SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
ProMedCo Management Company
(Name of Registrant as Specified in its Charter)
ProMedCo Management Company
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-11(c) or Rule 14a-12.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of transaction:
5) Total feed paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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[ProMedCo Letterhead]
February , 2000
Dear ProMedCo Stockholder:
You are cordially invited to attend a special meeting of our
stockholders to be held at 11:00 a.m. local time on , March , 2000, at The
Petroleum Club, 777 Main Street, Fort Worth, Texas. The purpose of the meeting
is to consider and vote upon a proposed sale of a new issue of the Company's
convertible preferred stock to affiliates of Goldman, Sachs & Co. for $55
million.
This sale of convertible preferred stock will be the second stage of an
investment in the Company by these investors. They have already made a portion
of their investment through the purchase, on January 13, 2000, of the Company's
senior subordinated notes and 1,250,000 shares of common stock for $16 million.
Upon approval of the proposal by the Company's stockholders and satisfaction of
other conditions, the investors will exchange the subordinated notes, shares of
common stock and an additional $39 million for 550,000 shares of the convertible
preferred stock, bringing their total investment to $55 million. The remaining
principal condition to this second stage of the investment is that the Company
will have obtained up to $65 million of additional financing under its bank
credit facility or similar debt financing. Completion of the proposed
transaction will thus provide us with as much as $120 million of new capital to
fund the continued expansion of our business.
The convertible preferred stock will accrue 6% annual dividends and
will initially be convertible into common stock at $3.25 per share. If all
shares are converted, the holders will own approximately 44% of the Company's
outstanding common stock.
We are very excited about this transaction. It will not only provide us
with the capital needed for our continued growth, but will also make available
to the Company the expertise and resources of the leading financial institution
of Goldman, Sachs & Co., whose representatives will join our Board. We also
believe that the endorsement of our business plan and management team by Goldman
Sachs, as well as the added stability resulting from its investment, will
further enhance our ability to recruit top talent and attract quality
acquisition candidates. THE BOARD HAS UNANIMOUSLY APPROVED THE TRANSACTIONS AND
RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL. In addition, members of senior
management have agreed to vote their shares in favor of the proposal, and we
sincerely hope all of you will support it as well.
Your vote is crucial to the completion of this important transaction.
Please read the accompanying proxy statement, which describes the proposal in
greater detail, and fill in, sign, date and mail the enclosed proxy card as soon
as possible, whether or not you plan to attend the meeting.
Sincerely,
H. Wayne Posey
Chairman and Chief Executive Officer
<PAGE>
ProMedCo Management Company
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held March , 2000
TO OUR STOCKHOLDERS:
A special meeting of the stockholders of ProMedCo Management Company
(the "Company") will be held at 11:00 a.m. local time on , March , 2000, at The
Petroleum Club, 777 Main Street, Fort Worth, Texas 76102 for the following
purposes:
1. to approve the issuance and sale of 550,000 shares of the
Company's Series A Convertible Preferred Stock, par value
$0.01 per share, to affiliates of Goldman, Sachs & Co. for
$55.0 million and the issuance and sale of the shares of the
Company's Common Stock, par value $0.01 per share, issuable
upon conversion of the Preferred Stock, and to adopt the
Securities Purchase Agreement dated as of January 13, 2000
pursuant to which the issuance and sale is being made; and
2. to transact such other business as may properly come before
the meeting or any adjournments thereof.
Holders of record of the Company's Common Stock at the close of
business on February , 2000 are entitled to vote at the meeting and at any
adjournments thereof.
Stockholders are requested to complete, date and sign the enclosed
proxy card and return it promptly in the enclosed envelope provided for your
convenience. Any stockholder present at the meeting may revoke his or her proxy
and vote personally on all matters brought before the meeting.
By Order of the Board of Directors,
Deborah A. Johnson
Secretary
Fort Worth, Texas
February , 2000
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ProMedCo Management Company
801 Cherry Street, Suite 1450
Fort Worth, Texas 76102
(817) 335-5035
PROXY STATEMENT
FOR THE
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH , 2000
This Proxy Statement is furnished to the holders of the Common Stock of
ProMedCo Management Company (the "Company") in connection with the solicitation
on behalf of the Board of Directors of the Company (the "Board") of proxies to
be used in voting at the special meeting of stockholders to be held at 11:00
a.m. local time on , March , 2000, at The Petroleum Club, 777 Main Street, Fort
Worth, Texas 76102 and any adjournments thereof.
At this important meeting, you will be asked to approve the issuance and
sale of 550,000 shares of the Company's Series A Convertible Preferred Stock
(the "Preferred Stock") to four affiliates of Goldman, Sachs & Co. (the
"Investors") for $55.0 million and the issuance and sale of the Company's Common
Stock issuable upon conversion of the Preferred Stock, and to adopt the
Securities Purchase Agreement (the "Purchase Agreement") pursuant to which the
sale is being made (the "Proposal"). On January 13, 2000, the Company entered
into the Purchase Agreement with the Investors and, pursuant thereto, issued and
sold to the Investors $16.0 million principal amount of the Company's Senior
Subordinated Notes due January 12, 2005 (the "Notes") and 1,250,000 shares of
Common Stock (the "GS Shares") for aggregate cash consideration of $16.0
million. Stockholder approval was not required for that transaction. The
Purchase Agreement provides that, subject to the approval of the Company's
stockholders and other conditions described below, the Company will issue to the
Investors, and the Investors will purchase from the Company, 550,000 shares of
Preferred Stock in exchange for the Notes, the GS Shares and $39.0 million cash,
or aggregate consideration of $55.0 million. The proceeds from the sale of the
Preferred Stock will be used primarily to fund the continued expansion of the
Company's business.
The Preferred Stock will accrue dividends at the annual rate of 6.0%
and will initially be convertible into shares of Common Stock at a conversion
price of $3.25 per share. If all of the Preferred Stock is converted, the
holders will own (based on the initial conversion price) 16,923,077 shares, or
approximately 44.0%, of the Company's outstanding Common Stock. Holders of the
Preferred Stock will be entitled to vote, together with the holders of the
Common Stock, on all matters submitted to a vote of stockholders on the same
basis as if the Preferred Stock had been converted into Common Stock.
The enclosed proxy is for use at the meeting if the stockholder will
not be able to attend in person. Any stockholder who executes a proxy may revoke
it at any time before it is voted by delivering to the Secretary of the Company
either an instrument revoking the proxy or a duly executed proxy bearing a later
date. A proxy also may be revoked by any stockholder present at the meeting who
expresses a desire to vote his or her shares in person.
All shares represented by valid proxies received pursuant to this
solicitation and not revoked before they are exercised will be voted in the
manner specified therein. If no specification is made, the shares will be voted
in favor of the Proposal.
Only holders of Common Stock of record at the close of business on
February , 2000 (the "Record Date") are entitled to vote at the meeting. On the
Record Date, shares of Common Stock were outstanding, of which each share is
entitled to one vote on any matter to be voted upon at the meeting or any
adjournments thereof. A majority of the outstanding shares must be represented
at the meeting, in person or by proxy, to constitute a quorum for holding the
meeting. Approval of the Proposal requires the affirmative vote of a majority of
the votes cast.
THE BOARD HAS UNANIMOUSLY APPROVED THE TRANSACTIONS AND RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL AND ADOPTION OF THE PROPOSAL.
The Notice of Special Meeting of Stockholders, this Proxy Statement and
the accompanying proxy are first being mailed to stockholders on or about
February , 2000.
<PAGE>
THE PROPOSAL
Background
In the spring of 1999, as management anticipated the need for
additional financing to sustain the Company's projected rate of growth, the
Company began to explore alternatives for obtaining additional capital. Recent
levels of the market price of the Common Stock made a public equity offering
infeasible. Access to capital generally in the industry had become difficult,
and other companies had turned to sources of private equity financing. After
considering various alternatives, the Company pursued a potential offering of
high-yield debt securities until September 1999, when deterioration of market
conditions appeared to make such an offering no longer a viable option.
During the same period, the Company was approached by several
investment groups with a variety of proposals for investment in the Company.
From these, management decided to pursue two similar equity investment
proposals, one of which was made by affiliates of Goldman, Sachs & Co. ("Goldman
Sachs"). The Company entered into confidentiality agreements with both groups,
provided information concerning its business to them, and discussed the basic
terms of a proposed transaction with both. The Company eventually determined
that the Goldman Sachs proposal was superior, and on November 24, 1999 it
entered into a letter of intent and exclusivity agreement with Goldman Sachs.
During the balance of November and much of December, Goldman Sachs
continued to conduct its due diligence investigation of the Company's business
and affairs and, together with its counsel, negotiated the terms of a definitive
purchase agreement and related agreements with the Company's management and
counsel. During this period, while the price of the Company's Common Stock
averaged approximately $2.62 per share, the parties negotiated and agreed upon
the $3.25 conversion price, recognizing that the market price could fluctuate
above or below that price prior to closing. On December 27, the Board met to
discuss the terms that had been negotiated. After reviewing and discussing the
proposed terms and the financing alternatives that the Company had considered,
the Board unanimously approved the proposed terms and authorized management to
enter into a definitive purchase agreement and related agreements.
The proposed investment was structured as a two-stage transaction
because of the rules of The Nasdaq Stock Market, Inc. requiring stockholder
approval of certain securities issues. Those rules require stockholder approval
of the private issuance of common stock (or securities convertible into common
stock) constituting 20% or more of an issuer's outstanding common stock at a
price, as here proposed, lower than the higher of its market price or book value
per share. They also require stockholder approval of transactions that result in
a change in control of the issuer. Although the Company believes that the
proposed investment will not result in a change in control within the meaning of
the Nasdaq rules, stockholder approval would also satisfy that requirement if
the investment were construed otherwise. In view of the time required to obtain
stockholder approval and the Company's current need for capital to maintain its
projected rate of expansion, the parties agreed upon an initial investment of
$16.0 million in subordinated notes and 1.25 million shares of Common Stock and,
following stockholder approval, exchange of those securities and an additional
$39.0 million for $55.0 million in aggregate face amount of convertible
preferred stock.
On January 13, 2000, the Company entered into the Purchase Agreement with
GS Capital Partners III, L.P., GS Capital Partners III Offshore, L.P., Goldman,
Sachs & Co. Verwaltungs GMBH and Stone Street Fund 2000, L.L.C, and
simultaneously closed the first stage of the transaction by issuing the Notes
and the GS Shares to the Investors for aggregate cash consideration of $16.0
million, less an amount in cash equal to $480,000 paid by the Company to the
Investors.
A complete copy of the Purchase Agreement is included as Appendix A to
this Proxy Statement. The summary descriptions of the Purchase Agreement and
related documents contained in the discussion that follows do not purport to be
complete and are qualified by reference to the complete text of the documents
themselves, copies of which are included in the Appendixes or available from the
Company upon request.
The Purchase Agreement
The Purchase Agreement provides for the Company's issuance and sale to
the Investors of the Preferred Stock for an aggregate purchase price of $55.0
million in cash. At the initial closing, on January 13, 2000, the Company issued
to the Investors the Notes and the GS Shares in consideration of an aggregate
cash payment of $16.0 million, less an amount in cash equal to $480,000 paid by
the Company to the Investors. At the second closing (the "Second Closing"), the
Company will issue to the Investors the Preferred Stock in exchange for the
Notes, the GS Shares and a cash payment of $39.0 million, less an amount in cash
equal to the sum of $1.17 million to be paid by the Company to the Investors and
all accrued and unpaid interest on the Notes. Assuming the conversion of the
Preferred Stock immediately after the Second Closing, the Investors will own
approximately 44.0% of the Company's outstanding Common Stock.
Second Closing. The Second Closing will take place on the same day that
the Proposal is approved by stockholders. If all conditions to the Second
Closing other than stockholder approval have not been satisfied as of the date
scheduled for the special meeting, the meeting will be adjourned until such
conditions have been satisfied.
Representations and Warranties. The Purchase Agreement contains various
representations and warranties of the Company (subject, in certain cases, to
specified exceptions) relating to, among other things, the following matters:
(i) due organization, good standing and subsidiaries; (ii) due authorization,
execution, delivery, performance and enforceability of the Purchase Agreement
and other related agreements and documents; (iii) capitalization; (iv) reports
and other documents filed with the Securities and Exchange Commission (the
"SEC") and the accuracy of the information contained therein; (v) financial
statements (including the absence of undisclosed liabilities); (vi) the absence
of certain changes or events having a material adverse effect on the business,
results of operations or financial condition of the Company; (vii) the absence
of any material litigation; (viii) title to properties and insurance; (ix) the
absence of any conflict with the certificate of incorporation and by-laws,
material contracts and applicable laws and the absence of any consent, approval
or authorization required in connection with the Purchase Agreement; (x)
compliance with material laws and possession of material licenses and permits;
(xi) payment of taxes and filing of tax returns; (xii) employee benefit plans;
(xiii) intellectual property matters; (xiv) material commitments of the Company;
(xv) acquisitions of the Company since January 1, 1997; (xvi) the absence of
brokerage or finder's fees; (xvii) the Company's insurance; (xviii) existing
indebtedness and future liens; (xix) compliance with state antitakeover statues;
(xx) Year 2000 readiness; and (xxi) disclosures made by the Company.
The Purchase Agreement also contains representations and warranties of
the Investors relating to (i) the investment intent of the Investors; (ii) their
understanding that the securities they are acquiring have not been registered
under the Securities Act of 1933; (iii) the "accredited investor" status of the
Investors within the meaning of Rule 501(a) under the Securities Act; and (iv)
the availability of funds to the Investors sufficient to pay their obligations
under the Purchase Agreement.
Covenants of the Company. In the Purchase Agreement the Company
covenanted and agreed with the Investors (subject, in some cases, to specified
exceptions), among other things:
(i) until the Second Closing (or the termination of the
parties' obligations to consummate the Second Closing), to conduct its
business in the ordinary course and not to, without the consent of the
Investors, change its accounting or tax accounting methods, acquire any
of its outstanding equity securities or issue additional equity
securities, or amend its certificate of incorporation or by-laws;
(ii) until the Second Closing (or the termination of the
parties' obligations to consummate the Second Closing), not to solicit
any proposals for any merger or business combination involving the
Company or purchase of the Company's stock or a material portion of its
assets;
(iii) prior to the Second Closing, to obtain $65.0 million
additional senior debt financing under the Company's existing bank
credit facility or another facility;
(iv) to hold a stockholders meeting as soon as practicable
after the Initial Closing to obtain stockholder approval of the
issuance and sale of the Preferred Stock at the Second Closing, to
recommend that stockholders grant such approval, and to file a proxy
statement with respect to such meeting with the SEC no later than
January 31, 2000;
<PAGE>
(v) to use its reasonable best efforts to obtain all required
consents and approvals with respect to the transactions contemplated
by the Purchase Agreement;
(vi) to grant to the Company's management stock options to
acquire 2.2 million shares of Common Stock (which the Company and the
Investors have agreed will have an exercise price of $3.25 per share),
of which options to purchase 660,000 shares were granted prior to the
Initial Closing and options to purchase 1.54 million shares will be
granted at the Second Closing; and
(vii) that after the Second Closing and so long as the
Investors own at least 10.0% of the Company's outstanding Common Stock,
the Investors will have preemptive rights to purchase any of the
Company's capital stock that the Company proposes to sell to a third
party (other than pursuant to the exercise of employee stock options or
other currently outstanding options or other securities exchangeable
for capital stock or in connection with a merger transaction).
Covenants of the Investors. In the Purchase Agreement the Investors
covenanted and agreed with the Company (subject, in some cases, to specified
exceptions), among other things:
(i) to use their reasonable best efforts to assist the Company in
obtaining the $65.0 million additional senior debt financing;
(ii) in the event the Second Closing does not take place, not
to sell or otherwise transfer the Notes prior to 90 days following the
termination of the parties' obligation to consummate the Second
Closing; and
(iii) until the later of (A) January 13, 2003 and (B) the date
on which the Investors own less than 10.0% of the shares of Common
Stock (assuming conversion of the Preferred Stock) owned by them
immediately following the Second Closing, not to acquire more than 1.4
million shares of the Company's capital stock in excess of the amount
acquired pursuant to the Purchase Agreement or solicit proxies with
respect to the Company's voting securities unless, among other things,
a third party makes a bona fide offer for substantially all of the
Company's outstanding securities or assets.
Investor Representation on Board. Pursuant to the Purchase Agreement,
following the Initial Closing the Investors designated one representative,
Sanjeev K. Mehra, a Managing Director of Goldman Sachs, to serve on the Board,
which was expanded from seven to eight directors, and as a member of the Board's
Executive Committee. The Purchase Agreement provides that on the date of the
Second Closing the Board will be further expanded to 10 directors and that the
Investors will have the right to designate two additional directors, or a total
of three directors, one of whom will continue to serve on the Executive
Committee. The designation right will be reduced to two directors at such time
as the number of shares of Common Stock (assuming conversion of the Preferred
Stock) owned by the Investors is less than two-thirds of the shares owned by
<PAGE>
them immediately following the Second Closing, will be further reduced to one
member at such time as the number of shares owned by them is less than one-third
of such amount, and will be eliminated at such time as the number of shares
owned by them is less than 10.0% of such amount.
Actions Requiring Investor Approval. The Purchase Agreement provides
that so long as the Investors own at least one-third of the shares of Preferred
Stock issued at the Second Closing, the Company will not, without the Investors'
consent, (i) authorize any merger, liquidation or recapitalization of the
Company or the sale of substantially all of its assets, (ii) make any
acquisition for a price exceeding $20.0 million, (iii) incur any additional
indebtedness that would cause the Company's ratio of total debt to EBITDA to
exceed 4.5 to 1.0, (iv) enter into any business other than one reasonably
related to its current business, or (v) amend its certificate of incorporation
or by-laws.
Conditions to the Second Closing. The Purchase Agreement provides that
the Second Closing will not take place unless and until the Company's
stockholders have approved the issuance of the Preferred Stock to the Investors.
In addition, the Investors' obligation to purchase the Preferred Stock is
subject to satisfaction of the following conditions, among others:
(i) the absence of any government action prohibiting the
transactions to be consummated at the Second Closing;
(ii) expiration of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act;
(iii) the continued accuracy of the Company's representations
and warranties (except to the extent that any inaccuracies in the
aggregate are not reasonably expected to have material adverse effect
on the business, results of operations or financial condition of the
Company);
(iv) the Company's satisfaction in all material respects with all
covenants required to be satisfied by it prior to the Second Closing;
(v) the filing and effectiveness of the certificate of
designation governing the rights of the holders of the Preferred
Stock;
(vi) the authorization, reservation and approval for Nasdaq
listing of the shares of Common Stock issuable upon conversion of the
Preferred Stock;
(vii) the Company's having obtained the $65.0 million additional
senior debt financing;
<PAGE>
(viii) the expansion of the Board to 10 members, including,
effective as of the Second Closing, the three directors designated by
the Investors; and
(ix) the absence of any development resulting or reasonably
expected to result in a material adverse effect on the business,
results of operations, prospects or financial condition of the Company.
The Company's obligation to issue the Preferred Stock to the Investors is
subject to the condition, among others, that the Investors shall have satisfied
in all material respects all covenants required to be satisfied by them prior to
the Second Closing.
Termination of the Parties' Obligations. The Purchase Agreement
provides that the parties' obligations to proceed with the Second Closing may be
terminated by mutual consent of the Company and the Investors, or by either the
Company or the Investors if:
(i) the Second Closing has not occurred by May 15, 2000;
(ii) a court or government agency has entered a
nonappealable order prohibiting the sale of the Preferred Stock;
(iii) a representation or warranty of the other party was
materially false at the time it was made or the other party has
materially breached any of its covenants and has failed to cure the
breach within 10 days of the terminating party's notice of termination;
or
(iv) the Company's stockholders have failed to approve the
sale of the Preferred Stock to the Investors.
The Investors may also terminate their obligation to purchase the Preferred
Stock if there is a continuing event of default under the Notes issued to the
Investors at the Initial Closing, or if the Company has not permitted the
initial Investor designee to serve on the Board and Executive Committee since
January 20, 2000.
Survival of Representations and Warranties and Indemnification. The
parties' representations and warranties expire on the later of (i) one year
after the Second Closing and (ii) January 13, 2001 if the parties' obligations
to consummate the Second Closing are terminated, except for the Company's
representations and warranties concerning tax matters, which expire 30 days
after expiration of the applicable statute of limitations, and the Company's
representations and warranties concerning its authority to enter into and
consummate the transactions contemplated by the Purchase Agreement and its
capitalization, which survive indefinitely. The Purchase Agreement contains
customary provisions whereby each party undertakes to indemnify the other with
respect to losses incurred by the other as a result of its material breach of
its representations, warranties, covenants or agreements.
<PAGE>
Expenses. The Company will pay up to $700,000 of the Investors' legal,
accounting and other expenses incurred in connection with the transactions
contemplated by the Purchase Agreement, whether or not the Second Closing
occurs.
Waiver of Conditions. The provisions of the Purchase Agreement may be
modified, amended or waived only by a written document executed and delivered by
the Company and the Investors.
The Preferred Stock
The 550,000 shares of Preferred Stock, designated "Series A Convertible
Preferred Stock," will have a liquidation preference of $100.00 (plus any
accrued but unpaid dividends) per share (the "Liquidation Preference") and will
rank senior to the Company's Common Stock and all other capital stock of the
Company with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company. The terms of the Preferred Stock are set forth in
full in the proposed Certificate of Designation of Series A Convertible
Preferred Stock reproduced in Appendix B hereto.
Dividend Rights. Holders of the Preferred Stock will be entitled to
receive, when, as and if declared by the Board, cumulative cash dividends at an
annual rate of 6.0% of the Liquidation Preference. Dividends will accrue daily
and will be payable quarterly. Accrued dividends not paid within 10 days of any
quarterly payment date will accrue dividends at an annual rate of 8.0% of the
Liquidation Preference. In addition, so long as any shares of Preferred Stock
remain outstanding, if the Company pays a dividend in cash, securities or other
property on shares of Common Stock, it will at the same time declare and pay a
dividend on shares of Preferred Stock in the amount that would be paid with
respect to such shares if they were converted into shares of Common Stock.
Voting Rights. Each share of Preferred Stock will entitle its holder to
vote on all matters submitted to a vote of the Company's stockholders, voting
together as a single class with the holders of the Common Stock. Each share of
Preferred Stock will entitle the holder to that number of votes equal to the
number of votes that could be cast by a holder of the shares of Common Stock
into which the share of Preferred Stock is convertible (initially, approximately
31 votes per share of Preferred Stock). In addition, the Company will be
prohibited, without the vote or consent of the holders of at least 50.0% of the
Preferred Stock from time to time outstanding, from issuing any capital stock
ranking senior to or on a parity with the Preferred Stock, increasing the number
of authorized shares of Preferred Stock, or taking any other action that
adversely affects the powers, preferences or special rights of the Preferred
Stock.
Conversion Rights. Each share of Preferred Stock will initially be
convertible, at any time, into a number of shares of the Company's Common Stock
equal to the Liquidation Preference divided by $3.25 (the "Conversion Price").
The Conversion Price will be subject to adjustment in the event, among others,
that the Company (i) pays any stock dividends on the Common Stock, (ii)
<PAGE>
subdivides, combines or reclassifies the Common Stock, (iii) distributes to the
holders of the Common Stock any dividends in the form of its capital stock,
evidences of its indebtedness, assets, cash or rights to purchase shares of
Common Stock, (iv) issues any shares of Common Stock (or securities convertible
into or exchangeable for shares of Common Stock) at a price (or having a
conversion price per share) less than the greater of (A) the market price of the
Common Stock and (B) the Conversion Price of the Preferred Stock at the time of
such issuance, (v) reclassifies its Common Stock or merges or consolidates with
another entity, or (vi) purchases or redeems any shares of Common Stock at a
price greater than its market price. The Conversion Price will not be adjusted
if the holders of the Preferred Stock have received the subject dividend or
distribution.
Optional Redemption. At any time after the fourth anniversary of the
issuance of the Preferred Stock and subject to the holders' conversion rights,
the Company may redeem all, but not less than all, of the Preferred Stock at a
price per share equal to the Liquidation Preference, provided the market price
per share of the Common Stock for at least 20 out of 30 consecutive trading days
has been at least 150.0% of the Conversion Price in effect at the beginning of
such period.
Mandatory Redemption. The Company will be required to redeem all shares
of Preferred Stock outstanding on the seventh anniversary of their issuance at a
price per share equal to the Liquidation Preference (the "Mandatory Redemption
Price").
Change of Control Repurchase. In the event of a change of control of
the Company, the Company will be required to make an offer to each holder of
Preferred Stock to repurchase all or any portion of such holder's shares of
Preferred Stock at a price per share equal to 101.0% of the Liquidation
Preference. "Change of control" is defined as (i) the sale of all or
substantially all of the Company's assets to any person other than the Investors
or their affiliates, (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction or other
event by which any person other than the Investors and their affiliates becomes
the beneficial owner of more than 45.0% of the voting stock of the Company, or
(iv) the first day on which a majority of the members of the Board does not
consist of persons who were directors on January 13, 2000 or elected with the
approval of a majority of those who were directors on that date.
