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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 28, 1996
INTERNATIONAL TECHNOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 1-09037 33-0001212
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION)
</TABLE>
23456 HAWTHORNE BOULEVARD 90505
TORRANCE, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 378-9933
NONE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
================================================================================
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ITEM 5. OTHER EVENTS.
(a) On August 28, 1996, International Technology Corporation (the
"Company") and Carlyle Partners II, L.P., a Delaware limited partnership,
Carlyle Partners III, L.P., a Delaware limited partnership, Carlyle
International Partners II L.P., a Cayman Islands limited partnership, Carlyle
International Partners III L.P., a Cayman Islands limited partnership, and C/S
International Partners, a Cayman Islands limited partnership, each of which is a
limited partnership of which TC Group, L.L.C. is the general partner
(collectively, the "Purchasers"), entered into a definitive agreement (the
"Securities Purchase Agreement") pursuant to which the Purchasers will purchase,
for an aggregate purchase price of $45 million, shares of a new series of
Cumulative Convertible Participating Preferred Stock, par value $100 per share
(the "Convertible Preferred Stock"), of the Company and warrants (the
"Warrants") to purchase up to 5,000,000 shares of common stock of the Company at
the price of $3.00 per share. In connection with the Investment, the Company and
the Purchasers will enter into a registration rights agreement pursuant to which
the Purchasers will have piggyback and demand registration rights with respect
to the common stock issuable upon conversion of the Convertible Preferred Stock
and/or exercise of the Warrants. Initially, the Purchasers will own
approximately 38% of the voting power of the Company (42% assuming exercise of
the Warrants). The description of the Securities Purchase Agreement included
herein does not purport to be complete and is qualified in its entirety by
reference to the terms of the Securities Purchase Agreement, a copy of which is
attached hereto as Exhibit 10.1 and incorporated herein by reference.
(b) On August 30, 1996, the Company's wholly owned subsidiary IT
Corporation obtained a consent and waiver (the "Consent and Waiver"), which
extended a waiver the Company had obtained prior to June 28, 1996 effective
through August 1996, under (i) the Credit Agreement, dated as of October 24,
1995 among IT Corporation, the several banks and other financial institutions
from time to time parties thereto (the "Lenders") and The Chase Manhattan Bank
(formerly known as Chemical Bank), as administrative agent for the Lenders (the
"Credit Agreement") and (ii) the several Note Purchase Agreements, each dated as
of October 24, 1995, between IT Corporation and the respective purchasers
thereunder (the "Note Purchase Agreements"). The Consent and Waiver waives from
June 28, 1996 through October 4, 1996 compliance with certain financial
covenants in the Credit Agreement and Note Purchase Agreements. Thereafter, any
event of default that would have existed and been continuing under the Credit
Agreement and Note Purchase Agreements but for the effect of the Consent and
Waiver shall be reinstated and constitute an event of default unless further
expressly waived. The Company is presently negotiating a related amendment to
the Credit Agreement and Note Purchase Agreements in conjunction with the
Investment described in (a) above. A copy of the Consent and Waiver is attached
hereto as Exhibit 10.2 and incorporated herein by reference.
(c) On August 31, 1996, IT Corporation obtained a consent (the "Consent")
to the Credit Agreement and the Note Purchase Agreements with respect to the
proposed transfer by IT Corporation of the capital stock of its wholly-owned
subsidiary IT Environmental Services, Inc. to a newly-created corporation,
including the investment of an amount up to an additional $350,000 in the newly-
created corporation. The Consent is attached hereto as Exhibit 10.3 and is
incorporated herein by reference.
(d) Mr. Eric Schwartz resigned his officer positions of Senior Vice
President--Law and Administration, General Counsel and Secretary effective as of
July 30, 1996. A copy of Mr. Schwartz's separation agreement is attached hereto
as Exhibit 10.4 and incorporated herein by reference.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
The following exhibits are filed with this report on Form 8-K:
Exhibit No. Description
----------- -----------
4 Form of Certificate of Designations, Preferences
and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations
and Restrictions Thereof of Cumulative
Convertible Participating Preferred Stock of
International Technology Corporation
10.1 Form of Securities Purchase Agreement dated as of
August 28, 1996 between International Technology
Corporation and Certain Purchasers Identified Therein
10.2 Consent and Waiver, dated as of August 30, 1996,
by The Chase Manhattan Bank, The First National
Bank of Boston, Societe Generale, John Hancock
Mutual Life Insurance Company, John Hancock Life
Insurance Company of America, Allstate Life
Insurance Company, The Mutual Life Insurance
Company of New York and Mony Life Insurance
Company of America
10.3 Consent, dated as of August 31, 1996, by The
Chase Manhattan Bank, The First National Bank of
Boston, Societe Generale, John Hancock Mutual
Life Insurance Company, John Hancock Life
Insurance Company of America, Allstate Life
Insurance Company, The Mutual Life Insurance
Company of New York and Mony Life Insurance
Company of America
10.4 Separation Agreement dated as of September 30, 1996
between International Technology Corporation and Eric
Schwartz.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNATIONAL TECHNOLOGY CORPORATION
Date: September 18, 1996 By: /s/ Anthony J. DeLuca
-------------------------------------
Anthony J. DeLuca
President and Acting Chief
Executive Officer
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EXHIBIT 4
FORM OF
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING.
OPTIONAL AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
CUMULATIVE CONVERTIBLE PARTICIPATING
PREFERRED STOCK
OF
INTERNATIONAL TECHNOLOGY CORPORATION
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CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS AND
QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
CUMULATIVE CONVERTIBLE PARTICIPATING
PREFERRED STOCK
OF
INTERNATIONAL TECHNOLOGY CORPORATION
_________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
_________________________
THE UNDERSIGNED, being, respectively, the President and Secretary of
International Technology Corporation, a Delaware corporation (the "Corporation")
do hereby certify that pursuant to the authority contained in Article Fourth of
its Certificate of Incorporation, as amended, (the "Certificate of
Incorporation") and in accordance with the provisions of Section 151(g) of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation at a meeting duly called and held on _____________, 1996 adopted the
following resolution, which resolution remains in full force and effect on the
date hereof:
RESOLVED, that there is hereby established a series of authorized
preferred stock, having a par value of $100 per share, which series shall be
designated as "Cumulative Convertible Participating Preferred Stock" (the
"Convertible Preferred Stock"), shall consist of 46,375 shares and shall have
the following voting powers, preferences and relative, participating, optional
and other special rights, and qualifications, limitations and restrictions
thereof as follows:
1. Certain Definitions.
-------------------
Unless the context otherwise requires, the terms defined in this
paragraph 1 shall have, for all purposes of this resolution, the meanings herein
specified (with terms defined in the singular having comparable meanings when
used in the plural).
"Affiliate" means (i) with respect to any Person, any other Person
---------
that directly or indirectly controls or manages, is controlled or managed by, or
is under common control or management with such Person, whether through the
ownership of equity interests, by contract or
1
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otherwise; and (ii) with respect to an individual, in addition to any Person
specified in clause (i), the spouse, any parent or any child of such individual
and any trust for the benefit of such individual's spouse, parent or child.
"Applicable Dividend Rate" means the following per annum percentages
------------------------
of Liquidation Preference: (i) zero percent (0%) with respect to dividends
payable on the first four Dividend Payment Dates following the Initial Issuance
Date, (ii) three percent (3%) with respect to dividends payable on the fifth
through eighth Dividend Payment Dates following the Initial Issuance Date, and
(iii) six percent (6%) with respect to dividends payable thereafter.
"Business Day" means a day other than a Saturday or Sunday or any
------------
federal, New York or California holiday.
"Carlyle Affiliate" means, at any time, any of Carlyle Partners II,
-----------------
L.P., a Delaware limited partnership, Carlyle Partners III, L.P., a Delaware
limited partnership, Carlyle International Partners II, L.P. a Cayman Islands
limited partnership, Carlyle International Partners III, L.P., a Cayman Islands
limited partnership, C/S International Partners, a Cayman Islands limited
partnership, and any of their Affiliates at such time, including, but not
limited to, The Carlyle Group, L.P., TC Group LLC and their respective
affiliates.
"Commission" means the United States Securities and Exchange
----------
Commission.
"Common Equity" means all shares now or hereafter authorized of any
-------------
class of common stock of the Corporation, including the Common Stock, and any
other stock of the Corporation, howsoever designated, authorized after the
Initial Issue Date, which has the right (subject always to prior rights of any
class or series of preferred stock) to participate in the distribution of the
assets and earnings of the Corporation without limit as to per share amount.
"Common Stock" means the common stock, par value $1.00 per share, of
------------
the Corporation.
"Conversion Date" shall have the meaning set forth in subparagraph
---------------
5(b) below.
"Conversion Price" shall initially mean $2.00 and thereafter shall be
----------------
subject to adjustment from time to time pursuant to the terms of paragraph 5
below, provided, however, that on the eighth anniversary of the Initial Issue
Date, the Conversion Price shall be adjusted to equal one half of the then
current Conversion Price per share of Common Stock, subject thereafter to
further adjustment pursuant to paragraph 5 below.
"Convertible Exchangeable Preferred Stock" means the 7% Cumulative
----------------------------------------
Convertible Exchangeable Preferred Stock, $100 par value per share, of the
Corporation.
"Convertible Exchangeable Preferred Stock Certificate of Designation"
-------------------------------------------------------------------
means the Certificate of Designation of the 7% Cumulative Convertible
Exchangeable Preferred Stock, $100 par value per share, of the Corporation.
"Convertible Preferred Stock" has the meaning set forth in paragraph 2
---------------------------
below.
2
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"Current Market Price" means, for a share of Common Stock on any date,
--------------------
the average of Quoted Prices for thirty (30) consecutive Trading Days commencing
forty-five (45) Trading Days before the date in question.
"Director" means a member of the Corporation's Board of Directors.
--------
"Dividend Payment Date" has the meaning set forth in subparagraph 3(c)
---------------------
below.
"Dividend Period" means the period from, and including, the Initial
---------------
Issue Date to, but not including, the first Dividend Payment Date and
thereafter, each quarterly period from, and including, each Dividend Payment
Date to, but not including, the next Dividend Payment Date.
"Five Year Period" means the period commencing on the Initial Issue
----------------
Date and ending on the fifth anniversary of the Initial Issue Date.
"Initial Issue Date" means the date that shares of Convertible
------------------
Preferred Stock are first issued by the Corporation.
"Junior Stock" means Common Equity, and any class or series of stock
------------
of the Corporation authorized after the Initial Issue Date which is not entitled
to receive any dividends in any Dividend Period unless all dividends required to
have been paid or declared and set apart for payment on the Cumulative Preferred
Stock and any other Parity Stock shall have been so paid or declared and set
apart for payment, and for purposes of paragraph 4 below, shall mean Common
Equity and any class or series of stock of the Corporation authorized after the
Initial Issue Date which is not entitled to receive any assets upon liquidation,
dissolution or winding up of the affairs of the Corporation until the
Convertible Preferred Stock and any other Parity Stock shall have received the
entire amount to which such stock is entitled upon such liquidation, dissolution
or winding up.
"Liquidation Preference" shall mean $1,000 per share.
----------------------
"Market Capitalization" means, as of any date, the product of the
---------------------
Current Market Price of the Common Stock as of such date multiplied by the
number of shares of Common Stock outstanding as of such date.
