EXHIBIT 10.21
FIRST AMENDMENT
TO
SUBSCRIPTION AND EXCHANGE AGREEMENT
This First Amendment to Subscription and Exchange Agreement (the "First
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Amendment"), dated as of January 12, 2000, is between Group Maintenance
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America Corp., a Texas corporation (the "Company"), and BOSS II, LLC, a Delaware
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limited liability company (the "Investor"). As used in this Agreement, the
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term "Party" refers to the Company or the Investor, individually, and the term
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"Parties" refers to the Company and the Investor, collectively.
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WHEREAS, the Company and the Investor are parties to that certain
Subscription and Exchange Agreement dated November 2, 1999 (the "Subscription
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Agreement"); and
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WHEREAS, pursuant to Section 9.1 of the Subscription Agreement, the Company
and the Investor wish to amend the Subscription Agreement in the manner set
forth in this First Amendment;
NOW THEREFORE, in consideration of the foregoing and the agreements set
forth herein, each of the Parties agrees as follows:
I. DEFINED TERMS AND ACKNOWLEDGMENT
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Unless otherwise defined herein, capitalized terms have the respective
meanings set out in the Subscription Agreement. Further, except as amended
herein, each of the Company and the Investor acknowledge and confirm each and
every term and provision of the Subscription Agreement.
II. AMENDMENTS
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A. Exhibit B to the Subscription Agreement is hereby deleted in its
entirety and replaced in its entirety with the Exhibit B attached
hereto as Annex I
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B. Exhibit 7.3(d) to the Subscription Agreement is hereby deleted in its
entirety and replaced in its entirety with the Exhibit 7.3(d) attached
hereto as Annex II
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III. MISCELLANEOUS
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A. Miscellaneous. The provisions of Article IX of the Subscription
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Agreement shall apply to this First Amendment and are hereby incorporated into
this First Amendment in their entirety except that the word "Agreement" as used
in Article IX shall be construed to mean the Subscription Agreement as amended
by this First Amendment where appropriate.
B. Entire Agreement; Third Party Beneficiaries. This First Amendment and
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the Subscription Agreement (a) constitute the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, and (b) are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
C. Counterparts. This First Amendment may be executed in two or more
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counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
D. Assignment. Neither this First Amendment, the Subscription Agreement
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nor any of the rights, interests or obligations hereunder or thereunder shall be
assigned by any party hereto (whether by operation of law or otherwise) without
the prior written consent of the other party; provided, that an Investor may
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assign its rights, interests and obligations to an Affiliate without the consent
of the Company. The Subscription Agreement, as amended by this First Amendment,
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns.
(The remainder of this page has been intentionally left blank.)
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IN WITNESS WHEREOF, this First Amendment has been duly executed and
delivered on the date first herein above written.
Company:
GROUP MAINTENANCE AMERICA CORP.
By:__________________________________
Name:________________________________
Title:_______________________________
Investor:
BOSS II, LLC
By:__________________________________
Name:________________________________
Title:_______________________________
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ANNEX I
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EXHIBIT B
GROUP MAINTENANCE AMERICA CORP.
STATEMENT OF DESIGNATION
7.25% CONVERTIBLE PREFERRED STOCK
Pursuant to Article 2.13 of Texas Business Corporation Act
A. The name of the corporation is Group Maintenance America Corp.
B. The following preamble and resolution were duly adopted by the Board of
Directors (the "Board of Directors") of Group Maintenance America Corp., a
Texas corporation (the "Corporation"), on __________, pursuant to the
provisions of Article 2.13 of the Texas Business Corporation Act:
WHEREAS, the Articles of Incorporation of the Corporation (the "Articles of
Incorporation") authorize the issuance of a class of preferred stock, par value
$.001 per share (the "Preferred Stock"), by the Corporation;
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors by the provisions of the Articles of Incorporation, the
Board of Directors hereby authorizes the issuance of a series of Preferred
Stock, and the Board of Directors hereby fixes and determines the designation,
preferences, limitations and relative rights, including voting rights, thereof
or so much thereof as shall not be fixed and determined by the Articles of
Incorporation, as follows:
1. Establishment and Designation of Series.
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There is hereby established out of the authorized but unissued
shares of Preferred Stock a series of Preferred Stock to be designated 7.25%
Convertible Preferred Stock (the "Convertible Preferred Stock"), to consist of
an aggregate of 260,000 shares and to have the designations, preferences,
limitations and relative rights, including voting rights, thereof, as set forth
herein.
2. Dividends.
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(a) The holders of the outstanding shares of Convertible Preferred
Stock shall be entitled to receive dividends at the Applicable Dividend
Rate on the Accumulated Amount, if, as and when declared by the Board of
Directors out of funds legally available therefor. Such dividends shall be
payable in arrears on each of March 31, June 30, September 30 and December
31 (each, a "Preferred Dividend Payment Date"), the first such Preferred
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Dividend Payment Date being March 31, 2000, except that if any Preferred
Dividend Payment Date is not a Business Day, then the Preferred Dividend
Payment Date shall be on the first immediately succeeding Business Day. Such
dividends shall accrue on a daily basis (computed on the basis of a 360-day year
of twelve 30-day months) commencing on the date of issuance, and shall compound,
if not paid in cash when due, on the next Preferred Dividend Payment Date,
regardless of whether the Board has declared a dividend payment or whether there
are any profits, surplus or other funds of the Corporation legally available for
dividends.
(b) During the Initial Dividend Period, dividends accruing during any
quarterly dividend period shall be payable in cash out of funds legally
available therefor at the option of the Company.
(c) During the Second Dividend Period, dividends accruing during any
quarterly dividend period shall be paid in cash, out of funds legally available
therefor.
(d) In the event a Change of Control occurs prior to the fifth anniversary
of the Original Issuance Date, the holders of the outstanding shares of
Convertible Preferred Stock, as of the close of business on the Business Day
immediately preceding the date of consummation of the Change of Control, shall
be entitled to receive, out of funds legally available therefor, all accrued or
accumulated and unpaid dividends as of the date of the consummation of such
Change of Control and the lesser of (i) all dividends that would accrue from the
date of the consummation of such Change of Control through the fifth anniversary
of the Original Issuance Date and (ii) all dividends that would accrue from the
date of the consummation of such Change of Control through the date that is two
and one-half (2 1/2) years from the date of the consummation of the Change of
Control, such dividends to be paid in cash, provided that, any holder of
Convertible Preferred Stock who converts such shares into shares of Common Stock
pursuant to Section 4 hereof after receipt of a notice from the Corporation
pursuant to Section 6 hereof and prior to the date of consummation of the Change
of Control to which such notice relates, may elect to receive the sum payable
pursuant to this paragraph in the form of cash, shares of Common Stock or any
combination thereof, all as specified in such holder's notice of election to
convert. Shares of Common Stock issued pursuant to the foregoing election shall
be valued at the Fair Market Value as of the date of consummation of the Change
of Control. Any holder of Convertible Preferred Stock who elects to require the
Company to redeem the Convertible Preferred Stock upon a Change of Control in
accordance with Section 6 hereof, shall be entitled to receive an amount equal
to the amount of such dividends, in cash, as part of the amount paid for such
redemption under Section 6(a). Payment of the amount specified in clauses (i)
and (ii) in accordance with this Section shall satisfy in full the obligation of
the Corporation to otherwise make such dividend payments on the scheduled
Preferred Dividend Payment Dates.
(e) The dividends payable with respect to the Convertible Preferred Stock
on each Preferred Dividend Payment Date pursuant to Sections 2(a) through (c)
shall be paid to the holders of shares of the Convertible Preferred Stock as
they appear on the stock records of the Corporation on such date (the "Preferred
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Record Date") as shall be fixed by the Board, which Preferred Record Date shall
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not be more than 40 days prior to the applicable Preferred Dividend Payment Date
and shall not precede the date upon which the resolution fixing such Preferred
Record Date is adopted.
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(f) Except as otherwise provided herein, if at any time the
Corporation pays less than the total amount of dividends then accrued or
accumulated with respect to the Convertible Preferred Stock, such payment
shall be distributed ratably among the holders of the shares of Convertible
Preferred Stock based upon the number of shares of Convertible Preferred
Stock then held by each holder.
(g) In addition to all dividends payable pursuant to Sections 2(a)
through (d), whenever the Corporation shall declare any dividend on its
Common Stock (other than a distribution described in Section 4(e)(5) or a
dividend described in Section 4(e)(11) (a "Common Dividend")), the holders
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of the outstanding shares of Convertible Preferred Stock shall have the
option, exercisable by the Requisite Convertible Preferred Shareholders to
(i) participate in such dividends on a ratable basis with such Common
Stock, pro rata in accordance with the number of shares of Common Stock
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into which such shares of Convertible Preferred Stock are then convertible
(the "Cash Election"), or (ii) reduce the Conversion Price then in effect
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by the amount of dividends payable with respect to one share of Common
Stock or, if not payable in cash, by an amount equal to the Fair Market
Value of such dividends. The Corporation shall notify each holder of
Convertible Preferred Stock within two Business Days following the date on
which the Board declares a Common Dividend, which notice shall specify the
amount of such dividend per share of such Common Stock. If the Corporation
shall have received, prior to the 10th day following the date of such
notice from the Corporation (the "Determination Date"), notices from the
Requisite Preferred Shareholders electing the Cash Election, then the
holders of record of Convertible Preferred Stock as of the Determination
Date shall be entitled to receive, out of funds legally available therefor,
the Common Dividend in accordance with clause (i). Any such dividend shall
be payable no later than 10 Business Days after the Determination Date.