Right to Designate Directors. In the event the Company fails to pay
accrued dividends for 12 consecutive months, or fails to pay the Mandatory
Redemption Price, the Company will be required to increase the Board by two
members and the holders of the Preferred Stock, voting as a single class, will
be entitled to elect two directors (in addition to the directors designated by
the Investors pursuant to the Purchase Agreement).
Liquidation, Dissolution or Winding Up. In the event of any bankruptcy
or insolvency of the Company or if the Company otherwise liquidates, dissolves
or winds up, after payment or provision for the payment of the Company's debts
and other liabilities, no distribution will be made to the holders of the
Company's Common Stock or any other shares ranking junior to or on a parity with
<PAGE>
the Preferred Stock until the holders of the Preferred Stock have received,
subject to certain adjustments, the greater of (i) the Liquidation Preference
with respect to each share of Preferred Stock held and (ii) the amount that
would have been received if the shares had been converted to shares of Common
Stock immediately prior to the date of such event.
Related Agreements
Simultaneously with the execution of the Purchase Agreement, the
Company and certain of its stockholders entered into several related agreements
with the Investors.
The Stockholder Voting Agreements. Five of the Company's directors and
executive officers, E. Thomas Chaney, Jack W. McCaslin, H. Wayne Posey, Richard
E. Ragsdale and Robert M. Sontheimer (the "Significant Stockholders"), who
together are the beneficial owners of an aggregate of 3,559,294 shares (or
approximately 15.9%) of the Company's outstanding Common Stock, have each
entered into a voting agreement with the Investors by which each has agreed to
vote his shares in favor of the Proposal and given his proxy with respect to
such vote to the Investors.
The Lockup Agreements. Messrs. Chaney, Posey and Ragsdale, who together
are the beneficial owners of an aggregate of 2,834,700 shares of Common Stock,
have entered into lockup agreements by which they have agreed that they will
not, without the prior consent of the Investors, sell any of such shares during
the six-month period following the Initial Closing or more than 25% of their
respective shares during the ensuing 18 months. If, however, the Investors sell
in excess of 25% of the shares of Common Stock owned by them (assuming
conversion of the Preferred Stock) immediately following the Second Closing,
Messrs. Chaney, Posey and Ragsdale will be permitted to sell an amount of
additional shares proportionate to such excess amount sold by the Investors.
The Registration Rights Agreement. The Company has entered into a
registration rights agreement under which the Investors have the right at any
time to require the Company, at the Company's expense, to file a registration
statement under the Securities Act to permit the resale of all or any portion of
the shares of Common Stock (or securities convertible into, or exercisable or
exchangeable for, shares of Common Stock) held by the Investors. While the
Investors are limited to two such so-called "demand registrations," they also
have the right, subject to limited exceptions, to require the Company to include
their shares in any other registration statement filed by the Company covering a
distribution of its equity securities. The registration rights agreement
contains customary terms and conditions, including cross-indemnities with
respect to liabilities resulting from any materially false or misleading
statement in or omission from any such registration statement. In the event
either of the Investors' demand registrations relates to an offering effected
through underwriters, the Company will be required to enter into an underwriting
agreement with the underwriters containing customary terms, including
representations and warranties and indemnities.
<PAGE>
The Notes
The $16.0 million principal amount of notes issued at the Initial
Closing, together with the GS Shares, will be exchanged at the Second Closing
for shares of Preferred Stock having an aggregate Liquidation Preference of
$16.0 million. In the event that the sale of the Preferred Stock is not approved
by stockholders or the Second Closing does not occur for any other reason, the
Notes will remain outstanding.
The Notes, issued on January 13, 2000, mature on January 13, 2005.
Interest accrues on the Notes until May 15, 2000 at the annual rate of 12.0%, of
which two-thirds is payable in cash and one-third is payable through the
issuance of additional notes having terms identical to those of the Notes ("PIK
Notes"). From May 15, 2000 until maturity, interest will accrue at the annual
rate of 14.0%, of which four-sevenths will be payable in cash and three-sevenths
will be payable through the issuance of PIK Notes. The Notes are subordinate to
the Company's senior indebtedness, which currently consists of primarily of its
bank credit facility.
The Company may redeem the Notes from March 31, 2001 through September
30, 2001 for a purchase price equal to 101.0% of the outstanding principal
amount plus accrued and unpaid interest. It is required to redeem the Notes, at
the option of any holder, at any time on or after March 31, 2002 for a purchase
price equal to 100.0% of such amount. In addition, in the event of a change of
control of the Company (defined as under the terms of the Preferred Stock), the
Company will be required to make an offer to each holder of Notes to purchase
all or any portion of such holder's Notes at a price equal to 101.0% of such
amount.
The Notes contain numerous negative covenants, customary in similar
debt instruments, limiting the Company's ability, without the consent of the
holders of the Notes, to, among other things, incur additional indebtedness,
create liens on its property, enter into transactions involving fundamental
changes such as a merger of the Company, sell its assets, declare or pay
dividends or other distributions on its capital stock, redeem or otherwise
acquire its capital stock, make investments or loans, enter into any business
not reasonably related to its current business and make acquisitions.
Events of default under the Notes include, in addition to failure to
pay principal or interest when due, breach of any covenant or agreement
contained in the Notes or the Purchase Agreement and related agreements, a
payment default under other indebtedness of the Company or acceleration of such
indebtedness aggregating $3.0 million or more.
At any time after the 90th day following the termination of the
obligations of the parties to consummate the Second Closing, upon the request of
the holders of at least $4.0 million aggregate principal amount of the Notes,
the Company is required, at the Company's expense, to prepare an offering
memorandum to facilitate the resale of the Notes pursuant to Rule 144A under the
Securities Act and, pursuant to a registration statement filed by the Company
under the Securities Act, to offer to exchange the Notes for debentures having
terms substantially identical to those of the Notes. Should the Company default
<PAGE>
in such obligations, cash interest payable under the Notes will increase to an
amount equal to 0.5% per annum for the first 90 days of such default and
thereafter to 1.0% so long as the default continues.
Effects of Approval of the Proposal
The sale of the Preferred Stock, together with the additional senior debt
financing upon which the sale is conditional, will provide capital to enable the
Company to continue the expansion of its business at its currently projected
rate. The Company also believes that the presence of Goldman Sachs as a
substantial investor in the Company, together with its representation on the
Board, will provide the Company with additional expertise and resources and
enhance its ability to attract high-quality personnel and acquisition
candidates. At the same time, while stockholders other than the Investors
currently have 94.6% of the voting power, following the issuance of the
Preferred Stock they will have only 56.0% of the voting power. While the
Investors' representatives will constitute only a minority of the Board, the
Investors may be expected to exert substantial influence on the future affairs
of the Company solely as a result of their percentage ownership of the Company's
capital stock.
Effects of Failure to Approve the Proposal
If the Proposal is not approved by stockholders, the Company will have
obtained only $16.0 million of additional capital in exchange for the Notes and
the GS Shares and, unless the Company is able to obtain alternate financing,
will be required to substantially reduce its rate of growth from both its
historical level and its currently projected level. There is no assurance that
such alternate financing will be available, and management does not believe that
any such financing that may be available will be upon terms more favorable to
the Company than those of the Proposal. The Company also believes that the
failure of stockholders to approve the Proposal will itself likely impede the
Company's future ability to attract capital in any transaction requiring
stockholder approval. In addition, if the Proposal is not approved, the Notes
will remain outstanding, and the interest rate under the Notes will increase
from 12.0% to 14.0%.
Interests of Certain Persons in the Proposal
In considering the Proposal, stockholders should be aware that some of
the Company's officers and directors have certain interests that may be in
addition to, or different from, the interests of the stockholders. Pursuant to
the requirements of the Purchase Agreement, the Company's executive officers, of
whom one, H. Wayne Posey, is also a director, were granted options to purchase
an aggregate of shares of Common Stock at the Initial Closing and, if the Second
Closing occurs, will be granted options to acquire an aggregate of additional
shares. In addition, Sanjeev K. Mehra, a director of the Company since January
20, 2000, is a Managing Director of Goldman, Sachs & Co., an affiliate of the
Investors and their designee on the Board.
<PAGE>
THE MEETING
Each copy of this Proxy Statement mailed to stockholders is accompanied
by a proxy card furnished in connection with the solicitation of proxies by the
Board for use at the special meeting. The meeting is scheduled to be held at
11:00 a.m. local time on , March , 2000, at The Petroleum Club, 777 Main Street,
Fort Worth, Texas. At the meeting, stockholders will consider and vote upon the
Proposal. The Company knows of no other matter to be presented at the meeting.
Your Board has unanimously determined that the transactions
contemplated by the Purchase Agreement are advisable and in the best interests
of the Company's stockholders, has approved and adopted the Purchase Agreement
and the related agreements and documents and has approved the issuance and sale
of the Preferred Stock. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND
ADOPTION OF THE PROPOSAL.
STOCKHOLDERS ARE REQUESTED PROMPTLY TO COMPLETE, DATE, SIGN AND RETURN
THE ACCOMPANYING PROXY CARD. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR
TO VOTE AT THE MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL.
Record Date and Voting
The Board has fixed the close of business on February , 2000 as the
Record Date for the determination of the stockholders of the Company who are
entitled to receive notice of and to vote at the meeting. At the close of
business on the Record Date, the Company had outstanding shares of Common Stock.
The holders of the Common Stock are entitled to one vote for each share held on
the Record Date.
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock is necessary to constitute a quorum for the transaction
of business. Abstentions (including broker non-votes) will be included in the
calculation of the number of votes represented at the meeting for purposes of
determining the existence of a quorum.
If the enclosed proxy card is properly executed and received by the
Company in time to be voted at the meeting, the shares represented thereby will
be voted in accordance with the instructions marked thereon. Properly executed
proxies with no instructions indicated thereon will be voted "FOR" approval and
adoption of the Proposal.
If any other matters properly come before the meeting, including a
motion to adjourn the meeting for the purpose of soliciting additional proxies,
the persons named in the accompanying proxy will vote the shares represented by
all properly executed proxies on such matters in their discretion, except that
shares represented by proxies that have been voted "against" the Proposal will
not be used to vote for adjournment of the meeting for the purpose of allowing
additional time for soliciting additional votes "for" the proposal.
Vote Required; Revocability of Proxies.
The Proposal must be approved by the affirmative vote of a majority of
the votes cast, either in person or by proxy, at the meeting and entitled to
vote.
Pursuant to the terms of the Stockholder Voting Agreements, the
Significant Stockholders have agreed to vote the Common Stock beneficially owned
by them in favor of the Proposal and have given the Investors proxies so to vote
such shares. In addition, the Investors have advised the Company that they
intend to vote the GS Shares in favor of the Proposal. As a result, (or
approximately %) of the total outstanding votes are committed to vote in favor
of the Proposal.
Brokers holding shares of Common Stock as nominees will not have
discretionary authority to vote such shares in the absence of instructions from
the beneficial owners thereof.
A stockholder may revoke a proxy at any time prior to its exercise by
(i) delivering to Deborah A. Johnson, Secretary, ProMedCo Management Company,
801 Cherry Street, Suite 1450, Fort Worth, Texas 76102, a written notice of
revocation prior to the meeting, (ii) delivering prior to the meeting, a duly
executed proxy bearing a later date or (iii) attending the meeting and voting in
person. The presence of a stockholder at the meeting will not in and of itself
automatically revoke such stockholder's proxy. If no instructions are indicated
on a properly executed proxy, such proxy will be voted "FOR" approval and
adoption of the Proposal.
If all conditions to the Second Closing other than stockholder approval
have not been satisfied as of the date scheduled for the meeting, the meeting
will be adjourned until such conditions have been satisfied. If the meeting is
adjourned for this or any other reason, at any subsequent reconvening of the
meeting, all proxies will be voted in the same manner as such proxies would have
been voted at the original convening of the meeting, except for any proxies
which have theretofore effectively been revoked or withdrawn.
Solicitation of Proxies
The Company will bear the costs of soliciting proxies from
stockholders. In addition to soliciting proxies by mail, directors, officers and
employees of the Company, without receiving additional compensation therefor,
may solicit proxies by telephone, by facsimile or in person. Arrangements may
also be made with brokerage firms and other custodians, nominees and fiduciaries
to forward solicitation materials to the beneficial owners of shares held of
record by such persons, and the Company will reimburse such persons for
reasonable out-of-pocket expenses incurred by them in connection therewith.
Other Matters
A list of stockholders of record entitled to be present and vote at the
meeting will be available at the offices of the Company for inspection by the
stockholders during regular business hours from , 2000 to the date of the
meeting. The list will also be available during the meeting for inspection by
stockholders who are present. Votes will be tabulated by an automated system
administered by Harris Trust and Savings Bank, Chicago, Illinois, the Company's
transfer agent. Members of the Company's independent accounting firm, Arthur
Andersen LLP, are expected to attend the meeting to make a statement if they so
desire and to respond to questions from stockholders.
<PAGE>
COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of the Record Date by (i) each person
who is known by the Company to be the beneficial owner of more than five percent
of the Company's outstanding Common Stock, (ii) each director of the Company,
(iii) certain executive officers of the Company and (iv) all directors and
executive officers of the Company as a group. Except as otherwise indicated, the
Company believes that the beneficial owners of the Common Stock listed, based on
information furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where applicable.
Unless otherwise indicated, the address of each stockholder is: c/o ProMedCo
Management Company, 801 Cherry Street, Suite 1450, Fort Worth, Texas 76102.
<TABLE>
<CAPTION>
Shares Beneficially
Number and Address Owned(1)
of Beneficial Owner Number Percent
<S> <C> <C>
H. Wayne Posey................................................................. 5,578,972 %
Richard E. Ragsdale(2)......................................................... 2,261,246 %
David T. Bailey, M.D........................................................... 71,701 *
Charles J. Buysse, M.D......................................................... 2,200 *
E. Thomas Chaney............................................................... 1,114,780 %
James F. Herd, M.D............................................................. 155,020 *
Jack W. McCaslin............................................................... 377,952 %
Robert D. Smith................................................................ 36,500 *
Robert M. Sontheimer........................................................... 347,142 %
Sanjeev K. Mehra(3)............................................................
Charles W. McQueary............................................................ 48,000 *
Dale K. Edwards................................................................ 154,000 *
Deborah A. Johnson............................................................. 51,666 *
Gregory A. Wagoner............................................................. 7,711 *
Wellington Management Company, LLP(4).......................................... 1,794,600 %
T. Rowe Price Associates(5).................................................... 1,404,700 %
The Goldman Sachs Group, Inc. (6) ............................................. 1,250,000 %
All Directors and executive officers as a group ( persons).................. %
- ----------
</TABLE>
* Less than 1%
(1) Includes shares issuable upon the exercise of options that are
exercisable within 60 days of the date of this Proxy Statement. The shares
underlying such options are deemed to be outstanding for the purpose of
computing the percentage of outstanding stock owned by such persons individually
and by each group of which they are a member, but are not deemed to be
outstanding for the purpose of computing the percentage of any other person.
(2) This amount includes 15,000 shares owned by Mr. Ragsdale's spouse and
50,000 shares owned by the Ragsdale Unified Credit Trust, as to which Mr.
Ragsdale disclaims beneficial ownership.
(3) Mr. Mehra, who is a Managing Director of Goldman, Sachs & Co.,
disclaims beneficial ownership of the shares owned by The Goldman Sachs Group,
Inc. and its affiliates, except to the extent of his pecuniary interest therein,
if any.
(4) Based upon a Schedule 13G filed with the Commission on February 9,
1999. The owner has sole investment and voting power with respect to none of
such shares, shared voting power with respect to 927,100 of such shares, and
shared investment power with respect to all of such shares. The address of
Wellington Management Company, LLP is 75 State Street, Boston, Massachusetts
02109.
(5) Based upon an amendment to a Schedule 13G filed with the Commission on
February 10, 1999. The stockholder has sole investment power with respect to all
of such shares and sole voting power with respect to 362,300 of such shares.
These securities are owned by various individual and institutional investors for
which T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as investment
adviser with power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the Securities
Exchange Act of 1934, T. Rowe Price is deemed to be a beneficial owner of such
securities; however, T. Rowe Price expressly disclaims that it is, in fact, the
beneficial owner of such securities. The address of T. Rowe Price Associates is
100 East Pratt Street, Baltimore, Maryland 21202.
(6) Represents shares owned by certain investment partnerships and a
limited liability company, of which Goldman Sachs or affiliates of Goldman Sachs
or the Goldman Sachs Group, Inc. ("GS Group") are the general partner, managing
partner, manager or investment manager. Consists of 928,994 shares held of
record by GS Capital Partners III, L.P., 255,391 shares held of record by GS
Capital Partners III Offshore, L.P., 42,888 shares held of record by Goldman,
Sachs & Co. Verwaltungs GmbH, and 22,727 shares held of record by Stone Street
Fund 2000, L.L.C. GS Group and Goldman Sachs disclaim beneficial ownership of
the shares owned by the investment partnerships and the limited liability
company to the extent attributable to partnership or membership interests
therein held by persons other than GS Group, Goldman Sachs and their affiliates.
Each of the investment partnerships and the limited liability company shares
voting and investment power with certain of its respective affiliates. The
address of GS Group is 85 Broad Street, New York, New York 10004.
<PAGE>
ADDITIONAL INFORMATION
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934 and, in accordance therewith, files reports,
proxy statements and other information with the SEC. Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the SEC at Room 1024, 450 Fifth Street, N.W., Washington
D.C. 20549 and at the regional offices of the SEC located at 7 World Trade
Center, 13th Floor, Suite 1300, New York, New York 10048 and Suite 1400,
Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material can also be obtained at prescribed rates by writing to
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549. Such material may also be accessed electronically by means of the
SEC's Web site (http://www.sec.gov.). The Common Stock is quoted on the Nasdaq
National Market, and such material can also be inspected at the offices of
Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT
CHARGE UPON REQUEST FROM DEBORAH A. JOHNSON, SECRETARY, PROMEDCO MANAGEMENT
COMPANY, 801 CHERRY STREET, SUITE 1450, FT. WORTH, TEXAS 76102.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference herein:
1. The Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
2. The Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30 and September 30, 1999.
All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act after the date of this Proxy
Statement, and prior to the date of the meeting, shall be deemed to be
incorporated by reference herein.
Any statement contained in a document filed with the SEC prior to the
date hereof and incorporated by reference herein shall be deemed to be modified
or superseded for purposes hereof to the extent that a statement contained
herein (or in any other subsequently filed document which also is incorporated
by reference herein) modifies or supersedes such statement. The modifying or
superseding statement may, but need not, state that it has modified or
superseded a prior statement or include any other information set forth in the
document that is not so modified or superseded. The making of a modifying or
superseding statement shall not be deemed an admission that the modified or
superseded statement, when made, constituted an untrue statement of a material
fact, an omission to state a material fact necessary to make a statement not
misleading, or the employment of a manipulative, deceptive or fraudulent device,
contrivance, scheme, transaction, act, practice, course of business or artifice
to defraud, as those terms are used in the Securities Act, the Securities
Exchange Act or the rules and regulations thereunder. Any statement so modified
shall not be deemed in its unmodified form to constitute a part hereof for
purposes of the Exchange Act. Any statement so superseded shall not be deemed to
constitute a part hereof for purposes of the Securities Exchange Act.
<PAGE>
APPENDIX A
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated
as of January 13, 2000, by and among PROMEDCO MANAGEMENT COMPANY, a Delaware
corporation (the "Company"), GS CAPITAL PARTNERS III, L.P., a Delaware limited
partnership ("GSCP"), and certain affiliates of GSCP set forth on the signature
page of this Agreement (the "GSCP Affiliates", and collectively with GSCP and
including their respective successors and permitted assigns, the "Investors",
and each individually, an "Investor").
W I T N E S S E T H :
WHEREAS, upon the terms and subject to the conditions set
forth in this Agreement, simultaneously with the execution and delivery of this
Agreement, at the initial closing (the "Initial Closing"), the Company is
issuing and selling to the Investors, and the Investors are purchasing from the
Company, (i) $16,000,000 in aggregate principal amount of the Company's Senior
Subordinated Notes, due January 13, 2005 (the "Notes") and (ii) 1,250,000 shares
(the "GS Shares") of the Company's common stock, par value $0.01 per share (the
"Common Stock"), for an aggregate purchase price of $16,000,000 in cash; and
WHEREAS, upon the terms and subject to the conditions set
forth in this Agreement, at the second closing (the "Second Closing"), the
Company wishes to issue and sell to the Investors, and the Investors wish to
purchase from the Company, (i) an aggregate of 390,000 shares of the Company's
Series A Convertible Preferred Stock, par value $0.01 per share (the "Preferred
Stock") for an aggregate purchase price of $39,000,000 in cash, and (ii) an
aggregate of 160,000 shares of Preferred Stock for an aggregate purchase price
of $16,000,000 payable by delivery to the Company of all outstanding Notes and
GS Shares held by the Investors in exchange therefor; and
WHEREAS, the Investors and the Company desire to provide for
the purchase and sale of the Notes, the GS Shares and the Preferred Stock and to
establish certain rights and obligations in connection therewith.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms; Interpretations. The following terms, as used herein,
shall have the following meanings:
"Additional Financing" shall have the meaning ascribed thereto
in Section 5.3.
"Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
"Agreement" shall have the meaning ascribed thereto in the
preamble.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Capitalized Lease" shall mean, with respect to any Person,
any lease or any other Commitment for the use of property which, in accordance
with generally accepted accounting principles, should be capitalized on the
lessee's or user's balance sheet.
"Capitalized Lease Obligation" of any Person shall mean and
include, as of any date as of which the amount thereof is to be determined, the
amount of the Liability capitalized or disclosed (or which should be disclosed
under U.S. GAAP) in a balance sheet of such Person as of such date in respect of
a Capitalized Lease of such Person.
"Certificate of Designation" shall have the meaning ascribed
thereto in Section 2.6(a)(iii).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commitment" and "Commitments" shall have the meaning ascribed
thereto in Section 3.14(a).
"Common Stock" shall have the meaning ascribed thereto in the
recitals.
"Company" shall have the meaning ascribed thereto in the
preamble.
"Company Affiliates" shall have the meaning ascribed thereto
in Section 5.2.
"Company Indemnified Party" shall have the meaning ascribed
thereto in Section 8.2.
"Compensation and Benefit Plans" shall mean all bonus,
vacation, deferred compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase, restricted stock
and stock option plans, all employment or severance contracts, all medical,
dental, disability, health and life insurance plans, all other material employee
benefit and fringe benefit plans, contracts or arrangements and any applicable
"change of control" or similar provisions in any plan, contract or arrangement
sponsored, maintained or contributed to by the Company or any of the
Subsidiaries for the benefit of officers, former officers, employees, former
employees, directors, former directors, or the beneficiaries of any of the
foregoing or pursuant to which the Company, any of the Subsidiaries or any ERISA
Affiliate has or may have any liability or obligation, contingent or otherwise.
"Confidentiality Agreement" shall have the meaning ascribed
thereto in Section 5.12.
"Consents" shall have the meaning ascribed thereto in Section
5.7.
"Consolidated EBITDA" shall have the meaning ascribed thereto
in the Credit Agreement as in effect on the date hereof.
"Conversion Shares" shall mean the shares of Common Stock
issuable upon conversion of the Preferred Stock.
"Credit Agreement" shall mean the Credit Agreement dated as of
December 17, 1998, among the Company, the Lenders referred to therein and Bank
of America, N.A. as Agent and Banc of America Securities, LLC, as Arranger, and
as amended by the First Amendment to Credit Agreement, dated as of December 31,
1998, the Amended and Restated Credit Agreement and First Amendment to Guarantee
and Collateral Agreement, dated as of June 29, 1999, the First Amendment to
Amended and Restated Credit Agreement dated as of November 9, 1999 and the
Consent and Second Amendment to Amended and Restated Credit Agreement, dated as
of November 12, 1999, all as amended, modified, renewed, refunded, restated,
replaced or refinanced from time to time.
"Designated Senior Indebtedness" shall mean the obligations of
the Company under the Credit Agreement.
"DGCL" shall mean the Delaware General Corporation Law.
"Encumbrances" shall mean any liens, charges, claims, security
interests, restrictions, options, proxies, voting trusts or other encumbrances.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean each business or entity which is
a member of a "controlled group of corporations," under "common control" or a
member of an "affiliated service group" with the Company or any of its
Subsidiaries within the meaning of Articles 414(b), (c) or (m) of the Code, or
required to be aggregated with the Company under Article 414(o) of the Code, or
is under "common control" with the Company, within the meaning of Article
4001(a)(14) of ERISA, and the regulations promulgated and proposed thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect at the time. Reference to
a particular section of the Exchange Act shall include reference to the
comparable section, if any, of any such successor federal statute.
"Exchange and Registration Rights Agreement" shall have the meaning
ascribed thereto in the Notes.
"Fried Frank Offices" shall have the meaning ascribed thereto
in Section 2.2.
