ii)
conflict with, contravene or result in a breach or violation of
any of the terms or provisions of, or constitute a default (with
or without notice or the passage of time) under, or result in or
give rise to a right of termination, cancellation, acceleration
or modification of any right or obligation under, or require any
consent, waiver or approval under, any note, bond, debt
instrument, indenture, mortgage, deed of trust, lease, loan
agreement, joint venture agreement, Regulatory Approval, contract
or any other agreement, instrument or obligation to which such
Investor is a party or by which the Investor or any of its
property is bound, or (iii) violate any Law applicable to the
Investor.
Section 4.04. Financial Advisors and Brokers. Except
for Bear, Xxxxxxx & Co. Inc., no Person has acted directly or
indirectly as a broker, finder or financial advisor of the
Investor in connection with the Transaction Agreements or the
transactions contemplated hereby or thereby, and no Person is
entitled to receive any broker's, finder's or similar fee or
commission in respect thereof based in any way on any agreement,
arrangement or understanding made by or on behalf of the Investor
or any of its directors, officers or employees.
Section 4.05. Ownership of Company Equity Securities;
Purpose of Investment. (a) The Investor does not own more than 1%
of the outstanding voting stock of the Company (each of "own" and
"voting stock" as defined for purposes of DGCL Section 203).
(b) Except as permitted pursuant to Section 11.10
hereof, the Investor is acquiring the Securities under this
Agreement for its own account solely for the purpose of
investment and not with a view to, or for sale in connection
with, any distribution thereof in violation of the Securities
Act. The Investor acknowledges that the Securities and the
Warrant Shares have not been registered under the Securities Act
and may be sold or disposed of in the absence of such
registration only pursuant to an exemption from the registration
requirements of the Securities Act.
ARTICLE V
GOVERNANCE
Section 5.01. Board Size. The Board of Directors shall
consist of a minimum of 11 directors and a maximum of 13
directors (before giving effect to the right, if any, of holders
of the Senior Preferred Stock to elect additional directors to
the Board of Directors as provided in the Certificate of
Designations).
27
Section 5.02. Board Representation. (a) The Board of
Directors shall elect the CEO to the Board of Directors effective
not later than the Closing Date. The CEO shall be included as a
director in Class III. So long as the CEO serves as chief
executive officer of the Company, at each annual meeting of the
stockholders of the Company at which Class III directors are up
for election, the Board of Directors or the Nominating Committee
thereof shall include the CEO for election to such class of
directors at such annual meeting. If the Board of Directors shall
cease to be a classified board, the Board of Directors or the
Nominating Committee thereof shall include the CEO for election
to the Board of Directors at each annual meeting of stockholders
of the Company for so long as the CEO serves as chief executive
officer of the Company.
(b) The Company shall cause the CEO to be included in
the slate of nominees recommended by the Board of Directors to
the Company's stockholders for election as directors at each
annual meeting of the stockholders of the Company as is required
by Section 5.02(a) hereof, and shall use its best efforts to
cause the election of the CEO, including soliciting proxies in
favor of the election of the CEO.
(c) The Board of Directors shall, subject to Section
5.02(g) hereof, elect four nominees designated in writing by the
Investor prior to the Closing (such persons, or replacements
designated by the Investor, the "Investor Nominees"), to the
Board of Directors effective as of the Closing Date in Class I
and Class II as specified by the Investor. Commencing with the
annual meeting of stockholders of the Company the record date for
which next follows the Closing Date, and at each annual meeting
of stockholders of the Company thereafter, the Investor shall be
entitled to present to the Board of Directors or the Nominating
Committee thereof a number of nominees for election to the class
of directors up for election to the Board of Directors at such
annual meeting equal to the number of Investor Nominees in such
class immediately prior to such election. If the Board of
Directors shall cease to be a classified board, the Investor
shall be entitled to present to the Board of Directors or the
Nominating Committee thereof four nominees for election to the
Board of Directors at each annual meeting of stockholders of the
Company. In the event of the death, disability, resignation or
removal of an Investor Nominee (other than pursuant to Section
5.02(e) hereof), the Investor shall designate a replacement for
such director, which replacement the Company shall cause to be
elected to the Board of Directors, subject to Section 5.02(g)
hereof.
(d) Subject to Section 5.02(g) hereof, the Company
shall cause each Investor Nominee designated for election to the
Board of Directors pursuant to the second sentence of Section
5.02(c) hereof to be included in the slate of nominees
recommended by the Board of Directors to the stockholders of the
Company for election as directors at the relevant annual meeting
of the stockholders, and shall use its reasonable best efforts to
cause the election of each such nominee, including soliciting
proxies in favor of the election of such person.
(e) Notwithstanding the foregoing provisions of this
Section 5.02, the total number of Investor Nominees the Investor
is entitled to designate for election to the Board of Directors
shall be reduced to (i) three, in the event that the Investor and
its Affiliates Beneficially Own, in the aggregate, at least 60%,
but less than 80%, of the Original Number of Warrant
28
Shares Beneficially Owned by the Investor and its Affiliates, in
the aggregate, as of the Closing (the "Investor Original Warrant
Shares"), (ii) two, in the event that the Investor and its
Affiliates Beneficially Own, in the aggregate, at least 40%, but
less than 60%, of the Investor Original Warrant Shares, (iii)
one, in the event the Investor and its Affiliates Beneficially
Own, in the aggregate, at least 20%, but less than 40%, of the
Investor Original Warrant Shares, or (iv) zero, in the event the
Investor and its Affiliates Beneficially Own, in the aggregate,
less than 20% of the Investor Original Warrant Shares. In the
event that the number of Investor Nominees the Investor is
entitled to designate for election to the Board of Directors is
reduced pursuant to the preceding sentence, the Investor shall be
entitled to designate which of the Investor Nominees the Investor
shall no longer be entitled to designate for election to the
Board of Directors. In the event that the number of Investor
Nominees the Investor is entitled to designate for election to
the Board of Directors is reduced pursuant to this Section
5.02(e), the relevant Investor Nominees shall resign from the
Board of Directors no later than the thirtieth day after the day
on which the Investor's Beneficial Ownership is reduced below the
applicable threshold ownership level of Investor Original Warrant
Shares specified in this Section 5.02(e). For purposes of any
calculation made pursuant to this Section 5.02(e) regarding the
Beneficial Ownership of Investor Original Warrant Shares by the
Investor or any of its Affiliates as of any time after the
Closing, any Warrant Share transferred to any Person other than
the Investor or its Affiliates shall be deemed not to be
Beneficially Owned by the Investor or any of its Affiliates,
regardless of whether such Warrant Share is subsequently acquired
by the Investor or any of its Affiliates.
(f) Reserved.
(g) If the Board of Directors shall determine in good
faith in the exercise of its fiduciary duties, based on the
advice of outside counsel, that nomination of any person
designated by the Investor for election to the Board of Directors
would not be in the best interests of the Company, then the
Company shall promptly notify the Investor of such determination
(either in person, if such determination shall be made at a Board
of Directors meeting at which an Investor Nominee is present or
by telephone (promptly confirmed in writing), if such
determination shall be made at a Board of Directors meeting at
which an Investor Nominee is not present) and thereafter the
Investor shall have a period of no less than five Business Days
to designate a new person for nomination for election to the
Board of Directors as an Investor Nominee. The Board of Directors
has approved the executives of the Investor set forth on Schedule
5.02(g) hereto as Investor Nominees for all purposes hereof as of
the date hereof.
Section 5.03. Committees. (a) Effective as of the
Closing Date, and for so long as an Investor Nominee serves as a
member of the Board of Directors, each committee of the Board of
Directors shall include at least one Investor Nominee; provided,
however, that in the event the rules of the primary national
securities exchange or national quotation system on which the
Common Stock is then listed or quoted prohibits the appointment
of any particular Investor Nominee to the Company's Audit
Committee such Investor Nominee shall not be appointed to such
committee; and provided, further, that if at any time the Board
of Directors shall have an executive or other committee that
performs functions similar to those customarily performed by an
executive committee of a board of directors, such committee shall
include at least two Investor Nominees so long as (i) the
Investor is entitled to designate four Investor Nominees for
29
election to the Board of Directors pursuant to Section 5.02
hereof, and (ii) such committee includes five or more directors.
(b) From and after the Closing Date, all directors of
the Company (including, without limitation, the Investor
Nominees) shall be afforded 10 days' advance notice of the time
and place of, and will be invited to attend, the regular and
special meetings of any committee of the Board of Directors. From
and after the Closing Date and so long as Investor Nominees serve
as members of the Board of Directors, the frequency of meetings,
make-up and subject matter of each committee of the Board of
Directors shall continue substantially as they are currently. So
long as the Investor has the right to have Investor Nominees
elected to committees of the Board of Directors, the Board of
Directors shall have at least the following committees: an Audit
Committee, a Compensation Committee and a Nominating Committee.
Section 5.04. CEO. The Bylaws of the Company shall
provide that the termination of the CEO shall require the
affirmative vote of at least 75% of the directors of the Company.
ARTICLE VI
STANDSTILL
Section 6.01. Standstill Agreement. (a) The Investor
covenants and agrees with the Company that, from the date hereof
through the Closing Date and thereafter (subject to paragraph (d)
below) for a period of three years following the Closing Date
(the "Standstill Period"), the Investor and its Affiliates shall
not, without the prior approval of the Board of Directors:
(i) acquire, seek, propose or offer to acquire or
agree to acquire (other than (w) in accordance with the
terms of this Agreement, the Warrants and the Certificates
of Designations; (x) as a result of a stock split, stock
dividend or other recapitalization by the Company or the
exercise of rights or warrants distributed to stockholders;
(y) as a result of transfers between the Investor and its
Affiliates, provided that the transferor did not itself
acquire the transferred Voting Securities in violation of
clauses (a) or (b) of this Section 6.01; or (z) in a
transaction in which the Investor or one of its Affiliates
acquires Beneficial Ownership of more than 50% of the
Voting Power of the Voting Securities of a previously
non-Affiliated business entity that owns less than 1% of
the Voting Power of the outstanding Voting Securities of
the Company if such acquisition is not made in
contemplation of any acquisition prohibited under this
subparagraph (a)), or commence or propose to commence any
tender offer or exchange offer seeking to acquire,
Beneficial Ownership of any additional Voting Securities of
the Company, or all or any substantial portion of the
assets of the Company and its Subsidiaries;
(ii) become a member of a Group with respect to the
Voting Securities of the Company, other than a Group
composed solely of itself and its Affiliates and, to the
extent of any Securities and Warrant Shares purchased
hereunder as of the Closing, any Designated Purchaser and
Affiliates of any Designated Purchaser, or any combination
thereof;
30
(iii) solicit any proxies or stockholder consents, or
become a participant (other than by voting), or encourage
any Person to become a participant, in a proxy or consent
solicitation with respect to any of the Company's Voting
Securities, in each case other than solicitations to
holders of shares of Preferred Stock with respect to
matters as to which the Preferred Stock is entitled to
vote;
(iv) call any special meeting of stockholders; or
(v) make any public disclosure, or take any action
which could require the Company to make any public
disclosure, with respect to an offer, proposal or
transaction that if made or consummated without the prior
approval of the Board of Directors, would not be permitted
under this Section 6.01.
(b) After the expiration of the Standstill Period,
neither the Investor nor any of its Affiliates shall acquire,
offer to acquire or agree to acquire (other than (w) in
accordance with the terms of this Agreement, the Warrants and the
Certificates of Designations; (x) as a result of a stock split,
stock dividend or other recapitalization by the Company or the
exercise of rights or warrants distributed to stockholders; (y)
as a result of transfers between the Investor and its Affiliates,
provided that the transferor did not itself acquire the
transferred Voting Securities in violation of clauses (a) or (b)
of this Section 6.01; or (z) in a transaction in which the
Investor or one of its Affiliates acquires Beneficial Ownership
of more than 50% of the Voting Power of the Voting Securities of
a previously non-Affiliated business entity that owns less than
1% of the Voting Power of the outstanding Voting Securities of
the Company), or commence any tender offer or exchange offer
seeking to acquire, Beneficial Ownership of any additional Voting
Securities of the Company, or acquire, offer to acquire or agree
to acquire all or any substantial portion of the assets of the
Company and its Subsidiaries, unless the Investor or an Affiliate
of the Investor (individually or as a member of a Group) so
acquires or offers to acquire such Voting Securities by means of
a tender offer approved by the Board of Directors for all of the
outstanding shares of Common Stock made on the same terms to each
holder of Common Stock or has theretofore made and consummated
such a tender offer and therein acquired more than 50% of the
Company's outstanding Common Stock.
(c) Notwithstanding the foregoing, the provisions of
clauses (a) and (b) of this Section 6.01 shall cease to be
applicable in the event that (i) the Company enters into a
definitive agreement with respect to a Control Transaction; (ii)
a bona fide offer is made by any Person (other than the Investor,
a Significant Designated Purchaser or an Affiliate of the
Investor or a Significant Designated Purchaser) to acquire more
than 50% of any class of the Company's Voting Securities and such
offer is approved by the Board of Directors; (iii) an Insolvency
Event occurs; or (iv) the Board of Directors (including a
majority of the outside directors other than the Investor
Nominees and any other directors that are employed by or serve as
a director of the Investor, a Significant Designated Purchaser or
any Affiliate of the Investor or a Significant Designated
Purchaser (other than the Company and its Subsidiaries)) so
determines. In the event the Company is soliciting proposals or
offers to acquire with respect to a Control Transaction from any
Person (a "bidding process") (other than the Investor, a
Significant Designated Purchaser or an Affiliate of the Investor
or a Significant Designated Purchaser), the Company
31
shall release the Investor from the restrictions contained in
clauses (a) and (b) of this Section 6.01 to the extent necessary
for the Investor to be permitted, on the same terms as bidders
approved by the Company, to make such a proposal or offer;
provided, however, that if the Investor withdraws from the
bidding process or the Company terminates the bidding process,
the Investor shall thereafter continue to be subject to the
restrictions contained in subparagraphs (a) and (b) of this
Section 6.01.
(d) The Company shall not adopt any stockholder rights
plan or similar device which would have an adverse effect on the
Investor and its Affiliates based solely upon the Investor and
its Affiliates holding Securities or Warrant Shares acquired in
the transactions contemplated by this Agreement or additional
Voting Securities acquired in transactions permitted by Section
6.01(a)(i) or Section 6.01(b) hereof other than, in each case,
subclause (z) thereof. The Company may adopt a stockholder rights
plan (with a 15% or greater "flip-in" and "flip-over" trigger) or
similar device (with similar thresholds) consistent with the
conditions set forth in the preceding sentence of this paragraph
(d), notwithstanding any other provision of this Agreement
(including, without limitation, Sections 3.09, 7.02, 8.02, 8.03
and 8.04 hereof). The Investor agrees that it shall not sell, or
permit any of its Affiliates to sell, any Securities or Voting
Securities of the Company in any transaction that to the
Investor's knowledge would result in the trigger of any such
"flip-in" or "flip-over" provision in any such rights plan or
similar device.
ARTICLE VII
PRE-CLOSING COVENANTS
Section 7.01. Taking of Necessary Action. Each of the
parties hereto agrees to use its reasonable best efforts promptly
to take or cause to be taken all actions and promptly to do or
cause to be done all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement. Without limiting
the foregoing, the Investor and the Company will use their
reasonable best efforts to make all filings, including filings
under the HSR Act, and obtain all Required Regulatory Approvals
and other Regulatory Approvals necessary or, in the opinion of
the Investors or the Company, advisable in order to permit the
consummation of the transactions contemplated hereby.
Section 7.02. Conduct of Business. From the date
hereof until the Closing, the Company shall conduct its business
and shall cause its Subsidiaries to conduct their respective
businesses in, and only in, the ordinary course and shall use,
and shall cause its Subsidiaries to use, their best efforts to
preserve intact their respective present business organizations,
operations, goodwill and relationships with third parties
(including, without limitation, clients and healthcare providers)
and to keep available the services of the present directors,
officers and key employees. Without limiting the generality of
the foregoing, except as required pursuant to outstanding
agreements or obligations of the Company or any of its
Subsidiaries that have been disclosed to the Investor and set
forth in the Schedules hereto or the SEC Reports, from the date
hereof until the Closing, without the prior written consent of
the Investor (except as expressly permitted or required by this
Agreement):
32
(i) the Company shall not, and shall cause each of its
Subsidiaries not to, sell any of the assets (other than
investment securities or any equity, partnership or other
interests in any Person sold by a Subsidiary of the Company
in the ordinary course of business, provided that the
Company and its Subsidiaries Beneficially Own, in the
aggregate, less than 5% of the Voting Power of the Voting
Securities of such Person) of the Company or its
Subsidiaries (or the securities of entities holding the
same) to any Person, other than the Company or a
Wholly-Owned Subsidiary of the Company, in one transaction
or a series of related transactions, in which the fair
value of the assets being sold, or the total consideration
(in the form of cash or property) to be received by the
Company and its Subsidiaries, exceeds $5,000,000;
(ii) the Company shall not, and shall cause each of
its Subsidiaries not to, acquire any assets (other than
investment securities acquired by a Subsidiary of the
Company in the ordinary course of business, provided that
the Company and its Subsidiaries Beneficially Own (and,
after giving effect to such transaction, would Beneficially
Own), in the aggregate, less than 5% of the Voting Power of
the Voting Securities of such Person) of any other Person
or acquire any equity, partnership or other interests in
any other Person (other than the Company or a Wholly-Owned
Subsidiary of the Company), in one transaction or series of
related transactions, in which the total consideration (in
the form of cash or property) to be paid by the Company and
its Subsidiaries exceeds $5,000,000;
(iii) the Company shall not, and shall cause each of
its Subsidiaries not to, take any of the actions or enter
into any of the agreements, commitments or transactions
described in clauses (i), (ii), (iii), (xi), (xii) or
(xiii) of Section 3.09 hereof;
(iv) the Company shall not, and shall cause each of
its Subsidiaries not to, take any action that it knows or
has reason to believe would cause a representation or
warranty of the Company set forth herein to be untrue if
made at such time, or a covenant of the Company set forth
in Article VIII to fail to be satisfied (as if such
covenant applied at such time); and
(v) the Company shall not, and shall cause each of its
Subsidiaries not to, commit or agree to do any of the
foregoing.
Section 7.03. Notifications. At all times prior to the
Closing Date, the Investor shall promptly notify the Company and
the Company shall promptly notify the Investor in writing of any
fact, change, condition, circumstance or occurrence or
nonoccurrence of any event which will or is reasonably likely to
result in the failure to satisfy the conditions to be complied
with or satisfied by it hereunder, provided, however, that the
delivery of any notice pursuant to this Section 7.03 shall not
limit or otherwise affect the remedies available hereunder to any
party receiving such notice.
Section 7.04. Alternative Transactions. (a) From the
date hereof until the earlier of the Closing and the termination
of this Agreement (the "Exclusivity Period"), the Company shall
not, shall not permit any of its Subsidiaries or Affiliates to,
and shall not authorize or permit
33
any of their Representatives to, directly or indirectly, (i)
solicit or initiate, or encourage the submission of, any
Proposal, (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be
expected to lead to, any Proposal or Alternative Transaction,
other than a transaction with the Investor, or (iii) authorize,
engage in, or enter into any agreement or understanding with
respect to, any Alternative Transaction; provided, however, to
the extent required by the fiduciary obligations of the Board of
Directors, as determined in good faith by the Board of Directors
based on the advice of outside counsel, the Company may
participate in such discussions or negotiations or furnish such
information in response to an unsolicited Proposal with respect
to, or authorize, engage in or enter into any agreement or
understanding with respect to, a Control Transaction; and
provided, further, that the Company, its Subsidiaries and
Affiliates and their Representatives may respond to any party
that initiates discussions regarding a potential Alternative
Transaction, to notify such party that it is engaged in the
transactions contemplated by this Agreement and will not engage
in any further communications while pursuing such transactions.
(b) The Company will promptly advise the Investor of,
and inform the Investor of the terms of, any Proposal that the
Company, any of its Subsidiaries or Affiliates or any of their
Representatives may receive during the Exclusivity Period.
Section 7.05. Financing. The Company agrees to
provide, will cause its Subsidiaries to provide, and will use its
reasonable best efforts to cause its and their respective
Representatives to provide, all reasonable cooperation in
connection with any financing to be consummated contemporaneously
with or at or after the Closing in respect of the transactions
contemplated by this Agreement, including without limitation, (x)
participation in meetings, due diligence sessions and road shows,
(y) the preparation of offering memoranda, private placement
memoranda, prospectuses and similar documents, and (z) the
execution and delivery of any commitment letters, underwriting or
placement agreements, pledge and security documents, other
definitive financing documents, or other requested certificates
or documents, including a certificate of the chief financial
officer of the Company with respect to solvency matters, comfort
letters of accountants and legal opinions as may be requested by
the Investor; provided, that the form and substance of any of the
material documents referred to in clause (y), and the terms and
conditions of any of the material agreements and other documents
referred to in clause (z), shall be substantially consistent with
the terms and conditions of the financing required to satisfy the
condition precedent set forth in 9.01(e) and, provided, further,
that the terms and conditions of such financing may not require
the payment of any commitment or other similar fee by the
Company, or the incurrence of any liabilities by the Company,
prior to the Closing without the Company's prior consent (which
consent will not be unreasonably withheld). The parties
acknowledge that the payment of any fees by the Company in
connection with any commitment letters, including the commitment
letter relating to the Senior Financing Arrangements, shall be
subject to the occurrence of the Closing. In addition, in
conjunction with the obtaining of any such financing, the Company
agrees, at the request of the Investor, to call for prepayment or
redemption, or to prepay, redeem and/or renegotiate, as the case
may be, any then existing Indebtedness of the Company; provided
that no such prepayment or redemption or call for
34
prepayment or redemption, shall themselves actually be made until
contemporaneously with or after the Closing.
Section 7.06. Delivery of 1997 Statements. The Company
shall deliver the 1997 Statements to the Investor as promptly as
practicable and in any event before the day which is five
Business Days prior to the Closing Date.
Section 7.07. Debenture Indentures. Prior to the
Closing, the Company and the Investor shall jointly prepare an
indenture or indentures, having terms comparable to the terms of
the Series A Preferred Stock and the Series B Preferred Stock
(including, without limitation, interest rates that are the same
as the respective dividend rates on the Series A Preferred Stock
and Series B Preferred Stock) and otherwise mutually acceptable
in form and substance, with respect to each of the Series A
Debentures and Series B Debentures.
ARTICLE VIII
ADDITIONAL COVENANTS
Section 8.01. Financial and Other Information. (a)
From and after the date hereof until the earlier of the Closing
and the termination of this Agreement, and thereafter for so long
as the Investor and its Affiliates Beneficially Own, in the
aggregate, at least 25% of the Original Number of Warrant Shares,
the Company shall (and shall cause each of its Subsidiaries to)
afford to and permit the Investor and its Representatives, upon
reasonable notice and in such manner as will not unreasonably
interfere with the conduct of the Company's (or such
Subsidiary's) business or jeopardize the ability of the Company
to assert successfully attorney-client privilege, reasonable
access to their respective properties, books, contracts,
commitments and records (including information regarding any
pending or threatened Proceeding to which the Company or any of
its Subsidiaries is, or reasonably expects to be, a party) and to
discuss the business, affairs, finances, regulatory status and
other matters related to the purchase and Beneficial Ownership of
the Securities and Warrant Shares with Representatives of the
Company.
(b) The Investor shall not use information provided
pursuant to Section 8.01(a) hereof except in connection with its
continuing evaluation of its investment in the Company and,
subject to applicable Law, will hold such information in
confidence until such time as such information otherwise becomes
publicly available; provided, however, that the Investor may
share any such information with a Designated Purchaser or
prospective Designated Purchaser prior to the Closing (but not
thereafter), if such Designated Purchaser or prospective
Designated Purchaser, as the case may be, executes and delivers
to the Company, in form and substance reasonably satisfactory to
the Company, a written confidentiality agreement including
customary standstill provisions.
Section 8.02. Limitation on Dividend Payments and
Stock Repurchases. From and after the Closing, so long as the
Investor Group Beneficially Owns, in the aggregate, at least 35%
of the Original Number of Warrant Shares and the Investor and its
Affiliates Beneficially Own, in the aggregate, at least 20% of
the Original Number of Warrant Shares, the Company shall not (i)
declare or pay any dividend on, or make any other distribution
with respect to, any
35
shares of Limited Stock (other than the Junior Preferred Stock),
or (ii) purchase, redeem or otherwise acquire, and shall cause
its Subsidiaries not to purchase, redeem or otherwise acquire,
any shares of Limited Stock (other than such purchases,
redemptions or acquisitions of Limited Stock from officers and
employees of the Company and its Subsidiaries; provided (i) that
such purchases, redemptions or acquisitions do not have purchase
prices which exceed $10,000,000 in the aggregate and (ii) such
purchases, redemptions or acquisitions are required by Law, the
provisions of the Option Plans or the provisions of Employment
Agreements in effect on the date hereof or entered into in
accordance with this Agreement or are in connection with the
repayment of promissory notes issued by employees in connection
with the purchase of Limited Stock from the Company, in
accordance with the past practice of the Company).
Section 8.03. Organizational Documents. From and after
the Closing, so long as the Investor Group Beneficially Owns, in
the aggregate, at least 35% of the Original Number of Warrant
Shares and the Investor and its Affiliates Beneficially Own, in
the aggregate, at least 20% of the Original Number of Warrant
Shares, the Company shall not effect any change or amendment to
the Certificate of Incorporation or Bylaws that is in any manner
adverse to the rights of the Investor Group (other than in
connection with a stockholders rights plan or similar device
permitted by Section 6.01(d) hereof).
Section 8.04. Limitation on Issuances of Equity
Securities. From and after the Closing, so long as the Investor
Group Beneficially Owns, in the aggregate, at least 35% of the
Original Number of Warrant Shares and the Investor and its
Affiliates Beneficially Own, in the aggregate, at least 20% of
the Original Number of Warrant Shares, the Company shall not, and
shall cause its Subsidiaries not to, issue any Equity Securities
or any Derivative Securities other than to the Company or a
Wholly-Owned Subsidiary of the Company; provided, however, that
the Company may issue capital stock (i) pursuant to options
outstanding under the Option Plans, (ii) pursuant to the
agreements and instruments listed on Schedule 8.04 hereto, and
(iii) in Qualified Offerings.
Section 8.05. Mergers, Consolidation, etc. From and
after the Closing, so long as the Investor Group Beneficially
Owns, in the aggregate, at least 35% of the Original Number of
Warrant Shares and the Investor and its Affiliates Beneficially
Own, in the aggregate, at least 20% of the Original Number of
Warrant Shares, the Company shall not authorize, engage in or
enter into any agreement or understanding with respect to, a
Control Transaction (other than the authorization, engaging in or
entering into of an agreement or understanding with respect to a
Control Transaction which agreement or understanding the Board of
Directors determines in good faith based on the written advice of
outside counsel is required to be authorized, engaged in or
entered into in order to comply with its fiduciary duties).
Section 8.06. Publicity. Except as required by Law or
by obligations pursuant to any listing agreement with or
requirement of any national securities exchange or national
quotation system on which the Common Stock is listed, admitted to
trading or quoted, neither the Company (or any of its Affiliates)
nor the Investor (nor any of its Affiliates) shall, without the
prior written consent of each other party hereto, which consent
shall not be unreasonably withheld or delayed, make any public
announcement or issue any press release with respect to
36
the transactions contemplated by this Agreement. Prior to making
any public disclosure required by applicable Law or pursuant to
any listing agreement with or requirement of any relevant
national exchange or national quotation system, the disclosing
party shall consult with the other parties hereto, to the extent
feasible, as to the content and timing of such public
announcement or press release.
Section 8.07. Status of Dividends. The Company agrees
to treat the Series A Preferred Stock and Series B Preferred
Stock as equity for all Tax purposes unless the Company
determines that there is no reasonable basis for such position.
The Company shall take no action that would jeopardize the
availability of the dividends received deduction under Section
243(a)(1) of the Code for the distributions on the Series A
Preferred Stock and Series B Preferred Stock that are paid out of
current or accumulated earnings and profits, if any.
Section 8.08. Director and Officer Indemnification.
(a) So long as the CEO or any Investor Nominee serves as a member
of the Board of Directors or as an officer of the Company, the
Company shall provide to each such individual indemnification and
directors' and officers' insurance having terms and provisions no
less favorable to such individuals than the indemnification and
directors' and officers' insurance provided to other directors
and officers of the Company (including, without limitation,
coverage for matters based in whole or in part on, or arising in
whole or in part out of, any matter existing or occurring while
such Investor Nominee was a director, even though such Investor
Nominee may no longer be a director at the time any claim for
indemnification or coverage under insurance is made).
(b) So long as the CEO or any Investor Nominee serves
as a member of the Board of Directors or as an officer of the
Company, the Company shall not amend the Certificate of
Incorporation or Bylaws so as to adversely affect the rights of
any such person with respect to indemnification by the Company
for any Losses incurred by such person in such person's capacity
as an officer or director of the Company.
(c) So long as the CEO or any Investor Nominee serves
as a member of the Board of Directors or as an officer of the
Company, the Company shall maintain in full force and effect, to
the extent available, directors' and officers' liability
insurance with respect to such person, which insurance shall be
in an amount, and shall cover such risks, as is customary for a
corporation in the same business as, or in a similar business to,
that engaged in by the Company.
Section 8.09. Listing; Reservation. (a) So long as
there are Warrants or Warrant Shares outstanding, the Company
shall use its reasonable best efforts to ensure that the Common
Stock continues to be quoted on Nasdaq.
(b) From and after the Closing, the Company shall at
all times reserve and keep available, out of its authorized and
unissued Common Stock, solely for the purpose of issuing Common
Stock upon the exercise of Warrants, such number of shares of
Common Stock free of preemptive rights as shall be sufficient to
issue Common Stock upon the exercise of all outstanding Warrants.
37
Section 8.10. Legend. The Investor agrees to the
placement on (i) certificates representing Securities purchased
by the Investor pursuant to the terms hereof, (ii) Certificates
representing Warrant Shares upon issuance pursuant to exercise of
the Warrants, and (iii) any certificate issued at any time in
exchange or substitution for any certificate bearing such legend,
of a legend (the "Private Placement Legend") substantially as set
forth below:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAW, AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS."
(b) The Private Placement Legend shall be removed from
a certificate representing Securities or Warrant Shares if such
securities represented thereby are sold pursuant to an effective
registration statement under the Securities Act or there is
delivered to the Company such satisfactory evidence, which may
include an opinion of independent counsel, as reasonably may be
requested by the Company, to confirm that neither such legend nor
the restrictions on transfer set forth therein are required to
ensure that transfers of such shares will not violate the
registration and prospectus delivery requirements of the
Securities Act.
Section 8.11. Limitation on Restrictions on Payment of
Dividends. Other than pursuant to this Agreement, the Bridge
Agreement, the Senior Financing Agreements, agreements with
Governmental Entities existing on the date hereof and set forth
on Schedule 8.11 hereto or applicable Law, the Company shall not,
and shall not permit any of its Subsidiaries to, directly or
indirectly, create, cause or suffer to exist or become effective
any contractual or other restrictions or limitations on the
ability of the Company or any of its Subsidiaries to pay any
dividends or make any other distributions on, or to purchase,
redeem or otherwise acquire, any of its Equity Securities.
Section 8.12. Management Arrangements. (a) The Company
will use its reasonable best efforts to maintain Plans and other
benefit and incentive arrangements for its senior management with
terms at least as favorable to senior management as those set
forth on Exhibit J hereto.
(b) From and after the Closing and for so long as the
Investor and its Affiliates Beneficially Own, in the aggregate,
at least 25% of the Investor Original Warrant Shares, the Company
will not permit the CEO to sell or otherwise transfer or reduce
his risk with respect to shares of Common Stock or options to
purchase Common Stock, except as expressly permitted by the
provisions of the CEO Agreement, and the Company will take all
required action to enforce such provisions and will not waive,
amend or otherwise modify any such provisions.
