<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 5, 1999
----------------
GLOBIX CORPORATION
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(Exact name of registrant as specified in charter)
Delaware 0-25615 13-3781263
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(State or other juris- (Commission (IRS Employer
diction of Incorporation) File number) Identification No.)
139 Centre Street, New York, New York 10013
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (212) 334-8500
--------------
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
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On November 5, 1999, Globix Corporation (the "Company")
entered into a Stock Purchase Agreement to sell to HMTF-IV Acquisition Corp.
(the "Buyer"), an affiliate of Hicks, Muse, Tate & Furst Incorporated, $80
million in a new Series A Convertible Preferred Stock ("Preferred Stock"). The
transaction is anticipated to close before year-end.
The Preferred Stock is redeemable, in whole or part, by the
Company at any time after November 15, 2004 and is subject to mandatory
redemption on November 15, 2014. Each share of Preferred Stock has an annual
dividend rate of 7.5% payable on March 31, June 30, September 30 and December
31, of each year, in cash or in additional shares of Preferred Stock at the
option of the Company. Additionally, each share of Preferred Stock is
convertible, at any time and at the holder's option, into shares of the
Company's common stock, $0.01 par value per share ("Common Stock"), at a
conversion price of $40 per share. The Preferred Stock has a liquidation
preference of $1,000 per share. Each share of the Preferred Stock entitles the
holder to vote on an "as converted" basis on all matters that the holders of
Common Stock are entitled to vote upon at a meeting of stockholders of the
Company. With respect to the election of directors of the Company, holders of
the Preferred Stock will vote proportionately.
Pursuant to the terms of the Stock Purchase Agreement, for so
long as affiliates of the Buyer own certain specified percentages of the
securities issued to it, Hicks Muse shall be
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entitled to nominate and elect up to two additional directors to serve on the
Company's Board of Directors. The Preferred Stock has not been registered under
the Securities Act of 1933, as amended. The holders of the Preferred Stock have
been granted registration rights for both the Preferred Stock and the shares of
Common Stock issuable upon the conversion of the Preferred Stock.
The foregoing summary of the transaction is qualified in its
entirety by reference to the full text of the exhibits filed with this Report.
The Company intends to use the net proceeds of the transaction
to continue its development of SuperPOP Internet data centers in Europe and the
United States and for general corporate purposes.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
Number
4.1 Stock Purchase Agreement between the
Company and HMTF-IV Acquisition
Corp., dated November 5, 1999.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
GLOBIX CORPORATION
By /s/ Marc H. Bell
---------------------------
Marc H. Bell, President
Dated: November 29, 1999
4
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EXHIBIT INDEX
Exhibit Description
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4.1 Stock Purchase Agreement between the Company and
HMTF-IV Acquisition Corp., dated November 5, 1999.
5
<PAGE> 1
Exhibit 4.1
STOCK PURCHASE AGREEMENT
dated as of
November 5, 1999
between
GLOBIX CORPORATION
and
HMTF-IV ACQUISITION CORP.
relating to the purchase and sale
of
SERIES A 7.5% CONVERTIBLE PREFERRED STOCK
of
GLOBIX CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1
<S> <C>
DEFINITIONS
Section 1.01 Definitions.................................................. 1
ARTICLE 2
PURCHASE AND SALE
Section 2.01 Purchase and Sale............................................ 4
Section 2.02 Closing...................................................... 4
Section 2.03 Certificates for Restricted Securities....................... 4
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
Section 3.01 Corporate Existence and Power................................ 5
Section 3.02 Corporate Authorization...................................... 5
Section 3.03 Approvals.................................................... 5
Section 3.04 Noncontravention............................................. 6
Section 3.05 Capitalization............................................... 6
Section 3.06 Authorization of Preferred Shares............................ 7
Section 3.07 Finders' Fees................................................ 7
Section 3.08 SEC Reports.................................................. 7
Section 3.09 Financial Statements......................................... 7
Section 3.10 Absence of Certain Changes................................... 7
Section 3.11 Litigation................................................... 8
Section 3.12 Offering of Preferred Shares................................. 8
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.01 Existence and Power.......................................... 9
Section 4.02 Authorization................................................ 9
Section 4.03 Approvals.................................................... 9
Section 4.04 Noncontravention............................................. 9
Section 4.05 Purchase for Investment...................................... 10
</TABLE>
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<TABLE>
<S> <C>
Section 4.06 Litigation.................................................. 10
Section 4.07 Finders' Fees............................................... 10
ARTICLE 5
COVENANTS OF THE CORPORATION
Section 5.01 Access to Information....................................... 10
Section 5.02 Certificate of Designations................................. 10
Section 5.03 Restrictions Pending the Closing............................ 11
Section 5.04 Reservation of Common Stock................................. 11
Section 5.05 Other Transfers of Restricted Securities.................... 11
Section 5.06 Venture Capital Operating Corporation Requirements.......... 11
Section 5.07 Buyer Directors............................................. 12
ARTICLE 6
COVENANTS OF BUYER
Section 6.01 Confidentiality............................................. 13
Section 6.02 Sale or Transfer of Restricted Securities................... 14
ARTICLE 7
COVENANTS OF BUYER AND THE CORPORATION
Section 7.01 Reasonable Best Efforts..................................... 14
Section 7.02 Certain Filings............................................. 14
Section 7.03 Public Announcements........................................ 14
Section 7.04 Standstill Agreement........................................ 15
Section 7.05 Registration Rights Agreement............................... 15
ARTICLE 8
CONDITIONS TO CLOSING
Section 8.01 Conditions to Obligations of Buyer and the Corporation...... 16
Section 8.02 Conditions to Obligation of Buyer........................... 16
Section 8.03 Conditions to Obligation of the Corporation................. 17
ARTICLE 9
TERMINATION
Section 9.01 Grounds for Termination..................................... 17
Section 9.02 Effect of Termination....................................... 18
ARTICLE 10
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
</TABLE>
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<TABLE>
<S> <C>
Section 10.01 Survival of Representation and Warranties................... 18
Section 10.02 Indemnification............................................. 18
Section 10.03 Procedures.................................................. 19
Section 10.04 Inspections................................................. 21
Section 10.05 Certain Other Matters....................................... 21
ARTICLE 11
MISCELLANEOUS
Section 11.01 Notices..................................................... 22
Section 11.02 Amendments and Waivers...................................... 23
Section 11.03 Expenses.................................................... 24
Section 11.04 Assignment.................................................. 24
Section 11.05 Governing Law............................................... 24
Section 11.06 Jurisdiction................................................ 24
Section 11.07 Counterparts; Third Party Beneficiaries..................... 25
Section 11.08 Entire Agreement............................................ 25
Section 11.09 Captions.................................................... 25
Section 11.10 Severability................................................ 25
Section 11.11 Specific Performance........................................ 25
Section 11.12 Remedies Cumulative......................................... 26
Section 11.13 No Affiliate Liability...................................... 26
</TABLE>
Exhibit A Certificate of Designations, Preferences and Rights
of Series A 7.5% Convertible Preferred Stock
Exhibit B Registration Rights
Exhibit C Management Rights Agreement
Exhibit D Opinion of Milberg Weiss Bershad Hynes & Lerach LLP
Exhibit E Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
<PAGE> 5
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of November 5, 1999 between Globix Corporation, a
Delaware corporation (the "Corporation"), and HMTF-IV Acquisition Corp., a
Delaware corporation ("Buyer").
WHEREAS, the Corporation desires to sell the Preferred Shares (as
defined herein) to Buyer, and Buyer desires to purchase the Preferred Shares
from the Corporation, upon the terms and subject to the conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01 Definitions. (a) The following terms, as used
herein, have the following meanings:
"Affiliate" means, with respect to any specified person, any
other person which, directly or indirectly, controls, is controlled by or is
under direct or indirect common control with, such specified person. For the
purposes of this definition, "control" when used with respect to any person
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise, and the terms "affiliated," "controlling," and "controlled" have
meanings correlative to the foregoing.
"Board of Directors" means the Board of Directors of the
Corporation.
"Closing Date" means the date of the Closing.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Funds" means both HMTF Equity Fund IV (1999), L.P. and HMTF
Private Equity Fund IV (1999), L.P.
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"GAAP" means generally accepted accounting principles used in
the United States of America.
"HMTF" means Hicks, Muse, Tate & Furst Incorporated, a Texas
corporation.
"HMTF Group" means HMTF and its Affiliates, Buyer and its
Affiliates, and its and their respective officers, directors, partners, members,
stockholders and employees (and members of their respective families and trusts
for the primary benefit of such family members).
"Lien" means any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind.
"Material Adverse Effect" means any circumstance, change or
effect, whether or not foreseeable or known as of the date hereof, that, when
taken together with all other circumstances, changes and effects, is or is
reasonably likely to be (whether or not such change, event or effect has, at the
time in question, manifested itself in the Corporation's historical financial
statements), materially adverse to the business, historical or near-term or
long-term projected results of operations, assets, conditions (financial or
otherwise), or liabilities (including, without limitation, contingent
liabilities) of the Corporation and its Subsidiaries taken as a whole.
"Person" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Preferred Shares" mean the shares of Series A 7.5%
Convertible Preferred Stock, par value $.01 per share, of the Corporation.
"Restricted Securities" means (i) the Preferred Shares issued
hereunder, and (ii) any securities issued directly or indirectly with respect to
the securities referred to in clause (i) above upon conversion of the Preferred
Shares, including in connection with a stock split or combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise
pursuant to the terms of the Preferred Shares. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have (a) been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) become eligible
for sale pursuant to Rule 144 (without any volume limitations) or (c) been
otherwise transferred and new certificates for them not bearing the Securities
Act legend set forth in Section 2.03(b) have been delivered by the Corporation.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
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"Subsidiary" means any corporation or other entity (and any
predecessor thereof) of which the securities or other ownership interests having
ordinary voting power to elect a majority of the Board of Directors or other
persons performing similar functions are directly or indirectly owned by the
Corporation.
"Transaction Fee" means a fee in the amount of 4% of the
Purchase Price, and is payable by the Corporation to Hicks, Muse & Co. Partners,
L.P. in connection with this transaction.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
<TABLE>
<CAPTION>
TERM SECTION
<S> <C>
Business Plan 3.15
Buyer Director 5.07
Certificate of Designations 3.06
Closing 2.02
Common Stock 3.05
HMTF Issued Series Preferred Shares 5.07
Damages 10.02
HMC 2.02
HSR Act 4.03
Purchase Price 2.01
Representatives 6.01
SEC Reports 3.05
Shares 3.05
Standstill Period 7.04
</TABLE>
(c) The following definitional provisions shall apply to this
Agreement:
(i) The words "hereof", "herein", and "hereunder" and
words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular
provision of this Agreement.
(ii) The terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
(iii) The terms "Dollars" and "$" shall mean United
States Dollars.
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(iv) References herein to a specific Section,
Subsection or Schedule shall refer, respectively, to Sections,
Subsections or Schedules of this Agreement, unless the express
context otherwise requires.
(v) Wherever the word "include," "includes," or
"including" is used in this Agreement, it shall be deemed to
be followed by the words "without limitation."
ARTICLE 2
PURCHASE AND SALE
Section 2.01 Purchase and Sale. Upon the terms and subject to
the conditions of this Agreement, the Corporation agrees to sell to Buyer, and
Buyer agrees to purchase from the Corporation, 80,000 Preferred Shares at the
Closing. The purchase price (the "Purchase Price") for the Preferred Shares is
$80,000,000 in cash. The Purchase Price shall be paid as provided in Section
2.02.
Section 2.02 Closing. The closing (the "Closing") of the
purchase and sale of the Preferred Shares hereunder shall take place at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York,
New York, as soon as possible, and in no event later than twelve business days
after satisfaction of the conditions set forth in Article 8, or at such other
time or place as Buyer and the Corporation may agree. At the Closing:
(a) Buyer shall deliver to the Corporation the Purchase Price
in immediately available funds by wire transfer to an account of the
Corporation with a bank designated by the Corporation, by notice to
Buyer, not later than two business days prior to the Closing Date.
(b) the Corporation shall deliver a counterpart signature page
to the Management Rights Agreement attached hereto as Exhibit C.
(c) following delivery of the certificate described in Section
8.03(c), the Corporation shall deliver to Buyer certificates for the
Preferred Shares.
(d) the Corporation shall deliver to Hicks, Muse & Co.
Partners, L.P. ("HMC") the Transaction Fee in immediately available
funds by wire transfer to an account designated by HMC by notice to the
Corporation, not later than two business days prior to the Closing
Date.
Section 2.03 Certificates for Restricted Securities.
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(a) Each certificate for Restricted Securities shall bear the
following legend for so long as such securities constitute Restricted
Securities:
"The securities represented hereby have not been registered
under the Securities Act of 1933, as amended, and may not be
offered, sold, transferred or otherwise disposed of except in
compliance with such laws."
(b) The Corporation agrees that, at the request of Buyer, it
will remove the legend contemplated by this Section from the
certificates representing any Restricted Securities in the event that
outside counsel for Buyer determines that the transfer of such
Preferred Shares is no longer restricted by the Securities Act and
outside counsel for the Corporation reasonably concurs in such
determination.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation represents and warrants to Buyer as of the date hereof
and as of the Closing that:
Section 3.01 Corporate Existence and Power. The Corporation is
a corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers required to carry on
its business as now conducted. The Corporation has delivered to Buyer true and
complete copies of the Certificate of Incorporation, as amended to date, and
By-laws, as in effect on the date hereof.
Section 3.02 Corporate Authorization. The execution, delivery
and performance of this Agreement by the Corporation is within the Corporation's
corporate powers and has been duly authorized by all necessary corporate action
on the part of the Corporation. This Agreement constitutes a legal and binding
agreement of the Corporation, enforceable against the Corporation in accordance
with its terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
Section 3.03 Approvals. Except as set forth in Schedule 3.03
hereto, the execution, delivery and performance of this Agreement by the
Corporation requires no action by or in respect of, or filing with, any
governmental or non-governmental body, agency, official or authority other than
(i) compliance with any applicable requirements of the Exchange Act, (ii)
compliance with any applicable requirements of the Securities Act, (iii)
notification requirements
<PAGE> 10
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (iv) the filing of the Certificate of Designations in accordance
with the laws of Delaware, and (v) other filings or notifications that are
immaterial to the consummation of the transactions contemplated hereby.
Section 3.04 Noncontravention. The execution, delivery and
performance of this Agreement by the Corporation do not and will not (i) violate
the certificate of incorporation or bylaws of the Corporation, (ii) assuming
compliance with the matters referred to in Section 3.03, violate any applicable
law, rule, regulation, judgment, injunction, order or decree binding upon the
Corporation or any Subsidiary, other than violations that would not have a
Material Adverse Effect, or (iii) except as to matters which would not have a
Material Adverse Effect, constitute a default under, or give rise to any right
of termination, cancellation or acceleration of any right or obligation of the
Corporation or any Subsidiary or to a loss of any benefit to which the
Corporation or any Subsidiary is entitled under any provision of any agreement
or other instrument binding upon the Corporation or any Subsidiary or (iv)
result in the creation or imposition of any Lien on any asset of the Corporation
or any Subsidiary except where such Lien would not have a Material Adverse
Effect.
Section 3.05 Capitalization. The authorized capital stock of
the Corporation consists of 75,000,000 shares (the "Shares") of common stock,
par value $0.01 per share (the "Common Stock") and 500,000 shares of preferred
stock, par value $0.01 per share. (i) 8,372,805 Shares are issued and
outstanding, all of which are validly issued, fully paid and nonassessable, (ii)
zero (0) Shares are held in the treasury of the Corporation, (iii) 2,589,819
Shares are reserved for future issuance pursuant to outstanding employee stock
options granted pursuant to the Corporation's Stock Option Plans, and (iv)
626,551 Shares are reserved for future issuance pursuant to outstanding
warrants. No shares of preferred stock are issued and outstanding. Schedule 3.05
sets forth a list of all options, warrants and other such rights to purchase
capital stock of the Corporation and their corresponding exercise prices. Except
as set forth on Schedule 3.05, the Corporation owns all of the issued and
outstanding capital stock of the Subsidiaries. Except as set forth on Schedule
3.05 and in the financial statements contained in the forms, reports and
documents filed with the Commission (the "SEC Reports"), there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Corporation or
any of its Subsidiaries or obligating the Corporation or any Subsidiary to issue
or sell any shares of capital stock of, or other equity interests in, the
Corporation or any Subsidiary and there are no outstanding debt or equity
securities of the Corporation or any Subsidiary which upon the conversion,
exchange or exercise thereof would require the issuance, sale or transfer by the
Corporation or any Subsidiary of any new or additional equity interests in the
Corporation or any Subsidiary (or any other securities of the Corporation or any
of its Subsidiaries which, whether after notice, lapse of time or payment of
monies, are or would be convertible into or exercisable or exchangeable for
equity interests in the Corporation or any of its Subsidiaries). Except as set
forth in the SEC Reports, there are no voting trusts or other agreements or
understandings to which the Corporation or any of its Subsidiaries is a party
with respect to the voting of capital stock of the Corporation.
<PAGE> 11
Section 3.06 Authorization of Preferred Shares. The issuance,
sale and delivery of the Preferred Shares to Buyer has been duly authorized by
all requisite corporate action of the Corporation and the Preferred Shares
issued to Buyer in accordance with the terms of the Certificate of Designations,
Preferences and Rights of Series A 7.5% Convertible Preferred Stock (the
"Certificate of Designations") set forth on Exhibit A hereto, when issued and
delivered in accordance with the terms of this Agreement, will be validly issued
and outstanding, fully paid and nonassessable, free and clear of any Liens and
not subject to preemptive or other similar rights of the stockholders of the
Corporation.
Section 3.07 Finders' Fees. Except for Chase Manhattan
Corporation, whose fees will be paid by the Corporation, there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of the Corporation who might be entitled to any fee
or commission in connection with the transactions contemplated by this
Agreement.
Section 3.08 SEC Reports. The Corporation has filed all
required SEC Reports when due in accordance with the Exchange Act. As of their
respective dates, the SEC Reports complied in all material respects with all
applicable requirements of the Exchange Act or the Securities Act, as the case
may be. As of their respective dates, none of the SEC Reports contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated or incorporated by reference therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
Section 3.09 Financial Statements. The consolidated financial
statements of the Corporation contained in the SEC Reports complied as to form
in all material respects with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present, in conformity with GAAP (except as may be
indicated in the notes thereto), the consolidated financial position of the
Corporation and its consolidated Subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements which will not be material, either
individually or in the aggregate). Except (i) as set forth or reflected on the
consolidated financial statements of the Corporation contained in the SEC
Reports or described in the notes thereto, and (ii) as set forth on Schedule
3.09, neither the Corporation nor any of the Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent, unasserted or
otherwise) that would be expected to have a Material Adverse Effect.
Section 3.10 Absence of Certain Changes. Since September 30,
1998, there has not been any event, occurrence or development of a state of
circumstances or facts that has had or could reasonably be expected to have a
Material Adverse Effect or an adverse effect on the ability of the Corporation
to perform its obligations under this Agreement.
<PAGE> 12
Section 3.11 Litigation. Except as set forth on Schedule 3.11,
and except as disclosed in the SEC Reports, there is no action, suit,
investigation or proceeding pending against, or to the knowledge of the
Corporation threatened against or affecting, the Corporation or any Subsidiary
before any court or arbitrator or any governmental body, agency or official
which (i) in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement or (ii) if
resolved adversely to the Corporation or a Subsidiary would reasonably be likely
to have, individually or in the aggregate, a Material Adverse Effect.
Section 3.12 Offering of Preferred Shares. Neither the
Corporation nor any Person acting on its behalf has taken or will take any
action (including, without limitation, any offering of any securities of the
Corporation under circumstances which would require, under the Securities Act,
the integration of such offering with the offering and sale of the Preferred
Shares) which might subject the offering, issuance or sale of the Preferred
Shares to the registration requirements of Section 5 of the Securities Act.
Section 3.13 No Permits or Licenses. Except as set forth on
Schedule 3.13, there are no governmental permits, licenses or authorizations
currently required for the Corporation or its Subsidiaries to conduct their
respective businesses.