"GAAP" shall have the meaning ascribed thereto in Section 3.5.
"Governmental Entity" shall mean any supernational, national,
foreign, federal, state or local judicial, legislative, executive,
administrative or regulatory body or authority.
"Grandfathered Amount" shall have the meaning ascribed thereto
in the Shareholder Rights Plan.
"GS Shares" shall have the meaning ascribed thereto in the
recitals.
"GSCP" shall have the meaning ascribed thereto in the
preamble.
"GSCP Affiliates" shall have the meaning ascribed thereto in
the preamble.
"Guarantee" by any Person shall mean all obligations (other
than endorsements in the ordinary course of business of negotiable instruments
for deposit or collection) of any Person guaranteeing, or in effect
guaranteeing, any Indebtedness or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, or (y)
to maintain working capital or other balance sheet condition, (iii) to lease
property or to purchase securities or other property or services primarily for
the purpose of assuring the owner of such Indebtedness or obligation of the
ability of the primary obligor to make payment of such Indebtedness or
obligation, or (iv) otherwise to assure the owner of the Indebtedness or
obligation of the primary obligor against loss in respect thereof. For the
purposes of any computations made under this Agreement, a Guarantee in respect
of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal
to the outstanding amount of the Indebtedness for borrowed money which has been
guaranteed, and a Guarantee in respect of any other Liability shall be deemed to
be Indebtedness equal to the maximum aggregate amount of such Liability.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder.
"Indebtedness" shall mean, with respect to any Person, (i) all
obligations of such Person for borrowed money, or with respect to deposits or
advances of any kind, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such Person
under conditional sale or other title retention agreements relating to property
purchased by such Person, (iv) all obligations of such Person issued or assumed
as the deferred purchase price of property or services (other than accounts
payable to suppliers and similar accrued liabilities incurred in the ordinary
course of business and paid in a manner consistent with industry practice), (v)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien or security interest on property owned or acquired by such Person
whether or not the obligations secured thereby have been assumed, (vi) all
Capitalized Lease Obligations of such Person, (vii) all Guarantees of such
Person, (viii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the account of
such Person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all obligations arising out of interest rate and currency swap agreements,
cap, floor and collar agreements, interest rate insurance, currency spot and
forward contracts and other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.
"Indemnification Claim Notice" shall have the meaning ascribed
thereto in Section 8.5(a).
"Indemnified Party" shall have the meaning ascribed thereto in
Section 8.5(a).
"Indemnifying Party" shall have the meaning ascribe thereto in
Section 8.5(a).
"Initial Closing" shall have the meaning ascribed thereto in
the recitals.
"Initial Closing Payment" shall be an amount in cash equal to
$480,000 payable to the Investors at the Initial Closing as provided in Section
2.1.
"Initial Closing Purchase Price" shall have the meaning
ascribed thereto in Section 2.1.
The "Initial Noteholder Designee" shall be Mr. Sanjeev Mehra.
"Intellectual Property" shall mean (i) all inventions and
discoveries (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (ii)
all trademarks, service marks, trade dress, logos, trade names and corporate
names, together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (iii) all copyrightable
works, all copyrights and all applications, registrations and renewals in
connection therewith, (iv) all mask works and all applications, registrations
and renewals in connection therewith, (v) all know-how, trade secrets and
confidential business information, whether patentable or unpatentable and
whether or not reduced to practice (including ideas, research and development,
formulas, compositions, manufacturing and production process and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information and business and marketing plans and proposals),
(vi) all computer software (including data and related documentation), (vii) all
management information systems, (viii) all other proprietary rights, (ix) all
copies and tangible embodiments thereof (in whatever form or medium) and (x) all
licenses and agreements in connection therewith.
"Investor" and "Investors" shall have the meaning ascribed
thereto in the preamble.
"Investor Designees" shall have the meaning ascribed thereto
in Section 5.9(b).
"Investor Expenses" shall have the meaning ascribed thereto in
Section 9.1.
"Investor Indemnified Party" shall have the meaning ascribed
thereto in Section 8.3.
"IRS" shall mean the Internal Revenue Service.
"Knowledge", with respect to the Company, shall mean the
knowledge of each member of the board of directors of the Company and each of
the material Subsidiaries and each executive officer of the Company and each of
the material Subsidiaries, and the knowledge that any of the foregoing
individuals would have after due and reasonable inquiry and investigation.
"Laws" shall mean any law, statute, rule, regulation, order or
other restriction of any court or Governmental Entity applicable to the
businesses conducted by the Company and the Subsidiaries.
"Leased Real Property" shall mean the real property leased or
subleased by the Company or any Subsidiary, together with, to the extent leased
or subleased by the Company or any Subsidiary, all buildings and other
structures, facilities or improvements currently or hereafter located thereon,
all fixtures, systems, equipment and items of personal property of the Company
or any Subsidiary attached or appurtenant thereto, and all easements, licenses,
rights and appurtenances relating to the foregoing.
"Liability" shall mean any debt, liability or obligation,
whether known or unknown, asserted or unasserted, accrued, absolute, contingent
or otherwise, whether due or to become due.
"Licenses" shall mean any licenses, franchise permits,
accreditations, consents, registrations, certificates, and other governmental or
regulatory permits, accreditations, authorizations or approvals required for the
operation of the businesses of the Company and the Subsidiaries as presently
conducted and for the ownership, lease or operation of the Company's and the
Subsidiaries' properties.
"Litigation" shall mean any claim, demand, action, suit,
proceeding, arbitration, investigation, civil, criminal or administrative
action, inquiry or hearing by or before any Governmental Entity or private
arbitration tribunal.
"Lock-up Agreements" shall mean the letters, date as of the
date hereof, from certain stockholders of the Company to the Investors.
"Losses" shall mean each and all of the following items:
claims, losses, (including, without limitation, losses of earnings) Liabilities,
obligations, payments, damages (actual, punitive or consequential), charges,
judgments, fines, penalties, amounts paid in settlement, costs and expenses
(including, without limitation, interest that may be imposed in connection
therewith, costs and expenses of investigation, suits, proceedings, demands,
assessments and fees, expenses and disbursements of counsel, consultants and
other experts).
"Market Value" shall mean the closing price of the Common
Stock on NASDAQ or such other exchange upon which the Common Stock might later
be traded, on the date specified.
"Material Adverse Effect" shall mean a material adverse effect
on the properties, business, operations, results of operations, earnings,
prospects, assets, Liabilities or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole.
"Multi-Employer Plan" shall have the meaning ascribed thereto
in Section 3.12(c).
"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation National Market System.
"1998 Balance Sheet" shall have the meaning ascribed thereto
in Section 3.5.
"Notes" shall have the meaning ascribed thereto in the
recitals.
"Noteholder Designees" shall have the meaning ascribed thereto
in Section 5.9(a).
"Owned Real Property" shall mean the real property owned by
the Company or any Subsidiary, together with all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all fixtures,
systems, equipment and items of personal property of the Company or any
Subsidiary attached or appurtenant thereto and all easements, licenses, rights
and appurtenances relating to the foregoing.
"Permitted Encumbrances" shall have the meaning ascribed
thereto in Section 3.8(b).
"Person" shall mean any individual, firm, corporation, limited
liability company, partnership, company or other entity, and shall include any
successor (by merger or otherwise) of such entity.
"Preferred Designees" shall have the meaning ascribed thereto
in Section 5.9(b).
"Preferred Stock" shall have the meaning ascribed thereto in
the recitals.
"Preferred Stock Registration Rights Agreement" shall have the
meaning ascribed thereto in Section 2.6(a)(ii).
"Proposed Securities" shall have the meaning ascribed thereto
in Section 5.18.
"Proxy Statement" shall have the meaning ascribed thereto in
Section 3.17.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated as of the date hereof, among the Company and the
Investors.
"Representatives" shall have the meaning ascribed thereto in
Section 5.9(g).
"Required Lenders" shall have the meaning ascribed to such
term in the Credit Agreement.
"Restricted Cash" shall have the meaning ascribed thereto in
the Credit Agreement as in effect on the date hereof.
"Return" shall mean any report, return, statement, estimate,
declaration, notice, form or other information required to be supplied to a
taxing authority in connection with Taxes.
"SEC" shall mean the Securities and Exchange Commission.
"Second Closing" shall have the meaning ascribed thereto in
the recitals.
"Second Closing Date" shall have the meaning ascribed thereto
in Section 2.5.
"Second Closing Cash Purchase Price" shall have the meaning
ascribed thereto in Section 2.4.
"Second Closing Payment" shall be an amount in cash equal to
$1,170,000 payable to the Investors at the Second Closing as provided in Section
2.4.
"Second Closing Termination Date" shall have the meaning
ascribed thereto in Section 7.1.
"SEC Reports" shall have the meaning ascribed thereto in
Section 3.4.
"Second Purchase" shall have the meaning ascribed thereto in
Section 2.4.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of such successor federal statute.
"Senior Indebtedness" shall have the meaning ascribed thereto
in the Notes.
"Shareholder Rights Plan" shall mean the Agreement, dated as
of February 18, 1997, between the Company and Harris Trust Company, as Rights
Agent.
"Significant Subsidiaries" shall mean any direct or indirect
subsidiary of the Company which would constitute a "significant subsidiary" as
defined in Rule 1-02 of Regulation S-X (or any successor thereto).
"Standstill Period" shall mean the period from the date hereof
until the later of (i) the third anniversary of the date hereof and (ii) the
date on which the Investors and Affiliates controlled by the Investors
beneficially own, in the aggregate, a number of shares of Common Stock
constituting less than 10.0% of the shares of Common Stock (assuming conversion
at such time of the Preferred Stock held by the Investors and their Affiliates)
beneficially owned by them immediately after the Second Closing (as such number
may be adjusted from time to time for stock splits, reverse stock splits,
dividends paid in Common Stock, reclassifications of the Common Stock, and other
similar events).
"Stockholders Meeting" shall have the meaning ascribed thereto
in Section 3.17.
"Subsidiary" or "Subsidiaries" shall mean any corporation,
limited liability company, partnership, business association or other Person
with respect to which the Company has, directly or indirectly, ownership of or
rights with respect to securities or other interests having the power to elect a
majority of such Person's board of directors or analogous or similar governing
body, or otherwise having the power to direct the management, business or
policies of that corporation, limited liability company, partnership, business
association or other Person.
"Tax" and "Taxes" shall means any and all federal, state,
local, foreign or other taxes of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any taxing authority, including, without limitation, taxes or other
charges on or with respect to income, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth, and
taxes or other charges in the nature of excise, withholding, ad valorem or value
added, and includes, without limitation, any liability for Taxes of another
person, as a transferee or successor, under Treas. Reg. ss. 1.1502-6 or
analogous provision of Law or otherwise.
"Tax Return" shall mean any return, report or similar
statement (including the attached schedules) required to be filed with respect
to any Tax, including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
"Terminating Breach" shall have the meaning ascribed thereto
in Section 7.1(d).
"TIA" shall mean the Trust Indenture Act of 1939.
"Total Debt" shall have the meaning ascribed thereto in the
Credit Agreement as in effect on the date hereof.
"Transaction Documents" shall mean this Agreement, the Notes,
the Voting Agreements, the Lock-up Agreements, the Certificate of Designation,
the Registration Rights Agreement and all other contracts, agreements,
schedules, certificates and other documents being delivered pursuant to or in
connection with this Agreement or the transactions contemplated hereby or
thereby.
"Transfer" shall have the meaning ascribed thereto in Section
5.17.
"Voting Agreements" shall mean the Voting Agreements, date as
of the date hereof, between the Investors and certain stockholders of the
Company.
ARTICLE II
ISSUANCE AND SALE OF NOTES, GS SHARES AND PREFERRED STOCK
2.1. Initial Issuance, Purchase and Sale. Simultaneously with
the execution and delivery of this Agreement, at the Initial Closing, the
Company is issuing and selling to each Investor, and each Investor is purchasing
from the Company, the aggregate principal amount of Notes and the number of GS
Shares set forth opposite such Investor's name on the signature page hereto, for
an aggregate purchase price of $16,000,000 in cash, less the Initial Closing
Payment (the "Initial Closing Purchase Price"). The Company and the Investors
agree that for U.S. federal, state and local income Tax purposes, the portion of
the Initial Closing Purchase Price allocable to the Notes shall be $13,484,375
and the portion of the Initial Closing Purchase Price allocable to the GS Shares
shall be $2,515,625. The Company and the Investors agree that they shall not
take any position inconsistent with any such allocation.
2.2. The Initial Closing. The Initial Closing is taking place at the
offices of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York 10004 (the "Fried Frank Offices") simultaneously with the
execution and delivery of this Agreement.
2.3. Initial Closing Deliveries. (a) Simultaneously with the execution and
delivery of this Agreement, at the Initial Closing, the Company is delivering or
causing to be delivered to the Investors the following:
(i) duly executed Notes in the principal amounts set forth
opposite such Investor's name on the signature page hereto;
(ii) certificates representing the number of GS Shares in
the amounts set forth opposite such Investor's name on the
signature page hereto;
(iii) a duly executed copy of the Registration Rights
Agreement;
(iv) duly executed copies of the Voting Agreements;
(v) duly executed copies of the Lock-up Agreements;
(vi) an opinion of the Company's counsel, dated as of the
date hereof, addressed to the Investors in the form of Exhibit
2.3(a)(vi), which opinion shall be reasonably satisfactory to the
Investors;
(vii) good standing certificates for the Company and each of
its Significant Subsidiaries, dated no earlier than five days
prior to the date hereof, from the jurisdiction in which each is
incorporated;
(viii) a copy of the resolutions of the Board of Directors
(A) duly authorizing the execution and delivery of each of the
Transaction Documents and the performance of the transactions
contemplated thereby, and (B) approving the Investors becoming
"interested stockholders" under Section 203 of the DGCL, which
resolutions shall be certified as true, correct and effective as
of the date hereof by the Secretary or Assistant Secretary of the
Company and which shall be satisfactory to the Investors;
(ix) evidence, satisfactory to the Investors, that Amendment
No. 1 to the Rights Agreement, in the form attached hereto as
Exhibit 2.3(a)(ix), has been duly executed;
(x) evidence, satisfactory to the Investors, that the
Initial Noteholder Designee shall be duly appointed to serve as a
member of "Class II" of the Board of Directors and the Executive
Committee of the Board of Directors and that the Board of
Directors shall consist of eight directors in each case effective
as of January 20, 2000;
(xi) evidence, satisfactory to the Investors, that the
transactions contemplated hereby will not constitute a "Change in
Control" of the Company under any Commitment to which an officer
is a party or under any of the Compensation and Benefit Plans;
(xii) copies of all third-party consents required to be
obtained by the Company prior to the Initial Closing as set forth
on Schedule 3.9(b), including, without limitation, the consent of
the Required Lenders under the Credit Agreement, which consents
shall be reasonably satisfactory to the Investors;
(xiii) an Officers' Certificate, dated as of the date
hereof, certifying that each of the representations and
warranties of the Company contained in this Agreement are true
and correct as of the date hereof (disregarding for this purpose
all references in such representations and warranties to any
materiality, Material Adverse Effect, Knowledge or similar
qualifications) (except to the extent such representations and
warranties are made as of a particular date, in which case such
representations and warranties shall have been true and correct
in all material respects as of such date), except for failures to
be true and correct which individually or in the aggregate would
not reasonably be expected to have a Material Adverse Effect; and
(xiv) such other instruments and documents as the Investors
reasonably request.
(b) Simultaneously with the execution and delivery of this
Agreement, at the Initial Closing, the Investors are delivering
to the Company the following:
(i) the Initial Closing Purchase Price, which shall
be paid by wire transfer of immediately available funds to an account
designated at least three business days prior to the date hereof by the
Company;
(ii) a duly executed copy of the Registration Rights
Agreement; and
(iii) an Officers' Certificate, dated as of the date hereof,
certifying that each of the representations and warranties of the
Investors contained in this Agreement are true and correct
(disregarding for this purpose all references in such
representations and warranties to any materiality, material
adverse effect, knowledge or similar qualifications) as of the
date hereof (except to the extent such representations and
warranties are made as of a particular date, in which case such
representations and warranties shall have been true and correct
in all material respects as of such date), except for failures to
be true and correct which individually or in the aggregate would
not reasonably be expected to have a material adverse effect on
the ability of the Investors to fulfill its obligations
hereunder.
2.4. Second Issuance, Purchase and Sale. Upon the terms and
subject to the conditions set forth herein, at the Second Closing, the Company
shall issue and sell to each Investor, and each Investor shall purchase from the
Company, the number of shares of Preferred Stock set forth opposite such
Investor's name on the signature page hereto (i) for an aggregate cash purchase
price equal to $39,000,000, minus (x) the Second Closing Payment and (y) any
accrued and unpaid interest on the Notes through and including the Second
Closing Date (the "Second Closing Cash Purchase Price"), and (ii) in exchange
for all of the Notes and GS Shares issued to such Investor at the Initial
Closing (the transactions to occur at the Second Closing, the "Second
Purchase"); provided, that the Investors shall have the right to reallocate
among the Investors the Preferred Stock to be purchased by each Investor by
delivering written notice of such reallocation to the Company not less than
three days prior to the Second Closing so long as such reallocation does not
change the total number of Preferred Stock being acquired hereunder or the
Second Closing Purchase Price.
2.5. The Second Closing. The parties agree that the Second Closing shall
take place at the Fried Frank Offices on the date of the Stockholders Meeting in
accordance with the provisions of Section 5.6.
2.6. Second Closing Deliveries. (a) At the Second Closing, the Company
shall deliver to the Investors the following:
(i) certificates representing the shares of Preferred Stock
in the amounts set forth opposite such Investor's name on the
signature page hereto;
(ii) a copy of the Certificate of Designation of the
Preferred Stock (the "Certificate of Designation"), as filed with
the Secretary of State of the State of Delaware;
(iii) an opinion of the Company's counsel, dated as of the
Second Closing Date, addressed to the Investors in the form of
Exhibit 2.6(a)(iii), which opinion shall be satisfactory to the
Investors;
(iv) a copy of the resolutions adopted by the Company's
stockholders at the Stockholders Meeting, which resolutions shall
be satisfactory to the Investors;
(v) evidence, satisfactory to the Investors, that the
Preferred Designees have been appointed to the Board of Directors
and that the Board of Directors consists of ten directors
effective as of the Second Closing;
(vi) evidence, satisfactory to the Investors, that the
Conversion Shares have been reserved for issuance and delivery
upon conversion of the Preferred Stock;
(vii) copies of all third-party consents required to be
obtained by the Company prior to the Second Closing as set forth
on Schedule 6.2(h), which consents shall be satisfactory to the
Investors;
(viii) an Officers' Certificate, dated as of the Second
Closing Date, certifying that the conditions set forth in
Sections 6.2(a) and 6.2(b) have been satisfied; and
(ix) such other instruments and documents as the Investors
reasonably request.
(b) At the Second Closing, the Investors shall deliver to
the Company the following:
(i) the Second Closing Cash Purchase Price, which shall be
paid by wire transfer of immediately available funds to an
account designated at least three business days prior to the
Second Closing Date by the Company;
(ii) the Notes and the GS Shares purchased by the Investors
at the Initial Closing; and
(iii) an Officers' Certificate, dated as of the
Second Closing Date, certifying that the conditions set forth in
Sections 6.3(a) and 6.3(b) have been satisfied.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Investor,
as of the date hereof and as of the Second Closing Date (to the extent the
Second Closing is consummated), as follows:
3.1. Organization; Subsidiaries. (a) The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
carry on its business as it is now being conducted. The Company is duly
qualified and licensed as a foreign corporation to do business, and is in good
standing (and has paid all relevant franchise or analogous taxes), in each
jurisdiction where the character of its assets owned or held under lease or the
nature of its business makes such qualification necessary, except where the
failure to so qualify or be licensed could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The minute
books (containing the records of meetings of stockholders, the Board of
Directors, and any committees of the Board of Directors), stock record books and
certificate books of the Company contain complete and correct records in all
material respects of all corporate actions taken at any such meetings and other
corporate governance matters, the stock ownership of the Company and the
transfer of the shares of its capital stock since the date of inception of the
Company. Complete and correct copies of all of the foregoing have previously
been made available to the Investors.
(b) Schedule 3.1(b) sets forth a complete and correct list of
each of the Subsidiaries. Except as set forth on Schedule 3.1(b), the Company
owns, either directly or indirectly through one or more Subsidiaries, all of the
capital stock or other equity interests of the Subsidiaries free and clear of
all Encumbrances, other than transfer restrictions imposed by applicable federal
and state securities Laws. All of the issued and outstanding shares of capital
stock or other equity interests of each of the Subsidiaries held directly or
indirectly by the Company have been duly authorized and are validly issued,
fully paid and nonassessable. No shares of capital stock or other equity
interests of any of the Subsidiaries are entitled to preemptive rights. Except
as set forth on Schedule 3.1(b) or as disclosed in the SEC Reports, there are no
outstanding subscription rights, options, warrants, convertible or exchangeable
securities or other rights of any character whatsoever relating to issued or
unissued capital stock or other equity interests of any of the Subsidiaries, or
any Commitments of any character whatsoever relating to issued or unissued
capital stock or other equity interests of any of the Subsidiaries or pursuant
to which the Company or any of the Subsidiaries is or may become bound to issue
or grant additional shares of its capital stock or other equity interests or
related subscription rights, options, warrants, convertible or exchangeable
securities or other rights, or to grant preemptive rights. Except as set forth
on Schedule 3.1(b) or as disclosed in the SEC Reports, there are no voting
trusts, stockholders agreements, proxies or other Commitments or understandings
to which any of the Subsidiaries is a party with respect to the voting or
transfer of any capital stock or other equity interest of any of the
Subsidiaries. Except as set forth on Schedule 3.1(b), the Company does not own,
directly or indirectly, any interest in any corporation, limited liability
company, partnership, business association or other Person.
(c) Each of the Subsidiaries is a corporation, limited
liability company, partnership, business association or other Person duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite power and authority to carry
on its business as it is now being conducted. Except as set forth on Schedule
3.1(c), each of the Subsidiaries is duly qualified and licensed to do business,
and is in good standing (and has paid all relevant franchise or analogous
taxes), in each jurisdiction where the character of its assets owned or held
under lease or the nature of the business conducted by it makes such
qualification necessary except where the failures of all of such Subsidiaries to
so qualify or be licensed could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The minute books or
other records (containing the records of meetings of stockholders or other
holders of other equity interests, the board of directors or other similar
governing body, and any committees thereof), the stock ownership or analogous
records and the certificate books of each of the Subsidiaries contain complete
and correct records in all material respects of substantially all actions taken
at any such meetings and other governance matters, the stock or other equity
ownership of each of the Subsidiaries and the transfer of the shares of its
capital stock or other equity interest since the date of inception of the
applicable Subsidiary. Complete and correct copies of all of the foregoing have
previously been made available to the Investors.
3.2. Due Authorization. The Company has all right, corporate
power and authority to enter into this Agreement and each of the other
Transaction Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Company of
this Agreement and each of the other Transaction Documents to which it is a
party, the issuance and sale of the Notes, the GS Shares and the Preferred Stock
by the Company and the compliance by the Company with each of the provisions of
this Agreement and each of the other Transaction Documents to which it is a
party (including the reservation and issuance of the Conversion Shares and the
consummation by the Company of the transactions contemplated hereby and thereby)
(a) are within the corporate power and authority of the Company and (b) have
been duly authorized by all requisite corporate proceedings on the part of the
Company, except for the approval by the stockholders of the Company referenced
in Section 5.6. The Board of Directors has determined that it is advisable and
in the best interest of the Company's stockholders for the Company to consummate
the issuance and sale of the Notes, the GS Shares and the Preferred Stock upon
the terms and subject to the conditions set forth in this Agreement, and has
unanimously recommended that the Company's stockholders approve the transactions
referenced in Section 5.6. As of the date hereof, the Board of Directors consist
of seven directors and the Initial Noteholder Designee shall be duly appointed
to serve as a member of the Board of Directors and the Executive Committee of
the Board of Directors as of January 20, 2000. This Agreement has been, and each
of the other Transaction Documents to which the Company is a party when executed
and delivered by the Company will be, duly and validly executed and delivered by
the Company, and this Agreement constitutes, and each of such other Transaction
Documents when executed and delivered by the Company will constitute, a valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, except as enforceability against the Company may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws now or hereafter in effect relating to the rights of creditors
generally. The GS Shares have been duly and validly issued and are outstanding,
fully paid and nonassessable. The Conversion Shares at the Second Closing will
be validly reserved for issuance, and upon issuance in accordance with the
Certificate of Designation will be duly and validly issued and outstanding,
fully paid and nonassessable.