38
Section 8.13. Stockholders' Meeting. (a) The Company
will take, in accordance with applicable law, the Certificate of
Incorporation and Bylaws, all action necessary to present the
Shareholder Approval Proposal (as defined below) for a vote at
the Company's 1998 annual meeting of stockholders, which meeting
shall be no later than May 31, 1998 (the "Stockholders'
Meeting").
(b) The Company's proxy statement for the 1998 annual
meeting (as amended or supplemented, the "Proxy Statement") shall
include a proposal to consider and vote on the Shareholder
Approval (the "Shareholder Approval Proposal"). The Proxy
Statement shall contain the recommendation of the Board of
Directors of the Company that the stockholders approve the
Shareholder Approval Proposal. The Company shall notify the
Investor promptly of the receipt by it of any comments from the
Commission or its staff and of any request by the Commission for
amendments or supplements to the Proxy Statement or for
additional information and will supply the Investor with copies
of all correspondence between the Company and its
representatives, on the one hand, and the Commission or the
members of its staff or of any other governmental officials, on
the other hand, with respect to the Proxy Statement. Insofar as
it relates to the Shareholder Approval Proposal, the Company
shall give the Investor and its counsel the reasonable
opportunity to review and comment on the Proxy Statement prior to
its being filed with the Commission and shall give the Investor
and its counsel the reasonable opportunity to review and comment
on all amendments and supplements to the Proxy Statement and all
responses to requests for additional information and replies to
comments prior to their being filed with, or sent to, the
Commission. The Company shall give reasonable consideration to
any comments the Investor or its counsel may provide with respect
to the Proxy Statement or any amendment or supplement thereto
insofar as it relates to the Shareholder Approval Proposal.
(c) In the event the Shareholder Approval Proposal is
not duly approved by the stockholders at the Stockholders'
Meeting, the Company shall take all reasonable action necessary,
in accordance with applicable law, the Certificate of
Incorporation and Bylaws to present and the Board of Directors
shall recommend the adoption of the Shareholder Approval Proposal
at each meeting of its stockholders held thereafter until the
Shareholder Approval Proposal is duly adopted by the stockholders
for so long as the Shareholder Approval is required under the
NASD Rules for the exercise of any Series B Warrant for Common
Stock.
(d) Other than with respect to any information with
respect to any member of the Investor Group supplied to the
Company by such member of the Investor Group in writing
specifically for inclusion in the Proxy Statement as to which
information the Company makes no representation or warranty, the
Company hereby represents and warrants that the Proxy Statement,
as of the date thereof and as of the date of the Stockholders'
Meeting, will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they will be made, not misleading.
(e) The Investor hereby represents and warrants that
the Proxy Statement, as of the date thereof and as of the date of
the Stockholders' Meeting, will not include an untrue statement
of a material fact or omit to state a material fact required to
be stated therein or
39
necessary to make the statements therein, in light of the
circumstances under which they will be made, not misleading, to
the extent, and only to the extent that such statement or
omission was made in reliance upon and in conformity with written
information with respect to the Investor and its Affiliates
supplied to the Company by the Investor specifically for
inclusion in the Proxy Statement.
Section 8.14. Calculations. For the purposes of any
calculation made pursuant to Section 8.01, 8.02, 8.03, 8.04, 8.05
or 11.12 hereof regarding the Beneficial Ownership of the
Original Number of Warrant Shares by a member of the Investor
Group as of any time after the Closing, any Warrant Share
transferred to any Person other than a member of the Investor
Group shall be deemed not to be Beneficially Owned by the
Investor Group or any member thereof, regardless of whether such
Warrant Share is subsequently acquired by a member of the
Investor Group.
ARTICLE IX
CONDITIONS
Section 9.01. Conditions to Investor's Obligations.
The obligation of the Investor to purchase and pay for the
Securities to be sold to the Investor pursuant to Section 2.01
hereof at the Closing is subject to satisfaction or waiver of
each of the following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company set forth in
Article III hereof shall have been true and correct on and
as of the date hereof and shall be true and correct as of
the Closing as if made on the Closing Date (except where
such representation and warranty speaks by its terms as of
a different date, in which case it shall be true and
correct as of such date), except for such failures to be
true and correct (without giving effect to any limitation
as to materiality or Material Adverse Effect set forth
therein) which, individually and in the aggregate, would
not have a Material Adverse Effect and except for such
failures to be true and correct that result from actions
expressly permitted under or pursuant to this Agreement.
The Company shall have performed in all material respects
all obligations and complied with all agreements,
undertakings and covenants required hereunder to be
performed by it at or prior to the Closing. The Company
shall have delivered to the Investor at the Closing a
certificate in form and substance satisfactory to the
Investor dated the Closing Date and signed by the chief
executive officer and the chief financial officer of the
Company to the effect that the conditions set forth in this
Section 9.01(a) have been satisfied.
(b) Opinions of Counsel. The Investor shall have
received at the Closing from Xxxxxxxx & Xxxxxxxx, special
counsel to the Company, and Xxxxxxx X. Xxxx, the General
Counsel of the Company, written opinions dated the Closing
Date, substantially as set forth in Exhibits F and G
hereto, respectively.
(c) CEO and Related Matters. (i) The CEO shall have
been duly and validly appointed Chief Executive Officer of
the Company by all necessary action of the Board
40
of Directors, and the Company and CEO shall have entered
into an employment agreement (the "CEO Agreement")
substantially in the form of Exhibit H hereto or otherwise
on terms reasonably acceptable to the Investor and the
Company. (ii) The Company shall have adopted Plans and
other benefit and incentive arrangements for senior
management, subject, in the case of Plans for the issuance
of options to purchase Common Stock, to any required
approval of the stockholders of the Company, on
substantially the terms set forth in Exhibit J hereto or
otherwise on terms reasonably acceptable to the Investor.
(iii) The CEO shall have purchased Common Stock for a
subscription price of $10 million as contemplated by the
CEO Agreement.
(d) Reserve Reports. The Investor shall have received
true, correct and complete copies of the Company's final
1997 reserve reports (including any revisions) prepared and
certified by TPF&C, which reports shall not differ in any
material respect from the Draft Reserve Report provided to
the Investor on or about February 20, 1998. The data on
which such reserve reports were based shall have been
accurate and complete with such exceptions as would not,
individually or in the aggregate, have a Material Adverse
Effect.
(e) Senior Financing. The Company shall have received
senior debt financing, or shall have the right to borrow
under a senior credit facility or similar financing
arrangement ("Senior Financing Arrangements") then in full
force in effect, in each case on terms and conditions
reasonably acceptable to the Investor and in an aggregate
amount of not less than $350,000,000; provided that
following the delivery of the Commitment Letter the terms
and conditions of the Senior Financing Arrangements shall
be deemed reasonably acceptable to the Investor if such
terms are no less favorable to the Company than the terms
set forth in the Commitment Letter.
(f) Amendment of Bylaws. The Bylaws shall have been
duly and validly amended by all necessary action of the
Board of Directors in order to permit the Company to comply
with its obligations under the Transaction Documents.
(g) Establishment of Preferred Shares and of Warrants.
The Company shall have amended the Certificate of
Incorporation by filing with the Secretary of State of the
State of Delaware the Certificates of Designations in the
form of Exhibits A, C and E hereto containing the
resolutions of the Board of Directors of the Company
creating the Preferred Stock and setting forth the terms
and conditions of the Preferred Stock and the Debentures. A
copy of the Certificate of Incorporation (including the
Certificates of Designations), certified by the State of
Delaware, shall have been delivered to the Investor.
(h) Compliance with Laws; No Adverse Action or
Decision. Since the date hereof, (i) no Law shall have been
promulgated, enacted or entered that restrains, enjoins,
prevents, materially delays, prohibits or otherwise makes
illegal the performance of any of the Transaction
Agreements or the consummation of the transactions
contemplated hereby or thereby; (ii) no preliminary or
permanent injunction or other order by any
41
Governmental Entity that restrains, enjoins, prevents,
delays, prohibits or otherwise makes illegal the
performance of any of the Transaction Agreements or the
consummation of the transactions contemplated hereby or
thereby shall have been issued and remain in effect, and
(iii) no Governmental Entity shall have instituted any
Proceeding that seeks to restrain, enjoin, prevent, delay,
prohibit or otherwise make illegal the performance of any
of the Transaction Agreements or the consummation of the
transactions contemplated hereby or thereby.
(i) Consents. All Required Regulatory Approvals set
forth on Schedule 1.01 hereto shall have been obtained or
made on terms reasonably satisfactory to the Investor, and
all waiting periods specified under applicable Law
(including, without limitation, the waiting period under
the HSR Act), the expiration of which is necessary for such
consummation, shall have expired or been terminated.
(j) Documents. The Investor shall have received all
such counterpart originals or certified or other copies of
the Transaction Agreements and such other documents as it
may reasonably request.
(k) Board Representation. (i) As contemplated by
Section 5.02 hereof, four Investor Nominees designated by
the Investor shall have been elected to the Board of
Directors effective as of the Closing; provided that the
condition set forth in this clause (i) shall be deemed
satisfied if less than four Investor Nominees designated by
the Investor are elected to the Board of Directors, if any
person so designated by the Investor is not elected to the
Board of Directors by reason of Section 5.02(g) hereof and
an acceptable replacement Investor Nominee is not
designated by the Investor within the time period specified
in Section 5.02(g) hereof. (ii) Directors' and officers'
liability insurance shall be available on customary terms
to the Investor Nominees in an amount of coverage at least
equal to $50 million.
(l) No Material Adverse Effect; No Control
Transaction. Since the date of this Agreement, no event
shall have occurred which has had, or is reasonably likely
to have, a Material Adverse Effect, and no Control
Transaction shall have been consummated or agreement,
understanding, or arrangement with respect thereto entered
into.
(m) Financial Statements. The 1997 Statements
(including the notes thereto) shall not reflect an adverse
difference from the Draft 1997 Statements in any material
respect with respect to the consolidated financial position
of the Company and its Subsidiaries as of the date thereof
or the consolidated results of operations or consolidated
retained earnings of the Company and its Subsidiaries for
the periods or as of the dates, as the case may be, set
forth therein (other than with respect to the lack of
footnote disclosure in the Draft 1997 Statements to the
extent the disclosure contained in the footnotes to the
1997 Statements is consistent with the information
contained in the Company Disclosure Documents).
42
Section 9.02. Conditions of the Company's Obligations.
The obligation of the Company to issue and sell the Securities to
the Investor at the Closing is subject to satisfaction or waiver
of each of the following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Investor set forth in
Article IV hereof shall have been true and correct in all
material respects on and as of the date hereof and shall be
true and correct as of the Closing as if made on the
Closing Date (except where such representation and warranty
speaks by its terms as of a different date, in which case
it shall be true and correct as of such date), except for
such failures to be true and correct (without giving effect
to any limitations as to materiality or material adverse
effect set forth therein) which, individually and in the
aggregate, would not have a material adverse effect on the
ability of the Investor to consummate the transactions
contemplated hereby and except for such failures to be true
and correct that result from actions expressly permitted
under or pursuant to this Agreement. The Investor shall
have performed in all material respects all obligations and
complied with all agreements, undertakings and covenants
required by it to be performed at or prior to the Closing,
and the Investor shall have delivered to the Company at the
Closing a certificate in form and substance satisfactory to
the Company dated the Closing Date and signed on behalf of
a member of the Investor to the effect that the conditions
set forth in this Section 9.02(a) have been satisfied.
(b) Opinion of Counsel. The Company shall have
received at the Closing from Cleary, Gottlieb, Xxxxx &
Xxxxxxxx, counsel to TPG, a written opinion dated the
Closing Date to the effect set forth in Exhibit K hereto.
(c) Compliance with Laws; No Adverse Action or
Decision. Since the date hereof, (i) no Law shall have been
promulgated, enacted or entered that restrains, enjoins,
prevents, materially delays, prohibits or otherwise makes
illegal the performance of any of the Transaction
Agreements or the consummation of the transactions
contemplated hereby or thereby; (ii) no preliminary or
permanent injunction or other order by any Governmental
Entity that restrains, enjoins, prevents, delays, prohibits
or otherwise makes illegal the performance of any of the
Transaction Agreements or the consummation of the
transactions contemplated hereby or thereby shall have been
issued and remain in effect; and (iii) no Governmental
Entity shall have instituted any action, claim, suit,
investigation or other proceeding that seeks to restrain,
enjoin, prevent, delay, prohibit or otherwise make illegal
the performance of any of the Transaction Agreements or the
consummation of the transactions contemplated hereby or
thereby.
(d) Consents. All Regulatory Approvals (including,
without limitation, the Required Regulatory Approvals) from
any Governmental Entity and all consents, waivers or
approvals from any other Person required for or in
connection with the execution and delivery of the
Transaction Agreements and the consummation at the Closing
by the parties hereto and thereto of the transactions
contemplated hereby and thereby shall have been obtained or
made on terms reasonably satisfactory to the Company, and
all waiting periods specified under applicable Law
(including, without limitation, the waiting period
43
under the HSR Act), the expiration of which is necessary
for such consummation, shall have expired or been
terminated.
(e) Documents. The Company shall have received all
such counterpart originals or certified or other copies of
the Transaction Agreements and such other documents as it
may reasonably request.
(f) Registration Rights Agreement. The Company shall
have received a fully executed counterpart of the
Registration Rights Agreement from the Investor and the
Registration Rights Agreement shall be in full force and
effect.
ARTICLE X
TERMINATION
Section 10.01. Termination of Agreement. (a) Subject
to Section 10.02 hereof, this Agreement may be terminated by
notice in writing at any time prior to the Closing by the
Investor or the Company if:
(i) the Closing shall not have occurred on or before
August 31, 1998; provided, however, that the right to
terminate this Agreement under this Section 10.01(a)(i)
shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to
occur on or before such date;
(ii) any Governmental Entity of competent jurisdiction
shall have issued any judgment, injunction, order, ruling
or decree or taken any other action restraining, enjoining
or otherwise prohibiting the consummation of the
transactions contemplated by the Transaction Agreements and
such judgment, injunction, order, ruling, decree or other
action becomes final and nonappealable; provided, that the
party seeking to terminate this Agreement pursuant to this
clause (ii) shall have used its best efforts to have such
judgment, injunction, order, ruling or decree lifted,
vacated or denied; or
(iii) the Company and the Investor so mutually agree
in writing.
(b) Subject to Section 10.02 hereof, this Agreement
may be terminated by the Company after March 5, 1998 if prior to
such termination the Investor shall not have delivered to the
Company a commitment letter with respect to the Senior Financing
Arrangements satisfactory to the Investor (a "Commitment
Letter"); provided that the right to terminate under this Section
10.01(b) shall not be available to the Company if the failure to
deliver a Commitment Letter has been due in any material respect
to the failure by the Company to cooperate in connection
therewith; and provided, further, that the Company shall be under
no obligation to consummate the financing contemplated by the
Commitment Letter.
Section 10.02. Effect of Termination. (a) If this
Agreement is terminated in accordance with Section 10.01 hereof
and the transactions contemplated hereby are not consummated,
this Agreement shall become null and void and of no further force
and effect
44
except that (i) the terms and provisions of this Section 10.02
and Sections 8.01(b) and 8.06 and Article XI hereof shall remain
in full force and effect and (ii) any termination of this
Agreement shall not relieve any party hereto from any liability
for any breach of its obligations hereunder.
(b) Within one business day of the later to occur of
(i) termination of the Investment Agreement and (ii) the earlier
of (A) the entering into of a written agreement, letter of
intent, agreement in principle, memorandum of understanding or
similar writing with respect to a Control Transaction and (B) the
consummation of a Control Transaction, the Company shall pay the
Investor (or its assignees) the Alternative Transaction Fee;
provided, that an Alternative Transaction Fee shall be payable
only in the event (i) a bona fide Control Transaction (whether or
not the same Control Transaction as is ultimately consummated or
as to which a written agreement, letter of intent, agreement in
principle, memorandum of understanding or similar writing is
ultimately entered into) is proposed to, or an inquiry or contact
with respect thereto is made to, the Company or its Designated
Representatives prior to the Cut-Off Date (as defined below) or a
Proposal with respect to a bona fide Control Transaction is
publicly announced by the Person contemplating such transaction
or an agent of such Person prior to the Cut-Off Date, and (ii) an
agreement with respect to a Control Transaction is entered into
or a Control Transaction is consummated within one year after the
Cut-Off Date. The term "Cut-Off Date" shall mean the earlier of
(i) August 31, 1998 and (y) the termination of this Agreement.
The term "Designated Representatives" means (i) any officers,
directors or employees of the Company or its Subsidiaries (the
"Affiliated Representatives") or (ii) any other Representative of
the Company to the extent that such Representative conveys the
relevant information to the Company or an Affiliated
Representative.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Fees and Expenses. (a) The Company
shall be responsible for the payment of all expenses incurred by
the Company in connection with the Transaction Agreements and the
transactions contemplated thereby, regardless of whether such
transactions are consummated, including, without limitation, all
fees and expenses of the Company's legal counsel and all
third-party consultants engaged by the Company to assist in such
transactions. The Company also agrees to reimburse the Investor
for all out-of-pocket expenses reasonably incurred by the
Investor in connection with the Transaction Agreements and the
transactions contemplated thereby, including, without limitation,
all fees and expenses of the Investor's legal counsel, financial
advisors, accountants, actuaries, and all third-party consultants
engaged by the Investor to assist in such transactions and all
fees and expenses, including fees and expenses of legal counsel,
incurred in connection with enforcing the provisions of, and
collecting amounts payable pursuant to, Section 10.02(b) hereof.
Such reimbursements shall be due to the Investor at the Closing,
or promptly following any earlier termination of this Agreement
for any reason or, in the case of fees and expenses incurred
thereafter, promptly upon demand therefor. Notwithstanding the
foregoing or any other provision of this Agreement, the Company
shall have no obligation under any circumstances whatsoever to
reimburse the Investor for any fees or expenses paid or payable
to Bear, Xxxxxxx & Co., Inc. for its services in connection with
the
45
Transaction Agreements and the transactions contemplated thereby
or for any expenses of the Designated Purchasers.
(b) All amounts payable under this Agreement shall be
paid in immediately available funds to an account or accounts
designated by the recipient of such amounts.
Section 11.02. Reserved.
Section 11.03. Survival of Representations and
Warranties. Notwithstanding any investigation conducted or notice
or knowledge obtained by or on behalf of any party hereto, each
representation or warranty in this Agreement or in the Schedules
hereto or certificates delivered pursuant to this Agreement shall
survive the Closing for a period of two years. Any claim for
indemnification under this Article XI arising out of the
inaccuracy or breach of any representation or warranty must be
made prior to the termination of such period.
Section 11.04. Specific Performance. The parties
hereto specifically acknowledge that monetary damages are not an
adequate remedy for violations of this Agreement, and that any
party hereto may, in its sole discretion, apply to a court of
competent jurisdiction for specific performance or injunctive or
such other relief as such court may deem just and proper in order
to enforce this Agreement or prevent any violation hereof and, to
the extent permitted by applicable law and to the extent the
party seeking such relief would be entitled on the merits to
obtain such relief, each party waives any objection to the
imposition of such relief.
Section 11.05. Indemnification. (a) Subject to the
last sentence of Section 11.01(a) hereof, the Company agrees to
indemnify and hold harmless (i) the Investor, each Designated
Purchaser, each member thereof, each limited or general partner
of each such member, each limited or general partner of each such
limited or general partner, each of their Affiliates and each of
their Representatives (collectively, the "Indemnified Parties")
from and against any and all losses, penalties, judgments, suits,
costs, claims, liabilities, damages and expenses (including,
without limitation, reasonable attorneys' fees and disbursements
but excluding Taxes imposed as a result of being a direct or
indirect owner of the Securities or realizing income or gain with
respect thereto) (collectively, "Losses"), incurred by, imposed
upon or asserted against any of the Indemnified Parties as a
result of, relating to or arising out of, the breach of any
representation, warranty, agreement or covenant made by the
Company in any Transaction Agreement or in any certificate
delivered by the Company pursuant to any Transaction Agreement
(each of which shall be deemed to have been made for the benefit
of all members of the Investor Group) and (ii) the Investor, each
member thereof, each limited or general partner of each such
member, each limited or general partner of each such limited or
general partner, each of their Affiliates and each of their
Representatives, to the fullest extent permitted by law, against
any and all Losses incurred by, imposed upon or asserted against
any such Indemnified Party as a result of, relating to or arising
out of any litigation, claims, suits or proceedings to which such
Indemnified Party is made a party (other than as a plaintiff) or
any penalties, costs, claims, liabilities, damages or expenses
suffered by such Indemnified Party, in each case in its capacity
as a direct or indirect holder or owner of Securities or Warrant
Shares; provided that unless and until a final and non-appealable
judicial determination shall be made
46
that such Indemnified Party is not entitled to indemnification
under clause (ii) above, each such Indemnified Party shall be
reimbursed for all indemnified Losses under clause (ii) above as
they are incurred; provided, further, that if a final and
non-appealable judicial determination shall be made that such
Indemnified Party is not entitled to be indemnified for Losses
under clause (ii) above, such Indemnified Party shall repay to
the Company the amount of such Losses for which the Company shall
have reimbursed such Indemnified Party. In determining the amount
of any Losses, the mitigating effect, if any, of the exercise
price reset provisions of the Warrants shall be taken into
account, it being understood that the fact that the exercise
price is reset shall not, by itself, be conclusive evidence that
there has been such a mitigating effect.
(b) The Investor agrees to indemnify and hold harmless
the Company and each of its Representatives (collectively, the
"Indemnified Company Parties") from and against any and all
Losses incurred by any of the Indemnified Company Parties as a
result of, or arising out of, the breach of any representation,
warranty, agreement or covenant made by the Investor in the
Transaction Agreements or in any certificate delivered by the
Investor pursuant to the Transaction Agreements.
(c) The following provisions shall apply to claims for
Losses from claims by a third party ("Claim"). The indemnifying
party shall have the absolute right, in its sole discretion and
expense, to elect to defend, contest or otherwise protect against
any such Claim with legal counsel of its own selection. The
Indemnified Parties or the Indemnified Company Parties, as the
case may be, shall have the right, but not the obligation, to
participate, at their own expense, in the defense thereof through
counsel of their own choice and shall have the right, but not the
obligation, to assert any and all crossclaims or counterclaims
they may have. The Indemnified Parties or the Indemnified Company
Parties, as the case may be, shall, and shall cause their
Affiliates to, at all times cooperate in all reasonable ways
with, make their relevant files and records available for
inspection and copying by, and make their employees available or
otherwise render reasonable assistance to, the indemnifying party
(i) in its defense of any action for which indemnity is sought
hereunder and (ii) its prosecution under the last sentence of
this Section 11.05(c) of any related claim, cross-complaint,
counterclaim or right of subrogation. In the event the
indemnifying party fails timely to defend, contest or otherwise
protect against any such suit, action, investigation, claim or
proceeding, the Indemnified Parties or the Indemnified Company
Parties, as the case may be, shall have the right, but not the
obligation, to defend, contest, assert cross-claims or
counterclaims or otherwise protect against the same. No claim or
action subject hereto may be settled unless the Indemnified
Parties or the Indemnified Company Parties, as the case may be,
and the indemnifying party consent thereto, such consent not to
be unreasonably withheld. The indemnifying party shall be
subrogated to the claims or rights of the Indemnified Parties or
the Indemnified Company Parties, as the case may be, as against
any other persons with respect to any Loss paid by the
indemnifying party under this Section 11.05(c).
Section 11.06. Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
to have been duly given, if delivered personally, by telecopier
or sent by first class mail, postage prepaid, as follows:
47
(a) If to the Company, to:
Oxford Health Plans, Inc.
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: General Counsel
With a copy to:
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx, Esq.
(b) If to the Investor, to:
TPG OXFORD LLC
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx
With a copy to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxx, Esq.
(c) If to any other holder of shares of Series A
Preferred Stock, Debentures, Warrants or Warrant Shares,
addressed to such holder at the address of such holder in the
record books of the Company; or to such other address or
addresses as shall be designated in writing.
All notices shall be effective when received.
Section 11.07. Entire Agreement; Amendment. This
Agreement and the documents described herein or attached or
delivered pursuant hereto (including, without limitation, the
Registration Rights Agreement the Certificate of Designations and
the Warrants) set forth the entire agreement between the parties
hereto with respect to the transactions contemplated by this
Agreement and supersedes the letter agreement dated February 23,
1998 between the Company and the Investor which is terminated in
its entirety hereby. Any provision of this Agreement may be
amended, modified or supplemented in whole or in part at any time
by an agreement in writing among the parties hereto executed in
the same manner as this Agreement; provided, however, that in the
case of the Company, any such amendment, modification or
supplement must be approved by a majority of the outside
directors other than
48
the Investor Nominees and any other directors that are employed
by or serve as a director of the Investor or any Affiliate of the
Investor (other than the Company and its Subsidiaries). No
failure on the part of any party to exercise, and no delay in
exercising, any right shall operate as waiver thereof, nor shall
any single or partial exercise by either party of any right
preclude any other or future exercise thereof or the exercise of
any other right. No investigation by the Investor of the Company
prior to or after the date hereof shall stop or prevent the
Investor from exercising any right hereunder or be deemed to be a
waiver of any such right.
Section 11.08. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed to constitute an original, but all of which together shall
constitute one and the same document.
Section 11.09. Governing Law. This Agreement shall be
governed by, and interpreted in accordance with, the laws of the
State of New York applicable to contracts made and to be
performed in that State without reference to its conflict of laws
rules. The parties hereto agree that the appropriate and
exclusive forum for any disputes arising out of this Agreement
solely between the Company and the Investor shall be the United
States District Court for the Southern District of New York, and,
if such court will not hear any such suit, the courts of the
state of the Company's incorporation, and the parties hereto
irrevocably consent to the exclusive jurisdiction of such courts,
and agree to comply with all requirements necessary to give such
courts jurisdiction. The parties hereto further agree that the
parties will not bring suit with respect to any disputes arising
out of this Agreement except as expressly set forth below for the
execution or enforcement of judgment, in any jurisdiction other
than the above specified courts. Each of the parties hereto
irrevocably consents to the service of process in any action or
proceeding hereunder by the mailing of copies thereof by
registered or certified airmail, postage prepaid, to the address
specified in Section 11.06 hereof. The foregoing shall not limit
the rights of any party hereto to serve process in any other
manner permitted by the law or to obtain execution of judgment in
any other jurisdiction. The parties further agree, to the extent
permitted by law, that final and unappealable judgment against
any of them in any action or proceeding contemplated above shall
be conclusive and may be enforced in any other jurisdiction
within or outside the United States by suit on the judgment, a
certified or exemplified copy of which shall be conclusive
evidence of the fact and the amount of indebtedness. The parties
agree to waive any and all rights that they may have to a jury
trial with respect to disputes arising out of this Agreement.
Section 11.10. Successors and Assigns. (a) Except as
otherwise expressly provided herein, the provisions hereof shall
inure to the benefit of, and be binding upon, the Company's
successors and assigns. Except as provided in Section 11.10(b)
hereof, neither this Agreement nor any rights hereunder shall be
assignable by any party hereto without the prior written consent
of the other party hereto; provided, however, that the Investor
may assign all or part of its interest in this Agreement and its
rights hereunder to any of its Affiliates and, thereafter, the
term "Investor," as applied to the assigning Investor, shall
include any such Affiliate to the extent of such assignment and
shall mean the assigning Investor and such Affiliates taken
collectively; and, provided, further, that no such assignment
shall relieve the Investor of its obligations hereunder.
49
(b) Notwithstanding the foregoing, prior to the
Closing the Investor may assign its rights with respect to the
purchase of up to 49% of the Securities to be purchased by the
Investor hereunder to any Person or Persons not Affiliated with
the Investor (each such Person, a "Designated Purchaser");
provided, however, that no assignment made pursuant to this
Section 11.10(b) shall relieve the Investor of any of its
obligations under this Agreement, including, without limitation,
its obligation to purchase all of such Securities pursuant to the
terms hereof; and, provided, further, that no assignment shall be
made pursuant to this Section 11.10(b) that would result in a
delay of the Closing beyond the date that otherwise would have
been fixed for the Closing if the Investor were purchasing all of
the Securities. The Investor shall not assign pursuant to this
Section 11.10(b) any of its rights under this Agreement other
than the right to purchase the Securities. Except as expressly
provided in this Agreement, no Designated Purchaser shall have
any rights under this Agreement or any rights of the Investor
(other than rights that by their terms are available to all
holders of Securities generally) under the Certificates of
Designations or the Warrants. As a condition to any assignment
pursuant to this Section 11.10(b), each Designated Purchaser
shall deliver to the Company a letter, dated as of the Closing
Date, in form and substance reasonably satisfactory to the
Company, pursuant to which such Designated Purchaser shall (i)
make the representation set forth in Section 4.05(b) hereof, (ii)
agree to comply with the provisions set forth in Section 8.06
hereof as if it were the Investor thereunder, (iii) appoint the
Investor as its exclusive agent for the purposes of administering
the indemnification provisions set forth in Section 11.05 hereof,
and (iv) if as a result of an assignment contemplated by this
Section 11.10(b) such Designated Purchaser would as of the
Closing Beneficially Own Voting Securities of the Company
representing more than 5% of the Voting Power of the Voting
Securities of the Company (such Designated Purchaser, a
"Significant Designated Purchaser"), agree to comply with the
provisions of Article VI hereof as if it were the Investor
thereunder. Any assignment under this Section 11.10(b) shall be
made by the Investor pursuant to a transaction that is exempt
from the registration requirements of the Securities Act. Any
assignment to such Designated Purchaser that does not comply with
the preceding provisions of this Section 11.10(b) shall be null
and void, and at the Closing the Investor shall purchase all
Securities that would have been purchased by such Designated
Purchaser. The Investor shall inform the Company of the identity
of each Designated Purchaser at least two Business Days prior to
the Closing Date.
Section 11.11. No Third-Party Beneficiaries. This
Agreement is for the sole benefit of the parties hereto and their
respective successors and permitted assigns and nothing herein,
express or implied, is intended or shall confer upon any other
Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement, except
that the provisions of Section 8.08 shall inure to the benefit of
and be enforceable by the Investor Nominees and the provisions of
Section 11.05 shall inure to the benefit of and be enforceable by
each Indemnified Party.
Section 11.12. Termination of Certain Provisions. In
the event the Investor and its Affiliates Beneficially Own, in
the aggregate, less than 10% of the Original Number of Warrant
Shares, the provisions set forth in Articles V, VI and VIII
hereof shall terminate and be of no further force or effect.
50
Section 11.13. Allocation. The Investor shall
reasonably determine, and the Company shall accept if reasonable,
the allocation of the Investment Purchase Price among the
Preferred Stock and the Warrants issued to the Investor at
Closing.
51
IN WITNESS WHEREOF, this Agreement has been executed
on behalf of the parties hereto by their respective duly
authorized officers, all as of the date first above written.
TPG OXFORD LLC
By /s/ Xxxxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: President
OXFORD HEALTH PLANS, INC.