"Non-Preferred Stock Director" means a Director of the Corporation
----------------------------
other than a Preferred Stock Director.
"Parity Stock" means, for purposes of paragraph 3 below, the
------------
Convertible Exchangeable Preferred Stock, and any other class or series of stock
of the Corporation authorized after the Initial Issue Date which is entitled to
receive payment of dividends on a parity with the Convertible Preferred Stock
without preference or priority of one over the other and, for purposes of
paragraph 4 below, shall mean the Convertible Exchangeable Preferred Stock and
any class or series of stock of the Corporation authorized after the Initial
Issue Date which is entitled to receive assets upon liquidation, dissolution or
winding up of the affairs of the Corporation on a parity with the Convertible
Preferred Stock without preference or priority of one over the other.
3
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"Person" means any individual, corporation, association, partnership,
------
joint venture, limited liability company, trust, estate or other entity or
corporation.
"PIK Dividends" has the meaning set forth in subparagraph 3(b) below.
-------------
"Preferred Stock Director" has the meaning set forth in paragraph 7(d)
------------------------
below.
"Quoted Price" means, with respect to Common Stock, the last reported
------------
sales price for Common Stock as reported by the National Association of
Securities Dealers, Inc. Automatic Quotations System -- National Market System,
or, if the Common Stock is listed or admitted for trading on a securities
exchange, the last reported sales price of the Common Stock on the principal
exchange on which the Common Stock is listed or admitted for trading (which
shall be for consolidated trading if applicable to such exchange), or if not so
reported or listed or admitted for trading, the last reported bid price of the
applicable security in the over-the-counter market. In the event that the
Quoted Price cannot be determined as aforesaid, the Board of Directors (by a
vote of the majority of the Non-Preferred Stock Directors), of the Corporation
shall determine the Quoted Price on the basis of such quotations as it in good
faith considers appropriate. Such determination may be challenged in good faith
by holders of a majority of the shares of Convertible Preferred Stock then
outstanding, and any dispute shall be resolved at the Corporation's cost, by the
determination of an investment banking firm of recognized national standing
selected by the Corporation and acceptable to such holders of Convertible
Preferred Stock, which determination shall be made in good faith and be
conclusive absent manifest error; provided, however, that in the event that the
determination of the Quoted Price by the investment banking firm deviates by no
more than 5% from the Company's determination of the Quoted Price, then the cost
to the Corporation of the retention of the investment banking firm shall be
borne by the holders of the Convertible Preferred Stock challenging the
Corporation's determination.
"Record Date" means the date designated by the Board of Directors of
-----------
the Corporation at the time a dividend is declared; provided, however, that such
Record Date shall not be more than sixty (60) days nor less than ten (10) days
prior to the respective Dividend Payment Date or such other date designated by
the Board of Directors for the payment of dividends.
"Redemption Date" means any date fixed by the Corporation pursuant to
---------------
subparagraph 6(b) for redemption of the Convertible Preferred Stock.
"Redemption Price" means a price per share equal to the Liquidation
----------------
Preference per share, plus an amount equal to all cumulative dividends accrued
and unpaid on such share to the Redemption Date.
"Rights" means any rights, options or warrants entitling a holder
------
thereof to substitute for or purchase any share of Common Stock of the
Corporation.
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"Trading Day" means, with respect to any security, any day on which
-----------
any market in which the applicable security is then traded and in which a Quoted
Price may be ascertained is open for business.
2. Number of Shares and Designation. 46,375 shares of the preferred
--------------------------------
stock, $100 par value per share, of the Corporation are hereby constituted as a
series of the preferred stock designated as Cumulative Convertible Participating
Preferred Stock (the "Convertible Preferred Stock").
3. Dividends.
---------
(a) The record holders of Convertible Preferred Stock shall be
entitled to receive dividends, when, as and if declared by the Board of
Directors of the Corporation, out of funds legally available for payment of
dividends. Such dividends shall be payable by the Corporation at the Applicable
Dividend Rate.
(b) Dividends on the Convertible Preferred Stock payable during
the period beginning on the first Dividend Payment Date on or following the
first anniversary of the Initial Issue Date and ending on the first Dividend
Payment Date on or following the second anniversary of the Initial Issue Date,
shall be paid in fully paid and nonassessable shares of Convertible Preferred
Stock (such dividends paid in kind being herein called "PIK Dividends").
Dividends on the Convertible Preferred Stock payable thereafter shall be paid in
cash. Dividends of additional shares of Convertible Preferred Stock shall be
paid by delivering to the record holders of Convertible Preferred Stock a number
of shares of Convertible Preferred Stock determined by dividing the total amount
of the cash dividend which otherwise would be payable on the Dividend Payment
Date to such holders (rounded to the nearest whole cent) by the Liquidation
Preference. The issuance of any such PIK Dividend in such amount shall
constitute full payment of such dividend. The Corporation shall not issue
fractional shares of Convertible Preferred Stock to which holders may become
entitled pursuant to this subparagraph, but in lieu thereof, the Corporation
shall deliver its check in an amount equal to the applicable fraction of the
Liquidation Preference. Any additional shares of Convertible Preferred Stock
issued pursuant to this paragraph shall be governed by this resolution and shall
be subject in all respects, except as to the date of issuance and date from
which dividends accrue and cumulate as set forth below, to the same terms as the
shares of Convertible Preferred Stock originally issued hereunder.
(c) Dividends on shares of Convertible Preferred Stock shall
accrue and be cumulative from and including the Initial Issue Date to and
including the date on which such shares shall have been converted into Common
Stock or redeemed pursuant to paragraph 6 hereof. Such dividends shall accrue
whether or not there shall be (at the time such dividend becomes payable or at
any other time) profits, surplus or other funds of the Corporation legally
available for the payment of dividends. Dividends shall be payable quarterly in
arrears when and as declared by the Board of Directors of the Corporation on
_________, ___________, ___________, and __________ of each year [NOTE: THE
FOREGOING DATES WILL BE AT QUARTERLY INTERVALS FROM THE CLOSING DATE] (a
"Dividend Payment Date"), commencing on ____________, 1997, and for shares paid
as PIK Dividends, commencing on the first Dividend Payment Date after such
shares are issued. If any Dividend Payment Date occurs on a day that is not a
Business Day, any accrued dividends otherwise payable on such
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Dividend Payment Date shall be paid on the next succeeding Business Day. The
amount of dividends payable on Convertible Preferred Stock for each full
Dividend Period shall be computed by dividing by four (4) the annual dividend at
the Applicable Dividend Rate set forth in subparagraph 3(a) above. Dividends
shall be paid to the holders of record of the Convertible Preferred Stock as
their names shall appear on the share register of the Corporation on the Record
Date for such dividend. Dividends payable in any Dividend Period which is less
than a full Dividend Period in length will be computed on the basis of a ninety
(90) day quarterly period and actual days elapsed in such Dividend Period.
Dividends on account of arrears for any past Dividend Periods may be declared
and paid at any time to holders of record on the Record Date therefor. For any
Dividend Period in which dividends are not paid in full on the Dividend Payment
Date first succeeding the end of such Dividend Period, then on such Dividend
Payment Date such accrued and unpaid dividends shall be added (solely for the
purpose of calculating dividends payable on the Convertible Preferred Stock) to
the Liquidation Preference of the Convertible Preferred Stock effective at the
beginning of the Dividend Period succeeding the Dividend Period as to which such
dividends were not paid and shall thereafter accrue additional dividends in
respect thereof at the rate set forth in subparagraph 3(a) above until such
accrued and unpaid dividends have been paid in full.
(d) So long as any shares of Convertible Preferred Stock shall be
outstanding, the Corporation shall not declare, pay or set apart for payment on
any Junior Stock any dividends whatsoever, whether in cash, property or
otherwise (other than dividends payable in shares of the class or series upon
which such dividends are declared or paid, or payable in shares of Common Stock
with respect to Junior Stock other than Common Stock, together with cash in lieu
of fractional shares), nor shall the Corporation make any distribution on any
Junior Stock, nor shall any Junior Stock be purchased, redeemed or otherwise
acquired by the Corporation or any of its subsidiaries of which it owns not less
than a majority of the outstanding voting power (except as currently required
pursuant to the terms of the Corporation's 401(k) plan, Non-Employee Directors
Retirement Plan or any other similar plan or program for employees and/or
directors, whether now existing or hereafter created, that provides for actions
that would not otherwise be permitted under this subparagraph (d)) nor shall any
monies be paid or made available for a sinking fund for the purchase or
redemption of any Junior Stock, unless (i) all dividends to which the holders of
Convertible Preferred Stock shall have been entitled for all previous Dividend
Periods shall have been paid or declared and a sum of money or PIK Dividends, as
applicable (as provided in subparagraph 3(b)) sufficient for the payment thereof
has been set apart and (ii) the holders of at least sixty-seven percent (67%) of
all of the outstanding shares of Convertible Preferred Stock have given their
consent to the payment of such dividends (given in person or by proxy, either by
written consent pursuant to section 228 of the Delaware General Corporation Law
or by a vote at a special meeting of stockholders called for such purpose or at
any annual meeting of stockholders, with the holders of Convertible Preferred
Stock voting as a class and with each share of Convertible Preferred Stock
having one vote). In addition, in the event that the Corporation declares or
pays any dividend or other distribution on the Common Stock (other than a
dividend payable solely in shares of Common Stock), the Corporation shall, at
the time of such declaration and payment, declare and pay a dividend or other
distribution on the Convertible Preferred Stock consisting of the dividend or
distribution that would have been payable on the shares of Common Stock had the
Cumulative Preferred Stock been converted into Common Stock immediately prior to
the date on the record date for such dividend or distribution, or, if no such
record was taken, the date as of which the record holders of Common Stock
entitled to such dividend or distribution
6
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were determined. Any such dividend or distribution declared, or required to be
declared or to be paid, on the Cumulative Preferred Stock shall be deemed to
have "accrued" on the Preferred Stock for all purposes of this Paragraph 3 and
shall remain an "accrued dividend" on the Cumulative Preferred Stock for all
purposes of this Section until paid.
(e) In the event that full dividends are not paid or made
available to the holders of all outstanding shares of Convertible Preferred
Stock and of any Parity Stock and funds available for payment of dividends shall
be insufficient to permit payment in full to holders of all such stock of the
full preferential amounts to which they are then entitled, then the entire
amount available for payment of dividends shall be distributed ratably among all
such holders of Convertible Preferred Stock and of any Parity Stock in
proportion to the full amount to which they would otherwise be respectively
entitled.
(f) Notwithstanding anything contained herein to the contrary, no
dividends on shares of Convertible Preferred Stock shall be declared by the
Board of Directors of the Corporation or paid or set apart for payment by the
Corporation at such time as the terms and provisions of any agreement of the
Corporation, including any agreement relating to its indebtedness, prohibits
such declaration, payment or setting apart for payment or provides that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or payment shall be
restricted or prohibited by law.