Unless a Cash Election has been made prior to the Determination Date, the
adjustment to the Conversion Price specified in clause (ii) shall become
effective as of the close of the business on the Determination Date.
3. Liquidation.
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Upon a Liquidation, after payment or provision for payment of the
debts and other liabilities of the Corporation and the liquidation preference of
any class or series of capital stock of the Corporation ranking senior to the
Convertible Preferred Stock, the holders of Convertible Preferred Stock shall be
entitled to receive, out of the remaining assets of the Corporation available
for distribution to its shareholders, with respect to each share of Convertible
Preferred Stock, an amount equal to the greater of (i) the Liquidation Amount of
such share and (ii) the amount the holder of such share would have received if
such holder had converted such share of Convertible Preferred Stock into shares
of Common Stock immediately prior to such Liquidation, before any distribution
shall be made to the holders of the Common Stock or any other class or series of
capital stock of the Corporation ranking junior to the Convertible Preferred
Stock. If upon any Liquidation the assets of the Corporation available for
distribution to its shareholders shall be insufficient to pay the holders of
Convertible Preferred Stock the full amount to which they shall be entitled, the
holders of Convertible Preferred Stock shall share in
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any distribution of assets pro rata in accordance with the total amount that
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each such holder would have received had there been such sufficient assets.
4. Conversion.
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(a) Upon the terms set forth in this Section 4, each holder of shares
of Convertible Preferred Stock shall have the right, at such holder's
option, at any time and from time to time, to convert all or any portion of
such shares into the number of fully paid and nonassessable shares of
Common Stock equal to the quotient obtained by dividing (A) the aggregate
Liquidation Amount of the shares of Convertible Preferred Stock to be
converted by (B) the Conversion Price (as defined below), as last adjusted
and then in effect, by surrender of the certificate or certificates
representing such shares in accordance with this Section 4. The initial
conversion price per share at which shares of Common Stock shall be
issuable upon conversion of shares of Convertible Preferred Stock (the
"Conversion Price") shall be $14.00, subject to adjustment as set forth
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herein.
(b) Any holder of shares of Convertible Preferred Stock electing to
convert all or any portion of the shares in accordance with Section 4(a)
above shall give written notice to the Corporation as specified herein
(which notice may be given by facsimile transmission) that such holder
elects to convert the same and shall state therein the number of shares of
Convertible Preferred Stock to be converted and the name or names in which
such holder wishes the certificate or certificates for shares of Common
Stock to be issued. Promptly thereafter, the holder shall surrender the
certificate or certificates representing the shares of Convertible
Preferred Stock to be converted, duly endorsed, at the office of the
Corporation or any transfer agent for such shares, or at such other place
designated by the Corporation, provided that the Corporation shall at all
times maintain an office or agency for such purposes. The Corporation
shall, promptly upon receipt of such notice, issue and deliver to or upon
the order of such holder, against delivery of the certificates representing
the shares of Convertible Preferred Stock that have been converted, a
certificate or certificates for the number of shares of Common Stock to
which such holder shall be entitled (in the number(s) and denomination(s)
designated by such holder), and the Corporation shall deliver to such
holder a certificate or certificates for the number of shares of
Convertible Preferred Stock that such holder has not elected to convert. To
the extent the holder requests that the shares of Common Stock to be issued
upon conversion shall be issued in the name of any Person other than the
holder of the Convertible Preferred Stock surrendered for conversion, such
holder shall deliver to the Corporation (and its transfer agent, if
applicable) such documents and certificates, including, if requested, an
opinion of counsel to the effect that the transfer thereof will not
constitute a violation of the Securities Act of 1933, as amended, or state
securities laws. The Corporation shall pay any documentary, stamp or
similar issue or transfer tax due on the issuance of Common Stock upon the
conversion of Convertible Preferred Stock or due on the issuance of a new
certificate or certificates for any Convertible Preferred Stock not
converted, other than any tax in respect of any transfer involved in any
issuance of shares of Common Stock in a name other than the name in which
the shares of Convertible Preferred Stock so converted were registered. The
conversion right with respect to any shares of Convertible Preferred Stock
shall be deemed to have been
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exercised at the earliest date upon which both the notice of conversion
referred to in the first sentence of this paragraph and the certificates
therefor shall have been so delivered (the "Conversion Date") and the
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Person or persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or
holders of such Common Stock upon that date.
(c) No fractional shares of Common Stock or scrip shall be issued
upon conversion of shares of Convertible Preferred Stock. The number of
full shares of Common Stock issuable upon conversion of Convertible
Preferred Stock shall be computed on the basis of the aggregate number of
shares of such Convertible Preferred Stock to be converted. Instead of any
fractional shares of Common Stock that would otherwise be issuable upon
conversion of any such shares, the Corporation shall pay a cash adjustment
in respect of such fractional interest in an amount equal to the product of
(i) the Fair Market Value of one share of Common Stock and (ii) such
fractional interest. The holders of fractional interests shall not be
entitled to any rights as shareholders of the Corporation in respect of
such fractional interests.
(d) The Corporation shall reserve out of its authorized but unissued
Common Stock a sufficient number of shares of Common Stock to permit the
conversion of all of the then-outstanding shares of Convertible Preferred
Stock. For the purposes of this Section 4(d), the full number of shares of
Common Stock then issuable upon the conversion of all then-outstanding
shares of Convertible Preferred Stock shall be computed as if at the time
of computation all outstanding shares of Convertible Preferred Stock were
held by a single holder. The Corporation shall from time to time, in
accordance with the laws of the State of Texas and its articles of
incorporation, increase the authorized amount of its Common Stock if at any
time the authorized amount of its Common Stock remaining unissued shall not
be sufficient to permit the conversion of all shares of Convertible
Preferred Stock at the time outstanding. All shares of Common Stock issued
upon conversion of the shares of Convertible Preferred Stock shall be
validly issued, fully paid and nonassessable.
(e) The Conversion Price shall be subject to adjustment from time to
time as follows:
(1) If the Corporation shall, (A) at any time or from time
to time after the Original Issuance Date through the date that is two
and one-half (2 1/2) years after the Original Issuance Date, issue any
shares of Common Stock, options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or
exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, other than
Excluded Stock, without consideration or for a consideration per share
less than the greater of (x) the Conversion Price or (y) the Fair
Market Value of the Common Stock, in effect immediately prior to the
issuance of such Common Stock or securities, or (B) at any time or
from time to time after the date that is two and one-half (2 1/2)
years after the Original Issuance Date, issue any shares of Common
Stock, options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common
Stock, or
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options to purchase or rights to subscribe for such convertible or
exchangeable securities, other than Excluded Stock, without
consideration or for a consideration per share less than the Fair
Market Value of the Common Stock, in effect immediately prior to the
issuance of such Common Stock or securities, then such Conversion
Price, as in effect immediately prior to each such issuance, shall
forthwith be lowered to a price equal to the price obtained by
multiplying:
(A) the Conversion Price at which shares of
Convertible Preferred Stock were theretofore convertible by
(B) a fraction of which (x) the denominator shall be
the number of shares of Common Stock outstanding on a fully-
diluted basis immediately after such issuance and (y) the
numerator shall be the sum of (1) the number of shares of Common
Stock outstanding on a fully-diluted basis immediately prior to
the date of such issuance and (2) the number of additional shares
of Common Stock which the aggregate offering price of the number
of shares of Common Stock so offered would purchase at the
greater of the Conversion Price or the Fair Market Value per
share of Common Stock.
(2) If the Corporation shall, at any time or from time to time
after the Original Issuance Date, directly or indirectly, redeem,
purchase or otherwise acquire any shares of Common Stock, options to
purchase or rights to subscribe for Common Stock, securities by their
terms convertible into or exchangeable for Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable
securities, for a consideration per share greater than the Fair Market
Value (plus, in the case of such options, rights, or securities, the
additional consideration required to be paid to the Corporation upon
exercise, conversion or exchange) for shares of Common Stock in effect
immediately prior to such event, then such Conversion Price, as in
effect immediately prior to each such event, shall forthwith be
lowered to a price equal to the price obtained by multiplying:
(A) the Conversion Price at which shares of Convertible
Preferred Stock were theretofore convertible by
(B) a fraction of which (x) the denominator shall be the
Fair Market Value per share of Common Stock immediately prior to
such event and (y) the numerator shall be the result of dividing:
(i) (1) the product of the number of shares of
Common Stock outstanding on a fully-diluted basis and
the Fair Market Value per share of Common Stock, in
each case immediately prior to such event, minus (2)
the aggregate consideration paid by the Corporation in
such event (plus, in the case of such options, rights,
or convertible or exchangeable securities, the
aggregate
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additional consideration to be paid by the Corporation
upon exercise, conversion or exchange), by
(ii) the number of shares of Common Stock
outstanding on a fully-diluted basis immediately after
such redemption.
(3) For the purposes of any adjustment of the Conversion Price
pursuant to Sections 4(e)(1) or (2) above, the following provisions
shall be applicable:
(A) In the case of the issuance of Common Stock for
cash in a public offering or private placement, the
consideration shall be deemed to be the amount of cash paid
therefor by the investors without deducting any discounts,
commissions or placement fees payable by the Corporation to
any underwriter or placement agent in connection with the
issuance and sale thereof that are usual and customary for
such a transaction. Notwithstanding anything provided above
to the contrary, for purposes of issuances described in this
clause, Fair Market Value for such issuance shall be deemed
to be the lesser of (i) the Closing Price on the date of the
execution of the underwriting, placement, subscription or
purchase agreement executed in connection with such offering
or placement and (ii) the Fair Market Value (as defined
herein) determined as of the date of the execution of the
underwriting, placement, subscription or purchase agreement
executed in connection with such offering or placement.