By /s/ Xxxxxxx X. Xxxxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President and
Chief Executive Officer
EXHIBIT A
CERTIFICATE OF DESIGNATIONS
of
SERIES A CUMULATIVE PREFERRED STOCK
of
OXFORD HEALTH PLANS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
--------------
Oxford Health Plans, Inc., a corporation organized and
existing under the General Corporation Law of the State of
Delaware (the "Corporation"), hereby certifies that the following
resolutions were adopted by the Board of Directors of the
Corporation (the "Board of Directors") pursuant to authority of
the Board of Directors as required by Section 151 of the Delaware
General Corporation Law:
RESOLVED, that pursuant to the authority granted to
and vested in the Board of Directors in accordance with the
provisions of the Second Amended and Restated Certificate of
Incorporation of the Corporation, as amended (the "Certificate of
Incorporation"), the Board of Directors hereby creates a series
of the Corporation's previously authorized preferred stock, par
value $0.01 per share (the "Preferred Stock"), and hereby states
the designation and number thereof, and fixes the voting powers,
preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and
restrictions thereof, as follows:
Series A Cumulative Preferred Stock:
I. Designation and Amount
The designation of this series of shares shall be
"Series A Cumulative Preferred Stock" (the "Series A Preferred
Stock"); the stated value per share shall be $1,000 (the "Stated
Value"); and the number of shares constituting such series shall
be 300,000. The number of shares of the Series A Preferred Stock
may be decreased from time to time by a resolution or resolutions
of the Board of Directors; provided, however, that such number
shall not be decreased below the aggregate number of shares of
the Series A Preferred Stock then outstanding.
II. Rank
A. With respect to dividend rights, the Series A
Preferred Stock shall rank (i) junior to each other class or
series of Preferred Stock which by its terms ranks senior to the
Series A Preferred Stock as to payment of dividends, (ii) on a
parity with each other class or series of Preferred Stock which
by its terms ranks on a parity with the Series A Preferred Stock
as to payment of dividends, including the Series B Preferred
Stock, par value $0.01 per share, of the Corporation (the "Series
B Preferred Stock") and (iii) prior to the Corporation's Common
Stock, par value $.01 per share (the "Common Stock"), and, except
as specified above, all other classes and series of capital stock
of the Corporation hereafter issued by the Corporation. With
respect to dividends, all equity securities of the Corporation to
which the Series A Preferred Stock ranks senior, including the
Common Stock, are collectively referred to herein as the "Junior
Dividend Securities"; all equity securities of the Corporation
with which the Series A Preferred Stock ranks on a parity,
including the Series B Preferred Stock, are collectively referred
to herein as the "Parity Dividend Securities"; and all equity
securities of the Corporation (other than convertible debt
securities) to which the Series A Preferred Stock ranks junior,
with respect to dividends, are collectively referred to herein as
the "Senior Dividend Securities."
B. With respect to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the Series A Preferred Stock
shall rank (i) junior to each other class or series of Preferred
Stock which by its terms ranks senior to the Series A Preferred
Stock as to distribution of assets upon liquidation, dissolution
or winding up, (ii) on a parity with each other class or series
of Preferred Stock which by its terms ranks on a parity with the
Series A Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation,
including the Series B Preferred Stock, and (iii) prior to the
Common Stock, and, except as specified above, all other classes
and series of capital stock of the Corporation hereinafter issued
by the Corporation. With respect to the distribution of assets
upon liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, all equity securities of the
Corporation to which the Series A Preferred Stock ranks senior,
including the Common Stock, are collectively referred to herein
as "Junior Liquidation Securities"; all equity securities of the
Corporation (other than convertible debt securities) to which the
Series A Preferred Stock ranks on parity, including the Series B
Preferred Stock, are collectively referred to herein as "Parity
Liquidation Securities"; and all equity securities of the
Corporation to which the Series A Preferred Stock ranks junior
are collectively referred to herein as "Senior Liquidation
Securities."
C. The Series A Preferred Stock shall be subject to
the creation of Junior Dividend Securities and Junior Liquidation
Securities (collectively, "Junior Securities") but no Parity
Dividend Securities or Parity Liquidation Securities
(collectively, "Parity Securities") (other than the Series B
Preferred Stock), or Senior Dividend Securities or Senior
Liquidation Securities (collectively, "Senior Securities") shall
be created except in accordance with the terms hereof and the
Investment Agreement, including, without limitation, Article
VIII, Section F hereof.
2
III. Dividends
A. Dividends. Prior to the Second Anniversary Date,
shares of Series A Preferred Stock shall accumulate dividends at
a rate of 8.243216% per annum, payment of which may be made in
cash or by the issuance of additional shares of Series A
Preferred Stock (which, upon issuance, shall be fully paid and
nonassessable), at the option of the Company; provided that if
any such dividend is paid after the Second Anniversary Date, such
dividend shall be paid in cash. On and after the Second
Anniversary Date, shares of Series A Preferred Stock shall
accumulate dividends at a rate of 8% per annum, which dividends
shall be paid in cash. On and prior to the Second Anniversary
Date, dividends shall be paid annually on the anniversary of the
original issuance of Series A Preferred Stock, and thereafter
dividends shall be paid in four equal quarterly installments on
the last day of March, June, September and December of each year,
or if any such date is not a Business Day, the Business Day next
preceding such day (each such date, regardless of whether any
dividends have been paid or declared and set aside for payment on
such date, a "Dividend Payment Date"), to holders of record (the
"Registered Holders") as they appear on the stock record books of
the Corporation on the fifteenth day prior to the relevant
Dividend Payment Date. Dividends shall be paid only when, as and
if declared by the Board of Directors out of funds at the time
legally available for the payment of dividends. Dividends shall
begin to accumulate on outstanding shares of Series A Preferred
Stock from the date of issuance and shall be deemed to accumulate
from day to day whether or not earned or declared until paid.
Dividends shall accumulate on the basis of a 360-day year
consisting of twelve 30-day months (four 90-day quarters) and the
actual number of days elapsed in the period for which payable.
B. Accumulation. Dividends on the Series A Preferred
Stock shall be cumulative, and from and after any Dividend
Payment Date on which any dividend that has accumulated or been
deemed to have accumulated through such date has not been paid in
full or any payment date set for a redemption on which such
redemption payment has not been paid in full, additional
dividends shall accumulate in respect of the amount of such
unpaid dividends or unpaid redemption payment (the "Arrearage")
at the annual rate then in effect as provided in Section A of
this Article III (or such lesser rate as may be the maximum rate
that is then permitted by applicable law). Such additional
dividends in respect of any Arrearage shall be deemed to
accumulate from day to day whether or not earned or declared
until the Arrearage is paid, shall be calculated as of such
successive Dividend Payment Date and shall constitute an
additional Arrearage from and after any Dividend Payment Date to
the extent not paid on such Dividend Payment Date. References in
any Article herein to dividends that have accumulated or that
have been deemed to have accumulated with respect to the Series A
Preferred Stock shall include the amount, if any, of any
Arrearage together with any dividends accumulated or deemed to
have accumulated on such Arrearage pursuant to the immediately
preceding two sentences. Additional dividends in respect of any
Arrearage may be declared and paid at any time, in whole or in
part, without reference to any regular Dividend Payment Date, to
Registered Holders as they appear on the stock record books of
the Corporation on such record date as may be fixed by the Board
of Directors (which record date shall be no less than 10 days
prior to the corresponding payment date). Dividends in respect of
any Arrearage shall be paid in cash.
3
C. Method of Payment. Dividends paid on the shares of
Series A Preferred Stock in an amount less than the total amount
of such dividends at the time accumulated and payable on all
outstanding shares of Series A Preferred Stock shall be allocated
pro rata on a share-by-share basis among all such shares then
outstanding. After the Second Anniversary Date, dividends that
are declared and paid in an amount less than the full amount of
dividends accumulated on the Series A Preferred Stock (and on any
Arrearage) shall be applied first to the earliest dividend which
has not theretofore been paid. All cash payments of dividends on
the shares of Series A Preferred Stock shall be made in such coin
or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
IV. Liquidation Preference
In the event of a liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the
holders of then-outstanding shares of Series A Preferred Stock
shall be entitled to receive out of the assets of the
Corporation, whether such assets are capital or surplus of any
nature, an amount per share equal to the sum of (i) the
dividends, if any, accumulated or deemed to have accumulated
thereon to the date of final distribution to such holders,
whether or not such dividends are declared, and (ii) the Stated
Value thereof, and no more, before any payment shall be made or
any assets distributed to the holders of any Junior Liquidation
Securities. After any such payment in full, the holders of Series
A Preferred Stock shall not, as such, be entitled to any further
participation in any distribution of assets of the Corporation.
All the assets of the Corporation available for distribution to
stockholders after the liquidation preferences of any Senior
Liquidation Securities shall be distributed ratably (in
proportion to the full distributable amounts to which holders of
Series A Preferred Stock and Parity Liquidation Securities, if
any, are respectively entitled upon such dissolution, liquidation
or winding up) among the holders of the then-outstanding shares
of Series A Preferred Stock and Parity Liquidation Securities, if
any, when such assets are not sufficient to pay in full the
aggregate amounts payable thereon.
Neither a consolidation or merger of the Corporation
with or into any other Person or Persons, nor a sale, conveyance,
lease, exchange or transfer of all or part of the Corporation's
assets for cash, securities or other property to a Person or
Persons shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for purposes of this Article IV,
but the holders of shares of Series A Preferred Stock shall
nevertheless be entitled from and after any such consolidation,
merger or sale, conveyance, lease, exchange or transfer of all or
part of the Corporation's assets to the rights provided by this
Article IV following any such transaction. Notice of any
voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, stating the payment date or dates when, and
the place or places where, the amounts distributable to each
holder of shares of Series A Preferred Stock in such
circumstances shall be payable, shall be given by first-class
mail, postage prepaid, mailed not less than 30 days prior to any
payment date stated therein, to holders of record as they appear
on the stock record books of the Corporation as of the date such
notices are first mailed.
4
V. Redemption
A. Optional Redemption. The Corporation shall not have
any right to redeem any shares of Series A Preferred Stock prior
to the fifth anniversary of the original issuance of the Series A
Preferred Stock. On and after such date, the Corporation shall
have the right, at its option and election, to redeem all the
outstanding shares of Series A Preferred Stock, in whole but not
in part, at any time, in accordance with the provisions of this
Article V. The redemption price for such shares of Series A
Preferred Stock shall be paid in cash out of funds legally
available therefor and shall be in an amount per share equal to
the sum of (i) the amount, if any, of all unpaid dividends
accumulated thereon to the date of actual payment of the
Redemption Price, whether or not such dividends have been
declared, and (ii) the Stated Value thereof (the "Redemption
Price").
B. Mandatory Redemption. On the tenth anniversary of
the original issuance of the Series A Preferred Stock (the
"Mandatory Redemption Date"), the Corporation shall redeem (the
"Mandatory Redemption") all outstanding shares of Series A
Preferred Stock by paying the Redemption Price therefor in cash
out of funds legally available for such purpose.
C. Notice and Redemption Procedures. Notice of the
redemption of shares of Series A Preferred Stock pursuant to
Section A or B hereof (a "Notice of Redemption") shall be sent to
the holders of record of the shares of Series A Preferred Stock
to be redeemed by first class mail, postage prepaid, at each such
holder's address as it appears on the stock record books of the
Corporation not more than 120 nor fewer than 90 days prior to the
date fixed for redemption, which date shall be set forth in such
notice (the "Redemption Date"); provided that failure to give
such Notice of Redemption to any holder, or any defect in such
Notice of Redemption to any holder shall not affect the validity
of the proceedings for the redemption of any shares of Series A
Preferred Stock held by any other holder. Notwithstanding the
foregoing, in the event that contemporaneously with or prior to
the delivery of a Notice of Redemption, the Corporation
irrevocably deposits, in accordance with Section F of this
Article V, funds sufficient to pay the aggregate Redemption Price
for the Series A Preferred Stock, such Notice of Redemption shall
be delivered not more than 120 days nor fewer than 30 days prior
to the Redemption Date; provided, however, that, if such Notice
of Redemption is delivered fewer than 60 days prior to the
Redemption Date and the Investor or any of its Affiliates
Beneficially Owns shares of Series A Preferred Stock as of the
date of the Notice of Redemption and uses its reasonable best
efforts to consummate the sale of its shares of Series A
Preferred Stock prior to the stated Redemption Date but has not
completed the sale of all the Series A Preferred Stock
Beneficially Owned by the Investor and its Affiliates (or such
other amount desired to be sold by the Investor and its
Affiliates), the Corporation shall, at the option of the Investor
(or any such Affiliate), delay such Redemption Date for a period
not to exceed 30 days as requested by the Investor (or any such
Affiliate) in order to complete such sale or sales, and shall
notify the holders of Series A Preferred Stock of such delay
within five days of receiving the request therefor. Any delay of
the Redemption Date pursuant to the proviso to the preceding
sentence shall be requested by the Investor (or its Affiliate) in
writing no later than the tenth day preceding the then-scheduled
Redemption Date stated in the Notice of Redemption. The
Redemption Date stated in a Notice of Redemption shall not be
delayed more than once in connection with the
5
redemption of shares of Series A Preferred Stock pursuant to such
Notice of Redemption. In order to facilitate the redemption of
shares of Series A Preferred Stock, the Board of Directors may
fix a record date for the determination of the holders of shares
of Series A Preferred Stock to be redeemed, in each case, not
more than 30 days prior to the date the Notice of Redemption is
mailed. On or after the Redemption Date, each holder of the
shares called for redemption shall surrender the certificate
evidencing such shares to the Corporation at the place designated
in such notice and shall thereupon be entitled to receive payment
of the Redemption Price. From and after the Redemption Date, all
dividends on shares of Series A Preferred Stock shall cease to
accumulate and all rights of the holders thereof as holders of
Series A Preferred Stock shall cease and terminate, except to the
extent the Corporation shall default in payment thereof on the
Redemption Date. Prior to any Redemption Date that has been fixed
by the Company, other than in connection with the Mandatory
Redemption, the Corporation shall take all measures reasonably
requested by the Investor to facilitate a sale or other
disposition of Series A Preferred Stock by the Investor or its
Affiliates prior to such Redemption Date, including, without
limitation, participation in due diligence sessions and provision
of information about the management, business and financial
condition of the Corporation, preparation of offering memoranda,
private placement memoranda and other similar documents and
preparation and delivery of such other certificates or documents
reasonably requested by the Investor. For so long as the Investor
or an Affiliate of the Investor holds any shares of Series A
Preferred Stock, no Notice of Redemption in connection with a
redemption pursuant to Section A or B of this Article V shall be
delivered unless (i) the Corporation's preferred stock is rated
Baa or better by Xxxxx'x or BBB or better by S&P, or in the event
the Corporation's preferred stock is not rated by Xxxxx'x and
S&P, the Corporation's unsecured debt is rated Baa or better by
Xxxxx'x or BBB or better by S&P or (ii) the Corporation has
sufficient funds reasonably available under committed lines of
credit or other similar sources of financing established with
financially sound financing providers to pay, on the Redemption
Date, the aggregate Redemption Price in connection with such
redemption (and shall reserve such funds or availability for the
payment of the aggregate Redemption Price); provided, that the
Corporation may deliver a Notice of Redemption without complying
with the foregoing conditions if prior to, or contemporaneously
with, the delivery of such notice the Corporation irrevocably
deposits in accordance with Section F of this Article V funds
sufficient to pay the aggregate Redemption Price for the Series A
Preferred Stock.
D. Change of Control. In the event there occurs a
Change of Control, any holder of record of shares of Series A
Preferred Stock, in accordance with the procedures set forth in
Section E hereof, may require the Corporation to redeem any or
all of the shares of Series A Preferred Stock held by such holder
at the Redemption Price therefor.
E. Change of Control Notice and Redemption Procedures.
Notice of any Change of Control shall be sent to the holders of
record of the outstanding shares of Series A Preferred Stock not
more than five days following a Change of Control, which notice
(a "Change of Control Notice") shall describe the transaction or
transactions constituting such Change of Control and set forth
each holder's right to require the Corporation to redeem any or
all shares of Series A Preferred Stock held by him or her out of
funds legally available therefor, the Redemption Date (which date
shall be not more than 30 days from the date of
6
such Change of Control Notice) and the procedures to be followed
by such holders in exercising his or her right to cause such
redemption; provided, however, that if shares of Series A
Preferred Stock are owned by more than 50 holders or groups of
Affiliated holders and if the Series A Preferred Stock is listed
on any national securities exchange or quoted on any national
quotation system, the Corporation shall give such Change of
Control Notice by publication in a newspaper of general
circulation in the Borough of Manhattan, The City of New York,
within 30 days following such Change of Control and, in any case,
a similar notice shall be mailed concurrently to each holder of
shares of Series A Preferred Stock. Failure by the Corporation to
give the Change of Control Notice as prescribed by the preceding
sentence, or the formal insufficiency of any such Change of
Control Notice, shall not prejudice the rights of any holder of
shares of Series A Preferred Stock to cause the Corporation to
redeem any such shares held by him or her. In the event a holder
of shares of Series A Preferred Stock shall elect to require the
Corporation to redeem any or all such shares of Series A
Preferred Stock pursuant to Section D hereof, such holder shall
deliver, prior to the Redemption Date as set forth in the Change
of Control Notice, or, if the Change of Control Notice is not
given as required by this Section E, at any time following the
last day the Corporation was required to give the Change of
Control Notice in accordance with this Section E (in which case
the Redemption Date shall be the date which is the later of (x)
30 days following the last day the Corporation was required to
give the Change of Control Notice in accordance with this Section
E and (y) 15 days following the delivery of such election by such
holder), a written notice, in the form specified by the
Corporation (if the Corporation did in fact give the notice
required by this Section E), to the Corporation so stating, and
specifying the number of shares to be redeemed pursuant to
Section D hereof; provided, however, that if all of the shares of
the Series A Preferred Stock are owned by 50 or fewer holders or
groups of affiliated holders, such holders or groups may deliver
a notice or an election to redeem at any time within 90 days
following the occurrence of a Change of Control without awaiting
receipt of a Change of Control Notice or the expiration of the
time allowed for the delivery of a Change of Control Notice
hereunder. The Corporation shall redeem the number of shares so
specified on the Redemption Date fixed by the Corporation or as
provided in the preceding sentence. The Corporation shall comply
with the requirements of Rules 13e-4 and 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection
with the repurchase of the shares of Series A Preferred Stock as
a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with
the provisions of this paragraph, the Corporation shall comply
with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations hereunder by virtue
thereof.
F. Deposit of Funds. The Corporation shall, on or
prior to any Redemption Date pursuant to this Article V, deposit
with its transfer agent or other redemption agent in the Borough
of Manhattan, The City of New York having a capital and surplus
of at least $500,000,000 selected by the Board of Directors, as a
trust fund for the benefit of the holders of the shares of Series
A Preferred Stock to be redeemed, cash that is sufficient in
amount to redeem the shares to be redeemed in accordance with the
Notice of Redemption or Change of Control Notice, with
irrevocable instructions and authority to such transfer agent or
other redemption
7
agent to pay to the respective holders of such shares, as
evidenced by a list of such holders certified by an officer of
the Corporation, the Redemption Price upon surrender of their
respective share certificates. Such deposit shall be deemed to
constitute full payment of such shares to the holders, and from
and after the date of such deposit, all rights of the holders of
the shares of Series A Preferred Stock that are to be redeemed as
stockholders of the Corporation with respect to such shares,
except the right to receive the Redemption Price upon the
surrender of their respective certificates, shall cease and
terminate. No dividends shall accumulate on any shares of Series
A Preferred Stock after the Redemption Date for such shares
(unless the Corporation shall fail to deposit cash sufficient to
redeem all such shares). In case holders of any shares of Series
A Preferred Stock called for redemption shall not, within two
years after such deposit, claim the cash deposited for redemption
thereof, such transfer agent or other redemption agent shall,
upon demand, pay over to the Corporation the balance so
deposited. Thereupon, such transfer agent or other redemption
agent shall be relieved of all responsibility to the holders
thereof and the sole right of such holders, with respect to
shares to be redeemed, shall be to receive the Redemption Price
as general creditors of the Corporation. Any interest accrued on
any funds so deposited shall belong to the Corporation, and shall
be paid to it from time to time on demand.
VI. Exchange of Series A Preferred Stock
A. The Series A Preferred Stock shall be exchangeable,
at any time, at the option of the Corporation and to the extent
permitted by applicable law, in whole but not in part, on any
Dividend Payment Date for Junior Subordinated Debentures (issued
pursuant to an indenture (the "Indenture") prepared in accordance
with the Investment Agreement), in principal amount of $1,000 per
share of Series A Preferred Stock (a "Debenture" and,
collectively, the "Debentures"), in accordance with this Article
VI:
(i) Each share of Series A Preferred Stock shall be
exchangeable at the offices of the Corporation and at such
other place or places, if any, as the Board of Directors
may designate. Except with the prior written consent of the
holders of all outstanding shares of Series A Preferred
Stock, the Corporation may not exchange any shares of
Series A Preferred Stock if (a) full cumulative dividends,
to the extent payable or deemed payable through the date of
exchange, have not been paid or set aside for payment on
all outstanding shares of the Series A Preferred Stock, (b)
the Corporation has failed to amend its Certificate of
Incorporation pursuant to Delaware law to confer the power
to vote upon holders of the Debentures as shall be
contemplated by the Indenture or (c) such exchange could
result in any tax consequence to the Investor or any of its
Affiliates which is materially adverse.
(ii) Prior to giving notice of its intention to
exchange, the Corporation shall execute and deliver to a
bank or trust company selected by the Board of Directors
and, if required by applicable law, qualify under the Trust
Indenture Act of 1939, as amended, the Indenture.
8
(iii) The Corporation shall mail written notice of its
intention to exchange Series A Preferred Stock for
Debentures (the "Exchange Notice") to each holder of record
of shares of Series A Preferred Stock not less than 90 nor
more than 120 days prior to the date fixed for exchange.
(iv) Prior to effecting any exchange provided above,
the Corporation shall deliver to each holder of shares of
Series A Preferred Stock an opinion of nationally
recognized legal counsel to the effect that: (i) each of
the Indenture and the Debentures have been duly authorized
and executed by the Corporation and, when delivered by the
Corporation in exchange for shares of Series A Preferred
Stock, will constitute valid and legally binding
obligations of the Corporation enforceable against the
Corporation in accordance with their terms, subject to
applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general
principles of equity; (ii) the exchange of the Debentures
for the shares of Series A Preferred Stock shall not
violate the provisions of this Article VI or of the
Delaware General Corporation Law, including Section 221
thereof; and (iii) the exchange of the Debentures for the
shares of Series A Preferred Stock is exempt from the
registration requirements of the Securities Act or, if no
such exemption is available, that the Debentures have been
duly registered for such exchange under such Act.
(v) Upon the exchange of shares of Series A Preferred
Stock for Debentures, the rights of the holders of shares
of Series A Preferred Stock as stockholders of the
Corporation shall terminate and such shares shall no longer
be deemed outstanding.
(vi) Before any holder of shares of Series A Preferred
Stock shall be entitled to receive Debentures, such holder
shall surrender the certificate or certificates therefor,
at the office of the Corporation or at such other place or
places, if any, as the Board of Directors shall have
designated, and shall state in writing the name or names
(with addresses) in which he or she wishes the certificate
or certificates for the Debentures to be issued. The
Corporation will, as soon as practicable thereafter, issue
and deliver at said office or place to such holder of
shares of Series A Preferred Stock, or to his or her
nominee or nominees, certificates for the Debentures to
which he or she shall be entitled as aforesaid. Shares of
Series A Preferred Stock shall be deemed to have been
exchanged as of the close of business on the date fixed for
exchange as provided above, and the Person or Persons
entitled to receive the Debentures issuable upon such
exchange shall be treated for all purposes (including the
accrual and payment of interest) as the record holder or
holders of such Debentures as of the close of business on
such date.
B. For purposes of clause (c) of paragraph (i) of
Section A, an exchange of shares of Series A Preferred Stock
shall be deemed to be an exchange that could result in a tax
consequence to the Investor or any of its Affiliates which is
materially adverse only if the Investor or its Affiliate shall
have delivered to the Corporation a written notice to such effect
on or before the fifteenth day after its receipt of the Exchange
Notice (an "Objection Notice"), which Objection Notice shall be
prepared in good faith and shall specify in reasonable detail the
nature of such tax consequences which could result from the
exchange (other than the difference
9
between the tax treatment of distributions on the Series A
Preferred Stock and interest payments on the Debentures);
provided, that the Investor or its Affiliates shall not deliver
an Objection Notice unless the Investor and its Affiliates
Beneficially Own, in the aggregate, at least 1,000 shares of
Series A Preferred Stock at the time of delivery of such
Objection Notice to the Corporation. If the Corporation receives
an Objection Notice, then the Corporation shall not exchange the
shares of Series A Preferred Stock of the Investor and its
Affiliates and the Corporation shall, within 15 days after its
receipt of the Objection Notice mail written notice to the effect
that it is canceling the proposed exchange of shares of Series A
Preferred Stock to each holder of record of shares of Series A
Preferred Stock to which it mailed the Exchange Notice.
C. Shares of the Series A Preferred Stock may be
exchanged for Warrant Shares pursuant to Section 4 of the
Warrants.
VII. Restrictions on Dividends
So long as any shares of the Series A Preferred Stock
are outstanding, the Board of Directors shall not declare, and
the Corporation shall not pay or set apart for payment any
dividend on any Junior Securities or make any payment on account
of, or set apart for payment money for a sinking or other similar
fund for, the repurchase, redemption or other retirement of, any
Junior Securities or Parity Securities or any warrants, rights or
options exercisable for or convertible into any Junior Securities
or Parity Securities (other than the repurchase, redemption or
other retirement of debentures or other debt securities that are
convertible or exchangeable into any Junior Securities or Parity
Securities), or make any distribution in respect of the Junior
Securities, either directly or indirectly, and whether in cash,
obligations or shares of the Corporation or other property (other
than distributions or dividends in Junior Securities to the
holders of Junior Securities), and shall not permit any
corporation or other entity directly or indirectly controlled by
the Corporation to purchase or redeem any Junior Securities or
Parity Securities or any warrants, rights, calls or options
exercisable for or convertible into any Junior Securities or
Parity Securities (other than the repurchase, redemption or other
retirement of debentures or other debt securities that are
convertible or exchangeable into any Junior Securities or Parity
Securities) unless prior to or concurrently with such
declaration, payment, setting apart for payment, repurchase,
redemption or other retirement or distribution, as the case may
be, all accumulated and unpaid dividends on shares of the Series
A Preferred Stock not paid on the dates provided for in paragraph
A of Article III hereof (including Arrearages and accumulated
dividends thereon) shall have been paid, except that when
dividends are not paid in full as aforesaid upon the shares of
Series A Preferred Stock, all dividends declared on the Series A
Preferred Stock and any series of Parity Dividend Securities
shall be declared and paid pro rata so that the amount of
dividends so declared and paid on Series A Preferred Stock and
such series of Parity Dividend Securities shall in all cases bear
to each other the same ratio that accumulated dividends
(including interest accrued on or additional dividends
accumulated in respect of such accumulated dividends) on the
shares of Series A Preferred Stock and such Parity Dividend
Securities bear to each other. Notwithstanding the foregoing,
this paragraph shall not prohibit (i) the acquisition,
repurchase, exchange, conversion, redemption or other retirement
for value of shares of Series A Preferred Stock or any Parity
Dividend Security by the Corporation in accordance with the terms
of such securities or of any shares of Trust Preferred Stock (as
defined
10
in Section F of Article VIII) or (ii) the acquisition,
repurchase, exchange, conversion, redemption or other retirement
for value by the Corporation of any Junior Dividend Securities by
the Corporation in accordance with obligations in existence at
the time of original issuance of the Series A Preferred Stock.
VIII. Voting Rights
A. The holders of shares of Series A Preferred Stock
shall have no voting rights except as set forth below or as
otherwise from time to time required by law.
B. So long as any shares of the Series A Preferred
Stock are outstanding, each share of Series A Preferred Stock
shall entitle the holder thereof to vote on all matters voted on
by holders of Common Stock, and the shares of Series A Preferred
Stock shall vote together with shares of Common Stock (and any
shares of Series B Preferred Stock entitled to vote) as a single
class; provided, however, that upon register or transfer on the
stock records of the Corporation of a share of Series A Preferred
Stock to any Person other than the Investor or an Affiliate of
the Investor, the transferee, and any subsequent transferee,
shall not be entitled to such voting rights. With respect to any
such vote, the Investor (together with its Affiliates) shall be
entitled to a number of votes per share of Series A Preferred
Stock equal to the quotient of the Investor Aggregate Vote
Number, divided by the number of shares of Series A Preferred
Stock held by such Investor and its Affiliates as of the record
date for such vote. The "Investor Aggregate Vote Number" shall
equal the number of Warrant Shares that would be issuable upon
the exercise of the Original Warrants (as defined below) by the
holders thereof (assuming all conditions precedent to such
exercise have been satisfied and that such exercise occurs as of
the record date for such vote), multiplied by the lesser of (x)
the quotient of the number of Original Warrants that are
Beneficially Owned by members of the Investor Group, in the
aggregate, as of the record date for such vote (excluding for
purposes of this calculation, however, any Original Warrants that
have been transferred on the books of the Corporation by any
member of the Investor Group to any Person other than a member of
the Investor Group, regardless of whether any such Original
Warrants are subsequently acquired by any member of the Investor
Group), divided by the number of Original Warrants, and (y) the
quotient of the number of Original Series A Preferred Shares (as
defined below) that are Beneficially Owned by members of the
Investor Group, in the aggregate, as of the record date for such
vote (excluding for purposes of this calculation, however, any
Original Series A Preferred Shares transferred on the stock
records of the Corporation by any member of the Investor Group to
any Person other than a member of the Investor Group, regardless
of whether any such Original Series A Preferred Shares are
subsequently acquired by any member of the Investor Group),
divided by the number of Original Series A Preferred Shares. The
term "Original Warrants" means those Warrants Beneficially Owned
by members of the Investor Group, in the aggregate, as of the
Closing. The term "Original Series A Preferred Shares" means
those shares of Series A Preferred Stock Beneficially Owned by
members of the Investor Group, in the aggregate, as of the
Closing.
C. If on any date (i) dividends payable on either the
Series A Preferred Stock or the Series B Preferred Stock shall
have been in arrears and not paid in full for four consecutive
quarterly periods or if dividends shall have been in arrears and
not paid in full on the first or
11
second annual anniversary of the original issuance of the Series
A Preferred Stock or Series B Preferred Stock, as the case may
be, or (ii) the Corporation shall have failed to satisfy its
obligation to redeem either shares of Series A Preferred Stock or
shares of Series B Preferred Stock pursuant to the relevant
Certificate of Designations, then the number of directors
constituting the Board of Directors shall, without further
action, be increased by two, and the holders of a majority of the
outstanding shares of Series A Preferred Stock and Series B
Preferred Stock shall have, in addition to the other voting
rights set forth herein, the exclusive right, voting together as
a single class without regard to series, to elect the two
directors (the "Additional Directors") of the Corporation to fill
such newly-created directorships. Notwithstanding the foregoing,
the Investor and its Affiliates shall not be permitted to elect,
pursuant to the preceding sentence, more than the number of
directors that would result in four directors designated for
nomination or elected by the Investor and its Affiliates then
being on the Board of Directors (including directors that the
Investor has a right to designate for nomination to the Board of
Directors pursuant to the Investment Agreement); provided, that
if at the time holders of Series A Preferred Stock and Series B
Preferred Stock have the right to elect Additional Directors and
(i) the Investor and its Affiliates Beneficially Own, in the
aggregate, a majority of the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock, taken together as a
single class, and (ii) the Investor and its Affiliates are not
permitted to elect one or both of the Additional Directors as
aforesaid, then the holders of Series A Preferred Stock and
Series B Preferred Stock (other than the Investor and its
Affiliates) shall have the right to elect, voting together as a
single class, one Additional Director pursuant to this Section C.
Additional Directors shall continue as directors and such
additional voting right shall continue until such time as (a) all
dividends accumulated on the Series A Preferred Stock and/or
Series B Preferred Stock, as the case may be, shall have been
paid in full or (b) any redemption obligation with respect to the
Series A Preferred Stock and/or the Series B Preferred Stock, as
the case may be, that has become due shall have been satisfied or
all necessary funds shall have been set aside for payment, as the
case may be, at which time such Additional Directors shall cease
to be directors and such additional voting right of the holders
of shares of Series A Preferred Stock shall terminate subject to
revesting in the event of each and every subsequent event of the
character indicated above and subject to any rights as to the
election of directors provided for the holders of any other
series of Preferred Stock of the Corporation.