4. Distributions Upon Liquidation, Dissolution or Winding Up.
---------------------------------------------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or other winding up of the affairs of the Corporation (in connection
with the bankruptcy or insolvency of the Corporation or otherwise), before any
payment or distribution of the assets of the Corporation (whether capital or
surplus) shall be made to or set apart for the holders of Junior Stock, the
holders of Convertible Preferred Stock shall be entitled to be paid out of the
assets of the Corporation in cash or property at its fair market value as
determined by the Board of Directors of the Corporation an amount per share
equal to the Liquidation Preference plus an amount equal to all dividends
accrued and unpaid thereon to the date of such liquidation or dissolution or
such other winding up. Except as provided in this paragraph, holders of
Convertible Preferred Stock shall not be entitled to any distribution in the
event of liquidation, dissolution or winding up of the affairs of the
Corporation.
(b) If, upon any such liquidation, dissolution or other winding
up of the affairs of the Corporation, the assets of the Corporation shall be
insufficient to permit the payment in full of the Liquidation Preference per
share plus an amount equal to all dividends accrued and unpaid on the
Convertible Preferred Stock and the full liquidating payments on all Parity
Stock, then the assets of the Corporation or the proceeds thereof shall be
ratably distributed among the holders of Convertible Preferred Stock and of any
Parity Stock in proportion to the full amounts to which they would otherwise be
entitled if all amounts payable thereon were paid in full. Neither the
consolidation or merger of the Corporation into or with another corporation or
corporations, nor the sale, lease, transfer or conveyance of all or
substantially all of the assets of the Corporation to another corporation or any
other entity for cash, securities or other property shall be deemed a
liquidation, dissolution or winding up of the affairs of the Corporation within
the meaning of this paragraph 4.
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(c) Written notice of any liquidation, dissolution or winding up
of the Corporation, stating the payment date or dates when and the place where
the amounts distributable in such circumstances shall be payable, shall be given
by first class mail, postage prepaid, not less than 30 days prior to any payment
date stated therein, to the holders of record of the shares of Convertible
Preferred stock at their address as the same shall appear in the records of the
Corporation.
5. Conversion Rights.
-----------------
(a) A holder of shares of Convertible Preferred Stock shall have
the right, at such holder's option, to convert all or any portion of its shares
of Convertible Preferred Stock into Common Stock at any time before the close of
business on the Business Day preceding the Redemption Date (unless the
Corporation shall default in payment of the Redemption Price, in which case, the
right of conversion shall be reinstated). For the purposes of conversion, each
share of Convertible Preferred Stock shall be valued at the Liquidation
Preference plus all accrued and unpaid dividends through the Conversion Date,
which shall be divided by the Conversion Price in effect on the Conversion Date
to determine the number of shares issuable upon conversion. Immediately
following such conversion, the rights of the holders of converted Convertible
Preferred Stock shall cease and the persons entitled to receive the Common Stock
upon the conversion of Convertible Stock shall be treated for all purposes as
having become the owners of such Common Stock.
(b) To convert Convertible Preferred Stock, a holder must (i)
surrender the certificate or certificates evidencing the shares of Convertible
Preferred Stock to be converted, duly endorsed in a form satisfactory to the
Corporation, at the office of the Corporation or transfer agent for the
Convertible Preferred Stock, if any, (ii) notify the Corporation at such office
that he elects to convert Convertible Preferred Stock, and the number of shares
he wishes to convert, (iii) state in writing the name or names in which he
wishes the certificate or certificates for shares of Common Stock to be issued,
and (iv) pay any transfer or similar tax if required (provided, however, that no
such payment shall be required if the Common Stock issuable upon conversion is
to be issued in the name of the converting holder of Convertible Preferred
Stock). In the case of lost or destroyed certificates evidencing ownership of
shares of Convertible Preferred Stock to be surrendered for conversion, the
holder shall submit proof of loss or destruction, and such indemnity as shall be
reasonably required by the Corporation. In the event that a holder fails to
notify the Corporation of the number of shares of Convertible Preferred Stock
which he wishes to convert, he shall be deemed to have elected to convert all
shares represented by the certificate or certificates surrendered for
conversion. The date on which the holder satisfies all those requirements is the
"Conversion Date." As soon as practicable after the Conversion Date, the
Corporation shall deliver or shall deliver through its transfer agent a
certificate for the number of full shares of Common Stock issuable upon the
conversion, a check for any fractional share and a new certificate representing
the unconverted portion, if any, of the shares of Convertible Preferred Stock
represented by the certificate or certificates surrendered for conversion. The
person in whose name the Common Stock certificate is registered shall be treated
as the stockholder of record on and after the Conversion Date. All shares of
Common Stock issuable upon conversion of the Convertible Preferred Stock shall
be fully paid and nonassessable and shall rank pari passu with the other shares
---- -----
of Common Stock outstanding from time to time. In the case of Convertible
Preferred Stock that has been converted after any Record Date but before the
next succeeding Dividend Payment Date, dividends that are payable on such
Dividend Payment Date shall be payable on such Dividend Payment Date
notwithstanding such conversion, and such dividends shall
8
<PAGE>
be paid to the holder of such Convertible Preferred Stock on such Record Date
(and shall not constitute "accrued and unpaid dividends" for purposes of
paragraph 5(a)). No other payment or adjustment for dividends, or for any
dividends in respect of shares of Common Stock shall be made upon conversion.
Holders of Common Stock issued upon conversion shall not be entitled to receive
any dividend payable to holders of Common Stock as of any record time before the
close of business on the Conversion Date. If a holder of Convertible Preferred
Stock converts more than one share at a time the number of full shares of Common
Stock issuable upon conversion shall be based on the total value of all shares
of Convertible Preferred Stock converted.
(c) The Corporation shall not issue a fractional share of Common
Stock upon conversion of Convertible Preferred Stock. Instead, the Corporation
shall deliver a check for an amount equal to the value of the fractional share.
The value of a fraction of a share is determined by multiplying the Current
Market Price of the Common Stock as of the Conversion Date by the fraction,
rounded to the nearest cent.
(d) A holder delivering Convertible Preferred Stock for
conversion will not be required to pay any taxes or duties in respect of the
issue or delivery of Common Stock on conversion but will be required to pay any
tax or duty that may be payable in respect of any transfer involved in the issue
or delivery of the shares of Common Stock. Certificates representing shares of
Common Stock will not be issued or delivered unless all taxes and duties, if
any, payable by the holder have been paid.
(e) The Corporation has reserved and shall continue to reserve
out of its authorized but unissued Common Stock or its Common Stock held in
treasury enough shares of Common Stock to permit the conversion of the
Convertible Preferred Stock in full. All shares of Common Stock which may be
issued upon conversion of Convertible Preferred Stock shall be fully paid and
nonassessable. The Corporation will use its best efforts to comply with all
securities laws regulating the offer and delivery of shares of Common Stock upon
conversion of Convertible Preferred Stock and will use its best efforts to list
such shares on each national securities exchange on which the Common Stock is
listed.
(f) If the Corporation:
(i) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Equity;
(ii) subdivides its outstanding shares of Common Stock into
a greater number of shares;
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares; or
(iv) issues by reclassification of its Common Stock any
shares of its capital stock;
then the Conversion Price and the number and kind of shares of capital stock of
the Company issuable upon conversion (as in effect immediately prior to such
action) shall be proportionately adjusted so that
9
<PAGE>
the holder of Convertible Preferred Stock thereafter converted may receive for
the same aggregate Conversion Price the aggregate number and kind of shares of
capital stock of the Corporation that he would have owned immediately following
such action if he had converted Convertible Preferred Stock immediately prior to
such action. The adjustment shall become effective immediately after the record
date in the case of dividend or distribution and immediately after the effective
date of a subdivision, combination or reclassification. Such adjustment shall be
made successively whenever any event listed above shall occur. If, after an
adjustment referred to in clauses (i) through (iv) above, a holder of
Convertible Preferred Stock upon conversion of it may receive shares of two or
more classes of capital stock of the Corporation, the Corporation shall
determine the allocation of the Conversion Price between the classes of capital
stock. After such allocation, the conversion rights and the Conversion Price
with respect to each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
subparagraph 5(f).
(g) If the Corporation distributes any Rights to all holders of
its Common Stock entitling them to purchase shares of Common Stock at a price
per share less than the Current Market Price per share on the date of
distribution of such Rights, the Conversion Price shall be adjusted in
accordance with the formula:
NxP
---
C'= C x O + M
-----
O + N
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares of Common
Stock.
M = the Current Market Price per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such Rights are issued
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such Rights. If at the end of
the period during which such Rights are exercisable, not all Rights shall have
been exercised, the Conversion Price shall be immediately readjusted to what it
would have been if "N" in the above formula had been the number of shares
actually issued.
(h) If the Corporation distributes to all holders of shares of
its Common Stock (i) any shares of any class of capital stock of the Corporation
other than its Common Equity, (ii) any evidence of indebtedness or other
securities of the Corporation or any subsidiary of the Corporation, or (iii)
cash or any other assets of the Corporation (including securities, but excluding
(x) those dividends, Rights and distributions referred to above in subparagraphs
5(f) and 5(g) and in subparagraphs 5(i) and 5(j), (y) dividends and
distributions paid exclusively in cash and (z) distributions
10
<PAGE>
upon mergers or consolidations to which paragraph 5(m) applies), the Conversion
Price shall be adjusted in accordance with the formula:
C'= C x M - F
-----
M
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
M = the Current Market Price per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date of the capital stock,
indebtedness, other securities, cash or assets distributed per
share of Common Stock.
The adjustment shall be made successively whenever any such distribution is made
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution.
(i) If the Corporation issues shares of Common Stock for a
consideration per share less than the Current Market Price per share on the date
the Corporation issues such additional shares, the Conversion Price shall be
adjusted in accordance with the formula:
P
-
C'= C x O + M
-----
A
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
M = the Current Market Price per share on the date of issuance of
such additional shares.
A = the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance. This
subparagraph 5(i) does not apply to (i) any transaction or issuance described in
subparagraphs 5(f), 5(g) or 5(h) above or subparagraph 5(j) below, (ii) the
conversion of Convertible Preferred Stock or Convertible Exchangeable Preferred
Stock, or the exercises of the warrants to purchase Common Stock issued to
Carlyle Affiliates on the Initial Issue Date, or the conversion, exchange or
exercise of other securities whose issuance was the subject of an adjustment
pursuant to subparagraph 5(g) or
11
<PAGE>
5(h) above or subparagraph 5(j) below, (iii) Common Stock issued to the
Corporation's employees under bona fide employee benefit plans adopted by the
Board of Directors of the Corporation and approved by the holders of Common
Stock when required by law, if such Common Stock would otherwise by covered by
this subparagraph 5(i), but only to the extent that (x) such shares are issued
pursuant to employee stock options with an exercise price not less than the
Current Market Price on the date of issuance of such option or (y) the aggregate
number of shares otherwise excluded hereby (together with the aggregate number
of shares issuable upon conversion, exchange or exercise of the securities
excluded by clause (iii) of subparagraph 5(j) below) and issued after the
Initial Issue Date do not exceed 5% of the Common Stock outstanding at the time
of any such issuance, (iv) Common Stock issued to acquire, or in the acquisition
of, all or any portion of a business as a going concern, in an arm's-length
transaction between the Corporation and an unaffiliated third party, whether
such acquisition shall be effected by purchase of assets, exchange of
securities, merger, consolidation or otherwise, or (v) Common Stock issued in a
bona fide public offering pursuant to a firm commitment underwriting.