Section 3.14 Intellectual Property, etc. The Corporation or a
Subsidiary owns or is licensed or otherwise has the right to use all
intellectual property necessary for the conduct of its business as presently
conducted, in each case, free and clear of all Liens. The conduct of the
Corporation's or any Subsidiaries' business, as presently conducted, does not
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien in or upon any of the properties or
assets of the Corporation or any Subsidiary under, any contract between the
Corporation or any Subsidiary, on the one hand, and any person or any other
intellectual property rights of any other person, except for such matters as
would not have a Material Adverse Effect. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not, except as to
matters which would not have a Material Adverse Effect, conflict with, or result
in a violation of any intellectual property right of any other Person.
Section 3.15 Business Plan. The financial projections and
business plan (the "Business Plan") provided to Buyer prior to the date hereof
was reasonably prepared on a basis reflecting (i) the management's best
estimates, (ii) assumptions and (iii) judgments, at the time provided to Buyer,
as to the future financial performance of the Corporation and the individual
business segments thereof, each of which was believed to be reasonable by the
Corporation's management; it being recognized by Buyer that the Business Plan as
it relates to future events is not to be viewed as fact and that actual results
during the periods covered thereby may differ from the Business Plan by a
material amount.
<PAGE> 13
Section 3.16 Accuracy and Completeness of Information
Provided. To the Corporation's knowledge, no representation, warranty or
covenant of the Corporation in this Agreement and no statement contained in any
exhibit, disclosure schedule, or certificate contemplated by this Agreement,
when read together, in light of the circumstances under which it was made,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not misleading.
There is no fact or information relating to the Corporation or its Subsidiaries
that is known to the Corporation that could reasonably be expected to have a
Material Adverse Effect and that has not been disclosed to Buyer.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Corporation as of the date hereof
and as of the Closing that:
Section 4.01 Existence and Power. Buyer is a corporation duly
formed, validly existing and in good standing under the laws of its jurisdiction
of formation.
Section 4.02 Authorization. The execution, delivery and
performance of this Agreement by Buyer are within Buyer's powers and have been
duly authorized by all necessary action on the part of Buyer. This Agreement
constitutes a legal, valid and binding agreement of Buyer, enforceable against
Buyer in accordance with its terms, except that (i) such enforcement may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
Section 4.03 Approvals. The execution, delivery and
performance of this Agreement by Buyer requires no action by or in respect of,
or filing with, any governmental or non-governmental body, agency or official or
any other Person other than (i) compliance with any applicable requirements of
the Exchange Act, (ii) notification requirements of the HSR Act, and (iii) other
filings or notifications that are immaterial to the consummation of the
transactions contemplated hereby.
Section 4.04 Noncontravention. The execution, delivery and
performance of this Agreement by Buyer does not and will not (i) violate the
certificate of incorporation or by-laws of the Buyer, or, (ii) assuming
compliance with the matters referred to in Section 4.03, violate any applicable
law, rule, regulation, judgment, injunction, order or decree, except for any
such
<PAGE> 14
violations which would not have a material adverse effect on the ability of
Buyer to consummate the transactions contemplated hereby.
Section 4.05 Purchase for Investment. Buyer is purchasing the
Preferred Shares for investment for its own account and not with a view to, or
for sale in connection with, any distribution thereof. Buyer (either alone or
together with its advisors) has sufficient knowledge and experience in financial
and business matters so as to be capable of evaluating the merits and risks of
its investment in the Preferred Shares and is capable of bearing the economic
risks of such investment.
Section 4.06 Litigation. There is no action, suit,
investigation or proceeding pending against, or to the knowledge of Buyer
threatened against or affecting, Buyer before any court or arbitrator or any
governmental body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement.
Section 4.07 Finders' Fees. Except for HMC, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of Buyer who might be entitled to any fee
or commission from the Corporation or any of its Affiliates upon consummation of
the transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS OF THE CORPORATION
The Corporation agrees that:
Section 5.01 Access to Information. From the date hereof until
the Closing Date, the Corporation will (i) furnish to Buyer and its authorized
representatives such financial and operating data and other information relating
to the Corporation and its Subsidiaries as such Persons may reasonably request
and (ii) instruct its counsel, independent accountants and financial advisors to
cooperate with Buyer and its authorized representatives in its investigation of
the Corporation. Any investigation pursuant to this Section shall be conducted
in such manner as not to interfere unreasonably with the conduct of the business
of the Corporation. In addition, during any time that Buyer has the right to
designate a director pursuant to paragraph 9 of the Certificate of Designations,
the Corporation will provide Buyer with copies of all financial information,
reports and presentations delivered to the lenders under the Corporation's
principal credit facilities, subject to the confidentiality agreement set forth
in Section 6.01.
Section 5.02 Certificate of Designations. Prior to the
Closing, the Corporation shall cause to be filed the Certificate of Designations
set forth as Exhibit A hereto as required pursuant to the law of Delaware.
<PAGE> 15
Section 5.03 Restrictions Pending the Closing. After the date
hereof and prior to the Closing Date, except as expressly provided for in this
Agreement or as consented to in writing by Buyer, the Corporation will not:
(i) amend its Certificate of Incorporation or By-laws
or similar organizational documents;
(ii) split, combine or reclassify any shares of the
Corporation's capital stock;
(iii) declare or pay any dividend or distribution
(whether in cash, stock or property) in respect of its capital
stock;
(iv) take any action, or knowingly omit to take any
action, that would, or that would reasonably be expected to,
result in (A) any of the representations and warranties of the
Corporation set forth in Article 3 becoming untrue or (B) any
of the conditions to the obligations of Buyer set forth in
Sections 8.01 or 8.02 not being satisfied; or
(v) enter into any agreement or commitment to do any
of the foregoing.
Section 5.04 Reservation of Common Stock. For so long as any
of the Preferred Shares is outstanding, the Corporation shall keep reserved for
issuance a sufficient number of shares of Common Stock to satisfy its conversion
obligations under the Certificate of Designations.
Section 5.05 Other Transfers of Restricted Securities. The
Corporation shall take all actions reasonably necessary to enable holders of the
Restricted Securities to sell such securities without registration under the
Securities Act pursuant to Rule 144 under the Securities Act or any successor
rule or regulation, and, specifically, the filing on a timely basis of all
reports required to be filed under the Exchange Act.
Section 5.06 Venture Capital Operating Corporation
Requirements. The Corporation agrees that for so long as Buyer has the right to
designate a director pursuant to paragraph 9 of the Certificate of Designations,
each of the Funds (which upon the Closing will collectively own substantially
all of the membership interests of Buyer) shall have the right: (a) to receive
the same information that is provided to members of the Corporation's board of
directors; (b) upon reasonable request and at reasonable times during normal
business hours, to receive income statements, balance sheets, budgets, business
plans and other financial information and to inspect the books and records of
the Corporation; and (c) upon reasonable request and at reasonable times during
normal business hours, to meet and consult with
<PAGE> 16
management with respect to the business of the Corporation. The foregoing rights
are intended to satisfy the requirement of management rights for purposes of
qualifying the Funds' indirect ownership interests in the Corporation as venture
capital investments for purposes of the Department of Labor's "plan assets"
regulations, and in the event such rights are not satisfactory for such purpose,
the Corporation and the Funds shall reasonably cooperate in good faith to agree
upon mutually satisfactory management rights which satisfy such regulations. The
Funds hereby agree to treat all information received by them pursuant to this
Section 5.06 in accordance with the provisions of Section 6.01.
Section 5.07 Buyer Directors (A) The HMTF Group (as defined
below), shall be entitled to designate for election to the Corporation's Board
of Directors two people (the "Buyer Directors"), for so long as members of the
HMTF Group own either (i) 50% or more of the Preferred Shares issued to members
of the HMTF Group on the Closing Date under this Agreement (together, with any
equity securities into which such shares are exchanged or converted, the "HMTF
Issued Series A Preferred Shares"), (ii) an amount of Common Stock issued upon
conversion of 50% or more of the HMTF Issued Series A Preferred Shares or (iii)
any combination of the HMTF Issued Series A Preferred Shares and Common Stock
issued upon conversion of HMTF Issued Series A Preferred Shares that, if taken
together, would represent (if all HMTF Issued Series A Preferred Shares were
converted) an amount of Common Stock issuable upon conversion of 50% or more of
the HMTF Issued Series A Preferred Shares, and (B) the HMTF Group shall be
entitled to designate for election to the Corporation's Board of Directors one
person (a "Buyer Director"), for so long as members of the HMTF Group own either
(i) 25% or more of (but less than 50% of) the HMTF Issued Series A Preferred
Shares, (ii) an amount of Common Stock issued upon conversion of 25% or more
(but less than 50% of) the HMTF Issued Series A Preferred Shares or (iii) any
combination of HMTF Issued Series A Preferred Shares and Common Stock issued
upon conversion of HMTF Issued Series A Preferred Shares that, if taken
together, would represent (if all HMTF Issued Series A Preferred Shares were
converted) an amount of Common Stock issuable upon conversion of 25% or more of
(but less than 50% of) the HMTF Issued Series A Preferred Shares; provided,
however, that the right to designate the Buyer Director or Directors under this
Section 5.07 shall be suspended at any time that the HMTF Group holds Preferred
Shares and has the right to elect one person or two persons, as applicable, to
the Board of Directors under the terms of the Preferred Shares set forth in the
Certificate of Designation. In the event the HMTF Group is entitled under this
Section 5.07 to designate a Buyer Director or the Buyer Directors for election
to the Corporation's Board of Directors and elects to have the Board of
Directors appoint a Buyer Director or the Buyer Directors, it shall so notify
the Corporation in writing and the Corporation shall (a) increase the size of
the Board of Directors by one or two, as applicable, and fill the vacancies
created thereby by electing the Buyer Director or the Buyer Directors and (b) in
connection with the meeting of stockholders of the Corporation next following
such election, nominate such Buyer Director or Buyer Directors for election as
directors by the stockholders and use its best efforts to cause the Buyer
Director or Buyer Directors to be so elected. If the HMTF Group is entitled
under this letter to designate the Buyer Director or the Buyer Directors for
election to the Corporation's Board of Directors and a vacancy shall exist in
the office of the or a Buyer Director, the HMTF Group shall be entitled to
designate a successor and the Board of Directors shall elect such
<PAGE> 17
successor and, in connection with the meeting of stockholders of the Corporation
next following such election, nominate such successor for election as director
by the stockholders and use its best efforts to cause the successor to be
elected.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
Section 6.01 Confidentiality.
(a) Buyer will hold, and will use its reasonable best efforts
to cause its officers, directors, members, employees, accountants,
counsel, consultants, advisors, financing sources, financial
institutions, and agents (the "Representatives") to hold, in
confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law or national stock exchange, all
confidential documents and information concerning the Corporation or
any of its Affiliates furnished to Buyer or its Representatives, except
to the extent that such information was (i) previously known on a
nonconfidential basis by Buyer, (ii) in the public domain through no
fault of Buyer, (iii) independently developed by Buyer, or (iv) later
acquired by Buyer from sources other than the Corporation or any of its
Affiliates not known by Buyer to be bound by any confidentiality
obligation; provided that Buyer may disclose such information to any of
the Representatives in connection with the transactions contemplated by
this Agreement so long as such Persons are informed by Buyer of the
confidential nature of such information and are directed by Buyer to
treat such information confidentially. Buyer shall be responsible for
any failure to treat such information confidentially by such Persons.
Buyer agrees that it shall not and it shall cause the Representatives
not to use any confidential documents or information for any purpose
other than monitoring and evaluating its investment in the Corporation
and in connection with the transactions contemplated by this Agreement.
If this Agreement is terminated, Buyer will, and will use its
reasonable best efforts to cause its Representatives to, destroy or
deliver to the Corporation, upon request, all documents and other
materials, and all copies thereof, obtained by Buyer or any of the
Representatives on Buyer's behalf from the Corporation in connection
with this Agreement that are subject to such confidence.
(b) In the event Buyer, or anyone to whom Buyer transmits
confidential information, is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoenas,
civil investigative demand or similar process) to disclose any such
information, Buyer will provide the Corporation with prompt notice so
that the Corporation may seek a protective order or other appropriate
remedy and/or waive Buyer's compliance with the provisions of this
Section. In the event that such
<PAGE> 18
protective order or other remedy is not obtained sufficiently promptly
so as not to adversely affect Buyer or those of its Representatives as
to whom the information has been requested or required, or the
Corporation waives Buyer's compliance with the provisions of this
Agreement, Buyer will furnish only that portion of such information
that Buyer is advised by counsel is legally required and, at the
Corporation's expense, will exercise its commercially reasonable
efforts to obtain reliable assurance that confidential treatment will
be accorded such information.
Section 6.02 Sale or Transfer of Restricted Securities. Buyer
will not sell, pledge, encumber or otherwise transfer, or agree to sell, pledge,
encumber or otherwise transfer, directly or indirectly, any Restricted
Securities in contravention of the Securities Act.
ARTICLE 7
COVENANTS OF BUYER AND THE CORPORATION
Section 7.01 Reasonable Best Efforts; Further Assurances.
Subject to the terms and conditions of this Agreement, Buyer and the Corporation
will use their reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary or desirable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement. The Corporation and Buyer agree to execute and deliver such
other documents, certificates, agreements and other writings and to take such
other actions as may be necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement.
Section 7.02 Certain Filings. The Corporation and Buyer shall
cooperate with one another (i) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement including making
any filings under the HSR Act, as soon as practicable but in no event later than
the second business day following the execution of this Agreement and (ii) in
taking such actions or making any such filings, furnishing information required
in connection therewith and seeking timely to obtain any such actions, consents,
approvals, waivers or terminations.
Section 7.03 Public Announcements. Prior to the Closing, the
parties agree to consult with each other before issuing any press release or
making any public statement with respect to this Agreement or the transactions
contemplated hereby and, except as may be required by applicable law or any
listing agreement with any national securities exchange, will not issue any such
press release or make any such public statement prior to such consultation.
Following the Closing, the parties agree to consult with each other before
issuing any press release or making any public filing that describes any terms
of this Agreement.
<PAGE> 19
Section 7.04 Standstill Agreement.
(a) During the period commencing on the date hereof and ending
on the earlier of (i) the fifth anniversary of the Closing Date (the
"Standstill Period") or (ii) the date these provisions terminate as
provided herein, except as (x) specifically permitted by this Agreement
or (y) specifically approved in writing in advance by the Board of
Directors of the Corporation, the Buyer shall not, and shall cause any
of its Affiliates or members of the HMTF Group to not, in any manner,
directly or indirectly acquire, or offer or agree to acquire, or become
the beneficial owner of or obtain any rights in respect of any capital
stock of the Corporation, except for any shares of Common Stock that
may be issuable upon the conversion of the Preferred Shares, provided,
that the foregoing limitation shall not prohibit the acquisition of
securities of the Corporation or any of its successors (i) issued as
dividends or as a result of stock splits and similar reclassifications
or otherwise in respect of Special Amounts (as defined in the
Certificate of Designations) or received in a merger or other business
combination in respect of Preferred Shares or Shares held by Buyer or
any of its Affiliates or members of the HMTF Group at the time of such
dividend, split or reclassification or merger or business combination
or (ii) otherwise acquired so long as (in the case of this clause (ii))
on the date of acquisition Buyer and its Affiliates and members of the
HMTF Group do not hold as a result of such acquisition Shares in an
aggregate amount in excess of 25% (calculated to include any Preferred
Shares then held by Buyer or its affiliates or members of the HMTF
Group as if such shares had been converted at the then existing
conversion ratio into Common Stock) of the number of shares of Common
Stock then outstanding; provided that any such additional shares
received pursuant to clause (i) or acquired pursuant to clause (ii)
shall be voted in the manner set forth in paragraph 9 of the
Certificate of Designations.
(b) The standstill provisions set forth herein shall terminate
on the earliest of (i) the last day of the Standstill Period and (ii)
upon the filing of a voluntary bankruptcy petition by the Corporation
or on the 60th day following the filing of an involuntary bankruptcy
petition against the Corporation if such petition is not discharged
with prejudice during such 60-day period.
Section 7.05 Registration Rights Agreement. The terms set
forth in Exhibit B hereto are hereby incorporated by reference.
<PAGE> 20
ARTICLE 8
CONDITIONS TO CLOSING
Section 8.01 Conditions to Obligations of Buyer and the
Corporation. The obligations of Buyer and the Corporation to consummate the
Closing are subject to the satisfaction of the following conditions:
(a) No provision of applicable law or regulation, judgment,
injunction, order or decree shall prohibit the consummation of the Closing.
(b) All applicable waiting periods under the HSR Act shall
have expired or been terminated.
Section 8.02 Conditions to Obligation of Buyer. The obligation
of Buyer to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a) The Corporation shall have performed in all material
respects all of its obligations hereunder required to be performed by
it on or prior to the Closing.
(b) The representations and warranties of the Corporation
contained in this Agreement shall in each case, if specifically
qualified by materiality, be true and correct and, if not so qualified,
be true and correct in all material respects at and as of the Closing,
as if made at and as of such date (except to the extent such
representations and warranties expressly relate to an earlier date, in
which case such representations and warranties shall be true and
correct on and as of such earlier date).
(c) The Certificate of Designations shall have been filed in
accordance with the laws of Delaware.
(d) The Corporation shall have delivered to Buyer (i) a copy
of the resolutions adopted by the Board of Directors, certified by the
Secretary of the Corporation, authorizing this Agreement and (ii) a
certificate dated the Closing Date, signed by an officer of the
Corporation, certifying as to the fulfillment of the conditions set
forth in Sections 8.02(a) and 8.02(b).
(e) The Corporation shall have delivered to Buyer an opinion
substantially in the form of Exhibit E to Buyer from Milberg Weiss
Bershad Hynes & Lerach LLP, with respect to the due incorporation, due
authorization, non-contravention, capitalization of the Corporation and
the validity of the Preferred Shares.
<PAGE> 21
(f) The Corporation shall have delivered to Buyer an opinion
substantially in the form of Exhibit F to Buyer from Skadden, Arps,
Slate, Meagher & Flom LLP, special counsel to the Corporation, with
respect to the valid, binding and enforceable nature of this Agreement.
(g) There shall not have occurred (i) any event, circumstance,
condition, fact, effect, or other matter which has had or could
reasonably be expected to have a Material Adverse Effect or a material
adverse effect on the ability of the Corporation and its Subsidiaries
to perform on a timely basis any material obligation under this
Agreement or to consummate the transactions contemplated hereby, or
(ii) any material disruption of, or material adverse change in,
financial, banking or capital market conditions.
Section 8.03 Conditions to Obligation of the Corporation. The
obligation of the Corporation to consummate the Closing is subject to the
satisfaction of the following further conditions:
(a) Buyer shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to
the Closing Date.
(b) The representations and warranties of Buyer contained in
this Agreement shall be true in all material respects at and as of the
Closing Date, as if made at and as of such date.
(c) The Corporation shall have received a certificate signed
by an appropriate officer of Buyer certifying as to the fulfillment of
the conditions as set forth in Section 8.03(a) and 8.03(b).
ARTICLE 9
TERMINATION
Section 9.01 Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of the Corporation and Buyer;
(b) by either the Buyer or Corporation if (i) the Closing
shall not have been consummated on or before December 15, 1999, (ii)
the other party shall have breached any of its material obligations
under this Agreement or (iii) the conditions set forth in Sections 8.02
or 8.03, respectively, shall have become incapable of being satisfied;
<PAGE> 22
(c) by either the Corporation or Buyer if consummation of the
transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or governmental body having
competent jurisdiction; or
(d) by Buyer if an event described in Section 8.02(g) shall
have occurred.
The party desiring to terminate this Agreement pursuant to clauses
9.01(b), 9.01(c) or 9.01(d) shall promptly give notice of such termination to
the other party.