D. In the event that one or more of the Investor
Nominees required to be designated for election to the Board of
Directors pursuant to the Investment Agreement are not so
designated or are not elected to the Board of Directors and the
Investor or any of its Affiliates Beneficially Owns shares of
Series A Preferred Stock, then the number of directors
constituting the Board of Directors shall, without further
action, be increased by the number of such Investor Nominees not
elected to the Board of Directors pursuant to the Investment
Agreement, and such holder or holders shall have, in addition to
the other voting rights set forth herein, the exclusive right,
voting separately as a single class, to elect a number of
directors to the Board of Directors equal to the number of such
Investor Nominees not elected to the Board of Directors.
Directors elected pursuant to this Section D shall continue as
directors and such additional voting right shall continue until
such time as the requisite number of Investor Nominees are
elected to the Board of Directors pursuant to the Investment
Agreement, at which time the directors elected by the Investor
and its Affiliates pursuant to this Section D shall cease to be
directors (unless elected
12
as Investor Nominees), and such additional voting rights shall
terminate subject to revesting in the event of each and every
subsequent event of the character indicated above.
E. (a) The foregoing rights of holders of shares of
Series A Preferred Stock to take any action as provided in this
Article VIII may be exercised at any annual meeting of
stockholders or at a special meeting of stockholders held for
such purpose as hereinafter provided or at any adjournment
thereof, or by the written consent, delivered to the Secretary of
the Corporation, of the holders of the minimum number of shares
required to take such action. So long as such right to vote
continues (and unless such right has been exercised by written
consent of the minimum number of shares required to take such
action), the Chairman of the Board of Directors may call, and
upon the written request of holders of record of 20% of the
outstanding shares of Series A Preferred Stock, addressed to the
Secretary of the Corporation at the principal office of the
Corporation, shall call, a special meeting of the holders of
shares entitled to vote as provided herein. Such meeting shall be
held within 60 days after delivery of such request to the
Secretary, at the place and upon the notice provided by law and
in the Bylaws for the holding of meetings of stockholders.
(b) Each director elected pursuant to Section C or D
hereof shall serve until the next annual meeting or until his or
her successor shall be elected and shall qualify, unless the
director's term of office shall have terminated pursuant to the
provisions of Section C or D hereof, as the case may be. In case
any vacancy shall occur among the directors elected pursuant to
Section C or D hereof, such vacancy may be filled for the
unexpired portion of the term by vote of the remaining director
or directors theretofore elected by such holders (or such
director's or directors' successor in office), if any. If any
such vacancy is not so filled within 20 days after the creation
thereof or if all of the directors so elected shall cease to
serve as directors before their term shall expire, the holders of
the shares then outstanding and entitled to vote for such
director pursuant to the provisions of Section C or D hereof, as
the case may be, may elect successors to hold office for the
unexpired terms of any vacant directorships, by written consent
as herein provided, or at a special meeting of such holders
called as provided herein. The holders of a majority of the
shares entitled to vote for directors pursuant to Section C or D
hereof, as the case may be, shall have the right to remove with
or without cause at any time and replace any directors such
holders have elected pursuant to such section, by written consent
as herein provided, or at a special meeting of such holders
called as provided herein.
F. Without the consent or affirmative vote of the
holders of at least a majority of the outstanding shares of
Series A Preferred Stock, voting separately as a class, the
Corporation shall not authorize, create or issue, or increase the
authorized amount of, (i) any Senior Securities or Parity
Securities or (ii) any class or series of capital stock or any
security convertible into or exercisable for any class or series
of capital stock, redeemable mandatorily or redeemable at the
option of the holder thereof at any time on or prior to the
Mandatory Redemption Date (whether or not only upon the
occurrence of a specified event); provided, however, that no
consent or vote of the holders of the outstanding shares of the
Series A Preferred Stock shall be required for the creation or
issuance by a trust formed at the direction of the Corporation of
any series of preferred securities of such trust for financing
purposes in an aggregate amount not to exceed $250,000,000
("Trust Preferred Stock"). No consent or vote of the holders of
the outstanding
13
shares of Series A Preferred Stock shall be required to
authorize, create or issue, or increase the authorized amount of,
any class or series of Junior Securities, or any security
convertible into a stock of any class or series of Junior
Securities, except to the extent such action would violate
Section H of this Article VIII.
G. Without the consent or affirmative vote of the
holders of at least a majority of the outstanding shares of
Series A Preferred Stock, voting separately as a class, the
Corporation shall not (i) amend, alter or repeal any provision of
the Certificate of Incorporation or the Bylaws, if the amendment,
alteration or repeal alters or changes the powers, preferences or
special rights of the Series A Preferred Stock so as to affect
them materially and adversely, or (ii) authorize or take any
other action if such action alters or changes any of the rights
of the Series A Preferred Stock in any respect or otherwise would
be inconsistent with the provisions of this Certificate of
Designations and the holders of any class or series of the
capital stock of the Corporation is entitled to vote thereon.
H. Other Securities. The Corporation shall not enter
into any agreement or issue any security that prohibits,
conflicts or is inconsistent with, or would be breached by, the
Corporation's performance of its obligations hereunder.
IX. Additional Definitions
For the purposes of this Certificate of Designations
of Series A Preferred Stock, the following terms shall have the
meanings indicated:
"Affiliate" has the meaning set forth in Rule 12b-2
under the Exchange Act. The term "Affiliated" has a correlative
meaning. Notwithstanding the foregoing, for all purposes hereof,
TPG, and each Person controlled by, controlling or under common
control with TPG (each, a "TPG Person"), shall not be deemed an
"Affiliate" of any Designated Purchaser Person (as defined
below), and no Designated Purchaser, and no Person controlled by,
controlling or under common control with such Designated
Purchaser (each, a "Designated Purchaser Person"), shall be
deemed an "Affiliate" of any TPG Person or any other Designated
Purchaser Person, in any such case solely as a consequence of the
Investment Agreement and the transactions contemplated thereby.
"Beneficially Own" with respect to any securities
means having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act as in
effect on the date hereof, except that a Person shall be deemed
to Beneficially Own all such securities that such Person has the
right to acquire whether such right is exercisable immediately or
after the passage of time). The terms "Beneficial Ownership" and
"Beneficial Owner" have correlative meanings. Notwithstanding the
foregoing, for all purposes hereof, no TPG Person shall be deemed
to Beneficially Own any securities that are held by any
Designated Purchaser Person, and no Designated Purchaser Person
shall be deemed to Beneficially Own any securities that are held
by any TPG Person or other Designated Purchaser Person, in any
such case solely as a consequence of the Investment Agreement or
the transactions contemplated thereby.
14
"Business Day" means any day, other than a Saturday,
Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to
close.
"Bylaws" means the Bylaws of the Corporation, as
amended.
"Change of Control" means such time as:
(i) any Person or Group (other than the Investor, its
Affiliates, the Corporation or any Subsidiaries of the
Corporation, or any Group composed of such Persons) has
become, directly or indirectly, the Beneficial Owner, by
way of merger, consolidation or otherwise, of a majority of
the voting power of the then-outstanding Voting Securities
of the Corporation on a fully-diluted basis, after giving
effect to the conversion and exercise of all outstanding
warrants, options and other securities of the Corporation
convertible into or exercisable for Voting Securities of
the Corporation (whether or not such securities are then
currently convertible or exercisable); or
(ii) the sale, lease, transfer or other disposition of
all or substantially all of the consolidated assets of the
Corporation and its Subsidiaries to any Person or Group; or
(iii) during any period of two consecutive calendar
years, individuals who at the beginning of such period
constituted the Board of Directors, together with any new
members of such Board of Directors whose election by such
Board of Directors or whose nomination for election by the
stockholders of the Corporation was approved by a vote of
at least a majority of the members of such Board of
Directors then still in office who either were directors at
the beginning of such period or whose election or
nomination for election was previously so approved or who
were approved pursuant to Section 5.02 of the Investment
Agreement or Article VIII, Section C, D or E of this
Certificate of Designations, cease for any reason to
constitute a majority of the directors of the Corporation
then in office; or
(iv) the Corporation consolidates with or merges with
or into another Person or any Person consolidates with, or
merges with or into, the Corporation, in any such event
pursuant to a transaction in which immediately after the
consummation thereof the Persons owning the
then-outstanding Voting Securities of the Corporation
immediately prior to such consummation shall not own a
majority in the aggregate (by reason of such prior
ownership) of the then-outstanding Voting Securities of the
Corporation or the surviving entity if other than the
Corporation; or
(v) the adoption of a plan relating to the liquidation
or dissolution of the Corporation, whether or not otherwise
in compliance with the provisions of this Series A
Preferred Stock.
"Closing" shall have the meaning assigned to such term
in the Investment Agreement.
15
"Designated Purchaser" has the meaning assigned to
such term in the Investment Agreement.
"Designated Purchaser Person" has the meaning set
forth in the definition of "Affiliate."
"Exchange Act" means the U.S. Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated
thereunder, from time to time.
"Group" has the meaning set forth in Rule 13d-5 under
the Exchange Act.
"Investment Agreement" means the Investment Agreement,
dated as of February 23, 1998, by and between the Investor and
the Corporation, as amended, supplemented or otherwise modified
from time to time.
"Investor Group" means, collectively, the Investor,
the Designated Purchasers, if any, and the respective Affiliates
of such Persons.
"Investor Nominee" means a person designated for
election to the Board of Directors by the Investor pursuant to
the Investment Agreement.
"Investor" means TPG.
"Moody's" means Xxxxx'x Investors Service and its
successors.
"Person" means any individual, corporation, company,
association, partnership, joint venture, trust or unincorporated
organization, or a government or any agency or political
subdivision thereof.
"Registration Rights Agreement" means the Registration
Rights Agreement, dated as of February 23, 1998, by and between
the Investor and the Corporation, as amended, supplemented or
otherwise modified from time to time.
"Second Anniversary Date" means the second anniversary
of the original issuance of the Series A Preferred Stock.
"Securities Act" means the U.S. Securities Act of
1933, as amended, and the rules and regulations promulgated
thereunder, from time to time.
"Series B Preferred Stock" has the meaning assigned to
such term in the Investment Agreement.
"S&P" means Standard and Poor's Ratings Group, a
division of the XxXxxx-Xxxx Companies, and its successors.
"Subsidiary" means, with respect to any Person, (i)
any corporation, association or other business entity of which
more than 50% of the total voting power of shares of voting stock
16
is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that
Person (or combination thereof) and (ii) any partnership (A) the
sole general partner of the managing general partner of which is
such Person or a Subsidiary of such Person or (B) the only
general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TPG" means TPG Oxford LLC, a Delaware limited
liability company.
"TPG Person" has the meaning set forth in the
definition of "Affiliate."
"Voting Securities" means the shares of Common Stock
and any other securities of the Corporation entitled to vote
generally for the election of directors.
"Warrants" means the Series A Warrants issued by the
Corporation on pursuant to the Investment Agreement.
"Warrant Shares" has the meaning assigned to such term
in the Warrants.
X. Miscellaneous
A. Notices. Any notice referred to herein shall be in
writing and, unless first-class mail shall be specifically
permitted for such notices under the terms hereof, shall be
deemed to have been given upon personal delivery thereof, upon
transmittal of such notice by telecopy (with confirmation of
receipt by telecopy or telex) or five days after transmittal by
registered or certified mail, postage prepaid, addressed as
follows:
(i) if to the Corporation, to its office at 000
Xxxxxxxxxxx Xxxxxx Xxxxxxx, Xxxxxxxxxxx 00000 (Attention:
General Counsel) or to the transfer agent for the Series A
Preferred Stock;
(ii) if to a holder of the Series A Preferred Stock,
to such holder at the address of such holder as listed in
the stock record books of the Corporation (which may
include the records of any transfer agent for the Series A
Preferred Stock); or
(iii) to such other address as the Corporation or such
holder, as the case may be, shall have designated by notice
similarly given.
B. Reacquired Shares. Any shares of Series A Preferred
Stock redeemed, purchased or otherwise acquired by the
Corporation, directly or indirectly, in any manner whatsoever
shall be retired and canceled promptly after the acquisition
thereof (and shall not be deemed to be outstanding for any
purpose) and, if necessary to provide for the lawful redemption
or purchase of such shares, the capital represented by such
shares shall be reduced in accordance with the Delaware General
Corporation Law. All such shares of Series A Preferred Stock
shall upon their cancellation and upon the filing of an
appropriate certificate with the Secretary of State of the State
of Delaware, become authorized but unissued shares of Preferred
Stock, par value $0.01 per share, of the Corporation and may be
reissued as part of another series of
17
Preferred Stock, par value $0.01 per share, of the Corporation
subject to the conditions or restrictions on issuance set forth
herein.
C. Enforcement. Any registered holder of shares of
Series A Preferred Stock may proceed to protect and enforce its
rights and the rights of such holders by any available remedy by
proceeding at law or in equity to protect and enforce any such
rights, whether for the specific enforcement of any provision in
this Certificate of Designations or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
D. Transfer Taxes. Except as otherwise agreed upon
pursuant to the terms of this Certificate of Designations, the
Corporation shall pay any and all documentary, stamp or similar
issue or transfer taxes and other governmental charges that may
be imposed under the laws of the United States of America or any
political subdivision or taxing authority thereof or therein in
respect of any issue or delivery of Debentures on exchange of, or
other securities or property issued on account of, shares of
Series A Preferred Stock pursuant hereto or certificates
representing such shares or securities. The Corporation shall
not, however, be required to pay any such tax or other charge
that may be imposed in connection with any transfer involved in
the issue or transfer and delivery of any certificate for
Debentures or other securities or property in a name other than
that in which the shares of Series A Preferred Stock so
exchanged, or on account of which such securities were issued,
were registered and no such issue or delivery shall be made
unless and until the Person requesting such issue has paid to the
Corporation the amount of any such tax or has established to the
satisfaction of the Corporation that such tax has been paid or is
not payable.
E. Transfer Agent. The Corporation may appoint, and
from time to time discharge and change, a transfer agent for the
Series A Preferred Stock. Upon any such appointment or discharge
of a transfer agent, the Corporation shall send notice thereof by
first-class mail, postage prepaid, to each holder of record of
shares of Series A Preferred Stock.
F. Record Dates. In the event that the Series A
Preferred Stock shall be registered under either the Securities
Act or the Exchange Act, the Corporation shall establish
appropriate record dates with respect to payments and other
actions to be made with respect to the Series A Preferred Stock.
18
IN WITNESS WHEREOF, this Certificate of Designations
is executed on behalf of the Corporation by its [ ] and
attested by its Assistant Secretary, this ___ day of [ ],
1998.
OXFORD HEALTH PLANS, INC.
By:__________________________
Name:
Title:
[Corporate Seal]
ATTEST:
_________________________
19
EXHIBIT B
Form of Series A Warrant Certificate
NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED
HEREBY HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAW, AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN THE REGISTRATION RIGHTS AGREEMENT
DATED AS OF FEBRUARY 23, 1998, BY AND BETWEEN TPG OXFORD LLC AND
OXFORD HEALTH PLANS, INC. (THE "COMPANY"), THE TERMS OF WHICH ARE
INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY AND AT THE
PRINCIPAL OFFICE OF THE WARRANT AGENT.
No. W-_______ _______ Warrants
SERIES A WARRANTS
Exercisable commencing _______ __, 1998;
Void after Expiration Time (as defined herein)
OXFORD HEALTH PLANS, INC., a Delaware corporation (the
"Company"), hereby certifies that, for value received, ________,
or registered assigns (the "Warrantholder"), is the owner of
________ Warrants (as defined below), each of which entitles the
Warrantholder to purchase from the Company one fully paid, duly
authorized and nonassessable share of Common Stock, par value
$0.01 per share, of the Company (the "Common Stock"), at any time
from and after _______ __, 1998 (the "Issue Date") and continuing
up to the Expiration Time (as defined herein) at a per share
exercise price determined according to the terms and subject to
the conditions set forth in this certificate (the "Warrant
Certificate"). The number of shares of Common Stock issuable upon
exercise of each such Warrant and the exercise price per share of
Common Stock are subject to adjustment from time to time pursuant
to the provisions of Sections 8 and 9 of this Warrant
Certificate. The Warrants evidenced by this Warrant Certificate
are part of a series of warrants to purchase up to ____ shares of
Common Stock (collectively, the "Warrants"), issued pursuant to
an Investment Agreement, dated as of February 23, 1998 (as it may
be amended, supplemented or otherwise modified from time to time,
the "Investment Agreement"), by and between TPG Oxford LLC, a
Delaware limited liability company (the "Investor"), and the
Company, and are entitled to certain rights and privileges set
forth therein.
Section 1. Definitions. As used in this Warrant
Certificate, the following terms shall have the meanings set
forth below:
"Adjusted Price" has the meaning set forth in Section 8 hereof.
"Adjustment Date" means the twentieth Trading Day
after the day on which the Company's Annual Report on Form
10-K for the year ended December 31, 1998 is filed with the
U.S. Securities and Exchange Commission.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day, other than a Saturday,
Sunday or a day on which banking institutions in the State
of New York are authorized or obligated by law or executive
order to close.
"Certificate of Designations" means the Certificate of
Designations for the Series A Preferred Stock filed by the
Company with the Secretary of State of the State of
Delaware.
"Certificate of Incorporation" means the Second Amended
and Restated Certificate of Incorporation of the Company,
as amended from time to time.
"Closing Price" with respect to a share of Common
Stock on any day means, subject to Section 9.1(f), the last
reported sale price on that day or, in case no such
reported sale takes place on such day, the average of the
last reported bid and asked prices, regular way, on that
day, in either case, as reported in the consolidated
transaction reporting system with respect to securities
quoted on Nasdaq or, if the shares of Common Stock are not
quoted on Nasdaq, as reported in the principal consolidated
transaction reporting system with respect to securities
listed on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to
trading or, if the shares of Common Stock are not quoted on
Nasdaq and not listed or admitted to trading on any
national securities exchange, the last quoted price or, if
not so quoted, the average of the high bid and low asked
prices on such other nationally recognized quotation system
then in use, or, if on any such day the shares of Common
Stock are not quoted on any such quotation system, the
average of the closing bid and asked prices as furnished by
a professional market maker selected by the Board of
Directors making a market in the shares of Common Stock. If
the shares of Common Stock are not publicly held or so
listed, quoted or publicly traded, the "Closing Price"
means the fair market value of a share of Common Stock, as
determined in good faith by the Board of Directors.
"Common Stock" has the meaning set forth in the preamble hereto.
"Company" has the meaning set forth in the preamble hereto.
"Equity Securities" of any Person means any and all
common stock, preferred stock, any other class of capital
stock and partnership or limited liability company
interests of such Person or any other similar interests of
any Person that is not a corporation, partnership or
limited liability company.
"Exercise Price" has the meaning set forth in Section 8 hereof.
"Expiration Date" means the earlier of (i) _____, 2008
[ten years after the Issue Date], and (ii) the date of an
Optional Redemption.
"Expiration Time" means 5:00 P.M., New York City time,
on the Expiration Date.
"Fractional Warrant Share" means any fraction of a
whole share of Common Stock issued, or issuable upon,
exercise of the Warrants.
"Investment Agreement" has the meaning set forth in the
preamble hereto.
"Investor" has the meaning set forth in the preamble hereto.
"Issue Date" has the meaning set forth in the preamble hereto.
"Nasdaq" means The Nasdaq Stock Market's National Market.
2
"Offer Time" has the meaning set forth in Section
9.1(e) hereof.
"Optional Redemption" means a redemption of the Series
A Preferred Stock pursuant to Article V, Section A of the
Certificate of Designations.
"Organic Change" means, with respect to any Person,
any transaction (including without limitation any
recapitalization, capital reorganization or
reclassification of any class or series of Equity
Securities, any consolidation of such Person with, or
merger of such Person into, any other Person, any merger of
another Person into such Person (other than a merger which
does not result in a reclassification, conversion, exchange
or cancellation of outstanding shares of capital stock of
such Person), and any sale or transfer or lease of all or
substantially all of the assets of such Person, but not
including any stock split, combination or subdivision which
is the subject of Section 9.1(b)) pursuant to which any
class or series of Equity Securities of such Person is
converted into the right to receive other securities, cash
or other property.
"Person" means any individual, firm, corporation,
company, limited liability company, association,
partnership, joint venture, trust or unincorporated
organization, or a government or any agency or political
subdivision thereof.
"Securities Act" means the U.S. Securities Act of 1933,
as amended, and the rules and regulations promulgated
thereunder.
"Senior Preferred Stock" has the meaning assigned to
such term in the Investment Agreement.
"Series A Preferred Stock" means the Series A
Cumulative Preferred Stock, par value $0.01 per share, of
the Company.
"Stated Value" means the stated value of the Series A
Preferred Stock as set forth in the Certificate of
Designations.
"Trading Day" means any day on which Nasdaq is open
for trading, or if the shares of Common Stock are not
quoted on Nasdaq, any day on which the principal national
securities exchange or national quotation system on which
the shares of Common Stock are listed, admitted to trading
or quoted is open for trading, or if the shares of Common
Stock are not so listed, admitted to trading or quoted, any
Business Day.
"Warrant" has the meaning set forth in the preamble hereto.
"Warrant Agent" means the Person named or otherwise
appointed as such as set forth in Section 10 hereof.
"Warrant Certificate" has the meaning in the preamble hereto.
3
"Warrant Market Price" means the average of the Closing
Prices of a share of Common Stock for the ten consecutive
Trading Days ending on the Trading Day immediately prior to
the day on which the Election to Exercise is delivered.
"Warrant Register" has the meaning set forth in Section 2.2 hereof.
"Warrant Shares" means the shares of Common Stock
issued, or issuable upon, exercise of the Warrants.
"Warrantholder" has the meaning set forth in the
preamble hereto.
Section 2. Transferability.
2.1. Registration. The Warrants shall be issued only in
registered form.
2.2. Transfer. The Warrants evidenced by this Warrant
Certificate may be sold or otherwise transferred at any time
(except as such sale or transfer may be restricted pursuant to
the Securities Act or any applicable state securities laws) and
any such sale or transfer shall be effected on the books of the
Company (the "Warrant Register") maintained at its principal
executive offices upon surrender of this Warrant Certificate for
registration of transfer duly endorsed by the Warrantholder or by
its duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment or authority to
transfer. Upon any registration of transfer, the Company shall
execute and deliver a new Warrant Certificate or Certificates in
appropriate denominations to the Person or Persons entitled
thereto.
2.3. Legend on Warrant Shares. If and for so long as
required by the Investment Agreement, this Warrant Certificate
shall contain a legend as set forth in Section 8.10 of the
Investment Agreement.
Section 3. Exchange of Warrant Certificate. Any
Warrant certificate may be exchanged for another certificate or
certificates of like tenor entitling the Warrantholder to
purchase a like aggregate number of Warrant Shares as the
certificate or certificates surrendered then entitles such
Warrantholder to purchase. Any Warrantholder desiring to exchange
a Warrant certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed,
the certificate evidencing the Warrant to be so exchanged.
Thereupon, the Company shall execute and deliver to the Person
entitled thereto a new Warrant certificate or certificates as so
requested.
Section 4. Term of Warrants; Exercise of Warrants.
4.1. Duration of Warrant. On the terms and subject to
the conditions set forth in this Warrant Certificate, the
Warrantholder may exercise the Warrants evidenced hereby, in
whole or in part, at any time and from time to time after the
Issue Date and before the Expiration Time. If the Warrants
evidenced hereby are not exercised by the Expiration Time, they
shall become void, and all rights hereunder shall thereupon
cease.
4
4.2. Exercise of Warrant.
(a) On the terms and subject to the conditions
set forth in this Warrant Certificate, the Warrantholder
may exercise the Warrants evidenced hereby, in whole or in
part, by presentation and surrender to the Warrant Agent of
this Warrant Certificate together with the attached
Election to Exercise duly filled in and signed, and
accompanied by payment to the Company of the Exercise Price
for the number of Warrant Shares specified in such Election
to Exercise. Payment of the aggregate Exercise Price shall
be made (i) in cash in an amount equal to the aggregate
Exercise Price; (ii) by certified or official bank check in
an amount equal to the aggregate Exercise Price; (iii) by
an exchange (which shall be treated as a recapitalization)
with the Company of a number of shares of Senior Preferred
Stock having an aggregate Stated Value plus accumulated and
unpaid dividends thereon equal to the aggregate Exercise
Price; (iv) by an exchange (which shall be treated as a
recapitalization) with the Company of outstanding Warrants
(other than the Warrants being exercised) having an
aggregate Warrant Market Price which, after subtracting the
aggregate Exercise Prices thereof, equals the aggregate
Exercise Price of the Warrants being exercised; or (v) by
any combination of the foregoing.
(b) On the terms and subject to the conditions
set forth in this Warrant Certificate, upon such
presentation and surrender of this Warrant Certificate and
payment of such aggregate Exercise Price as set forth in
paragraph (a) hereof, the Company shall promptly issue and
cause to be delivered to the Warrantholder, or to such
Persons as the Warrantholder may designate in writing a
certificate or certificates (in such name or
names as the Warrantholder may designate in writing) for
the specified number of duly authorized, fully paid and
non-assessable Warrant Shares issuable upon exercise, and
shall deliver to the Warrantholder cash, as provided in
Section 11 hereof, with respect to any Fractional Warrant
Shares otherwise issuable upon such surrender. In the event
that the Warrants evidenced by this Warrant Certificate are
exercised in part prior to the Expiration Time, the Company
shall issue and cause to be delivered to the Warrantholder,
or to such Persons as the Warrantholder may designate in
writing, a certificate or certificates (in such name or
names as the Warrantholder may designate in writing)
evidencing any remaining unexercised Warrants.
(c) Each Person in whose name any certificate for
Warrant Shares is issued shall for all purposes be deemed
to have become the holder of record of the Warrant Shares
represented thereby on the first date on which both the
Warrant certificate evidencing the respective Warrants was
surrendered and payment of the Exercise Price and any
applicable taxes was made, irrespective of date of issue or
delivery of such certificate.
Section 5. Payment of Taxes. The Company shall pay any
and all documentary, stamp or similar issue or transfer taxes and
other governmental charges that may be imposed under the laws of
the United States of America or any political subdivision or
taxing authority thereof or therein in respect of any issue or
delivery of Warrant Shares or of other
5
securities or property deliverable upon exercise of the Warrants
evidenced by this Warrant Certificate or certificates
representing such shares or securities (other than income taxes
imposed on the Warrantholder); provided that the Company shall
not be required to pay any such tax or other charge that may be
imposed in connection with any transfer involved in the issue of
any certificate for Warrant Shares or other securities or
property, or payment of cash, to any Person other than the holder
of the Warrant certificate surrendered upon exercise, and in case
of any such tax or charge, the Warrant Agent and the Company
shall not be required to issue any security or property or pay
any cash until such tax or charge has been paid or it has been
established to the Warrant Agent's and the Company's satisfaction
that no such tax or charge is payable.
Section 6. Mutilated or Missing Warrant. If any
Warrant certificate is lost, stolen, mutilated or destroyed, the
Company shall issue and the Warrant Agent shall countersign, in
exchange and substitution for and upon cancellation of the
mutilated Warrant certificate, or in lieu of and substitution for
the Warrant certificate lost, stolen or destroyed, upon receipt
of a proper affidavit or other evidence reasonably satisfactory
to the Company and the Warrant Agent (and surrender of any
mutilated Warrant certificate) and bond of indemnity in form and
amount and with corporate surety reasonably satisfactory to the
Company and the Warrant Agent in each instance protecting the
Company and the Warrant Agent, a new Warrant certificate of like
tenor and representing an equivalent number of Warrants as the
Warrant certificate so lost, stolen, mutilated or destroyed. Any
such new Warrant certificate shall constitute an original
contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant
certificate shall be at any time enforceable by anyone. An
applicant for such substitute Warrant certificate shall also
comply with such other reasonable regulations and pay such other
reasonable charges as the Company or the Warrant Agent may
prescribe. All Warrant certificates shall be held and owned upon
the express condition that the foregoing provisions are exclusive
with respect to the replacement of lost, stolen, mutilated or
destroyed Warrant certificates, and shall preclude any and all
other rights or remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the
replacement of negotiable instruments or other securities without
their surrender.
Section 7. Reservation of Shares. The Company hereby
agrees that there shall be reserved for issuance and delivery
upon exercise of this Warrant, free from preemptive rights, the
number of shares of authorized but unissued shares of Common
Stock as shall be required for issuance or delivery upon exercise
of the Warrants evidenced by this Warrant Certificate. The
Company further agrees that it will not, by amendment of its
Certificate of Incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions
to be observed or performed hereunder by the Company. Without
limiting the generality of the foregoing, the Company agrees that
before taking any action which would cause an adjustment reducing
the Exercise Price below the then-par value of Warrant Shares
issuable upon exercise hereof, the Company shall from time to
time take all such action that may be necessary in order that the
Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at the Exercise Price as so
adjusted.
6
Section 8. Exercise Price. The price per share (the
"Exercise Price") at which Warrant Shares shall be purchasable
upon the exercise of the Warrants evidenced by this Warrant
Certificate shall be $17.75, subject to adjustment pursuant to
Section 9 hereof; provided, that, unless the Warrantholder
otherwise elects by delivering a written notice to that effect to
the Company or the Warrant Agent on the Adjustment Date, in the
event the Exercise Price for the Warrants evidenced by this
Warrant Certificate immediately prior to the Adjustment Date
shall be greater than the amount (the "Adjusted Price") equal to
the product of 1.15 multiplied by the average of the Closing
Prices of a share of Common Stock for the twenty consecutive
Trading Days ending on the last Trading Day prior to the
Adjustment Date (the "Adjusted Price Determination Period"), the
Exercise Price shall be deemed to equal the Adjusted Price as of
the Adjustment Date, and any adjustments to the Exercise Price
made pursuant to Section 9.1 hereof on and after the Adjustment
Date shall be made with respect to such Adjusted Price. In case
any event that would require an adjustment to the Exercise Price
pursuant to Section 9 hereof occurs with an "ex" date or an
effective date occurrring during the Adjusted Price Determination
Period, the Closing Prices used in determining the Adjusted Price
shall be appropriately adjusted to take such event into account.
No adjustment to the Exercise Price shall be made pursuant to
this Section 8 with respect to any Warrants that have been
surrendered for exercise prior to the Adjustment Date or
exchanged in connection with the exercise of Warrants prior to
the Adjustment Date in accordance with clause (iv) of Section
4.2(a) hereof.
Section 9. Adjustment of Exercise Price and Number of
Shares. The number and kind of securities purchasable upon the
exercise of the Warrants evidenced by this Warrant Certificate
and the Exercise Price thereof shall be subject to adjustment
from time to time after the date hereof upon the happening of
certain events, as follows:
9.1. Adjustments to Exercise Price. The Exercise Price
shall be subject to adjustment as follows:
(a) Stock Dividends. In case the Company after the
date hereof shall pay a dividend or make a distribution to
all holders of shares of Common Stock in shares of Common
Stock, then in any such case the Exercise Price in effect
at the opening of business on the day following the record
date for the determination of stockholders entitled to
receive such dividend or distribution shall be reduced to a
price obtained by multiplying such Exercise Price by a
fraction of which (x) the numerator shall be the number of
shares of Common Stock outstanding at the close of business
on such record date and (y) the denominator shall be the
sum of such number of shares of Common Stock outstanding
and the total number of shares of Common Stock constituting
such dividend or distribution, such reduction to become
effective immediately after the opening of business on the
day following such record date. For purposes of this
subsection (a), the number of shares of Common Stock at any
time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable
in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company will not
pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Company.