(B) In the case of the issuance of Common Stock for
consideration consisting in whole or in part other than
cash, the value of such non-cash consideration shall be
deemed to be the fair market value thereof as determined in
good faith by the Board or a duly authorized committee
thereof, irrespective of any accounting treatment.
Notwithstanding anything provided above to the contrary, for
purposes of issuances described in this clause, Fair Market
Value for such issuance shall be deemed to be the fair
market value as determined in good faith by the Board or a
duly authorized committee thereof, irrespective of any
accounting treatment, as of the date of the approval of such
transaction by the Board or appropriate committee of the
Board.
(C) In the case of the issuance of options to purchase
or rights to subscribe for Common Stock, securities by their
terms convertible into or exchangeable for Common Stock, or
options to purchase or rights to subscribe for such
convertible or exchangeable securities, except for options
to acquire Excluded Stock:
(i) the aggregate maximum number of shares
of Common Stock deliverable upon exercise of such
options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued
at the time such options or
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rights were issued and for a consideration equal
to the consideration (determined in the manner
provided in Sections 4(e)(3)(A) and (B) above), if
any, received by the Corporation upon the issuance
of such options or rights plus the minimum
purchase price provided in such options or rights
for the Common Stock covered thereby;
(ii) the aggregate maximum number of shares
of Common Stock deliverable upon conversion of or
in exchange for any such convertible or
exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for
such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such
securities, options, or rights were issued and for
a consideration equal to the consideration
received by the Corporation for any such
securities and related options or rights
(excluding any cash received on account of accrued
interest or accrued dividends), plus the
additional consideration, if any, to be received
by the Corporation upon the conversion or exchange
of such securities or the exercise of any related
options or rights (the consideration in each case
to be determined in the manner provided in
Sections 4(e)(3)(A) and (B) above); and
(iii) on any change in the number of shares or
exercise price of Common Stock deliverable upon
exercise of any such options or rights or
conversions of or exchanges for such securities,
other than a change resulting from the
antidilution provisions thereof, the applicable
Conversion Price shall forthwith be readjusted to
such Conversion Price as would have been obtained
had the adjustment made upon the issuance of such
options, rights or securities not converted prior
to such change or options or rights related to
such securities not converted prior to such change
been made upon the basis of such change;
(iv) Upon the expiration of the right to
convert, exchange or acquire Common Stock in
accordance with the terms of any securities, the
issuance of which securities had effected an
adjustment to the Conversion Price pursuant to the
terms of this Section 4(e), if any such securities
shall not have been converted, exercised or
exchanged prior to such expiration, the number of
shares of Common Stock deemed to have been issued
and outstanding by reason of the fact that they
were issuable upon conversion, exchange or
exercise of any such security pursuant to Section
4(e)(l)
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above, shall no longer be computed as set forth
above and the Conversion Price shall forthwith be
readjusted and thereafter be the price at which it
would have been had the adjustment to the
Conversion Price made upon the issuance or sale of
any such security been made on the basis of the
issuance only of the number of additional shares
of Common Stock actually issued upon exercise,
conversion or exchange thereof and thereupon only
the number of additional shares of Common Stock
actually so issued shall be deemed to have been
issued and the only consideration actually
received by the Corporation (computed as set forth
above) shall be deemed to have been received by
the Corporation; and
(v) No further adjustment of the Conversion
Price adjusted upon the issuance of any such
options, rights, convertible securities or
exchangeable securities shall be made as a result
of the actual issuance of Common Stock on the
exercise of any such rights or options or any
conversion or exchange of any such securities.
(4) All calculations under this Section will be made to the
nearest one-hundredth of a cent or to the nearest whole share, as
the case may be. No adjustment to the Conversion Price will be
required unless such adjustment would result in an increase or
decrease of at least one percent (1%) of the Conversion Price;
provided, however, that any adjustments which by reason of this
clause (4) are not required to be made will be carried forward
and taken into account in a subsequent adjustment, if any.
(5) If, at any time after the Original Issuance Date, the
number of shares of Common Stock outstanding is increased by a
stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then the
provisions of Section 4(e)(1) shall not apply and, following the
record date for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up,
the Conversion Price shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each
share of Convertible Preferred Stock shall be increased in
proportion to such increase in outstanding shares.
(6) If, at any time after the Original Issuance Date, the
number of shares of Common Stock outstanding is decreased by a
combination of the outstanding shares of Common Stock, then,
following the record date for such combination, the Conversion
Price shall be appropriately increased so that the number of
shares of Common Stock issuable on conversion of each share of
Convertible Preferred Stock shall be decreased in proportion to
such decrease in outstanding shares.
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(7) In the event of any capital reorganization of the
Corporation, any reclassification of the stock of the Corporation
(other than a change in par value or from par value to no par
value or from no par value to par value or as a result of a stock
dividend or subdivision, split-up or combination of shares), or
any consolidation or merger of the Corporation (other than the
Merger), each share of Convertible Preferred Stock shall after
such reorganization, reclassification, consolidation, or merger
be convertible into the kind and number of shares of stock or
other securities or property of the Corporation or of the
corporation resulting from such consolidation or surviving such
merger to which the holder of the number of shares of Common
Stock deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation or merger) upon
conversion of such share of Convertible Preferred Stock would
have been entitled upon such reorganization, reclassification,
consolidation or merger. The provisions of this clause shall
similarly apply to successive reorganizations, reclassifications,
consolidations, or mergers.
(8) In any case in which the provisions of this Section
4(e) shall require that an adjustment shall become effective
immediately after a record date of an event, the Corporation may
defer until the occurrence of such event (1) issuing to the
holder of any share of Convertible Preferred Stock converted
after such record date and before the occurrence of such event
the shares of capital stock issuable upon such conversion by
reason of the adjustment required by such event in addition to
the shares of capital stock issuable upon such conversion before
giving effect to such adjustments, and (2) paying to such holder
any amount in cash in lieu of a fractional share of capital stock
pursuant to Section 4(c) above; provided, however, that the
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Corporation shall deliver to such holder an appropriate
instrument evidencing such holder's right to receive such
additional shares and such cash.
(9) Whenever a Conversion Price shall be adjusted as
provided in this Section 4(e), the Corporation shall make
available for inspection during regular business hours, at its
principal executive offices or at such other place as may be
designated by the Corporation, a statement, signed by its chief
financial officer, showing in detail the facts requiring such
adjustment and the Conversion Price that shall be in effect after
such adjustment. The Corporation shall also cause a copy of such
statement to be sent by first class certified mail, return
receipt requested and postage prepaid, to each holder of
Convertible Preferred Stock affected by the adjustment at such
holder's address appearing on the Corporation's records. Where
appropriate, such copy may be given in advance and may be
included, as part of any notice required to be mailed under the
provisions of this Section 4(e) below.
(10) If the Corporation shall propose to take any action of
the types described in clauses (5), (6) or (7) of this Section
4(e), the Corporation shall give notice to each holder of shares
of Convertible Preferred Stock, in the manner set forth in clause
(9) above, which notice shall specify the record date, if any,
with respect to any such action and the date on which such action
is to take place.
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Such notice shall also set forth such facts with respect thereto as shall
be reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon conversion of shares of
Convertible Preferred Stock. In the case of any action which would require
the fixing of a record date, such notice shall be given at least 20 days
prior to the date so fixed, and in case of all other action, such notice
shall be given at least 30 days prior to the taking of such proposed
action. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of any such action.
(11) Without duplication of any other adjustment provided for in this
Section 4, at any time the Corporation makes or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in securities of the Corporation other than
shares of Common Stock, provision shall be made so that each holder of
Convertible Preferred Stock shall have the option to (i) receive as part of
such dividend or distribution the number of securities of the Corporation
which such holder would have received had its shares of Convertible
Preferred Stock been converted into shares of Common Stock immediately
prior to the date of such event or (ii) receive upon conversion thereof, in
addition to the shares of Common Stock receivable thereupon, the number of
securities of the Corporation which such holder would have received had its
shares of Convertible Preferred Stock been converted into shares of Common
Stock on the date of such event and had such holder thereafter, during the
period from the date of such event to and including the date of conversion,
retained such securities receivable by it pursuant to this paragraph during
such period, subject to the sum of all other adjustments called for during
such period under this Section 4 with respect to the rights of such holder
of Convertible Preferred Stock.
(12) If the Corporation issues any securities after the Original
Issuance Date containing provisions protecting the holder or holders
thereof against dilution in any manner more favorable to such holder or
holders thereof than those set forth in this Section 4, such provisions (or
any more favorable portion thereof) shall be deemed to be incorporated
herein as if fully set forth in this Statement and, to the extent
inconsistent with any provision of this Statement, shall be deemed to be
substituted therefor.
5. Redemption at Option of the Corporation.
---------------------------------------
(a) The Corporation shall have the right to redeem, at any time after the
fifth anniversary of the Original Issuance Date, out of funds legally available
for such purpose, all, but not less than all, of the shares of Convertible
Preferred Stock then outstanding, for an amount per share (the "Corporation
-----------
Redemption Price"), which shall be payable in cash, as set forth below:
----------------
11
(i) 103% of the Liquidation Amount, if such redemption occurs
on or after the fifth anniversary of the Original Issuance
Date and before the sixth anniversary date of the Original
Issuance Date;
(ii) 102% of the Liquidation Amount, if such redemption occurs
on or after the sixth anniversary of the Original Issuance
Date and before the eighth anniversary date of the Original
Issuance Date; and
(iii) 101% of the Liquidation Amount, if such redemption occurs
on or after the eighth anniversary of the Original Issuance
Date but prior to the Maturity Date.