Section 9.02 Effect of Termination. If this Agreement is
terminated as permitted by Section 9.01, such termination shall be without
liability of either party (or any stockholder, director, officer, partner,
employee, agent, consultant or representative of such party) to the other party
to this Agreement; provided that if such termination shall result from the
willful (a) failure of either party to fulfill a condition to the performance of
the obligations of the other party, (b) failure to perform a covenant of this
Agreement or (c) breach by either party hereto of any representation or warranty
or agreement contained herein, such party shall be fully liable for any and all
losses incurred or suffered by the other party as a result of such failure or
breach. The provisions of Sections 6.01, 11.01, 11.03, 11.05, 11.06, 11.07,
11.08, 11.09, 11.10, 11.11, 11.12 and 11.13 shall survive any termination hereof
pursuant to Section 9.01.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 10.01 Survival of Representation and Warranties. All
representations and warranties contained in this Agreement and all claims with
respect thereto shall terminate upon the expiration of 18 months after the
Closing Date, except that the representations and warranties contained in
Sections 3.01, 3.02, 3.03, 3.06, 4.01, 4.02, and 4.03 shall survive
indefinitely. Notwithstanding the preceding sentence, any covenant, agreement,
representation or warranty in respect of which indemnity may be sought under
this Agreement shall survive the time at which it would otherwise terminate
pursuant to the preceding sentence, if notice of the inaccuracy or breach
thereof giving rise to such right of indemnity shall have been given to the
party against whom such indemnity may be sought prior to such time.
Section 10.02 Indemnification. (a) The Corporation hereby
indemnifies Buyer against and agrees to hold Buyer harmless from any and all
damage, loss, liability and expense (including, without limitation, reasonable
expenses of investigation and reasonable attorneys' fees and expenses in
connection with any action, suit or proceeding) ("Damages") incurred or suffered
by Buyer arising out of any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by the Corporation pursuant to this Agreement;
provided that (i) the Corporation shall not be liable under this Section
10.02(a) unless the aggregate amount of Damages with respect to all matters
referred to in this Section 10.02(a) exceeds $2,000,000 in
<PAGE> 23
which event Buyer shall be entitled to make a claim against the Corporation for
the full amount of such Damages, and (ii) the Corporation's maximum liability
under this Section 10.02(a) shall not exceed $60,000,000; provided, further that
the Corporation's indemnity obligations hereunder for Buyer Damages shall be
calculated net of (i.e. after deducting) any insurance proceeds and any third
party payments by virtue of indemnification or subrogation actually received by
the Buyer with respect to the subject matter of a claim.
(b) Buyer hereby indemnifies the Corporation against and
agrees to hold the Corporation harmless from any and all Damages
incurred or suffered by the Corporation arising out of any
misrepresentation or breach of warranty, covenant or agreement made or
to be performed by Buyer pursuant to this Agreement; provided that (i)
Buyer shall not be liable under this Section 10.02(b) unless the
aggregate amount of Damages with respect to all matters referred to in
this Section 10.02(b) exceeds $2,000,000 in which event the Corporation
shall be entitled to make a claim against the Buyer for the full amount
of such Damages, and (ii) Buyer's maximum liability under this Section
10.02(b) shall not exceed $60,000,000; provided, further that Buyer's
indemnity obligations hereunder shall be calculated net of (i.e. after
deducting) any insurance proceeds or third party payments by virtue of
indemnification or subrogation actually received by the Corporation
with respect to the subject matter of a claim.
Section 10.03 Procedures. (a) The Buyer, on the one hand, and
the Corporation, on the other hand, as the case may be, are sometimes referred
to herein individually as an "Indemnified Party" and collectively as the
"Indemnified Parties." All claims for indemnification by any Indemnified Party
hereunder shall be asserted and resolved as set forth in this Section 10.03.
(b)(i) In the event that any claim or demand by a third party for
which the Buyer or the Corporation, as the case may be (an
"Indemnifying Party"), may be liable to any Indemnified Party
hereunder (a "Claim") is asserted against or sought to be
collected from any Indemnified Party by a third party, such
Indemnified Party shall as promptly as practicable notify the
Indemnifying Party in writing of such Claim and the amount or
the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount of
such Claim) (the "Claim Notice"); provided that failure to so
notify an Indemnifying Party shall not relieve it from
liability except to the extent that the Indemnifying Party is
actually prejudiced by such failure to give notice. The
Indemnifying Party shall have up to thirty (30) days from the
personal delivery or mailing of the Claim Notice (the "Notice
Period") to notify the Indemnified Party (a) whether or not
the Indemnifying Party disputes the liability of the
Indemnifying Party to the Indemnified Party hereunder with
respect to such Claim and (b) whether or not it desires to
defend the Indemnified Party against such Claim.
Notwithstanding the foregoing, the Indemnified Party, during
the period the Indemnifying Party is determining whether to
elect to assume the defense of a matter covered by this
<PAGE> 24
Section 10.03, may take such reasonable actions as it deems
necessary to preserve any and all rights with respect to the
matter, without such actions being construed as a waiver of
the Indemnified Party's rights to defense and indemnification
pursuant to this Agreement. All costs and expenses incurred by
the Indemnifying Party in defending such Claim and all costs
incurred by the Indemnified Party during the Notice Period
shall be a liability of, and shall be paid by, the
Indemnifying Party. If the Indemnifying Party elects not to
defend the Indemnified Party against such Claim, then the
amount of any such Claim, or, if the same be contested by the
Indemnified Party, then that portion thereof as to which such
defense is unsuccessful (and the reasonable costs and expenses
pertaining to such defense) shall be the liability of the
Indemnifying Party hereunder.
(ii) Except as hereinafter provided, in the event that the
Indemnifying Party notifies the Indemnified Party in writing
within the Notice Period that it acknowledges its
indemnification obligation and desires to defend the
Indemnified Party against such Claim, the Indemnifying Party
shall, at its sole cost and expense, have the right to defend
the Indemnified Party by appropriate proceedings with counsel
reasonably acceptable to the Indemnified Party and shall have
the sole power to direct and control such defense. If any
Indemnified Party desires to participate in any such defense
it may do so at its sole cost and expense unless, in the
reasonable judgment of the Indemnified Party, it is advisable
to be represented by separate counsel because a conflict or
potential conflict exists between the Indemnifying Party and
the Indemnified Party which makes representation of both
parties inappropriate, in which case the reasonable fees of
counsel (including local counsel) for the Indemnified Party
shall be paid by the Indemnifying Party.
(iii) The Indemnified Party shall not settle or compromise a Claim
for which it is indemnified by the Indemnifying Party without
the written consent of the Indemnifying Party unless the
Indemnifying Party elects not to defend the Indemnified Party
against such Claim. The Indemnifying Party may, with the
consent of the Indemnified Party (which consent shall not be
unreasonably withheld), settle or compromise any action or
consent to the entry of any judgment for which the
Indemnifying Party is obligated to pay the full amount of the
liability for such Claim if it includes as a term thereof the
delivery by the claimant or plaintiff to the Indemnified Party
of a duly executed written unconditional release of the
Indemnified Party from all liability in respect of such action
and such settlement or compromise would not otherwise
adversely affect the Indemnified Party.
(iv) Notwithstanding the foregoing, the Indemnified Party shall
have the sole right to defend, settle, or compromise any Claim
with respect to which it has agreed in writing to waive its
right to indemnification pursuant to this Agreement.
<PAGE> 25
(v) To the extent the Indemnifying Party shall direct, control, or
participate in the defense or settlement of any third-party
claim or demand, the Indemnified Party will give the
Indemnifying Party and its counsel access to, during normal
business hours, all business records and other documents which
are reasonably relevant to such Claim, and shall permit them
to consult with the employees and counsel of the Indemnified
Party. The Indemnified Party shall use its reasonable efforts
in the defense of all such Claims. The parties hereto shall
each render to each other such assistance as may reasonably be
requested in order to ensure the proper and adequate defense
of any such claim or proceeding.
(vi) Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to assume the defense of any third party Claim
(and shall be liable for the reasonable fees and expenses of
counsel incurred by the Indemnified Party in defending such
third party Claim) if the third party Claim seeks an order,
injunction or other equitable relief or relief for other than
money damages against the Indemnified Party which the
Indemnified Party reasonably determines, after conferring with
its outside counsel, cannot be separated from any related
claim for money damages. If such equitable relief or other
relief portion of the third party Claim can be so separated
from that for money damages, the Indemnifying Party shall be
entitled to assume the defense of the portion relating to
money damages.
(vii) Any payments to be made to the Indemnified Party hereunder
shall be made by periodic payments of the amount thereof
during the course of such investigation or defense, as and
when bills are received or loss, liability, claim, damage, or
expense is incurred.
Section 10.04 Inspections; No Other Representations. Buyer is
an informed and sophisticated purchaser, and has undertaken such investigation
and has been provided with and has evaluated such documents and information as
it has deemed necessary to enable it to make an informed and intelligent
decision with respect to the execution, delivery and performance of this
Agreement. Buyer will undertake prior to the Closing such further investigation
and request such additional documents and information as it deems necessary.
Buyer agrees to accept the Preferred Shares based upon its own inspection,
examination and determination with respect thereto as to all matters, and
without reliance upon any express or implied representations or warranties of
any nature made by or on behalf of or imputed to the Corporation, except as
expressly set forth in this Agreement.
Section 10.05 Certain Other Matters.
(a) If the Closing shall occur, the indemnification provisions
of this Article 10.05 shall be the sole and exclusive remedy for any
inaccuracy or breach of any representation or warranty or any breach of
any covenant or agreement made in this
<PAGE> 26
Agreement, provided, however, that a party may seek specific
performance or damages for fraud where applicable.
(b) Upon making any payment to an Indemnified Party for any
indemnification claim pursuant to this Article 10, the Indemnifying
Party shall be subrogated, to the extent of such payment, to any rights
that the Indemnified Party may have against any other third parties
(other than insurance companies) with respect to the subject matter
underlying such indemnification claim and the Indemnified Party shall
take such actions, at the Indemnifying Party's sole cost and expense,
as the Indemnifying Party may reasonably require to perfect such
subrogation or to pursue such rights against such other Persons as the
Indemnified Party may have.
ARTICLE 11
MISCELLANEOUS
Section 11.01 Notices. All notices, requests and other
communications to any party hereunder shall be in writing and shall be deemed
duly given, effective (i) three Business Days later, if sent by registered or
certified mail, return receipt requested, postage prepaid, (ii) when sent if
sent by telecopier or fax, provided that the telecopy or fax is promptly
confirmed by telephone confirmation thereof, (iii) when served, if delivered
personally to the intended recipient, and (iv) one Business Day later, if sent
by overnight delivery via a national courier service, and in each case,
addressed,
if to Buyer, to:
HMTF-IV Acquisition Corp.
c/o Hicks, Muse, Tate & Furst Incorporated
1325 Avenue of the Americas
25th Floor
New York, New York 10019
Attention: Michael Levitt
Telecopier: (212) 424-1450
with a copy to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr., Esq.
Telecopier: (214) 740-7313
<PAGE> 27
with a copy to:
Vinson & Elkins LLP
1325 Avenue of the Americas
17th Floor
New York, New York 10019
Attention: Eric S. Shube, Esq.
Telecopier: (917) 206-8005
if to the Corporation, to:
Globix Corporation
139 Centre Street
New York, New York 10012
Attention: President
Telecopier No.: (212) 334-8507
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Howard L. Ellin, Esq.
Telecopier No.: (212) 735-2000
and
Milberg Weiss Bershad Hynes & Lerach LLP
One Pennsylvania Plaza
New York, New York 10119-0165
Attention: Arnold N. Bressler, Esq.
Telecopier No.: (212) 868-1229
Any party may change the address to which notices or other
communications hereunder are to be delivered by giving the other party notice in
the manner herein set forth. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
shall be deemed to be receipt of the notice as of the date of such rejection,
refusal or inability to deliver.
Section 11.02 Amendments and Waivers. Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective. No failure or delay by any party in exercising
<PAGE> 28
any right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative.
Section 11.03 Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such cost or
expense; provided, however, that the Corporation shall pay the filing fee
payable in respect of the HSR filing.
Section 11.04 Assignment. The rights and obligations of the
parties hereunder cannot be assigned or delegated except (i) that Buyer may
assign any or all of its rights and obligations under this Agreement to any one
or more of its Affiliates and (ii) that Buyer may assign its rights and
obligations under Sections 2.03, 6.02, 7.04 and Exhibit B of this Agreement to
any one or more members of the HMTF Group. Subject to the preceding sentence,
this Agreement and all of the provisions hereof shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Following the date hereof, but in any event within seven
business days hereof, Affiliates of Buyer may become parties to this Agreement
by executing a counterpart signature page hereto and making the type of
representations set forth in Article IV hereof to the Corporation with respect
to such Buyer Affiliate. Upon such execution, Schedule I hereto shall be
modified to reflect the number of Preferred Shares to be purchased by such Buyer
Affiliate, and the aggregate purchase price for such Shares (the "Investment
Amount"). Each Buyer Affiliate shall be severally liable for the obligations of
Buyer and the Buyer Affiliate pursuant to this Agreement on a pro rata basis
determined by dividing such Buyer Affiliate's Investment Amount by the Purchase
Price, but in no event shall such obligations exceed such Buyer Affiliate's
Investment Amount. In connection with the foregoing, this Agreement shall be
amended so as to reflect the foregoing and any other changes that Buyer and the
Corporation deem appropriate to reflect the foregoing. Notwithstanding anything
to the contrary set forth in this Agreement, after the consummation of the
Closing, no Buyer Affiliate shall be obligated to make any payment with respect
to, or otherwise perform, the obligations of the Corporation hereunder.
Section 11.05 Governing Law. This Agreement shall be governed
by and construed in accordance with the law of the State of New York, without
regard to the conflicts of law rules of such state.
Section 11.06 Jurisdiction. Except as otherwise expressly
provided in this Agreement, the parties hereto agree that any suit, action or
proceeding seeking to enforce any provision of, or based on any matter arising
out of or in connection with, this Agreement or the transactions contemplated
hereby may only be brought in federal court sitting in the State of New York or
any other New York court, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in
<PAGE> 29
any such court or that any such suit, action or proceeding which is brought in
any such court has been brought in an inconvenient forum.
Section 11.07 Counterparts; Third Party Beneficiaries. This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement shall become effective when each party
hereto shall have received a counterpart hereof signed by the other party
hereto. No provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder, except for the
limitation on recourse provided in Section 11.13.
Section 11.08 Entire Agreement. This Agreement (including the
Exhibits hereto) and the Certificate of Designations constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement (except for the letter agreement dated on or about October 1, 1999
with respect to confidential treatment of information provided by the
Corporation, which remains in effect).
Section 11.09 Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
Section 11.10 Severability. The provisions of this Agreement
shall be deemed severable and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Agreement, or the application
thereof to any person or entity or any circumstance, is invalid or
unenforceable, (a) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision to other
persons, entities or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
Section 11.11 Specific Performance. The parties hereto agree
that the remedy at law for any breach of this Agreement would be inadequate and
that any party by whom this Agreement is enforceable shall be entitled to
specific performance in addition to any other appropriate relief or remedy. Such
party may, in its sole discretion, apply to a court of competition jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
<PAGE> 30
Section 11.12 Remedies Cumulative. Except as otherwise herein
provided, the rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by applicable law.
Section 11.13 No Affiliate Liability. Each of the following is
herein referred to as a "Buyer Affiliate:" (a) any direct or indirect holder of
any equity interests or securities in Buyer (whether limited or general
partners, members, stockholders or otherwise), (b) any Affiliate of Buyer, or
(c) any director, officer, employee, representative or agent of (i) Buyer, (ii)
any Affiliate of Buyer or (iii) any such holder of equity interests or
securities referred to in clause (a) above. No Buyer Affiliate shall have any
liability or obligation of any nature whatsoever in connection with or under
this Agreement or the transactions contemplated hereby and the Corporation
hereby waives and releases all claims of any such liability and obligation, it
being understood that no such Person or entity (other than Buyer) shall be
liable for or in respect of such matters.
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
GLOBIX CORPORATION
By: /s/ Marc H. Bell
----------------
Name: Marc H. Bell
Title: President
HMTF-IV ACQUISITION CORP.
By: /s/ Thomas O. Hicks
---------------------------
Name: Thomas O. Hicks
Title: Chief Executive Officer
<PAGE> 32
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES A 7.5% CONVERTIBLE PREFERRED STOCK
of
GLOBIX CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, the undersigned, Brian Reach, Chief Financial Officer, and Paul
Asher, Secretary, of Globix Corporation, a Delaware corporation (hereinafter
called the "Corporation"), pursuant to the provisions of Sections 103 and 151 of
the General Corporation Law of the State of Delaware, do hereby make this
Certificate of Designations and do hereby state and certify that pursuant to the
authority expressly vested in the Board of Directors of the Corporation by the
Certificate of Incorporation, the Board of Directors duly adopted the following
resolutions:
RESOLVED, that, pursuant to Article FOURTH of the Certificate of
Incorporation (which authorizes 500,000 shares of preferred stock, $.01 par
value ("Preferred Stock")), the Board of Directors hereby fixes the powers,
designations, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions, of a
series of Preferred Stock.
RESOLVED, that each share of such series of Preferred Stock shall rank
equally in all respects and shall be subject to the following provisions:
1. Number and Designation. 250,000 shares of the Preferred Stock of the
Corporation shall be designated as Series A 7.5% Convertible Preferred Stock
(the "Series A Preferred Stock") (including 170,000 shares of Series A Preferred
Stock reserved exclusively for the payment of dividends pursuant to paragraph
4).
2. Definitions. Unless the context otherwise requires, when used herein
the following terms shall have the meaning indicated.
"Affiliate" means, with respect to any specified person, any other
person which, directly or indirectly, controls, is controlled by or is under
direct or indirect common control with, such specified person. For the purposes
of this definition, "control" when used with respect to any person means the
power to direct the management and policies of such person, directly or
<PAGE> 33
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "affiliated," "controlling," and "controlled" have
meanings correlative to the foregoing.
"Board of Directors" means the Board of Directors of the Corporation.
"Buyer" means HMTF-IV Acquisition Corp., a Delaware corporation.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in New York
City, New York generally are authorized or required by law or other governmental
actions to close.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting and/or non-voting) of such person's capital stock, whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights (other than any evidence of indebtedness), warrants or options
exchangeable for or convertible into such capital stock.
"Change of Control" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50% of the total
Voting Stock of the Corporation; or (b) the Corporation consolidates with, or
merges with or into, another person or sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to any
person, or any person consolidates with, or merges with or into the Corporation,
in any such event pursuant to a transaction in which either (A) the outstanding
Voting Stock of the Corporation is converted into or exchanged for cash,
securities or other property, other than any such transaction where (i) the
outstanding Voting Stock of the Corporation is converted into or exchanged for
Voting Stock of the surviving or transferee corporation or its parent
corporation and/or cash, securities or other property in an amount which could
be paid by the Corporation under the terms of the Corporation's credit and
financing agreements and (ii) immediately after such transaction no "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act), is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total Voting Stock of the
surviving or transferee corporation, as applicable; or (B) the holders of the
outstanding Voting Stock of the Corporation immediately prior to such
transaction hold less than 50% of the outstanding Voting Stock of the surviving
or transferee corporation or its parent corporation immediately after the
transaction or (C) during any consecutive two-year period, individuals who at
the beginning of such period constituted the Board of Directors (together with
any new directors whose election by the Board of Directors or whose nomination
for election by
<PAGE> 34
the stockholders of the Corporation was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office.
"Common Stock" means the Corporation's common stock, par value $.01 per
share.