7
(b) Stock Splits and Reverse Splits. In case after the
date hereof outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock,
the Exercise Price in effect at the opening of business on
the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and,
conversely, in case after the date hereof outstanding
shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Exercise Price in
effect at the opening of business on the day following the
day upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as
the case may be, to become effective immediately after the
opening of business on the day following the day upon which
such subdivision or combination becomes effective.
(c) Issuances Below Market. In case the Company after
the date hereof shall issue rights or warrants to holders
of shares of Common Stock entitling them to subscribe for
or purchase shares of Common Stock at a price per share
less than the Closing Price per share on the record date
for the determination of stockholders entitled to receive
such rights or warrants, the Exercise Price in effect at
the opening of business on the day following such record
date shall be adjusted to a price obtained by multiplying
such Exercise Price by a fraction of which (x) the
numerator shall be the number of shares of Common Stock
outstanding at the close of business on such record date
plus the number of shares of Common Stock that the
aggregate offering price of the total number of shares so
to be offered would purchase at such Closing Price and (y)
the denominator shall be the number of shares of Common
Stock outstanding at the close of business on such record
date plus the number of additional shares of Common Stock
so to be offered for subscription or purchase, such
adjustment to become effective immediately after the
opening of business on the day following such record date;
provided, however, that no adjustment shall be made if the
Company issues or distributes to each Warrantholder the
rights or warrants that each Warrantholder would have been
entitled to receive had the Warrants held by such
Warrantholder been exercised prior to such record date; and
provided, further, that in no event shall the fact that the
Series B Warrants of the Company become exercisable for
shares of Common Stock upon occurrence of the Shareholder
Approval (as defined in the Investment Agreement)
constitute an issuance of rights or warrants pursuant to
this Section 9.1(c). For purposes of this subsection (c),
the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury
of the Company but shall include shares issuable in respect
of scrip certificates issued in lieu of fractions of shares
of Common Stock. The Company shall not issue any rights or
warrants in respect of shares of Common Stock held in the
treasury of the Company. Rights or warrants issued by the
Company to all holders of Common Stock entitling the
holders thereof to subscribe for or purchase Equity
Securities, which rights or warrants (i) are deemed to be
transferred with such shares of Common Stock, (ii) are not
exercisable and (iii) are also issued in respect of future
issuances of Common Stock, including shares of Common Stock
issued upon exercise of the Warrants evidenced by this
Warrant Certificate, in each case in clauses (i) through
(iii) until the occurrence of a specified event or events
(a "Trigger Event"), shall for purposes of this subsection
(c) not be deemed issued until the occurrence of the
earliest Trigger Event.
8
(d) Special Dividends. In case the Company after the
date hereof shall distribute to all holders of shares of
Common Stock evidences of its indebtedness or assets
(excluding any regular periodic cash dividend), Equity
Securities (other than Common Stock) or rights to subscribe
(excluding those referred to in subsection (c) above) for
Equity Securities other than Common Stock, in each such
case the Exercise Price in effect immediately prior to the
close of business on the record date for the determination
of stockholders entitled to receive such distribution shall
be adjusted to a price obtained by multiplying such
Exercise Price by a fraction of which (x) the numerator
shall be the Closing Price per share of Common Stock on
such record date, less the then-current fair market value
as of such record date (as determined by the Board of
Directors in its good faith judgment) of the portion of
assets or evidences of indebtedness or Equity Securities or
subscription rights so distributed applicable to one share
of Common Stock, and (y) the denominator shall be such
Closing Price, such adjustment to become effective
immediately prior to the opening of business on the day
following such record date; provided, however, that no
adjustment shall be made (1) if the Company issues or
distributes to each Warrantholder the subscription rights
referred to above that each Warrantholder would have been
entitled to receive had the Warrants held by such
Warrantholder been exercised prior to such record date or
(2) if the Company grants to each Warrantholder the right
to receive, upon the exercise of the Warrants held by such
Warrantholder at any time after the distribution of the
evidences of indebtedness or assets or Equity Securities
referred to above, the evidences of indebtedness or assets
or Equity Securities that such Warrantholder would have
been entitled to receive had such Warrants been exercised
prior to such record date. The Company shall provide any
Warrantholder, upon receipt of a written request therefor,
with any indenture or other instrument defining the rights
of the holders of any indebtedness, assets, subscription
rights or Equity Securities referred to in this subsection
(d). Rights or warrants issued by the Company to all
holders of Common Stock entitling the holders thereof to
subscribe for or purchase Equity Securities, which rights
or warrants (i) are deemed to be transferred with such
shares of Common Stock, (ii) are not exercisable and (iii)
are also issued in respect of future issuances of Common
Stock, including shares of Common Stock issued upon
exercise of the Warrants evidenced by this Warrant
Certificate, in each case in clauses (i) through (iii)
until the occurrence of a Trigger Event, shall for purposes
of this subsection (d) not be deemed issued until the
occurrence of the earliest Trigger Event.
(e) Tender or Exchange Offer. In case a tender or
exchange offer made by the Company or any subsidiary of the
Company for all or any portion of the Common Stock shall be
consummated and such tender offer shall involve an
aggregate consideration having a fair market value (as
determined by the Board of Directors in its good faith
judgment) at the last time (the "Offer Time") tenders may
be made pursuant to such tender or exchange offer (as it
may be amended) that, together with the aggregate of the
cash plus the fair market value (as determined by the Board
of Directors in its good faith judgment), as of the Offer
Time, of consideration payable in respect of any tender or
exchange offer by the Company or any such subsidiary for
all or any portion of the Common Stock consummated
preceding the Offer Time and in respect of which no
9
Exercise Price adjustment pursuant to this subsection (e)
has been made, exceeds 5% of the product of the Closing
Price of the Common Stock at the Offer Time multiplied by
the number of shares of Common Stock outstanding (including
any tendered shares) at the Offer Time, the Exercise Price
shall be reduced so that the same shall equal the price
determined by multiplying the Exercise Price in effect
immediately prior to the Offer Time by a fraction of which
(x) the numerator shall be (i) the product of the Closing
Price of the Common Stock at the Offer Time multiplied by
the number of shares of Common Stock outstanding (including
any tendered shares) at the Offer Time minus (ii) the fair
market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the
tender or exchange offer) of all shares validly tendered
and not withdrawn as of the Offer Time (the shares deemed
so accepted, up to any such maximum, being referred to as
the "Purchased Shares") and (y) the denominator shall be
the product of (i) such Closing Price at the Offer Time
multiplied by (ii) such number of outstanding shares at the
Offer Time minus the number of Purchased Shares, such
reduction to become effective immediately prior to the
opening of business on the day following the Offer Time.
For purposes of this subsection (e), the number of shares
of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall
include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock.
(f) Closing Price Determination. For the purpose of
any computation under subsections (c) and (d) of this
Section 9.1, the Closing Price of Common Stock on any date
shall be deemed to be the average of the Closing Prices for
the five consecutive Trading Days ending not later than the
day in question and commencing on a day selected at random
in good faith by the Company which is not more than 20
Trading Days before the day in question, provided, however,
that (i) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that
requires an adjustment to the Exercise Price pursuant to
this Section 9 occurs on or after the 20th Trading Day
prior to the day in question and prior to the "ex" date for
the issuance or distribution requiring such computation,
the Closing Price for each Trading Day prior to the "ex"
date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction which the Exercise
Price is so required to be adjusted as a result of such
other event, (ii) if the "ex" date for any event (other
than the issuance or distribution requiring such
computation) that requires an adjustment to the Exercise
Price pursuant to this Section 9 occurs on or after the
"ex" date for the issuance or distribution requiring such
computation and on or prior to the day in question, the
Closing Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction by
which the Exercise Price is so required to be adjusted as a
result of such other event, and (iii) if the "ex" date for
the issuance or distribution requiring such computation is
on or prior to the day in question, after taking into
account any adjustment required pursuant to clause (ii) of
this proviso, the Closing Price for each Trading Day on or
after such "ex" date shall be adjusted by adding thereto
the fair market value on the day in question (as determined
by the Board of Directors in a manner consistent with any
determination of such value for the purposes of
subsection (d)
10
of this Section 9.1) of the assets, evidences of
indebtedness, Equity Securities or subscription rights
being distributed applicable to one share of Common Stock
as of the close of business on the day before such "ex"
date. For the purposes of any computation under subsection
(e) of this Section 9.1, the Closing Price on any date
shall be deemed to be the average of the daily Closing
Prices for the five consecutive Trading Days ending not
later than the Offer Time of such tender or exchange offer
and commencing on a day selected at random in good faith by
the Company which date shall be on or after the latest (the
"Commencement Date") of (i) the date 20 Trading Days before
the date in question, (ii) the date of commencement of the
tender or exchange offer requiring such computation and
(iii) the date of the last amendment, if any, of such
tender or exchange offer involving a change in the maximum
number of shares for which tenders are sought or a change
in the consideration offered; provided, however, that if
the "ex" date for any event (other than the tender or
exchange offer requiring such computation) that requires
an adjustment to the Exercise Price pursuant to this
Section 9 occurs on or after the Commencement Date and
prior to the Offer Time for the tender or exchange offer
requiring such computation, the Closing Price for each
Trading Day prior to the "ex" date for such other event
shall be adjusted by multiplying such Closing Price by the
same fraction by which the Exercise Price is so required to
be adjusted as a result of such other event. For purposes
of this subsection (f), the term "ex" date, (i) when used
with respect to any issuance or distribution, means the
first date on which the Common Stock trades regular way on
Nasdaq or on the relevant exchange or in the relevant
market from which the Closing Price was obtained without
the right to receive such issuance or distribution, (ii)
when used with respect to any subdivision or combination of
shares of Common Stock, means the first date on which the
Common Stock trades regular way on Nasdaq or such exchange
or in such market after the time at which such subdivision
or combination becomes effective, and (iii) when used with
respect to any tender or exchange offer means the first
date on which the Common Stock trades regular way on Nasdaq
or such exchange or in such market after the Offer Time of
such tender or exchange offer.
(g) Minimum Adjustment Requirement. No adjustment
shall be required unless such adjustment would result in an
increase or decrease of at least $0.01 in the Exercise
Price then subject to adjustment; provided, however, that
any adjustments that are not made by reason of this
subsection (g) shall be carried forward and taken into
account in any subsequent adjustment. In case the Company
shall at any time issue shares of Common Stock by way of
dividend on any stock of the Company or subdivide or
combine the outstanding shares of Common Stock, said amount
of $0.01 specified in the preceding sentence (as
theretofore increased or decreased, if said amount shall
have been adjusted in accordance with the provisions of
this subsection (g)) shall forthwith be proportionately
increased in the case of such a combination or decreased in
the case of such a subdivision or stock dividend so as
appropriately to reflect the same.
(h) Calculations. All calculations under this Section
9.1 shall be made to the nearest $0.01.
11
(i) Certificate. Whenever an adjustment in the
Exercise Price is made as required or permitted by the
provisions of this Section 9.1, the Company shall promptly
file with the Warrant Agent a certificate of its chief
financial officer setting forth (A) the adjusted Exercise
Price as provided in this Section 9.1 and a brief statement
of the facts requiring such adjustment and the computation
thereof and (B) the number of shares of Common Stock (or
portions thereof) purchasable upon exercise of a Warrant
after such adjustment in the Exercise Price in accordance
with Section 9.2 hereof and the record date therefor, and
promptly after such filing shall mail or cause to be mailed
a notice of such adjustment to each Warrantholder at his or
her last address as the same appears on the Warrant
Register. Such certificate, in the absence of manifest
error, shall be conclusive and final evidence of the
correctness of such adjustment. The Warrant Agent shall be
entitled to rely upon such certificate, and shall be under
no duty or responsibility with respect to any such
certificate except to exhibit the same to any Warrantholder
desiring inspection thereof.
(j) Notice. In case:
(i) the Company shall declare any dividend or any
distribution of any kind or character (whether in cash,
securities or other property) on or in respect of shares of
Common Stock or to the stockholders of the Company (in
their capacity as such), excluding any regular periodic
cash dividend paid out of current or retained earnings (as
such terms are used in generally accepted accounting
principles); or
(ii) the Company shall authorize the granting to the
holders of shares of Common Stock of rights to subscribe
for or purchase any shares of capital stock or of any other
right; or
(iii) of any reclassification of shares of Common
Stock (other than a subdivision or combination of
outstanding shares of Common Stock), or of any
consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or
substantially all of the assets of the Company; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be filed with the Warrant
Agent and shall cause to be mailed to the Warrantholders,
at their last addresses as they shall appear upon the
Warrant Register, at least 30 days prior to the applicable
record date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of
such dividend, distribution or rights or, if a record is
not to be taken, the date as of which the holders of shares
of Common Stock of record to be entitled to such dividend,
distribution or rights are to be determined or (y) the date
on which such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and, if applicable, the date
as of which it is expected that holders of shares of Common
Stock of record shall be entitled to exchange their shares
of Common Stock for securities or
12
other property (including cash) deliverable upon such
reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up. Failure to give any
such notice, or any defect therein, shall not affect the
validity of the proceedings referred to in clauses (i),
(ii), (iii) and (iv) above.
(k) Section 305. Anything in this Section 9.1 to the
contrary notwithstanding, the Company shall be entitled,
but not required, to make such reductions in the Exercise
Price, in addition to those required by this Section 9.1,
as it in its discretion shall determine to be advisable,
including, without limitation, in order that any dividend
in or distribution of shares of Common Stock or shares of
capital stock of any class other than Common Stock,
subdivision, reclassification or combination of shares of
Common Stock, issuance of rights or warrants, or any other
transaction having a similar effect, shall not be treated
as a distribution of property by the Company to its
stockholders under Section 305 of the Internal Revenue Code
of 1986, as amended, or any successor provision and shall
not be taxable to them.
(l) No Adjustment. Anything to the contrary herein
notwithstanding, no adjustment to the Exercise Price or the
number of shares of Common Stock purchasable upon exercise
of a Warrant shall be made pursuant to this Section 9.1 or
Section 9.2 as a result of, or in connection with, the
issuance of options or rights to purchase Common Stock
issued to employees of the Company or its Subsidiaries
pursuant to a stock option or other similar plan adopted by
the Board of Directors or an employment agreement approved
by the Board of Directors, or the modification, renewal or
extension of any such plan or agreement if approved by the
Board of Directors.
(m) When Adjustment Not Required. If the Company shall
take a record of the holders of its Common Stock for
purposes of taking any action that requires an adjustment
of the Exercise Price under this Section 9, and shall,
thereafter and before the effective date of such action,
legally abandon its plan to take such action, then
thereafter no adjustment shall be required by reason of the
taking of such record and any such adjustment previously
made in respect thereof shall be rescinded and annulled.
9.2. Adjustment to Number of Warrant Shares. Upon each
adjustment of the Exercise Price pursuant to Section 9.1 hereof
the number of Warrant Shares purchasable upon exercise of a
Warrant outstanding prior to the effectiveness of such adjustment
shall be adjusted to the number, calculated to the nearest
one-hundredth of a share, obtained by (x) multiplying the number
of Warrant Shares purchasable immediately prior to such
adjustment upon the exercise of a Warrant by the Exercise Price
in effect prior to such adjustment and (y) dividing the product
so obtained by the Exercise Price in effect after such adjustment
of the Exercise Price.
9.3. Organic Change.
(a) Company Survives. Upon the consummation of an
Organic Change (other than a transaction in which the
Company is not the surviving entity), lawful provision
shall be made as part of the terms of such transaction
whereby the terms of the Warrant Certificates shall be
modified, without payment of any additional consideration
therefor,
13
so as to provide that upon exercise of Warrants following
the consummation of such Organic Change, the Warrantholders
of such Warrants shall have the right to purchase only the
kind and amount of securities, cash and other property
receivable upon such Organic Change by a holder of the
number of Warrant Shares into which such Warrants might
have been exercised immediately prior to such Organic
Change, assuming such holder of Warrant Shares (i) is not a
Person with which the Company consolidated or into which
the Company merged or which merged into the Company or to
which a sale, transfer or lease of all or substantially all
of the assets of the Company was made, as the case may be
(a "constituent Person"), or an Affiliate of a constituent
Person, and (ii) failed to exercise his rights of election,
if any, as to the kind and amount of securities, cash
and other property receivable upon such Organic Change
(provided that if the kind and amount of securities, cash
and other property receivable upon such Organic Change is
not the same for each share of Common Stock held
immediately prior to such Organic Change by others than a
constituent Person or an Affiliate thereof and in respect
of which such rights of election shall not have been
exercised ("non-electing shares"), then for the purpose of
this subsection (a) the kind and amount of securities, cash
and other property receivable upon such Organic Change by
each non-electing share shall be deemed to be the kind and
amount so receivable per share by a plurality of the
non-electing shares); provided, however, that no adjustment
shall be made as a result of such Organic Change to the
Exercise Price or the number of Warrant Shares
notwithstanding any provision of Section 9 hereof unless
any event requiring any such adjustment shall have occurred
or shall occur prior to, upon or after such Organic Change.
Lawful provision also shall be made as part of the terms of
the Organic Change so that all other terms of the Warrant
Certificates shall remain in full force and effect
following such an Organic Change. The provisions of this
Section 9.3(a) shall similarly apply to successive Organic
Changes.
(b) Company Does Not Survive. The Company shall not
enter into an Organic Change that is a transaction in which
the Company is not the surviving entity unless lawful
provision shall be made as part of the terms of such
transaction whereby the surviving entity shall issue new
securities to each Warrantholder, without payment of any
additional consideration therefor, with terms that provide
that upon the exercise of the Warrants, the Warrantholders
of such Warrants shall have the right to purchase only the
kind and amount of securities, cash and other property
receivable upon such Organic Change by a holder of the
number of Warrant Shares into which such Warrants might
have been exercised immediately prior to such Organic
Change, assuming such holder of Warrant Shares (i) is not a
constituent Person or an Affiliate of a constituent Person
and (ii) failed to exercise his rights of election, if any,
as to the kind and amount of securities, cash and other
property receivable upon such Organic Change (provided that
if the kind and amount of securities, cash and other
property receivable upon such Organic Change is not the
same for each non-electing share, then for the purpose of
this subsection (b) the kind and amount of securities, cash
and other property receivable upon such Organic Change by
each non-electing share shall be deemed to be the kind and
amount so receivable per share by a plurality of the
non-electing shares); provided, however, that no adjustment
shall be made as a result of such Organic Change to the
Exercise Price or the number of Warrant Shares
notwithstanding any provision of Section 9 hereof unless
any
14
event requiring any such adjustment shall have occurred or
shall occur prior to, upon or after such Organic Change.
The certificate or articles of incorporation or other
constituent document of the surviving entity shall provide
for such adjustments which, for events subsequent to the
effective date of such certificate or articles of
incorporation or other constituent document, shall be
equivalent to the adjustments provided for in Section 9.1
hereof.
9.4. Statement on Warrants. The form of Warrant
Certificate need not be changed because of any adjustment made
pursuant to Section 8, Section 9.1 or Section 9.2 hereof, and
Warrants issued after such adjustment may state the same Exercise
Price and the same number of Warrant Shares as are stated in this
Warrant Certificate.
Section 10. Warrant Agent. On the date of issuance of
the Warrants, the Company shall cause to be appointed in the
Borough of Manhattan, The City of New York, a Warrant Agent,
having a capital and surplus of at least $100,000,000.
Section 11. Fractional Interests. The Company shall
not be required to issue Fractional Warrant Shares on the
exercise of the Warrants evidenced by this Warrant Certificate.
If any Fractional Warrant Share would, but for the provisions of
this Section 11, be issuable on the exercise of the Warrants
evidenced by this Warrant Certificate (or specified portions
thereof), the Company shall pay an amount in cash equal to the
fraction of a Warrant Share represented by such Fractional
Warrant Share multiplied by the Closing Price on the day of such
exercise.
Section 12. No Rights as Shareholder. Nothing in this
Warrant Certificate shall be construed as conferring upon the
Warrantholder or its transferees any rights as a shareholder of
the Company, including the right to vote, receive dividends,
consent or receive notices as a shareholder with respect to any
meeting of shareholders for the election of directors of the
Company or any other matter.
Section 13. Successors. All the covenants and
provisions of this Warrant Certificate by or for the benefit of
the Company or the Warrantholder shall bind and inure to the
benefit of their respective successors and permitted assigns
hereunder.
Section 14. Governing Law; Choice of Forum, Etc.
The validity, construction and performance of this Warrant
Certificate shall be governed by, and interpreted in accordance
with, the laws of New York without reference to its conflict of
laws rules. The parties hereto agree that the appropriate and
exclusive forum for any disputes arising out of this Warrant
Certificate solely between or among any or all of the Company, on
the one hand, and the Investor and/or any Person who has become a
Warrantholder, on the other, shall be the United States District
Court for the Southern District of New York, and, if such court
will not hear any such suit, the courts of the state of the
Company's incorporation, and the parties hereto irrevocably
consent to the exclusive jurisdiction of such courts, and agree
to comply with all requirements necessary to give such courts
jurisdiction. The parties hereto further agree that the parties
will not bring suit with respect to any disputes, except as
expressly set forth below, arising out of this Warrant
Certificate for the execution or enforcement of judgment, in any
jurisdiction other than the above specified courts. Each of the
parties hereto irrevocably consents to the service of
15
process in any action or proceeding hereunder by the mailing of
copies thereof by registered or certified airmail, postage
prepaid, if to (i) the Company, at 000 Xxxxxxxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxxxxx, 00000, Attention: General Counsel, or at
such other address specified by the Company in writing to the
Warrant Agent, and (ii) any Warrantholder, at the address of such
Warrantholder specified in the Warrant Register. The foregoing
shall not limit the rights of any party hereto to serve process
in any other manner permitted by the law or to obtain execution
of judgment in any other jurisdiction. The parties further agree,
to the extent permitted by law, that final and unappealable
judgment against any of them in any action or proceeding
contemplated above shall be conclusive and may be enforced in any
other jurisdiction within or outside the United States by suit on
the judgment, a certified or exemplified copy of which shall be
conclusive evidence of the fact and the amount of indebtedness.
The parties agree to waive any and all rights that they may have
to a jury trial with respect to disputes arising out of this
Agreement.
Section 15. Benefits of this Agreement. Nothing in
this Warrant Certificate shall be construed to give to any Person
other than the Company and the Warrantholder any legal or
equitable right, remedy or claim under this Warrant Certificate,
and this Warrant Certificate shall be for the sole and exclusive
benefit of the Company and the Warrantholder.
IN WITNESS WHEREOF, the Company has caused this
Warrant to be duly executed, as of this _____th day of _________,
1998.
OXFORD HEALTH PLANS, INC.
By:_________________________
Name:
Title:
[Corporate Seal]
Attest:
_________________________
Countersigned:
______________________, as Warrant Agent
By:_________________________
Name:
Title:
16
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants)
To OXFORD HEALTH PLANS, INC.:
The undersigned hereby irrevocably elects to exercise
the right of purchase represented by the within Warrant
Certificate for, and to purchase thereunder, _____ Warrant
Shares, as provided for therein, and tenders herewith payment of
the purchase price in full in the form of [COMPLETE WHERE
APPLICABLE]:
|_| cash or a certified or official bank check in the
amount of $_____; and/or
|_| $_____ Stated Value of Senior Preferred Stock
(as to which $____ of accumulated dividends
are unpaid), of which $____ Stated Value and the
corresponding accumulated dividends should be
applied toward the payment of such Warrant Shares;
and/or
|_| ____ number of Warrants, valued at $_____ each
(such value arrived at by subtracting the Exercise
Price of $_____ from the Warrant Market Price of
$______, both the Exercise Price and Warrant Market
Price determined in accordance with the provision
of the Warrant Certificate);
For a total purchase price of $_____.
If the Stated Value and accumulated and unpaid
dividends of the shares of Senior Preferred Stock or the value of
the Warrants evidenced by the Warrant Certificate delivered
herewith exceeds that portion of the payment which is to be paid
by the surrender of such shares or Warrants, you are authorized,
as agent of the undersigned, to deliver to the Company such
shares or Warrant Certificate delivered herewith for exchange
into smaller denominations in order that you may deliver to the
undersigned new shares of Senior Preferred Stock or Warrant
Certificates, in Stated Value or number as the case may be, equal
to the difference between the Stated Value or number as the case
may be, of the Senior Preferred Stock or Warrants surrendered,
less the Stated Value or number as the case may be, thereof, used
to purchase Warrant Shares.
Please issue a certificate or certificates for such Warrant
Shares in the name of, and pay any cash for any Fractional
Warrant Shares to (please print name address and social security
or other identifying number)* :
Name: ______________________________________________________
Address: ______________________________________________________
______________________________________________________
Soc. Sec. #:________________
AND, if said number of Warrant Shares shall not be all the shares
purchasable under the within Warrant Certificate, a new Warrant
Certificate is to be issued in the name of the undersigned for
the balance remaining of the Warrant Shares purchasable
thereunder rounded up to the next higher whole number of Warrant
Shares.
Signature:**______________________________
--------
* The Warrant Certificate and the Investment Agreement
contain restrictions on the sale and other transfer of the
Warrants evidenced by such Warrant Certificate.
** The above signature should correspond exactly with
the name on the face of this Warrant Certificate or with
the name of the assignee appearing in the assignment form
below.
2
ASSIGNMENT FORM
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto
___________________________________________________________________
___________________________________________________________________
(Name and Address of Assignee must be Printed or Typewritten)
Warrants to purchase _____ Warrant Shares of the Company,
evidenced by the within Warrant Certificate hereby irrevocably
constituting and appointing ________________ Attorney to
transfer said Warrants on the books of the Company, with full
power of substitution in the premises.
Dated:____________, __
________________________________
Signature of Registered Holder*
________________________________
Signature Guaranteed: Signature of Guarantor
_____________
* The above signature should correspond exactly with
the name on the face of this Warrant Certificate.
EXHIBIT C
CERTIFICATE OF DESIGNATIONS
of
SERIES B CUMULATIVE PREFERRED STOCK
of
OXFORD HEALTH PLANS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
--------------
Oxford Health Plans, Inc., a corporation organized and
existing under the General Corporation Law of the State of
Delaware (the "Corporation"), hereby certifies that the following
resolutions were adopted by the Board of Directors of the
Corporation (the "Board of Directors") pursuant to authority of
the Board of Directors as required by Section 151 of the Delaware
General Corporation Law:
RESOLVED, that pursuant to the authority granted to
and vested in the Board of Directors in accordance with the
provisions of the Second Amended and Restated Certificate of
Incorporation of the Corporation, as amended (the "Certificate of
Incorporation"), the Board of Directors hereby creates a series
of the Corporation's previously authorized preferred stock, par
value $0.01 per share (the "Preferred Stock"), and hereby states
the designation and number thereof, and fixes the voting powers,
preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and
restrictions thereof, as follows:
Series B Cumulative Preferred Stock:
I. Designation and Amount
The designation of this series of shares shall be
"Series B Cumulative Preferred Stock" (the "Series B Preferred
Stock"); the stated value per share shall be $1,000 (the "Stated
Value"); and the number of shares constituting such series shall
be 300,000. The number of shares of the Series B Preferred Stock
may be decreased from time to time by a resolution or resolutions
of the Board of Directors; provided, however, that such number
shall not be decreased below the aggregate number of shares of
the Series B Preferred Stock then outstanding.
II. Rank
A. With respect to dividend rights, the Series B
Preferred Stock shall rank (i) junior to each other class or
series of Preferred Stock which by its terms ranks senior to the
Series B Preferred Stock as to payment of dividends, (ii) on a
parity with each other class or series of Preferred Stock which
by its terms ranks on a parity with the Series B Preferred Stock
as to payment of dividends, including the Series A Preferred
Stock, par value $0.01 per share, of the Corporation (the "Series
A Preferred Stock") and (iii) prior to the Corporation's Common
Stock, par value $.01 per share (the "Common Stock"), and, except
as specified above, all other classes and series of capital stock
of the Corporation hereafter issued by the Corporation. With
respect to dividends, all equity securities of the Corporation to
which the Series B Preferred Stock ranks senior, including the
Common Stock, are collectively referred to herein as the "Junior
Dividend Securities"; all equity securities of the Corporation
with which the Series B Preferred Stock ranks on a parity,
including the Series A Preferred Stock, are collectively referred
to herein as the "Parity Dividend Securities"; and all equity
securities of the Corporation (other than convertible debt
securities) to which the Series B Preferred Stock ranks junior,
with respect to dividends, are collectively referred to herein as
the "Senior Dividend Securities."
B. With respect to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the Series B Preferred Stock
shall rank (i) junior to each other class or series of Preferred
Stock which by its terms ranks senior to the Series B Preferred
Stock as to distribution of assets upon liquidation, dissolution
or winding up, (ii) on a parity with each other class or series
of Preferred Stock which by its terms ranks on a parity with the
Series B Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation,
including the Series A Preferred Stock, and (iii) prior to the
Common Stock, and, except as specified above, all other classes
and series of capital stock of the Corporation hereinafter issued
by the Corporation. With respect to the distribution of assets
upon liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, all equity securities of the
Corporation to which the Series B Preferred Stock ranks senior,
including the Common Stock, are collectively referred to herein
as "Junior Liquidation Securities"; all equity securities of the
Corporation (other than convertible debt securities) to which the
Series B Preferred Stock ranks on parity, including the Series A
Preferred Stock, are collectively referred to herein as "Parity
Liquidation Securities"; and all equity securities of the
Corporation to which the Series B Preferred Stock ranks junior
are collectively referred to herein as "Senior Liquidation
Securities."
C. The Series B Preferred Stock shall be subject to
the creation of Junior Dividend Securities and Junior Liquidation
Securities (collectively, "Junior Securities") but no Parity
Dividend Securities or Parity Liquidation Securities
(collectively, "Parity Securities") (other than the Series A
Preferred Stock), or Senior Dividend Securities or Senior
Liquidation Securities (collectively, "Senior Securities") shall
be created except in accordance with the terms hereof and the
Investment Agreement, including, without limitation, Article
VIII, Section F hereof.
2
III. Dividends
A. Dividends. Prior to the Second Anniversary Date,
shares of Series B Preferred Stock shall accumulate dividends at
a rate of 9.308332% per annum, payment of which may be made in
cash or by the issuance of additional shares of Series B
Preferred Stock (which, upon issuance, shall be fully paid and
nonassessable), at the option of the Company; provided that if
any such dividend is paid after the Second Anniversary Date, such
dividend shall be paid in cash. On and after the Second
Anniversary Date, shares of Series B Preferred Stock shall
accumulate dividends at a rate of 9% per annum, which dividends
shall be paid in cash. On and prior to the Second Anniversary
Date, dividends shall be paid annually on the anniversary of the
original issuance of Series B Preferred Stock, and thereafter
dividends shall be paid in four equal quarterly installments on
the last day of March, June, September and December of each year,
or if any such date is not a Business Day, the Business Day next
preceding such day (each such date, regardless of whether any
dividends have been paid or declared and set aside for payment on
such date, a "Dividend Payment Date"), to holders of record (the
"Registered Holders") as they appear on the stock record books of
the Corporation on the fifteenth day prior to the relevant
Dividend Payment Date. Notwithstanding the foregoing, from and
after the day on which the Shareholder Approval occurs, dividends
shall accumulate on the Series B Preferred Stock (i) prior to the
Second Anniversary Date, at a rate of 8.243216% per annum,
payment of which may be made in cash or by the issuance of
additional shares of Series B Preferred Stock (which upon
issuance shall be fully paid and nonassessable), at the option of
the Company, provided that if any such dividend is paid after the
Second Anniversary Date, such dividend shall be paid in cash, and
(ii) on and after the Second Anniversary Date, at a rate of 8%
per annum, which dividends shall be paid in cash. Dividends shall
be paid only when, as and if declared by the Board of Directors
out of funds at the time legally available for the payment of
dividends. Dividends shall begin to accumulate on outstanding
shares of Series B Preferred Stock from the date of issuance and
shall be deemed to accumulate from day to day whether or not
earned or declared until paid. Dividends shall accumulate on the
basis of a 360-day year consisting of twelve 30-day months (four
90-day quarters) and the actual number of days elapsed in the
period for which payable. Dividends payable at more than one
annual rate for any dividend period or partial dividend period
shall be pro rated on the basis of the number of days in such
dividend period or partial dividend period, calculated as
aforesaid, and the actual number of days elapsed for which
dividends are payable at each such annual rate.