(j) If the Corporation issues any Rights (other than Convertible
Preferred Stock or securities issued in transactions described in subparagraph
5(g) or 5(h) above) and for a consideration per share of Common Stock initially
deliverable upon conversion, exchange or exercise of such Rights that is less
than the Current Market Price per share on the date of issuance of such Rights,
the Conversion Price shall be adjusted in accordance with the formula:
P
-
C'= C x O + M
-----
O + D
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such Rights.
P = the aggregate consideration received for the issuance of such
Rights.
M = the Current Market Price per share of Common Stock on the date
of issuance of such Rights.
D = the maximum number of shares deliverable upon conversion or in
exchange for or upon exercise of such Rights at the initial
conversion, exchange or exercise rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance. If all of
the Common Stock deliverable upon conversion, exchange or exercise of such
Rights has not been issued when such Rights are no longer outstanding, then the
Conversion Price shall promptly be readjusted to the Conversion Price that would
then be in effect had the adjustment upon the issuance of such Rights been made
on the basis of the actual number of shares of Common Stock issued upon
conversion, exchange or exercise of such Rights. This subparagraph 5(j) does not
apply to (i) the issuance of any such securities to acquire, or in the
acquisition of, all or any portion of a business as a going concern, in an
arm's-length transaction
12
<PAGE>
between the Corporation and an unaffiliated third party, whether such
acquisition shall be effected by purchase of assets, exchange of securities,
merger, consolidation or otherwise, (ii) the issuance of any such securities in
a bona fide public offering pursuant to a firm commitment underwriting, (iii)
the issuance of any such securities to the Corporation's employees under bona
fide employee benefit plans adopted by the Board of Directors of the Corporation
and approved by the holders of Common Stock when required by law, if such
securities would otherwise by covered by this subparagraph 5(j) (but only to the
extent that the aggregate number of shares issuable upon the conversion,
exchange or exercise of the aggregate number of securities excluded hereby
(together with the aggregate number of shares excluded by clause (iii)(y) of
subparagraph 5(i) above) and issued after the Initial Issue Date shall not
exceed 5% of the Common Stock outstanding at the time of any such issuance), or
(iv) shares issued as PIK Dividends.
(k) In case the Corporation or any of its subsidiaries shall, by
dividend or otherwise, make distributions exclusively in cash (excluding any
cash that is distributed upon a merger or consolidation to which Section 5(m)
applies or as part of a distribution covered by Section 5(h)) to all the holders
of Common Stock in an aggregate amount that, combined together with (i) the
aggregate amount of all other such all-cash distributions to all holders of its
Common Stock made within the 12 months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to this Section 5(k)
or Section 5(l) has been made and (ii) the aggregate of any cash plus the fair
market value of other consideration payable in respect of any tender or exchange
offer or other stock repurchase program by the Corporation or any of its
subsidiaries for all or any portion of the Common Stock concluded within the 12
months preceding the date of payment of such distribution and in respect of
which no adjustment pursuant to this Section 5(k) or Section 5(l) has been made
exceeds 12.5% of the Corporation's Market Capitalization on the record date for
such distribution then, and in each such case, immediately after the close of
business on such date of such determination, the Conversion Price shall be
adjusted in accordance with the formula:
C'= C x M - E
-----
M
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
M = the Current Market Price per share of Common Stock on the date
fixed for determination times the number of shares of Common
Stock outstanding on such date.
E = the total amount of cash to be distributed at such time to
holders of Common Stock.
(l) In the case of the consummation of a tender offer, exchange
offer (other than an odd-lot offer) or other stock repurchase program made by
the Corporation or any subsidiary thereof for all or any portion of the Common
Stock involving the payment by the Corporation or such subsidiary of an
aggregate consideration that, together with (i) any cash or other consideration
payable in a tender offer, exchange offer or other stock repurchase program by
the Corporation or any of its subsidiaries for Common Stock consummated within
12 months preceding the consummation of such tender offer, exchange offer or
other stock repurchase program (the
13
<PAGE>
"Expiration Time") in respect of which no adjustment has been made pursuant to
this paragraph 5(l) or Section 5(k) and (ii) the aggregate amount of all such
all-cash distributions referred to in Section 5(k) above to all holders of
Common Stock within the 12 months preceding such Expiration Time in respect of
which no adjustments have been made, exceeds 12.5% of the Corporation's Market
Capitalization as of the Trading Day next succeeding the Expiration Time, the
Conversion Price shall be reduced in accordance with the formula:
C'= C x M - E
-----
N
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
M = the Current Market Price per share of Common Stock on the
Trading Day next succeeding the Expiration Time times the number
of shares of Common Stock outstanding at the Expiration Time
(including any tendered, exchanged or purchased shares).
N = the Current Market Price per share of Common Stock on the
Trading Day next succeeding the Expiration Time times the number
of shares of the Common Stock outstanding at the Expiration
Time, less any shares purchased in such tender offer, exchange
offer or other stock repurchase program.
E = the fair market value of the aggregate consideration payable
to stockholders upon consummation of such tender offer, exchange
offer or other stock repurchase program.
The reduction shall become effective immediately prior to the opening of
business on the day following the Expiration Time.
(m) In case of any consolidation, amalgamation, arrangement or
merger of the Corporation with or into another Person or any merger of another
Person with or into the Corporation (other than a transaction to which paragraph
5(f) applies), or in case of any sale or transfer of all or substantially all of
the assets of the Corporation, each share of Convertible Preferred Stock then
outstanding will, without the consent of the holder of any Convertible Preferred
Stock, become convertible only into the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock (and other securities, if
applicable) into which such Convertible Preferred Stock was convertible
immediately prior thereto (assuming such holder of Common Stock (and other
securities, if applicable) failed to exercise any rights of election and that
such Convertible Preferred Stock was then convertible). Concurrently with the
consummation of such transaction, the corporation formed by or surviving any
such consolidation or merger if other than the Company, or the person to which
such sale or conveyance shall have been made, shall enter into a supplemental
agreement so providing and further providing for adjustments which shall be as
equivalent as may be practicable to the adjustments provided for in this
Section.
14
<PAGE>
(n) In addition, in the event that any other transaction or event
occurs as to which the foregoing adjustment provisions are not strictly
applicable but the failure to make any adjustment would adversely affect the
conversion rights represented by the Convertible Preferred Stock in accordance
with the essential intent and principles of such provisions, then, in each such
case, either (i) the Corporation shall appoint an investment banking firm of
recognized national standing, or any other financial expert that does not (or
whose directors, officers, employees, affiliates or stockholders do not) have a
direct or material indirect financial interest in the Corporation or any of
subsidiaries, who has not been, and, at the time it is called upon to give
independent financial advice to the Corporation, is not (and none of its
directors, officers, employees, affiliates or stockholders are) a promoter,
director or officer of the Corporation or any of its subsidiaries, which will
give their opinion upon or (ii) the Board of Directors (by a majority of the
Non-Preferred Stock Directors) shall determine, consistent with such directors'
fiduciary duties to the Corporation's stockholders, the adjustment, if any, on a
basis consistent with the essential intent and principles established in the
foregoing conversion price adjustment provisions, necessary to preserve, without
dilution, the conversion rights represented by the Convertible Preferred Stock.
Upon receipt of such opinion or determination, the Corporation shall promptly
mail a copy thereof to the holders of the Convertible Preferred Stock and will
make the adjustments described therein.
(o) For purposes of any computation respecting consideration
received pursuant to a transaction described or contemplated by this paragraph
5, the following shall apply:
(i) in case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Corporation for any underwriting of the issue or
otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof
(irrespective of the accounting treatment thereof);
(iii) whenever this Certificate of Designation calls for the
determination of "fair market value," such fair market value shall be
determined in good faith by the Board of Directors (by a majority of the
Non-Preferred Stock Directors) as evidenced by a written resolution
thereof, and subject to the provisions of subparagraph 5(v) below; and
(iv) in the case of the issuance of Rights, the aggregate
consideration received therefor shall be deemed to be the consideration
received by the Corporation for the issuance of such Rights plus the
additional minimum consideration, if any, to be received by the Corporation
upon the conversion or exchange or exercise thereof (the consideration in
each case to be determined in the same manner as provided in clauses (i)
and (ii) of this subparagraph 5(o)).
(p) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Conversion Price. Any adjustments which by reason of this subparagraph (p)
are not required to be made shall be carried
15
<PAGE>
forward and taken into account in any subsequent adjustment. All calculations
under this paragraph 5 shall be made to the nearest cent or to the nearest
1/100th of a share, as the case may be.
(q) No adjustment in the Conversion Price need be made under this
paragraph 5 for (i) rights to purchase Common Stock pursuant to a Corporation
plan for reinvestment of dividends or interest, or (ii) any change in the par
value or no par value of the Common Stock. The Corporation shall take no action
that would cause any adjustment under this paragraph 5 that would reduce the
Conversion Price below the par value of the Common Stock. If an adjustment is
made to the Conversion Price upon the establishment of a record date for a
distribution subject to subparagraphs 5(g) or 5(h) above and if such
distribution is subsequently canceled, the Conversion Price then in effect shall
be readjusted, effective as of the date when the Board of Directors of the
Corporation determines to cancel such distribution, to the Conversion Price
which would have been in effect if such record date had not been fixed. No
adjustment in the Conversion Price need be made under subparagraphs 5(h), 5(k)
and 5(l) above if the Corporation issues or distributes to each holder of
Convertible Preferred Stock the shares of capital stock, evidences of
indebtedness, other securities of the Corporation or any subsidiary of the
Corporation, assets, Rights or cash, referred to in those subparagraphs that
each holder would have been entitled to receive had Convertible Preferred Stock
been converted into Common Stock prior to the happening of such event or the
record date with respect thereto.
(r) Whenever the Conversion Price is adjusted, the Corporation
shall promptly mail to holders of Convertible Preferred Stock, first class,
postage prepaid, a notice of the adjustment and a certificate from the
Corporation's independent public accountants briefly stating the facts requiring
the adjustment and the manner of computing it. Subject to subparagraph 5(v)
below, the certificate shall be conclusive evidence that the adjustment is
correct.
(s) The Corporation from time to time may, by a vote of the Board
of Directors (by a majority of the Non-Preferred Stock Directors) reduce the
Conversion Price by any amount for any period of time if the period is at least
twenty (20) Business Days and if the reduction is irrevocable during the period,
but in no event may the Conversion Price be less than the par value of a share
of Common Stock. Whenever the Conversion Price is so reduced, the Corporation
shall mail to holders of Convertible Preferred Stock a notice of the reduction.
The Corporation shall mail the notice first class, postage prepaid, at least 20
days before the date the reduction in the Conversion Price is to take effect.
The notice shall state the reduced Conversion Price and the period it will be in
effect. A reduction of the Conversion Price pursuant to this subparagraph 5(s)
does not change or adjust the Conversion Price otherwise in effect for purposes
of subparagraphs 5(f), 5(g), 5(h), 5(i), 5(j), 5(k) and 5(l) above.