"Current Market Price" means the average of the daily Market Prices of
the Common Stock for ten consecutive trading days immediately preceding the date
for which such value is to be computed; provided, however, that (A) if the "ex"
date (as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Conversion Ratio pursuant to paragraph 8(g)(i), (ii), (iii), (iv), (v) or (vi)
occurs during such 10 consecutive trading days, the closing price for each
trading day prior to the "ex" date for such other event shall be adjusted by
multiplying such closing price by the same fraction by which the Conversion
Ratio is so required to be adjusted as a result of such other event, (B) if the
"ex" date for any event (other that the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Ratio pursuant to
paragraph 8(g)(i), (ii), (iii), (iv), (v) or (vi) occurs on or after the "ex"
date for the issuance or distribution requiring such computation and prior to
the day in question, the closing price for each trading day on and after the
"ex" date for such other event shall be adjusted by multiplying such closing
price by the reciprocal of the fraction by which the Conversion Ratio is so
required to be adjusted as a result of such other event and (C) if the "ex" date
for the issuance or distribution requiring such computation is prior to the day
in question, after taking into account any adjustment required pursuant to
clause (A) or (B) of this proviso, the closing price for each trading day on or
after such "ex" date shall be adjusted by adding thereto the amount of any cash
and the fair market value (as determined by the Board of Directors in a manner
consistent with any determination of such value for purposes of paragraph
8(g)(iv) or (v), whose determination shall be conclusive and described in a
resolution of the Board of Directors) of the evidences of indebtedness, shares
of capital stock or assets being distributed applicable to one share of Common
Stock as of the close of business on the day before such "ex" date. For purposes
of any computation under paragraph 8(g)(vi), the Current Market Price on any
date shall be deemed to be the average of the daily closing prices per share of
Common Stock for such day and the next two succeeding trading days; provided,
however, that, if the "ex" date for any event (other than the tender offer
requiring such computation) that requires an adjustment to the Conversion Ratio
pursuant to paragraph 8(g)(i), (ii), (iii), (iv), (v) or (vi) occurs on or after
the Expiration Time for the tender or exchange offer requiring such computation
and prior to the day in question, the closing price for each trading day on and
after the "ex" date for such other event shall be adjusted by multiplying such
closing price by the reciprocal of the fraction by which the Conversion Ratio is
so required to be adjusted as a result of such other event. For purposes of this
paragraph, the term "ex" date (1) when used with respect to any issuance or
distribution, means the first date on which the shares of Common Stock trade
regular way on the relevant exchange or in the relevant market from which the
closing price was obtained without the right to receive such issuance or
distribution,
<PAGE> 35
(2) when used with respect to any subdivision or combination of shares of Common
Stock, means the first date on which the shares of Common Stock trade regular
way on such exchange or in such market after the time at which such subdivision
or combination becomes effective and (3) when used with respect to any tender or
exchange offer means the first date on which the shares of Common Stock trade
regular way on such exchange or in such market after the Expiration Time of such
offer. Notwithstanding the foregoing, whenever successive adjustments to the
Conversion Ratio are called for pursuant to paragraph 8(g), such adjustments
shall be made to the Current Market Price as may be necessary or appropriate to
effectuate the intent of paragraph 8(g) and to avoid unjust or inequitable
results, as determined in good faith by the Board of Directors.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated thereunder.
"Issue Date" means the original date of issuance of shares of Series A
Preferred Stock.
"Liquidation Preference" is an amount equal to $1,000.00 per share of
Series A Preferred Stock.
"Market Price" means, with respect to the Common Stock, on any given
day, (i) the price of the last trade, as reported on the Nasdaq National Market,
not identified as having been reported late to such system, or (ii) if the
Common Stock is so traded, but not so quoted, the average of the last bid and
ask prices, as those prices are reported on the Nasdaq National Market, or (iii)
if the Common Stock is not listed or authorized for trading on the Nasdaq
National Market or any comparable system, the average of the closing bid and
asked prices as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Corporation for that
purpose. If the Common Stock is not listed and traded in a manner that the
quotations referred to above are available for the period required hereunder,
the Market Price per share of Common Stock shall be deemed to be the fair value
per share of such security as determined in good faith by the Board of Directors
of the Corporation.
"Special Amount" means, with respect of any share of Series A Preferred
Stock, all dividends and other amounts which have become payable in respect of
such share under paragraph 4(a), and any amounts which have become payable under
paragraph 10, but which have not been paid. The Special Amount with respect to
any such share shall be reduced by the amount of any such dividends and other
amounts actually paid in respect of such share under paragraph 4(c) (including
any such amounts paid in shares of Series A Preferred Stock pursuant to
paragraph 4(f)).
"Voting Stock" means, with respect to any person, the Capital Stock of
any class or kind ordinarily having the power to vote for the election of
directors or other members of the governing body of such person.
<PAGE> 36
3. Rank. (a) Any class or series of stock of the Corporation, whether
now existing or hereafter created, shall be deemed to rank:
(i) prior to the Series A Preferred Stock, either as to the
payment of dividends or other amounts or as to distribution of
assets upon liquidation, dissolution (whether voluntary or
involuntary) or winding up, or both, if the holders of such class
or series shall be entitled by the terms thereof to the receipt of
dividends or other amounts and of amounts distributable upon
liquidation, dissolution or winding up, in preference or priority
to the holders of Series A Preferred Stock ("Senior Securities");
(ii) on a parity with the Series A Preferred Stock, either as
to the payment of dividends or other amounts or as to distribution
of assets upon liquidation, dissolution (whether voluntary or
involuntary) or winding up, or both, whether or not the dividend
rates, dividend payment dates or redemption or liquidation prices
per share thereof be different from those of the Series A Preferred
Stock, if the holders of the Series A Preferred Stock and of such
class of stock or series shall be entitled by the terms thereof to
the receipt of dividends or other amounts or of amounts
distributable upon liquidation, dissolution or winding up, or both,
in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences (including, but not
limited to preferences as to payment of dividends or other amounts
distributable upon liquidation), without preference or priority one
over the other and such class of stock or series is not a class of
Senior Securities ("Parity Securities"); and
(iii) junior to the Series A Preferred Stock, either as to the
payment of dividends or as to the distribution of assets upon
liquidation, dissolution (whether voluntary or involuntary) or
winding up, or both, if such stock or series shall be Common Stock
or if the holders of the Series A Preferred Stock shall be entitled
by the terms thereof to receipt of dividends or other amounts, and
of amounts distributable upon liquidation, dissolution or winding
up, or both, in preference or priority to the holders of shares of
such stock or series (including, but not limited to preferences as
to payment of dividends or other amounts distributable upon
liquidation) ("Junior Securities").
(b) The respective definitions of Senior Securities, Junior
Securities and Parity Securities shall also include any rights or options
exercisable or exchangeable for or convertible into any of the Senior
Securities, Junior Securities and Parity Securities, as the case may be.
<PAGE> 37
(c) The Series A Preferred Stock shall be subject to the creation
of Junior Securities.
4. Dividends. (a) The holders of shares of Series A Preferred Stock
shall be entitled to receive with respect to each share of Series A Preferred
Stock, when, as and if declared by the Board of Directors, out of funds legally
available for the payment of dividends, dividends at a rate per annum equal to
seven and one-half percent (7.5%) of the Liquidation Preference per share and an
additional amount at a rate per annum equal to seven and one-half percent (7.5%)
of the Special Amount with respect to any share of Series A Preferred Stock (an
"Additional Amount"), to be paid in accordance with the terms of this paragraph
4; provided, however, that, upon the failure by the Corporation to make the
Change of Control Offer pursuant to paragraph 11 hereof, the dividend rate per
annum shall increase to fifteen percent (15%) of the Liquidation Preference per
share and any Additional Amount shall accrue at a rate of fifteen percent (15%)
of the Special Amount with respect to a share of Series A Preferred Stock, each
to be effective retroactively as of the date of the Change of Control; provided,
further, that the dividend and Additional Amount rates shall be subject to
further adjustment in accordance with paragraph 12(d) hereof. Such dividends and
Additional Amounts shall be cumulative from the Issue Date and shall be payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year (unless such day is not a Business Day, in which event such dividends and
Additional Amounts shall be payable on the next succeeding Business Day) (each
such date being a "Dividend Payment Date" and each such quarterly period being a
"Dividend Period"). Each such dividend and Additional Amount shall be payable to
the holders of record of shares of the Series A Preferred Stock as they appear
on the share register of the Corporation on the corresponding Record Date. As
used herein, the term "Record Date" means, with respect to the dividend payable
on March 31, June 30, September 30 and December 31, respectively of each year,
the preceding March 15, June 15, September 15 and December 15, or such other
record date, not more than 60 days or less than 10 days preceding the payment
dates thereof, as shall be fixed by the Board of Directors.
(b) The amount of dividends and Additional Amounts payable for each
full Dividend Period for the Series A Preferred Stock shall be computed by
dividing the annual seven and one-half percent (7.5%) rate by four (4);
provided, however, that upon the failure by the Corporation to make the
Change of Control Offer pursuant to paragraph 11 hereof, the amount of
dividends and Additional Amounts payable for each full Dividend Period
shall be computed by dividing the annual fifteen percent (15%) rate by four
(4), such rate to be effective retroactively as of the date of the Change
of Control; provided, further, that the dividend and Additional Amount
rates shall be subject to further adjustment in accordance with paragraph
12(d) hereof. The amount of dividends and Additional Amounts payable for
the initial Dividend Period, or any other period shorter or longer than a
full Dividend Period, on the Series A Preferred Stock shall be computed on
the basis of twelve 30-day months and a 360-day year. Holders of shares of
Series A Preferred Stock shall not be entitled to any dividends, whether
payable in cash, property or stock, in excess of amounts payable under
Section 4(a) hereof (including
<PAGE> 38
Special Amounts and Additional Amounts), on the Series A Preferred Stock.
Except as expressly provided herein, no interest, or sum of money in lieu
of interest, shall be payable in respect of any dividend payment or
payments on the Series A Preferred Stock that may be in arrears.
(c) Special Amounts for any past Dividend Periods may be declared
and paid in shares of Series A Preferred Stock on any subsequent Dividend
Payment Date, to holders of record on the corresponding Record Date.
(d) So long as any shares of the Series A Preferred Stock are
outstanding, no dividend, except any dividend paid to effectuate a stock
split and except as described in the next succeeding sentence, shall be
declared or paid or set apart for payment or other distribution on any
Parity Securities, nor shall any Parity Securities be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or
made available for a sinking fund for the redemption of any shares of any
such stock) by the Corporation, directly or indirectly (except by
conversion into or exchange for Parity Securities or Junior Securities),
unless in each case all Special Amounts have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof
set apart for such payment on the Series A Preferred Stock for all Dividend
Periods terminating on or prior to the date of payment of the dividend on
or redemption of such class or series of Parity Securities. When Special
Amounts and Additional Amounts are not paid in full or a sum sufficient for
such payment is not set apart, as aforesaid, all Special Amounts declared
upon shares of the Series A Preferred Stock and all dividends declared upon
any other class or series of Parity Securities shall be declared ratably in
proportion to the respective amounts of Special Amounts and Additional
Amounts accumulated and unpaid on the Series A Preferred Stock and
dividends accumulated and unpaid on such Parity Securities.
(e) So long as any shares of the Series A Preferred Stock are
outstanding, no dividend, (except paid to effectuate a stock split) shall
be declared or paid or set apart for payment or other distribution declared
or made upon Junior Securities (other than under a shareholders' right
plan), nor shall any Junior Securities be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of shares
of Common Stock made for purposes of an employee incentive or benefit plan
of the Corporation or any subsidiary) (any such dividend, distribution,
redemption or purchase being hereinafter referred to as a "Junior
Securities Distribution") for any consideration (or any moneys be paid to
or made available for a sinking fund for the redemption of any shares of
any such stock) by the Corporation, directly or indirectly (except by
conversion into or exchange for Junior Securities), unless in each case (i)
all Special Amounts on all outstanding shares of the Series A Preferred
Stock and accrued and unpaid dividends on any other Parity Securities shall
have been paid or set apart for payment for all past Dividend Periods with
respect to the Series A Preferred Stock and all past dividend periods with
respect to such Parity Securities and (ii) sufficient funds shall
<PAGE> 39
have been paid or set apart for the payment of the dividend and Additional
Amount for the current Dividend Period with respect to the Series A
Preferred Stock and the current dividend period with respect to any Parity
Securities.
(f) The Corporation may pay current dividends, or dividends or
Additional Amounts that have accrued from the last Dividend Payment Date
through the date of payment, at its election, in cash or shares of Series A
Preferred Stock or any combination thereof. The Corporation may pay accrued
dividends (including accrued and unpaid dividends), Additional Amounts
(including accrued and unpaid Additional Amounts) and Special Amounts and
any dividends accrued thereon only in shares of Series A Preferred Stock.
The number of shares of Series A Preferred Stock to be issued in
circumstances when dividends, Additional Amounts or Special Amounts are
paid with additional shares of Series A Preferred Stock will equal the cash
amount of the dividend, Additional Amount or Special Amount, if any,
payable (but for the operation of this Section 4(f)), divided by the
Liquidation Preference, rounded to the nearest full share, up or down,
after taking into account all shares of Series A Preferred Stock owned by
the holder thereof, provided that if the resulting fractional share held by
such holder equals one-half or more of a share of Series A Preferred Stock,
such fractional share shall be rounded up to the nearest full share.
5. Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
before any payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of Junior
Securities, the holders of the shares of Series A Preferred Stock shall be
entitled to receive with respect to each share of Series A Preferred Stock an
amount in cash equal to the Liquidation Preference, plus the Special Amount in
respect of such share, plus an amount equal to all dividends and the Additional
Amount accrued and unpaid thereon from the last Dividend Payment Date to the
date of final distribution to such holders, but such holders shall not be
entitled to any further payment. If, upon any liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation, or proceeds
thereof, shall be insufficient to pay in full the preferential amount aforesaid
and liquidating payments on all Parity Securities, then such assets, or the
proceeds thereof, shall be distributed among the holders of shares of Series A
Preferred Stock and all such other Parity Securities ratably in accordance with
the respective amounts that would be payable on such shares of Preferred Stock
and any such other Parity Securities if all amounts payable thereon were paid in
full. For the purposes of this paragraph 5, (i) a consolidation or merger of the
Corporation with one or more corporations, or (ii) a sale or transfer of all or
substantially all of the Corporation's assets, shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
(b) Subject to the rights of the holders of any Parity Securities,
after payment shall have been made in full to the holders of the Series A
Preferred Stock, as provided in this paragraph 5, any other series or class
or classes of Junior Securities shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to
<PAGE> 40
receive any and all assets remaining to be paid or distributed, and the
holders of the Series A Preferred Stock and any Parity Securities shall not
be entitled to share therein.
6. Redemption. (a) The Series A Preferred Stock shall be redeemable by
the Corporation on or after November 15, 2004. After such date, to the extent
the Corporation shall have funds legally available for such payment, the
Corporation may redeem at its option shares of Series A Preferred Stock, at any
time in whole or from time to time in part, at a redemption price per share
equal to the Liquidation Preference, plus the Special Amount in respect of such
share, plus an amount equal to all dividends and the Additional Amount accrued
and unpaid thereon from the last Dividend Payment Date to the date fixed for
redemption, without interest.
(b) To the extent the Corporation shall have funds legally
available for such payment, on November 15, 2014, the Corporation shall
redeem all outstanding shares of the Series A Preferred Stock, if any, at a
redemption price per share in cash equal to the Liquidation Preference,
plus the Special Amount in respect of such share, plus an amount equal to
all dividends and the Additional Amount accrued and unpaid thereon from the
last Dividend Payment Date to such date, without interest.
(c) Shares of Series A Preferred Stock which have been issued and
reacquired in any manner, including shares purchased or redeemed, shall
(upon compliance with any applicable provisions of the laws of the State of
Delaware) have the status of authorized and unissued shares of the class of
Preferred Stock undesignated as to series and may be predesignated and
reissued as part of any series of the Preferred Stock; provided that no
such issued and reacquired shares of Series A Preferred Stock shall be
reissued or sold as Series A Preferred Stock.
(d) If the Corporation is unable or shall fail to discharge its
obligation to redeem all outstanding shares of Series A Preferred Stock
pursuant to paragraph 6(b) (the "Mandatory Redemption Obligation"), the
Mandatory Redemption Obligation shall be discharged as soon as the
Corporation is able to discharge such Mandatory Redemption Obligation. If
and so long as any Mandatory Redemption Obligation with respect to the
Series A Preferred Stock shall not be fully discharged, the Corporation
shall not (i) directly or indirectly, redeem, purchase, or otherwise
acquire any Parity Security or discharge any mandatory or optional
redemption, sinking fund or other similar obligation in respect of any
Parity Securities (except in connection with a redemption, sinking fund or
other similar obligation to be satisfied pro rata with the Series A
Preferred Stock) or (ii) declare or make any Junior Securities
Distribution, or, directly or indirectly, discharge any mandatory or
optional redemption, sinking fund or other similar obligation in respect of
any Junior Securities.
<PAGE> 41
7. Procedure for Redemption. (a) In the event that fewer than all the
outstanding shares of Series A Preferred Stock are to be redeemed, the number of
shares to be redeemed shall be determined by the Board of Directors and the
shares to be redeemed shall be selected pro rata (with any fractional shares
being rounded to the nearest whole share).
(b) In the event the Corporation shall redeem shares of Series A
Preferred Stock, notice of such redemption shall be given by first class
mail, postage prepaid mailed not less than 30 days nor more than 60 days
prior to the redemption date, to each holder of record of the shares to be
redeemed at such holder's address as the same appears on the stock register
of the Corporation; provided that neither the failure to give such notice
nor any defect therein shall affect the validity of the giving of notice
for the redemption of any share of Series A Preferred Stock to be redeemed
except as to the holder to whom the Corporation has failed to give said
notice or except as to the holder whose notice was defective. Each such
notice shall state: (i) the redemption date; (ii) the number of shares of
Series A Preferred Stock to be redeemed and, if fewer than all the shares
held by such holder are to be redeemed, the number of shares to be redeemed
from such holder; (iii) the redemption price; (iv) the place or places
where certificates for such shares are to be surrendered for payment of the
redemption price; (v) the then current Conversion Ratio; and (vi) that
dividends and Additional Amounts on the shares to be redeemed will cease to
accrue on such redemption date.
(c) Notice having been mailed as aforesaid, from and after the
redemption date, dividends and Additional Amounts on the shares of Series A
Preferred Stock so called for redemption shall cease to accrue, said shares
shall no longer be deemed outstanding, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive
from the Corporation the redemption price) shall cease. Upon surrender in
accordance with said notice of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Directors of
the Corporation shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the redemption price
aforesaid. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing
the unredeemed shares without cost to the holder thereof. The Corporation's
obligation to provide moneys in accordance with this Section 7(c) shall be
deemed fulfilled if, on or before the applicable redemption date, the
Corporation shall deposit with a bank or trust company having an office or
agency in the Borough of Manhattan, City of New York, and having a combined
capital and surplus of at least $1,000,000,000 in funds necessary for such
redemption, in trust, with irrevocable instructions that such funds be
applied to the redemption of the shares of Series A Preferred Stock so
called for redemption. Any interest accrued on such funds shall be paid to
the Corporation from time to time. Any funds so deposited to which holders
of Series A Preferred Stock are lawfully entitled but which are unclaimed
at the end of two years from such redemption date shall be released or
repaid to the Corporation, after which, subject to any applicable laws
relating to escheat or unclaimed property, the holder or holders of such
shares of
<PAGE> 42
Series A Preferred Stock so called for redemption shall look only to the
Corporation for payment of the applicable redemption price. The election by
the Corporation to redeem shares of Series A Preferred Stock shall become
irrevocable only on the redemption date included in the relevant notice.
(d) Notwithstanding anything to the contrary contained herein, if
the Corporation's notice of redemption has been given pursuant to this
Section 7 and any holder of shares of Series A Preferred Stock shall, prior
to the close of business on the third Business Day immediately preceding
the redemption date, give written notice to the Corporation of the
conversion of any and all of the shares to be redeemed held by such holder
(accompanied by a certificate or certificates for such shares, duly
endorsed or assigned to the Corporation), then such shares shall not be
redeemed and the conversion of such shares to be redeemed shall become
effective as provided in Section 8.
8. Conversion. (a) Subject to the provisions of this paragraph 8, the
holders of the shares of Series A Preferred Stock shall have the right, at any
time and from time to time, at such holder's option, to convert any or all
outstanding shares (and fractional shares) of Series A Preferred Stock, in whole
or in part, into fully paid and non-assessable shares of Common Stock. The
number of shares of Common Stock deliverable upon conversion of a share of
Series A Preferred Stock, adjusted as hereinafter provided, is referred to
herein as the "Conversion Ratio." The Conversion Ratio as of any date shall be
an amount equal to the sum of (i) the Liquidation Preference, (ii) the Special
Amount and (iii) an amount equal to all dividends and the Additional Amount
accrued thereon from the last Dividend Payment Date to such date, divided by
$40, subject to adjustment from time to time pursuant to paragraph 8(g) hereof.