B. Accumulation. Dividends on the Series B Preferred
Stock shall be cumulative, and from and after any Dividend
Payment Date on which any dividend that has accumulated or been
deemed to have accumulated through such date has not been paid in
full or any payment date set for a redemption on which such
redemption payment has not been paid in full, additional
dividends shall accumulate in respect of the amount of such
unpaid dividends or unpaid redemption payment (the "Arrearage")
at the annual rate then in effect as provided in Section A of
this Article III (or such lesser rate as may be the maximum rate
that is then permitted by applicable law). Such additional
dividends in respect of any Arrearage shall be deemed to
accumulate from day to day whether or not earned or declared
until the Arrearage is paid, shall be calculated as of such
successive Dividend Payment Date and shall constitute an
additional Arrearage from and after any Dividend Payment Date to
the extent not paid on such
3
Dividend Payment Date. References in any Article herein to
dividends that have accumulated or that have been deemed to have
accumulated with respect to the Series B Preferred Stock shall
include the amount, if any, of any Arrearage together with any
dividends accumulated or deemed to have accumulated on such
Arrearage pursuant to the immediately preceding two sentences.
Additional dividends in respect of any Arrearage may be declared
and paid at any time, in whole or in part, without reference to
any regular Dividend Payment Date, to Registered Holders as they
appear on the stock record books of the Corporation on such
record date as may be fixed by the Board of Directors (which
record date shall be no less than 10 days prior to the
corresponding payment date). Dividends in respect of any
Arrearage shall be paid in cash.
C. Method of Payment. Dividends paid on the shares of
Series B Preferred Stock in an amount less than the total amount
of such dividends at the time accumulated and payable on all
outstanding shares of Series B Preferred Stock shall be allocated
pro rata on a share-by-share basis among all such shares then
outstanding. After the Second Anniversary Date, dividends that
are declared and paid in an amount less than the full amount of
dividends accumulated on the Series B Preferred Stock (and on any
Arrearage) shall be applied first to the earliest dividend which
has not theretofore been paid. All cash payments of dividends on
the shares of Series B Preferred Stock shall be made in such coin
or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
IV. Liquidation Preference
In the event of a liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the
holders of then-outstanding shares of Series B Preferred Stock
shall be entitled to receive out of the assets of the
Corporation, whether such assets are capital or surplus of any
nature, an amount per share equal to the sum of (i) the
dividends, if any, accumulated or deemed to have accumulated
thereon to the date of final distribution to such holders,
whether or not such dividends are declared, and (ii) the Stated
Value thereof, and no more, before any payment shall be made or
any assets distributed to the holders of any Junior Liquidation
Securities. After any such payment in full, the holders of Series
B Preferred Stock shall not, as such, be entitled to any further
participation in any distribution of assets of the Corporation.
All the assets of the Corporation available for distribution to
stockholders after the liquidation preferences of any Senior
Liquidation Securities shall be distributed ratably (in
proportion to the full distributable amounts to which holders of
Series B Preferred Stock and Parity Liquidation Securities, if
any, are respectively entitled upon such dissolution, liquidation
or winding up) among the holders of the then-outstanding shares
of Series B Preferred Stock and Parity Liquidation Securities, if
any, when such assets are not sufficient to pay in full the
aggregate amounts payable thereon.
Neither a consolidation or merger of the Corporation
with or into any other Person or Persons, nor a sale, conveyance,
lease, exchange or transfer of all or part of the Corporation's
assets for cash, securities or other property to a Person or
Persons shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for purposes of this Article IV,
but the holders of shares of Series B Preferred Stock shall
nevertheless be entitled from and after any such consolidation,
merger or sale, conveyance, lease, exchange or transfer of all or
part of the
4
Corporation's assets to the rights provided by this Article IV
following any such transaction. Notice of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when, and the
place or places where, the amounts distributable to each holder
of shares of Series B Preferred Stock in such circumstances shall
be payable, shall be given by first-class mail, postage prepaid,
mailed not less than 30 days prior to any payment date stated
therein, to holders of record as they appear on the stock record
books of the Corporation as of the date such notices are first
mailed.
V. Redemption
A. Optional Redemption. The Corporation shall not have
any right to redeem any shares of Series B Preferred Stock prior
to the fifth anniversary of the original issuance of the Series B
Preferred Stock. On and after such date, the Corporation shall
have the right, at its option and election, to redeem all the
outstanding shares of Series B Preferred Stock, in whole but not
in part, at any time, in accordance with the provisions of this
Article V. The redemption price for such shares of Series B
Preferred Stock shall be paid in cash out of funds legally
available therefor and shall be in an amount per share equal to
the sum of (i) the amount, if any, of all unpaid dividends
accumulated thereon to the date of actual payment of the
Redemption Price, whether or not such dividends have been
declared, and (ii) the Stated Value thereof (the "Redemption
Price").
B. Mandatory Redemption. On the tenth anniversary of
the original issuance of the Series B Preferred Stock (the
"Mandatory Redemption Date"), the Corporation shall redeem (the
"Mandatory Redemption") all outstanding shares of Series B
Preferred Stock by paying the Redemption Price therefor in cash
out of funds legally available for such purpose.
C. Notice and Redemption Procedures. Notice of the
redemption of shares of Series B Preferred Stock pursuant to
Section A or B hereof (a "Notice of Redemption") shall be sent to
the holders of record of the shares of Series B Preferred Stock
to be redeemed by first class mail, postage prepaid, at each such
holder's address as it appears on the stock record books of the
Corporation not more than 120 nor fewer than 90 days prior to the
date fixed for redemption, which date shall be set forth in such
notice (the "Redemption Date"); provided that failure to give
such Notice of Redemption to any holder, or any defect in such
Notice of Redemption to any holder shall not affect the validity
of the proceedings for the redemption of any shares of Series B
Preferred Stock held by any other holder. Notwithstanding the
foregoing, in the event that contemporaneously with or prior to
the delivery of a Notice of Redemption, the Corporation
irrevocably deposits, in accordance with Section F of this
Article V, funds sufficient to pay the aggregate Redemption Price
for the Series B Preferred Stock, such Notice of Redemption shall
be delivered not more than 120 days nor fewer than 30 days prior
to the Redemption Date; provided, however, that, if such Notice
of Redemption is delivered fewer than 60 days prior to the
Redemption Date and the Investor or any of its Affiliates
Beneficially Owns shares of Series B Preferred Stock as of the
date of the Notice of Redemption and uses its reasonable best
efforts to consummate the sale of its shares of Series B
Preferred Stock prior to the stated Redemption Date but has not
completed the sale of all the Series B Preferred Stock
Beneficially Owned by the Investor and its Affiliates (or such
other amount desired to be sold by
5
the Investor and its Affiliates), the Corporation shall, at the
option of the Investor (or any such Affiliate), delay such
Redemption Date for a period not to exceed 30 days as requested
by such Investor (or any such Affiliate) in order to complete
such sale or sales, and shall notify the holders of Series B
Preferred Stock of such delay within five days of receiving the
request therefor. Any delay of the Redemption Date pursuant to
the proviso to the preceding sentence shall be requested by the
Investor (or any such Affiliate) in writing no later than the
tenth day preceding the then-scheduled Redemption Date stated in
the Notice of Redemption. The Redemption Date stated in a Notice
of Redemption shall not be delayed more than once in connection
with the redemption of shares of Series B Preferred Stock
pursuant to such Notice of Redemption. In order to facilitate the
redemption of shares of Series B Preferred Stock, the Board of
Directors may fix a record date for the determination of the
holders of shares of Series B Preferred Stock to be redeemed, in
each case, not more than 30 days prior to the date the Notice of
Redemption is mailed. On or after the Redemption Date, each
holder of the shares called for redemption shall surrender the
certificate evidencing such shares to the Corporation at the
place designated in such notice and shall thereupon be entitled
to receive payment of the Redemption Price. From and after the
Redemption Date, all dividends on shares of Series B Preferred
Stock shall cease to accumulate and all rights of the holders
thereof as holders of Series B Preferred Stock shall cease and
terminate, except to the extent the Corporation shall default in
payment thereof on the Redemption Date. Prior to any Redemption
Date that has been fixed by the Company, other than in connection
with the Mandatory Redemption, the Corporation shall take all
measures reasonably requested by the Investor to facilitate a
sale or other disposition of Series B Preferred Stock by the
Investor or its Affiliates prior to such Redemption Date,
including, without limitation, participation in due diligence
sessions and provision of information about the management,
business and financial condition of the Corporation, preparation
of offering memoranda, private placement memoranda and other
similar documents and preparation and delivery of such other
certificates or documents reasonably requested by the Investor.
For so long as the Investor or an Affiliate of the Investor holds
any shares of Series B Preferred Stock, no Notice of Redemption
in connection with a redemption pursuant to Section A or B of
this Article V shall be delivered unless (i) the Corporation's
preferred stock is rated Baa or better by Xxxxx'x or BBB or
better by S&P, or in the event the Corporation's preferred stock
is not rated by Xxxxx'x and S&P, the Corporation's unsecured debt
is rated Baa or better by Xxxxx'x or BBB or better by S&P or (ii)
the Corporation has sufficient funds reasonably available under
committed lines of credit or other similar sources of financing
established with financially sound financing providers to pay, on
the Redemption Date, the aggregate Redemption Price in connection
with such redemption (and shall reserve such funds or
availability for the payment of the aggregate Redemption Price);
provided, that the Corporation may deliver a Notice of Redemption
without complying with the foregoing conditions if prior to, or
contemporaneously with, the delivery of such notice the
Corporation irrevocably deposits in accordance with Section F of
this Article V funds sufficient to pay the aggregate Redemption
Price for the Series B Preferred Stock.
D. Change of Control. In the event there occurs a
Change of Control, any holder of record of shares of Series B
Preferred Stock, in accordance with the procedures set forth in
Section E hereof, may require the Corporation to redeem any or
all of the shares of Series B Preferred Stock held by such holder
at the Redemption Price therefor.
6
E. Change of Control Notice and Redemption Procedures.
Notice of any Change of Control shall be sent to the holders of
record of the outstanding shares of Series B Preferred Stock not
more than five days following a Change of Control, which notice
(a "Change of Control Notice") shall describe the transaction or
transactions constituting such Change of Control and set forth
each holder's right to require the Corporation to redeem any or
all shares of Series B Preferred Stock held by him or her out of
funds legally available therefor, the Redemption Date (which date
shall be not more than 30 days from the date of such Change of
Control Notice) and the procedures to be followed by such holders
in exercising his or her right to cause such redemption;
provided, however, that if shares of Series B Preferred Stock are
owned by more than 50 holders or groups of Affiliated holders and
if the Series B Preferred Stock is listed on any national
securities exchange or quoted on any national quotation system,
the Corporation shall give such Change of Control Notice by
publication in a newspaper of general circulation in the Borough
of Manhattan, The City of New York, within 30 days following such
Change of Control and, in any case, a similar notice shall be
mailed concurrently to each holder of shares of Series B
Preferred Stock. Failure by the Corporation to give the Change of
Control Notice as prescribed by the preceding sentence, or the
formal insufficiency of any such Change of Control Notice, shall
not prejudice the rights of any holder of shares of Series B
Preferred Stock to cause the Corporation to redeem any such
shares held by him or her. In the event a holder of shares of
Series B Preferred Stock shall elect to require the Corporation
to redeem any or all such shares of Series B Preferred Stock
pursuant to Section D hereof, such holder shall deliver, prior to
the Redemption Date as set forth in the Change of Control Notice,
or, if the Change of Control Notice is not given as required by
this Section E, at any time following the last day the
Corporation was required to give the Change of Control Notice in
accordance with this Section E (in which case the Redemption Date
shall be the date which is the later of (x) 30 days following the
last day the Corporation was required to give the Change of
Control Notice in accordance with this Section E and (y) 15 days
following the delivery of such election by such holder), a
written notice, in the form specified by the Corporation (if the
Corporation did in fact give the notice required by this Section
E), to the Corporation so stating, and specifying the number of
shares to be redeemed pursuant to Section D hereof; provided,
however, that if all of the shares of the Series B Preferred
Stock are owned by 50 or fewer holders or groups of affiliated
holders, such holders or groups may deliver a notice or an
election to redeem at any time within 90 days following the
occurrence of a Change of Control without awaiting receipt of a
Change of Control Notice or the expiration of the time allowed
for the delivery of a Change of Control Notice hereunder. The
Corporation shall redeem the number of shares so specified on the
Redemption Date fixed by the Corporation or as provided in the
preceding sentence. The Corporation shall comply with the
requirements of Rules 13e-4 and 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection
with the repurchase of the shares of Series B Preferred Stock as
a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with
the provisions of this paragraph, the Corporation shall comply
with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations hereunder by virtue
thereof.
7
F. Deposit of Funds. The Corporation shall, on or
prior to any Redemption Date pursuant to this Article V, deposit
with its transfer agent or other redemption agent in the Borough
of Manhattan, The City of New York having a capital and surplus
of at least $500,000,000 selected by the Board of Directors, as a
trust fund for the benefit of the holders of the shares of Series
B Preferred Stock to be redeemed, cash that is sufficient in
amount to redeem the shares to be redeemed in accordance with the
Notice of Redemption or Change of Control Notice, with
irrevocable instructions and authority to such transfer agent or
other redemption agent to pay to the respective holders of such
shares, as evidenced by a list of such holders certified by an
officer of the Corporation, the Redemption Price upon surrender
of their respective share certificates. Such deposit shall be
deemed to constitute full payment of such shares to the holders,
and from and after the date of such deposit, all rights of the
holders of the shares of Series B Preferred Stock that are to be
redeemed as stockholders of the Corporation with respect to such
shares, except the right to receive the Redemption Price upon the
surrender of their respective certificates, shall cease and
terminate. No dividends shall accumulate on any shares of Series
B Preferred Stock after the Redemption Date for such shares
(unless the Corporation shall fail to deposit cash sufficient to
redeem all such shares). In case holders of any shares of Series
B Preferred Stock called for redemption shall not, within two
years after such deposit, claim the cash deposited for redemption
thereof, such transfer agent or other redemption agent shall,
upon demand, pay over to the Corporation the balance so
deposited. Thereupon, such transfer agent or other redemption
agent shall be relieved of all responsibility to the holders
thereof and the sole right of such holders, with respect to
shares to be redeemed, shall be to receive the Redemption Price
as general creditors of the Corporation. Any interest accrued on
any funds so deposited shall belong to the Corporation, and shall
be paid to it from time to time on demand.
VI. Exchange of Series B Preferred Stock
A. The Series B Preferred Stock shall be exchangeable,
at any time, at the option of the Corporation and to the extent
permitted by applicable law, in whole but not in part, on any
Dividend Payment Date for Junior Subordinated Debentures (issued
pursuant to an indenture (the "Indenture") prepared in accordance
with the Investment Agreement) in principal amount of $1,000 per
share of Series B Preferred Stock (a "Debenture" and,
collectively, the "Debentures"), in accordance with this Article
VI:
(i) Each share of Series B Preferred Stock shall be
exchangeable at the offices of the Corporation and at such
other place or places, if any, as the Board of Directors
may designate. Except with the prior written consent of the
holders of all outstanding shares of Series B Preferred
Stock, the Corporation may not exchange any shares of
Series B Preferred Stock if (a) full cumulative dividends,
to the extent payable or deemed payable through the date of
exchange, have not been paid or set aside for payment on
all outstanding shares of the Series B Preferred Stock, (b)
the Corporation has failed to amend its Certificate of
Incorporation pursuant to Delaware law to confer the power
to vote upon holders of the Debentures as shall be
contemplated by the Indenture or (c) such exchange could
result in any tax consequence to the Investor or any of its
Affiliates which is materially adverse.
8
(ii) Prior to giving notice of its intention to
exchange, the Corporation shall execute and deliver to a
bank or trust company selected by the Board of Directors
and, if required by applicable law, qualify under the Trust
Indenture Act of 1939, as amended, the Indenture.
(iii) The Corporation shall mail written notice of its
intention to exchange Series B Preferred Stock for
Debentures (the "Exchange Notice") to each holder of record
of shares of Series B Preferred Stock not less than 90 nor
more than 120 days prior to the date fixed for exchange.
(iv) Prior to effecting any exchange provided above,
the Corporation shall deliver to each holder of shares of
Series B Preferred Stock an opinion of nationally
recognized legal counsel to the effect that: (i) each of
the Indenture and the Debentures have been duly authorized
and executed by the Corporation and, when delivered by the
Corporation in exchange for shares of Series B Preferred
Stock, will constitute valid and legally binding
obligations of the Corporation enforceable against the
Corporation in accordance with their terms, subject to
applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general
principles of equity; (ii) the exchange of the Debentures
for the shares of Series B Preferred Stock shall not
violate the provisions of this Article VI or of the
Delaware General Corporation Law, including Section 221
thereof; and (iii) the exchange of the Debentures for the
shares of Series B Preferred Stock is exempt from the
registration requirements of the Securities Act or, if no
such exemption is available, that the Debentures have been
duly registered for such exchange under such Act.
(v) Upon the exchange of shares of Series B Preferred
Stock for Debentures, the rights of the holders of shares
of Series B Preferred Stock as stockholders of the
Corporation shall terminate and such shares shall no longer
be deemed outstanding.
(vi) Before any holder of shares of Series B Preferred
Stock shall be entitled to receive Debentures, such holder
shall surrender the certificate or certificates therefor,
at the office of the Corporation or at such other place or
places, if any, as the Board of Directors shall have
designated, and shall state in writing the name or names
(with addresses) in which he or she wishes the certificate
or certificates for the Debentures to be issued. The
Corporation will, as soon as practicable thereafter, issue
and deliver at said office or place to such holder of
shares of Series B Preferred Stock, or to his or her
nominee or nominees, certificates for the Debentures to
which he or she shall be entitled as aforesaid. Shares of
Series B Preferred Stock shall be deemed to have been
exchanged as of the close of business on the date fixed for
exchange as provided above, and the Person or Persons
entitled to receive the Debentures issuable upon such
exchange shall be treated for all purposes (including the
accrual and payment of interest) as the record holder or
holders of such Debentures as of the close of business on
such date.
B. For purposes of clause (c) of paragraph (i) of
Section A, an exchange of shares of Series B Preferred Stock
shall be deemed to be an exchange that could result in a tax
9
consequence to the Investor or any of its Affiliates which is
materially adverse only if the Investor or its Affiliate shall
have delivered to the Corporation a written notice to such effect
on or before the fifteenth day after its receipt of the Exchange
Notice (an "Objection Notice"), which Objection Notice shall be
prepared in good faith and shall specify in reasonable detail the
nature of such tax consequences which could result from the
exchange (other than the difference between the tax treatment of
distributions on the Series B Preferred Stock and interest
payments on the Debentures); provided, that the Investor or its
Affiliates shall not deliver an Objection Notice unless the
Investor and its Affiliates Beneficially Own, in the aggregate,
at least 1,000 shares of Series B Preferred Stock at the time of
delivery of such Objection Notice to the Corporation. If the
Corporation receives an Objection Notice, then the Corporation
shall not exchange the shares of Series B Preferred Stock of the
Investor and its Affiliates and the Corporation shall, within 15
days after its receipt of the Objection Notice mail written
notice to the effect that it is canceling the proposed exchange
of shares of Series B Preferred Stock to each holder of record of
shares of Series B Preferred Stock to which it mailed the
Exchange Notice.
C. Shares of the Series B Preferred Stock may be
exchanged for Warrant Shares pursuant to Section 4 of the
Warrants.
VII. Restrictions on Dividends
So long as any shares of the Series B Preferred Stock
are outstanding, the Board of Directors shall not declare, and
the Corporation shall not pay or set apart for payment any
dividend on any Junior Securities or make any payment on account
of, or set apart for payment money for a sinking or other similar
fund for, the repurchase, redemption or other retirement of, any
Junior Securities or Parity Securities or any warrants, rights or
options exercisable for or convertible into any Junior Securities
or Parity Securities (other than the repurchase, redemption or
other retirement of debentures or other debt securities that are
convertible or exchangeable into any Junior Securities or Parity
Securities), or make any distribution in respect of the Junior
Securities, either directly or indirectly, and whether in cash,
obligations or shares of the Corporation or other property (other
than distributions or dividends in Junior Securities to the
holders of Junior Securities), and shall not permit any
corporation or other entity directly or indirectly controlled by
the Corporation to purchase or redeem any Junior Securities or
Parity Securities or any warrants, rights, calls or options
exercisable for or convertible into any Junior Securities or
Parity Securities (other than the repurchase, redemption or other
retirement of debentures or other debt securities that are
convertible or exchangeable into any Junior Securities or Parity
Securities) unless prior to or concurrently with such
declaration, payment, setting apart for payment, repurchase,
redemption or other retirement or distribution, as the case may
be, all accumulated and unpaid dividends on shares of the Series
B Preferred Stock not paid on the dates provided for in paragraph
A of Article III hereof (including Arrearages and accumulated
dividends thereon) shall have been paid, except that when
dividends are not paid in full as aforesaid upon the shares of
Series B Preferred Stock, all dividends declared on the Series B
Preferred Stock and any series of Parity Dividend Securities
shall be declared and paid pro rata so that the amount of
dividends so declared and paid on Series B Preferred Stock and
such series of Parity Dividend Securities shall in all cases bear
to each other the same ratio that accumulated dividends
(including interest accrued on or additional dividends
accumulated in respect of such
10
accumulated dividends) on the shares of Series B Preferred Stock
and such Parity Dividend Securities bear to each other.
Notwithstanding the foregoing, this paragraph shall not prohibit
(i) the acquisition, repurchase, exchange, conversion, redemption
or other retirement for value of shares of Series B Preferred
Stock or any Parity Dividend Security by the Corporation in
accordance with the terms of such securities or of any shares of
Trust Preferred Stock (as defined in Section F of Article VIII)
or (ii) the acquisition, repurchase, exchange, conversion,
redemption or other retirement for value by the Corporation of
any Junior Dividend Securities by the Corporation in accordance
with obligations in existence at the time of original issuance of
the Series B Preferred Stock.
VIII. Voting Rights
A. The holders of shares of Series B Preferred Stock
shall have no voting rights except as set forth below or as
otherwise from time to time required by law.
B. Through the Approval Date, shares of Series B
Preferred Stock shall have no voting rights except as set forth
in Section C of this Article VIII. After the Approval Date, so
long as any shares of the Series B Preferred Stock are
outstanding, each share of Series B Preferred Stock shall entitle
the holder thereof to vote on all matters voted on by holders of
Common Stock, and the shares of Series B Preferred Stock shall
vote together with shares of Common Stock (and any shares of
Series A Preferred Stock entitled to vote) as a single class;
provided, however, that upon register or transfer on the stock
records of the Corporation of a share of Series B Preferred Stock
to any Person other than the Investor or an Affiliate of the
Investor, the transferee, and any subsequent transferee, shall
not be entitled to such voting rights. With respect to any such
vote, the Investor (together with its Affiliates) shall be
entitled to a number of votes per share of Series B Preferred
Stock equal to the quotient of the Investor Aggregate Vote
Number, divided by the number of shares of Series B Preferred
Stock held by such Investor and its Affiliates as of the record
date for such vote. The "Investor Aggregate Vote Number" shall
equal the number of Warrant Shares that would be issuable upon
the exercise of Original Warrants (as defined below) by the
holders thereof (assuming all conditions precedent to such
exercise have been satisfied and that such exercise occurs as of
the record date for such vote), multiplied by the lesser of (x)
the quotient of the number of Original Warrants that are
Beneficially Owned by members of the Investor Group, in the
aggregate, as of the record date for such vote (excluding for
purposes of this calculation, however, any Original Warrants that
have been transferred on the books of the Corporation by any
member of the Investor Group to any Person other than a member of
the Investor Group, regardless of whether any such Original
Warrants are subsequently acquired by any member of the Investor
Group), divided by the number of Original Warrants, and (y) the
quotient of the number of Original Series B Preferred Shares (as
defined below) that are Beneficially Owned by members of the
Investor Group, in the aggregate, as of the record date for such
vote (excluding for purposes of this calculation, however, any
Original Series A Preferred Shares transferred on the stock
records of the Corporation by any member of the Investor Group to
any Person other than a member of the Investor Group, regardless
of whether any such Original Series B Preferred Shares are
subsequently acquired by any member of the Investor Group),
divided by the number of Original Series B Preferred Shares. The
term "Original Warrants" means those Warrants Beneficially
11
Owned by members of the Investor Group, in the aggregate, as of
the Closing. The term "Original Series B Preferred Shares" means
those shares of Series B Preferred Stock Beneficially Owned by
members of the Investor Group, in the aggregate, as of the
Closing.
C. If on any date (i) dividends payable on either the
Series B Preferred Stock or the Series A Preferred Stock shall
have been in arrears and not paid in full for four consecutive
quarterly periods or if dividends shall have been in arrears and
not paid in full on the first or second annual anniversary of the
original issuance of the Series B Preferred Stock or Series A
Preferred Stock, as the case may be, or (ii) the Corporation
shall have failed to satisfy its obligation to redeem either
shares of Series B Preferred Stock or shares of Series A
Preferred Stock pursuant to the relevant Certificate of
Designations, then the number of directors constituting the Board
of Directors shall, without further action, be increased by two,
and the holders of a majority of the outstanding shares of Series
B Preferred Stock and Series A Preferred Stock shall have, in
addition to the other voting rights set forth herein, the
exclusive right, voting together as a single class without regard
to series, to elect the two directors (the "Additional
Directors") of the Corporation to fill such newly-created
directorships. Notwithstanding the foregoing, the Investor and
its Affiliates shall not be permitted to elect, pursuant to the
preceding sentence, more than the number of directors that would
result in four directors designated for nomination or elected by
the Investor and its Affiliates then being on the Board of
Directors (including directors that the Investor has a right to
designate for nomination to the Board of Directors pursuant to
the Investment Agreement); provided, that if at the time holders
of Series A Preferred Stock and Series B Preferred Stock have the
right to elect Additional Directors and (i) the Investor and its
Affiliates Beneficially Own, in the aggregate, a majority of the
outstanding shares of Series B Preferred Stock and Series A
Preferred Stock, taken together as a single class, and (ii) the
Investor and its Affiliates are not permitted to elect one or
both of the Additional Directors as aforesaid, then the holders
of Series B Preferred Stock and Series A Preferred Stock (other
than the Investor and its Affiliates) shall have the right to
elect, voting together as a single class, one Additional Director
pursuant to this Section C. Additional Directors shall continue
as directors and such additional voting right shall continue
until such time as (a) all dividends accumulated on the Series B
Preferred Stock and/or Series A Preferred Stock, as the case may
be, shall have been paid in full or (b) any redemption obligation
with respect to the Series B Preferred Stock and/or Series A
Preferred Stock, as the case may be, that has become due shall
have been satisfied or all necessary funds shall have been set
aside for payment, as the case may be, at which time such
Additional Directors shall cease to be directors and such
additional voting right of the holders of shares of Series B
Preferred Stock shall terminate subject to revesting in the event
of each and every subsequent event of the character indicated
above and subject to any rights as to the election of directors
provided for the holders of any other series of Preferred Stock
of the Corporation.
D. [Reserved]
E. (a) The foregoing rights of holders of shares of
Series B Preferred Stock to take any action as provided in this
Article VIII may be exercised at any annual meeting of
stockholders or at a special meeting of stockholders held for
such purpose as hereinafter provided or at any adjournment
thereof, or by the written consent, delivered to the Secretary of
the
12
Corporation, of the holders of the minimum number of shares
required to take such action. So long as such right to vote
continues (and unless such right has been exercised by written
consent of the minimum number of shares required to take such
action), the Chairman of the Board of Directors may call, and
upon the written request of holders of record of 20% of the
outstanding shares of Series B Preferred Stock, addressed to the
Secretary of the Corporation at the principal office of the
Corporation, shall call, a special meeting of the holders of
shares entitled to vote as provided herein. Such meeting shall be
held within 60 days after delivery of such request to the
Secretary, at the place and upon the notice provided by law and
in the Bylaws for the holding of meetings of stockholders.
(b) Each director elected pursuant to Section C hereof
shall serve until the next annual meeting or until his or her
successor shall be elected and shall qualify, unless the
director's term of office shall have terminated pursuant to the
provisions of Section C hereof, as the case may be. In case any
vacancy shall occur among the directors elected pursuant to
Section C hereof, such vacancy may be filled for the unexpired
portion of the term by vote of the remaining director or
directors theretofore elected by such holders (or such director's
or directors' successor in office), if any. If any such vacancy
is not so filled within 20 days after the creation thereof or if
all of the directors so elected shall cease to serve as directors
before their term shall expire, the holders of the shares then
outstanding and entitled to vote for such director pursuant to
the provisions of Section C hereof, as the case may be, may elect
successors to hold office for the unexpired terms of any vacant
directorships, by written consent as herein provided, or at a
special meeting of such holders called as provided herein. The
holders of a majority of the shares entitled to vote for
directors pursuant to Section C hereof, as the case may be, shall
have the right to remove with or without cause at any time and
replace any directors such holders have elected pursuant to such
section, by written consent as herein provided, or at a special
meeting of such holders called as provided herein.
F. Without the consent or affirmative vote of the
holders of at least a majority of the outstanding shares of
Series B Preferred Stock, voting separately as a class, the
Corporation shall not authorize, create or issue, or increase the
authorized amount of, (i) any Senior Securities or Parity
Securities or (ii) any class or series of capital stock or any
security convertible into or exercisable for any class or series
of capital stock, redeemable mandatorily or redeemable at the
option of the holder thereof at any time on or prior to the
Mandatory Redemption Date (whether or not only upon the
occurrence of a specified event); provided, however, that no
consent or vote of the holders of the outstanding shares of the
Series B Preferred Stock shall be required for the creation or
issuance by a trust formed at the direction of the Corporation of
any series of preferred securities of such trust for financing
purposes in an aggregate amount not to exceed $250,000,000
("Trust Preferred Stock"). No consent or vote of the holders of
the outstanding shares of Series B Preferred Stock shall be
required to authorize, create or issue, or increase the
authorized amount of, any class or series of Junior Securities,
or any security convertible into a stock of any class or series
of Junior Securities, except to the extent such action would
violate Section H of this Article VIII.
G. Without the consent or affirmative vote of the
holders of at least a majority of the outstanding shares of
Series B Preferred Stock, voting separately as a class, the
Corporation
13
shall not (i) amend, alter or repeal any provision of the
Certificate of Incorporation or the Bylaws, if the amendment,
alteration or repeal alters or changes the powers, preferences or
special rights of the Series B Preferred Stock so as to affect
them materially and adversely, or (ii) authorize or take any
other action if such action alters or changes any of the rights
of the Series B Preferred Stock in any respect or otherwise would
be inconsistent with the provisions of this Certificate of
Designations and the holders of any class or series of the
capital stock of the Corporation is entitled to vote thereon.
H. Other Securities. The Corporation shall not enter
into any agreement or issue any security that prohibits,
conflicts or is inconsistent with, or would be breached by, the
Corporation's performance of its obligations hereunder.