(b) Not less than 20 nor more than 60 days (such date as fixed by the
Board of Directors of the Corporation is referred to herein as the "Redemption
----------
Record Date") prior to the date fixed for any redemption of shares of the
-----------
Convertible Preferred Stock pursuant to this Section 5, a notice specifying the
time and place of the redemption, the redemption price and the number of shares
to be redeemed shall be given by first class mail, postage prepaid, to the
holders of record on the Redemption Record Date of the shares of the Convertible
Preferred Stock to be redeemed at their respective addresses as the same shall
appear on the books of the Corporation, calling upon each holder of record to
surrender to the Corporation on the redemption date at the place designated in
the notice such holder's certificate or certificates representing the number of
shares specified in the notice of redemption. Neither failure to mail such
notice, nor any defect therein or in the mailing hereof, to any particular
holder shall affect the sufficiency of the notice or the validity of the
proceedings for redemption with respect to the other holders. Any notice mailed
in the manner herein provided shall be conclusively presumed to have been duly
given whether or not the holder receives the notice. On or after the redemption
date, each holder of shares of Convertible Preferred Stock to be redeemed shall
present and surrender such holder's certificate or certificates for such shares
to the Corporation at the place designated in the redemption notice and
thereupon the Corporation Redemption Price shall be paid to or on the order of
the person whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be canceled.
(c) If a notice of redemption has been given pursuant to this Section
5 and if, on or before the redemption date, the funds necessary for such
redemption (including all dividends on the shares of Convertible Preferred Stock
to be redeemed that will accrue to the redemption date) shall have been set
aside by the Corporation, separate and apart from its other funds in trust for
the pro rata benefit of the holders of the shares of Convertible Preferred Stock
--- ----
so called for redemption, then, notwithstanding that any certificates for such
shares of Convertible Preferred Stock have not been surrendered for
cancellation, on the redemption date dividends shall cease to accrue on the
shares of the Convertible Preferred Stock to be redeemed, and the holders of
such shares shall cease to be shareholders with respect to those shares and
shall have no voting or other rights with respect thereto, except the right to
receive the moneys payable upon such redemption, without interest thereon, upon
surrender (and endorsement, if required by the Corporation) of their
certificates, and the shares of Convertible Preferred Stock evidenced
12
thereby shall no longer be outstanding, provided, however, nothing in this
-------- -------
Section 5 will limit the right of the holders of shares of Convertible
Preferred Stock to convert such shares after the notice of redemption has
been given and prior to the redemption date in accordance with Section 4.
If the holder of any shares of Convertible Preferred Stock shall not,
within one year after the redemption date, claim the amount deposited for
the redemption thereof, such funds shall be released to the Corporation and
held thereby until such holder shall make a claim therefor.
(d) If a notice of redemption has been given pursuant to this Section
5 and any holder of shares of Convertible Preferred Stock shall, prior to
the close of business on the Business Day immediately preceding the
redemption date, give written notice to the Corporation pursuant to Section
4 above of the conversion of any or all of the shares to be redeemed held
by the holder (accompanied by a certificate or certificates for such
shares, duly endorsed or assigned to the Corporation, as required by
Section 4 above), then such redemption shall not become effective as to
such shares to be converted and such conversion shall become effective as
provided in Section 4 above, whereupon any funds deposited by the
Corporation for the redemption of such shares shall immediately upon such
conversion be returned to the Corporation or, if then held in trust by the
Corporation, shall automatically and without further corporate action or
notice be discharged from the trust.
6. Redemption at the Option of the Holders.
---------------------------------------
(a) Each holder of Convertible Preferred Stock shall have the right to
require the Corporation to redeem, out of funds legally available therefor,
any or all of such holder's shares of Convertible Preferred Stock at the
Redemption Price, plus the amount described in the first sentence of
Section 2(d), in connection with the occurrence of a Change of Control as
set forth herein.
(b) The Corporation shall notify the holders of the Convertible
Preferred Stock in writing promptly upon the occurrence of a Change of
Control; provided, however, that any failure by the Corporation to provide
-------- -------
such notice shall not affect the right of the holders of shares of
Convertible Preferred Stock to require a redemption of such shares in
connection with such Change of Control. Such notice shall state the terms
and conditions of such Change of Control.
(c) In the event the Requisite Convertible Preferred Shareholders
expect that a Change of Control will occur, the Requisite Convertible
Preferred Shareholders may so notify the Corporation, which notice shall
specify the circumstances constituting the expected Change of Control.
Within three Business Days following the receipt by the Corporation of such
notice, the Corporation shall notify each holder of Convertible Preferred
Stock of the receipt of such notice from the Requisite Convertible
Preferred Shareholders. For a period of 15 days following such notice by
the Corporation, each holder of Convertible Preferred Stock may elect to
have any or all of such holder's shares of Convertible Preferred Stock
redeemed under this Section 6(c) by providing an irrevocable written notice
(a "Section 6(c) Redemption Notice") to the Corporation of such election;
------------------------------
provided, however, no redemption shall be effected prior to the
-------- -------
13
consummation of the Change of Control. The Corporation shall effect such
redemption on the later to occur of (i) 15 days following receipt by the
Corporation of such Section 6(c) Redemption Notice and (ii) the date of the
consummation of such Change of Control (such date on which redemption is
required, the "Redemption Date") and the holders of record of shares of
---------------
Convertible Preferred Stock being redeemed in accordance with this Section
6(c) shall promptly deliver certificates representing the shares being
redeemed to the Corporation or its agents. If a holder has delivered a
Section 6(c) Redemption Notice and no Change of Control shall have been
consummated within 180 days from the date of such Section 6(c) Redemption
Notice, then such Section 6(c) Redemption Notice shall be null and void and
the holders shall again be entitled to deliver a new Section 6(c)
Redemption Notice in accordance with the terms of this Section 6(c).
(d) If the Corporation has delivered to the holders of the Convertible
Preferred Stock a notice pursuant to Section 6(b) above that a Change of
Control has occurred, each holder of Convertible Preferred Stock may elect
to have any or all of such holder's shares of Convertible Preferred Stock
redeemed under this Section 6(d) by providing an irrevocable written notice
(a "Section 6(d) Redemption Notice") to the Corporation of such election at
------------------------------
any time prior to the 90th day following the date of the Corporation's
notice given pursuant to Section 6(b) (the "Expiration Date"). The
---------------
Corporation shall effect the redemption of all shares pursuant to this
Section 6(d) on the date which is 15 days after the Expiration Date.
(e) If, on or before any redemption date specified in paragraph (c) or
(d) above, the funds necessary for such redemption (including all dividends
on the shares of Convertible Preferred Stock to be redeemed that will
accrue to the redemption date) shall have been set aside by the
Corporation, separate and apart from its other funds in trust for the pro
rata benefit of the holders of the shares of Convertible Preferred Stock so
called for redemption, then, notwithstanding that any certificates for such
shares of Convertible Preferred Stock have not been surrendered for
cancellation, on the redemption date, dividends shall cease to accrue on
the shares of the Convertible Preferred Stock to be redeemed, and the
holders of such shares shall cease to be shareholders with respect to those
shares and shall have no voting or other rights with respect thereto,
except the right to receive the monies payable upon such redemption,
without interest thereon, upon surrender (and endorsement, if required by
the Corporation) of their certificates, and the shares of Convertible
Preferred Stock evidenced thereby shall no longer be outstanding. Upon
delivery to the Corporation of an irrevocable notice from a holder of
Convertible Preferred Stock pursuant to paragraph (c) or (d) above, the
right of such holder to convert the shares of Convertible Preferred Stock
to be redeemed into shares of Common Stock pursuant to Section 4 shall
cease and terminate. If the holder of any shares of Convertible Preferred
Stock shall not, within one year after the redemption date, claim the
amount deposited for the redemption thereof, such funds shall be released
to the Corporation and held thereby until such holder shall make a claim
therefor. On and after the redemption date pursuant to either Section 6(c)
or (d) above (unless default shall be made by the Corporation in the
payment of the applicable Redemption Price, in which event such rights
shall be exercisable until such default is cured), all rights in respect of
the shares of Convertible Preferred Stock to be redeemed, except the right
to receive the Redemption Price, shall cease and terminate, and such shares
shall no longer be deemed
14
to be outstanding, whether or not the certificates representing such shares
have been received by the Corporation.
(f) If the assets of the Corporation available for redemption of the
Convertible Preferred Stock shall be insufficient to permit the payment of
the entire Redemption Price required to be paid pursuant to this Section 6,
then the holders of Convertible Preferred Stock shall share ratably in any
such redemption based on the respective number of shares of Convertible
Preferred Stock that each holder thereof holds.
(g) Any communication or notice relating to redemption given pursuant
to this Section 6 shall be sent by first-class certified mail, postage
prepaid, to the holders of record of shares of Convertible Preferred Stock,
at their respective addresses as the same shall appear on the books of the
Corporation, or to the Corporation at the address of its principal, or
registered office, as the case may be.
(h) The Corporation shall not engage in any Sale of the Corporation
transaction unless (i) if the Corporation shall be the surviving or
continuing entity of such transaction, the Corporation shall, after
consummation thereof, have sufficient funds to perform its obligations
under this Section 6, and (ii) if the Corporation shall not be the
surviving or continuing entity of such transaction, proper and adequate
provision shall be made, in the definitive documentation providing for such
transaction or otherwise, to ensure that the surviving or continuing
corporation of such transaction shall expressly assume the Corporation's
obligations under this Section 6 and shall have sufficient funds to perform
its obligations under this Section 6.