3.3. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 50,000,000 shares of Common Stock,
of which 21,732,423 shares are issued and outstanding and (ii) 20,000,000 shares
of preferred stock, par value $0.01 per share, of which no shares are issued and
outstanding. All of the issued and outstanding shares of Common Stock have been
duly authorized and are validly issued, fully paid and nonassessable. Other than
the shares of Preferred Stock to be issued to the Investors at the Second
Closing, no shares of capital stock of the Company are entitled to preemptive
rights. Except as set forth on Schedule 3.3, as disclosed in the SEC Reports or
as contemplated by this Agreement or the other Transaction Documents, there are
no outstanding subscription rights, options, warrants, convertible or
exchangeable securities or other rights of any character whatsoever relating to
issued or unissued capital stock of the Company, or any Commitments of any
character whatsoever relating to issued or unissued capital stock of the Company
or pursuant to which the Company or any of the Subsidiaries is or may become
bound to issue or grant additional shares of its capital stock or related
subscription rights, options, warrants, convertible or exchangeable securities
or other rights, or to grant preemptive rights. Except as set forth on Schedule
3.3, as disclosed in the SEC Reports or as contemplated by this Agreement or the
other Transaction Documents, (i) the Company has not agreed to register any
securities under the Securities Act or under any state securities law or granted
registration rights to any Person or entity and (ii) there are no voting trusts,
stockholders agreements, proxies or other Commitments or understandings in
effect to which the Company is a party or of which it has Knowledge with respect
to the voting or transfer of any of the shares of Common Stock. Except as set
forth on Schedule 3.3, to the extent that any options, warrants or any of the
other rights described above are outstanding, neither the issuance and sale of
the Notes, the GS Shares or the Preferred Stock nor the issuance of any
Conversion Shares will result in an adjustment of the exercise or conversion
price or number of shares issuable upon the exercise or conversion of any such
options, warrants or other rights.
3.4. SEC Reports. The Company has timely filed all proxy
statements, reports and other documents required to be filed by it with the SEC
under the Exchange Act from and after January 1, 1997, and the Company has made
available to each of the Investors complete and correct copies of all annual
reports, quarterly reports, proxy statements and other reports filed by the
Company with the SEC under the Exchange Act from and after such date
(collectively, the "SEC Reports"). Each SEC Report was on the date of its filing
in compliance in all material respects with the requirements of its respective
report form and did not on the date of filing contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were or will be made, not misleading, and as of the date hereof
there is no fact or facts not disclosed in the SEC Reports that relate
specifically to the Company or any of the Subsidiaries and which could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Complete and correct copies of all material correspondence
between the Company or any of the Subsidiaries, on the one hand, and the SEC, on
the other hand, have previously been made available to the Investors.
3.5. Financial Statements. The consolidated financial
statements (including any related schedules and/or notes) included in the SEC
Reports have been prepared in accordance with United States generally accepted
accounting principles ("GAAP") consistently followed throughout the periods
involved, except as may be noted therein, and fairly present in all material
respects the consolidated financial condition, results of operations and changes
in stockholders' equity of the Company and the Subsidiaries as of the respective
dates thereof and for the respective periods then ended (in each case subject,
as to interim statements, to changes resulting from year-end adjustments).
Neither the Company nor any of the Subsidiaries has any Liability, except (i)
liabilities and obligations in the respective amounts reflected or reserved
against in the audited consolidated balance sheet of the Company and the
Subsidiaries as of December 31, 1998 (the "1998 Balance Sheet"), or (ii)
liabilities and obligations incurred in the ordinary course of business since
December 31, 1998 which could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
3.6. Absence of Certain Changes. Except as set forth on
Schedule 3.6, as disclosed in the SEC Reports or as contemplated by this
Agreement or the other Transaction Documents, since December 31, 1998: (i) the
business of the Company and the Subsidiaries taken as a whole has been conducted
in the ordinary course of business consistent with past practice, (ii) the
Company and each of the Subsidiaries have not (a) suffered any change, event or
development or series of changes, events or developments which could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (b) suffered any damage, destruction or casualty loss to its
physical properties (whether or not covered by insurance) which could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or (c) been the subject of any Litigation or threatened or
commenced investigation by a Governmental Entity, and (iii) there has not been
any transaction, act, development, circumstance or event that if it had occurred
on or after the date hereof without the prior consent of the Investors would
constitute a breach of Section 5.1.
3.7. Litigation. (a) Except as set forth on Schedule 3.7(a) or
as disclosed in the SEC Reports, there is no Litigation pending or, to the
Knowledge of the Company, threatened against the Company or any of the
Subsidiaries or involving any of their respective properties or assets by or
before any court, arbitrator or other Governmental Entity, which, if determined
adversely to the Company, could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(b) Neither the Company nor any of the Subsidiaries is in
default under or in breach of any order, judgment or decree of any court,
arbitrator or other Governmental Entity, and neither the Company nor any of the
Subsidiaries is a party or subject to any order, judgment or decree of any
court, arbitrator or other Governmental Entity.
3.8. Title to Properties. (a) The Company and each of the Subsidiaries have
good and valid title to, or, in the case of property leased by them, a valid and
subsisting leasehold interest in, their respective properties and assets, free
of all Encumbrances except for Permitted Encumbrances.
(b) Schedule 3.8(b) sets forth a complete and correct list of
all Owned Real Property. With respect to the Owned Real Property, the Company or
a Subsidiary has good and marketable title in fee simple to the Owned Real
Property, free and clear of all Encumbrances except for (A) Encumbrances set
forth on Schedule 3.8(b), (B) liens for taxes not yet due and payable, and (C)
Encumbrances that are not individually or in the aggregate material (the
Encumbrances described in clauses (A), (B) and (C) collectively, "Permitted
Encumbrances").
(c) Schedule 3.8(c) sets forth a complete and correct list of
all Leased Real Property. With respect to the Leased Real Property, the Company
or a Subsidiary has good and valid leasehold estates in the Leased Real
Property, free and clear of all Encumbrances except for Permitted Encumbrances.
3.9. Consents; No Violations. (a) Except as set forth on
Schedule 3.9(a), neither the execution, delivery or performance by the Company
of this Agreement or any of the other Transaction Documents to which it is a
party nor the consummation of the transactions contemplated hereby or thereby
will (i) conflict with, or result in a breach or a violation of, any provision
of the certificate of incorporation or by-laws or other organizational documents
of the Company or any of the Subsidiaries; (ii) constitute, with or without
notice or the passage of time or both, a breach, violation or default, create an
Encumbrance, or give rise to any right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or acceleration,
under (A) any Law or (B) any Commitment to which the Company or any of the
Subsidiaries is a party or pursuant to which any of them or any of their assets
or properties is subject, except, with respect to the matters set forth in this
clause (ii), for breaches, violations, defaults, Encumbrances, or rights of
termination, modification, cancellation, prepayment, suspension, limitation,
revocation or acceleration, which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or adversely affect the
ability of the Company to consummate the transactions contemplated by this
Agreement or any other Transaction Document to which it is a party; (C)
constitute a "Change in Control" of the Company under any Commitment to which an
officer is a party or under any of the Compensation and Benefit Plans; or (D)
except for any required filing under the HSR Act, require any consent, approval
or authorization of, notification to, filing with, or exemption or waiver by,
any Governmental Entity or any other Person on the part of the Company or any of
the Subsidiaries. Neither the Company nor any of the Subsidiaries is a party to
any agreement or bound by the terms of any instrument or security which would
prevent the Company from paying cash dividends on the Preferred Stock on a
current basis.
(b) The Company has received all consents required to be
obtained prior to or at the Initial Closing as set forth on Schedule 3.9(b),
including, without limitation, the consent of the Required Lenders under the
Credit Agreement to the transactions contemplated hereby and by the other
Transaction Documents.
3.10. Compliance with Laws; Licenses. Except as set forth on
Schedule 3.10 or as disclosed in the SEC Reports, the Company and each of the
Subsidiaries are in compliance in all material respects with all Laws, and since
January 1, 1997, neither the Company nor any of the Subsidiaries has received
any notice of any alleged violation of Law applicable to it. Except as set forth
on Schedule 3.10, the Company and each of the Subsidiaries have all Licenses,
and all of such Licenses are valid and in full force and effect, and the Company
and each of the Subsidiaries have duly performed and are in compliance in all
material respects with all of their obligations under such Licenses. No event
has occurred with respect to any of such Licenses that allows, or after notice
or lapse of time or both would allow, the suspension, limitation, revocation,
non-renewal or termination thereof or would result in any other material
impairment of the rights of the holder thereof in and under any of such
Licenses, and no terminations thereof or proceedings to suspend, limit, revoke
or terminate any License have been threatened.
3.11. Tax Matters. The Company and each of the Subsidiaries
have (i) filed all federal, state, local and foreign Tax Returns required to be
filed by them (taking into account extensions), (ii) paid all Taxes shown to be
due on such Returns and paid or accrued on the 1998 Balance Sheet all Taxes
which are otherwise due and payable and (iii) paid or accrued on the 1998
Balance Sheet all Taxes for which a notice of assessment or collection has been
received, except in the case of clauses (i), (ii) or (iii) for any such filings,
payments or accruals which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Neither the IRS nor
any other taxing authority has asserted any claim for Taxes, nor to the
Knowledge of the Company, is threatening to assert any claims for Taxes, against
the Company or any of the Subsidiaries which claims, if determined adversely to
the Company or any of the Subsidiaries, would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Company and each
of the Subsidiaries have withheld or collected and paid over to the appropriate
Governmental Entities (or are properly holding for such payment) all Taxes
required by Law to be withheld or collected, except for amounts which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. There are no liens for Taxes upon the assets of the Company or
any of the Subsidiaries (other than liens for Taxes that are not yet due),
except for liens which could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect. Neither the Company nor any of
the Subsidiaries (i) has any Liability under Treasury Regulation Section
1.1502-6 or analogous state, local, or foreign law provision, except to the
extent any such Liabilities could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, or (ii) is a party to
a Tax sharing or Tax indemnity agreement or any other Commitment of a similar
nature with any entity other than the Company or any of the Subsidiaries that
remains in effect and under which the Company or any of the Subsidiaries could
have any material Liability for Taxes. No claim has been made by a taxing
authority in a jurisdiction where the Company or any of the Subsidiaries does
not file Tax Returns that the Company or any of the Subsidiaries is or may be
subject to taxation by that jurisdiction where such claim, if determined
adversely to the Company or any of the Subsidiaries, would, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. Neither
the Company nor any of the Subsidiaries is the subject of any currently ongoing
audit or examination with respect to a material amount of Taxes, nor, to the
Knowledge of the Company, has any such audit been threatened or proposed, by any
taxing authority.
3.12. Employee Benefit Plans. (a) Schedule 3.12 sets forth a
complete and correct list of (i) each material Compensation and Benefit Plan,
and (ii) each Compensation and Benefit Plan (whether or not material) which
contains a "change of control" or similar provision. The Company has heretofore
delivered or made available to the Investors complete and correct copies of all
such Compensation and Benefit Plans and any amendments thereto (or if a
Compensation and Benefit Plan is not in written form, a written description
thereof), any related trust or other funding agreement or vehicle, the most
recent reports or summaries required under ERISA or the Code and, with respect
to each Compensation and Benefit Plan intended to qualify under Article 401 of
the Code, the most recent determination letter received from the IRS.
(b) The Company, each of the Subsidiaries and each ERISA
Affiliate have performed in all material respects all obligations required to be
performed by them under each Compensation and Benefit Plan and none of the
Company, any of the Subsidiaries or any ERISA Affiliate is in material default
under or in material violation of any Compensation and Benefit Plan. Each
Compensation and Benefit Plan has been established, operated, maintained and
administered, as the case may be, substantially in accordance with its terms and
in compliance with all applicable laws, statutes, orders, rules and regulations,
including, but not limited to, ERISA and the Code.
(c) Except as set forth on Schedule 3.12, at no time has the
Company, any of the Subsidiaries or any ERISA Affiliate contributed to or been
required to contribute to, or incurred any withdrawal liability (within the
meaning of Article 4201 of ERISA) to, any Compensation and Benefit Plan that is
a "multi-employer plan" within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA (a "Multi-Employer Plan").
(d) None of the Company, any of the Subsidiaries or any ERISA
Affiliate (i) presently sponsors, maintains or contributes to, (ii) is required
to sponsor, maintain or contribute to or (iii) has ever sponsored, maintained,
contributed to or been required to contribute to, any Compensation and Benefit
Plan (other than a Multi-Employer Plan) that is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA and that is subject to Title
IV of ERISA.
3.13. Intellectual Property. Schedule 3.13 sets forth a
complete and correct list of each item of Intellectual Property owned or used by
the Company or any of the Subsidiaries. Except as disclosed on Schedule 3.13,
(i) the Company or a Subsidiary owns or has the right to use pursuant to a valid
license, sub-license or other agreement all of the Intellectual Property used by
it, except where the absence of any thereof could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect and (ii)
neither the Company nor any of the Subsidiaries has interfered with, infringed
upon or misappropriated any Intellectual Property rights of third parties,
except for interferences, infringements and misappropriations which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, and neither the Company nor any of the Subsidiaries has received
any written claim, demand or notice alleging any such interference, infringement
or misappropriation. To the Knowledge of the Company, no third party has
interfered with, infringed upon or misappropriated any Intellectual Property
rights of the Company or any of the Subsidiaries, except for interferences,
infringements and misappropriations which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
3.14. Commitments.
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(a) Schedule 3.14 sets forth (or cross-references to another schedule
hereto that sets forth) a complete and correct list of all contracts or
agreements (whether written or oral), including any amendments thereto, (x) to
which the Company or any of the Subsidiaries is a party or (y) by or to which
the Company or any of the Subsidiaries or any of their properties may be bound
or subject (whether or not listed or required to be listed on Schedule 3.14,
individually a "Commitment" and collectively, the "Commitments") of the
following types:
(i) Commitments for the sale of any tangible or intangible
properties or assets other than in the ordinary course of
business, or for the grant of any option or preferential rights
to purchase any such properties or assets, in each case providing
for aggregate payments in excess of $100,000;
(ii) Commitments for the construction, modification or
repair of any building, structure or facility or for the
incurrence of any capital expenditures or for the acquisition of
fixed assets, in each case providing for aggregate payments in
excess of $100,000;
(iii) Commitments relating to the acquisition or disposition
by the Company or any of the Subsidiaries of any business or the
capital stock of any other Person that have not been consummated
or that have been consummated but contain representations,
covenants, guaranties, indemnities or other obligations that
remain in effect;
(iv) Commitments relating to any Litigation;
(v) Commitments relating to the lending or borrowing of
money, including loan agreements, performance bonds, letters of
credit, bankers acceptances and similar instruments or
arrangements;
(vi) Commitments containing covenants of the Company or any
of the Subsidiaries or any successor thereto not to compete, not
to engage in any line of business or conduct business in any
geographical area or with any Person, or not to disclose certain
information;
(vii) Commitments pursuant to which the Company or any of
the Subsidiaries (x) leases, subleases, licenses or otherwise has
the right to use any real or personal property, whether tangible
or intangible, including leases and subleases of the Leased Real
Property, or (y) is the lessor of any real or personal property,
in each case providing for aggregate payments in excess of
$100,000;
(viii) Commitments in respect of Licenses and Commitments
relating to Intellectual Property;
(ix) Commitments in respect of any joint venture,
partnership or other similar arrangement (including, without
limitation, any joint development agreement);
(x) Commitments with any Governmental Entity, including,
without limitation, the United States Department of Health and
Human Services;
(xi) Commitments relating to Indebtedness not included under
clause (v), including Commitments relating to outstanding letters
of credit or performance bonds or creating any Liability as
guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any Person, except as
endorser or maker of checks or letters of credit endorsed or made
in the ordinary course of business;
(xii) any Commitment that is material to the Company or any
of the Subsidiaries regardless of the size of any payment
thereunder and regardless of whether it would otherwise not be
required to be listed on Schedule 3.14 because of the exclusions
set forth in any of clauses (i) through (xi) of this Section
3.14(a); and
(xiii) Commitments currently in negotiation by the Company
or any of the Subsidiaries of a type that if entered into would
be required to be listed on Schedule 3.14 or to be disclosed on
any other schedule hereto.
(b) Complete and correct copies (or, if oral, full written
descriptions) of all Commitments required to be listed on
Schedule 3.14, including all amendments thereto, and complete and
correct copies of all standard form Commitments used in the
conduct of the business, have been made available to the
Investors. Except as set forth on Schedule 3.14, all of the
Commitments are valid, binding, in full force and effect and
enforceable in accordance with their respective terms by the
Company or a Subsidiary (as the case may be) against the
respective counterparties to such Commitments except where the
failure to be valid, binding or in full force and effect could
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Except as set forth on Schedule
3.14, (i) there is no breach, violation or default and no event
that, with or without notice or the passage of time or both,
would constitute a breach, violation or default, or give rise to
any Encumbrance or right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration under, any Commitment, except for breaches,
violations, defaults, Encumbrances or rights of termination,
modification, cancellation, prepayment, suspension, limitation,
revocation or acceleration that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect, and (ii) neither the Company nor any of the Subsidiaries
or, to the Company's Knowledge, any other party to any of the
Commitments is in arrears in respect of the performance or
satisfaction of the terms and conditions on its part to be
performed or satisfied under any of such Commitments except where
any such failure could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, and no
waiver or indulgence thereunder has been granted by any of the
parties thereto. Schedule 3.14 sets forth a complete and correct
list of each Commitment that contains a provision requiring the
other party thereto to consent to the transactions contemplated
hereby in order for such Commitment to remain in full force and
effect following each Closing in accordance with its current
terms.
3.15. Acquisitions. Schedule 3.15 sets forth a complete and
correct list of all acquisitions (by purchase of assets, purchase of stock,
merger or otherwise) of any Person or any businesses, business lines or material
assets pending or consummated or agreed to be consummated by the Company or any
of the Subsidiaries since January 1, 1997 or earlier to the extent that the
Company or any of the Subsidiaries has continuing Liabilities with respect to
any acquisition. All continuing material Liabilities of the Company or any of
the Subsidiaries in connection with any acquisition (including, without
limitation, arising out of indemnification, the granting of registration rights
or the terms of any earn-out or make-whole provisions) are summarized on
Schedule 3.15. In connection with any acquisition consummated by the Company or
any of the Subsidiaries in which part or all of the consideration consisted of
shares of capital stock or any other securities (including, without limitation,
capital stock of the Company), such shares of capital stock or other securities
were issued in compliance with the registration requirements of all applicable
federal and state securities laws.
3.16. Brokers or Finders. No agent, broker, investment banker
or other Person is or will be entitled to any broker's or finder's fee or any
other commission or similar fee in connection with any of the transactions
contemplated by this Agreement or the other Transaction Documents based on
arrangements made by or on behalf of the Company or any of the Subsidiaries.
3.17. Proxy Statement. Any proxy statement to be sent to the
stockholders of the Company in connection with a meeting of the stockholders of
the Company in connection with the transactions contemplated by this Agreement
and the other Transaction Documents (the "Stockholders Meeting"; such proxy
statement as amended or supplemented is referred to herein as the "Proxy
Statement") will comply as to form in all material respects with Article 14(a)
of the Exchange Act and the rules promulgated thereunder, and it shall not, on
the date the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to stockholders or at the time of the Stockholders Meeting, contain
any untrue statement of a material fact, or, in light of the circumstances under
which made, omit to state any material fact necessary in order to make the
statements made therein not false or misleading, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for the Stockholders Meeting which has
become false or misleading. If at any time prior to the Second Closing any event
relating to the Company or any of the Subsidiaries or any of their respective
Affiliates, officers or directors should be discovered by the Company that is
required to be set forth in a supplement to the Proxy Statement, the Company
shall promptly inform the Investors thereof.
3.18. Insurance. Schedule 3.18 sets forth a complete and
correct list of all insurance coverage carried by the Company and each of the
Subsidiaries, including for each policy the type and scope of coverage, the
carrier and the amount of coverage. The Company maintains a directors' and
officers' insurance policy with National Union Fire Insurance Company of
Pittsburgh, PA, a complete and correct copy of which has previously been
delivered to the Investors.
3.19. Holding Company Act and Investment Company Act. Neither
the Company nor any of the Subsidiaries is: (i) a "public utility company" or a
"holding company," or an "affiliate" or a "subsidiary company" of a "holding
company," or an "affiliate" of such a "subsidiary company," as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended, or (ii) a
"public utility," as defined in the Federal Power Act, as amended, or (iii) an
"investment company" or an "affiliated person" thereof or an "affiliated person"
of any such "affiliated person," as such terms are defined in the Investment
Company Act of 1940, as amended.
3.20. Offering of the Notes, the GS Shares and the Preferred
Stock. (a) It is not necessary in connection with the offer, sale and delivery
of the Notes, the GS Shares and the Preferred Stock to the Investors to register
the Notes, the GS Shares or the Preferred Stock under the Securities Act. Until
such time as the exchange notes are issued pursuant to the Exchange and
Registration Rights Agreement or the Notes or exchange notes are otherwise
registered pursuant to an effective registration statement under the Securities
Act, it is not necessary to qualify an indenture relating to the Notes or
exchange notes under the TIA.
(b) The Company has not, directly or indirectly, offered, sold
or solicited any offer to buy and will not, directly or indirectly, offer, sell
or solicit any offer to buy, any security of a type or in a manner which would
be integrated with the sale of the Notes, the GS Shares or the Preferred Stock
and require any of the Notes, the GS Shares or the Preferred Stock to be
registered under the Securities Act. None of the Company, its Affiliates or any
person acting on its or any of their behalf has engaged or will engage in any
form of general solicitation or general advertising (within the meaning of Rule
502(c) under the Securities Act) in connection with the offering of the Notes,
the GS Shares and the Preferred Stock. With respect to any Notes, GS Shares or
Preferred Stock, if any, sold in reliance upon the exemption afforded by
Regulation S: (i) none of the Company, its Affiliates or any person acting on
its or their behalf has engaged or will engage in any directed selling efforts
within the meaning of Regulation S and (ii) each of the Company and its
Affiliates and any Person acting on its or their behalf has complied and will
comply with the offering restrictions set forth in Regulation S.
(c) The Notes are eligible for resale pursuant to Rule 144A
and will not, as of the date hereof, be of the same class as securities listed
on a national securities exchange registered under Section 6 of the Exchange Act
or quoted on a U.S. automated interdealer quotation system.
3.21. Existing Indebtedness; Future Liens. (a) Schedule 3.21
sets forth a complete and correct list of all outstanding Indebtedness of the
Company and each of the Subsidiaries as of the date hereof. Neither the Company
nor any of the Subsidiaries has defaulted and no waiver of default is currently
in effect, in the payment of any principal or interest on any such Indebtedness
and no event or condition exists with respect to any such Indebtedness that
would permit (or that with notice or the lapse of time, or both, would permit)
one or more Persons to cause such Indebtedness to become due and payable before
its stated maturity or before its regularly scheduled dates of payment. Neither
the Company nor any of the Subsidiaries has received any notice from any Person
declaring or threatening to declare any Indebtedness owed by the Company or any
of the Subsidiaries to such Person due and payable prior to the stated maturity
of such Indebtedness or before its regularly scheduled dates of payment.
(b) Neither the Company nor any of the Subsidiaries has agreed
or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property or assets, whether now owned or
hereafter acquired, to be subject to any Encumbrances (other than Permitted
Encumbrances).
3.22. Solvency. The Company is not, and after giving effect to
the issuance and sale of the Notes, the GS Shares and the Preferred Stock and
the application of the proceeds therefrom will not be, insolvent within the
meaning of Title 11 of the United States Code or any comparable state law
provision.
3.23. Section 203 of the DGCL; Takeover Statute. The Board of
Directors has taken all action necessary to cause the restrictions contained in
Section 203 of the DGCL to be inapplicable to the transactions contemplated by
this Agreement or the other Transaction Documents and to approve the Investors
becoming "interested stockholders" (as defined in such Section), whether by way
of the transactions contemplated by this Agreement or the other Transaction
Documents, conversion of the Preferred Stock or any other future transaction.
The execution, delivery and performance of this Agreement or any of the other
Transaction Documents and the consummation of the transactions contemplated
hereby or thereby will not cause to be applicable to the Company any "fair
price," "moratorium," "control share acquisition" or other similar antitakeover
statute or regulation enacted under state or federal laws.
3.24. Year 2000. To the knowledge of the Company, the
software, computers and other hardware and systems used by the Company and each
of the Subsidiaries will (i) accurately process date information before, during
and after January 1, 2000, including, but not limited to, accepting date input,
providing date output and performing calculations on dates or portions of dates;
(ii) function accurately and without interruption before, during and after
January 1, 2000 without any change in operations associated with the advent of
the new century; (iii) respond to two digit year date input in a way that
resolves the ambiguity as to century in a disclosed, defined and predetermined
manner; and (iv) store and provide output of date information in ways that are
unambiguous as to century. The Company and each of the Subsidiaries have
contacted their principal vendors and suppliers and other Persons with whom the
Company or any of the Subsidiaries has material business relationships, and each
of such vendors, suppliers and other Persons have notified the Company or the
applicable Subsidiary that its software, computers and other hardware and
systems are Year 2000 compliant in all material respects to the extent affecting
the Company or any of the Subsidiaries. The ability of such vendors, suppliers
and other Persons to identify and resolve their own Year 2000 issues could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
3.25. Margin Regulations. No part of the proceeds from the
sale of the Notes will be used, directly or indirectly, for the purpose of
buying or carrying any margin stock within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System (12 C.F.R. 221), or for the
purpose of buying or carrying or trading in any securities. Margin stock does
not constitute more than 5% of the value of the consolidated assets of the
Company and the Subsidiaries and the Company has no present intention that
margin stock will constitute more than 5% of the value of such assets. As used
in this Section, the terms "margin stock" and "purpose of buying or carrying"
shall have the meanings assigned to them in Regulation U.