Notwithstanding any call for redemption pursuant to paragraph 6, the right to
convert shares so called for redemption shall terminate at the close of business
on the third Business Day immediately preceding the date fixed for such
redemption unless the Corporation shall default in making payment of the amount
payable upon such redemption.
(b) (i) In order to exercise the conversion privilege, the holder
of the shares of Series A Preferred Stock to be converted shall surrender
the certificate representing such shares at the office of the Corporation,
with a written notice of election to convert completed and signed,
specifying the number of shares to be converted. Unless the shares issuable
on conversion are to be issued in the same name as the name in which such
shares of Series A Preferred Stock are registered, each share surrendered
for conversion shall be accompanied by instruments of transfer, in form
satisfactory to the Corporation, duly executed by the holder or the
holder's duly authorized attorney, and an amount sufficient to pay any
transfer or similar tax.
(ii) As promptly as practicable after the surrender by the
holder of the certificates for shares of Series A Preferred Stock
as aforesaid, the Corporation shall issue and shall deliver to such
holder, or on the holder's written order to the holder's
transferee, (y) a certificate or certificates for
<PAGE> 43
the whole number of shares of Common Stock issuable upon the
conversion of such shares in accordance with the provisions of this
paragraph 8, any cash adjustment required pursuant to Section 8(f),
and (z) in the event of a conversion in part, a certificate or
certificates for the whole number of shares of Series A Preferred
Stock not being so converted.
(iii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the
certificates for shares of Series A Preferred Stock shall have been
surrendered and such notice received by the Corporation as
aforesaid, and the person in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder of record of
the shares of Common Stock represented thereby at such time on such
date and such conversion shall be into a number of whole shares of
Common Stock equal to the product of the number of shares of Series
A Preferred Stock surrendered times the Conversion Ratio in effect
at such time on such date. All shares of Common Stock delivered
upon conversion of the Series A Preferred Stock will upon delivery
be duly and validly issued and fully paid and non- assessable, free
of all liens and charges and not subject to any preemptive rights.
Upon the surrender of certificates representing the shares of
Series A Preferred Stock to be converted, the shares to be so
converted shall no longer be deemed to be outstanding and all
rights of a holder with respect to such shares surrendered for
conversion shall immediately terminate except the right to receive
the Common Stock and other amounts payable pursuant to this
paragraph 8 and a certificate or certificates representing the
shares of Series A Preferred Stock not converted.
(c) (i) Upon delivery to the Corporation by a holder of shares of
Series A Preferred Stock of a notice of election to convert, the right of
the Corporation to redeem such shares of Series A Preferred Stock shall
terminate, regardless of whether a notice of redemption has been mailed as
aforesaid.
(ii) If a holder of Series A Preferred Stock delivers to the
Corporation a notice of election to convert, the Series A Preferred
Stock to be converted shall cease to accrue dividends and
Additional Amounts pursuant to paragraph 4 but shall continue to be
entitled to receive pro rata dividends and Additional Amounts for
the period from the last Dividend Payment Date to the date of
delivery of the notice of election to convert in preference to and
in priority over any dividends on any Junior Securities.
<PAGE> 44
(iii) Except as provided above and in paragraph 8(g), the
Corporation shall make no payment or adjustment for accrued and
unpaid dividends or Additional Amounts on shares of Series A
Preferred Stock, whether or not in arrears, on conversion of such
shares or for dividends in cash on the shares of Common Stock
issued upon such conversion.
(d) (i) The Corporation covenants that it will at all times reserve
and keep available, free from preemptive rights, such number of its
authorized but unissued shares of Common Stock as shall be required for the
purpose of effecting conversions of the Series A Preferred Stock.
(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the
Series A Preferred Stock, the Corporation shall comply with all
applicable federal and state laws and regulations which require
action to be taken by the Corporation.
(e) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of shares of Common Stock on conversion of the Series A Preferred Stock
pursuant hereto; provided that the Corporation shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
issue or delivery of shares of Common Stock in a name other than that of
the holder of the Series A Preferred Stock to be converted and no such
issue or delivery shall be made unless and until the person requesting such
issue or delivery has paid to the Corporation the amount of any such tax or
has established, to the satisfaction of the Corporation, that such tax has
been paid.
(f) In connection with the conversion by a holder of any shares of
Series A Preferred Stock, no fractions of shares of Common Stock shall be
required to be issued to such holder, but in lieu thereof the Corporation
shall pay a cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the Market Price per
share of Common Stock on the Business Day on which such shares of Series A
Preferred Stock are deemed to have been converted.
(g) (i) In case the Corporation shall at any time after the date of
issue of the Series A Preferred Stock (A) declare a dividend or make a
distribution on Common Stock payable in Common Stock, (B) subdivide or
split the outstanding Common Stock, (C) combine or reclassify the
outstanding Common Stock into a smaller number of shares, (D) issue any
shares of its Capital Stock in a reclassification of Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing corporation), or (E)
consolidate with, or merge with or into, any other Person, the Conversion
Ratio in effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision,
<PAGE> 45
split, combination, consolidation, merger or reclassification shall be
proportionately adjusted so that the conversion of the Series A Preferred
Stock after such time shall entitle the holder to receive the aggregate
number of shares of Common Stock or other securities of the Corporation (or
shares of any security into which such shares of Common Stock have been
combined, consolidated, merged or reclassified pursuant to clause 8
(g)(i)(C) , 8 (g)(i)(D) or 8(g)(i)(E) above) which, if this Series A
Preferred Stock had been converted immediately prior to such time, such
holder would have owned upon such conversion and been entitled to receive
by virtue of such dividend, distribution, subdivision, split, combination,
consolidation, merger or reclassification assuming such holder of Common
Stock of the Corporation (x) is not a Person with which the Corporation
consolidated or into which the Corporation merged or which merged into the
Corporation or to which such recapitalization, sale or transfer was made,
as the case may be ("constituent person"), or an affiliate of a constituent
person and (y) failed to exercise any rights of election as to the kind or
amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, recapitalization, sale or
transfer (provided, that if the kind or amount of securities, cash and
other property receivable upon such reclassification, change,
consolidation, merger, recapitalization, sale or transfer is not the same
for each share of Common Stock of the Corporation held immediately prior to
such reclassification, change, consolidation, merger, recapitalization,
sale or transfer by other than a constituent person or an affiliate thereof
and in respect of which such rights of election shall not have been
exercised ("non-electing share"), then for the purpose of this subparagraph
8(g) the kind and amount of securities, cash and other property receivable
upon such reclassification, change, consolidation, merger,
recapitalization, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of
the non-electing shares). Such adjustment shall be made successively
whenever any event listed above shall occur.
(ii) In case the Corporation shall issue or sell any Common
Stock (other than Common Stock issued (A) pursuant to the
Corporation's existing or future stock option plans or pursuant to
any other existing or future Common Stock-related director or
employee compensation plan of the Corporation approved by the Board
of Directors, (B) as consideration for the acquisition of a
business or of assets, (C) in a firmly committed underwritten
public offering when either (i) the underwriting discount is less
than 5%, or (ii) the offering price per share is greater than the
Conversion Price, (D) to the Corporation's joint venture partners
in exchange for interests in the relevant joint venture, or (E)
upon exercise or conversion of any security the issuance of which
caused an adjustment under paragraph 8(g)(i) or 8(g)(iii) hereof or
the issuance of which did not require adjustment hereunder) without
consideration or for a consideration per share less than the
Current Market Price on the date of such issuance, or shall issue
securities convertible into Common Stock having a
<PAGE> 46
conversion price per share less than the Current Market Price at
the date of issuance of such convertible security, the Conversion
Ratio to be in effect after such issuance or sale shall be
determined by multiplying the Conversion Ratio in effect
immediately prior to such issuance or sale by a fraction, (1) the
numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to such issuance or sale
and the number of additional shares of Common Stock to be issued or
sold (or, in the case of convertible securities, issued on
conversion), and (2) the denominator of which shall be the sum of
(x) the number of shares of Common Stock outstanding immediately
prior to such issuance or sale and (y) the number of shares of
Common Stock which the aggregate consideration receivable by the
Corporation for the total number of additional shares of Common
Stock so issued or sold (or issuable on conversion) would purchase
at the Current Market Price in effect immediately prior to such
issuance or sale. In case any portion of the consideration to be
received by the Corporation shall be in a form other than cash, the
fair market value of such noncash consideration shall be utilized
in the foregoing computation. Such fair market value shall be
determined in good faith by the Board of Directors.
(iii) In case the Corporation shall fix a record date for the
issuance of rights, options or warrants (other than rights, options
or warrants issued (A) pursuant to the Corporation's existing or
future stock option plans or pursuant to any other existing or
future Common Stock- related director or employee compensation plan
of the Corporation approved by the Board of Directors, (B) as
consideration for the acquisition of a business or of assets, (C)
in a firmly committed underwritten public offering when either (i)
the underwriting discount is less than 5%, or (ii) the offering
price per share is greater than the Conversion Price, (D) to the
Corporation's joint venture partners in exchange for interests in
the relevant joint venture, or (E) upon exercise or conversion of
any security the issuance of which caused an adjustment under
paragraph 8(g)(i) or 8(g)(ii) hereof or the issuance of which did
not require adjustment hereunder) to the holders of its Common
Stock or other securities entitling such holders to subscribe for
or purchase shares of Common Stock (or securities convertible into
shares of Common Stock) at a price per share of Common Stock (or
having a conversion price per share of Common Stock, if a security
convertible into shares of Common Stock) less than the Current
Market Price on such record date, the maximum number of shares of
Common Stock issuable upon exercise of such rights, options or
warrants (or conversion of such convertible securities) shall be
deemed to have been issued and outstanding as of such record date
and the Conversion Ratio shall be adjusted pursuant to paragraph
8(g)(ii) hereof,
<PAGE> 47
as though such maximum number of shares of Common Stock had been so
issued for an aggregate consideration payable by the holders of
such rights, options, warrants or convertible securities prior to
their receipt of such shares of Common Stock. In case any portion
of such consideration shall be in a form other than cash, the fair
market value of such noncash consideration shall be determined as
set forth in paragraph 8(g)(ii) hereof. Such adjustment shall be
made successively whenever such record date is fixed; and in the
event that such rights, options or warrants are not so issued or
expire in whole or in part unexercised, or in the event of a change
in the number of shares of Common Stock to which the holders of
such rights, options or warrants are entitled (other than pursuant
to adjustment provisions therein comparable to those contained in
this paragraph 8(g)), the Conversion Ratio shall again be adjusted
as follows: (A) in the event that all of such rights, options or
warrants expire unexercised, the Conversion Ratio shall be the
Conversion Ratio that would then be in effect if such record date
had not been fixed; (B) in the event that less than all of such
rights, options or warrants expire unexercised, the Conversion
Ratio shall be adjusted pursuant to paragraph 8(g)(ii) to reverse
the adjustment with respect to rights, options or warrants that
have lapsed or expired unexercised; and (C) in the event of a
change in the number of shares of Common Stock to which the holders
of such rights, options or warrants are entitled, the Conversion
Ratio shall be adjusted to reflect the Conversion Ratio which would
then be in effect if such holder had initially been entitled to
such changed number of shares of Common Stock. Notwithstanding
anything herein to the contrary, no further adjustment to the
Conversion Ratio shall be made upon the issuance or sale of Common
Stock upon the exercise of any rights, options or warrants to
subscribe for or purchase Common Stock, if any adjustment in the
Conversion Ratio was made or required to be made upon the record
date for the issuance or sale of such rights, options or warrants
under this clause 8(g)(iii).
Rights or warrants distributed by the Corporation to holders
of shares of Common Stock entitling the holders thereof to
subscribe for or purchase shares of the Corporation's capital stock
(either initially or under certain circumstances), which rights or
warrants, until the occurrence of a specified event or events
("Dilution Trigger Event"): (A) are deemed to be transferred with
such shares of Common Stock; (B) are not exercisable; and (C) are
also issued in respect of future issuances of shares of Common
Stock, shall be deemed not to have been distributed for purposes of
this paragraph 8 (g)(iii) (and no adjustment to the Conversion
Ratio under this paragraph 8(g)(iii) shall be required) until the
occurrence of the earliest Dilution Trigger Event, whereupon such
rights and warrants shall be
<PAGE> 48
deemed to have been distributed and an appropriate adjustment to
the Conversion Ratio under this paragraph 8 (g)(iii) shall be made.
If any such rights or warrants, including any such existing rights
or warrants distributed prior to the first issuance of shares of
Series A Preferred Stock, are subject to subsequent events, upon
the occurrence of each of which such rights or warrants shall
become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the occurrence of each such
event shall be deemed to be such date of issuance and record date
with respect to new rights or warrants (and a termination or
expiration of the existing rights or warrants, without exercise by
the holder thereof). In addition, in the event of any distribution
(or deemed distribution) of rights or warrants, or any Dilution
Trigger Event with respect thereto, that was counted for purposes
of calculating a distribution amount for which an adjustment to the
Conversion Ratio under this paragraph 8(g)(iii) was made, (1) in
the case of any such rights or warrants which shall have been
redeemed or repurchased without exercise by any holders thereof,
the Conversion Ratio shall be readjusted upon such final redemption
or repurchase to give effect to such distribution or Dilution
Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price
received by a holder or holders of shares of Common Stock with
respect to such rights or warrants (assuming such holder had
retained such rights or warrants), made to all holders of shares of
Common Stock as of the date of such redemption or repurchase, and
(2) in the case of such rights or warrants which shall have expired
or been terminated without exercise by any holders thereof, the
Conversion Ratio shall be readjusted as if such rights and warrants
had not been issued.
(iv) In case the Corporation shall fix a record date for the
making of a distribution to holders of Common Stock (including any
such distribution made in connection with a consolidation or merger
in which the Corporation is the continuing corporation) of
evidences of indebtedness, assets or other property (other than (x)
dividends payable in Common Stock or rights, options or warrants
referred to in paragraph 8(g)(i) or 8(g)(iii) hereof for which an
adjustment was made, (y) dividends paid solely in cash, or (z)
distributions of stock or assets having an aggregate fair market
value of less than $7.5 million on a cumulative basis), the
Conversion Ratio to be in effect after such record date shall be
determined by multiplying the Conversion Ratio in effect
immediately prior to such record date by a fraction, (A) the
numerator of which shall be the Current Market Price on such record
date, and (B) the denominator of which shall be the Current Market
Price on such record date, less the fair market value (determined
as set forth in paragraph 8 (g)(ii) hereof) of the
<PAGE> 49
portion of the assets, other property or evidence of indebtedness
so to be distributed which is applicable to one share of Common
Stock. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is
not so made, the Conversion Ratio shall again be adjusted to be the
Conversion Ratio which would then be in effect if such record date
had not been fixed.
For purposes of this paragraph 8(g)(iv) and paragraph 8(g)(i)
and 8(g)(iii), any dividend or distribution to which this paragraph
8(g)(iv) is applicable that also includes shares of Common Stock,
or rights or warrants to subscribe for or purchase shares of Common
Stock to which paragraph 8(g)(i) or 8(g)(iii) applies (or both)
shall be deemed instead to be (A) a dividend or distribution of the
evidences of indebtedness, assets, shares of capital stock, rights
or warrants other than such shares of Common Stock or rights or
warrants to which paragraph 8(g)(i) or 8(g)(iii) applies (and any
Conversion Ratio adjustment required by this paragraph 8(g)(iv)
with respect to such dividend or distribution shall then be made)
immediately followed by (B) a dividend or distribution of such
shares of Common Stock or such rights or warrants (and any further
Conversion Ratio adjustment required by paragraph 8(g)(i) or
8(g)(iii) with respect to such dividend or distribution shall then
be made).
(v) If the Corporation shall, by dividend or otherwise,
distribute to holders of its shares of Common Stock cash (excluding
any cash that is distributed upon a merger or consolidation to
which paragraph 8(h) applies or as part of a distribution referred
to in paragraph 8(g)(iv)) in an aggregate amount that, combined
together with (A) the aggregate amount of any other such
distributions to holders of its shares of Common Stock made
exclusively in cash within the 12 months preceding the date of
payment of such distribution, and in respect of which no adjustment
pursuant to this paragraph 8(g)(v) has been made, and (B) the
aggregate of any cash plus the fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) of
consideration payable in respect of any tender offer by the
Corporation for all or any portion of the shares of Common Stock
concluded within the 12 months preceding the date of payment of
such distribution, and in respect of which no adjustment pursuant
to paragraph 8(vi) has been made, exceeds 5% of the Corporation's
consolidated net income for the preceding fiscal year then, and in
each such case, immediately after the close of business on such
date, the Conversion Ratio shall be increased so that the same
shall equal the ratio determined by multiplying the Conversion
Ratio in effect immediately prior to the close of business on such
record date by a
<PAGE> 50
fraction and (1) the numerator of which shall be equal to the
Current Market Price on such record date; (2) the denominator of
which shall be equal to the Current Market Price on the record date
less an amount equal to the quotient of (x) the excess of such
combined amount over 5% of the Corporation's consolidated net
income for the preceding fiscal year and (y) the number of shares
of Common Stock outstanding on the record date; provided, however,
that, if the portion of the cash so distributed applicable to one
share of Common Stock is equal to or greater than the Current
Market Price of the shares of Common Stock on the record date, in
lieu of the foregoing adjustment, adequate provision shall be made
so that each holder of shares of Series A Preferred Stock shall
have the right to receive upon conversion of a shares of Series A
Preferred Stock (or any portion thereof) the amount of cash such
holder would have received had such holder converted such share of
Series A Preferred Stock (or portion thereof) immediately prior to
such record date. If such dividend or distribution is not so paid
or made, the Conversion Ratio shall again be adjusted to be the
Conversion Ratio which would then be in effect if such dividend or
distribution had not been declared.
(vi) If a tender offer made by the Corporation or any of its
Subsidiaries for all or any portion of the Common Stock expires and
such tender offer (as amended upon the expiration thereof) requires
the payment to shareholders (based on the acceptance (up to any
maximum specified in the terms of the tender offer) of Purchased
Shares) of an aggregate consideration having a fair market value
(as determined by the Board of Directors, whose determination shall
be conclusive and described in a resolution of the Board of
Directors) that, combined together with (A) the aggregate of the
cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in
a resolution of the Board of Directors), as of the expiration of
such tender offer, of consideration payable in respect of any other
tender offers, by the Corporation or any of its Subsidiaries for
all or any portion of the shares of Common Stock expiring within
the 12 months preceding the expiration of such tender offer and in
respect of which no adjustment pursuant to this paragraph 8(g)(vi)
has been made and (B) the aggregate amount of any distributions to
all holders of the Common Stock made exclusively in cash within 12
months preceding the expiration of such tender offer and in respect
of which no adjustment pursuant to paragraph 8(g)(v) has been made,
exceeds 5% of the Corporation's consolidated net income for the
preceding fiscal year, then, and in each such case, immediately
prior to the opening of business on the day after the date of the
Expiration Time, the Conversion Ratio shall be adjusted so that the
same shall equal the ratio determined by multiplying the Conversion
Ratio
<PAGE> 51
in effect immediately prior to the close of business on the date of
the Expiration Time by a fraction of which the numerator shall be
the sum of (x) the fair market value (determined as aforesaid) of
the aggregate consideration payable to shareholders based on the
acceptance (up to any maximum specified in the terms of the tender
offer) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less
any Purchased Shares) at the Expiration Time and the Current Market
Price of the shares of Common Stock on the trading day next
succeeding the Expiration Time and the denominator shall be the
number of shares of Common Stock outstanding (including any
tendered shares) at the Expiration Time multiplied by the Current
Market Price of the shares of Common Stock on the trading day next
succeeding the Expiration Time, such adjustment (if any) to become
effective immediately prior to the opening of business on the day
following the Expiration Time. If the Corporation is obligated to
purchase shares pursuant to any such tender offer, but the
Corporation is permanently prevented by applicable law from
effecting any such purchases or all such purchases are rescinded,
the Conversion Ratio shall again be adjusted to be the Conversion
Ratio which would then be in effect if such tender offer had not
been made. If the application of this paragraph 8(g)(vi) to any
tender offer would result in a decrease in the Conversion Ratio, no
adjustment shall be made for such tender offer under this paragraph
8(g)(vi).