7. Mandatory Redemption.
--------------------
On the Maturity Date, the Corporation shall redeem each outstanding share
of Convertible Preferred Stock for the Liquidation Amount of such share at such
time. If the assets of the Corporation available for redemption of the
Convertible Preferred Stock shall be insufficient to permit the payment of the
entire Liquidation Amount to which they shall be entitled, the holders of
Convertible Preferred Stock shall share ratably in any such redemption based on
the respective number of shares of Convertible Preferred Stock that each holder
thereof holds.
8. Voting Rights.
-------------
(a) Except as otherwise expressly provided herein or required by law
and so long as any shares of the Convertible Preferred Stock are
outstanding, each share of Convertible Preferred Stock shall entitle the
holder thereof to notice of and to vote, in person or by proxy, at any
special or annual meeting of shareholders, on all matters entitled to be
voted on by holders of Common Stock (and any other series or class of
Voting Stock also entitled to vote with the holders of Common Stock),
voting together as a single class with all other shares entitled to vote
thereon. With respect to any such vote, each share of Convertible Preferred
Stock shall entitle the holder thereof to cast that number of votes as is
equal to the number of votes that such holder would be entitled to cast had
such holder converted such share of Convertible Preferred Stock into shares
of
15
Common Stock as of the record date for determining the shareholders of the
Corporation entitled to vote on any such matters.
(b) At any time after the Original Issuance Date, the Corporation
shall not, and shall not permit any Subsidiary to, without first obtaining
the affirmative written consent or approval of the Requisite Convertible
Preferred Shareholders:
(i) in any manner authorize, create, designate, issue, sell or
reclassify any class or series of capital stock of the Corporation
(including any shares of treasury stock) or rights, options, warrants
or other securities convertible into or exercisable or exchangeable
for capital stock or any debt security which by its terms is
convertible into or exchangeable for any equity security or has any
other equity feature or any security that is a combination of debt and
equity, which, in each case, as to the payment of dividends,
distribution of assets or Redemptions, including, without limitation,
distributions to be made upon a Liquidation, is pari passu with, is
---- -----
senior to the Convertible Preferred Stock or is mandatorily redeemable
prior to the Convertible Preferred Stock or which in any manner
materially adversely affects the rights, preferences or remedies of
the holders of the Convertible Preferred Stock;
(ii) in any manner alter or change the terms, designations,
powers, preferences or relative, participating, optional or other
special rights, or the qualifications, limitations or restrictions
thereof, of the Convertible Preferred Stock;
(iii) in any manner authorize, create, issue or sell any
additional shares of Convertible Preferred Stock;
(iv) amend, alter or repeal any of the provisions of (A) the
Articles of Incorporation of the Corporation (as amended or restated)
or (B) the By-laws of the Corporation, if such amendment, alteration
or repeal would alter or change the rights, preferences or privileges
of the holders of such Convertible Preferred Stock so as to adversely
affect them.
(v) declare or pay any dividend with respect to, or make any
payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, retirement or other
acquisition of, any shares of any class of capital stock of the
Corporation ranking junior to the Convertible Preferred Stock, or any
warrants or options to purchase any such capital stock, or make any
other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Corporation or
any Subsidiary (other than a declaration or payment of a stock
dividend payable in shares of Common Stock to the holders of Common
Stock); provided, however, that the Corporation may declare or pay any
-------- -------
dividend on (or repurchase) the Common Stock if such amount, when
combined with the sum of all other dividends declared or paid on (plus
all amounts paid in the repurchase of), the Common Stock in the
preceding twelve-month period, does not exceed 5% of the aggregate
Fair Market Value of
16
the Common Stock at the time of the declaration or payment of such
dividend or commitment to repurchase, as the case may be;
(vi) agree to, or permit any Subsidiary to agree to, any
provision in any agreement that would by its terms impose any
restriction on the ability of the Corporation to honor the exercise of
any rights of the holders of the Convertible Preferred Stock;
(vii) enter into any transaction, including, without limitation,
any purchase, sale, lease or exchange of property, the rendering of
any service or the payment of any management, advisory or similar
fees, with any Affiliate (other than any transaction between the
Corporation and any wholly-owned Subsidiary or between or among
wholly-owned Subsidiaries) unless such transaction is (a) in the
ordinary course of business of the Corporation and its Subsidiaries,
and (b) upon fair and reasonable terms no less favorable to the
Corporation and its Subsidiaries than they would obtain in a
comparable arm's length transaction with a Person which is not an
Affiliate
9. Board of Directors.
------------------
(a) The holders of the Convertible Preferred Stock, voting as a
separate class, shall be entitled to elect directors (the "Convertible
-----------
Preferred Directors") to the Board as follows:
-------------------
(i) for so long as Apollo and its Affiliates hold in the
aggregate Common Stock Equivalents representing at least 50% of the
number of Conversion Shares issuable upon conversion of the
Convertible Preferred Stock issued on the Original Issuance Date,
Apollo shall be entitled to elect the greater of 3 directors or the
number of directors that represents 30% of the Board, rounded up to
the nearest whole director;
(ii) for so long as Apollo and its Affiliates hold in the
aggregate Common Stock Equivalents representing at least 25% of the
number of Conversion Shares issuable upon conversion of the
Convertible Preferred Stock issued on the Original Issuance Date,
Apollo shall be entitled to elect the number of directors that
represents 22% of the Board, rounded up to the nearest whole director;
(iii) for so long as Apollo and its Affiliates hold in the
aggregate Common Stock Equivalents representing at least 12 1/2% of
the number of Conversion Shares issuable upon the conversion of the
Convertible Preferred Stock issued on the Original Issuance Date,
Apollo shall be entitled to elect the number of directors that
represents 15% of the Board, rounded up to the nearest whole director.
(b) In the event the number of directors the holders of Convertible
Preferred Stock are entitled to elect decreases in accordance with
paragraph (a) above, then the
17
number of directors the holders of Convertible Preferred Stock are entitled
to elect pursuant to paragraph (a) shall not thereafter be increased,
irrespective of any subsequent acquisition of Common Stock Equivalents by
Apollo and its Affiliates. In determining the number of directors the
holders of the Convertible Preferred Stock shall be entitled to elect
pursuant to paragraph (a) above, Apollo and its Affiliates shall be deemed
to hold each Common Stock Equivalent that is held of record by Apollo or
any of its Affiliates, or as to which Apollo or any of its Affiliates
retains the entire economic interest.
(c) Each committee of the Board shall include directors elected by the
holders of shares of the Convertible Preferred Stock in the same
proportion, rounded up to the nearest whole director, as such directors
comprise the Board and the Corporation shall provide each Convertible
Preferred Director with notice at least 48 hours prior to any meeting of
the Board or any committee.
(d) If an Event of Non-Compliance occurs (each, a "Trigger Event"),
-------------
the Requisite Convertible Preferred Shareholders (voting as a separate
class) shall have the special right to elect that number of individuals to
the Board that will constitute a majority of the Board. Upon receipt by the
Corporation of written notice of the occurrence of a Trigger Event signed
by the Requisite Convertible Preferred Shareholders, the number of
directors constituting the entire Board shall be increased by a number
which, together with the number of directors which the holders of the
Convertible Preferred Stock have elected pursuant to Section 9(a), shall
constitute a majority of the number of directors constituting the entire
Board. In case any vacancy shall occur among the directors elected by the
holders of the Convertible Preferred Stock pursuant to Section 9(a) or
9(d), a successor shall be elected by the Convertible Preferred Directors
(or by the holders of the Convertible Preferred Stock, in the event no such
director remains in office). Upon receipt by the Corporation of written
consents signed by or on behalf of the Requisite Convertible Preferred
Shareholder designating the persons to fill the vacancy, created by
increase or otherwise, the Board shall immediately fill such vacancies with
the designees named in such notice. In lieu of delivery of notice to the
Corporation described in the preceding sentence, at their discretion, the
holders of the Convertible Preferred Stock, voting separately as a single
class, may elect such directors at any annual meeting of the shareholders
or any special meeting of the holders of the Convertible Preferred Stock
called as hereinafter provided. At any time during which the power to elect
any directors has been vested in the holders of Convertible Preferred
Stock, the Secretary of the Corporation, upon written request of any holder
of Convertible Preferred Stock, shall call a meeting of the holders of the
Convertible Preferred Stock for the election of directors as provided
herein. The rights of the holders of the Convertible Preferred Stock to
increase the number of directors and designate such additional directors,
as provided in this Section 9(d) shall continue until such time as there is
no longer a Trigger Event in existence, at which time such special right
shall terminate, subject to revesting upon the occurrence and continuation
of any subsequent Trigger Event which gives rise hereunder. After the
expiration of such Trigger Event, the term of office of the directors
elected pursuant to the increase under this Section 9(d) shall
automatically expire and the number of directors shall be reduced
accordingly.
18
(e) Any transferee of shares of Convertible Preferred Stock shall be
required, as a condition to such transfer, to enter into a written
agreement with the transferor and the Corporation, which agreement shall
confer on Apollo (or such other Person as the Corporation shall approve),
for so long as such shares remain outstanding, sole power and authority to
vote such shares of Convertible Preferred Stock (at any meeting of
shareholders or by execution of a written consent of shareholders), with
respect to (i) any election of directors of the Corporation, including any
election of directors pursuant to Section 9 of this Statement, or (ii) any
matter described in Section 8(b)(vi). A counterpart of any such contract
shall be deposited with the Corporation at its principal place of business
or registered office and shall be subject to examination by shareholders,
in accordance with Article 2.30 of the Texas Business Corporation Act. Upon
any transfer in which the transferee does not agree to such contractual
agreement described above, such shares of Convertible Preferred Stock shall
automatically convert into a like number of Series B Convertible Preferred
Stock, which shall be identical in all respects to the Convertible
Preferred Stock, except such Series B Convertible Preferred Stock shall not
------
be entitled to vote (at any meeting of shareholders or by execution of a
written consent of shareholders) with respect to (i) any election of
directors of the Corporation, including any election of directors pursuant
to Section 9, or (ii) any matter described in Section 8(b)(vi).