3.26. Disclosure. Neither this Agreement nor any other
Transaction Document, nor any schedule or exhibit hereto or thereto, nor any
certificate furnished to the Investors by or on behalf of the Company in
connection with the transactions contemplated hereby and thereby, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading. The
financial forecasts furnished by the Company to the Investors have been
reasonably prepared and reflect the best currently available estimates and
judgment of the Company's management as to the expected future financial
performance of the Company and the Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each of the Investors, severally and not jointly, hereby
represents and warrants to the Company, as of the date hereof and as of the
Second Closing Date (to the extent the Second Closing is consummated), as
follows:
4.1. Acquisition for Investment. Such Investor is acquiring the Notes, the
GS Shares and -------------------------- the Preferred Stock for its own
account, for investment and not with a view to the distribution thereof within
the meaning of the Securities Act.
4.2. Restricted Securities. Such Investor understands that (i)
the Notes, the GS Shares and the Preferred Stock will not be registered under
the Securities Act or any state securities laws by reason of their issuance by
the Company in a transaction exempt from the registration requirements thereof
and (ii) the Notes, the GS Shares, the Preferred Stock and the Conversion Shares
may not be sold unless such disposition is registered under the Securities Act
and applicable state securities laws or is exempt from registration thereunder.
4.3. Accredited Investor. Such Investor is an "accredited investor" (as
defined in Rule 501(a) under the Securities Act).
4.4. Sufficient Funds. Such Investor will have available sufficient funds
to pay its obligations under this Agreement on the date any such obligation is
due.
ARTICLE V
COVENANTS
5.1. Conduct of Business by the Company Pending the Second
Closing. The Company covenants and agrees that, between the date hereof and the
earlier of the Second Closing Date and the Second Closing Termination Date,
unless the Investors otherwise agree in writing, the Company shall, and shall
cause each of the Subsidiaries to, (a) conduct its business only in the ordinary
course and consistent with past practice; (b) use reasonable best efforts to
preserve and maintain its assets and properties and its relationships with its
customers, suppliers, advertisers, distributors, agents, officers and employees
and other Persons with which it has significant business relationships; (c) use
reasonable best efforts to maintain all of the material assets it owns or uses
in the ordinary course of business consistent with past practice; (d) use
reasonable best efforts to preserve the goodwill and ongoing operations of its
business; (e) maintain its books and records in the usual, regular and ordinary
manner, on a basis consistent with past practice; (f) perform and comply in all
material respects with its Commitments; and (g) comply in all material respects
with applicable Laws. Except as expressly contemplated by this Agreement or as
set forth on Schedule 5.1, between the date hereof and the earlier of the Second
Closing Date and the Second Closing Termination Date, the Company shall not, and
shall cause each of the Subsidiaries not to, do any of the following without the
prior written consent of the Investors:
(i) change any method of accounting or accounting practice used by the
Company or any Subsidiary, other than such changes required by GAAP;
(ii) other than in connection with the transactions contemplated hereby,
repurchase, redeem or otherwise acquire or exchange any share of Common Stock or
other equity interests; except for issuances of Common Stock pursuant to the
exercise of options to purchase Common Stock or pursuant to existing Commitments
outstanding on the date hereof, in each case listed on Schedule 3.3, and except
as contemplated by this Agreement and pursuant to acquisitions permitted
pursuant to Sections 3.7 and 3.13 of the Notes, issue or sell any additional
shares of the capital stock of, or other equity interests in, the Company or any
of the Subsidiaries, or securities convertible into or exchangeable for such
shares or other equity interests, or issue or grant any subscription rights,
options, warrants or other rights of any character relating to shares of such
capital stock, such other equity interests or such securities;
(iii) amend the Company's certificate of incorporation or by-laws, except
with respect to the filing of the Certificate of Designation, or amend any
Subsidiary's charter or by-laws or other organizational documents in any
material respect;
(iv) make any change in the Company's or any Subsidiary's Tax accounting
methods, any new election with respect to Taxes or any modification or
revocation of any existing election with respect to Taxes or settle or otherwise
dispose of any Tax audit, dispute, or other Tax proceeding;
(v) take any action that is reasonably likely to result in any of the
representations and warranties set forth in Article III becoming false or
inaccurate in any material respect as of the Second Closing Date; or
(vi) agree to take any of the actions restricted by this Section 5.1.
5.2. No Solicitation. Between the date hereof and the earlier
of the Second Closing and the Second Closing Termination Date, other than in
connection with the transactions contemplated hereby, neither the Company nor
any of the Subsidiaries shall solicit, propose or facilitate (including by way
of providing information regarding the Company or any of the Subsidiaries or
their respective businesses to any Person), directly or indirectly, any
inquiries, discussions, offers or proposals for, continue or enter into
negotiations looking toward, or enter into or consummate any Commitment or
understanding in connection with any offer or proposal regarding, any purchase
or other acquisition of all or any material portion of the Company and the
Subsidiaries taken as a whole, the business or assets of the Company and the
Subsidiaries taken as a whole, any debt financing (other than pursuant to
Section 5.3 hereof), or any of the capital stock of or equity interests in
(whether newly issued or currently outstanding) the Company or any of the
Subsidiaries (other than with respect to proposed acquisitions by the Company of
businesses for which the Company would use its capital stock as consideration as
permitted by Sections 3.7 and 3.13 of the Notes), or any merger, business
combination or recapitalization involving the Company or any of the material
Subsidiaries or their respective businesses; and the Company shall cause the
Subsidiaries and the Affiliates, officers, directors, employees, representatives
and agents of the Company and the Subsidiaries (collectively, "Company
Affiliates") to refrain from engaging in any of the above activities that the
Company is restricted from engaging in. The Company agrees to promptly inform
the Investors of the identity of any Person making any inquiry, offer or
proposal, and the nature and terms of any such inquiry, offer or proposal, and
to keep the Investors promptly and fully informed as to the status thereof. The
Company shall be liable to the Investors for any breach of the covenants set
forth in this Section 5.2 by any Company Affiliate.
5.3. Bank Financing. Prior to the Second Closing, the Company
shall obtain additional senior debt financing under the Credit Agreement or
another facility syndicated or privately placed by a bank or its affiliates in
an amount not less than $65 million, on terms reasonably satisfactory to the
Investors taking into account current market conditions (the "Additional
Financing"). The Investors shall use their reasonable best efforts to assist and
cooperate with the Company in its efforts to obtain the Additional Financing;
provided, however, that any such assistance and cooperation by the Investors
shall not, in any case, require the Investors to waive or modify any of their
rights under any of the Transaction Documents and shall not require the
expenditure of any funds by the Investors.
5.4. Press Releases; Interim Public Filings. Subject to
Section 9.2, the Company shall deliver to the Investors complete and correct
copies of all press releases and public filings made between the date hereof and
the earlier of the Second Closing and the Second Closing Termination Date. The
Company shall not disclose the name or identity of any of the Investors as an
investor in the Company in any press release or other public announcement or in
any document or material filed with any Governmental Entity without the prior
written consent of such Investor, unless such disclosure is required by
applicable Law, in which case prior to making such disclosure the Company shall
give written notice to such Investor, describing in reasonable detail the
proposed content of such disclosure, shall permit such Investor to review and
comment upon the form and substance of such disclosure and shall take such
comments into account in making such disclosure.
5.5. HSR Act. Each of the Investors and the Company shall
cooperate with the other in making filings under the HSR Act and shall use its
best efforts to take, or cause to be taken, all actions necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement to occur at the Second Closing,
including using its reasonable best efforts to resolve such objections, if any,
as the Antitrust Division of the Department of Justice or the Federal Trade
Commission or state antitrust enforcement or other Governmental Entities may
assert under antitrust Laws with respect to the transactions contemplated
hereby. In the event an action is instituted by any Person challenging the
transactions contemplated hereby as violative of the antitrust laws, the
Investors and the Company shall use their reasonable best efforts to resist or
resolve such action.
5.6. Proxy Statement; Stockholders Meeting. The Company shall
hold the Stockholders Meeting as soon as practicable after the date hereof for
the purpose of acting upon this Agreement and the transactions to be consummated
at the Second Closing to the extent requiring stockholder approval, including,
without limitation, the issuance and sale of the Preferred Stock to the
Investors; provided, however, that the Company shall adjourn the Stockholders
Meeting from time to time until all of the conditions set forth in Article VI
(other than the condition set forth in Section 6.1(c) and other than those
conditions that by their nature are to be satisfied at the Second Closing) are
satisfied or waived, such that the Stockholders Meeting shall take place on the
same day as the Second Closing in accordance with Section 2.5. The Company shall
recommend that its stockholders approve this Agreement and the transactions
contemplated hereby requiring such stockholder approval. The Company and the
Investors shall cooperate in the preparation of the Proxy Statement to be mailed
to the Company's stockholders in connection with the solicitation of such
approval and shall use their reasonable best efforts to take, or cause to be
taken, all actions necessary to prepare the Proxy Statement, file the Proxy
Statement with the SEC and respond to any comments it may have, and distribute
the Proxy Statement to the Company's stockholders as expeditiously as
practicable; provided, that the Company shall file the Proxy Statement with the
SEC no later than January 31, 2000. The Company shall give the Investors a
reasonable opportunity to review and comment on the Proxy Statement and related
communications with stockholders of the Company, and the Investors shall have
the right to consent to any descriptions of or references to (i) the Investors
or any of their Affiliates, and (ii) the Transaction Documents and the other
agreements executed concurrently therewith and the transactions contemplated
thereby in the Proxy Statement or such communications, which consent shall not
be unreasonably withheld or delayed.
5.7. Consents; Approvals. The Company shall use its reasonable
best efforts to obtain all consents, waivers, exemptions, approvals,
authorizations or orders (collectively, "Consents") (including, without
limitation (i) Consents required to avoid any breach, violation, default,
encumbrance or right of termination, modification, cancellation, prepayment,
suspension, limitation, revocation or acceleration set forth on Schedule 3.9 or
required to be set forth thereon, (ii) all Consents pursuant to the Company's or
any of the Subsidiaries' financing documents, including without limitation, all
indentures and credit agreements of the Company or any of the Subsidiaries, and
(iii) all United States and foreign governmental and regulatory rulings and
approvals), and the Company shall make all filings (including, without
limitation, all filings with United States and foreign governmental or
regulatory agencies), required or desirable in connection with the consummation
of the transactions contemplated by this Agreement and the other Transaction
Documents, in each case as promptly as practicable but in any event prior the
Second Closing if permitted to be filed prior thereto; provided, however, no
payment (other than filing fees related to the matters contemplated hereby and
except as set forth on Schedule 6.2(h)) or other accommodation shall be made by
the Company in connection with obtaining any of the foregoing without the
Investors' prior written consent. The Company also shall use its reasonable best
efforts to obtain all necessary state securities laws or blue sky permits and
approvals required to consummate the transactions contemplated by the Second
Purchase and shall furnish all information as may be reasonably requested in
connection with any such action.
5.8. Listing. The Company shall use its best efforts to cause
the Common Stock to continue to be listed on NASDAQ during the term of this
Agreement and for so long as any Notes, Preferred Stock, GS Shares or Conversion
Shares are outstanding. Prior to the Second Closing, the Company shall prepare
and submit to NASDAQ a listing application covering the Conversion Shares and
shall obtain approval for the listing of such Conversion Shares, subject to
official notice of issuance. Promptly after the Second Closing Termination Date,
the Company shall prepare and submit to NASDAQ a listing application covering
the GS Shares and shall obtain approval for the listing of such GS Shares,
subject to official notice of issuance.
5.9. Board Representation. (a) From January 20, 2000 and for
so long as the Investors and their Affiliates own at least $5,500,000 in
aggregate principal amount of the Notes, GSCP shall have the right to designate,
at all times and from time to time, one director of the Company (which director
shall also serve on the Executive Committee of the Board of Directors)
(individuals designated pursuant to this paragraph, together with the Initial
Noteholder Designee, the "Noteholder Designees"). GSCP shall cause the
Noteholder Designee to resign from the Executive Committee of the Board of
Directors on the Second Closing Termination Date.
(b) From the Second Closing Date and for so long as the
Investors and their Affiliates collectively beneficially own a number of shares
of Common Stock (assuming conversion at such time of the Preferred Stock held by
the Investors and their Affiliates) that is not less than (i) 66 2/3% of the
number of shares of Common Stock beneficially owned (assuming conversion at such
time of the Preferred Stock held by the Investors and their Affiliates) by them
immediately after the Second Closing (as such number may be adjusted for stock
splits, reverse stock splits, dividends paid in Common Stock, reclassifications
of the Common Stock, and other similar events), GSCP shall have the right to
designate, at all times and from time to time, three directors of the Company;
(ii) 33 1/3% of the number of shares of Common Stock beneficially owned
(assuming conversion at such time of the Preferred Stock held by the Investors
and their Affiliates) by them immediately after the Second Closing (as such
number may be adjusted for stock splits, reverse stock splits, dividends paid in
Common Stock, reclassifications of the Common Stock, and other similar events),
GSCP shall have the right to designate, at all times and from time to time, two
directors of the Company; and (iii) 10.0% of the number of shares of Common
Stock beneficially owned (assuming conversion at such time of the Preferred
Stock held by the Investors and their Affiliates) by them immediately after the
Second Closing (as such number may be adjusted for stock splits, reverse stock
splits, dividends paid in Common Stock, reclassifications of the Common Stock,
and other similar events), GSCP shall have the right to designate, at all times
and from time to time, one director of the Company (individuals designated
pursuant to this paragraph, the "Preferred Designees", and together with the
Noteholder Designees, the "Investor Designees") The Initial Preferred Designees
elected pursuant to paragraph (c) below and the Initial Noteholder Designee
elected prior to the Initial Closing shall be the initial Preferred Designees.
(c) Prior to the Second Closing, each of the Company and the
Board of Directors shall take such action as may be necessary (including seeking
any necessary vote or approval of any stockholder of the Company, taking any
action necessary to expand the size of the Board of Directors, or causing any
existing director to resign in order to make room for the Initial Preferred
Designees) to cause the Initial Preferred Designees to be elected to the Board
of Directors.
(d) GSCP and the Company agree that one Preferred Designee
shall have the right to sit on the Executive Committee of the Board of
Directors.
(e) If requested by GSCP, the Company will use its reasonable
best efforts (in accordance with the certificate of incorporation and by-laws of
the Company and the DGCL) to cause the removal any Investor Designee (in
accordance with the certificate of incorporation and by-laws of the Company and
the DGCL). Any vacancy among the Investor Designees caused by removal or by the
death, retirement or resignation of any Investor Designee shall be filled by a
Person designated by GSCP, and the Company agrees to take any such action as is
necessary, in accordance with the certificate of incorporation and by-laws of
the Company and the DGCL, to cause such designee to be appointed or elected to
the Board of Directors. In the event that the term of any director who at such
time is an Investor Designee is to expire, then in connection with any meeting
of the Company's stockholders at which a successor to such director is to be
elected, the Company shall nominate an Investor Designee designated by GSCP and
shall recommend that stockholders vote in favor of such individual's election to
the Board of Directors in any proxy statement, information statement or other
communication to stockholders issued or disseminated by the Company. In the
event of any vacancy among the Investor Designees, the Board of Directors shall
not take any action not approved by the remaining Investor Designee(s) (or by
the Investors if there be no remaining Investor Designee) during the period from
the time GSCP informs the Company of a designee to fill any such vacancy to the
time such designee is duly appointed or elected to the Board of Directors.
Whenever the number of directors that GSCP has the right to designate is reduced
in accordance with paragraphs (a) and (b) above, GSCP will cause the appropriate
number of Investor Designee(s) to tender their resignation(s) from the Board of
Directors.
(f) After the date hereof, without the prior written consent
of GSCP, the Board of Directors (i) shall not consist of more than eight members
so long as the Investors and their Affiliates own any Notes and (ii) shall not
consist of more than ten members so long as the Investors and their Affiliates
beneficially own at least 10.0% of the number of shares of Common Stock
beneficially owned (assuming conversion at such time of the Preferred Stock held
by the Investors and their Affiliates) by them immediately after the Second
Closing (as such number may be adjusted for stock splits, reverse stock splits,
dividends paid in Common Stock, reclassifications of the Common Stock, and other
similar events).
(g) The rights set forth in this Section 5.9 are intended to
satisfy the requirement of contractual management rights for purposes of
qualifying GSCP's interests in the Company 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 as to GSCP, the Company
and the Investors shall reasonably cooperate in good faith to agree upon
mutually satisfactory management rights which satisfy such regulations.
5.10. Certificate of Designation. The Preferred Stock shall
have the terms, designations, powers, preferences and relative participation,
optional and other special rights, qualifications, limitations and restrictions
set forth in the form of the Certificate of Designation attached hereto as
Exhibit 5.10. The Company shall, prior to or concurrently with the Second
Closing, cause the Certificate of Designation to be filed with the Secretary of
State of the State of Delaware.
5.11. Cooperation. The Investors and the Company agree to use
their reasonable best efforts to take, or cause to be taken, as promptly as
practicable all such further actions as shall be necessary to make effective and
consummate the transactions contemplated by the Second Purchase and the other
transactions contemplated hereby.
5.12. Access to Property; Records. Between the date hereof and
the earlier of the Second Closing and the Second Closing Termination Date, the
Company shall give the Investors and their Affiliates, officers, employees,
directors, attorneys, accountants, investment bankers, agents and
representatives reasonable access upon reasonable advance notice to the assets,
properties, offices and other facilities, Commitments, accounting books, legal
documents and other business and financial records (including all interim
financial statements) of the Company, and to the outside auditors of the Company
and their work papers relating to the Company and the Subsidiaries. The parties
hereto agree that no investigation by the Investors or its representatives shall
affect or limit the scope of the representations and warranties of the Company
contained in this Agreement or in any other Transaction Document delivered
pursuant hereto or limit the Liability for breach of any such representation or
warranty. Each Investor agrees to hold all information obtained pursuant to this
Section 5.12 confidential pursuant to the letter agreement, dated October 18,
1999, between the Company and Goldman, Sachs & Co. (the "Confidentiality
Agreement").
5.13. Incentive Stock Options. (a) At the Initial Closing, the
Company shall cause to be granted options to acquire 660,000 shares of Common
Stock, at a per share exercise price equal to the Market Value as of such date,
in such amounts and to such persons as are reasonably determined by the Board of
Directors after consultation with the Investors. Such options shall be
"incentive stock options" within the meaning of Section 422 of the Code to the
extent possible (and shall otherwise be non-qualified stock options) and shall
be evidenced by award agreements which contain customary terms and conditions
reasonably acceptable to the Investors.
(b) At the Second Closing, the Company shall cause to be
granted options to acquire 1,540,000 shares of Common Stock at a per share
exercise price equal to the Market Value as of such date, in such amounts and to
such persons as are reasonably determined by the Board of Directors after
consultation with the Investors. Such options shall be "incentive stock options"
within the meaning of Section 422 of the Code to the extent possible (and shall
otherwise be non-qualified stock options) and shall be evidenced by award
agreements which contain customary terms and conditions reasonably acceptable to
the Investors.
5.14. Notice of Breach. From the date hereof through the
earlier of the Second Closing and the Second Closing Termination Date, as
promptly as practicable, and in any event not later than five business days
after senior management of the Company becomes aware thereof, the Company shall
provide the Investors with written notice of (a) any representation or warranty
of the Company contained in this Agreement or any other Transaction Document
being untrue or inaccurate in any material respect at any time from the date
hereof to the earlier of the Second Closing and the Second Closing Termination
Date, or (b) any failure of the Company to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by the Company under
this Agreement or any other Transaction Document; provided, however, that the
delivery of any notice pursuant to this Section 5.14 shall not limit or
otherwise affect the remedies available to the Investors, or modify in any way
any disclosure made in this Agreement or any other Transaction Document or the
schedules hereto or thereto as of the date hereof.
5.15. Transfer Taxes. The Company shall be responsible for any
Liability with respect to any transfer, stamp or similar Taxes that may be
payable in connection with the execution, delivery and performance of this
Agreement including, without limitation, any such Taxes with respect to the
issuance of the Notes, the GS Shares, the Preferred Stock or the Conversion
Shares.
5.16. Rule 144; Integration. (a) So long as any Notes, GS
Shares, Preferred Stock or Conversion Shares are outstanding, the Company shall
file all reports required to be filed by it under the Securities Act and the
Exchange Act and after the Second Closing, shall take such further action as the
Investors may reasonably request, all to the extent required to enable the
Investors to sell any of the foregoing securities pursuant to and in accordance
with Rule 144. Such action shall include, but not be limited to, making
available adequate current public information meeting the requirements of
paragraph (c) of Rule 144. During the period of two years following the Initial
Closing, the Company shall not, and shall not permit any of its Affiliates to,
resell any of the Notes which constitute "restricted securities" under Rule 144
that have been reacquired by any of them.
(b) The Company shall not sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Securities
Act) that would be integrated with the sale of the Notes in a manner that would
require the registration under the Securities Act of the sale of Notes to the
Investors or any Affiliate of the Investors.
(c) From the date hereof until December 31, 2000, the Company shall not
offer for sale, sell, contract to sell, loan or pledge or otherwise dispose of,
directly or indirectly, or file a registration statement for, or announce any
offer, sale, contract for sale of or other disposition of any debt securities
(or securities convertible into or exercisable or exchangeable into debt
securities) issued or guaranteed by the Company without the prior written
consent of the Investors.
5.17. Transfer Restrictions; Resale of Notes. The Investors
will not, prior to the 90th day following the Second Closing Termination Date,
sell, transfer, assign, convey, gift, mortgage, pledge, encumber, hypothecate,
or otherwise dispose of, directly or indirectly, ("Transfer") any of the Notes
except for Transfers between and among the Investors and their Affiliates.
5.18. Preemptive Rights. (a) From the Second Closing Date and
for so long as the Investors collectively beneficially own (assuming conversion
of all shares of Preferred Stock into Common Stock) not less than 10.0% of the
total number of shares of Common Stock outstanding from time to time, in the
event the Company proposes to issue any capital stock of any kind (including any
Common Stock, preferred stock, warrants, options or securities or units
comprising securities convertible into or exchangeable for Common Stock or
preferred stock or rights to acquire the same) of the Company, other than (1)
pursuant to an employee or non-management director stock option plan, stock
bonus plan, stock purchase plan or other management equity program or plan, (2)
pursuant to any merger, share exchange or acquisition pursuant to which shares
of Common Stock are exchanged for, or issued upon cancellation or conversion of,
equity securities of an entity engaged primarily in, or to acquire assets
primarily for use in, the business conducted by the Company and the Subsidiaries
or a business reasonably related to the business conducted by the Company and
the Subsidiaries, or (3) securities issuable upon exercise of previously issued
warrants, options or other rights to acquire capital stock or upon conversion of
previously issued securities convertible into capital stock, then the Company
shall:
(i) deliver to the Investors written notice setting forth in reasonable
detail (1) the terms and provisions of the securities proposed to be issued (the
"Proposed Securities"); (2) the price and other terms of the proposed sale of
such securities; (3) the amount of such securities proposed to be issued; and
(4) such other information as the Investors may reasonably request in order to
evaluate the proposed issuance; and
(ii) offer to issue to the Investors in the aggregate a portion of the
Proposed Securities equal to a percentage determined by dividing (x) the number
of shares of Common Stock beneficially owned by the Purchasers (assuming
conversion of all shares of Preferred Stock into Common Stock, by (y) the total
number of shares of Common Stock then outstanding.
The Investors must exercise the purchase rights hereunder within ten business
days after receipt of such notice from the Company.
(b) Upon the expiration of the offering period described
above, or if the Investors shall default in paying for or purchasing the
Proposed Securities on the terms offered by the Company, the Company shall
thereafter be free to sell such Proposed Securities that the Investors have not
elected to purchase during the ninety days following such expiration on terms
and conditions no more favorable to the purchasers thereof than those offered to
the Investors. Any Proposed Securities offered or sold by the Company after such
90 day period must be reoffered to the Investor pursuant to this Section 5.18.
(c) The election by the Investors not to exercise preemptive
rights under this Section 5.18 in any one instance shall not affect their rights
(other than in respect of a reduction in its percentage holdings) as to any
subsequent proposed issuance. Any sale of such securities by the Company without
first giving the Investors the rights described in this Section 5.18 shall be
void and of no force and effect, and the Company shall not register such sale or
issuance on the books and records of the Company.