(t) If:
(i) the Corporation takes any action that would require an
adjustment in the Conversion Price pursuant to subparagraph 5(g) or 5(h)
above, or clause (iv) of subparagraph 5(f) above;
16
<PAGE>
(ii) the Corporation consolidates or merges with, or
transfers all or substantially all of its assets to, another corporation,
and stockholders of the Corporation must approve the transaction; or
(iii) there is a dissolution or liquidation of the
Corporation;
a holder of Convertible Preferred Stock may want to convert such stock into
shares of Common Stock prior to the record date for or the effective date
of the transaction so that he may receive the Rights, assets or securities
which a holder of shares of Common Stock on that date may receive.
Therefore, the Corporation shall mail to such holders a notice, first
class, postage prepaid, stating the proposed record or effective date, as
the case may be. The Corporation shall mail such notice at least twenty
(20) days before such date. Failure to mail the notice or any defect in
such notice shall not affect the validity of any transaction referred to in
clause (i), (ii) or (iii) of this subparagraph 5(t).
(u) In any case in which this paragraph 5 shall require that an
adjustment as a result of any event become effective from and after a record
date, the Corporation may elect to defer until after the occurrence of the event
triggering the adjustment (i) the issuance to the holder of any shares of
Convertible Preferred Stock converted after such record date and before the
occurrence of such event of the additional shares of Common Stock or other
capital stock issuable upon such conversion over and above the shares issuable
on the basis of the Conversion Price in effect immediately prior to adjustment
and (ii) a check for any remaining fractional shares of Common Stock as provided
in subparagraph 5(c) above; provided, however, that the Company shall deliver to
-------- -------
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares and cash upon the occurrence of the
event requiring the adjustment.
(v) Except as provided in the immediately following sentence, any
determination that the Corporation or its Board of Directors (including by a
majority of the Non-Preferred Stock Directors) must make pursuant to this
paragraph 5 shall be conclusive. Whenever the Corporation or its Board of
Directors (including by a majority of the Non-Preferred Stock Directors) shall
be required to make a determination under this paragraph 5, such determination
shall be made in good faith and may be challenged in good faith by the holders
of a majority of the shares of Convertible Preferred Stock then outstanding
(with any shares held by the Corporation or any of its Affiliates not being
considered to be outstanding for purposes of this Certificate of Designation),
and any dispute shall be resolved, at the Corporation's expense, by an
investment banking firm of recognized national standing selected by the
Corporation and acceptable to such holders of Convertible Preferred Stock;
provided, however, that in the event the determination by such investment
- -------- -------
banking firm deviates by no more than 5% from the Corporation's determination,
then the cost to the Corporation of the retention of the investment banking firm
shall be borne by the holders of the Convertible Preferred Stock challenging the
Corporation's determination.
(w) All shares of Convertible Preferred Stock converted pursuant
to this paragraph 5 shall be retired and shall be restored to the status of
authorized and unissued shares of preferred stock, without designation as to
series and may thereafter be reissued as shares of any series of preferred stock
other than Convertible Preferred Stock.
17
<PAGE>
(x) In the event that all holders of Convertible Exchangeable
Preferred Stock shall not have waived their rights that accrue pursuant to
Section 8 of the Convertible Exchangeable Preferred Stock Certificate of
Designations as a result of the Company's issuance of Convertible Preferred
Stock on the Initial Issuance Date, then (i) the Company shall send to the
holders of the Convertible Exchangeable Preferred Stock not providing such
waiver, as promptly as possible following the Closing Date, the Special
Conversion Notice (as defined in the Convertible Exchangeable Preferred Stock
Certificate of Designation) and (ii) upon expiration of the forty-five (45) day
period following the provision of such Special Conversion Notice, the Conversion
Price shall be adjusted in accordance with the following formula to adjust for
the effects of the conversion of Convertible Exchangeable Preferred Stock at the
Special Conversion Price (as defined in the Convertible Exchangeable Preferred
Stock Certificate of Designation):
C'= C x (O/(O + P - ((D/0.135)/X)))
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of shares of Common Stock outstanding immediately
prior to the conversion of shares of Convertible Exchangeable
Preferred Stock into Common Stock at the Special Conversion
Price.
P = the number of shares of Common Stock issued upon conversion of
shares of Convertible Exchangeable Preferred Stock at the Special
Conversion Price.
D = the amount of annual dividends payable on the shares of
Convertible Exchangeable Preferred Stock converted into Common
Stock at the Special Conversion Price.
X = the regular Conversion Price of the Convertible Exchangeable
Preferred Stock (i.e., $5.84).
6. Redemption by the Corporation.
-----------------------------
(a) The Convertible Preferred Stock may be redeemed in whole, but
not in part, at any time after , 2003 at the option of the Corporation,
as determined by the Board of Directors (by a majority of the Non-Preferred
Stock Directors), at the Redemption Price. If the Redemption Date is on or after
a Record Date and on or before the related Dividend Payment Date, the dividend
payable shall be paid to the holder in whose name the Convertible Preferred
Stock is registered at the close of business on such record date.
(b) Notice of any redemption shall be sent by or on behalf of the
Corporation not more than sixty (60) days nor less than thirty (30) days prior
to the Redemption Date, by first class mail, postage prepaid, to all holders of
record of the Convertible Preferred Stock at their respective last addresses as
they shall appear on the books of the Corporation; provided, however, that no
failure to give such notice or any defect therein or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any shares of
Convertible Preferred Stock except as to the holder to whom the Corporation has
failed to give notice or except as to the
18
<PAGE>
holder to whom notice was defective. In addition to any information required by
law or by the applicable rules of any exchange upon which Convertible Preferred
Stock may be listed or admitted to trading, such notice shall state: (i) the
Redemption Date; (ii) the Redemption Price; (iii) the place or places in the
United States where certificates for such shares are to be surrendered for
payment of the Redemption Price; (iv) that dividends on the shares to be
redeemed will cease to accrue on the Redemption Date; (v) the Conversion Price;
(viii) that Convertible Preferred Stock called for redemption may be converted
at any time before the close of business on the Redemption Date; and (vi) that
holders of Convertible Preferred Stock must satisfy the requirements of
paragraph 5 above if such holders desire to convert such shares. Upon the
mailing of any such notices of redemption, the Corporation shall become
obligated to redeem at the time of redemption specified thereon all shares
called for redemption.
(c) If notice has been mailed in accordance with subparagraph
6(b) above and provided that on or before the Redemption Date specified in such
notice, all funds necessary for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds in trust for the pro rata
benefit of the holders of the shares so called for redemption, so as to be, and
to continue to be available therefor, then, from and after the Redemption Date,
dividends on the shares of the Convertible Preferred Stock so called for
redemption shall cease to accrue, and said shares shall no longer be deemed to
be outstanding and shall not have the status of shares of Convertible Preferred
Stock, and all rights of the holders thereof as shareholders of the Corporation
(except the right to receive from the Corporation the Redemption Price) shall
cease. Upon surrender, in accordance with said notice, of the certificates for
any shares so redeemed (properly endorsed or assigned for transfer, if the
Corporation shall so require and the notice shall so state), such shares shall
be redeemed by the Corporation at the Redemption Price.
(d) Any funds deposited with a bank or trust Corporation for the
purpose of redeeming Convertible Preferred Stock shall be irrevocable except
that:
(i) the Corporation shall be entitled to receive from such
bank or trust Corporation the interest or other earnings, if any, earned on
any money so deposited in trust, and the holders of any shares redeemed
shall have no claim to such interest or other earnings; and
(ii) any balance of monies so deposited by the Corporation
and unclaimed by the holders of the Convertible Preferred Stock entitled
thereto at the expiration of two (2) years from the applicable Redemption
Date shall be repaid, together with any interest or other earnings earned
thereon, to the Corporation, and after any such repayment, the holders of
the shares entitled to the funds so repaid to the Corporation shall look
only to the Corporation for payment without interest or other earnings.
(e) No Convertible Preferred Stock may be redeemed except with
funds legally available for the payment of the Redemption Price.
(f) All shares of Convertible Preferred Stock redeemed pursuant
to this paragraph 6 shall be retired and shall be restored to the status of
authorized and unissued shares of
19
<PAGE>
preferred stock, without designation as to series and may thereafter be reissued
as shares of any series of preferred stock other than shares of Convertible
Preferred Stock.
7. Voting Rights.
--------------
In addition to any voting rights provided by law, the holders of
shares of Convertible Preferred Stock shall have the following voting rights:
(a) So long as any shares of the Convertible Preferred Stock
remain outstanding, each share of Convertible Preferred Stock shall entitle the
holder thereof to vote on all matters voted on by holders of Common Stock
(except during the Five Year Period with respect to the election of the Non-
Preferred Stock Directors), voting together with the Common Stock as a single
class (together with all other classes and series of stock of the Corporation
that are entitled to vote as a single class with the Common Stock) at all
meetings of the stockholders of the Corporation. In any vote with respect to
which the Convertible Preferred Stock shall vote with the holders of Common
Stock as a single class together with all other classes and series of stock of
the Corporation that are entitled to vote as a single class with the Common
Stock, each share of Convertible Preferred Stock shall entitle the holder
thereof to cast the 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 Convertible Preferred Stock is convertible on the date of such
vote. Such voting right of the holders of the Convertible Preferred Stock may be
exercised at any annual meeting of stockholders, any special meeting of
stockholders, or by written consent of the minimum number of shares required to
take such action pursuant to Section 228 of the Delaware General Corporation.
(b) On any matter on which the holders of Convertible Preferred
Stock are entitled by law or under the Certificate of Incorporation to vote
separately as a class, each such holder shall be entitled to one vote for each
share held, and such matter shall be determined by a majority of the votes cast
unless Delaware law or this Certificate of Designations requires approval by a
higher percentage.
(c) During such time as any shares of Convertible Preferred
Stock are outstanding, the Corporation will not, without the affirmative vote or
consent of the holders of at least a majority of the issued and outstanding
shares of Convertible Preferred Stock voting together as a separate class, (i)
create, authorize or issue (including on conversion or exchange of any
convertible or exchangeable securities or by reclassification) any class or
series of shares ranking on a parity with or prior to the Convertible Preferred
Stock, either as to dividends or redemption or upon voluntary or involuntary
liquidation, dissolution or winding up, (ii) increase the authorized shares of,
or issue (including on conversion or exchange of any convertible or exchangeable
securities or by reclassification) any shares of Convertible Preferred Stock,
except for the issuance of PIK Dividends in accordance with Section 3(b), (iii)
amend, alter, waive the application of, or repeal (whether by merger,
consolidation or otherwise) any provision of the Certificate of Incorporation of
the Corporation, enter into any agreement or take any other corporate action
which in any manner would alter, change, or otherwise adversely affect the
powers, rights or preferences of the Convertible Preferred Stock, (iv) effect
the reorganization, recapitalization, liquidation, dissolution or winding up of
the Corporation, or the sale, lease, conveyance or exchange of all or
substantially all of the assets, property or business of the Corporation, or the
merger or consolidation of the Corporation with or into any other corporation,
20
<PAGE>
if such transaction in any manner would alter, change or otherwise adversely
affect the powers, rights, or preferences of the Convertible Preferred Stock or
(v) take any action which would cause a dividend or other distribution to be
deemed to be received by the holders of the Convertible Preferred Stock for
federal income tax purposes unless such dividend or other distribution is
actually received by such holders.