(vii) In the event that, at any time as a result of the
provisions of this paragraph 8(g), a holder of Series A Preferred
Stock upon subsequent conversion shall become entitled to receive
any shares of Capital Stock of the Corporation other than Common
Stock, the number of such other shares so receivable upon
conversion of Series A Preferred Stock shall thereafter be subject
to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions contained herein.
(h) Subject to paragraph 9 hereof, in case of any consolidation of
the Corporation with, or merger of the Corporation into, any other
corporation, or in case of any merger of another corporation into the
Corporation (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock of the Corporation), or in case of any sale,
conveyance or transfer of 50% or more of the assets of the Corporation, the
holder of each share of Series A Preferred Stock then outstanding shall
have the right thereafter, during the period such share of Series A
Preferred Stock shall be convertible as specified in
<PAGE> 52
Paragraph 8(a), to convert such share of Series A Preferred Stock only into
the kind and amount of securities, cash and other property receivable upon
such consolidation, merger, conveyance or transfer by a holder of the
number of shares of shares of Common Stock of the Corporation into which
such share of Series A Preferred Stock might have been converted
immediately prior to such consolidation, merger, conveyance or transfer,
assuming such holder of shares of Common Stock of the Corporation failed to
exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such consolidation,
merger, conveyance or transfer (provided that, if the kind or amount of
securities, cash and other property receivable upon such consolidation,
merger, conveyance or transfer is not the same for each Common Share of the
Corporation in respect of which such rights of election shall not have been
exercised ("nonelecting share"), then for the purpose of this paragraph 8
the kind and amount of securities, cash and other property receivable upon
such consolidation, merger, conveyance or transfer by each nonelecting
share shall be deemed to be the kind and amount so receivable per share by
a plurality of the nonelecting shares). Such securities shall provide for
adjustments which, for events subsequent to the effective date of the
triggering event, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this paragraph 8. The above provisions of
this paragraph 8 shall similarly apply to successive consolidations,
mergers, conveyance or transfers.
(i) In case:
(i) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash
out of its earned surplus; or
(ii) the Corporation shall authorize the granting to all
holders of its shares of Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any other rights; or
(iii) of any reclassification of the Common Stock (other than
a subdivision or combination of the Corporation's outstanding
shares of Common Stock), or of any consolidation or merger to which
the Corporation is a party and for which approval of any
shareholders of the Corporation is required, or the sale,
conveyance or transfer of all or substantially all the assets of
the Corporation; or
(iv) of the voluntary or involuntary dissolution, liquidation
or winding-up of the Corporation;
then the Corporation shall cause to be filed with the Registrar and at each
office or agency maintained for the purpose of conversion of shares of
Series A Preferred Stock, and shall cause to be mailed to all holders at
their last addresses as they shall appear in
<PAGE> 53
the shares of a Series A Preferred Stock Register, at least 20 Business
Days (or 10 Business Days in any case specified in clause (i) or (ii)
above) prior to the applicable date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of shares of Common Stock of record
to be entitled to such dividend, distribution, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up is expected
to become effective, and the date as of which it is expected that holders
of shares of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. Failure to give the notice required
by this paragraph 8(i) or any defect therein shall not affect the legality
or validity of any dividend, distribution, right, warrant,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up, or the vote upon any such action.
(j) All adjustments pursuant to this paragraph 8 shall be notified to
the holders of the Series A Preferred Stock and such notice shall be
accompanied by a schedule of computations of the adjustments.
9. Voting Rights. (a) The holders of record of shares of Series A
Preferred Stock shall not be entitled to any voting rights except as hereinafter
provided in this paragraph 9 or as otherwise provided by law.
(b) Each share of Series A Preferred Stock shall entitle the holder
thereof to vote on all matters that the holders of Common Stock are
entitled to vote upon on at a meeting of stockholders of the Corporation,
except that with respect to the election of directors of the Corporation,
except as set forth in clause (c) below, the shares of Series A Preferred
Stock shall automatically be voted in the same proportion as the votes of
the holders of Common Stock. With respect to any such vote, each share of
Series A Preferred Stock shall entitle the holder thereof to cast the
number of votes equal to the number of votes which could be cast by in such
vote by a holder of the shares of Common Stock into which such share of
Series A Preferred Stock is convertible on the record date for such vote
or, if no such record date is established, on the date any written consent
of stockholders is solicited.
(c) For so long as members of the HMTF Group own (A) either (i) 50% or
more of the shares of Series A Preferred Stock issued to members of the
HMTF Group on the Closing Date under the Stock Purchase Agreement dated as
of November 5, 1999 (together with any equity securities into which such
shares are exchanged or converted, the "HMTF Issued Series A Preferred
Shares"), (ii) an amount of Common Stock issued upon conversion of 50% or
more of the HMTF Issued Series A Preferred Shares or (iii) any combination
of HMTF Issued Series A Preferred Shares and
<PAGE> 54
Common Stock issued upon conversion of HMTF Issued Series A Preferred
Shares that, if taken together, would represent (if all HMTF Issued Series
A Preferred Shares were converted) an amount of Common Stock issuable upon
conversion of 50% or more of the HMTF Issued Series A Preferred Shares, the
number of directors then constituting the Board of Directors shall be
increased by two and the HMTF Holders, voting as a single class, shall be
entitled to elect the two additional directors (the "Buyer Directors") to
serve on the Board of Directors at any annual meeting of stockholders or
special meeting held in place thereof, or at a special meeting of the HMTF
Holders called as hereinafter provided, or (B) either (i) 25% or more of
(but less than 50% of) the HMTF Issued Series A Preferred Shares", (ii) an
amount of Common Stock issued upon conversion of 25% or more of (but less
than 50% of) the HMTF Issued Series A Preferred Shares or (iii) any
combination of HMTF Issued Series A Preferred Shares and Common Stock
issued upon conversion of HMTF Issued Series A Preferred Shares that, if
taken together, would represent (if all HMTF Issued Series A Preferred
Shares were converted) an amount of Common Stock issuable upon conversion
of 25% or more of (but less than 50% of) the HMTF Issued Series A Preferred
Shares, the HMTF Holders, voting as a single class, shall be entitled to
elect only one additional Buyer Director to serve on the Board of Directors
at any annual meeting of stockholders or special meeting held in place
thereof, or at a special meeting of the HMTF Holders called as hereinafter
provided. At any time after voting power to elect a director shall have
become vested and be continuing in the HMTF Holders pursuant to this
paragraph, or if a vacancy shall exist in the office of a director elected
by the HMTF Holders, a proper officer of the Corporation may, upon the
written request of the holders of record of at least fifty percent (50%) of
the HMTF Issued Series A Preferred Shares then outstanding held by the HMTF
Holders addressed to the Secretary of the Corporation, call a special
meeting of the HMTF Holders for the purpose of electing the additional
Buyer Director that such holders are entitled to elect. If such meeting
shall not be called by a proper officer of the Corporation within twenty
(20) days after personal service of said written request upon the Secretary
of the Corporation, or within twenty (20) days after mailing the same
within the United States by certified mail, addressed to the Secretary of
the Corporation at its principal executive offices, then the holders of at
least fifty percent (50%) of the HMTF Issued Series A Preferred Shares then
outstanding held by the HMTF Holders may designate in writing one of their
number to call such meeting at the expense of the Corporation, and such
meeting may be called by the person so designated upon the notice required
for the annual meeting of stockholders of the Corporation and shall be held
at the place for holding the annual meetings of stockholders. Any holder of
HMTF Issued Series A Preferred Shares so designated shall have, and the
Corporation shall provide, access to the lists of stockholders to be called
pursuant to the provisions hereof. In the event the HMTF Group loses the
right to nominate one or more Buyer Directors pursuant to the first
sentence of this paragraph 9(c), then the HMTF Group shall direct one or
more Buyer Directors to tender his resignation (which resignation need not
be accepted by the board of directors). "HMTF Group" means Hicks, Muse,
Tate & Furst Incorporated, a Texas corporation, and its Affiliates, the
Buyer and its Affiliates, and their respective officers, directors,
partners,
<PAGE> 55
members, stockholders and employees (and members, stockholders and
employees (and members of their respective families and trusts for the
primary benefit of such family members), and "HMTF Holders" shall mean
the members of the HMTF Group holding HMTF Issued Series A Preferred
Shares or the Common Stock into which such shares are converted.
(d) In the event the HMTF Group elects to have the Board of
Directors appoint the Buyer Directors (in lieu of following the
procedures for direct election set forth in paragraph 9(c)) it shall so
notify the Corporation in writing and the Corporation shall (i)
increase the size of the Board of Directors by two and fill the
vacancies created thereby by electing the Buyer Directors and (ii) in
connection with the meeting of shareholders of the Corporation next
following such election, nominate such Buyer Directors for election as
directors by the stockholders and use its best efforts to cause the
Buyer Directors to be so elected. If a vacancy shall exist in the
office of a Buyer Director, the HMTF Group shall be entitled to
designate a successor and the Board of Directors shall elect such
successor and, in connection with the meeting of stockholders of the
Corporation next following such election, nominate such successor for
election as director by the stockholders and use its best efforts to
cause the successor to be so elected.
(e) If the Corporation shall have failed to discharge its
Mandatory Redemption Obligation, the number of directors then
constituting the Board of Directors shall be increased by one (in
addition to any directors appointed or elected pursuant to paragraph
9(c) or (d) hereof) and the HMTF Holders, voting as a single class,
shall be entitled to elect the additional director to serve on the
Board of Directors at any annual meeting of stockholders or special
meeting held in place thereof, or at a special meeting of the HMTF
Holders called as hereinafter provided. Whenever the Corporation shall
have fulfilled its Mandatory Redemption Obligation, then the right of
the HMTF Holders to elect such additional director shall cease and the
term of office of any person so elected as director by the HMTF Holders
shall forthwith terminate and the number of the Board of Directors
shall be reduced accordingly.
(f) Without the written consent of holders of a majority of
the outstanding HTMF Issued Series A Preferred Shares or the vote of
holders of a majority of the outstanding HTMF Issued Series A Preferred
Shares at a meeting of the holders of Series A Preferred Stock called
for such purpose, the Corporation will not amend, alter or repeal any
provision of the Certificate of Incorporation or this Certificate of
Designations so as to adversely affect the preferences (including,
without limitation, liquidation preferences, conversion price, dividend
rate and preferences and Optional Redemption provisions), rights or
powers of the Series A Preferred Stock or to authorize the issuance or
sale of any additional shares of Series A Preferred Stock; provided
that any such amendment that changes any dividend or other amount
payable on or the liquidation preference of the Series A Preferred
Stock shall require the written consent of holders of
<PAGE> 56
two-thirds of the outstanding HTMF Issued Series A Preferred Shares or
the vote of holders of two-thirds of the outstanding HTMF Issued Series
A Preferred Shares at a meeting of the holders of HTMF Issued Series A
Preferred Shares called for such purpose.
(g) Without the written consent of holders of a majority of
the outstanding HTMF Issued Series A Preferred Shares or the vote of
holders of a majority of the outstanding HTMF Issued Series A Preferred
Shares at a meeting of such holders called for such purpose, the
Corporation will not create, authorize or issue any Senior Securities
or Parity Securities.
(h) Without the written consent of holders of a majority of
the outstanding HTMF Issued Series A Preferred Shares or the vote of
holders of a majority of the outstanding HTMF Issued Series A Preferred
Shares at a meeting of the holders of HMTF Issued Series A Preferred
Shares called for such purpose, the Corporation shall not, in a single
transaction or series of related transactions, consolidate or merge
with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, any person or
adopt a plan of liquidation unless: either (1) the Corporation is the
surviving or continuing person and the Series A Preferred Stock shall
remain outstanding without any amendment that would adversely affect
the preferences, rights or powers of the Series A Preferred Stock or
(2) (i) the person (if other than the Corporation) formed by such
consolidation or into which the Corporation is merged or the person
which acquires by conveyance, transfer or lease the properties and
assets of the Corporation substantially as an entirety or in the case
of a plan of liquidation, the person to which assets of the Corporation
have been transferred, shall be a corporation, partnership or trust
organized and existing under the laws of the United States or any State
thereof or the District of Columbia and (ii) the Series A Preferred
Stock shall be converted into or exchanged for and shall become shares
of such successor, transferee or resulting person, having in respect of
such successor, transferee or resulting person, the same powers,
preferences and relative participating, optional or other special
rights and the qualifications, limitations or restrictions thereon,
that the Series A Preferred Stock had immediately prior to such
transaction. For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
related transactions) of all or substantially all of the properties or
assets of one or more subsidiaries of the Corporation, the Capital
Stock of which constitutes all or substantially all of the properties
and assets of the Corporation, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the
Corporation.
(i) In exercising the voting rights set forth in this
paragraph 9, except as otherwise provided in paragraph 9(b), each share
of Series A Preferred Stock shall have one vote per share, except that
when any other series of preferred stock shall have the right to vote
with the Series A Preferred Stock as a single class on any matter, then
the Series A Preferred Stock shall have with respect to such matters
one vote per $1,000
<PAGE> 57
(or fraction thereof) of the aggregate Liquidation Preference plus
Special Amounts. Except as otherwise required by applicable law or as
set forth herein, the shares of Series A Preferred Stock shall not have
any relative, participating, optional or other special voting rights
and powers and the consent of the holders thereof shall not be required
for the taking of any corporate action.
(j) Upon the occurrence of a Change of Control if the
Corporation shall have failed to make the Change of Control Offer in
accordance with paragraph 11 hereof, thereafter, but subject to the
provisions of paragraph 12(d) hereof, the consent of the holders of a
majority of the shares of the HMTF Issued Series A Preferred Shares,
voting as a separate class, shall also be required to approve (i) any
subsequent merger, consolidation, recapitalization or other business
combination involving the Corporation or any material subsidiary, (ii)
a sale of 50% or more of the assets of the Corporation on a
consolidated basis, and (iii) the payment of any cash dividends to
holders of, or the redemption or repurchase of, Pari Passu Securities
or Junior Securities.
10. Change of Control Payment. Notwithstanding anything to
the contrary contained in paragraph 4(b) hereof, upon the occurrence of a Change
of Control prior to the fifth anniversary of the Issue Date of the Series A
Preferred Stock, the Corporation shall pay, and the holders of the shares of
Series A Preferred Stock shall be entitled to receive, an amount (the "Change of
Control Payment") payable in shares of Series A Preferred Stock, cash or any
combination thereof, at the option of the Corporation, on each outstanding share
of Series A Preferred Stock, equal to the excess of (1) the amount that the sum
of the Special Amount and the Additional Amount on one share of Series A
Preferred Stock would be if (i) such share had been outstanding from the date of
original issuance of the Series A Preferred Stock to the fifth anniversary of
the date of original issuance of the Series A Preferred Stock and no dividends
had been declared and paid on such share and (ii) such fifth anniversary was a
Dividend Payment Date (such that the accumulated dividends thereon would have
been added to the Special Amount thereof) over (2) the amount of the actual sum
of the Special Amount and the Additional Amount of such outstanding share of
Series A Preferred Stock on the Change of Control date plus the amount of any
dividends previously received (i.e. declared and paid) thereon. The Change of
Control Payment shall not affect (i) the right of the holders of shares of
Series A Preferred Stock to convert such shares pursuant to paragraph 8 hereof,
(ii) the continued accrual of dividends pursuant to paragraph 4(a) on the
outstanding shares of Series A Preferred Stock during such five-year period or
thereafter, (iii) except as expressly set forth in this subparagraph 10, any
other provision hereof relating to the payment of dividends or (iv) the
provisions of paragraph 9, paragraph 11 or paragraph 12 hereof. Notwithstanding
the foregoing, the Change of Control Payment payable pursuant to this paragraph
10 shall be subject to the following limitations:
(1) Upon a Change of Control on or prior to the second
anniversary of the date of the initial issuance of the Series A
Preferred Stock, the aggregate Change of Control Payment shall not
exceed the amount of shares or cash necessary to ensure that if all of
the shares of Series A Preferred Stock then
<PAGE> 58
outstanding were converted or redeemed for cash on such date, the
holders of such Series A Preferred Stock would receive aggregate
consideration upon such conversion or redemption with a fair market
value determined as set forth in paragraph 8(g)(ii) hereof of no less
than the product of (i) three (3), multiplied by (ii) the aggregate
Liquidation Preference on the date of the Change of Control of all
outstanding shares of Series A Preferred Stock.
(2) Upon a Change of Control after the second anniversary,
but on or prior to the third anniversary, of the date of the initial
issuance of the Series A Preferred Stock, the aggregate Change of
Control Payment shall not exceed the amount of shares or cash necessary
to ensure that if all of the shares of Series A Preferred Stock then
outstanding were converted or redeemed for cash on such date, the
holders of such Series A Preferred Stock would receive aggregate
consideration upon such conversion or redemption with a fair market
value determined as set forth in paragraph 8(g) (ii) hereof of no less
than the product of (i) four (4), multiplied by (ii) the aggregate
Liquidation Preference on the date of the Change of Control of all
outstanding shares of Series A Preferred Stock.
(3) Upon a Change of Control after the third anniversary, but
on or prior to the fourth anniversary of, the date of the initial
issuance of the Series A Preferred Stock, the aggregate Change of
Control Payment shall not exceed the amount of shares or cash necessary
to ensure that if all of the shares of Series A Preferred Stock then
outstanding were converted or redeemed for cash on such date, the
holders of such Series A Preferred Stock would receive aggregate
consideration upon such conversion or redemption with a fair market
value determined as set forth in paragraph 8(g) (ii) hereof of no less
than the product of (i) five (5), multiplied by (ii) the aggregate
Liquidation Preference on the date of the Change of Control of all
outstanding shares of Series A Preferred Stock.
(4) Upon a Change of Control after the fourth anniversary,
but prior to the fifth anniversary of, the date of the initial issuance
of the Series A Preferred Stock, the aggregate Change of Control
Payment shall not exceed the amount of shares or cash necessary to
ensure that if all of the shares of Series A Preferred Stock then
outstanding were converted or redeemed for cash on such date, the
holders of such Series A Preferred Stock would receive aggregate
consideration upon such conversion or redemption with a fair market
value determined as set forth in paragraph 8(g)(ii) hereof of no less
than the product of (i) six (6), multiplied by (ii) the aggregate
Liquidation Preference on the date of the Change of Control of all
outstanding shares of Series A Preferred Stock.
(5) The Corporation shall have the right to institute
reasonable procedures in order to implement this paragraph 10 (as well
as paragraphs 11 and 12 hereof) and, to the extent reasonably
practicable, will make proper provision
<PAGE> 59
prior to the date of any Change of Control to ensure that the holders
of shares of Series A Preferred Stock will be entitled to receive the
benefits intended to be afforded by this paragraph 10.
11. Change of Control Offer.
(a) Upon the occurrence of a Change of Control, the
Corporation shall have the right, but not the obligation, to offer (the "Change
of Control Offer") to repurchase the shares of Series A Preferred Stock at a
purchase price per share in cash equal to 101% of the Liquidation Preference of
each share of Series A Preferred Stock repurchased, plus 101% of the Special
Amount in respect of such share (after giving effect to the Change of Control
Payment), plus an amount equal to 101% of all dividends and the Additional
Amount accrued and unpaid thereon from the last Dividend Payment Date to the
date fixed for repurchase (the "Change of Control Purchase Amount"). Within 20
days following any Change of Control, the Corporation shall mail a notice to
each holder of shares of Series A Preferred Stock (with a copy to the Registrar)
describing the transaction or transactions that constitute the Change of Control
and, if the Corporation so elects, offering to repurchase shares of Series A
Preferred Stock on a date specified in such notice (the "Change of Control
Purchase Date"), which date shall be no earlier than 90 days and no later than
120 days from the date such notice is mailed, pursuant to the procedures
required by Section 6 and described in such notice. The failure of the
Corporation to make such Change of Control Offer within such 20-day period shall
constitute an irrevocable waiver of the Corporation's right to make such Change
of Control Offer solely with the respect to the relevant Change of Control and
shall result in the increased dividend rate referred to in paragraph 4 (a)
hereof and the special voting rights referred to in 9(j) hereof becoming
applicable effective as of the date of the Change of Control. The Corporation
shall comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations to the extent such laws and regulations
are applicable in connection with the repurchase of the Series A Preferred Stock
as a result of a Change of Control.