5.19 Standstill Agreement. (a) During the period commencing on
the date hereof and ending on the earlier of (i) the expiration of the
Standstill Period or (ii) the date these provisions terminate as provided
herein, except as (x) contemplated by this Agreement or any other Transaction
Document or (y) specifically approved in writing in advance by the Company, the
Investors shall not, and shall cause any Affiliates controlled by them to not,
in any manner, directly or indirectly:
(A) 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 Company in an
amount in excess of the Grandfathered Amount, except for the Conversion Shares
or otherwise as permitted pursuant to this Agreement or any other Transaction
Document, provided, however, that the foregoing limitation shall not prohibit
the acquisition of securities of the Company or any of its successors issued as
dividends or as a result of stock splits and similar reclassifications or
received in a merger or other business combination in respect of Preferred
Shares or Shares held by the Investors or any of their Affiliates at the time of
such dividend, split or reclassification or merger or business combination; or
(B) solicit proxies or consents or become a "participant" in a
"solicitation" (as such terms are defined or used in Regulation 14A under the
Exchange Act) of proxies or consents with respect to any voting securities of
the Company or any of its successors or initiate or become a participant in any
stockholder proposal or "election contest" (as such term is defined or used in
Rule 14a-11 under the Exchange Act) with respect to the Company or any of its
successors or induce others to initiate the same (except for activities
undertaken by the Investors or the Investor Designees in connection with
solicitations by the Board of Directors).
(b) The standstill provisions set forth herein shall terminate
on the earliest of (i) the last day of the Standstill Period, (ii) the
occurrence of any breach by the Company in any material respect of any covenant
or agreement contained in this Agreement or in any other Transaction Document,
(iii) the filing of a voluntary bankruptcy petition by the Company or on the
60th day following the filing of an involuntary bankruptcy petition against the
Company if such petition is not discharged with prejudice during such 60-day
period, (iv) the occurrence of a change in control (as defined in the
Certificate of Designation) of the Company or (v) the occurrence of a Third
Party Proposal.
(c) For purposes of this Agreement, a Third Party Proposal
shall mean and occur if any Person (other than the Investors or their
Affiliates) makes a bona fide offer for all or substantially all of the
Company's outstanding equity securities or assets.
(d) Notwithstanding anything to the contrary in this Agreement
or in any other Transaction Document, nothing shall prohibit the Investors from
making an offer to the Board of Directors to purchase all or substantially all
of the Company's outstanding equity securities or assets.
5.20. Actions Requiring Investor Approval. So long as at the
Investors and their Affiliates beneficially own at least one-third of the shares
of Preferred Stock issued at the Second Closing, the Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, without the
consent of GSCP:
(a) authorize a consolidation with or merger with or into, or conveyance,
transfer or lease of all or substantially all assets as an entirety to, any
Person;
(b) authorize a liquidation, dissolution, recapitalization or
reorganization;
(c) acquire (by merger, consolidation, or acquisition of stock or assets)
any corporation, a limited liability company, a partnership, an association, a
trust or any other entity or organization for a purchase price greater than $20
million;
(d) create, incur, assume or suffer to exist any Indebtedness after the
date hereof if such additional Indebtedness would cause the ratio of (i) Total
Debt (less Restricted Cash) to (ii) Consolidated EBITDA for the period of four
consecutive quarters of the Company ending on, or most recently preceding, the
date of determination, to be greater than 4.5 to 1.00;
(e) enter into any business, either directly or through any subsidiary or
joint venture or similar arrangement, except for those businesses in which the
Company and its Subsidiaries, taken as whole, are engaged on the date hereof or
which are reasonably related, incidental, or ancillary thereto; or
(f) authorize, adopt or approve an amendment to the certificate of
incorporation or by-laws of the Company, each as in effect as of the Second
Closing.
5.21. Dividends. The Company agrees that it shall pay cash
dividends on the Preferred Stock on a current basis so long as it is not
precluded from doing so under its debt instruments or Delaware law. In
furtherance thereof, the Company agrees to use its best efforts to pay such
dividends, including, without limitation, using its best efforts to refrain from
entering into any agreements which would preclude such payments, to seek a
waiver under any agreements which would prevent such payments at any time and to
take whatever actions are necessary, including revaluing assets, to create
surplus for the purpose of paying such dividends.
5.22. Use of Proceeds. The proceeds from the sale of the Notes, the GS
Shares and the Preferred Stock shall be used for general corporate purposes as
shall be determined by the Board of Directors.
ARTICLE VI
CONDITIONS
6.1. Conditions to Obligations of the Investors and the
Company. The respective obligations of the Investors and the Company to
consummate the Second Purchase shall be subject to the satisfaction or waiver at
or prior to the Second Closing of each of the following conditions:
(a) no statute, rule or regulation or order of any
Governmental Entity court or administrative agency shall be in effect
that prohibits the consummation of the transactions to be consummated
at the Second Closing;
(b) any waiting period (and any extension thereof)
under the HSR Act applicable to the transactions to be consummated at
the Second Closing shall have expired or been terminated; and
(c) the issuance of the Preferred Stock to the
Investors in connection with the Second Purchase shall have been
approved and adopted by the requisite vote of the stockholders of the
Company in accordance with applicable NASDAQ rules and the Company's
certificate of incorporation and by-laws.
6.2. Conditions to Obligations of the Investors. The obligation of the
Investors to consummate the Second Purchase shall be subject to the satisfaction
or waiver at or prior to the Second Closing of each of the following conditions:
(a) each of the representations and warranties of the
Company contained in this Agreement shall be true and correct
(disregarding for this purpose all references in such representations
and warranties to any materiality, Material Adverse Effect, Knowledge
or similar qualifications) when made and as of the Second Closing
(except to the extent such representations and warranties are made as
of a particular date, in which case such representations and warranties
shall have been true and correct in all material respects as of such
date), except for failures to be true and correct which individually or
in the aggregate would not reasonably be expected to have a Material
Adverse Effect;
(b) the Company in all material respects shall have
performed, satisfied and complied with each of its covenants and
agreements set forth in this Agreement to be performed, satisfied and
complied with prior to or at the Second Closing, disregarding for this
purpose all references in such covenants and agreements to any
materiality or similar qualifications;
(c) the Certificate of Designation shall have been duly filed with the
Secretary of State of the State of Delaware and shall be in full force and
effect;
(d) the Conversion Shares shall have been duly authorized and reserved for
issuance and approved for listing on NASDAQ, subject to official notice of
issuance;
(e) the Company shall have obtained the Additional Financing;
(f) the Board of Directors shall consist of ten directors, three of whom
shall be the Preferred Designees, effective as of the Second Closing;
(g) there shall not have occurred after December 31,
1998 any change or development or series of changes or developments
(including without limitation as a result of any change in the Law)
which has resulted in or could reasonably be expected to result
individually or in the aggregate in a Material Adverse Effect;
(h) the Consents set forth on Schedule 6.2(h) shall
have been obtained or made by the Company, without any payment or other
accommodation having been or being made by the Company or any of the
Subsidiaries (except for the payment set forth on Schedule 6.2(h)); and
(i) the Company shall have made the deliveries set forth in Section 2.6(a)
hereof.
6.3. Conditions to Obligations of the Company. The obligation of the
Company to consummate the Second Purchase shall be subject to the satisfaction
or waiver at or prior to the Second Closing of each of the following conditions:
(a) each of the representations and warranties of the
Investors contained in this Agreement shall be true and correct
(disregarding for this purpose all references in such representations
and warranties to any materiality, material adverse effect, knowledge
or similar qualifications) when made and as of the Second Closing
(except to the extent such representations and warranties are made as
of a particular date, in which case such representations and warranties
shall have been true and correct in all material respects as of such
date), except for failures to be true and correct which individually or
in the aggregate would not reasonably be expected to have a material
adverse effect on the ability of the Investors to fulfill its
obligations hereunder;
(b) the Investors in all material respects shall have
performed, satisfied and complied with each of its covenants and
agreements set forth in this Agreement to be performed, satisfied and
complied with prior to or at the Second Closing, disregarding for this
purpose all references in such covenants and agreements to any
materiality or similar qualifications; and
(c) the Investors shall have made the deliveries set forth in Section
2.6(b) hereof.
ARTICLE VII
TERMINATION
7.1. Termination. The obligations of the parties to consummate the Second
Closing may be terminated at any time prior to the Second Closing,
notwithstanding approval thereof by the stockholders of the Company:
(a) by mutual written consent of the Company and the Investors at any time
prior to the Second Closing; or
(b) by either the Investors or the Company if the Second Closing shall not
have been consummated by May 15, 2000; or
(c) by either the Investors or the Company if a
Governmental Entity shall have issued a nonappealable final order,
decree or ruling or taken any other action having the effect of
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement; or
(d) by the Investors or the Company, (i) if any
representation or warranty of the other set forth in this Agreement or
in any other Transaction Document shall be untrue in any material
respect when made, or (ii) upon a breach in any material respect of any
covenant or agreement on the part of the other set forth in this
Agreement or in any other Transaction Document (either (i) or (ii)
above being a "Terminating Breach"); provided, that, if such
Terminating Breach is curable within ten business days after notice of
a party's intent to terminate this Agreement, through the exercise of
reasonable efforts, and for so long as the other party continues to
exercise such reasonable efforts during such ten business day cure
period, the termination shall be effective immediately following notice
and such ten business day cure period and only if the Terminating
Breach is not cured as of such time; or
(e) by the Investors if an "Event of Default" under the Notes shall have
occurred and be continuing; or
(f) by either the Company or the Investors in the event that the
stockholders of the Company fail to approve the transactions described in
Section 5.6 at the Stockholders Meeting; or
(g) by the Investors if the Company shall not have complied in all respects
with the covenants set forth in Section 5.9(a).
Any party exercising its right to terminate under this Section
7.1 shall exercise such right by delivery of written notice to the other party
in accordance with Section 9.7 hereof. The date of any termination of the
obligations of the parties to consummate the Second Closing pursuant to this
Section 7.1 is referred to herein as the "Second Closing Termination Date".
7.2. Effect of Termination. In the event of any termination of
the obligations to consummate the Second Closing pursuant to Section 7.1, all
obligations and agreements of the parties contained in this Agreement or in any
other Transaction Document that relate to the Second Closing shall forthwith
become void and there shall be no Liability on the part of any party hereto
relative to such obligations and agreements, provided that nothing contained in
this Agreement shall relieve any party from Liability for any breach of this
Agreement or any other Transaction Document occurring prior to any such
termination.
ARTICLE VIII
SURVIVAL; CERTAIN REMEDIES
8.1. Survival. The representations and warranties of the
parties contained in this Agreement or in any of the other Transaction Documents
shall expire on the later of (i) the one year anniversary of the Initial Closing
if the parties' obligations to consummate the Second Closing are terminated
under Section 7.1 or (ii) the one year anniversary of the Second Closing, except
that the representations and warranties set forth in Section 3.11 shall survive
until 30 days after the expiration of the applicable statute of limitations
(including any extensions thereof) and the representations and warranties set
forth in Sections 3.2 and 3.3 shall survive indefinitely. After the expiration
of such periods, any claim by a party hereto based upon any such representation
or warranty shall be of no further force and effect unless a party has asserted
a claim in accordance with this Article VIII for breach of any such
representation or warranty prior to the expiration of such period, in which
event any representation or warranty to which such claim relates shall survive
with respect to such claim until such claim is resolved as provided in this
Article VIII. The covenants and agreements of the parties contained in this
Agreement or in any of the other Transaction Documents shall survive until
performed in accordance with their terms without limitation as to time.
8.2 Indemnification for the Benefit of the Company. Each
Investor agrees, from and after the date hereof, to indemnify the Company and
its Affiliates and agents, and the officers, directors, employees, successors,
transferees and assigns of each of them (each, a "Company Indemnified Party")
against and hold them harmless from and against all Losses incurred by any of
them based upon, resulting from or arising out of (i) the breach of any
representation or warranty of such Investor contained in this Agreement or any
of the other Transaction Documents or (ii) the breach of or failure to perform
any covenant or agreement of such Investor contained in this Agreement or any of
the other Transaction Documents.
8.3 Indemnification by the Company. The Company agrees,
subject to Section 8.1, from and after the date hereof, to indemnify the
Investors and their respective Affiliates and agents and the officers,
directors, employees, members, successors, transferees and assigns of each of
them (each, an "Investor Indemnified Party") against and hold them harmless from
and against all Losses incurred by any of them based upon, resulting from or
arising out of (i) the breach of any representation or warranty of the Company
contained in this Agreement or any of the other Transaction Documents, or (ii)
the breach of or failure to perform any covenant or agreement of the Company
contained in this Agreement or any of the other Transaction Documents.
8.4 Materiality. Except for the representation and warranty
contained in the penultimate sentence of Section 3.4, the Material Adverse
Effect and other materiality (or correlative meaning) qualifications included in
the representations, warranties, covenants and agreements contained herein or in
any of the other Transaction Documents shall have no effect on any provisions in
this Article VIII concerning the indemnities of the Company or the Investors
with respect to such representations, warranties, covenants and agreements, each
of which representations, warranties, covenants and agreements shall be read as
though there were no Material Adverse Effect or other materiality qualification
for purposes of such indemnities.
8.5 Indemnification Procedures. (a) An Investor Indemnified
Party or a Company Indemnified Party, as the case may be (for purposes of this
Section 8.5, an "Indemnified Party"), shall give the indemnifying party under
Section 8.2 or 8.3, as applicable (for purposes of this Section 8.5, an
"Indemnifying Party"), prompt written notice (the "Indemnification Claim
Notice") of any third party claim for which it will seek indemnification
hereunder; provided that failure of the Indemnified Party to give the
Indemnifying Party prompt written notice as provided herein shall not relieve
the Indemnifying Party of any of its obligations hereunder except to the extent
that the Indemnifying Party is prejudiced thereby. The Indemnifying Party shall
have the right to assume, through counsel of its own choosing, which counsel
shall be reasonably satisfactory to the Indemnified Party, the defense of any
third party claim which is the subject of indemnification hereunder at its own
expense. If the Indemnifying Party elects to assume the defense of any such
claim, the Indemnified Party may participate with its own counsel in such
defense, but in such case the fees and expenses of counsel to the Indemnified
Party shall be paid by the Indemnified Party. The Indemnified Party shall, upon
reasonable notice, provide the Indemnifying Party with access to its records and
personnel relating to any such claim during normal business hours and shall
otherwise cooperate with the Indemnifying Party in the defense or settlement
thereof, and the Indemnifying Party shall reimburse the Indemnified Party for
all its reasonable out-of-pocket expenses in connection therewith. If the
Indemnifying Party elects to direct the defense of any such claim, the
Indemnified Party shall not pay, or permit to be paid, any part of such claim
unless the Indemnifying Party consents in writing to such payment (which consent
shall not be unreasonably withheld) or unless the Indemnifying Party withdraws
from or fails to maintain the defense of such claim or unless a final judgment
from which no appeal may be taken by or on behalf of the Indemnifying Party is
entered against the Indemnified Party for indemnification; provided that, if the
third party claimant is prepared to settle its claim by payment to it of a
specified amount and, notwithstanding the request of the Indemnified Party for
consent to the proposed settlement, the Indemnifying Party does not consent
thereto, then the Indemnifying Party shall indemnify the Indemnified Party
separately for the difference, if any, between the specified amount of the
proposed settlement and the amount which is finally adjudicated to be the amount
of the Liability to the third party. No settlement in respect of any third-party
claim may be effected by the Indemnifying Party without the Indemnified Party's
prior written consent (which consent shall not be unreasonably withheld). If the
Indemnifying Party shall fail to undertake any such defense (or shall fail upon
request to advise the Indemnified Party in writing that it will undertake such
defense) within 30 days of receipt of the Indemnification Claim Notice, or
subsequently withdraws from or fails to maintain the defense of such claim, the
Indemnified Party shall have the right to undertake the defense or settlement
thereof at the Indemnifying Party's expense. If the Indemnified Party assumes
the defense of any such claim pursuant to this Section 8.5 it may conduct such
defense (including entering into any settlement) as it reasonably deems
appropriate.
(b) Notwithstanding the foregoing, with respect to any claim that the
Indemnifying Party is defending, the Indemnified Party shall have the right to
retain separate counsel to represent it and the Indemnifying Party shall pay the
fees and expenses of such separate counsel if there are conflicts that make it
reasonably necessary for separate counsel to represent the Indemnified Party and
the Indemnifying Party.
(c) The parties agree to treat any indemnification payments made by the
Company pursuant to this Agreement for Tax purposes as adjustments to the
purchase price of the Notes and the GS Shares or the Preferred Stock, as the
case may be.
8.6 Duplication. Any Liability for indemnification hereunder
shall be determined without duplication of recovery by reason of the state of
facts giving rise to such Liability constituting a breach of more than one
representation, warranty, covenant or agreement; provided, however, that subject
to there being no duplication of recovery, the Indemnified Party shall be
entitled to recover to the maximum extent provided in this Agreement (by way of
example, if any Indemnified Party's entitlement to indemnification is both by
reason for a breach of a representation and warranty to which the one year
survival period of Section 8.1 applies and by reason of a breach of a
representation and warranty to which such survival period does not apply, the
Indemnified Party shall be entitled to indemnification without regard to such
one year survival period.)
8.7 Subordination. The Investors agree that the
indemnification obligations of the Company pursuant to this Article VIII are
hereby made subordinate and subject in right of payment to the prior payment in
full of the Designated Senior Indebtedness in the same manner as the Notes are
subordinated to the Senior Indebtedness pursuant to the subordination provisions
of the Notes. The provisions of this Section 8.7 shall not be amended or
modified without the prior written consent of the Required Lenders.
ARTICLE IX
MISCELLANEOUS
9.1. Fees and Expenses. At the Initial Closing and at the
Second Closing or the Second Closing Termination Date, as applicable, the
Company shall reimburse the Investors in cash for their fees and expenses
incurred as of the date hereof or the Second Closing (to the extent not
previously reimbursed by the Company) as the case may be, in connection with
this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby (including, without limitation, the fees and
disbursements of its attorneys, accountants, consultants and other advisors)
(collectively, "Investor Expenses"); provided, however, that the amount of
Investor Expenses in respect of which the Investors shall be reimbursed
hereunder shall not exceed $700,000 in the aggregate.
9.2. Public Announcements. The Investors and the Company shall
consult with each other before issuing any press release with respect to this
Agreement or the transactions contemplated hereby and neither shall issue any
such press release or make any such public statement without the prior consent
of the other, which consent shall not be unreasonably withheld; provided,
however, that a party may, without the prior consent of the other party, issue
such press release or make such public statement as may upon the advice of
counsel be required by Law or the rules and regulations of NASDAQ, if it has
used reasonable efforts to consult with the other party prior thereto.
9.3. Restrictive Legends. None of the Notes, the Preferred
Stock, the GS Shares or the Conversion Shares may be transferred without
registration under the Securities Act and applicable state securities laws
unless counsel to the Company shall advise the Company that such transfer may be
effected without such registration. Each Note or certificate representing any of
the foregoing shall bear legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS [NOTE] [CERTIFICATE] HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR THE
SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS
EFFECTIVE UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW,
OR (II) ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR
APPLICABLE STATE SECURITIES LAW, RELATING TO THE DISPOSITION
OF SECURITIES, INCLUDING RULE 144.
9.4. Further Assurances. At any time or from time to time
after the Initial Closing, the Company, on the one hand, and the Investors, on
the other hand, agree to cooperate with each other, and at the request of the
other party, to execute and deliver any further instruments or documents and to
take all such further action as the other party may reasonably request in order
to evidence or effectuate the consummation of the transactions contemplated
hereby or by the other Transaction Documents and to otherwise carry out the
intent of the parties hereunder or thereunder.
9.5. Successors and Assigns. This Agreement shall bind and
inure to the benefit of the Company and the Investors and their respective
successors, permitted assigns, heirs and personal representatives of the Company
and the Investors, provided that the Company may not assign its rights or
obligations under this Agreement to any Person without the prior written consent
of the Investors, and provided further that no Investor may assign its rights or
obligations under this Agreement to any Person (other than an Affiliate of such
Investor) without the prior written consent of the Company, which consent shall
not be unreasonably withheld or delayed. In addition, and whether or not any
express assignment has been made, the provisions of this Agreement that are for
the Investors' benefit as purchasers or holders of Notes, Preferred Stock, the
GS Shares or the Conversion Shares are also for the benefit of, and enforceable
by, any subsequent holder of such Notes, Preferred Stock, GS Shares or
Conversion Shares.
9.6. Entire Agreement. This Agreement and the other Transaction Documents
and the Confidentiality Agreement contain the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior and
contemporaneous arrangements or understandings with respect thereto.
9.7. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy,
nationally recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated in
writing by such party to the other parties:
(i) if to the Company, to:
ProMedCo Management Company
801 Cherry Street, Suite 1450
Fort Worth, Texas 76102
Facsimile: (817) 335-8321
Attention: Mr. Robert Smith
Chief Financial Officer
with a copy to (which shall not constitute notice):
Dyer, Ellis & Joseph
600 New Hampshire, NW
Washington, DC 20037
Telecopy: (202) 944-3068
Attention: Michael Joseph, Esq.
(ii) if to the Investors, to:
GS Capital Partners III, L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Telecopy: (212) 357-5505
Attention: Mr. Sanjeev Mehra
Attention: Ben Adler, Esq.
with copies to (which shall not constitute notice):
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopy: (212) 859-8587
Attention: Robert C. Schwenkel, Esq.
All such notices, requests, consents and other communications
shall be deemed to have been given or made if and when delivered personally or
by overnight courier to the parties at the above addresses or sent by electronic
transmission, with confirmation received, to the telecopy numbers specified
above (or at such other address or telecopy number for a party as shall be
specified by like notice).
9.8. Amendments. The terms and provisions of this Agreement
may be modified or amended, or any of the provisions hereof waived, temporarily
or permanently, in a writing executed and delivered by the Company and the
Investors. No waiver of any of the provisions of this Agreement shall be deemed
to or shall constitute a waiver of any other provision hereof (whether or not
similar). No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof.
9.9. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
9.10. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
9.11. Nouns and Pronouns. Whenever the context may require,
any pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice versa.
9.12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW.
9.13. Submission to Jurisdiction. Each of the parties hereto
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of New York and of the United States of
America, in each case located in the County of New York, for any Litigation
arising out of or relating to this Agreement or the other Transaction Documents
and the transactions contemplated hereby and thereby (and agrees not to commence
any Litigation relating hereto or thereto except in such courts), and further
agrees that service of any process, summons, notice or document by U.S.
registered mail to its respective address set forth in this Agreement shall be
effective service of process for any Litigation brought against it in any such
court. Each of the parties hereto hereby irrevocably and unconditionally waives
any objection to the laying of venue of any Litigation arising out of this
Agreement or the transactions contemplated hereby in the courts of the State of
New York or the United States of America, in each case located in the County of
New York, hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such Litigation brought in any such
court has been brought in an inconvenient forum.
9.14. WAIVER OF JURY TRIAL. THE COMPANY AND THE INVESTORS
HEREBY WAIVE ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.
9.15. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid, but
if any provision of this Agreement is held to be invalid or unenforceable in any
respect, such invalidity or unenforceability shall not render invalid or
unenforceable any other provision of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PROMEDCO MANAGEMENT COMPANY
By:_________________________
Name:
Title:
GS CAPITAL PARTNERS III, L.P.
$____________ Notes
By: GS ADVISORS III, L.P.
its general partner _____________ GS Shares
By: GS ADVISORS III, INC., ___________ shares of Preferred Stock
its general partner
By:_____________________
Name:
Title:
GS CAPITAL PARTNERS III OFFSHORE, L.P.
By: GS ADVISORS III (CAYMAN), L.P. $____________ Notes
its general partner
_____________ GS Shares
By: GS ADVISORS III, INC.,
its general partner _____________ shares of Preferred Stock
By:_____________________
Name:
Title:
<PAGE>
GOLDMAN, SACHS & CO.