10. Definitions.
-----------
As used herein, the following terms shall have the following meanings:
"Accumulated Amount" means an amount per share of Convertible
------------------
Preferred Stock equal to the Original Cost plus the sum of all dividends accrued
but unpaid as of the most recent Preferred Dividend Payment Date.
"Affiliate" means, with respect to any Person, any other Person that
---------
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such Person; provided that
Affiliates of Apollo shall exclude any operating companies that would otherwise
be deemed an Affiliate of Apollo, but shall include all investment partnerships
and special purpose entities that are not operating companies, whether existing
as of the date hereof or created hereafter, if the Persons controlling Apollo
have a dominant management role in such entities. For the purpose of the above
definition, the term "control" (including, with correlative meaning, the terms
"controlling", "controlled by", and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Applicable Dividend Rate" means 7.25% per annum; provided however that the
------------------------ --------
Applicable Dividend Rate shall be 9.25% upon the occurrence of and during the
continuation of any Event of Non-Compliance until cured, except for any Event of
Non-Compliance related solely to:
19
(i) a breach by the Company of any provisions of the Purchase
Agreement; or
(ii) any breach of Sections 15(a), (iii), (v), (vi), (vii), or
(ix) through (xiii) (in the case of (xiii), only insofar as it relates
to the foregoing clauses) of the Investor Rights Agreement that does
not have a material adverse effect on the Corporation and its
Subsidiaries, taken as a whole.
"Apollo" means Apollo Management IV, L.P.
------
"Appraisal Procedure" shall mean the following procedure to determine
-------------------
the fair market value, as to any security, for purposes of the definition of
"Fair Market Value" or the fair market value, as to any other property (in
either case, the "valuation amount"). The valuation amount shall be determined
in good faith jointly by the disinterested members of the Board and the
Requisite Convertible Preferred Shareholders; provided, however, that if such
-------- -------
parties are not able to agree on the valuation amount within a reasonable period
of time (not to exceed twenty (20) days) the valuation amount shall be
determined by an investment banking firm of national recognition, which firm
shall be reasonably acceptable to the disinterested members of the Board and the
Requisite Convertible Preferred Shareholders. If the disinterested members of
the Board and the Requisite Convertible Preferred Shareholders are unable to
agree upon an acceptable investment banking firm within ten (10) days after the
date either party proposed that one be selected, the investment banking firm
will be selected by an arbitrator located in New York City, New York, selected
by the American Arbitration Association (or if such organization ceases to
exist, the arbitrator shall be chosen by a court of competent jurisdiction). The
arbitrator shall select the investment banking firm (within ten (10) days of his
appointment) from a list, jointly prepared by the disinterested members of the
Board and the Requisite Convertible Preferred Shareholders, of not more than six
investment banking firms of national standing in the United States, of which no
more than three may be named by the disinterested members of the Board and no
more than three may be named by the Requisite Convertible Preferred
Shareholders. The arbitrator may consider, within the ten-day period allotted,
arguments from the parties regarding which investment banking firm to choose,
but the selection by the arbitrator shall be made in its sole discretion from
the list of six. The disinterested members of the Board and the Requisite
Convertible Preferred Shareholders shall submit to the investment banking firm
their respective determinations of the valuation amount, and any supporting
arguments and other data as they may desire, within ten (10) days of the
appointment of the investment banking firm, and the investment banking firm
shall as soon as practicable thereafter make its own determination of the
valuation amount. The final valuation amount for purposes hereof shall be the
average of the two valuation amounts closest together, as determined by the
investment banking firm, from among the valuation amounts submitted by the
Corporation and the Requisite Convertible Preferred Shareholders and the
valuation amount calculated by the investment banking firm. The determination of
the final valuation amount by such investment-banking firm shall be final and
binding upon the parties. The party that submits the valuation amount that is
not used by the investment banking firm to calculate the final valuation amount
shall pay the fees and expenses of the investment banking firm and arbitrator
(if any) used to determine the valuation amount. If required by any such
investment banking firm or arbitrator, the Corporation shall execute a retainer
and engagement letter containing reasonable terms and conditions, including,
without limitation, customary provisions concerning the rights of
indemnification and contribution by the
20
Corporation in favor of such investment banking firm or arbitrator and its
officers, directors, partners, employees, agents and Affiliates.
"Board" means the Board of Directors of the Corporation.
-----
"BOSC" means Building One Services Corporation, a Delaware
----
Corporation.
"Business Day" means any day except a Saturday, Sunday or a day
------------
on which banking institutions are legally authorized to close in the City of New
York
"Change of Control" means the occurrence, after the date of the
-----------------
consummation of the Merger, of any of the following events (each a "Change of
Control"):
(i) the Sale of the Corporation,
(ii) the adoption of a plan relating to a Liquidation,
(iii) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other
than Apollo and its Affiliates, is or becomes the
"beneficial owner" (as defined in Rules 13-d-3 and
13d-5 under the Exchange Act), directly or indirectly,
of Voting Stock entitled to cast a majority of the
votes entitled to be cast by the holders of the
outstanding Voting Stock of the Corporation,
(iv) (A) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other
than Apollo and its Affiliates, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-
5 under the Exchange Act), directly or indirectly, of
Voting Stock entitled to cast more than 30% of the
votes entitled to be cast by the holders of the
outstanding Voting Stock of the Corporation and (B)
Apollo and its Affiliates beneficially owns, directly
or indirectly, Voting Stock entitled to cast in the
aggregate a lesser percentage of the votes entitled to
be cast by the outstanding Voting Stock of the
Corporation than such other person or group, or
(v) the first day on which a majority of the Common Stock
Directors are not Continuing Directors.
"Closing Price" means with respect to the shares of Common Stock
-------------
on any day, (i) the last reported sales price, or in the case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case on the NYSE, or (ii) if the shares of Common Stock are
not listed or admitted to trading on the NYSE, the last reported sales price, or
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading,
or (iii) if the shares of Common Stock are not listed on any national securities
exchange, the average of the closing bid and asked prices in the over-the-
counter market as furnished by any NYSE member firm selected from time to time
by
21
the Corporation for that purpose, or (iv) if such prices in the over-the-counter
market are not available, the Fair Market Value.
"Common Stock" means the Common Stock, par value $0.001, of the
------------
Corporation.
"Common Stock Directors" means those directors who have not been
----------------------
elected by the holders of the shares of the Convertible Preferred Stock pursuant
to Section 9.
"Common Stock Equivalent" means one share of Common Stock or the
-----------------------
right to acquire, whether or not immediately exercisable, one share of Common
Stock, whether evidenced by an option, warrant, convertible security or other
instrument or agreement, in each case, as adjusted to account for any stock
splits, reverse stock splits, stock dividends or other similar events.
"Consolidated Net Income" means, with respect to any Person, for
-----------------------
any period, the aggregate net income (or loss) of such Person and its
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
or losses from asset sales or abandonments or reserves relating thereto, (b)
after-tax items classified as extraordinary or nonrecurring gains or losses, (c)
the net income of any Person acquired in a "pooling of interests" transaction
accrued prior to the date it becomes a Subsidiary of the referent Person or is
merged or consolidated with the referent Person or any Subsidiary of the
referent Person, (d) the net income (but not loss) of any Subsidiary of the
referent Person to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is by a contract, operation of
law or otherwise prohibited, (e) the net income of any Person, other than a
Subsidiary of the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a wholly owned Subsidiary of the
referent Person by such Person, and (f) in the case of a successor to the
referent Person by consolidation or merger or as a transferee of the referent
Person's assets, any earnings of the successor corporation prior to such
consolidation, merger or transfer of assets.
"Continuing Directors" means Common Stock Directors who were
--------------------
directors on the Original Issuance Date or whose election to the Board, or whose
nomination for election by the shareholders of the Corporation, was approved by
a majority of the Common Stock Directors then still in office who were either
directors on the Original Issuance Date or whose election or nomination for
election was previously so approved.
"Conversion Date" shall have the meaning set forth in Section
---------------
4(b).
"Conversion Price" shall have the meaning set forth in Section
----------------
4(a).
"Conversion Shares" means the shares of Common Stock issuable
-----------------
upon conversion of the Convertible Preferred Stock, as adjusted to account for
any stock splits, reverse splits, stock dividends or other similar events.
"Corporation Redemption Price" shall have the meaning set forth
----------------------------
in Section 5(a).