(d) Unless and until Carlyle Affiliates cease collectively to
beneficially own shares of capital stock having 20% or more of the votes that
may be cast generally at annual or special meetings of stockholders, then the
number of Directors comprising the Board of Directors shall at all times be an
odd number, and the holders of Convertible Preferred Stock, voting separately as
a class, shall have the exclusive right to elect (i) during the Five Year
Period, the smallest number of Directors that constitutes a majority of the
Board of Directors and (ii) subsequent to the Five Year Period, the greatest
number of Directors that constitutes a minority of the Board of Directors (each
such Director, a "Preferred Stock Director") at any special meeting of
stockholders called for such purpose, at each annual meeting of stockholders and
in any written consent of stockholders pursuant to Section 228 of the Delaware
General Corporation Law. So long as the holders of the Convertible Preferred
Stock have the right to elect Preferred Stock Directors pursuant to the
preceding sentence, then (i) during the Five Year Period, the holders of the
Common Stock, voting separately as a class, will have the exclusive right
(subject to the rights of the holders of Convertible Exchangeable Preferred
Stock pursuant to Section 10 of the Convertible Exchangeable Preferred Stock
Certificate of Designations) to elect the Non-Preferred Stock Directors and (ii)
subsequent to the Five Year Period (subject to the rights of the holders of
Convertible Exchangeable Preferred Stock pursuant to Section 10 of the
Convertible Exchangeable Preferred Stock Certificate of Designations) each share
of Convertible Preferred Stock shall entitle the holder thereof to vote,
together with the Common Stock as a single class (together with all other
classes and series of stock of the Corporation that are entitled to vote as a
single class with the Common Stock) for the election of the Non-Preferred Stock
Directors at any such meeting and in any written consent of stockholders
pursuant to Section 228 of the Delaware General Corporation Law. From and after
the date on which Carlyle Affiliates cease collectively to beneficially own
shares of capital stock having 20% or more of the votes that may be cast
generally at annual or special meetings of stockholders, the right of the
holders of the Convertible Preferred Stock to elect the Preferred Stock
Directors shall terminate in the manner set forth in subparagraph 7(e) and each
share of Convertible Preferred Stock shall thereafter entitle the holder thereof
to vote together with the Common Stock as a single class (together with all
other classes and series of stock of the Corporation that are entitled to vote
as a single class with the Common Stock) for the election of all directors of
the Corporation as provided in subparagraph 7(a) (subject to the provisions of
subparagraph 7(f) below and Section 10 of the Convertible Exchangeable Preferred
Stock Certification of Designations).
(e) The Preferred Stock Directors elected as provided herein
shall serve until the next annual meeting or until their respective successors
shall be elected and shall qualify. Any Preferred Stock Director may be removed
with or without cause by, and shall not be removed other than by, the vote of
the holders of a majority of the outstanding shares of Convertible Preferred
Stock, voting separately as a class, at a meeting called for such purpose or by
written consent in accordance with Section 228 of the Delaware General Corporate
Law. If the office of any Preferred Stock Director becomes vacant by reason of
death, resignation, retirement, disqualification or removal from office or
otherwise, the remaining Preferred Stock Directors, by majority vote, may elect
a successor, or, alternatively, the holders of a majority of the outstanding
shares of Convertible Preferred Stock,
21
<PAGE>
voting separately as a class, at a meeting called for such purpose or by written
consent in accordance with Section 228 of the Delaware General Corporation Law
may elect a successor. Any such successor shall hold office for the unexpired
term in respect of which such vacancy occurred. Upon any termination of the
right of the holders of Convertible Preferred Stock to vote for and elect
Preferred Stock Directors as herein provided, the Preferred Stock Directors then
serving on the Board of Directors may continue to hold their office for the
remainder of their term. Only Non-Preferred Stock Directors shall have the right
to vote in the election of any person to fill any vacancy created by the death,
resignation, retirement, disqualification or removal from office or otherwise of
any Non-Preferred Stock Director and all such rights with respect to the Non-
Preferred Stock Directors shall be exercised for and on behalf of the Board of
Directors by a majority of the Non-Preferred Stock Directors. This subparagraph
(e) may not be amended without (x) the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock and (y) the affirmative vote
of the holders of a majority of the outstanding shares of Convertible Preferred
Stock.
(f) (i) Whenever, at any time or times when the Convertible
Preferred Stock is no longer entitled to elect Preferred Stock Directors
pursuant to subparagraph 7(d), dividends payable on the shares of Preferred
Stock at the time outstanding shall be cumulatively in arrears for six Dividend
Periods (whether or not consecutive), the holders of Convertible Preferred Stock
shall have the exclusive right, voting separately as a class with holders of
shares of any Parity Stock upon which like voting rights have been conferred and
are exercisable (the Convertible Preferred Stock and any such Parity Stock,
collectively for purposes of this subparagraph 7(f), the "Defaulted Preferred
Stock"), to elect two Directors at the Corporation's next annual meeting of
stockholders and at each subsequent annual meeting of stockholders; provided,
--------
however, that if such voting rights shall become vested more than 90 days or
- -------
less than 20 days before the date prescribed for the annual meeting of
stockholders, thereupon the holders of the shares of Defaulted Preferred Stock
shall be entitled to exercise their voting rights at a special meeting of the
holders of shares of Defaulted Preferred Stock as set forth in clauses (ii) and
(iii) of this subparagraph 7(f). At elections for such Directors, each holder of
Preferred Stock shall be entitled to one hundred votes for each share held (the
holders of shares of any other series of Defaulted Preferred Stock ranking on
such a parity being entitled to such number of votes, if any, for each share of
stock held as may be granted to them). Upon the vesting of such right of the
holders of Defaulted Preferred Stock, the maximum authorized number of members
of the Board of Directors shall automatically be increased by two and the two
vacancies so created shall be filled by vote of the holders of outstanding
Defaulted Preferred Stock as hereinafter set forth. The right of holders of
Defaulted Preferred Stock, voting separately as a class without regard to
series, to elect members of the Board of Directors as aforesaid shall continue
until such time as all dividends accumulated on Defaulted Preferred Stock shall
have been paid or declared and funds set aside for payment in full, at which
time such right shall terminate, except as herein or by law expressly provided,
subject to revesting in the event of each and every subsequent default of the
character above mentioned.
(ii) Whenever such voting right shall have vested, such
right may be exercised initially either at a special meeting of the holders of
shares of Defaulted Preferred Stock called as hereinafter provided, or at any
annual meeting of stockholders held for the purpose of electing Directors, and
thereafter at such meetings or by the written consent of such holders pursuant
to Section 228 of the General Corporation Law of the State of Delaware.
22
<PAGE>
(iii) At any time when such voting right shall have vested
in the holders of shares of Defaulted Preferred Stock entitled to vote thereon,
and if such right shall not already have been initially exercised, an officer of
the Corporation shall, upon the written request of holders of record of 10% of
the voting power represented by the shares of such Defaulted Preferred Stock
then outstanding, addressed to the Treasurer of the Corporation, call a special
meeting of holders of shares of such Defaulted Preferred Stock. Such meeting
shall be held at the earliest practicable date upon the notice required for
annual meetings of stockholders at the place for holding annual meetings of
stockholders of the Corporation or, if none, at a place designated by the
Treasurer of the Corporation. If such meeting shall not be called by the proper
officers of the Corporation within 30 days after the personal service of such
written request upon the Treasurer of the Corporation, or within 30 days after
mailing the same within the United States, by registered mail, addressed to the
Treasurer of the Corporation at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal authorities), then the
holders of record of 10% of the voting power represented by the shares of
Defaulted Preferred Stock then outstanding may designate in writing any person
to call such meeting at the expense of the Corporation, and such meeting may be
called by such person so designated upon the notice required for annual meetings
of stockholders and shall be held at the same place as is elsewhere provided in
this paragraph. Any holder of shares of Defaulted Preferred Stock then
outstanding that would be entitled to vote at such meeting shall have access to
the stock books of the Corporation for the purpose of causing a meeting of
stockholders to be called pursuant to the provisions of this paragraph.
Notwithstanding the provisions of this paragraph, however, no such special
meeting shall be called or held during a period within 45 days immediately
preceding the date fixed for the next annual meeting of stockholders.
(iv) The directors elected pursuant to this subparagraph
7(f) shall serve until the earlier of (i) the next annual meeting or until their
respective successors shall be elected and shall qualify or (ii) until such time
as all dividends accumulated on Defaulted Preferred Stock shall have been paid
or declared and funds set aside for payment in full; any Director elected by the
holders of Defaulted Preferred Stock may be removed by, and shall not be removed
otherwise than by, the vote of the holders of a majority of the voting power of
the outstanding shares of the Defaulted Preferred Stock who were entitled to
participate in such election of directors, voting as a separate class, at a
meeting called for such purpose or by written consent as permitted by law and
the Certificate of Incorporation and Bylaws of the Corporation. If the office of
any Director elected by the holders of Defaulted Preferred Stock, voting as a
class, becomes vacant by reason of death, resignation, retirement,
disqualification or removal from office or otherwise, the remaining Director
elected by the holders of Defaulted Preferred Stock, voting as a class, may
choose a successor who shall hold office for the unexpired term in respect of
which such vacancy occurred. Upon any termination of the right of the holders of
Defaulted Preferred Stock to vote for directors as herein provided, the term of
office of all Directors then in office elected by the holders of Defaulted
Preferred Stock, voting as a class, shall terminate immediately. Whenever the
terms of office of the Directors elected by the holders of Defaulted Preferred
Stock, voting as a class, shall so terminate and the special voting powers
vested in the holders of Defaulted Preferred Stock shall have expired, the
number of Directors shall be such number as may be provided for in the Bylaws or
Certificate of Incorporation irrespective of any increase made pursuant to the
provisions of this subparagraph 7(f).
23
<PAGE>
8. Exclusion of Other Rights. Except as may otherwise be required by
-------------------------
law, the shares of Convertible Preferred Stock shall not have any voting powers,
preferences and relative, participating, optional or other special rights, other
than those specifically set forth in this resolution (as such resolution may be
amended from time to time) and in the Certificate of Incorporation. The shares
of Convertible Preferred Stock shall have no preemptive or subscription rights
in respect of any securities of the Corporation.
9. Financial Statements.
--------------------
(a) Whether or not required by the rules and regulations of the
Commission, so long as any shares of Convertible Preferred Stock are
outstanding, the Corporation shall furnish to the holders of Convertible
Preferred Stock (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Corporation were required to file such Forms, including "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the
Corporation's certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Corporation were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Corporation shall
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, for so long as any Convertible Preferred Stock remains
outstanding, the Corporation shall furnish to the holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(b) The Corporation shall, so long as any of the shares of
Convertible Preferred Stock are outstanding, deliver to the holders of
Convertible Preferred Stock, forthwith upon any Executive Officer of the
Corporation becoming aware of any default under this Certificate of
Designations, an Officers' Certificate specifying such default and what action
the Corporation is taking or proposes to take with respect thereto.
10. Ranking. With regard to rights to receive dividends, redemption
-------
payments and distributions upon liquidation, dissolution or winding up of the
Corporation, the Convertible Preferred Stock shall rank pari passu with any
---- -----
Parity Stock and senior to the Common Stock and any other equity securities or
other securities into which any convertible indebtedness is convertible which
are issued by the Corporation after the date of this Certificate of Designation.