VERWALTUNGS GMBH
$____________ Notes
By:_____________________
Name: _____________ GS Shares
Title:
_____________ shares of Preferred Stock
STONE STREET FUND 2000, LLC
By:_____________________ $____________ Notes
Name:
Title: _____________ GS Shares
_____________ shares of Preferred Stock
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
<S> <C> <C>
ARTICLE I DEFINITIONS................................................................................2
1.1. Defined Terms; Interpretations.....................................................2
ARTICLE II ISSUANCE AND SALE OF NOTES, GS SHARES AND PREFERRED STOCK.................................11
2.1. Initial Issuance, Purchase and Sale...............................................11
2.2. The Initial Closing...............................................................12
2.3. Initial Closing Deliveries........................................................12
2.4. Second Issuance, Purchase and Sale................................................14
2.5. The Second Closing................................................................14
2.6. Second Closing Deliveries.........................................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................15
3.1. Organization; Subsidiaries........................................................16
3.2. Due Authorization.................................................................17
3.3. Capitalization....................................................................18
3.4. SEC Reports.......................................................................19
3.5. Financial Statements..............................................................19
3.6. Absence of Certain Changes........................................................19
3.7. Litigation........................................................................20
3.8. Title to Properties...............................................................20
3.9. Consents; No Violations...........................................................20
3.10. Compliance with Laws; Licenses....................................................21
3.11. Tax Matters.........................................................................21
3.12. Employee Benefit Plans............................................................22
3.13. Intellectual Property.............................................................23
3.14. Commitments.......................................................................24
3.15. Acquisitions......................................................................26
3.16. Brokers or Finders................................................................26
3.17. Proxy Statement...................................................................26
3.18. Insurance.........................................................................27
3.19. Holding Company Act and Investment Company Act....................................27
3.20. Offering of the Notes, the GS Shares and the Preferred Stock......................27
3.21. Existing Indebtedness; Future Liens...............................................28
3.22. Solvency..........................................................................28
3.23. Section 203 of the DGCL; Takeover Statute.........................................28
3.24. Year 2000.........................................................................29
3.25. Margin Regulations................................................................29
3.26. Disclosure........................................................................29
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE INVESTORS...........................................30
4.1. Acquisition for Investment........................................................30
4.2. Restricted Securities.............................................................30
4.3. Accredited Investor...............................................................30
4.4. Sufficient Funds..................................................................30
ARTICLE V COVENANTS.................................................................................30
5.1. Conduct of Business by the Company Pending the Second Closing.....................30
5.2. No Solicitation...................................................................32
5.3. Bank Financing....................................................................32
5.4. Press Releases; Interim Public Filings............................................32
5.5. HSR Act...........................................................................33
5.6. Proxy Statement; Stockholders Meeting.............................................33
5.7. Consents; Approvals...............................................................34
5.8. Listing...........................................................................34
5.9. Board Representation..............................................................34
5.10. Certificate of Designation........................................................37
5.11. Cooperation.......................................................................37
5.12. Access to Property; Records.......................................................37
5.13. Incentive Stock Options...........................................................37
5.14. Notice of Breach..................................................................38
5.15. Transfer Taxes....................................................................38
5.16. Rule 144; Integration.............................................................38
5.17. Transfer Restrictions; Resale of Notes............................................39
5.18. Preemptive Rights.................................................................39
5.19 Standstill Agreement..............................................................40
5.20. Actions Requiring Investor Approval...............................................41
5.21. Dividends.........................................................................42
5.22. Use of Proceeds...................................................................42
ARTICLE VI CONDITIONS................................................................................42
6.1. Conditions to Obligations of the Investors and the Company........................42
6.2. Conditions to Obligations of the Investors........................................43
6.3. Conditions to Obligations of the Company..........................................44
ARTICLE VII TERMINATION...............................................................................44
7.1. Termination.......................................................................44
7.2. Effect of Termination.............................................................45
ARTICLE VIII SURVIVAL; CERTAIN REMEDIES................................................................46
8.1. Survival..........................................................................46
8.2 Indemnification for the Benefit of the Company....................................46
8.3 Indemnification by the Company....................................................46
8.4 Materiality.......................................................................47
8.5 Indemnification Procedures........................................................47
8.6 Duplication.......................................................................48
ARTICLE IX MISCELLANEOUS.............................................................................49
9.1. Fees and Expenses.................................................................49
9.2. Public Announcements..............................................................49
9.3. Restrictive Legends...............................................................49
9.4. Further Assurances................................................................50
9.5. Successors and Assigns............................................................50
9.6. Entire Agreement..................................................................50
9.7. Notices...........................................................................50
9.8. Amendments........................................................................51
9.9. Counterparts......................................................................51
9.10. Headings..........................................................................52
9.11. Nouns and Pronouns................................................................52
9.12. GOVERNING LAW.....................................................................52
9.13. Submission to Jurisdiction........................................................52
9.14. WAIVER OF JURY TRIAL..............................................................52
9.15. Severability......................................................................52
</TABLE>
<PAGE>
Exhibits
Exhibit 2.3(a)(vi) Form of Opinion
Exhibit 2.3(a)(ix) Form of Amendment No. 1 to Rights Agreement
Exhibit 2.6(a)(iii) Form of Second Closing Opinion
Exhibit 5.10 Form of Certificate of Designation
<PAGE>
SECURITIES PURCHASE AGREEMENT
by and among
PROMEDCO MANAGEMENT COMPANY
GS CAPITAL PARTNERS III, L.P.
and
The Parties Listed On The Signature Page Hereto
January 13, 2000
<PAGE>
APPENDIX B
PROMEDCO MANAGEMENT COMPANY
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151(g) of the General Corporation Law of
the State of Delaware, ProMedCo Management Company (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware ("DGCL"), DOES HEREBY CERTIFY that:
Pursuant to the authority conferred upon the Board of
Directors of the Corporation (the "Board of Directors") by Section A of Article
IV of the Restated Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), and in accordance with the provisions of
Section 151(g) of the DGCL, the Board of Directors on _______________, adopted
the following resolution creating a series of Preferred Stock designated as
Series A Convertible Preferred Stock.
RESOLVED, that pursuant to the authority vested in the Board
of Directors in accordance with the DGCL and the provisions of the Certificate
of Incorporation, a series of the class of authorized Preferred Stock, par value
$0.01 per share, of the Corporation is hereby created and that the designation
and number of shares thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof, are as follows:
SECTION 1. DEFINITIONS.
Unless the context otherwise requires, when used herein the
following terms shall have the meaning indicated.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in The City of New York
or at a place of payment are authorized by law, regulation or executive
order to remain closed.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or
more related transactions, of all or substantially all of the
properties and assets of the Corporation and its Subsidiaries taken as
a whole to any Person (as such term is used in Section 13(d)(3) of the
Exchange Act), other than the Purchasers or their affiliates, (ii) the
adoption of a plan relating to the liquidation or dissolution of the
Corporation, (iii) the consummation of any transaction or other event
(including, without limitation, any merger or consolidation) the result
of which is that any "Person" or "Group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) (other than the
Purchasers and their affiliates) becomes the "beneficial owner" (as
such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a Person shall be deemed to have beneficial ownership
of all shares 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 45% of the voting stock of the
Corporation, or (iv) the first day on which a majority of the members
of the Board of Directors are not Continuing Directors.
"Commission" shall mean the Securities and Exchange
Commission.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors who (i) was a member of the Board
of Directors as of January 13, 2000 or (ii) was nominated for election
or elected to the Board of Directors with the approval, recommendation
or endorsement of a majority of the Continuing Directors who were
members of the Board of Directors at the time of such nomination or
election.
"Conversion Price" shall mean the Initial Conversion Price,
subject to adjustment as provided in Section 9.
"Current Market Price" shall mean the average of the daily
Market Prices of the Common Stock for twenty consecutive Trading Days
immediately preceding the date for which such value is to be computed.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect
at the time. Reference to a particular section of the Exchange Act
shall include reference to the comparable section, if any, of any such
successor federal statute.
"Fair Market Value" shall mean, as to shares of Common Stock
or any other class of capital stock or securities of the Corporation or
any other issuer which are publicly traded, the average of the daily
Market Prices of such shares for twenty consecutive Trading Days
immediately preceding the date for which the Fair Market Value of any
such security is to be determined. The "Fair Market Value" of any such
security which is not publicly traded or of any other property shall
mean the fair value thereof as determined by an independent investment
banking or appraisal firm experienced in the valuation of such
securities or property selected in good faith by the Board of Directors
or a committee thereof.
"Junior Stock" shall mean any capital stock or any rights,
warrants or other securities convertible into or exchangeable for
shares of any capital stock of the Corporation ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock.
"Liquidation Preference" with respect to a share of Series A
Preferred Stock shall mean, as at any date, $100.00 per share (as
adjusted for any stock dividends, combinations or splits with respect
to such share), plus an amount equal to all accrued but unpaid
dividends (whether or not declared) on such share as at such date.
"Market Price" when used with reference to shares of Common
Stock or other securities on any date, shall mean (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 or such
other securities are not publicly held or so listed or publicly traded,
"Market Price" shall mean the Fair Market Value per share of Common
Stock or of such other securities as determined in good faith by the
Board of Directors based on an opinion of an independent investment
banking firm acceptable to holders of a majority of the shares of
Series A Preferred Stock, which opinion may be based on such
assumptions as such firm shall deem to be necessary and appropriate.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, fully diluted shares of Common Stock (calculated as
prescribed by generally accepted accounting principles), except shares
then owned or held by or for the account of the Corporation or any
subsidiary thereof, and shall include all shares (i) issuable in
respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock and (ii) issuable in
respect of options or warrants to purchase, or securities convertible
into, shares of Common Stock.
"Parity Stock" shall mean any capital stock or any rights,
warrants or other securities convertible into or exchangeable for
shares of any capital stock of the Corporation ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock.
"Paying Agent" shall mean the Transfer Agent or such other
Person or Persons as may be appointed by the Board of Directors from
time to time.
"Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by merger
or otherwise) of such entity.
"Securities Purchase Agreement" shall mean the Securities
Purchase Agreement, dated as of January 13, 2000, by and among the
Corporation and GS Capital Partners III, L.P. ("GSCP"), and certain
affiliates of GSCP set forth on the signature page thereto (the "GSCP
Affiliates", and collectively with GSCP and including their respective
successors and permitted assigns, the "Purchasers").
"Senior Stock" shall mean any capital stock or any rights,
warrants or other securities convertible into or exchangeable for
shares of any capital stock of the Corporation ranking senior to
(either as to dividends or upon liquidation, dissolution or winding up)
the Series A Preferred Stock.
"Subsidiary" or "Subsidiaries" shall mean any corporation,
limited liability company, partnership, business association or other
Person with respect to which the Company has, directly or indirectly,
ownership of or rights with respect to securities or other interests
having the power to elect a majority of such Person's board of
directors or analogous or similar governing body, or otherwise having
the power to direct the management, business or policies of that
corporation, limited liability company, partnership, business
association or other Person.
"Trading Day" means a Business Day or, if the Common Stock is
listed or admitted to trading on any national securities exchange, a
day on which such exchange is open for the transaction of business.
Section 2. Designation; Number; rank.
(a) Number; Designation. 550,000 shares of Preferred Stock of the
Corporation shall constitute a series designated as "Series A Convertible
Preferred Stock" (the "Series A Preferred Stock").
(b) Rank. The Series A Preferred Stock shall, with respect to
dividend rights and rights on liquidation, dissolution or winding up, rank
senior to the Common Stock, par value $0.01 per share, of the Corporation (the
"Common Stock") and all other capital stock of the Corporation issued prior to
or on or after the date hereof.
Section 3. Dividends.
(a) Payment of Dividends. The holders of shares of Series A
Preferred Stock, in preference to the holders of shares of Common Stock and of
any shares of other capital stock of the Corporation as to payment of dividends,
shall be entitled to receive, when, as and if declared by the Board of
Directors, out of the assets of the Corporation legally available therefor,
distributions in the form of cumulative cash dividends at an annual rate per
share equal to 6% of the Liquidation Preference from and after the respective
dates of issuance of applicable shares of Series A Preferred Stock (the "Issue
Date"), as long as the shares of Series A Preferred Stock remain outstanding.
Dividends shall be (i) computed on the basis of the Liquidation Preference; (ii)
accrue and be payable quarterly, in arrears, on March 31, June 30, September 30
and December 31 (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), except that if any Quarterly Dividend Payment Date is
not a Business Day then the Quarterly Dividend Payment Date shall be on the
first immediately succeeding Business Day, commencing on the first Quarterly
Dividend Payment Date following the Issue Date; and (iii) payable in cash.
(b) Accrual of Dividends; Default Dividends. Dividends payable
pursuant to clause (a) of this Section 3 shall begin to accrue and be cumulative
from the Issue Date, whether or not declared on a daily basis. The amount of
dividends so payable shall be determined on the basis of twelve 30-day months
and a 360-day year. Accrued dividends not paid within 10 days of any Quarterly
Dividend Payment Date shall accrue dividends at an annual dividend rate of 8% of
the Liquidation Preference (the "Default Dividend Rate") until paid in full and
shall be payable at any time as of which funds legally available therefor are
available to the Corporation (without reference to any regular Quarterly
Dividend Payment Date) to the holders of record on such date, not exceeding 30
days preceding the payment thereof, as may be fixed by the Board of Directors.
Dividends paid on shares of Series A Preferred Stock (including any dividends
payable at the Default Dividend Rate (such dividends, "Default Dividends")) in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. All references herein to "unpaid
dividends" shall be deemed to include any unpaid Default Dividends.
(c) Restricted Payments. So long as any shares of Series A
Preferred Stock are outstanding, the Corporation shall not declare, pay or set
apart for payment any dividend on any of shares of Common Stock or other capital
stock of the Corporation or make any payment on account of, or set apart for
payment money for a sinking or other similar fund for, the purchase, redemption
or other retirement of, any of shares of Common Stock or other capital stock of
the Corporation or any warrants, rights, calls or options exercisable for or
convertible into any shares of Common Stock or other capital stock of the
Corporation, or make any distribution in respect thereof, either directly or
indirectly, and whether in cash, obligations or shares of the Corporation or
other property, and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any of the Common
Stock or other capital stock of the Corporation or any warrants, rights, calls
or options exercisable for or convertible into any Common Stock or other capital
stock of the Corporation unless, all unpaid dividends on the shares of Series A
Preferred Stock shall have been paid.
(d) Dividends on Common Stock. So long as any shares of Series
A Preferred Stock remain outstanding, if the Corporation pays a dividend in
cash, securities or other property on shares of Common Stock then at the same
time the Corporation shall declare and pay a dividend on shares of Series A
Preferred Stock in the amount of dividends that would be paid with respect to
shares of Series A Preferred Stock if such shares were converted into shares of
Common Stock on the record date for such dividends (or if no record date is
established, at the date such dividend is declared).
SECTION 4. VOTING RIGHTS.
In addition to any voting rights provided by law, the holders
of shares of Series A Preferred Stock shall have the voting rights set forth in
this Section 4:
(a) Right to Vote as a Single Class with Holders of Common
Stock. So long as any shares of Series A Preferred Stock are outstanding, each
share of Series A Preferred Stock shall entitle the holder thereof to notice of
and to vote on all matters submitted to a vote of the stockholders of the
Corporation, voting together as a single class with the holders of shares of
Common Stock. The holders of each share of Series A Preferred Stock shall be
entitled to vote with respect to each share of Series A Preferred Stock held by
each such holder a number of votes equal to the number of votes which could be
cast in such vote by a holder of the number of shares of Common Stock into which
such share of Series A Preferred Stock is convertible (as adjusted pursuant to
Section 9) on the record date for such vote. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an
as-converted basis (after aggregation of all shares of Common Stock into which
shares of Series A Preferred Stock held by each holder could be converted) shall
be rounded to the nearest whole number (with one-half being rounded upward).
(b) Right to Designate Directors. In addition to any of the
voting rights provided to the holders of shares of Series A Preferred Stock
pursuant to the Securities Purchase Agreement, in the event the Corporation
shall have failed to pay in full (i) dividends on the shares of Series A
Preferred Stock for a period of twelve consecutive months or (ii) the Mandatory
Redemption Price within 30 days of the Mandatory Redemption Date, then, in
addition to any other rights that may otherwise be available to holders of
Series A Preferred Stock pursuant to this Certificate of Designation or
otherwise, the total number of directors of the Corporation shall be increased
by two, and the holders of Series A Preferred Stock, voting together as a single
class, shall by affirmative vote of holders of a plurality of the total number
of shares of Series A Preferred Stock voting thereon, be entitled to elect to
the Board of Directors, at a meeting of such stockholders or by written consent
in lieu thereof, two additional directors (the "Default Directors") (which
directors shall be in addition to, and not in lieu of, any Preferred Designees
(as defined in the Securities Purchase Agreement) and which shall each be
required to satisfy any qualifications existing under applicable law and shall
be entitled to all rights of voting and participation as are directors of the
Corporation generally), and shall be entitled, by affirmative vote of holders of
a majority of the total number of shares of Series A Preferred Stock then
outstanding or by written consent in lieu thereof, at any time to remove any
director so elected. Any other provision of this Certificate of Designation or
the Certificate of Incorporation or By-laws of the Corporation notwithstanding,
no Default Director may be removed except in the manner provided for in this
paragraph. Vacancies among the Default Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
may be filled at any time, but only by the affirmative vote of holders of a
plurality of the total number of shares of Series A Preferred Stock then
outstanding, voting together as a single class, or by written consent in lieu
thereof, and any director so chosen shall hold office for a term expiring on the
date the term of office of the director such newly-elected director shall have
replaced would have expired. At any time during which the holders of Series A
Preferred Stock are entitled to elect Default Directors, in the event the
Corporation declares and pays in cash all theretofore unpaid dividends and/or
pays in full the Mandatory Redemption Amount, as the case may be, then the term
of any Default Director then in office shall be deemed to have expired as of the
time such payments are made, and the total number of directors of the
Corporation shall be reduced by the number of Default Directors then in office
whose term shall have expired and the holders of Series A Preferred Stock shall
cease to have any rights hereunder to elect Default Directors, in each case,
unless and until one or more of the conditions specified in clauses (i) and (ii)
hereof shall recur.
(c) Actions Not to be Taken Without Vote of Holders of Series
A Preferred Stock. The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, without the affirmative vote or consent
of the holders of not less than 50% of all shares of Series A Preferred Stock at
any time outstanding:
(i) authorize, increase the authorized number of shares of,
or issue any shares of Senior Stock or Parity Stock;
(ii) increase the authorized number of shares of, or issue
(including on conversion or exchange of any convertible or
exchangeable securities or by reclassification) any shares of,
Series A Preferred Stock other than as required by this
Certificate of Designation; or
(iii) reclassify any shares of Series A Preferred Stock or
authorize, adopt or approve an amendment to this Certificate of
Designation which would increase or decrease the par value of the
shares of Series A Preferred Stock, or alter or change the
powers, preferences or special rights of the Series A Preferred
Stock so as to affect such shares of Series A Preferred Stock
adversely.
(d) Exercise of Voting Rights. (i) The foregoing rights of
holders of shares of Series A Preferred Stock to take any actions as provided in
this Section 4 may be exercised at any annual meeting of stockholders or at a
special meeting of stockholders held for such purpose or at any adjournment
thereof, or by the written consent, delivered to the Secretary of the
Corporation, of the holders of not less than 50% of all shares of Series A
Preferred Stock outstanding as of the record date of such written consent.
So long as such right to vote continues, the Chairman of the
Board of the Corporation may call, and if the holders of shares
of Series A Preferred Stock are to vote separately as a single
class, upon the written request of holders of record of 20% of
the outstanding shares of Series A Preferred Stock, addressed to
the Secretary of the Corporation, at the principal office of the
Corporation, the Chairman of the Board of the Corporation shall
call, a special meeting of the holders of shares of Series A
Preferred Stock entitled to vote as provided herein. The
Corporation shall use its best efforts to hold such meeting
within 60, but in any event not later than 90, days after
delivery of such request to the Secretary, at the place and upon
the notice provided by law and in the By-laws of the Corporation
for the holding of meetings of stockholders; provided that the
Corporation shall not be required to call such a special meeting
if such request is received fewer than 90 days before the date
fixed for the next ensuing annual meeting of stockholders of the
Corporation; and provided, further, that if it is necessary for
the Corporation to solicit proxies for use at such special
meeting, the Corporation's obligation to conduct such special
meeting shall be delayed for such period of time as is necessary
for the Corporation to prepare and file a proxy statement and to
obtain the Commission's clearance of such proxy statement.
(ii) At each meeting of stockholders at which the holders of
shares of Series A Preferred Stock shall have the right, voting
separately as a single class, to take any action, the presence in
person or by proxy of the holders of record of one-half of the
total number of shares of Series A Preferred Stock then
outstanding and entitled to vote on the matter shall be necessary
and sufficient to constitute a quorum. At any such meeting or at
any adjournment thereof, in the absence of a quorum of the
holders of shares of Series A Preferred Stock, a majority of the
holders of such shares present in person or by proxy shall have
the power to adjourn the meeting as to the actions to be taken by
the holders of shares of Series A Preferred Stock from time to
time and place to place without notice other than announcement at
the meeting until a quorum shall be present.
(iii) For the taking of any action as provided in this
Section 4 by the holders of shares of Series A Preferred Stock,
each such holder shall have one vote for each share of such stock
standing in his name on the transfer books of the Corporation as
of any record date fixed for such purpose or, if no such date be
fixed, at the close of business on the Business Day next
preceding the day on which notice is given, or if notice is
waived, at the close of business on the Business Day next
preceding the day on which the meeting is held.
Section 5. Redemption.
(a) Optional Redemption. (i) Subject to the rights of holders
of shares of Series A Preferred Stock set forth in Section 9 hereof, the
Corporation shall, at any time following the fourth anniversary of the Issue
Date, have the right, at its sole option and election made in accordance with
clause (a)(ii) below, to redeem, to the extent the Corporation shall have the
funds legally available therefor, all, but not less than all, of the then
outstanding shares of Series A Preferred Stock within 45 days following any date
on which the Market Price per share of Common Stock for at least 20 out of 30
consecutive Trading Days immediately preceding such date, including the last
Trading Day of such period, is equal to or greater than 150% of the Conversion
Price in effect as of the first day of such 30-Trading Day period (any such
date, a "Redemption Trigger Date"), for an amount per share equal to the
Liquidation Preference (the "Optional Redemption Price") as of the Optional
Redemption Date (as defined below). Notwithstanding the foregoing, no redemption
shall be permitted pursuant to this Section 5(a) at any time during which the
Common Stock is not listed or admitted to be listed on any of the New York Stock
Exchange, the American Stock Exchange, or the Nasdaq National Market.
(ii) Notice of any redemption of shares of Series A Preferred Stock
pursuant to clause (a)(i) shall be mailed, first class postage prepaid, to each
holder of shares of Series A Preferred Stock, at such holder's address as it
appears on the transfer books of the Corporation, specifying (x) the Optional
Redemption Price and (y) the redemption date (the "Optional Redemption Date");
and calling upon such holder to surrender to the Corporation, in the manner and
at the place designated, such holder's certificate or certificates representing
the shares to be redeemed (the "Optional Redemption Notice"). The Optional
Redemption Notice shall be mailed not more than 20 days following the applicable
Redemption Trigger Date. The Optional Redemption Date shall be determined by the
Corporation but in no event shall be earlier than the 10th day following the
date of the Redemption Notice or later than the 25th day following the
Redemption Notice.
(b) Mandatory Redemption. (i) Subject to the rights of holders
of shares of Series A Preferred Stock set forth in Section 9 hereof, the
Corporation shall, on the seventh anniversary of the Issue Date (such date, the
"Mandatory Redemption Date"), redeem, to the extent the Corporation shall have
the funds legally available therefor, all, but not less than all, of the then
outstanding shares of Series A Preferred Stock for an amount per share equal to
the Liquidation Preference as of such date (the "Mandatory Redemption Price").
If the funds of the Corporation legally available for redemption of shares of
Series A Preferred Stock on the Mandatory Redemption Date are insufficient to
redeem the total number of shares to be redeemed on such date, those funds which
are legally available will be used to redeem the maximum possible number of such
shares ratably among the holders of such shares to be redeemed based upon the
number of shares of Series A Preferred Stock held by each such holder. The
shares of Series A Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided in this Certificate of
Designation at any time. Thereafter, when sufficient additional funds of the
Corporation are legally available for the redemption of shares of Series A
Preferred Stock that remain outstanding, such funds shall immediately be used to
redeem the entire balance of the shares of Series A Preferred Stock that the
Corporation has become obliged to redeem on the Mandatory Redemption Date but
which the Corporation has not redeemed.
(ii) Notice of any redemption of shares of Series A Preferred Stock
pursuant to clause (b)(i) shall be mailed, first class postage prepaid, to each
holder of shares of Series A Preferred Stock, at such holder's address as it
appears on the transfer books of the Corporation, specifying (x) the number of
shares of Series A Preferred Stock to be redeemed, (y) the Mandatory Redemption
Price and (z) the Mandatory Redemption Date; and calling upon such holder to
surrender to the Corporation, in the manner and at the place designated, such
holder's certificate or certificates representing the shares to be redeemed (the
"Mandatory Redemption Notice"). The Mandatory Redemption Notice shall be mailed
not less than 25 and not more than 45 days prior to the Mandatory Redemption
Date.
(c) Payment of Redemption Price. On the date of any redemption
pursuant to this Section 5, (i) the Corporation shall in cash or by wire
transfer to an account designated by each holder the Optional Redemption Price
or the Mandatory Redemption Price, as the case may be, for each of its shares of
Series A Preferred Stock, and (ii) after payment has been made in accordance
with clause (i) above, dividends on the shares of Series A Preferred Stock so
called for redemption shall cease to accrue, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from the
Corporation the Optional Redemption Price or the Mandatory Redemption Price, as
the case may be, and except the right to convert shares of Series A Preferred
Stock so called for redemption prior to the close of business on the date
immediately preceding the date fixed for such redemption) shall cease.
Section 6. change of control.
(a) Offer to Repurchase. Upon the occurrence of a Change of
Control, the Corporation shall make an offer (a "Change of Control Offer") to
each holder of shares of Series A Preferred Stock to repurchase all or any part
(subject to the rights of holder pursuant to Section 9) of each such holder's
shares of Series A Preferred Stock at an offer price in cash equal to 101% of
the Liquidation Preference as of the Change of Control Payment Date (the "Change
of Control Payment"). The Corporation shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of shares of Series A Preferred Stock as a result of a
Change of Control, and the Corporation shall not be in violation of this
Certificate of Designation by reason of any act required by such rule or other
applicable law.