(b) On the Change of Control Purchase Date, the Corporation
shall, to the extent lawful:
(1) accept for payment all shares of Series A Preferred Stock
properly tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the
Change of Control Purchase Amount in respect of all shares of Series A
Preferred Stock so tendered; and
(3) deliver or cause to be delivered to the Registrar all
certificates for shares of Series A Preferred Stock so accepted
together with an officer's
<PAGE> 60
certificate stating the aggregate number of shares being purchased by
the Corporation.
(c) The paying agent shall promptly mail to each holder of
shares of Series A Preferred Stock so tendered the Change of Control Purchase
Amount for such shares of Series A Preferred Stock, and the Registrar shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each holder a new certificate for any shares of Series A Preferred Stock not
tendered that are represented by the surrendered certificate. The Corporation
shall notify each holder of Series A Preferred Stock the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Purchase Date.
(d) The provisions of this paragraph that permit the
Corporation to make a Change of Control Offer shall be applicable regardless of
whether any other provisions of this certificate are applicable. Except as set
forth in this paragraph, no holder of shares of Series A Preferred Stock shall
have any right to require the Corporation to repurchase or redeem the shares of
Series A Preferred Stock in the event of a takeover, recapitalization or other
similar transaction.
12. Purchase Offer.
(a) If the Corporation shall elect not to make, or shall fail
to make, the Change of Control Offer following the occurrence of a
Change of Control pursuant to paragraph 11 hereof within the 20-day
period specified therein, then in addition to the redemption rights
that the Corporation may exercise pursuant to paragraph 6 hereof after
November 5, 2004, the Corporation shall also have the right (but not
the obligation), at any time and from time to time prior to November 5,
2004, to offer (the "Purchase Offer") to repurchase the shares of
Series A Preferred Stock at a purchase price per share in cash equal to
101% of the Liquidation Preference of each share of Series A Preferred
Stock repurchased, plus 101% of the Special Amount in respect of such
share (after giving effect to the Change of Control Payment to the
extent that such payment shall not have been made in cash), plus an
amount equal to 101% of all dividends and the Additional Amount accrued
and unpaid thereon from the last Dividend Payment Date to the date
fixed for repurchase (the "Purchase Payment"). If the Corporation
elects to make a Purchase Offer, the Corporation shall mail a notice to
each holder of shares of Series A Preferred Stock (with a copy to the
Registrar) offering to repurchase shares of Series A Preferred Stock on
a date specified in such notice (the "Purchase Payment Date"), which
date shall be no earlier than 90 days and no later than 120 days from
the date such notice is mailed, pursuant to the procedures required by
Section 6 and described in such notice. The Corporation shall comply
with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations to the extent such laws and
regulations are applicable in connection with the repurchase of the
Series A Preferred Stock
<PAGE> 61
hereunder.
(b) On the Purchase Payment Date, the Corporation shall, to
the extent lawful:
(1) accept for payment all shares of Series A Preferred Stock
properly tendered pursuant to the Purchase Offer;
(2) deposit with the paying agent an amount equal to the
Purchase Payment in respect of all shares of Series A Preferred Stock
so tendered; and
(3) deliver or cause to be delivered to the Registrar all
certificates for shares of Series A Preferred Stock so accepted
together with an officer's certificate stating the aggregate number of
shares being purchased by the Company.
(c) The paying agent shall promptly mail to each holder of
shares of Series A Preferred Stock so tendered the Purchase Payment for
such shares of Series A Preferred Stock, and the Registrar shall
promptly authenticate and mail (or cause to be transferred by book
entry) to each such holder a new certificate for any shares of Series A
Preferred Stock not tendered that are represented by the surrendered
certificate. The Corporation shall notify the holders of Series A
Preferred Stock the results of the Purchase Offer on or as soon as
practicable after the Purchase Payment Date.
(d) If a holder of shares of Series A Preferred Stock elects
not to, or otherwise fails to, properly tender shares of Series A
Preferred Stock into the Purchase Offer, then (i) with respect to each
share of Series A Preferred Stock that such holder fails to tender, the
Liquidation Preference, the Special Amount and all dividends and the
Additional Amount that have accrued thereon or been paid thereon in
shares of Series A Preferred Stock from the effective date of any
increase in the dividend rate effected pursuant to paragraph 4
(following the failure of the Company to make the Change of Control
Offer) through the expiration date of the Purchase Offer made pursuant
to paragraph 12 shall be recalculated as if the dividend rate
applicable to each share of Series A Preferred Stock for such period
had been seven and one-half percent (7.5%); (ii) any dividends and any
Additional Amount applicable to periods following the expiration of the
Purchase Offer with respect to each such share shall be computed at a
rate of seven and one-half percent (7.5%) per annum; (iii) the amount
of dividends and the Additional Amount payable for each full Dividend
Period for the Series A Preferred Stock applicable to periods following
the expiration of the Purchase Offer shall be computed by dividing
seven and one-half percent (7.5%) by four (4); and (iv) the special
voting provisions provided in paragraph 9(j) shall terminate on the
expiration date of the Purchase Offer, in each case subject to
reinstatement upon a subsequent Change of Control. Nothing in this
paragraph 12(d) shall affect the Change of Control Payment received
pursuant to
<PAGE> 62
paragraph 10.
13. Limitation and Rights Upon Insolvency. Notwithstanding
any other provision of this Certificate of Designations, the Corporation shall
not be required to pay any dividend on, or to pay any amount in respect of any
redemption of, the Series A Preferred Stock at a time when immediately after
making such payment the Corporation is or would be rendered insolvent (as
defined by applicable law), provided that the obligation of the Corporation to
make any such payment shall not be extinguished in the event the foregoing
limitation applies.
14. Reports. So long as any of the Series A Preferred Stock
is outstanding, in the event the Corporation is not required to file quarterly
and annual financial reports with the Securities and Exchange Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act, the Corporation
will furnish the holders of the Series A Preferred Stock with reports containing
the same information as would be required in such reports.
15. Notice. Except as may otherwise be provided for herein,
all notices referred to herein shall be in writing, and all notices hereunder
shall be deemed to have been given upon, the earlier of receipt of such notice
or three Business Days after the mailing of such notice if sent by registered
mail (unless first-class mail shall be specifically permitted for such notice
under the terms of this Certificate of Designations) with postage prepaid,
addressed: if to the Corporation to Globix Corporation, 139 Centre Street, New
York, New York, 10012, Attention: Chief Financial Officer, or to an agent of the
Corporation designated as permitted by the Certificate of Incorporation or, if
to any holder of the Series A Preferred Stock, to such holder at the address of
such holder of the Series A Preferred Stock as listed in the stock record books
of the Corporation; or to such other address as the Corporation or holder, as
the case may be, shall have designated by notice similarly given.
16. General Provisions. (a) The term "Person" as used herein
means any corporation, limited liability company, partnership, trust,
organization, association, other entity or individual.
(b) The term "outstanding", when used with reference to
shares of stock, shall mean issued shares, excluding shares held by the
Corporation or a subsidiary.
(c) The headings of the paragraphs, subparagraphs, clauses
and subclauses of this Certificate of Designations are for convenience
of reference only and shall not define, limit or affect any of the
provisions hereof.
(d) Each holder of shares of Series A Preferred Stock, by
acceptance thereof, acknowledges and agrees that payments of dividends,
interest, premium and principal on, and exchange, redemption and
repurchase of, such securities by the Corporation are subject to
restrictions on the Corporation contained in certain credit and
financing agreements.
<PAGE> 63
IN WITNESS WHEREOF, Globix Corporation has caused this
Certificate of Designations to be signed and attested by the undersigned this
____ day of November, 1999.
GLOBIX CORPORATION
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE> 64
EXHIBIT B
REGISTRATION RIGHTS
This constitutes Exhibit B to the Stock Purchase Agreement (as it may
be amended from time to time, the "Stock Purchase Agreement") dated as of
November 5, 1999 between Globix Corporation, a Delaware corporation (together
with any successor thereto, the "Corporation") and HMTF-IV Acquisition Corp., a
Delaware corporation ("Buyer").
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. Terms defined in the Stock Purchase
Agreement are used herein as therein defined. In addition, the following terms,
as used herein, have the following meanings:
"Commission" means the Securities and Exchange Commission.
"Demand Registration Statement" means the Demand Registration Statement
as defined in Section 2.01.
"Holder" means a person who owns Registrable Securities and is either
(a) Buyer or (b) a direct or an indirect transferee of Buyer who has agreed in
writing to be bound by the terms of Sections 2.03(b), 6.02 and 7.04 of the Stock
Purchase Agreement and this Exhibit B.
"Piggyback Registration" means a Piggyback Registration as defined in
Section 2.02.
"Registrable Common Stock" means the shares of Common Stock issued upon
conversion of the Preferred Shares, including any additional shares of Common
Stock issued in respect thereof in connection with a stock split, stock dividend
or similar event with respect to the Common Stock.
"Registrable Securities" means (a) the Preferred Shares, (b) the
Registrable Common Stock, and (c) any securities of the Corporation hereafter
acquired by Buyer or into which such Preferred Shares, Registrable Common Stock
or securities may thereafter be changed. As to any particular Registrable
Securities, such Registrable Securities shall cease to be Registrable Securities
as soon as they (i) have been sold or otherwise disposed of pursuant to a
registration statement that was filed with the Commission and declared effective
under the Securities Act, (ii) are eligible for sale pursuant to Rule 144
without being subject to applicable volume limitations thereunder, (iii) have
been otherwise sold, transferred or disposed of by a Holder to any Person that
is not a Holder, or (iv) have ceased to be outstanding.
<PAGE> 65
"Rule 144" means Rule 144 (or any successor rule of similar effect)
promulgated under the Securities Act.
"Selling Holder" means any Holder who is selling Registrable Securities
pursuant to a public offering registered hereunder.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
SECTION 1.02. Internal References. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Exhibit B, and
references to the parties shall mean the parties to the Stock Purchase
Agreement.
ARTICLE 2
REGISTRATION RIGHTS
Section 2.1 Demand Registration.
(a) Holders ("Requesting Holders") of a majority of the
Registrable Securities may make up to three written requests for
registration under the Securities Act of all or any part of the
Registrable Securities held by the Holders (each, a "Demand
Registration"); provided that the Demand Registrations must be in
respect of Registrable Securities with a fair market value of at least
$30,000,000 unless such registration request is for all remaining
Registrable Securities, in which case such Registrable Securities shall
have a fair market value of at least $5,000,000. Such requests will
specify the aggregate number of shares of Registrable Securities
proposed to be sold and will also specify the intended method of
disposition thereof. A registration will not count as a Demand
Registration until it has become effective. Should a Demand
Registration not become effective due to the failure of a Requesting
Holder to perform its obligations under this Exhibit B or the inability
of the Requesting Holders to reach agreement with the Underwriters for
the proposed sale on price or other customary terms for such
transaction, or in the event the Requesting Holders withdraw or do not
pursue the request for the Demand Registration (in each of the
foregoing cases, provided that at such time the Corporation is in
compliance in all material respects with its obligations under this
Exhibit B), then such Demand Registration shall be deemed to have been
effected (provided that (i) if the Demand Registration does not become
effective because of a material adverse change that has occurred or is
reasonably likely to occur in the condition (financial or otherwise),
business, assets or results of operations of the Corporation and its
Subsidiaries taken as a whole that occurs subsequent to the date of the
written request made by the Requesting Holders or (ii) if after the
Demand Registration has become effective, an offering of Registrable
Shares pursuant to a registration is interfered with by
<PAGE> 66
any stop order, injunction, or other order or requirement of the
Commission or other government agency or court, then the Demand
Registration shall not be deemed to have been effected and will not
count as a Demand Registration).
(b) In the event that Requesting Holders withdraw or do not
pursue a request for a Demand Registration and, pursuant to Section
2.01(a) hereof, such Demand Registration is deemed to have been
effected, the Requesting Holders may reacquire such Demand Registration
(such that the withdrawal or failure to pursue a request will not count
as a Demand Registration hereunder) if the Requesting Holders reimburse
the Corporation for any and all Registration Expenses incurred by the
Corporation in connection with such request for a Demand Registration.
(c) If the Requesting Holders so elect, the offering of such
Registrable Securities pursuant to such Demand Registration (or Shelf
Registration, as defined below) shall be in the form of a "firm
commitment" underwritten offering. A majority in interest of the
Requesting Holders shall have the right to select the managing
Underwriters and any additional investment bankers and managers to be
used in connection with any offering under this Section 2.01 or Section
2.03, subject to the Corporation's approval, which approval shall not
be unreasonably withheld.
(d) The Selling Holders will inform the Corporation of the
time and manner of any disposition of Registrable Common Stock, and
agree to cooperate with the Corporation in effecting the disposition of
the Registrable Common Stock in a manner that does not unreasonably
disrupt the public trading market for the Common Stock.
(e) The Corporation will have the right to preempt any Demand
Registration with a primary registration by delivering written notice
(within five business days after the Corporation has received a request
for such Demand Registration) of such intention to the Buyer indicating
that the Corporation has identified a specific business need and use
for the proceeds of the sale of such securities and the Corporation
shall use commercially reasonable efforts to effect a primary
registration within 60 days of such notice. In the ensuing primary
registration, the Holders will have such piggyback registration rights
as are set forth in Section 2.02 hereof. Upon the Corporation's
preemption of a requested Demand Registration, such requested
registration will not count as the Requesting Holders' Demand
Registration; provided that a Demand Registration will not be deemed
preempted if the Requesting Holders are not able to sell all of the
securities requested to be included in the Demand Registration by
exercising their piggyback registration rights as set forth in Section
2.02. The Corporation may exercise the right to preempt only twice in
any 360-day period; provided, that during any 360 day period there
shall be a period of at least 120 consecutive days during which the
Requesting Holders may effect a Demand Registration.
<PAGE> 67
Upon receipt of any request for Demand Registration, the Corporation
shall promptly (but in any event within ten (10) days) give a written notice of
such proposed Demand Registration to all other Holders entitled to make a Demand
Request hereunder, who shall have the right, exercisable by written notice to
the Corporation within twenty (20) days of their receipt of the Corporation's
notice, to elect to include in such Demand Registration such portion of their
Registrable Shares as they may request. All such Holders requesting to have
their Registrable Shares included in a Demand Registration in accordance with
the preceding sentence shall deemed to be "Requesting Holders" for purposes of
this Section 2.01.
Section 2.02 Piggyback Registration. If the Corporation
proposes to file a registration statement under the Securities Act with respect
to an offering of Common Stock for its own account or for the account of another
Person (other than a registration statement on Form S-4 or S-8 or pursuant to
Rule 415 (or any substitute form or rule, respectively, that may be adopted by
the Commission)), the Corporation shall give written notice of such proposed
filing to the Holders at the address set forth in the share register of the
Corporation as soon as reasonably practicable (but in no event less than 10 days
before the anticipated filing date), undertaking to provide each Holder the
opportunity to register on the same terms and conditions such number of shares
of Registrable Common Stock as such Holder may request (a "Piggyback
Registration"). Each Holder will have five business days after receipt of any
such notice to notify the Corporation as to whether it wishes to participate in
a Piggyback Registration (which notification shall not be deemed to be a request
for a Demand Registration); provided that should a Holder fail to provide timely
notice to the Corporation, such Holder will forfeit any rights to participate in
the Piggyback Registration with respect to such proposed offering. In the event
that the registration statement is filed on behalf of a Person other than the
Corporation, the Corporation will use its reasonable best efforts to have the
shares of Registrable Common Stock that the Holders wish to sell included in the
registration statement. If the Corporation shall determine in its sole
discretion not to register or to delay the proposed offering, the Corporation
may, at its election, provide written notice of such determination to the
Holders and (i) in the case of a determination not to effect the proposed
offering, shall thereupon be relieved of the obligation to register such
Registrable Common Stock in connection therewith, and (ii) in the case of a
determination to delay a proposed offering, shall thereupon be permitted to
delay registering such Registrable Common Stock for the same period as the delay
in respect of the proposed offering. As between the Corporation and the Selling
Holders, the Corporation shall be entitled to select the Underwriters in
connection with any Piggyback Registration.
Section 2.03 Shelf Registration. In addition to the three
Demand Registrations provided for in Section 2.01, Holders of a majority of the
Registrable Securities shall be entitled to request a shelf registration (a
"Shelf Registration"), provided that such request is otherwise in compliance
with the provisions of Section 2.01. The Corporation shall be required to
maintain the effectiveness of the Shelf Registration for at least 36 calendar
months (which period shall be extended if necessary by the amount of time that a
Suspension Event was in effect pursuant to Section 3.03), it being expressly
agreed and understood that for purposes of this Agreement any subsequent
underwritten "take-down" with respect to the Shelf Registration shall constitute
a
<PAGE> 68
Demand Registration to be counted toward the three total Demand Registrations
authorized by Section 2.01. The Corporation shall not be required to effect a
Demand Registration pursuant to Section 2.01 if the Corporation shall at the
time have effective a Shelf Registration pursuant to which the Holders that
requested registration could effect the disposition of such Holders' Registrable
Securities in the manner requested.
Section 2.04 Reduction of Offering.
(a) Priority on Demand Registrations. No securities to be sold for the
account of any Person (including the Corporation) other than a Requesting Holder
shall be included in a Demand Registration unless the managing underwriter or
underwriters shall advise the Corporation or the Requesting Holders that the
inclusion of such securities will not materially and adversely affect the price,
timing or distribution of the offering (a "Material Adverse Effect").
Furthermore, in the event the managing underwriter or underwriters shall advise
the Corporation or the Requesting Holders that even after exclusion of all
securities of other Persons (including the Corporation) pursuant to the
immediately preceding sentence, the amount of Registrable Securities proposed to
be included in such Demand Registration by Requesting Holders is sufficiently
large to cause a Material Adverse Effect, the Registrable Securities of the
Requesting Holders to be included in such Demand Registration shall equal the
number of shares which the Corporation or the Requesting Holders are so advised
can be sold in such offering without a Material Adverse Effect and such shares
shall be allocated pro rata among the Requesting Holders on the basis of the
number of Registrable Shares requested to be included in such registration by
each such Requesting Holder; provided, however, that if any Registrable
Securities requested to be registered pursuant to a Demand Request under Section
2.01 are excluded from registration hereunder, then the Holder(s) having shares
excluded ("Excluded Holders") shall have the right to withdraw all, but not less
than all, of their shares from such registration.
(b) Priority on Piggyback Registrations. If any Person (including the
Corporation) requests, pursuant to Section 2.02 or in connection with similar
contractual piggyback registration rights, that Registrable Securities be
included in a registration statement and the managing underwriter or
underwriters advise the Corporation or the Requesting Holders that the inclusion
of such Registrable Securities would cause a Material Adverse Effect, then in
such circumstances the number of such Persons' Registrable Securities to be
included in the registration statement shall be reduced to an amount, which in
the judgment of the managing underwriter or underwriters, would eliminate such
Material Adverse Effect in the following order of priority:
(i) if the registration statement is to be filed as a result
of a demand registration, such reduction shall be effected first by eliminating
any Registrable Securities requested to be included by the Corporation, and
thereafter by the other Persons (except the Requesting Holders), pro rata based
on the ratio which each such Person's requested shares bears to the total number
of shares requested to be included in such registration statement by all Persons
(except
<PAGE> 69
the Requesting Holders and the Corporation) who have requested that their shares
be included in such registration statement.
(ii) if the registration statement is to be filed as a
primary registration by the Corporation, such reduction shall be effected by
eliminating any Registrable Securities requested to be included by the other
Persons pro rata based on the ratio which each such Person's shares bears to the
total number of shares owned by all Persons who have requested that their shares
be included in such registration statement.