IX. Additional Definitions
For the purposes of this Certificate of Designations
of Series B Preferred Stock, the following terms shall have the
meanings indicated:
"Affiliate" has the meaning set forth in Rule 12b-2
under the Exchange Act. The term "Affiliated" has a correlative
meaning. Notwithstanding the foregoing, for all purposes hereof,
TPG, and each Person controlled by, controlling or under common
control with TPG (each, a "TPG Person"), shall not be deemed an
"Affiliate" of any Designated Purchaser Person (as defined
below), and no Designated Purchaser, and no Person controlled by,
controlling or under common control with such Designated
Purchaser (each, a "Designated Purchaser Person"), shall be
deemed an "Affiliate" of any TPG Person or any other Designated
Purchaser Person, in any such case solely as a consequence of the
Investment Agreement and the transactions contemplated thereby.
"Approval Date" shall have the meaning assigned to
such term in the Series B Warrant.
"Beneficially Own" with respect to any securities
means having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act as in
effect on the date hereof, except that a Person shall be deemed
to Beneficially Own all such securities that such Person has the
right to acquire whether such right is exercisable immediately or
after the passage of time). The terms "Beneficial Ownership" and
"Beneficial Owner" have correlative meanings. Notwithstanding the
foregoing, for all purposes hereof, no TPG Person shall be deemed
to Beneficially Own any securities that are held by any
Designated Purchaser Person, and no Designated Purchaser Person
shall be deemed to Beneficially Own any securities that are held
by any TPG Person or other Designated Purchaser Person, in any
such case solely as a consequence of the Investment Agreement or
the transactions contemplated thereby.
"Business Day" means any day, other than a Saturday,
Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to
close.
"Bylaws" means the Bylaws of the Corporation, as
amended.
14
"Change of Control" means such time as:
(i) any Person or Group (other than the Investor, its
Affiliates, the Corporation or any Subsidiaries of the
Corporation, or any Group composed of such Persons) has
become, directly or indirectly, the Beneficial Owner, by
way of merger, consolidation or otherwise, of a majority of
the voting power of the then-outstanding Voting Securities
of the Corporation on a fully-diluted basis, after giving
effect to the conversion and exercise of all outstanding
warrants, options and other securities of the Corporation
convertible into or exercisable for Voting Securities of
the Corporation (whether or not such securities are then
currently convertible or exercisable); or
(ii) the sale, lease, transfer or other disposition of
all or substantially all of the consolidated assets of the
Corporation and its Subsidiaries to any Person or Group; or
(iii) during any period of two consecutive calendar
years, individuals who at the beginning of such period
constituted the Board of Directors, together with any new
members of such Board of Directors whose election by such
Board of Directors or whose nomination for election by the
stockholders of the Corporation was approved by a vote of
at least a majority of the members of such Board of
Directors then still in office who either were directors at
the beginning of such period or whose election or
nomination for election was previously so approved or who
were approved pursuant to Section 5.02 of the Investment
Agreement or Article VIII, Section C, D or E of this
Certificate of Designations, cease for any reason to
constitute a majority of the directors of the Corporation
then in office; or
(iv) the Corporation consolidates with or merges with
or into another Person or any Person consolidates with, or
merges with or into, the Corporation, in any such event
pursuant to a transaction in which immediately after the
consummation thereof the Persons owning the
then-outstanding Voting Securities of the Corporation
immediately prior to such consummation shall not own a
majority in the aggregate (by reason of such prior
ownership) of the then-outstanding Voting Securities of the
Corporation or the surviving entity if other than the
Corporation; or
(v) the adoption of a plan relating to the liquidation
or dissolution of the Corporation, whether or not otherwise
in compliance with the provisions of this Series B
Preferred Stock.
"Closing" shall have the meaning assigned to such term
in the Investment Agreement.
"Designated Purchaser" has the meaning assigned to
such term in the Investment Agreement.
"Designated Purchaser Person" has the meaning set
forth in the definition of "Affiliate."
15
"Exchange Act" means the U.S. Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated
thereunder, from time to time.
"Group" has the meaning set forth in Rule 13d-5 under
the Exchange Act.
"Investment Agreement" means the Investment Agreement,
dated as of February 23, 1998, by and between the Investor and
the Corporation, as amended, supplemented or otherwise modified
from time to time.
"Investor" means TPG.
"Investor Group" means, collectively, the Investor,
the Designated Purchasers, if any, and the respective Affiliates
of such Persons.
"Investor Nominee" means a person designated for
election to the Board of Directors by an Investor pursuant to the
Investment Agreement.
"Moody's" means Xxxxx'x Investors Service and its
successors.
"Person" means any individual, corporation, company,
association, partnership, joint venture, trust or unincorporated
organization, or a government or any agency or political
subdivision thereof.
"Registration Rights Agreement" means the Registration
Rights Agreement, dated as of February 23, 1998, by and between
the Investor and the Corporation, as amended, supplemented or
otherwise modified from time to time.
"Second Anniversary Date" means the second anniversary
of the original issuance of the Series B Preferred Stock.
"Securities Act" means the U.S. Securities Act of
1933, as amended, and the rules and regulations promulgated
thereunder, from time to time.
"Series A Preferred Stock" has the meaning assigned to
such term in the Investment Agreement.
"Shareholder Approval" shall have the meaning assigned
to such term in the Investment Agreement.
"S&P" means Standard and Poor's Ratings Group, a
division of the XxXxxx-Xxxx Companies, and its successors.
"Subsidiary" means, with respect to any Person, (i)
any corporation, association or other business entity of which
more than 50% of the total voting power of shares of voting stock
is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that
Person (or combination thereof) and (ii) any partnership (A) the
sole general partner of the managing general partner of which is
such Person or a Subsidiary of such
16
Person or (B) the only general partners of which are such Person
or of one or more Subsidiaries of such Person (or any combination
thereof).
"TPG" means TPG Oxford LLC, a Delaware limited
liability company.
"TPG Person" has the meaning set forth in the
definition of "Affiliate."
"Voting Securities" means the shares of Common Stock
and any other securities of the Corporation entitled to vote
generally for the election of directors.
"Warrants" means the Series B Warrants issued by the
Corporation on pursuant to the Investment Agreement.
"Warrant Shares" has the meaning assigned to such term
in the Warrants.
X. Miscellaneous
A. Notices. Any notice referred to herein shall be in
writing and, unless first-class mail shall be specifically
permitted for such notices under the terms hereof, shall be
deemed to have been given upon personal delivery thereof, upon
transmittal of such notice by telecopy (with confirmation of
receipt by telecopy or telex) or five days after transmittal by
registered or certified mail, postage prepaid, addressed as
follows:
(i) if to the Corporation, to its office at 000
Xxxxxxxxxxx Xxxxxx Xxxxxxx, Xxxxxxxxxxx 00000 (Attention:
General Counsel) or to the transfer agent for the Series B
Preferred Stock;
(ii) if to a holder of the Series B Preferred Stock,
to such holder at the address of such holder as listed in
the stock record books of the Corporation (which may
include the records of any transfer agent for the Series B
Preferred Stock); or
(iii) to such other address as the Corporation or such
holder, as the case may be, shall have designated by notice
similarly given.
B. Reacquired Shares. Any shares of Series B Preferred
Stock redeemed, purchased or otherwise acquired by the
Corporation, directly or indirectly, in any manner whatsoever
shall be retired and canceled promptly after the acquisition
thereof (and shall not be deemed to be outstanding for any
purpose) and, if necessary to provide for the lawful redemption
or purchase of such shares, the capital represented by such
shares shall be reduced in accordance with the Delaware General
Corporation Law. All such shares of Series B Preferred Stock
shall upon their cancellation and upon the filing of an
appropriate certificate with the Secretary of State of the State
of Delaware, become authorized but unissued shares of Preferred
Stock, par value $0.01 per share, of the Corporation and may be
reissued as part of another series of Preferred Stock, par value
$0.01 per share, of the Corporation subject to the conditions or
restrictions on issuance set forth herein.
17
C. Enforcement. Any registered holder of shares of
Series B Preferred Stock may proceed to protect and enforce its
rights and the rights of such holders by any available remedy by
proceeding at law or in equity to protect and enforce any such
rights, whether for the specific enforcement of any provision in
this Certificate of Designations or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
D. Transfer Taxes. Except as otherwise agreed upon
pursuant to the terms of this Certificate of Designations, the
Corporation shall pay any and all documentary, stamp or similar
issue or transfer taxes and other governmental charges that may
be imposed under the laws of the United States of America or any
political subdivision or taxing authority thereof or therein in
respect of any issue or delivery of Debentures on exchange of, or
other securities or property issued on account of, shares of
Series B Preferred Stock pursuant hereto or certificates
representing such shares or securities. The Corporation shall
not, however, be required to pay any such tax or other charge
that may be imposed in connection with any transfer involved in
the issue or transfer and delivery of any certificate for
Debentures or other securities or property in a name other than
that in which the shares of Series B Preferred Stock so
exchanged, or on account of which such securities were issued,
were registered and no such issue or delivery shall be made
unless and until the Person requesting such issue has paid to the
Corporation the amount of any such tax or has established to the
satisfaction of the Corporation that such tax has been paid or is
not payable.
E. Transfer Agent. The Corporation may appoint, and
from time to time discharge and change, a transfer agent for the
Series B Preferred Stock. Upon any such appointment or discharge
of a transfer agent, the Corporation shall send notice thereof by
first-class mail, postage prepaid, to each holder of record of
shares of Series B Preferred Stock.
F. Record Dates. In the event that the Series B
Preferred Stock shall be registered under either the Securities
Act or the Exchange Act, the Corporation shall establish
appropriate record dates with respect to payments and other
actions to be made with respect to the Series B Preferred Stock.
IN WITNESS WHEREOF, this Certificate of Designations
is executed on behalf of the Corporation by its [ ] and
attested by its Assistant Secretary, this ___ day of [ ],
1998.
OXFORD HEALTH PLANS, INC.
By:_____________________________
Name:
Title:
[Corporate Seal]
ATTEST:
________________________
18
EXHIBIT D
Form of Series B Warrant Certificate
NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED
HEREBY HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAW, AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN THE REGISTRATION RIGHTS AGREEMENT
DATED AS OF FEBRUARY 23, 1998, BY AND BETWEEN TPG OXFORD LLC AND
OXFORD HEALTH PLANS, INC. (THE "COMPANY"), THE TERMS OF WHICH ARE
INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY AND AT THE
PRINCIPAL OFFICE OF THE WARRANT AGENT.
No. W-__________ __________ Warrants
SERIES B WARRANTS
Exercisable commencing _______ __, 1998;
Void after Expiration Time (as defined herein)
OXFORD HEALTH PLANS, INC., a Delaware corporation (the
"Company"), hereby certifies that, for value received, ________,
or registered assigns (the "Warrantholder"), is the owner of ________
Warrants (as defined below), each of which entitles the
Warrantholder to purchase from the Company, prior to the Approval
Date (as defined below), one one-thousandth of a fully paid, duly
authorized and nonassessable share of Series C Junior
Participating Preferred Stock, par value $0.01 per share, of the
Company (the "Junior Preferred Stock"), and, from and after the
Approval Date, one share of common stock, par value $0.01 per
share, of the Company (the "Common Stock"), at any time from and
after _______ __, 1998 (the "Issue Date") and continuing up to
the Expiration Time (as defined herein) at a per share exercise
price determined according to the terms and subject to the
conditions set forth in this certificate (the "Warrant
Certificate"). The number of shares of Junior Preferred Stock and
Common Stock issuable upon exercise of each such Warrant and the
exercise price per share of Junior Preferred Stock and Common
Stock are subject to adjustment from time to time pursuant to the
provisions of Sections 8 and 9 of this Warrant Certificate. The
Warrants evidenced by this Warrant Certificate are part of a
series of warrants to purchase, prior to the Approval Date, up to
_____ one-thousandths of a share of Junior Preferred Stock and, from
and after the Approval Date, up to ____ shares of Common Stock
(collectively, the "Warrants"), issued pursuant to an Investment
Agreement, dated as of February 23, 1998 (as it may be amended,
supplemented or otherwise modified from time to time, the
"Investment Agreement"), by and between TPG Oxford LLC, a
Delaware limited liability company (the "Investor"), and the
Company and are entitled to certain rights and privileges set
forth therein.
Section 1. Definitions. As used in this Warrant
Certificate, the following terms shall have the meanings set
forth below:
"Adjusted Price" has the meaning set forth in Section
8 hereof.
"Adjustment Date" means the twentieth Trading Day
after the day on which the Company's Annual Report on Form
10-K for the year ended December 31, 1998 is filed with the
U.S. Securities and Exchange Commission.
"Approval Date" means the date, if any, on which the
Company obtains the Shareholder Approval.
"Board of Directors" means the board of directors of
the Company.
"Business Day" means any day, other than a Saturday,
Sunday or a day on which banking institutions in the State
of New York are authorized or obligated by law or executive
order to close.
2
"Certificate of Designations" means the Certificate of
Designations for the Series B Preferred Stock filed by the
Company with the Secretary of State of the State of
Delaware.
"Certificate of Incorporation" means the Second
Amended and Restated Certificate of Incorporation of the
Company, as amended from time to time.
"Closing Price" with respect to a share of Common
Stock on any day means, subject to Section 9.1(f), the last
reported sale price on that day or, in case no such
reported sale takes place on such day, the average of the
last reported bid and asked prices, regular way, on that
day, in either case, as reported in the consolidated
transaction reporting system with respect to securities
quoted on Nasdaq or, if the shares of Common Stock are not
quoted on Nasdaq, as reported in the principal consolidated
transaction reporting system with respect to securities
listed on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to
trading or, if the shares of Common Stock are not quoted on
Nasdaq and not listed or admitted to trading on any
national securities exchange, the last quoted price or, if
not so quoted, the average of the high bid and low asked
prices on such other nationally recognized quotation system
then in use, or, if on any such day the shares of Common
Stock are not quoted on any such quotation system, the
average of the closing bid and asked prices as furnished by
a professional market maker selected by the Board of
Directors making a market in the shares of Common Stock. If
the shares of Common Stock are not publicly held or so
listed, quoted or publicly traded, the "Closing Price"
means the fair market value of a share of Common Stock, as
determined in good faith by the Board of Directors.
"Common Stock" has the meaning set forth in the
preamble hereto.
"Company" has the meaning set forth in the preamble
hereto.
"Equity Securities" of any Person means any and all
common stock, preferred stock, any other class of capital
stock and partnership or limited liability company
interests of such Person or any other similar interests of
any Person that is not a corporation, partnership or
limited liability company.
"Exercise Price" has the meaning set forth in Section
8 hereof.
"Expiration Date" means the earlier of (i) ________,
2008 [ten years after the Issue Date], and (ii) the date of an
Optional Redemption.
"Expiration Time" means 5:00 P.M., New York City time,
on the Expiration Date.
"Fractional Warrant Share" means (i) prior to the
Approval Date, any fraction of a share of Junior Preferred
Stock less than one one-thousandth of a share of Junior
Preferred Stock, and (ii) from and after the Approval Date,
any fraction of a whole share of Common Stock issued, or
issuable upon, exercise of the Warrants.
3
"Investment Agreement" has the meaning set forth in
the preamble hereto.
"Investor" has the meaning set forth in the preamble
hereto.
"Issue Date" has the meaning set forth in the preamble
hereto.
"Junior Preferred Stock" has the meaning set forth in
the preamble hereto.
"Nasdaq" means The Nasdaq Stock Market's National
Market.
"Offer Time" has the meaning set forth in Section
9.1(e) hereof.
"Optional Redemption" means a redemption of the Series
B Preferred Stock pursuant to Article V, Section A of the
Certificate of Designations.
"Organic Change" means, with respect to any Person,
any transaction (including without limitation any
recapitalization, capital reorganization or
reclassification of any class or series of Equity
Securities, any consolidation of such Person with, or
merger of such Person into, any other Person, any merger of
another Person into such Person (other than a merger which
does not result in a reclassification, conversion, exchange
or cancellation of outstanding shares of capital stock of
such Person), and any sale or transfer or lease of all or
substantially all of the assets of such Person, but not
including any stock split, combination or subdivision which
is the subject of Section 9.1(b)) pursuant to which any
class or series of Equity Securities of such Person is
converted into the right to receive other securities, cash
or other property.
"Person" means any individual, firm, corporation,
company, limited liability company, association,
partnership, joint venture, trust or unincorporated
organization, or a government or any agency or political
subdivision thereof.
"Securities Act" means the U.S. Securities Act of
1933, as amended, and the rules and regulations promulgated
thereunder.
"Senior Preferred Stock" has the meaning assigned to
such term in the Investment Agreement.
"Series B Preferred Stock" means the Series B
Cumulative Preferred Stock, par value $0.01 per share, of
the Company.
"Shareholder Approval" has the meaning assigned to
such term in the Investment Agreement.
"Stated Value" means the stated value of the Series B
Preferred Stock as set forth in the Certificate of
Designations.
"Trading Day" means any day on which Nasdaq is open
for trading, or if the shares of Common Stock are not
quoted on Nasdaq, any day on which the principal
4
national securities exchange or national quotation system
on which the shares of Common Stock are listed, admitted to
trading or quoted is open for trading, or if the shares of
Common Stock are not so listed, admitted to trading or
quoted, any Business Day.
"Warrant" has the meaning set forth in the preamble
hereto.
"Warrant Agent" means the Person named or otherwise
appointed as such as set forth in Section 10 hereof.
"Warrant Certificate" has the meaning in the preamble
hereto.
"Warrant Market Price" means the average of the
Closing Prices of a share of Common Stock for the ten
consecutive Trading Days ending on the Trading Day
immediately prior to the day on which the Election to
Exercise is delivered.
"Warrant Register" has the meaning set forth in
Section 2.2 hereof.
"Warrant Shares" means (i) prior to the Approval Date,
each one one-thousandth of a share of Junior Preferred
Stock and (ii) from and after the Approval Date, the shares
of Common Stock, in each case, issued, or issuable upon,
exercise of the Warrants.
"Warrantholder" has the meaning set forth in the
preamble hereto.
Section 2. Transferability.
2.1. Registration. The Warrants shall be issued only
in registered form.
2.2. Transfer. The Warrants evidenced by this Warrant
Certificate may be sold or otherwise transferred at any time
(except as such sale or transfer may be restricted pursuant to
the Securities Act or any applicable state securities laws) and
any such sale or transfer shall be effected on the books of the
Company (the "Warrant Register") maintained at its principal
executive offices upon surrender of this Warrant Certificate for
registration of transfer duly endorsed by the Warrantholder or by
its duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment or authority to
transfer. Upon any registration of transfer, the Company shall
execute and deliver a new Warrant Certificate or Certificates in
appropriate denominations to the Person or Persons entitled
thereto.
2.3. Legend on Warrant Shares. If and for so long as
required by the Investment Agreement, this Warrant Certificate
shall contain a legend as set forth in Section 8.10 of the
Investment Agreement.
Section 3. Exchange of Warrant Certificate. Any
Warrant certificate may be exchanged for another certificate or
certificates of like tenor entitling the Warrantholder to
purchase a like aggregate number of Warrant Shares as the
certificate or certificates surrendered then entitles such
Warrantholder to purchase. Any Warrantholder desiring to exchange
a Warrant certificate shall make such request in writing
delivered to the Company, and shall
5
surrender, properly endorsed, the certificate evidencing the
Warrant to be so exchanged. Thereupon, the Company shall execute
and deliver to the Person entitled thereto a new Warrant
certificate or certificates as so requested.
Section 4. Term of Warrants; Exercise of Warrants.
4.1. Duration of Warrant. On the terms and subject to
the conditions set forth in this Warrant Certificate, the
Warrantholder may exercise the Warrants evidenced hereby, in
whole or in part, at any time and from time to time after the
Issue Date and before the Expiration Time. If the Warrants
evidenced hereby are not exercised by the Expiration Time, they
shall become void, and all rights hereunder shall thereupon
cease.
4.2. Exercise of Warrant.
(a) On the terms and subject to the conditions
set forth in this Warrant Certificate, the Warrantholder
may exercise the Warrants evidenced hereby, in whole or in
part, by presentation and surrender to the Warrant Agent of
this Warrant Certificate together with the attached
Election to Exercise duly filled in and signed, and
accompanied by payment to the Company of the Exercise Price
for the number of Warrant Shares specified in such Election
to Exercise. Payment of the aggregate Exercise Price shall
be made (i) in cash in an amount equal to the aggregate
Exercise Price; (ii) by certified or official bank check in
an amount equal to the aggregate Exercise Price; (iii) by
an exchange (which shall be treated as a recapitalization)
with the Company of a number of shares of Senior Preferred
Stock having an aggregate Stated Value plus accumulated and
unpaid dividends thereon equal to the aggregate Exercise
Price; (iv) by an exchange (which shall be treated as a
recapitalization) with the Company of outstanding Warrants
(other than the Warrants being exercised) having an
aggregate Warrant Market Price which, after subtracting the
aggregate Exercise Prices thereof, equals the aggregate
Exercise Price of the Warrants being exercised; or (v) by
any combination of the foregoing.
(b) On the terms and subject to the conditions
set forth in this Warrant Certificate, upon such
presentation and surrender of this Warrant Certificate and
payment of such aggregate Exercise Price as set forth in
paragraph (a) hereof, the Company shall promptly issue and
cause to be delivered to the Warrantholder, or to such
Persons as the Warrantholder may designate in writing a
certificate or certificates (in such name or
names as the Warrantholder may designate in writing) for
the specified number of duly authorized, fully paid and
non-assessable Warrant Shares issuable upon exercise, and
shall deliver to the Warrantholder cash, as provided in
Section 11 hereof, with respect to any Fractional Warrant
Shares otherwise issuable upon such surrender. In the event
that the Warrants evidenced by this Warrant Certificate are
exercised in part prior to the Expiration Time, the Company
shall issue and cause to be delivered to the Warrantholder,
or to such Persons as the Warrantholder may designate in
writing, a certificate or certificates (in such name or
names as the Warrantholder may designate in writing)
evidencing any remaining unexercised Warrants.
6
(c) Each Person in whose name any certificate for
Warrant Shares is issued shall for all purposes be deemed
to have become the holder of record of the Warrant Shares
represented thereby on the first date on which both the
Warrant certificate evidencing the respective Warrants was
surrendered and payment of the Exercise Price and any
applicable taxes was made, irrespective of date of issue or
delivery of such certificate.
Section 5. Payment of Taxes. The Company shall pay any
and all documentary, stamp or similar issue or transfer taxes and
other governmental charges that may be imposed under the laws of
the United States of America or any political subdivision or
taxing authority thereof or therein in respect of any issue or
delivery of Warrant Shares or of other securities or property
deliverable upon exercise of the Warrants evidenced by this
Warrant Certificate or certificates representing such shares or
securities (other than income taxes imposed on the
Warrantholder); provided that the Company shall not be required
to pay any such tax or other charge that may be imposed in
connection with any transfer involved in the issue of any
certificate for Warrant Shares or other securities or property,
or payment of cash, to any Person other than the holder of the
Warrant certificate surrendered upon exercise, and in case of any
such tax or charge, the Warrant Agent and the Company shall not
be required to issue any security or property or pay any cash
until such tax or charge has been paid or it has been established
to the Warrant Agent's and the Company's satisfaction that no
such tax or charge is payable.
Section 6. Mutilated or Missing Warrant. If any
Warrant certificate is lost, stolen, mutilated or destroyed, the
Company shall issue and the Warrant Agent shall countersign, in
exchange and substitution for and upon cancellation of the
mutilated Warrant certificate, or in lieu of and substitution for
the Warrant certificate lost, stolen or destroyed, upon receipt
of a proper affidavit or other evidence reasonably satisfactory
to the Company and the Warrant Agent (and surrender of any
mutilated Warrant certificate) and bond of indemnity in form and
amount and with corporate surety reasonably satisfactory to the
Company and the Warrant Agent in each instance protecting the
Company and the Warrant Agent, a new Warrant certificate of like
tenor and representing an equivalent number of Warrants as the
Warrant certificate so lost, stolen, mutilated or destroyed. Any
such new Warrant certificate shall constitute an original
contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant
certificate shall be at any time enforceable by anyone. An
applicant for such substitute Warrant certificate shall also
comply with such other reasonable regulations and pay such other
reasonable charges as the Company or the Warrant Agent may
prescribe. All Warrant certificates shall be held and owned upon
the express condition that the foregoing provisions are exclusive
with respect to the replacement of lost, stolen, mutilated or
destroyed Warrant certificates, and shall preclude any and all
other rights or remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the
replacement of negotiable instruments or other securities without
their surrender.
Section 7. Reservation of Shares. The Company hereby
agrees that there shall be reserved for issuance and delivery
upon exercise of this Warrant, free from preemptive rights, (i)
all of the authorized but unissued shares of Junior Preferred
Stock and (ii) the number
7
of shares of authorized but unissued shares of Common Stock as
may in the future or shall at any time be required for issuance
or delivery upon exercise of the Warrants evidenced by this
Warrant Certificate, except that from and after the Approval Date
no such shares of Junior Preferred Stock shall be required to be
so reserved. The Company further agrees that it will not, by
amendment of its Certificate of Incorporation or through
reorganization, consolidation, merger, dissolution or sale of
assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations
or conditions to be observed or performed hereunder by the
Company. Without limiting the generality of the foregoing, the
Company agrees that before taking any action which would cause an
adjustment reducing the Exercise Price below the then-par value
of Warrant Shares issuable upon exercise hereof, the Company
shall from time to time take all such action that may be
necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price
as so adjusted.
Section 8. Exercise Price. The price per share (the
"Exercise Price") at which Warrant Shares shall be purchasable
upon the exercise of the Warrants evidenced by this Warrant
Certificate shall be $17.75, subject to adjustment pursuant to
Section 9 hereof; provided, that, unless the Warrantholder
otherwise elects by delivering a written notice to that effect to
the Company or the Warrant Agent on the Adjustment Date, in the
event the Exercise Price for the Warrants evidenced by this
Warrant Certificate immediately prior to the Adjustment Date
shall be greater than the amount (the "Adjusted Price") equal to
the product of 1.15 multiplied by the average of the Closing
Prices of a share of Common Stock for the twenty consecutive
Trading Days ending on the last Trading Day prior to the
Adjustment Date (the "Adjusted Price Determination Period"), the
Exercise Price shall be deemed to equal the Adjusted Price as of
the Adjustment Date, and any adjustments to the Exercise Price
made pursuant to Section 9.1 hereof on and after the Adjustment
Date shall be made with respect to such Adjusted Price. In case
any event that would require an adjustment to the Exercise Price
pursuant to Section 9 hereof occurs with an "ex" date or an
effective date occurrring during the Adjusted Price Determination
Period, the Closing Prices used in determining the Adjusted Price
shall be appropriately adjusted to take such event into account.
No adjustment to the Exercise Price shall be made pursuant to
this Section 8 with respect to any Warrants that have been
surrendered for exercise prior to the Adjustment Date or
exchanged in connection with the exercise of Warrants prior to
the Adjustment Date in accordance with clause (iv) of Section
4.2(a) hereof.
Section 9. Adjustment of Exercise Price and Number of
Shares. The number and kind of securities purchasable upon the
exercise of the Warrants evidenced by this Warrant Certificate
and the Exercise Price thereof shall be subject to adjustment
from time to time after the date hereof upon the happening of
certain events, as follows:
9.1. Adjustments to Exercise Price. The Exercise Price
shall be subject to adjustment as follows:
(a) Stock Dividends. In case the Company after
the date hereof shall pay a dividend or make a distribution
to all holders of shares of Common Stock in shares of
Common Stock, then in any such case the Exercise Price in
effect at the opening of
8
business on the day following the record date for the
determination of stockholders entitled to receive such
dividend or distribution shall be reduced to a price
obtained by multiplying such Exercise Price by a fraction
of which (x) the numerator shall be the number of shares of
Common Stock outstanding at the close of business on such
record date and (y) the denominator shall be the sum of
such number of shares of Common Stock outstanding and the
total number of shares of Common Stock constituting such
dividend or distribution, such reduction to become
effective immediately after the opening of business on the
day following such record date. For purposes of this
subsection (a), the number of shares of Common Stock at any
time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable
in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company will not
pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Company.
(b) Stock Splits and Reverse Splits. In case
after the date hereof outstanding shares of Common Stock
shall be subdivided into a greater number of shares of
Common Stock, the Exercise Price in effect at the opening
of business on the day following the day upon which such
subdivision becomes effective shall be proportionately
reduced, and, conversely, in case after the date hereof
outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Exercise
Price in effect at the opening of business on the day
following the day upon which such combination becomes
effective shall be proportionately increased, such
reduction or increase, as the case may be, to become
effective immediately after the opening of business on the
day following the day upon which such subdivision or
combination becomes effective.
(c) Issuances Below Market. In case the Company
after the date hereof shall issue rights or warrants to
holders of shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price
per share less than the Closing Price per share on the
record date for the determination of stockholders entitled
to receive such rights or warrants, the Exercise Price in
effect at the opening of business on the day following such
record date shall be adjusted to a price obtained by
multiplying such Exercise Price by a fraction of which (x)
the numerator shall be the number of shares of Common Stock
outstanding at the close of business on such record date
plus the number of shares of Common Stock that the
aggregate offering price of the total number of shares so
to be offered would purchase at such Closing Price and (y)
the denominator shall be the number of shares of Common
Stock outstanding at the close of business on such record
date plus the number of additional shares of Common Stock
so to be offered for subscription or purchase, such
adjustment to become effective immediately after the
opening of business on the day following such record date;
provided, however, that no adjustment shall be made if the
Company issues or distributes to each Warrantholder the
rights or warrants that each Warrantholder would have been
entitled to receive had the Warrants held by such
Warrantholder been exercised prior to such record date; and
provided, further, that in no event shall the fact that the
Warrants become exercisable for shares of Common Stock upon
occurrence of the Shareholder Approval constitute an
9
issuance of rights or warrants pursuant to this Section
9.1(c). For purposes of this subsection (c), the number of
shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of
Common Stock. The Company shall not issue any rights or
warrants in respect of shares of Common Stock held in the
treasury of the Company. Rights or warrants issued by the
Company to all holders of Common Stock entitling the
holders thereof to subscribe for or purchase Equity
Securities, which rights or warrants (i) are deemed to be
transferred with such shares of Common Stock, (ii) are not
exercisable and (iii) are also issued in respect of future
issuances of Common Stock, including shares of Common Stock
issued upon exercise of the Warrants evidenced by this
Warrant Certificate, in each case in clauses (i) through
(iii) until the occurrence of a specified event or events
(a "Trigger Event"), shall for purposes of this subsection
(c) not be deemed issued until the occurrence of the
earliest Trigger Event.
(d) Special Dividends. In case the Company after
the date hereof shall distribute to all holders of shares
of Common Stock evidences of its indebtedness or assets
(excluding any regular periodic cash dividend), Equity
Securities (other than Common Stock) or rights to subscribe
(excluding those referred to in subsection (c) above) for
Equity Securities other than Common Stock, in each such
case the Exercise Price in effect immediately prior to the
close of business on the record date for the determination
of stockholders entitled to receive such distribution shall
be adjusted to a price obtained by multiplying such
Exercise Price by a fraction of which (x) the numerator
shall be the Closing Price per share of Common Stock on
such record date, less the then-current fair market value
as of such record date (as determined by the Board of
Directors in its good faith judgment) of the portion of
assets or evidences of indebtedness or Equity Securities or
subscription rights so distributed applicable to one share
of Common Stock, and (y) the denominator shall be such
Closing Price, such adjustment to become effective
immediately prior to the opening of business on the day
following such record date; provided, however, that no
adjustment shall be made (1) if the Company issues or
distributes to each Warrantholder the subscription rights
referred to above that each Warrantholder would have been
entitled to receive had the Warrants held by such
Warrantholder been exercised prior to such record date or
(2) if the Company grants to each Warrantholder the right
to receive, upon the exercise of the Warrants held by such
Warrantholder at any time after the distribution of the
evidences of indebtedness or assets or Equity Securities
referred to above, the evidences of indebtedness or assets
or Equity Securities that such Warrantholder would have
been entitled to receive had such Warrants been exercised
prior to such record date. The Company shall provide any
Warrantholder, upon receipt of a written request therefor,
with any indenture or other instrument defining the rights
of the holders of any indebtedness, assets, subscription
rights or Equity Securities referred to in this subsection
(d). Rights or warrants issued by the Company to all
holders of Common Stock entitling the holders thereof to
subscribe for or purchase Equity Securities, which rights
or warrants (i) are deemed to be transferred with such
shares of Common Stock, (ii) are not exercisable and (iii)
are also issued in respect of future issuances of Common
Stock,
10
including shares of Common Stock issued upon exercise of
the Warrants evidenced by this Warrant Certificate, in each
case in clauses (i) through (iii) until the occurrence of a
Trigger Event, shall for purposes of this subsection (d)
not be deemed issued until the occurrence of the earliest
Trigger Event.