(b) Within 25 days following any Change of Control, the
Corporation shall mail a notice to each holder of shares of Series A Preferred
Stock stating:
(i) that the Change of Control Offer is being made pursuant to this Section
6 and that all shares of Series A Preferred Stock tendered will be accepted for
payment;
(ii) the purchase price and the purchase date, which shall be at least 30
but no more than 60 days from the date on which the Corporation mails notice of
the Change of Control (the "Change of Control Payment Date");
(iii) that any shares of Series A Preferred Stock not tendered will
continue to accrue dividends as provided in this Certificate of Designation;
(iv) that, unless the Corporation defaults in the payment of the Change of
Control Payment, all shares of Series A Preferred Stock accepted for payment
pursuant to the Change of Control Offer shall cease to accrue dividends after
the Change of Control Payment Date;
(v) that holders of shares of Series A Preferred Stock electing to have any
shares of Series A Preferred Stock purchased pursuant to a Change of Control
Offer shall be required to surrender the shares of Series A Preferred Stock to
the Corporation or its designated agent for such purpose, at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date; and
(vi) that holders of shares of Series A Preferred Stock will be entitled to
withdraw their election if the Corporation or its designated agent for such
purpose, receives, not later than the close of business on the second Business
Day preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder of shares of Series
A Preferred Stock, the number of shares of Series A Preferred Stock delivered
for purchase, and a statement that such holder is withdrawing his election to
have such shares purchased.
(c) On the Change of Control Payment Date, the Corporation
shall, to the extent lawful, (i) accept for payment all shares of Series A
Preferred Stock tendered pursuant to the Change of Control Offer and (ii)
deposit with the Paying Agent an amount equal to the Change of Control Payment
in respect of all shares of Series A Preferred Stock so tendered. The
Corporation shall promptly mail to each holder of shares of Series A Preferred
Stock so tendered the Change of Control Payment for such shares. The Corporation
shall publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.
Section 7. Status of Converted or Redeemed Stock.
Any shares of Series A Preferred Stock converted, redeemed,
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares of Series A Preferred Stock shall upon their cancellation, and upon the
filing of any document required by the DGCL, become authorized but unissued
shares of Preferred Stock, $0.01 par value, of the Corporation and may be
reissued as part of another series of Preferred Stock, $0.01 par value, of the
Corporation.
Section 8. Liquidation, Dissolution or Winding Up.
(a) (i) In the event the Corporation shall (A) commence a
voluntary case under the Federal bankruptcy laws or any other applicable Federal
or state bankruptcy, insolvency or similar law, or (B) consent to the entry of
an order for relief in an involuntary case under such law or to the appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation, or of any substantial part of its
property, or (C) make an assignment for the benefit of its creditors, or (D)
admit in writing its inability to pay its debts generally as they become due, or
(ii)(x) if a decree or order for relief in respect of the Corporation shall be
entered by a court having jurisdiction in the premises in an involuntary case
under the Federal bankruptcy laws or any other applicable Federal or state
bankruptcy, insolvency or similar law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and (y) any such decree or order shall be
unstayed and in effect for a period of 60 consecutive days and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or (iii) if the
Corporation shall otherwise liquidate, dissolve or wind up, after payment or
provision for the payment for the debts and other liabilities of the Corporation
(each, a "Liquidation"), before any payment or distribution to holders of shares
of Junior Stock or Parity Stock, holders of shares of Series A Preferred Stock
shall be entitled to receive an amount equal to the greater of (x) the
Liquidation Preference with respect to each share of Series A Preferred Stock
held by such holder as of the date of Liquidation, or (y) the amount that would
have been received with respect to shares of Series A Preferred Stock upon any
such Liquidation if such shares had been converted to shares of Common Stock
immediately prior to the date of such Liquidation.
(b) If, upon any such Liquidation, whether voluntary or
involuntary, the assets to be distributed to the holders of the Series A
Preferred Stock shall be insufficient to permit payment of the full amount of
the Liquidation Preference with respect to each share of Series A Preferred
Stock, then the entire assets of the Corporation to be distributed among the
holders of the Series A Preferred Stock shall be distributed ratably among such
holders in accordance with the number of shares of Series A Preferred Stock held
by each such holder.
(c) After the payment to the holders of shares of the Series A
Preferred Stock of the full amount of any liquidating distribution to which they
are entitled under this Section 8, the holders of the Series A Preferred Stock
as such shall have no right or claim to any of the remaining assets of the
Corporation.
(d) Whenever the distribution provided for in this Section 8
shall be payable in securities or property other than cash, the value of such
distribution shall be the Fair Market Value of such securities or property.
Section 9. Conversion.
(a) Right to Convert. Subject to the provisions for adjustment
hereinafter set forth, each share of Series A Preferred Stock shall be
convertible into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing the Liquidation Preference as of the
Conversion Date by the Conversion Price in effect as of the Conversion Date. The
Conversion Price shall initially be $3.25 (the "Initial Conversion Price"), and
shall be subject to adjustment as provided in clauses (e) through (g) of this
Section 9. The conversion right set forth in this clause (a) shall be
exercisable at the option of the holder at any time following the Issue Date. In
the case of shares of Series A Preferred Stock called for redemption pursuant to
Section 5 hereof, conversion rights shall expire with respect to such shares on
the Optional Redemption Date or the Mandatory Redemption Date, as the case may
be, when payment in full of the applicable redemption price shall have been made
by the Corporation.
(b) Mechanics of Conversion. Conversion of shares of Series A
Preferred Stock may be effected by any such holder upon the surrender to the
Corporation at the principal office of the Corporation or at the office of any
agent or agents of the Corporation, as may be designated by the Board of
Directors (the "Transfer Agent"), of the certificate(s) for such Series A
Preferred Stock to be converted, accompanied by a written notice (the date of
such notice being referred to as the "Conversion Date") stating that such holder
elects to convert all or a specified whole number of such shares in accordance
with the provisions of this Section 9 and specifying the name or names in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued; provided that in all cases the converting holder shall convert at
least 1000 shares of Series A Preferred Stock (or if such holder holds less than
1000 shares, all shares of Series A Preferred Stock held by such holder). In
case any holder's notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name or names. Other
than such taxes, the Corporation will pay any and all transfer, issue, stamp and
other taxes (other than taxes based on income) that may be payable in respect of
any issue or delivery of shares of Common Stock on conversion of Series A
Preferred Stock pursuant hereto. As promptly as practicable, and in any event
within five Business Days after the surrender of such certificate or
certificates and the receipt of such notice relating thereto and, if applicable,
payment of all transfer taxes which are the responsibility of the holder as set
forth above (or the demonstration to the satisfaction of the Corporation that
such taxes have been paid), the Corporation shall deliver or cause to be
delivered (i) certificates representing the number of validly issued, fully paid
and nonassessable full shares of Common Stock, to which the holder of shares of
Series A Preferred Stock being converted shall be entitled and (ii) if less than
the full number of shares of Series A Preferred Stock evidenced by the
surrendered certificate or certificates is being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares being
converted. Such conversion shall be deemed to have been made at the close of
business on the Conversion Date so that the rights of the holder thereof as to
the shares being converted shall cease except for the rights pursuant to Section
9(c) to receive shares of Common Stock, in accordance herewith, and the person
entitled to receive the shares of Common Stock shall be treated for all purposes
as having become the record holder of such shares of Common Stock at such time.
In case any shares of Series A Preferred Stock are to be
redeemed pursuant to Sections 5 or 6, such right of conversion shall cease and
terminate as to the shares of Series A Preferred Stock to be redeemed at the
close of business on the Business Day preceding the applicable redemption date.
(c) Fractional Shares. In connection with the conversion of
any shares of Series A Preferred Stock into shares of Common Stock, no fractions
of shares of Common Stock shall be issued, 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 Trading Day on which such shares of Series A Preferred Stock
are deemed to have been converted. If more than one share of Series A Preferred
Stock shall be surrendered for conversion by the same holder at the same time,
the number of full shares of Common Stock issuable on conversion thereof shall
be computed on the basis of the total number of shares of Series A Preferred
Stock so surrendered. Promptly upon conversion, the Corporation shall pay to the
holder of shares of Series A Preferred Stock so converted out of funds legally
available, an amount equal to any accrued and unpaid dividends on the shares of
Series A Preferred Stock surrendered for conversion to the date of such
conversion, together with cash in lieu of any fractional interest of such
holder.
(d) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available for issuance upon the
conversion of the Series A Preferred Stock, free from any preemptive rights,
such number of its authorized but unissued shares of Common Stock as will from
time to time be sufficient to permit the conversion of all outstanding shares of
Series A Preferred Stock issued or issuable pursuant to the Securities Purchase
Agreement into shares of Common Stock, and shall take all actions required to
increase the authorized number of shares of Common Stock if necessary to permit
the conversion of all outstanding shares of Series A Preferred Stock.
(e) Adjustment to Conversion Price for Dividends and for
Combinations or Subdivisions of Common Stock; Additional Shares. (i) In case the
Corporation shall at any time or from time to time after the Issue Date (A) pay
a dividend, or make a distribution, on the outstanding shares of Common Stock in
shares of Common Stock, (B) subdivide the outstanding shares of Common Stock,
(C) combine the outstanding shares of Common Stock into a smaller number of
shares or (D) issue by reclassification of the shares of Common Stock any shares
of capital stock of the Corporation, then, and in each such case, the Conversion
Price in effect immediately prior to such event or the record date therefor,
whichever is earlier, shall be adjusted so that the holder of any shares of
Series A Preferred Stock thereafter surrendered for conversion into Common Stock
shall be entitled to receive the number of shares of Common Stock or other
securities of the Corporation which such holder would have owned or have been
entitled to receive after the happening of any of the events described above,
had such shares of Series A Preferred Stock been surrendered for conversion
immediately prior to the happening of such event or the record date therefor,
whichever is earlier. An adjustment made pursuant to this clause (i) shall
become effective (x) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of such subdivision, reclassification or
combination, at the close of business on the day upon which such corporate
action becomes effective. No adjustment shall be made pursuant to this clause
(i) in connection with any transaction to which clause (f) applies.
(ii) In case the Corporation shall pay a dividend or make a distribution to
all holders of shares of Common Stock (including any dividend or distribution
paid in connection with a consolidation or merger in which the Corporation is
the continuing corporation) of any shares of capital stock of the Corporation or
evidences of its indebtedness or assets or cash (excluding dividends or
distributions in connection with the liquidation, dissolution or winding up of
the Corporation) or rights or warrants to subscribe for or purchase shares of
Common Stock or securities convertible into or exchangeable for Common Stock
(excluding those securities referred to in subsection (i) above), then in each
such case the Conversion Price in effect immediately prior thereto shall be
reduced to an amount determined by determined by multiplying (A) the Conversion
Price in effect on the record date for the determination of stockholders
entitled to receive the payment or distribution by (B) a fraction, the numerator
of which shall be the Current Market Price per share of Common Stock on such
record date less the then Fair Market Value as of such record date of the cash,
assets, evidences of indebtedness or securities so paid with respect to one
share of Common Stock, and the denominator of which shall be the Current Market
Price per share of Common Stock on such record date. Such adjustment shall be
made whenever any such payment is made, and shall become effective retroactively
immediately after such record date.
(iii) In case the Corporation shall issue shares of Common Stock (or
rights, warrants or other securities convertible into or exchangeable for shares
of Common Stock) (collectively, "Additional Shares") after the Issue Date at a
price per share (or having a conversion price per share) less than the greater
of (A) the Current Market Price per share of Common Stock on the date preceding
the earlier of the issuance or public announcement of the issuance of such
Additional Shares of Common Stock and (B) the Conversion Price as of the date of
issuance of such shares (or, in the case of convertible or exchangeable
securities, less than the Current Market Price as of the date of issuance of the
rights, warrants or other securities in respect of which shares of Common Stock
were issued), then, and in each such case, the Conversion Price shall be reduced
to an amount determined by multiplying (A) the Conversion Price in effect on the
day immediately prior to such date by (B) a fraction, the numerator of which
shall be the sum of (1) the number of shares of Common Stock Outstanding
immediately prior to such sale or issue multiplied by the greater of (a) the
then applicable Conversion Price per share and (b) the Current Market Price per
share of Common Stock on the date preceding the earlier of the issuance or
public announcement of the issuance of such Additional Shares of Common Stock
(the greater of (a) and (b) above hereinafter referred to as the "Adjustment
Price") and (2) the aggregate consideration receivable by the Corporation for
the total number of shares of Common Stock so issued (or into or for which the
rights, warrants or other convertible securities may convert or be exercisable),
and the denominator of which shall be the sum of (x) the total number of shares
of Common Stock Outstanding immediately prior to such sale or issue and (y) the
number of Additional Shares issued (or into or for which the rights, warrants or
convertible securities may be converted or exercised), multiplied by the
Adjustment Price. An adjustment made pursuant to this clause (iii) shall be made
on the next Business Day following the date on which any such issuance is made
and shall be effective retroactively to the close of business on the date of
such issuance. For purposes of this clause (iii), the aggregate consideration
receivable by the Corporation in connection with the issuance of shares of
Common Stock or of rights, warrants or other securities convertible into shares
of Common Stock shall be deemed to be equal to the sum of the aggregate offering
price (before deduction of underwriting discounts or commissions and expenses
payable to third parties) of all such Common Stock, rights, warrants and
convertible securities plus the aggregate amount (as determined on the date of
issuance), if any, payable upon exercise or conversion of any such rights,
warrants and convertible securities into shares of Common Stock. If, subsequent
to the date of issuance of such right, warrants or other convertible securities,
the exercise or conversion price thereof is reduced, such aggregate amount shall
be recalculated and the Conversion Price shall be adjusted retroactively to give
effect to such reduction. On the expiration of any option or the termination of
any right to convert or exchange any securities into Additional Shares, the
Conversion Price then in effect hereunder shall forthwith be increased to the
Conversion Price which would have been in effect at the time of such expiration
or termination (but taking into account other adjustments made following the
time of issuance of such options or securities) had such option or security, to
the extent outstanding immediately prior to such expiration or termination,
never been issued. If Common Stock is sold as a unit with other securities, the
aggregate consideration received for such Common Stock shall be deemed to be net
of the Fair Market Value of such other securities. The issuance or reissuance of
(i) any shares of Common Stock or rights, warrants or other securities
convertible into shares of Common Stock (whether treasury shares or newly issued
shares) (A) pursuant to a dividend or distribution on, or subdivision,
combination or reclassification of, the Outstanding shares of Common Stock
requiring an adjustment in the Conversion Price pursuant to clause (i) of this
clause (e); (B) pursuant to any restricted stock or stock option plan or program
of the Corporation involving the grant of options or rights to acquire shares of
Common Stock after the date hereof to directors, officers and employees of the
Corporation and its Subsidiaries as provided in Section 5.13 of the Purchase
Agreement; (C) pursuant to any option, warrant, right, or convertible security
outstanding as of the Issue Date, or (ii) the Series A Preferred Stock and any
shares of Common Stock issuable upon conversion or exercise thereof, shall not
be deemed to constitute an issuance of Common Stock or convertible securities by
the Corporation to which this clause (iii) applies. No adjustment shall be made
pursuant to this clause (iii) in connection with any transaction to which clause
(f) applies.
(iv) The term "dividend," as used in this clause (e), shall mean a dividend
or other distribution upon the capital stock of the Corporation.
(v) Anything in this clause (e) to the contrary notwithstanding, the
Corporation shall not be required to give effect to any adjustment in the
Conversion Price (x) if, in connection with any event which would otherwise
require an adjustment pursuant to this clause (e), the holders of Series A
Preferred Stock have received the dividend or distribution to which such holders
are entitled under Section 3 hereof or (y) unless and until the net effect of
one or more adjustments (each of which shall be carried forward), determined as
above provided, shall have resulted in a change of the Conversion Price such
that the number of shares of Common Stock receivable upon conversion of each
share of Series A Preferred Stock would differ by at least one one-hundredth of
one share of Common Stock, and when the cumulative net effect of more than one
adjustment so determined shall be to change the Conversion Price by at least one
one-hundredth of one share of Common Stock, such change in Conversion Price
shall thereupon be given effect.
(vi) The certificate of any firm of independent public accountants of
recognized national standing selected by the Board of Directors (which may be
the firm of independent public accountants regularly employed by the
Corporation) shall be presumptively correct for any computation made under this
clause (e).
(vii) If the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this clause
(e) or in the Conversion Price then in effect shall be required by reason of the
taking of such record.
(viii) If any event occurs as to which the provisions of this Section 9(e)
are not strictly applicable or if strictly applicable would not fairly protect
the rights of the holders of the Series A Preferred Stock in accordance with the
essential intent and principles of such provisions, the Board of Directors shall
make an adjustment in the application of such provisions, in accordance with
such essential intent and principles, so as to protect such rights of the
holders of the Series A Preferred Stock.
(f) Adjustment to Conversion Price for Reclassification and
Reorganization. In the case of any reclassification of the Common Stock, any
consolidation of the Corporation with, or merger with the Corporation into, any
other Person, any merger of another entity into the Corporation (other than a
merger that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Corporation), any sale
or transfer of all or substantially all of the assets of the Corporation or any
compulsory share exchange pursuant to which share exchange the shares of Common
Stock are converted into other securities, cash or other property (each of the
foregoing, a "Transaction"), in addition to any rights of holders of shares of
Series A Preferred Stock pursuant to Section 6, each share of Series A Preferred
Stock then outstanding shall thereafter be convertible into, in lieu of the
Common Stock issuable upon such conversion prior to consummation of such
Transaction, the kind and amount of shares of stock and other securities and
property receivable (including cash) upon the consummation of such Transaction
by a holder of that number of shares of Common Stock into which one share of
Series A Preferred Stock was convertible immediately prior to such Transaction.
In case securities or property other than Common Stock shall be issuable or
deliverable upon conversion as aforesaid, then all references in this Section 9
shall be deemed to apply, so far as appropriate and nearly as may be, to such
other securities or property. The Corporation, the person formed by the
consolidation or resulting from the merger or which acquires such assets or
which acquires the Corporation's shares, as the case may be, shall make
provisions in its certificate or articles of incorporation or other constituent
document to establish such rights and such rights shall be clearly provided for
in the definitive transaction documents relating to such transaction. The
certificate or articles of incorporation or other constituent document shall
provide for adjustments, which, for events subsequent to the effective date of
the certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 9. The provisions of this Section 9(f) shall similarly apply
to successive reclassifications, consolidations, mergers, sales, transfers or
share exchanges.
(g) Adjustment to Conversion Price for Redemption. In case the
Corporation shall purchase, redeem or otherwise acquire any shares of Common
Stock at a price per share greater than the Current Market Price per share of
such Common Stock on the date of such event, or in case the Corporation shall
purchase, redeem or otherwise acquire other securities convertible into or
exchangeable for Common Stock for a consideration per share of Common Stock into
which such security is convertible or exchangeable greater than the Current
Market Price per share of Common Stock on the date of such event, then the
Conversion Price in effect immediately prior thereto shall be reduced to an
amount determined by multiplying (A) the Conversion Price in effect on the day
immediately prior to such date by (B) a fraction, the numerator of which shall
be the difference between (1) the number of shares of Common Stock Outstanding
immediately prior to such purchase, redemption or acquisition multiplied by the
then applicable Current Market Price per share and (2) the aggregate
consideration payable by the Corporation for the total number of shares of
Common Stock so purchased, redeemed or acquired (or, into or for which the
rights, warrants or other convertible securities may convert or be exercisable),
and the denominator of which shall be the difference between (x) the total
number of shares of Common Stock Outstanding immediately prior to such event and
(y) the number of shares so purchased, redeemed or acquired, multiplied by the
then applicable Current Market Price per share. Such adjustment shall be made
whenever such Common Stock is purchased, redeemed or otherwise acquired by the
Corporation, and shall become effective immediately after such date.
(h) Notice of Record Date. In case at any time or from time to
time (i) the Corporation shall pay any stock dividend or make any other non-cash
distribution to the holders of its Common Stock, or offer for subscription pro
rata to the holders of its Common Stock any additional shares of stock of any
class or any other right, or (ii) there shall be any capital reorganization or
reclassification of the Common Stock of the Corporation or consolidation or
merger of the Corporation with or into another corporation, or any sale or
conveyance to another corporation of the property of the Corporation as an
entirety or substantially as an entirety, or (iii) there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, then, in
any one or more of said cases the Corporation shall give at least 20 days' prior
written notice (the time of mailing of such notice shall be deemed to be the
time of giving thereof) to the registered holders of the Series A Preferred
Stock at the addresses of each as shown on the books of the Corporation
maintained by the Transfer Agent thereof of the date on which (A) a record shall
be taken for such stock dividend, distribution or subscription rights or (B)
such reorganization, reclassification, consolidation, merger, sale or
conveyance, dissolution, liquidation or winding up shall take place, as the case
may be; provided that, in the case of any Transaction to which clause (f)
applies the Corporation shall give at least 30 days' prior written notice as
aforesaid. Such notice shall also specify the date as of which the holders of
the Common Stock of record shall participate in said dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale or conveyance or participate in
such dissolution, liquidation or winding up, as the case may be. Failure to give
such notice shall not invalidate any action so taken.
Section 10. Reports.
(a) Reports as to Adjustments. Upon any adjustment of the
Conversion Price then in effect and any increase or decrease in the number of
shares of Common Stock issuable upon the operation of the conversion provisions
set forth in Section 9, then, and in each such case, the Corporation shall
promptly deliver to the Transfer Agent of the Series A Preferred Stock and
Common Stock, a certificate signed by the President or a Vice President and by
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation, setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was calculated
and specifying the Conversion Price then in effect following such adjustment and
the increased or decreased number of shares issuable upon a conversion following
such adjustment, and shall set forth in reasonable detail the method of
calculation of each and a brief statement of the facts requiring such
adjustment. Where appropriate, such notice to holders of the Series A Preferred
Stock may be given in advance and included as part of the notice required under
the provisions of Section 9(i).
(b) Financial Reports. So long as any of shares of 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.
Section 11. Certain Covenants.
Any registered holder of Series A Preferred Stock may proceed
to protect and enforce its rights and the rights of such holders by any
available remedy by proceeding at law or in equity to protect and enforce any
such rights, whether for the specific enforcement of any provision in this
Certificate of Designation or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
<PAGE>
IN WITNESS WHEREOF, the officers named below, acting for and
on behalf of ProMedCo Management Company have hereunto subscribed their names on
this ___ day of ________________.
PROMEDCO MANAGEMENT COMPANY
By:__________________________________________________
Name:
Title:
Attest:
By:_________________________________________
Name:
Title:
<PAGE>
[card front]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROMEDCO MANAGEMENT COMPANY-- COMMON STOCK PROXY -- for the Special Meeting of
Stockholders at 11:00 a.m. local time on , March , 2000, at The Petroleum Club
located at 777 Main Street, Fort Worth, Texas 76102.
The undersigned hereby appoints H. Wayne Posey and Deborah A. Johnson, or
either of them, with full power of substitution, as Proxies to represent and
vote all of the shares of Common Stock of ProMedCo Management Company held of
record by the undersigned at the above-stated Special Meeting, and any
adjournments thereof, upon the matter set forth in the Notice of Special Meeting
of Stockholders and Proxy Statement dated Februay , 2000, as follows:
1. to approve the issuance and sale of 550,000 shares of the Company's Series
A Convertible Preferred Stock, par value $0.01 per share, to affiliates of
Goldman, Sachs & Co. for $55.0 million AND THE ISSUANCE AND SALE OF THE
SHARES OF THE COMPANY'S COMMON STOCK, PAR VALUE $0.01 PER SHARE, ISSUABLE
UPON CONVERSION OF THE PREFERRED STOCK, AND TO ADOPT THE SECURITIES
PURCHASE AGREEMENT DATED AS OF JANUARY 13, 2000 PURSUANT TO WHICH THE
ISSUANCE AND SALE IS BEING MADE; and
___ FOR ___ AGAINST ____ ABSTAIN
2. TO TAKE ANY ACTION UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF
The Board of Directors recommends a vote FOR Proposal 1.
This proxy, when properly executed, will be voted as specified. If no
specification is made, it will be voted for Proposal 1, and in the discretion of
the Proxy or Proxies on any other business that may properly come before the
Special Meeting or any adjournments thereof.
[card reverse]
Joint owners must EACH sign. Please sign EXACTLY as your name(s) appear(s) on
this proxy. When signing as attorney, trustee, executor, administrator, guardian
or corporate officer, please give your FULL title.
MARK HERE IF YOU PLAN TO ATTEND THE SPECIAL MEETING
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
Any proxy heretofore given by the undersigned with respect to such stock is
hereby revoked. Receipt of the Notice of the 2000 Special Meeting and Proxy
Statement is hereby acknowledged. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE DATE SIGNATURE DATE