The Convertible Preferred Stock shall not be subject to the creation of capital
stock senior with regards to the right to receive dividends, redemption payments
and distribution upon liquidation, dissolution or winding up of the Corporation.
11. Modification and Waiver.
-----------------------
(a) Except as otherwise provided above, the terms of this
Certificate of Designation may be amended and the rights hereunder may be waived
with the consent of holders of a majority of the shares of the Convertible
Preferred Stock then outstanding, provided, that no such
--------
24
<PAGE>
modification or waiver shall change the dividend rights or the terms for
conversion of the Convertible Preferred Stock without the consent of each holder
of Convertible Preferred Stock.
(b) The Convertible Preferred Stock shall also be subject to the
miscellaneous provisions regarding the Corporation's preferred stock set forth
in the Certificate of Incorporation, as amended.
12. Headings of Subdivisions. The headings of the various
------------------------
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
13. Severability of Provisions. If any voting powers, preferences and
--------------------------
relative, participating, optional and other special rights of the Convertible
Preferred Stock and qualifications, limitations and restrictions thereof set
forth in this resolution (as such resolution may be amended from time to time)
is invalid, unlawful or incapable of being enforced by reason of any rule of law
or public policy, all other voting powers, preferences and relative,
participating, optional and other special rights of the Convertible Preferred
Stock and any qualifications, limitations and restrictions thereof set forth in
this resolution (as so amended) which can be given effect without the invalid,
unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of the Convertible Preferred
Stock or qualifications, limitations and restrictions thereof shall,
nevertheless, remain in full force and effect, and no voting powers, preferences
and relative, participating, optional or other special rights of the Convertible
Preferred Stock or qualifications, limitations and restrictions thereof herein
set forth shall be deemed dependent upon any other such voting powers,
preferences and relative, participating, optional or other special rights of
Convertible Preferred Stock or qualifications, limitations and restrictions
thereof unless so expressed herein.
14. Record Holders. The Corporation and the transfer agent for the
--------------
Convertible Preferred Stock may deem and treat the record holder of any shares
of Preferred Stock as the true and lawful owner thereof for all purposes, and
neither the Company nor the transfer agent shall be affected by any notice to
the contrary.
15. Notice. Except as may otherwise be provided for herein, all
------
notices referred to herein shall be in writing, and all notices hereunder shall
be deemed to have been given upon receipt, in the case of a notice of conversion
given to the Corporation as contemplated in Section 5(b) hereof, or, in all
other cases, upon the earlier of receipt of such notice or three Business Days
after the mailing of such notice if sent by registered mail (unless first-class
mail shall be specifically permitted for such notice under the terms of this
Certificate) with postage prepaid, addressed: if to the Corporation, to its
offices at 23456 Hawthorne Boulevard, Torrance, California 90505 Attention:
Secretary or to an agent of the Corporation designated as permitted by this
Certificate, or, if to any holder of the Convertible Preferred Stock, to such
holder at the address of such holder of the Convertible Preferred Stock as
listed in the stock record books of the Corporation (which may include the
records of any transfer agent for the Preferred Stock); or to such other address
as the Company or holder, as the case may be, shall have designated by notice
similarly given.
25
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
duly executed by [NAME AND TITLE OF OFFICER] and attested by [NAME OF SECRETARY]
its secretary, this day of , 199 .
---- ---------- -
INTERNATIONAL TECHNOLOGY CORPORATION
By:
---------------------------------
ATTEST: Name:
----------------------------
Title:
---------------------------
By:
------------------------
Name:
----------------------
Secretary
26
<PAGE>
SECURITIES PURCHASE AGREEMENT
by and between
INTERNATIONAL TECHNOLOGY CORPORATION
and
CERTAIN PURCHASERS
IDENTIFIED HEREIN
Dated as of August 28, 1996
<PAGE>
SECURITIES PURCHASE AGREEMENT
-----------------------------
This Securities Purchase Agreement (this "Agreement"), dated as of
---------
August 28, 1996, is by and among (i) International Technology Corporation, a
Delaware corporation (the "Company"), and (ii) Carlyle Partners II, L.P., a
-------
Delaware limited partnership ("CPII"), Carlyle Partners III, L.P. ("CPIII"), a
---- -----
Delaware limited partnership, Carlyle International Partners II L.P. ("CIPII"),
-----
a Cayman Islands limited partnership, Carlyle International Partners III L.P.
("CIPIII"), a Cayman Islands limited partnership, and C/S International
------
Partners, a Cayman Islands limited partnership ("C/SIP"), each of which is a
-----
limited partnership of which TC Group, L.L.C. is the general partner
(collectively, the "Purchasers").
----------
RECITAL
-------
WHEREAS, the Company desires to sell to the Purchasers, and the
Purchasers desire to purchase from the Company, (i) an aggregate of 45,000
shares (the "Preferred Shares") of its newly issued convertible participating
----------------
preferred stock, $100 par value per share (the "Convertible Preferred Stock"),
---------------------------
having the rights, designations and preferences set forth in the Certificate of
Designations (as defined herein) and (ii) warrants (the "Warrants") to purchase
--------
5,000,000 shares of common stock, $1.00 par value per share, of the Company (the
"Common Stock"), for the consideration as set forth in Section 2.2.
------------
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1. Defined Terms. As used herein, the terms below shall have the
-------------
following meanings:
"Affiliate" shall mean any entity controlling, controlled by or under
---------
common control with the Company. For the purposes of this definition, "control"
shall have the meaning presently specified for that word in Rule 405 promulgated
by the SEC under the Securities Act.
"Agreement" shall mean this Securities Purchase Agreement, together
---------
with all schedules and exhibits referenced herein.
"Ancillary Agreements" means the Warrant Agreement and the
--------------------
Registration Rights Agreement.
1
<PAGE>
"Ancillary Proposals" has the meaning specified in Section 6.1(a).
-------------------
"Applicable Law" means any statute, law, rule, or regulation or any
--------------
judgment, order, writ, injunction or decree of any Governmental Entity to which
a specified person or property is subject.
"Alternative Transaction" has the meaning set forth in Section 6.8 of
-----------------------
the Agreement.
"Benefit Arrangement" means any employment, consulting, severance or
-------------------
other similar contract, arrangement or policy and each plan, arrangement
(written or oral), program, agreement or commitment providing for insurance
coverage (including without limitation any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health or accident benefits (including
without limitation any "voluntary employees' beneficiary association" as defined
in Section 501(c)(9) of the Code providing for the same or other benefits) or
for deferred compensation, profit-sharing bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (A) is not a Welfare
Plan, Pension Plan or Multiemployer Plan, (B) is entered into, maintained,
contributed to or required to be contributed to, as the case may be, by the
Company or an ERISA Affiliate or under which the Company or any ERISA Affiliate
may incur any liability, and (C) covers any present or former employees,
directors or consultants of the Company (with respect to their relationship with
such entities).
"Board of Directors" means the Board of Directors of the Company as it
------------------
is constituted prior to the Closing Date.
"Bylaws" means the Bylaws of the Company as in effect on the date
------
hereof.
"Business" means the business of the Company as described more fully
--------
in the "Business" section of the Company's Annual Report on Form 10-K for the
fiscal year ended March 29, 1996.
"Carlyle" means TC Group, L.L.C. or (to the extent appropriate from
-------
the context) one or more of its Affiliates.
"Carlyle Affiliates" means, at any time, any of the Purchasers and any
------------------
of their Affiliates at such time, including, but not limited to, The Carlyle
Group, L.P., TC Group, L.L.C. and their respective affiliates.
"Carlyle Transaction Expenses" means the reasonable fees and expenses
----------------------------
incurred by the Purchasers and/or by Carlyle on behalf of the Purchasers,
including, but not limited to, fees and expenses of legal counsel, accountants,
consultants and travel expenses in connection with the preparation of the
Agreement and Carlyle's due diligence examination relating to the Agreement and
the transaction contemplated hereby, in an amount not to exceed $900,000.
2
<PAGE>
"Certificate Amendments" means any amendments to the Certificate of
----------------------
Incorporation reasonably necessary in connection with the transactions
contemplated under this Agreement and the Ancillary Agreements, including,
without limitation, (a) an increase to the authorized number of shares of Common
Stock of the Company to 150,000,000 shares, (b) the terms and conditions of the
designations, rights and preference of the Convertible Preferred Stock set forth
in the Certificate of Designations, (c) such other changes to the Certificate of
Incorporation as are reasonably necessary to give effect to the rights,
preferences and designations of the Convertible Preferred Stock contained in the
Certificate of Designations and the provisions of this Agreement and the
Ancillary Agreements and (d) a reduction of the par value of a share of Common
Stock to $.01. Notwithstanding the foregoing, the Certificate Amendments will
not include the Ancillary Proposals (approval of which is not a condition to
Closing).
"Certificate of Designations" means the Certificate of Designations,
---------------------------
Preferences and Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations and Restrictions thereof of the Cumulative
Convertible Participating Preferred Stock, $100 par value per share, of
International Technology Corporation, substantially in the form attached hereto
as Exhibit A.
"Certificate of Incorporation" means the Certificate of Incorporation
----------------------------
of the Company as amended or restated and as in effect on the date hereof.
"Closing" has the meaning set forth in Section 3.1 of the Agreement.
-------
"Closing Date" means the date five (5) business days following the
------------
date on which the last of the conditions to the Closing set forth in Section 7.1
have been fulfilled or waived and either the Purchasers, on the one hand, or the
Company, on the other hand, shall have notified the other party of such
fulfillment or waiver, or such other date as may be agreed to by the Purchasers
and the Company.
"Code" means the Internal Revenue Code of 1986, as it may be amended
----
from time to time.
"Commission" means the United States Securities and Exchange
----------
Commission.
"Common Stock" has the meaning set forth in the Recital to the
------------
Agreement.
"Conversion Shares" means the shares of Common Stock issuable upon the
-----------------
conversion of the Preferred Shares.
"Convertible Exchangeable Preferred Stock" means the 7% Cumulative
----------------------------------------
Convertible Exchangeable Preferred Stock, $100 par value per share, of the
Company.
"Convertible Exchangeable Preferred Stock Certificate of Designations"
--------------------------------------------------------------------
means the Certificate of Designations of the 7% Cumulative Convertible
Exchangeable Preferred Stock, $100 par value per share, of the Company.
3
<PAGE>
"Convertible Preferred Stock" has the meaning set forth in the Recital
---------------------------
to the Agreement.
"Credit Facility" means, collectively, (a) the Credit Agreement among
---------------
IT Corporation, the several lenders from time to time parties thereto and
Chemical Bank, as administrative agent, dated as of October 24, 1995 and (b) the
Note Purchase Agreement dated as of October 24, 1995 relating to the 8.67%
Guaranteed Senior Secured Notes due October 30, 2003.
"Employee Plans" means all Benefit Arrangements, Multiemployer Plans,
--------------
Pension Plans and Welfare Plans.
"Encumbrance" means any claim, lien, pledge, option, charge, easement,
-----------
security interest, right-of-way, encumbrance or other rights of third parties,
and, with respect to any securities, any agreements, understandings or
restrictions affecting the voting rights or other incidents of record or
beneficial ownership pertaining to such securities.
"Environmental Conditions" means the Release or threatened Release of
------------------------
any Hazardous Material (whether or not upon a Facility or any former facility or
other property and whether or not such Release constituted at the time thereof a
violation of any Environmental Law) as a result of which Company has or may
become liable to any person or by reason of which any Facility, any former
facility or any of the assets of the Company may suffer or be subjected to any
Encumbrances.