If as a result of the provisions of this Section 2.04(b) any Person shall not be
entitled to include all Registrable Securities in a registration that such
Person has requested to be so included, such Person may withdraw such Person's
request to include Registrable Securities in such registration statement.
Section 2.05 Preservation of Rights. The Corporation has not
and will not grant any registration rights to third parties which contravene the
rights granted hereunder.
ARTICLE 3
REGISTRATION PROCEDURES
Section 3.01 Filings; Information. In connection with the
registration of Registrable Securities pursuant to Section 2.01, Section 2.02
and Section 2.03 hereof, the Corporation will use its reasonable best efforts to
effect the registration of such Registrable Securities as promptly as is
reasonably practicable, and in connection with any such request:
(a) The Corporation will expeditiously prepare and file with
the Commission a registration statement on any form for which the
Corporation then qualifies and which counsel for the Corporation shall
deem appropriate and available for the sale of the Registrable
Securities to be registered thereunder in accordance with the intended
method of distribution thereof, and use its reasonable best efforts to
cause such filed registration statement to become and remain effective
for such period, not to exceed 120 days, as may be reasonably necessary
to effect the sale of such securities; provided that if the Corporation
shall furnish to the Buyer a certificate signed by the Corporation's
Chairman, President or any Vice-President stating that the Corporation
is engaged in confidential negotiations or other confidential business
activities, disclosure of which would be required in such registration
statement (but would not be required if such registration statement
were not filed), and the Board of Directors of the Corporation has
determined in good faith that such disclosure would be materially
detrimental to the Corporation or its stockholders, then the
Corporation may postpone the filing (but not the preparation) or
effectiveness of a registration statement for a period of not more than
120 days; provided, that during any 360 day period there shall be a
period of at least 120 consecutive days during which the Corporation
will make a registration statement
<PAGE> 70
available under this Exhibit B; and provided further, that if (i) the
effective date of any registration statement filed pursuant to a Demand
Registration would otherwise be at least 45 calendar days, but fewer
than 90 calendar days, after the end of the Corporation's fiscal year,
and (ii) the Securities Act requires the Corporation to include audited
financials as of the end of such fiscal year, the Corporation may delay
the effectiveness of such registration statement for such period as is
reasonably necessary to include therein its audited financial
statements for such fiscal year.
(b) The Corporation will, if requested, prior to filing such
registration statement or any amendment or supplement thereto, furnish
to the Selling Holders, and each applicable managing Underwriter, if
any, copies thereof, and thereafter furnish to the Selling Holders and
each such Underwriter, if any, such number of copies of such
registration statement, amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference
therein) and the prospectus included in such registration statement
(including each preliminary prospectus) as the Selling Holders or each
such Underwriter may reasonably request in order to facilitate the sale
of the Registrable Securities by the Selling Holders.
(c) After the filing of the registration statement, the
Corporation will promptly notify the Selling Holders of any stop order
issued or, to the Corporation's knowledge, threatened to be issued by
the Commission and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered.
(d) The Corporation will use its reasonable best efforts to
qualify the Registrable Securities for offer and sale under such other
securities or blue sky laws of such jurisdictions in the United States
as the Selling Holders reasonably request; keep each such registration
or qualification (or exemption therefrom) effective during the period
in which such registration statement is required to be kept effective;
and do any and all other acts and things which may be reasonably
necessary or advisable to enable each seller to consummate the
disposition of the Registrable Shares owned by such seller in such
jurisdictions, provided that the Corporation will not be required to
(i) qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this paragraph 3.01(d),
(ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction.
(e) The Corporation will as promptly as is practicable notify
the Selling Holders, at any time when a prospectus relating to the sale
of the Registrable Securities is required by law to be delivered in
connection with sales by an Underwriter or dealer, of the occurrence of
any event requiring the preparation of a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading and
<PAGE> 71
promptly make available to the Selling Holders, and to the Underwriters
any such supplement or amendment. Upon receipt of any notice of the
occurrence of any event of the kind described in the preceding
sentence, Selling Holders will forthwith discontinue the offer and sale
of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until receipt by the Selling
Holders and the Underwriters of the copies of such supplemented or
amended prospectus and, if so directed by the Corporation, the Selling
Holders will deliver to the Corporation all copies, other than
permanent file copies then in the possession of Selling Holders, of the
most recent prospectus covering such Registrable Securities at the time
of receipt of such notice. In the event the Corporation shall give such
notice, the Corporation shall extend the period during which such
registration statement shall be maintained effective as provided in
Section 3.01(a) hereof by the number of days during the period from and
including the date of the giving of such notice to the date when the
Corporation shall make available to the Selling Holders such
supplemented or amended prospectus.
(f) The Corporation will enter into customary agreements
(including an underwriting agreement in customary form) and take such
other actions as are required in order to expedite or facilitate the
sale of such Registrable Securities.
(g) At the request of any Underwriter in connection with an
underwritten offering the Corporation will furnish (i) an opinion of
counsel, addressed to the Underwriters, covering such customary matters
as the managing Underwriter may reasonably request and (ii) a comfort
letter or comfort letters from the Corporation's independent public
accountants covering such customary matters as the managing Underwriter
may reasonably request.
(h) If requested by the managing underwriter or any seller,
the Corporation shall promptly incorporate in a prospectus supplement
or post-effective amendment such information as the managing
underwriter or any seller reasonably requests to be included therein,
including without limitation, with respect to the Registrable Shares
being sold by such seller, the purchase price being paid therefor by
the underwriters and with respect to any other terms of the
underwritten offering of the Registrable Shares to be sold in such
offering, and promptly make all required filings of such prospectus
supplement or post-effective amendment.
(i) The Corporation shall promptly make available for
inspection by any underwriter participating in any disposition pursuant
to any registration statement, and any attorney, accountant or other
agent or representative retained by any such underwriter (collectively,
the "Inspectors"), all material financial and other records, pertinent
corporate documents and properties of the Corporation (collectively,
the "Records"), as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the
Corporation's officers, directors and employees to supply all
information requested by any such Inspectors in connection with such
registration
<PAGE> 72
statement; provided, however, that unless the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in
the registration statement or the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction, the Corporation shall not be required to provide any
information under this subparagraph (i) if (A) the Corporation
believes, after consultation with counsel for the Corporation, that to
do so would cause the Corporation to forfeit an attorney-client
privilege that was applicable to such information or (B) if either (1)
the Corporation has requested and been granted from the Commission
confidential treatment of such information contained in any filing with
the Commission or documents provided supplementally or otherwise or (2)
the Corporation reasonably determines in good faith that such Records
are confidential and so notifies the Inspectors in writing unless prior
to furnishing any such information with respect to (A) or (B) such
Inspectors agree to enter into a confidentiality agreement in customary
form and subject to customary exceptions; provided further, however,
that each Holder of Registrable Securities agrees that it will, upon
learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Corporation and allow the
Corporation, at its expense, to undertake appropriate action and to
prevent disclosure of the Records deemed confidential.
(j) The Corporation shall cause the Registrable Securities to
be (A) listed on each securities exchange, if any, on which similar
securities issued by the Corporation are then listed, or (B) authorized
to be quoted and/or listed (to the extent applicable) on the Nasdaq
National Market if the Registrable Securities so qualify.
(k) The Corporation shall provide a CUSIP number for the
Registrable Securities included in any registration statement not later
than the effective date of such registration statement.
(l) The Corporation shall cooperate with each seller and each
underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the National Association of Securities
Dealers, Inc.
(m) The Corporation will make generally available to its
security holders, as soon as reasonably practicable, an earnings
statement covering a period of 12 months, beginning within three months
after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act and the rules and regulations of the Commission
thereunder.
The Corporation may require Selling Holders promptly to
furnish in writing to the Corporation such information regarding such Selling
Holders, the plan of distribution of the Registrable Securities and other
information as the Corporation may from time to time reasonably request or as
may be legally required in connection with such registration.
<PAGE> 73
Section 3.02 Registration Expenses. In connection with any
Registration, the Corporation shall pay the following expenses incurred in
connection with such registration (the "Registration Expenses"): (i)
registration and filing fees with the Commission and the National Association of
Securities Dealers, Inc., (ii) fees and expenses of compliance with securities
or blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities), (iii)
printing expenses, (iv) fees and expenses incurred in connection with the
listing or quotation of the Registrable Securities, (v) fees and expenses of
counsel to the Corporation and the reasonable fees and expenses of independent
certified public accountants for the Corporation (including fees and expenses
associated with the special audits or the delivery of comfort letters), (vi) the
reasonable fees and expenses of any additional experts retained by the
Corporation in connection with such registration, and (vii) all road show costs
and expenses not paid by the underwriters. The Selling Holders shall pay (i) any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities, (ii) fees and expenses of counsel for the Selling
Holders and (iii) any out-of-pocket expenses of the Selling Holders.
Section 3.03 Black-Out Period. Subject to the provisions of
this Section 3.01, following the effectiveness of a Registration Statement (and
the filings with any state securities commissions), the Corporation, by written
notice to the Buyer and to the other Holders, may direct the Holders to suspend
sales of the Registrable Shares pursuant to the Registration Statement, if any
of the following events shall occur: (i) pending negotiations relating to, or
consummation of, a transaction or the occurrence of an event that requires
additional disclosure of material information by the Corporation in the
Registration Statement and which has not been so disclosed; or (ii) a material
corporate transaction or development is pending or has occurred, the disclosure
of which should be set forth in the Registration Statement and the Board of
Directors of the Corporation shall have determined in good faith would not be in
the best interests of the Corporation and its stockholders. Upon the occurrence
of such event, the Corporation shall use its best efforts to cause the
Registration Statement to become effective or to promptly amend or supplement
the Registration Statement on a post-effective basis, as applicable, so as to
permit the Holders to resume sales of the Registrable Shares. Notwithstanding
the foregoing, the Holders shall not be obligated to comply with this Section
3.03 for more than one hundred eighty (180) days during any twelve (12) month
period.
In the case of an event which causes the Corporation to
suspend the effectiveness of a Registration Statement (a "Suspension Event"),
the Corporation may give written notice (a "Suspension Notice") to the Holders
at the addresses set forth in the stock transfer records of the Corporation to
suspend sales of the Registrable Shares so that the Corporation may amend or
update the Registration Statement; provided, however, that such suspension shall
continue only for so long as the Suspension Event or its effect is continuing
and the Corporation is taking all reasonable steps to terminate suspension of
the effectiveness of the Registration Statement as promptly as possible. The
Holders shall not effect any sales of the Registrable Shares pursuant to such
Registration Statement at any time after receipt of a Suspension Notice from the
Corporation (and prior to receipt of an End of Suspension Notice (defined
below)). If so
<PAGE> 74
requested by the Corporation, the Holders will deliver to the Corporation (at
the expense of the Corporation) all copies in their possession, other than
permanent file copies then in the Holders' possession, of the Prospectus
covering such Registrable Shares at the time of receipt of the Suspension
Notice. The Holders may recommence effecting sales of the Registrable Shares
pursuant to the Registration Statement (or such filings) following further
notice to such effect (an "End of Suspension Notice") from the Corporation,
which End of Suspension Notice shall be given by the Corporation to the Holders
in the manner described above promptly following the conclusion of any
Suspension Event.
ARTICLE 4
INDEMNIFICATION AND CONTRIBUTION
Section 4.01 Indemnification by the Corporation. The
Corporation agrees to indemnify and hold harmless each Selling Holder and its
Affiliates and their respective officers, directors, partners, stockholders,
members, employees, agents and representatives and each Person (if any) which
controls a Selling Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) caused by, arising out of, resulting from or related to any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Registrable Securities (as
amended or supplemented if the Corporation shall have furnished any amendments
or supplements thereto) or any preliminary prospectus, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by or
contained in or based upon any information furnished in writing to the
Corporation by or on behalf of such Selling Holder or any Underwriter expressly
for use therein or by the Selling Holder or Underwriter's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after the Corporation has furnished the Buyer or Underwriter
with copies of the same. The Corporation also agrees to indemnify any
Underwriters of the Registrable Securities, their officers and directors and
each person who controls such Underwriters on substantially the same basis as
that of the indemnification of the Selling Holders provided in this Section
4.01.
Section 4.02 Indemnification by the Selling Holders. Each
Selling Holder agrees to indemnify and hold harmless the Corporation, its
officers and directors, and each Person, if any, which controls the Corporation
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the
Corporation to each Selling Holder, but only with reference to information
furnished in writing by or on behalf of such Selling Holder expressly for use in
any registration statement or prospectus relating to the Registrable Securities,
or any amendment or supplement thereto, or any preliminary prospectus. Each
Selling Holder also agrees to indemnify and hold harmless any Underwriters of
the Registrable Securities, their officers and directors and each person who
<PAGE> 75
controls such Underwriters on substantially the same basis as that of the
indemnification of the Corporation provided in this Section 4.02.
Section 4.03 Conduct of Indemnification Proceedings. In case
any proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
Section 4.01 or Section 4.02, such Person (the "Indemnified Party") shall
promptly notify the Person against whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party, upon the request of
the Indemnified Party, shall retain counsel reasonably satisfactory to such
Indemnified Party to represent such Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party and, in the written
opinion of counsel for the Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
of attorneys (in addition to any local counsel) at any time for all such
Indemnified Parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the Indemnified
Parties, such firm shall be designated in writing by the Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent (not to
be unreasonably withheld), or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment.
Section 4.04 Contribution. If the indemnification provided for
in this Article 4 is unavailable to an Indemnified Party in respect of any
losses, claims, damages or liabilities in respect of which indemnity is to be
provided hereunder, then each such Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall to the fullest extent permitted by law contribute
to the amount paid or payable by such Indemnified Party as a result of such
losses, claims, damages or liabilities in such proportion as is appropriate to
reflect the relative fault of such party in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Corporation, a Selling Holder and the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
<PAGE> 76
The Corporation and each Selling Holder agrees that it would
not be just and equitable if contribution pursuant to this Section 4.04 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Article 4, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and each Selling
Holder shall not be required to contribute any amount in excess of the amount by
which the net proceeds of the offering (before deducting expenses) received by
such Selling Holder exceeds the amount of any damages which such Selling Holder
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
ARTICLE 5
MISCELLANEOUS
Section 5.01 Participation in Underwritten Registrations. No
Person may participate in any underwritten registered offering contemplated
hereunder unless such Person (a) agrees to sell its securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements, (b) completes and executes all
questionnaires, powers of attorney, custody arrangements, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and this Exhibit B and (c) furnishes in
writing to the Corporation such information regarding such Person, the plan of
distribution of the Registrable Securities and other information as the
Corporation may from time to time request or as may be legally required in
connection with such registration; provided, however, that no such Person shall
be required to make any representations or warranties in connection with any
such registration other than representations and warranties as to (i) such
Person's ownership of his or its Registrable Securities to be sold or
transferred free and clear of all liens, claims, and encumbrances, (ii) such
Person's power and authority to effect such transfer, and (iii) such matters
pertaining to compliance with securities laws as may be reasonably requested;
provided further, however, that the obligation of such Person to indemnify
pursuant to any such underwriting arrangements shall be several, not joint and
several, among such Persons selling Registrable Shares, and the liability of
each such Person will be in proportion to, and provided further that such
liability will be limited to, the net amount
<PAGE> 77
received by such Person from the sale of such Person's Registrable Shares
pursuant to such registration.
Section 5.02 Rule 144. The Corporation covenants that it will
file any reports required to be filed by it under the Securities Act and the
Exchange Act and that it will take such further action as the Holders may
reasonably request to the extent required from time to time to enable the
Holders to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission. Upon the request of the
Buyer, the Corporation will deliver to the Buyer a written statement as to
whether it has complied with such reporting requirements.
Section 5.03 Holdback Agreements. Each Holder agrees, in the
event of an underwritten offering for the Corporation (whether for the account
of the Corporation or otherwise) not to offer, sell, contract to sell or
otherwise dispose of any Registrable Securities, or any securities convertible
into or exchangeable or exercisable for such securities, including any sale
pursuant to Rule 144 under the Securities Act (except as part of such
underwritten offering), during the 14 days prior to, and during the 90-day
period (or such lesser period as the lead or managing underwriters may require)
beginning on, the effective date of the registration statement for such
underwritten offering (or, in the case of an offering pursuant to an effective
shelf registration statement pursuant to Rule 415, the pricing date for such
underwritten offering).
Section 5.04 Termination. The registration rights granted
under this Agreement will terminate on November 15, 2014; provided, however,
that if the shares of Preferred Shares outstanding on such date shall not have
been redeemed in full in accordance with Section 6(b) of the Certificate of
Designations, this Agreement shall remain in full force and effect with respect
to such shares (and the shares of Common Stock issuable upon the conversion of
such shares) until such time as such shares have been so redeemed in full.
<PAGE> 78
EXHIBIT C
MANAGEMENT RIGHTS AGREEMENT
Globix Corporation (the "Corporation") hereby acknowledges and agrees that HMTF
Equity Fund IV (1999), L.P. and HMTF Private Equity Fund IV (1999), L.P.
(collectively, the "Funds"), the indirect owners of an equity interest in the
Corporation, directly have the right to exercise on their behalf the management
rights associated with such equity interest so long as they are the indirect
owners of such equity interest in the Corporation. The Corporation also agrees
that the Funds have the following additional management rights so long as they
are the indirect owners of such equity interest in the Corporation:
(a) the right to receive the same information as provided to members of the
board of directors of the Corporation;
(b) upon a reasonable request of the Funds and at a reasonable time during
normal business hours, to receive income statements, balance sheets,
budgets, business plans and other financial information and to inspect
books and records of the Corporation; and
(c) upon a reasonable request and at reasonable times during normal
business hours, to meet and consult with management with respect to the
business of the Corporation.
The above-mentioned rights are intended to satisfy the requirement of management
rights for purposes of qualifying the Funds' indirect ownership of an interest
in the Corporation as a venture capital investment for purposes of the
Department of Labor "plan asset" regulations, 29 C.F.R. Section 2510.3-101, and
in the event such rights are not satisfactory for such purpose, the Corporation
and the Funds shall reasonably cooperate in good faith to agree upon mutually
satisfactory management rights which satisfy such regulations. The Corporation
hereby acknowledges and agrees that the foregoing management rights have been
and are effect as of the date of the Funds' indirect investment in the
Corporation.
DATED: ______________, 1999.
____________________________
Globix Corporation
By: ____________________________
Name:
Title:
<PAGE> 79
EXHIBIT D
OPINION OF MILBERG WEISS BERSHAD HYNES & LERACH LLP
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and has all
corporate powers required to carry on its business as now conducted.
2. The Stock Purchase Agreement has been duly authorized, executed and
delivered by the Company.
3. The execution, delivery and performance of the Stock Purchase
Agreement by the Company do not and will not (i) violate the certificate of
incorporation or by-laws of the Company, (ii) violate any applicable law, rule,
regulation, judgement, injunction, order or decree binding upon the Company or
any Subsidiary, other than violations that would not have a Material Adverse
Effect, (iii) except as to matters which would not have a Material Adverse
Effect, constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of the Company or any
Subsidiary or to a loss of any benefit to which the Company or any Subsidiary is
entitled under any provision of any agreement or other instrument binding upon
the Company, or (iv) result in the creation or imposition of any Lien on any
asset of the Company or any Subsidiary except where such Lien would not have a
Material Adverse Effect.
4. The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in Section 3.05 of the Stock
Purchase Agreement.
5. The issuance, sale and delivery of the Preferred Shares has been
duly authorized by all requisite corporate action of the Company and the
Preferred Shares issued to you in accordance with the Certificate of
Designations, when issued and delivered in accordance with the terms of the
Stock Purchase Agreement, will be validly issued and outstanding, fully paid and
nonassessable, free and clear of any Liens and not subject to preemptive or
other similar rights of the stockholders of the Company.
6. The shares of Common Stock into which the Preferred Shares are
convertible have been duly and validly authorized and, when issued and delivered
upon conversion of the Preferred Shares, as contemplated in the Certificate of
Designations, will be validly issued, fully paid and nonassessable.
<PAGE> 80
EXHIBIT E
Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
Based upon and subject to the foregoing, we are of the opinion
that the Purchase agreement constitutes the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except to
the extent that enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