"Event of Non-Compliance" means the occurrence of any of the
-----------------------
following:
22
(i) the Corporation fails to pay the dividends or
distributions required pursuant to Section 2 hereof and such
failure to pay continues 10 days after notice of such failure has
been delivered by any holder of shares of Convertible Preferred
Stock;
(ii) the Corporation fails to pay the full redemption price
when due under Sections 5, 6 or 7 hereof;
(iii) any breach by the Corporation of Section 8(b) hereof,
any other material breach by the Corporation of any of the terms
and conditions hereof, or any material and intentional breach by
the Corporation of any of the terms and conditions of the
Investor Rights Agreement or the Purchase Agreement;
(iv) there is a payment default, or any other default
giving rise to a right of acceleration, under any Indebtedness of
the Corporation that has an aggregate principal amount
outstanding, as of the date of such default or acceleration, in
excess of $10,000,000 (after giving effect to any notice or cure
period relating to such Indebtedness);
(v) the Corporation or any of its material Subsidiaries
shall (A) voluntarily commence any proceeding or file any
petition seeking relief under Title 11 of the United States Code
or any other federal, state or foreign bankruptcy, insolvency or
similar law, (B) consent to the institution of, or fail to
controvert in a timely and appropriate manner, any such
proceeding or the filing of any such petition, (C) apply for or
consent to the appointment of a receiver, trustee, custodian,
sequestrator or similar official for any such Person or for any
substantial part of its property or assets, (D) file an answer
admitting the material allegations of a petition filed against it
in any such proceeding, (E) make a general assignment for the
benefit of creditors, (F) fail generally to pay its debts as they
become due or (G) take any corporate or shareholder action in
furtherance of any of the foregoing; or
(vi) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (A) relief in respect of the Corporation or
any of its material Subsidiaries, or of any substantial part of
their respective property or assets, under Title 11 of the United
States Code or any other federal, state or foreign bankruptcy,
insolvency or similar law, (B) the appointment of a receiver,
trustee, custodian, sequestrator or similar official for any such
Person or for any substantial part of its property or (C) the
winding-up or liquidation of any such Person, and such
proceeding, petition or order shall continue unstayed and in
effect for a period of 60 consecutive days.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
"Excluded Stock" means (i) shares of Common Stock issuable upon
--------------
exercise of any warrants or options of the Corporation outstanding on the
Original Issuance Date, (ii) shares of Common Stock issuable upon exercise of
any warrant or option of BOSC assumed by the
23
Corporation in connection with the Merger, (iii) shares of Common Stock issued
pursuant to the conversion of the Convertible Preferred Stock, (iv) shares of
Common Stock issued as consideration pursuant to any acquisition by the Company
or any Subsidiary of any Person or assets (an "Acquisition") if (x) the total
consideration paid in such Acquisition is (based on total cash consideration,
total Indebtedness assumed by the Company and its Subsidiaries and the Fair
Market Value of the shares of Common Stock issued and other property paid) is
less than 2.0% of the total assets of the Company and its Subsidiaries as of the
end of its most recently completed fiscal quarter and (y) the Consolidated Net
Income per outstanding share of Common Stock for the immediately preceding full
twelve month period giving pro forma effect to such Acquisition, and related
financing, as if such Acquisition were consummated at the beginning of such
period is greater than the actual Consolidated Net Income per outstanding share
of Common Stock for such period, (v) shares of Convertible Preferred Stock
issued as dividends to the holders of Convertible Preferred Stock, (vi) shares
of Common Stock or options issued pursuant to any Company or BOSC employee
incentive or benefit arrangement existing on the date hereof pursuant to the
terms thereof on the date hereof, (vii) shares of Common Stock or options issued
pursuant to Corporation employee incentive or benefit arrangements adopted after
the Original Issuance Date of substantially the same size and on terms that are
no less favorable to the Company than such plans existing on the date hereof to
become effective upon the termination of such existing plans to replace such
existing plans and all outstanding options thereunder, (viii) shares of Common
Stock issued pursuant to obligations to pay earnouts with respect to the
Acquisitions described on Schedule I hereto in accordance with the agreements
relating thereto, (ix) up to 2,500,000 shares of Common Stock under a new
employee option plan to be instituted by the Corporation at the closing of the
Merger, (x) up to 1,200,000 shares of Common Stock issued pursuant to a stock
performance incentive plan no less favorable to the Corporation than the BOSC
1999 Stock Performance Incentive Plan (whether as an addition to such plan, or
as a part of an expanded plan which incorporates the BOSC plan plus the
additional 1,200,000 shares) and (xi) Common Stock issued to the shareholders of
BOSC pursuant to the Merger Agreement.
"Fair Market Value" means, as to any security, the average of the
-----------------
Closing Prices of such security (i) averaged over a period of 21 days consisting
of the day immediately preceding the day as of which "Fair Market Value" is
being determined and the 20 consecutive Business Days prior to such immediately
preceding day and (ii) excluding any trades that are not bona fide, arm's length
transactions). If at any time such security is not listed on any domestic
securities exchange or quoted in the NASDAQ System or the domestic over-the-
counter market, the "Fair Market Value" of such security shall be the fair
market value thereof as determined in accordance with the Appraisal Procedure,
using an appropriate valuation method, assuming an arms-length sale to an
independent party. In determining the fair market value of any class or series
of Common Stock, a sale of all of the issued and outstanding Common Stock of the
Corporation will be assumed, without giving regard to the lack of liquidity of
such stock due to any restrictions (contractual or otherwise) applicable thereto
or any discount for minority interests and assuming the conversion or exchange
of all securities then outstanding that are convertible into or exchangeable for
Common Stock and the exercise of all rights and warrants then outstanding and
exercisable to purchase shares of such stock or securities convertible into or
exchangeable for shares of such stock; provided, however that such assumption
-------- -------
will not include those securities, rights and warrants convertible into Common
Stock where the conversion, exchange or exercise price per share is greater than
the fair market value; provided, further,
-------- -------
24
however, that fair market value shall be determined with regard to the relative
-------
priority of each class or series of Common Stock (if more than one class or
series exists.)
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by (or which
customarily would be evidenced by) bonds, debentures, notes or similar
instruments, (c) all reimbursement obligations of such Person with respect to
letters of credit and similar instruments, (d) all obligations of such Person
under conditional sale or other title retention agreements relating to property
or assets purchased by such Person, (e) all obligations of such Person incurred,
issued or assumed as the deferred purchase price of property or services other
than accounts payable incurred and paid on terms customary in the business of
such Person, provided that Indebtedness shall include contingent purchase price
obligations and other earnout obligations of the Corporation and its
Subsidiaries incurred in connection with the acquisition of any business, to the
extent that it is more likely than not that such obligations will be paid (it
being understood that the "deferred purchase price" in connection with any
purchase of property or assets shall include only that portion of the purchase
price which shall be deferred beyond the date on which the purchase is actually
consummated), (f) all obligations secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person under forward sales,
futures, options and other similar hedging arrangements (including interest rate
hedging or protection agreements), (h) all guaranties by such Person of
obligations of others and (i) all capitalized lease obligations of such Person.
"Initial Dividend Period" means the period from and including the
-----------------------
Original Issuance Date through and including the third anniversary of the
Original Issuance Date.
"Investor's Rights Agreement" means the Investor Rights Agreement
---------------------------
dated as of the Original Issuance Date among the Corporation and the Investor.
"Investor" means BOSS II, LLC.
--------
"Lien" means any security interest, lien, pledge, claim, charge,
----
escrow, encumbrance, option, right of first offer, right of first refusal,
preemptive right, mortgage, indenture, security agreement or other similar
agreement, arrangement, contract, commitment, understanding or obligation,
whether written or oral and whether or not relating in any way to credit or the
borrowing of money.
"Liquidation" means any voluntary or involuntary liquidation,
-----------
dissolution, or winding up of the affairs of the Corporation, other than any
dissolution, liquidation or winding up in connection with any reincorporation of
the Corporation in another jurisdiction.
"Liquidation Amount" means, as to each share of Convertible
------------------
Preferred Stock, the Original Cost plus all accrued and unpaid dividends and all
accumulated and unpaid dividends, whether or not declared and whether or not
there are profits, surplus or other funds legally available for dividends,
payable with respect to such share of Convertible Preferred Stock.
"Maturity Date" means the 12th anniversary of the Original
-------------
Issuance Date.
25
"Merger" means the merger contemplated by the Agreement and Plan
------
of Merger dated November 2, 1999, by and between Group Maintenance America Corp.
and Building One Services Corporation.
"NASDAQ System" means the National Association of Securities
-------------
Dealers Automated Quotation System.
"Original Cost" means $1,000 per share.
-------------
"Original Issuance Date" for the Convertible Preferred Stock
----------------------
means the date of original issuance of the first share of such Convertible
Preferred Stock.
"Person" shall be construed broadly and shall include, without
------
limitation, an individual, a partnership, an investment fund, a limited
liability corporation, a corporation, an association, a joint stock corporation,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
"Preferred Dividend Payment Date" shall have the meaning set
-------------------------------
forth in Section 2(a).
"Preferred Record Date" shall have the meaning set forth in
---------------------
Section 2(b).
"Purchase Agreement" means the Securities Purchase Agreement
------------------
dated as of November 2, 1999 among the Corporation and the Investor.
"Redemption Date" shall have the meaning set forth in Section
---------------
6(c).
"Redemption Price" shall mean 101% of the Liquidation Amount.
----------------
"Redemption Record Date" has the meaning set forth in Section
----------------------
5(b).
"Requisite Convertible Preferred Shareholders" means, as of
--------------------------------------------
any date of determination, the holders of a majority of the outstanding shares
of Convertible Preferred Stock as of such date.
"Sale of the Corporation" shall mean (i) the sale or other
-----------------------
disposition, directly or indirectly, of all or substantially all of the
Corporation's assets in one transaction or a series of transactions or (ii) the
merger or consolidation of the Corporation with or into another Person, in the
case of clause (ii) only, under circumstances in which the holders of Voting
Stock entitled to cast a majority of the votes entitled to be cast by the
holders of the Voting Stock of the Corporation, immediately prior to the merger
or consolidation, own Voting Stock entitled to cast less than a majority of the
votes entitled to be cast by the holders of the Voting Stock of the Corporation
or the surviving or resulting corporation or acquirer, as the case may be,
immediately following such merger or consolidation. A sale (or sales) of one or
more Subsidiaries of the Corporation (whether by way of merger, consolidation,
reorganization or sale of all or substantially all assets or securities) which
constitutes all or substantially all of the consolidated assets of the
Corporation shall be deemed a Sale of the Corporation.