(e) Tender or Exchange Offer. In case a tender or
exchange offer made by the Company or any subsidiary of the
Company for all or any portion of the Common Stock shall be
consummated and such tender offer shall involve an
aggregate consideration having a fair market value (as
determined by the Board of Directors in its good faith
judgment) at the last time (the "Offer Time") tenders may
be made pursuant to such tender or exchange offer (as it
may be amended) that, together with the aggregate of the
cash plus the fair market value (as determined by the Board
of Directors in its good faith judgment), as of the Offer
Time, of consideration payable in respect of any tender or
exchange offer by the Company or any such subsidiary for
all or any portion of the Common Stock consummated
preceding the Offer Time and in respect of which no
Exercise Price adjustment pursuant to this subsection (e)
has been made, exceeds 5% of the product of the Closing
Price of the Common Stock at the Offer Time multiplied by
the number of shares of Common Stock outstanding (including
any tendered shares) at the Offer Time, the Exercise Price
shall be reduced so that the same shall equal the price
determined by multiplying the Exercise Price in effect
immediately prior to the Offer Time by a fraction of which
(x) the numerator shall be (i) the product of the Closing
Price of the Common Stock at the Offer Time multiplied by
the number of shares of Common Stock outstanding (including
any tendered shares) at the Offer Time minus (ii) the fair
market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the
tender or exchange offer) of all shares validly tendered
and not withdrawn as of the Offer Time (the shares deemed
so accepted, up to any such maximum, being referred to as
the "Purchased Shares") and (y) the denominator shall be
the product of (i) such Closing Price at the Offer Time
multiplied by (ii) such number of outstanding shares at the
Offer Time minus the number of Purchased Shares, such
reduction to become effective immediately prior to the
opening of business on the day following the Offer Time.
For purposes of this subsection (e), the number of shares
of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall
include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock.
(f) Closing Price Determination. For the purpose
of any computation under subsections (c) and (d) of this
Section 9.1, the Closing Price of Common Stock on any date
shall be deemed to be the average of the Closing Prices for
the five consecutive Trading Days ending not later than the
day in question and commencing on a day selected at random
in good faith by the Company which is not more than 20
Trading Days before the day in question, provided, however,
that (i) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that
requires an adjustment to the Exercise Price pursuant to
this Section 9 occurs on or after the 20th Trading Day
prior to the day in question and prior to the "ex" date for
the issuance or distribution requiring
11
such computation, the Closing Price for each Trading Day
prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the same
fraction which the Exercise Price is so required to be
adjusted as a result of such other event, (ii) if the "ex"
date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to
the Exercise Price pursuant to this Section 9 occurs on or
after the "ex" date for the issuance or distribution
requiring such computation and on or prior to the day in
question, the Closing Price for each Trading Day on and
after the "ex" date for such other event shall be adjusted
by multiplying such Closing Price by the reciprocal of the
fraction by which the Exercise Price is so required to be
adjusted as a result of such other event, and (iii) if the
"ex" date for the issuance or distribution requiring such
computation is on or prior to the day in question, after
taking into account any adjustment required pursuant to
clause (ii) of this proviso, the Closing Price for each
Trading Day on or after such "ex" date shall be adjusted by
adding thereto the fair market value on the day in question
(as determined by the Board of Directors in a manner
consistent with any determination of such value for the
purposes of subsection (d) of this Section 9.1) of the
assets, evidences of indebtedness, Equity Securities or
subscription rights being distributed applicable to one
share of Common Stock as of the close of business on the
day before such "ex" date. For the purposes of any
computation under subsection (e) of this Section 9.1, the
Closing Price on any date shall be deemed to be the average
of the daily Closing Prices for the five consecutive
Trading Days ending not later than the Offer Time of such
tender or exchange offer and commencing on a day selected
at random in good faith by the Company which date shall be
on or after the latest (the "Commencement Date") of (i) the
date 20 Trading Days before the date in question, (ii) the
date of commencement of the tender or exchange offer
requiring such computation and (iii) the date of the last
amendment, if any, of such tender or exchange offer
involving a change in the maximum number of shares for
which tenders are sought or a change in the consideration
offered; provided, however, that if the "ex" date for any
event (other than the tender or exchange offer requiring
such computation) that requires an adjustment to the
Exercise Price pursuant to this Section 9 occurs on or
after the Commencement Date and prior to the Offer Time for
the tender or exchange offer requiring such computation,
the Closing Price for each Trading Day prior to the "ex"
date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction by which the
Exercise Price is so required to be adjusted as a result of
such other event. For purposes of this subsection (f), the
term "ex" date, (i) when used with respect to any issuance
or distribution, means the first date on which the Common
Stock trades regular way on Nasdaq or on the relevant
exchange or in the relevant market from which the Closing
Price was obtained without the right to receive such
issuance or distribution, (ii) when used with respect to
any subdivision or combination of shares of Common Stock,
means the first date on which the Common Stock trades
regular way on Nasdaq or such exchange or in such market
after the time at which such subdivision or combination
becomes effective, and (iii) when used with respect to any
tender or exchange offer means the first date on which the
Common Stock trades regular way on Nasdaq or such exchange
or in such market after the Offer Time of such tender or
exchange offer.
12
(g) Minimum Adjustment Requirement. No adjustment
shall be required unless such adjustment would result in an
increase or decrease of at least $0.01 in the Exercise
Price then subject to adjustment; provided, however, that
any adjustments that are not made by reason of this
subsection (g) shall be carried forward and taken into
account in any subsequent adjustment. In case the Company
shall at any time issue shares of Common Stock by way of
dividend on any stock of the Company or subdivide or
combine the outstanding shares of Common Stock, said amount
of $0.01 specified in the preceding sentence (as
theretofore increased or decreased, if said amount shall
have been adjusted in accordance with the provisions of
this subsection (g)) shall forthwith be proportionately
increased in the case of such a combination or decreased in
the case of such a subdivision or stock dividend so as
appropriately to reflect the same.
(h) Calculations. All calculations under this
Section 9.1 shall be made to the nearest $0.01.
(i) Certificate. Whenever an adjustment in the
Exercise Price is made as required or permitted by the
provisions of this Section 9.1, the Company shall promptly
file with the Warrant Agent a certificate of its chief
financial officer setting forth (A) the adjusted Exercise
Price as provided in this Section 9.1 and a brief statement
of the facts requiring such adjustment and the computation
thereof and (B) the number of shares of Common Stock (or
portions thereof) purchasable upon exercise of a Warrant
after such adjustment in the Exercise Price in accordance
with Section 9.2 hereof and the record date therefor, and
promptly after such filing shall mail or cause to be mailed
a notice of such adjustment to each Warrantholder at his or
her last address as the same appears on the Warrant
Register. Such certificate, in the absence of manifest
error, shall be conclusive and final evidence of the
correctness of such adjustment. The Warrant Agent shall be
entitled to rely upon such certificate, and shall be under
no duty or responsibility with respect to any such
certificate except to exhibit the same to any Warrantholder
desiring inspection thereof.
(j) Notice. In case:
(i) the Company shall declare any dividend
or any distribution of any kind or character (whether
in cash, securities or other property) on or in
respect of shares of Common Stock or to the
stockholders of the Company (in their capacity as
such), excluding any regular periodic cash dividend
paid out of current or retained earnings (as such
terms are used in generally accepted accounting
principles); or
(ii) the Company shall authorize the
granting to the holders of shares of Common Stock of
rights to subscribe for or purchase any shares of
capital stock or of any other right; or
(iii) of any reclassification of shares of
Common Stock (other than a subdivision or combination
of outstanding shares of Common Stock), or of any
consolidation or merger to which the Company is a
party and for which
13
approval of any stockholders of the Company is
required, or of the sale or transfer of all or
substantially all of the assets of the Company; or
(iv) of the voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then the Company shall cause to be filed with the Warrant
Agent and shall cause to be mailed to the Warrantholders,
at their last addresses as they shall appear upon the
Warrant Register, at least 30 days prior to the applicable
record date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of
such dividend, distribution or rights or, if a record is
not to be taken, the date as of which the holders of shares
of Common Stock of record to be entitled to such dividend,
distribution or rights are to be determined or (y) the date
on which such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and, if applicable, the date
as of which it is expected that holders of shares of Common
Stock of record shall be entitled to exchange their shares
of Common Stock for securities or other property (including
cash) deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. Failure to give any such notice,
or any defect therein, shall not affect the validity of the
proceedings referred to in clauses (i), (ii), (iii) and
(iv) above.
(k) Section 305. Anything in this Section 9.1 to
the contrary notwithstanding, the Company shall be
entitled, but not required, to make such reductions in the
Exercise Price, in addition to those required by this
Section 9.1, as it in its discretion shall determine to be
advisable, including, without limitation, in order that any
dividend in or distribution of shares of Common Stock or
shares of capital stock of any class other than Common
Stock, subdivision, reclassification or combination of
shares of Common Stock, issuance of rights or warrants, or
any other transaction having a similar effect, shall not be
treated as a distribution of property by the Company to its
stockholders under Section 305 of the Internal Revenue Code
of 1986, as amended, or any successor provision and shall
not be taxable to them.
(l) No Adjustment. Anything to the contrary
herein notwithstanding, no adjustment to the Exercise Price
or the number of shares of Common Stock purchasable upon
exercise of a Warrant shall be made pursuant to this
Section 9.1 or Section 9.2 as a result of, or in connection
with, the issuance of options or rights to purchase Common
Stock issued to employees of the Company or its
Subsidiaries pursuant to a stock option or other similar
plan adopted by the Board of Directors or an employment
agreement approved by the Board of Directors, or the
modification, renewal or extension of any such plan or
agreement if approved by the Board of Directors.
(m) When Adjustment Not Required. If the Company
shall take a record of the holders of its Common Stock for
purposes of taking any action that requires an adjustment
of the Exercise Price under this Section 9 and shall,
thereafter and before the effective date of such action,
legally abandon its plan to take such action, then
thereafter
14
no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in
respect thereof shall be rescinded and annulled.
9.2. Adjustment to Number of Warrant Shares. Upon each
adjustment of the Exercise Price pursuant to Section 9.1 hereof
the number of Warrant Shares purchasable upon exercise of a
Warrant outstanding prior to the effectiveness of such adjustment
shall be adjusted to the number, calculated to the nearest
one-hundredth of a Warrant Share, obtained by (x) multiplying the
number of Warrant Shares purchasable immediately prior to such
adjustment upon the exercise of a Warrant by the Exercise Price
in effect prior to such adjustment and (y) dividing the product
so obtained by the Exercise Price in effect after such adjustment
of the Exercise Price.
9.3. Organic Change.
(a) Company Survives. Upon the consummation of an
Organic Change (other than a transaction in which the
Company is not the surviving entity), lawful provision
shall be made as part of the terms of such transaction
whereby the terms of the Warrant Certificates shall be
modified, without payment of any additional consideration
therefor, so as to provide that upon exercise of Warrants
following the consummation of such Organic Change, the
Warrantholders of such Warrants shall have the right to
purchase only the kind and amount of securities, cash and
other property receivable upon such Organic Change by a
holder of the number of Warrant Shares into which such
Warrants might have been exercised immediately prior to
such Organic Change, assuming such holder of Warrant Shares
(i) is not a Person with which the Company consolidated or
into which the Company merged or which merged into the
Company or to which a sale, transfer or lease of all or
substantially all of the assets of the Company was made, as
the case may be (a "constituent Person"), or an Affiliate
of a constituent Person, and (ii) failed to exercise his
rights of election, if any, as to the kind and amount of
securities, cash and other property receivable upon such
Organic Change (provided that if the kind and amount of
securities, cash and other property receivable upon such
Organic Change is not the same for each share of Common
Stock held immediately prior to such Organic Change by
others than a constituent Person or an Affiliate thereof
and in respect of which such rights of election shall not
have been exercised ("non-electing shares"), then for the
purpose of this subsection (a) the kind and amount of
securities, cash and other property receivable upon such
Organic Change by each non-electing share shall be deemed
to be the kind and amount so receivable per share by a
plurality of the non-electing shares); provided, however,
that no adjustment shall be made as a result of such
Organic Change to the Exercise Price or the number of
Warrant Shares notwithstanding any provision of Section 9
hereof unless any event requiring any such adjustment shall
have occurred or shall occur prior to, upon or after such
Organic Change. Lawful provision also shall be made as part
of the terms of the Organic Change so that all other terms
of the Warrant Certificates shall remain in full force and
effect following such an Organic Change. The provisions of
this Section 9.3(a) shall similarly apply to successive
Organic Changes.
15
(b) Company Does Not Survive. The Company shall
not enter into an Organic Change that is a transaction in
which the Company is not the surviving entity unless lawful
provision shall be made as part of the terms of such
transaction whereby the surviving entity shall issue new
securities to each Warrantholder, without payment of any
additional consideration therefor, with terms that provide
that upon the exercise of the Warrants, the Warrantholders
of such Warrants shall have the right to purchase only the
kind and amount of securities, cash and other property
receivable upon such Organic Change by a holder of the
number of Warrant Shares into which such Warrants might
have been exercised immediately prior to such Organic
Change, assuming such holder of Warrant Shares (i) is not a
constituent Person or an Affiliate of a constituent Person
and (ii) failed to exercise his rights of election, if any,
as to the kind and amount of securities, cash and other
property receivable upon such Organic Change (provided that
if the kind and amount of securities, cash and other
property receivable upon such Organic Change is not the
same for each non-electing share, then for the purpose of
this subsection (b) the kind and amount of securities, cash
and other property receivable upon such Organic Change by
each non-electing share shall be deemed to be the kind and
amount so receivable per share by a plurality of the
non-electing shares); provided, however, that no adjustment
shall be made as a result of such Organic Change to the
Exercise Price or the number of Warrant Shares
notwithstanding any provision of Section 9 hereof unless
any event requiring any such adjustment shall have occurred
or shall occur prior to, upon or after such Organic Change.
The certificate or articles of incorporation or other
constituent document of the surviving entity shall provide
for such adjustments which, for events subsequent to the
effective date of such certificate or articles of
incorporation or other constituent document, shall be
equivalent to the adjustments provided for in Section 9.1
hereof.
9.4. Statement on Warrants. The form of Warrant
Certificate need not be changed because of any adjustment made
pursuant to Section 8, Section 9.1 or Section 9.2 hereof, and
Warrants issued after such adjustment may state the same Exercise
Price and the same number of Warrant Shares as are stated in this
Warrant Certificate.
9.5. Restriction on Actions Relating to Junior
Preferred Stock. No action shall be take by the Company with
respect to the Junior Preferred Stock, including without
limitation stock splits, stock dividends, stock combinations,
issuances below market and special dividends, which would require
an adjustment of the Exercise Price if such action were taken
with respect to the Common Stock, except pursuant to, and in
accordance with, Section 9.2.
Section 10. Warrant Agent. On the date of issuance of
the Warrants, the Company shall cause to be appointed in the
Borough of Manhattan, The City of New York, a Warrant Agent,
having a capital and surplus of at least $100,000,000.
Section 11. Fractional Interests. The Company shall
not be required to issue Fractional Warrant Shares on the
exercise of the Warrants evidenced by this Warrant Certificate.
If any Fractional Warrant Share would, but for the provisions of
this Section 11, be issuable on the exercise of the Warrants
evidenced by this Warrant Certificate (or specified portions
thereof),
16
the Company shall pay an amount in cash equal to the fraction of
a Warrant Share represented by such Fractional Warrant Share
multiplied by the Closing Price on the day of such exercise.
Section 12. Notice of Approval Date. When and if the
Approval Date shall occur, the Company shall promptly file with
the Warrant Agent a certificate to such effect, and promptly
after such filing shall mail or cause to be mailed a notice of
such occurrence to each Warrantholder at his or her last address
as the same appears on the Warrant Register.
Section 13. No Rights as Shareholder. Nothing in this
Warrant Certificate shall be construed as conferring upon the
Warrantholder or its transferees any rights as a shareholder of
the Company, including the right to vote, receive dividends,
consent or receive notices as a shareholder with respect to any
meeting of shareholders for the election of directors of the
Company or any other matter.
Section 14. Successors. All the covenants and
provisions of this Warrant Certificate by or for the benefit of
the Company or the Warrantholder shall bind and inure to the
benefit of their respective successors and permitted assigns
hereunder.
Section 15. Governing Law; Choice of Forum, Etc. The
validity, construction and performance of this Warrant
Certificate shall be governed by, and interpreted in accordance
with, the laws of New York without reference to its conflict of
laws rules. The parties hereto agree that the appropriate and
exclusive forum for any disputes arising out of this Warrant
Certificate solely between or among any or all of the Company, on
the one hand, and the Investor and/or any Person who has become a
Warrantholder, on the other, shall be the United States District
Court for the Southern District of New York, and, if such court
will not hear any such suit, the courts of the state of the
Company's incorporation, and the parties hereto irrevocably
consent to the exclusive jurisdiction of such courts, and agree
to comply with all requirements necessary to give such courts
jurisdiction. The parties hereto further agree that the parties
will not bring suit with respect to any disputes, except as
expressly set forth below, arising out of this Warrant
Certificate for the execution or enforcement of judgment, in any
jurisdiction other than the above specified courts. Each of the
parties hereto irrevocably consents to the service of process in
any action or proceeding hereunder by the mailing of copies
thereof by registered or certified airmail, postage prepaid, if
to (i) the Company, at 000 Xxxxxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxxx, 00000, Attention: General Counsel, or at such other
address specified by the Company in writing to the Warrant Agent,
and (ii) any Warrantholder, at the address of such Warrantholder
specified in the Warrant Register. The foregoing shall not limit
the rights of any party hereto to serve process in any other
manner permitted by the law or to obtain execution of judgment in
any other jurisdiction. The parties further agree, to the extent
permitted by law, that final and unappealable judgment against
any of them in any action or proceeding contemplated above shall
be conclusive and may be enforced in any other jurisdiction
within or outside the United States by suit on the judgment, a
certified or exemplified copy of which shall be conclusive
evidence of the fact and the amount of indebtedness. The parties
agree to waive any and all rights that they may have to a jury
trial with respect to disputes arising out of this Agreement.
17
Section 16. Benefits of this Agreement. Nothing in
this Warrant Certificate shall be construed to give to any Person
other than the Company and the Warrantholder any legal or
equitable right, remedy or claim under this Warrant Certificate,
and this Warrant Certificate shall be for the sole and exclusive
benefit of the Company and the Warrantholder.
18
IN WITNESS WHEREOF, the Company has caused this
Warrant to be duly executed, as of this _____th day of _________,
1998.
OXFORD HEALTH PLANS, INC.
By:_______________________
Name:
Title:
[Corporate Seal]
Attest:
________________________
Countersigned:
________________________, as Warrant Agent
By:_____________________
Name:
Title:
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants)
To OXFORD HEALTH PLANS, INC.:
The undersigned hereby irrevocably elects to exercise
the right of purchase represented by the within Warrant
Certificate for, and to purchase thereunder, Warrant Shares, as
provided for therein, and tenders herewith payment of the
purchase price in full in the form of [COMPLETE WHERE
APPLICABLE]:
[ ] cash or a certified or official bank check in the
amount of $ ; and/or C
[ ] $__________ Stated Value of Senior Preferred Stock (as
to which $__________ of accumulated dividends are
unpaid), of which $__________ Stated Value and the
corresponding accumulated dividends should be applied
toward the payment of such Warrant Shares; and/or
[ ] number of Warrants, valued at $ each (such value
arrived at by subtracting the Exercise Price of $ from
the Warrant Market Price of $ , both the Exercise Price
and Warrant Market Price determined in accordance with
the provisions of the Warrant Certificate);
For a total purchase price of $__________
If the Stated Value and accumulated and unpaid
dividends of the shares of Senior Preferred Stock or the value of
the Warrants evidenced by the Warrant Certificate delivered
herewith exceeds that portion of the payment which is to be paid
by the surrender of such shares or Warrants, you are authorized,
as agent of the undersigned, to deliver to the Company such
shares or Warrant Certificate delivered herewith for exchange
into smaller denominations in order that you may deliver to the
undersigned new shares of Senior Preferred Stock or Warrant
Certificates, in Stated Value or number as the case may be, equal
to the difference between the Stated Value or number as the case
may be, of the Senior Preferred Stock or Warrants surrendered,
less the Stated Value or number as the case may be, thereof, used
to purchase Warrant Shares.
Please issue a certificate or certificates for such Warrant
Shares in the name of, and pay any cash for any Fractional
Warrant Shares to (please print name address and social security
or other identifying number)* :
Name: _______________________________________________________
Address: _______________________________________________________
_______________________________________________________
Soc. Sec. #: _________________
AND, if said number of Warrant Shares shall not be all the shares
purchasable under the within Warrant Certificate, a new Warrant
Certificate is to be issued in the name of the undersigned for
the balance remaining of the Warrant Shares purchasable
thereunder rounded up to the next higher whole number of Warrant
Shares.
Signature:**_________________________
--------
* The Warrant Certificate and the Investment Agreement contain
restrictions on the sale and other transfer of the Warrants
evidenced by such Warrant Certificate.
** The above signature should correspond exactly with the name
on the face of this Warrant Certificate or with the name of
the assignee appearing in the assignment form below.*
2
ASSIGNMENT FORM
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto
_________________________________________________________________
_________________________________________________________________
(Name and Address of Assignee must be Printed or Typewritten)
Warrants to purchase ______ Warrant Shares of the Company,
evidenced by the within Warrant Certificate hereby irrevocably
constituting and appointing _________________ Attorney to
transfer said Warrants on the books of the Company, with full
power of substitution in the premises.
Dated: _____________, 19__
_________________________________
Signature of Registered Holder*
_________________________________
Signature Guaranteed: Signature of Guarantor
--------
* The above signature should correspond exactly with the name
on the face of this Warrant Certificate.
EXHIBIT E
CERTIFICATE OF DESIGNATIONS
OF
SERIES C JUNIOR PARTICIPATING PREFERRED STOCK
OF
OXFORD HEALTH PLANS, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
-----------------------------
OXFORD HEALTH PLANS, INC., a corporation organized and
existing under the General Corporation Law of the State of
Delaware (hereinafter called the "Company"), hereby certifies
that the following resolution was duly adopted by the Board of
Directors of the Company as required by Section 151 of the
General Corporation Law of the State of Delaware at a meeting
duly called and held on *, 1998:
RESOLVED, that pursuant to the authority granted to
and vested in the Board of Directors of the Company (hereinafter
called the "Board of Directors" or the "Board") in accordance
with the provisions of the Company's Certificate of
Incorporation, as amended to date (hereinafter called the
"Certificate of Incorporation"), the Board of Directors hereby
creates a series of Preferred Stock, par value $.01 per share, of
the Company and hereby states the designation and number of
shares, and fixes the relative rights, powers and preferences
thereof, and the limitations thereof, as follows:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Series C Junior Participating
Preferred Stock" (the "Series C Preferred Stock") and the number
of shares constituting the Series C Preferred Stock shall be
6,730. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series C Preferred Stock to
a number less than the number of shares then outstanding.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares
of any series of Preferred Stock of the Company (the "Preferred
Stock") (or any similar stock) ranking prior and superior to the
Series C Preferred Stock with respect to dividends, the holders
of shares of Series C Preferred Stock, in preference to the
holders of Common Stock, par value $.0l per share (the "Common
Stock"), of the Company and of any other stock of the Company
ranking junior to the Series C Preferred Stock, shall be entitled
to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, dividends and
other distributions, in an amount per share (rounded to the
nearest cent) equal to, subject to the provision for adjustment
hereinafter set forth, 1000 times the aggregate per share amount
of all cash dividends, and 1000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common
Stock, declared on the Common Stock since the immediately
preceding dividend or distribution declared on the Series C
Preferred Stock. In the event the Company shall at any time after
*, 1998 declare or pay any dividend on the Common Stock payable
in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the amount per share to
which holders of shares of Series C Preferred Stock were entitled
immediately prior to such event under the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Company shall declare a dividend or
distribution on the Series C Preferred Stock as provided in
paragraph (A) of this Section immediately after it declares a
dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock).
(C) The Board of Directors may fix a record date for
the determination of holders of shares of Series C Preferred
Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60
days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. Except as set forth in
Section 10, or as otherwise from time to time required by law,
holders of Series C Preferred Stock shall have no voting rights
and their consent shall not be required for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever dividends or distributions payable on the
Series C Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all unpaid dividends and
distributions, whether or not declared, on shares of Series
C Preferred Stock outstanding shall have been paid in full,
the Company shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior
(as to dividends) to the Series C Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a
parity (as to dividends) with the Series C Preferred
Stock, except dividends paid ratably on the Series C
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled;
2
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Preferred
Stock, provided that the Company may at any time
redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock
of the Company ranking junior (as to dividends and
upon dissolution, liquidation or winding up) to the
Series C Preferred Stock or rights, warrants or
options to acquire such junior stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series C Preferred Stock,
or any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or
winding up) with the Series C Preferred Stock, except
in accordance with a purchase offer made in writing or
by publication (as determined by the Board of
Directors) to all holders of such shares of Series C
Preferred Stock, or shares of Series C Preferred Stock
and parity stock, as the case may be, upon such terms
as the Board of Directors, after consideration of the
respective dividend rates and other relative rights
and preferences of the respective series and classes,
shall determine in good faith will result in fair and
equitable treatment among the respective series or
classes.
(B) The Company shall not redeem or purchase or
otherwise acquire shares of Common Stock (other than
pursuant to any written agreement of the Company in
existence on *, 1998 and other than redemptions or
purchases or other acquisitions for aggregate consideration
not in excess of $10,000,000 since *, 1998), unless, in
each case, the Company promptly (within five business days)
makes a purchase offer in writing or by publication (as
determined by the Board of Directors) to all holders of
shares of Series C Preferred Stock offering to purchase a
number of shares of Series C Preferred Stock equal to one
one-thousandth of the number of shares of Common Stock
redeemed or purchased or otherwise acquired in such
transaction at a price per share equal to 1000 times the
amount of consideration paid for one share of Common Stock
in such transaction and otherwise on terms and conditions
no less favorable to the holders than those applicable in
such transaction (as determined by the Board of Directors
in good faith). In the event the Company shall at any time
after *, 1998 declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then in each such case (i) the number of shares of
Series C Preferred Stock which holders thereof were
entitled to have the Company offer to purchase immediately
prior to such event under the preceding sentence shall be
adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the
denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such
event, and (ii) the amount per share to which holders of
shares of Series C Preferred Stock were entitled
immediately prior to such event under the preceding
sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of
Common Stock outstanding
3
immediately prior to such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately after such event.
(C) The Company shall not, and shall not permit any
subsidiary of the Company to, enter into any agreement with
any person providing for the purchase or other acquisition
by such person (or any other person), whether pursuant to
tender offer, exchange offer or otherwise, unless in each
case such person promptly (within five business days) makes
a purchase offer in writing or by publication (as
determined by the Board of Directors) to all holders of
shares of Series C Preferred Stock offering to purchase a
number of shares of Series C Preferred Stock equal to
one-one thousandth of the number of shares of Common Stock
purchased or otherwise acquired in such transaction at a
price per share equal to 1000 times the amount of
consideration paid for one share of Common Stock in such
transaction and otherwise on terms and conditions no less
favorable to the holders than those applicable in such
transaction (as determined by the Board of Directors in
good faith). In the event the Company shall at any time
after *, 1998 declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then in each such case (i) the number of shares of
Series C Preferred Stock which holders thereof were
entitled to have redeemed or purchased or otherwise
acquired immediately prior to such event under the
preceding sentence shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately
prior to such event, and (ii) the amount per share to which
holders of shares of Series C Preferred Stock were entitled
immediately prior to such event under the preceding
sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of
Common Stock outstanding immediately prior to such event
and the denominator of which is the number of shares of
Common Stock that were outstanding immediately after such
event.
(D) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration
any shares of stock of the Company unless the Company
could, under paragraph (A) or (B) of this Section 4,
purchase or otherwise acquire such shares at such time and
in such manner.
Section 5. Reacquired Shares. Any shares of Series C
Preferred Stock purchased or otherwise acquired by the Company in
any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred
Stock, subject to the conditions and restrictions on issuance set
forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon
any liquidation, dissolution or winding up of the Company, no
distribution shall be made (A) to the holders of the
4
Common Stock or of shares of any other stock of the Company
ranking junior, upon liquidation, dissolution or winding up, to
the Series C Preferred Stock unless, prior thereto, the holders
of shares of Series C Preferred Stock shall have received (i)
$1.00 per share, plus (ii) an amount equal to declared and unpaid
dividends and distributions thereon, to the date of such payment,
plus (iii) an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 1000
times the aggregate amount to be distributed per share to holders
of shares of Common Stock, or (B) to the holders of shares of
stock ranking on a parity upon liquidation, dissolution or
winding up with the Series C Preferred Stock, except
distributions made ratably on the Series C Preferred Stock and
all such parity stock in proportion to the total amounts to which
the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Company
shall at any time after *, 1998 declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such
case the aggregate amount per share to which holders of shares of
Series C Preferred Stock were entitled immediately prior to such
event under clause (A)(iii) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding
immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the
Company shall enter into any consolidation, merger, combination
or other transaction in which the shares of Common Stock are
converted into, exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case
each share of Series C Preferred Stock shall at the same time be
similarly converted into, exchanged for or changed into an amount
per share (subject to the provision for adjustment hereinafter
set forth) equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as
the case may be, into which or for which each share of Common
Stock is converted, exchanged or changed. In the event the
Company shall at any time after *, 1998 declare or pay any
dividend on the Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount set forth in the preceding
sentence with respect to the conversion, exchange or change of
shares of Series C Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to
such event.
Section 8. No Redemption. The shares of Series C
Preferred Stock shall not be redeemable from any holder.
Section 9. Rank. The Series C Preferred Stock shall
rank, with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding
up
5
of the Company, junior to all other series of Preferred Stock
(unless the terms of any such series shall provide otherwise) and
senior to the Common Stock.
Section 10. Amendment. Without the consent or
affirmative vote of the holders of at least a majority of the
outstanding shares of Series C Preferred Stock, voting separately
as a class, the Company shall not (i) amend, alter or repeal any
provision of the Certificate of Incorporation or the Bylaws, if
the amendment, alteration or repeal alters or changes the powers,
preferences or special rights of the Series C Preferred Stock so
as to affect them materially and adversely, or (ii) authorize or
take any other action if such action alters or changes any of the
rights of the Series C Preferred Stock in any respect or
otherwise would be inconsistent with the provisions of this
Certificate of Designations and the holders of any class or
series of the capital stock of the Company is entitled to vote
thereon.
Section 11. Fractional Shares. Series C Preferred
Stock may be issued in fractions of a share which shall entitle
the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of
holders of Series C Preferred Stock.
IN WITNESS WHEREOF, this Certificate of Designations
is executed on behalf of the Company by its Chairman of the Board
of Directors and attested by its Secretary this * day of *, 1998.
----------------------------------
Chairman of the Board of Directors
Attest:
------------------------
Secretary
6