26
"Second Dividend Period" means the period from, but not
----------------------
including, the third anniversary of the Original Issuance Date through and
including the Maturity Date.
"Statement" means this Statement of designations, rights,
---------
preferences, powers, privileges and restrictions, qualifications, and
limitations.
"Subsidiary" means any entity of which a majority of the
----------
outstanding Voting Stock, is owned by the Corporation either directly or
indirectly through Subsidiaries.
"Trigger Event" shall have the meaning set forth in Section 9(d).
-------------
"Voting Stock" of a Person means any class or all classes of
------------
capital stock or other interests (including partnership interests) of such
Person then outstanding and normally entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
thereof.
27
IN WITNESS WHEREOF, Group Maintenance America Corp. has caused this
Statement of Designation to be duly executed this __ day of ____________.
GROUP MAINTENANCE AMERICA CORP.
By:____________________________
Name:__________________________
Title:_________________________
ANNEX II
-5-
EXHIBIT 7.3(d)
[Date]
BOSS II, LLC
1301 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
We have acted as counsel for Group Maintenance America Corp. (the "Company") in
connection with the issuance by the Company of _________ shares of convertible
preferred stock, $.001 par value (the "Convertible Preferred Stock"). The
Convertible Preferred Stock is being issued and sold on the date hereof by the
Company to you pursuant to the Subscription and Exchange Agreement (the
"Subscription and Exchange Agreement") dated as of November 2, 1999 between you
and the Company. In connection with the Subscription and Exchange Agreement, the
Company is also entering into the Investors' Rights Agreement (the "Rights
Agreement") dated as of _________, 2000 between you and the Company and the Fee
Letter (the "Letter") dated as of November 2, 1999 between you and the Company,
and will file the Statement of Designation (the "Statement of Designation")
relating to the Convertible Preferred Stock. The Subscription and Exchange
Agreement, the Rights Agreement, the Letter and the Statement of Designation are
herein collectively referred to as the "Transaction Documents." This opinion is
being rendered to you pursuant to Section 7.3(d) of the Subscription and
Exchange Agreement.
Before rendering the opinion hereinafter set forth, we have examined the
Subscription and Exchange Agreement, the Rights Agreement, the Letter and the
Statement of Designation, and have examined and relied as to matters of fact
upon, the documents delivered to you today at the closing of the purchase and
sale of the Convertible Preferred Stock (except the certificates representing
the Convertible Preferred Stock of which we have examined a specimen). We have
made such investigations of law and examined such other documents and records as
we have deemed necessary and relevant as a basis for the opinion hereinafter
expressed. In the course of the foregoing investigations and examinations, we
assumed (i) the genuineness of all signatures on, and the authenticity of, all
documents and records submitted to us as originals and the conformity to
original documents and records of all documents and records submitted to us as
copies, (ii) the truthfulness of all statements of fact set forth therein, (iii)
the due authorization, execution and delivery by the parties, other than
[Date]
Page 2
the Company, thereto of all documents and instruments examined by us (except
with respect to the Company as set forth in paragraph 2 below), and (iv) that,
to the extent such documents and instruments purport to constitute agreements of
such parties (other than the Company), they constitute valid, binding and
enforceable obligations of such parties.
Based on the foregoing and subject to the limitations, assumptions and
qualifications set forth herein, and having due regard for such legal
considerations as we deem relevant, we are of the option that:
1. The Company and each of its Material Subsidiaries (as defined in the
Subscription and Exchange Agreement) is a corporation duly
incorporated, validly existing and in good standing under the laws
of its state of incorporation; and the Company and each [Material]
Subsidiary has all requisite corporate power and authority to
conduct the business in which it is engaged, to own and lease its
assets and property, and with respect to the Company, to execute,
deliver and perform its obligations under the Transaction Documents,
to issue and sell the Convertible Preferred Stock pursuant to the
Subscription and Exchange Agreement, and to issue the Common Stock
initially issuable upon conversion of the Convertible Preferred
Stock (the "Conversion Shares").
2. The execution and delivery by the Company of the Transaction
Documents and the consummation by the Company of its obligations
thereunder (including, without limitation, the issuance of the
convertible Preferred Stock and the Conversion Shares) have been
duly authorized by all requisite corporate action on the part of the
Company, and the Company has duly executed and delivered the
Transaction Documents.
3. The execution and delivery by the Company of the Transaction
Documents and the consummation by the Company of the transactions
contemplated therein do not (i) violate any provision of the
Company's articles of incorporation or bylaws, (ii) violate any
provision of any existing law, rule or regulation applicable to the
Company or any order, writ, injunction or decree of any court or
governmental agency known to us after due inquiry and having
jurisdiction over the Company, or (iii) violate or cause a default
under, or result in, or require the creation or imposition of any
mortgage, pledge, charge, security interest or encumbrance upon any
of the Company's properties, under any Material Contract, known to
us after due inquiry, to which the Company is party.
[Date]
Page 3
4. Each Transaction Document is a valid and legally binding obligation
of the Company, enforceable against the Company in accordance with
its terms.
5. No authorization, approval, consent or order of, or filing with, any
governmental agency having jurisdiction over the Company is required
to be obtained by the Company but has not been obtained for the
execution and delivery of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated
therein except as may be required by federal and state securities
laws with respect to actions taken relative to the Company Indenture
dated as of January 22, 1999.
6. The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
8. The Company is not a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
9. The Convertible Preferred Stock has been duly authorized and when
issued and delivered against payment therefore, in accordance with
the terms of the Subscription and Exchange Agreement, will be
validly issued, fully paid and nonassessable. The Conversion Shares
issuable as of the date hereof have been duly authorized and
reserved for issuance, and when issued and delivered in accordance
with the Statement of Designations, will be validly issued, fully
paid and non-assessable. The issuance of the Convertible Preferred
Stock and the Conversion Shares are not subject to any preemptive
rights under Texas law, the Company's articles of incorporation or
any currently existing contractual obligation known to us after due
inquiry, except as may be granted in the Transaction Documents; and
10. Assuming the accuracy of the representations and warranties of the
Company and you in the Subscription and Exchange Agreement and the
Letter Agreement dated November __, 1999 between the Company and
Apollo Investment Fund IV, L.P., and Apollo Overseas Partners IV,
L.P., no registration of the Convertible Preferred Stock under the
Securities Act of 1933, as amended, is required for the valid sale
to you today of the Convertible Preferred Stock.
The opinion set forth above is, with your concurrence, limited to the law of the
State of Texas and the relevant law of the United States of America, and we
render no opinion with respect to the law of any other jurisdiction nor do we
express any opinion with respect to the
[Date]
Page 4
anti-fraud provisions of any state or federal securities laws. In this regard,
we call to your attention the provisions of the Subscription and Exchange
Agreement, the Rights Agreement and the Letter which provide that the law of the
state of New York shall govern such agreements, and note that the laws of the
State of New York may be materially different than the laws of the State of
Texas. With respect to the opinion expressed in paragraph 1 above, we have, with
your concurrence, relied exclusively upon certificates of public officials of
the states of incorporation.
We express no opinion as to the enforceability of provisions in the Subscription
and Exchange Agreement, the Rights Agreement and the Letter which provide that
the agreements are to be government by and construed in accordance with the laws
of the State of New York. With your concurrence we have assumed that,
notwithstanding the governing law provisions of such agreement, that such
agreements will be governed by the internal laws of the State of Texas without
giving effect to any laws of conflict requiring the application of any other
jurisdiction.
Whenever our opinion is based on circumstances "known to us after due inquiry,"
we have relied exclusively on certificates of officers (after the discussion of
the contents thereof with such officers) of the Company or certificates of
others as to the existence or nonexistence of the circumstances upon which such
opinion is predicated. We have no reason to believe, however, than any such
certificate is untrue or inaccurate in any material respect.
We have assumed, with your concurrence and without investigation, that there has
not been any mutual mistake of fact or misunderstanding, fraud, duress or any
undue influence.
The enforceability of dividend, payment and redemption provisions in the
Convertible Preferred Stock and the Statement of Designations is subject to the
availability of sufficient funds legally available therefor.
In addition to the limitations and qualifications set forth above, the
enforceability of obligations of the Company under any of the Transaction
Documents is subject to the effect of any applicable bankruptcy (including,
without limitation, fraudulent conveyance and preference), insolvency,
reorganization, rehabilitation, moratorium or similar laws and decisions
relating to or affecting the enforcement of creditors' rights generally, and to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing, and the
possible unavailability of specific performance or injunctive relief. Such
principles are of general application, and in applying such principles a court,
among other things, might decline to order the Company to perform covenants.
Further, the enforceability of indemnification provisions contained in the
Subscription and
[Date]
Page 5
Exchange Agreement may be limited by applicable law or public policy.
This opinion is solely for your benefit pursuant to Section 7.3(d) of the
Subscription and Exchange Agreement, and may not be used or relied upon by you
for any other purpose and may not be used or relied upon for any purpose by any
other person or entity without our express prior written authorization. Except
for the use permitted herein, this opinion may not be quoted, circulated or
published, in whole or in part, or otherwise referred to, filed with or
furnished to any other person or entity, without our express prior written
authorization.
Very truly yours,
Xxxxxxxxx & Xxxxxxxxx, L.L.P.