"Environmental Laws" means any and all foreign, Federal, state, local
------------------
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
legally binding decrees, or other requirement of any Governmental Entity
(including, without limitation, common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of the environment or of
human health relating to exposure of any kind of Hazardous Materials, as has
been, is now, or may at any time hereafter be, in effect.
"Environmental Permits" means any and all permits, licenses,
---------------------
registrations, notifications, exemptions and any other authorization required
under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"ERISA Affiliate" means any entity which is (or at any relevant time
---------------
was) a member of a "controlled group of corporations" with, under "common
control" with, a member of an "affiliated service group" with, or otherwise
required to be aggregated with the Company, as set forth in Section 414(b), (c),
(m) or (o) of the Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Facilities" means the offices and buildings and all other real
----------
property and related facilities which are owned, leased or operated by the
Company or any Subsidiary.
4
<PAGE>
"Fixtures and Equipment" shall mean all of the furniture, fixtures,
----------------------
furnishings, machinery and equipment owned by the Company or any Subsidiary.
"GAAP" has the meaning set forth in Section 4.9 of the Agreement.
----
"Government Contracts" shall mean all contracts, options, agreements,
--------------------
commitments of sales or purchase orders of the Company with the United States
Government or any department or agency thereof, including, any contract, option,
agreement, commitment or sales order of the Company with any other party in
connection with a contract between a third party and the United States
Government or a department or agency thereof. Such term also includes all bids,
quotations and proposals, which if accepted, would result in a Government
Contract.
"Governmental Entity" means any court or tribunal in any jurisdiction
-------------------
(domestic or foreign) or any public, governmental, or regulatory body, agency,
department, commission, board, bureau, or other authority or instrumentality
(domestic or foreign).
"Hazardous Materials" means any hazardous substance, gasoline or
-------------------
petroleum (including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, ureaformaldehyde insulation, asbestos or asbestos-
containing materials, pollutants, contaminants, radioactivity, and any other
materials or substances of any kind, whether solid, liquid or gas, and whether
or not any such substance is defined as hazardous under any Environmental Law,
that is regulated pursuant to any Environmental Law or that could give rise to
liability under any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
-------
1976, as amended.
"Interim Period" has the meaning set forth in Section 6.3 of the
--------------
Agreement.
"Knowledge of the Company" (or similar language to that effect) means
------------------------
to the knowledge of Messrs. Gibson, DeLuca, Mahoney, Pompe, Coffman, Kirk,
Soose, Rice, Ockelmann, Conway and Redwine.
"Material Adverse Effect" with respect to any person or entity shall
-----------------------
mean an event, occurrence or condition that has had or reasonably would be
expected to have a material adverse effect on the business, condition (financial
or otherwise), assets, liabilities, working capital or operations of such person
or entity and its Subsidiaries (if any), taken as a whole.
"Material Agreement" means (a) any written or oral agreement,
------------------
contract, lease, commitment, understanding, instrument or obligation to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective properties may be bound involving total
value or consideration or liability in excess of $5,000,000 (except with respect
to sales contracts, in which case the total value or consideration or liability
is in excess of $10,000,000), or (b) any other agreement listed as an exhibit to
the Company's Form 10-K for the fiscal year ended March 29, 1996.
5
<PAGE>
"Material Subsidiary" means any one or more of IT Corporation, IT
-------------------
Environmental Services, Inc., IT Hanford, Inc., IT Tulsa Holdings, Inc.,
Gradient Corporation, Universal Professional Insurance Company and any other
Subsidiary which is a "significant subsidiary" within the meaning of Regulation
S-X.
"Multiemployer Plan" means any "multiemployer plan," as defined in
------------------
Section 4001(a)(3) or 3(37) of ERISA, which (A) the Company or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute
to, or, after September 25, 1980, maintained, administered, contributed to or
was required to contribute to, or under which the Company or any ERISA Affiliate
may incur any liability and (B) covers any employee or former employee of the
Company or any ERISA Affiliate (with respect to their relationship with such
entities).
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Pension Plan" means any "employee pension benefit plan" as defined in
------------
Section 3(2) of ERISA (other than a Multiemployer Plan) which (A) the Company or
any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the five years prior to the Closing Date, maintained,
administered, contributed to or was required to contribute to, or under which
the Company or any ERISA Affiliate may incur any liability and (B) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such entities).
"Permits" shall mean all licenses, permits, orders, consents,
-------
approvals, registrations, authorizations, qualifications and filings required by
any federal, state, local or foreign laws or governmental or regulatory bodies
and all industry or other non-governmental self-regulatory organizations.
"Permitted Encumbrances" means (i) any mechanic's or materialmen's
----------------------
lien or similar Encumbrances with respect to amounts not yet due and payable or
which are being contested in good faith by appropriate proceedings and for which
appropriate reserves have been established, (ii) Encumbrances for Taxes not yet
due and payable or which are being contested in good faith by appropriate
proceeding, for which appropriate reserves have been established, (iii)
easements, licenses, covenants, rights of way and similar Encumbrances which,
individually or in the aggregate, would not materially and adversely affect the
marketability or value of the property encumbered thereby or materially
interfere with the operations of the Business or (iv) Encumbrances arising under
the Credit Facility.
"Person" means any individual, copartner, association, partnership,
------
joint venture, limited liability company, trust, estate or other entity or
organization.
"Pre-Closing Environmental Conditions" means any Environmental
------------------------------------
Condition occurring or in existence on or prior to the Closing Date.
"Preferred Shares" has the meaning set forth in the Recital hereto.
----------------
6
<PAGE>
"Proceeding" means any action, suit or proceeding, whether civil,
----------
criminal, administrative, arbitrative or investigative, any appeal in such an
action, suit or proceeding, and any inquiry or investigation that could
reasonably be expected to lead to such an action, suit or proceeding.
"Proxy Material" means the proxy statement and other proxy materials
--------------
(as amended and supplemented) to be used to solicit proxies on behalf of the
board of directors of the Company in connection with the Stockholders Meeting.
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement by and among the Company and the Purchasers substantially in the form
attached hereto as Exhibit B.
"Regulations" means any laws, statutes, ordinances, regulations,
-----------
rules, notice requirements, court decisions and orders of any foreign, federal,
state or local government and any other governmental department or agency,
including without limitation Environmental Laws, energy, motor vehicle safety,
public utility, zoning, building and health codes, occupational safety and
health laws and laws respecting employment practices, employee documentation,
terms and conditions of employment and wages and hours.
"Release" means and includes any spilling, leaking, pumping, pouring,
-------
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment or the workplace of any Hazardous Materials, and
otherwise as defined in any Environmental Law.
"Schedules" has the meaning set forth in Section 10.11 of the
---------
Agreement.
"SEC Filings" has the meaning set forth in Section 4.9 of the
-----------
Agreement.
"Securities" means the Preferred Shares and the Warrants.
----------
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Stockholders Meeting" has the meaning set forth in Section 6.1 of the
--------------------
Agreement.
"Subsidiary" means, with respect to any Person, (a) any corporation of
----------
which at least a majority in interest of the outstanding voting stock (having by
the terms thereof voting power under ordinary circumstances to elect a majority
of the directors of such corporation, irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned or controlled by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries, or (b) any corporate or non-corporate entity in which such Person,
one or more Subsidiaries of such Person, or such person and one or more
Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has an ownership interest and 100% of the revenue of
which is included in the
7
<PAGE>
consolidated financial reports of such Person consistent with generally accepted
accounting principles.
"Tax" or "Taxes" means any federal, state, local or foreign net or
--- -----
gross income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax, governmental fee or like assessment or charge of any
kind whatsoever, including any interest, penalty or addition thereto, whether
disputed or not, imposed by any governmental authority or arising under any Tax
law or agreement, including, without limitation, any joint venture or
partnership agreement.
"Tax Return" means any return, declaration, report, claim for refund
----------
or information or return or statement relating to Taxes, including any schedule
or attachment thereto, and including any amendments thereof.
"Transaction" means, taken together, the transactions contemplated
-----------
under this Agreement.
"Warrant Agreement" means that certain Warrant Agreement by and among
-----------------
the Company and the Purchasers substantially in the form attached hereto as
Exhibit C pursuant to which the Company shall issue to the Purchasers the
Warrants.
"Warrant Certificate" has the meaning set forth in Section 8.1 of the
-------------------
Agreement.
"Warrants" has the meaning set forth in the Recital to the Agreement.
--------
"Warrant Shares" means the Common Stock issuable upon the exercise of
--------------
the Warrants.
"Welfare Plan" means any "employee welfare benefit plan" as defined in
------------
Section 3(1) of ERISA, which (A) the Company or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or under which the
Company or any ERISA Affiliate may incur any liability and (B) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such entities).
8
<PAGE>
ARTICLE II
PURCHASE AND SALE OF SECURITIES
-------------------------------
2.1. Purchase and Sale of Securities. Upon the terms and subject
-------------------------------
to the conditions contained herein, on the Closing Date, the Company will sell
to the Purchasers and the Purchasers will purchase from the Company, all of the
Securities.
2.2. Consideration for Securities. Upon the terms and subject to
----------------------------
the conditions contained herein, as consideration for the purchase of the
Securities, on the Closing Date, the Purchasers shall pay to the Company an
aggregate purchase price in the amount of $45,000,000 payable by delivery to the
Company of same day funds.
ARTICLE III
CLOSING
-------
3.1. Closing. The closing of the transactions contemplated herein
-------
(the "Closing") shall be held at 10:00 a.m. Eastern Time on the Closing Date
-------
at the offices of Latham & Watkins, 1001 Pennsylvania Avenue, N.W., Suite 1300,
Washington, D.C. 20004, unless the parties hereto otherwise agree.
3.2. Deliveries by the Company at Closing. At Closing, the Company
------------------------------------
shall issue and deliver to the Purchasers:
(a) certificates evidencing the Preferred Shares in the name of
the several Purchasers (or their assignees) in the respective amounts as set
forth in a written notice provided to the Company by the Purchasers;
(b) certificates evidencing the Warrants in the name of the
several Purchasers (or their assignees) in the respective amounts as set forth
in a written notice provided to the Company by the Purchasers; and
(c) all such other documents and instruments as the Purchasers
or their counsel shall reasonably request to consummate or evidence the
Transaction.
3.3. Deliveries by the Purchasers at Closing. At Closing, the
---------------------------------------
Purchasers shall deliver to the Company:
(a) same day funds as provided in Section 2.2;
(b) all such other documents and instruments as the Company or
its counsel shall reasonably request to consummate or evidence the Transaction.
3.4. Certificates; Opinions. At Closing, the Purchasers and the
----------------------
Company shall deliver the certificates, opinion of counsel, and other documents
described in Article 7.
9
<PAGE>
3.5. Ancillary Agreements. At Closing, the Company and the
--------------------
Purchasers shall enter into the Ancillary Agreements.
3.6. Form of Documents and Instruments. All of the documents and
---------------------------------
instruments delivered at Closing shall be in form and substance, and shall be
executed and delivered in a manner, reasonably satisfactory to the parties'
respective counsel.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to the Purchasers as follows:
4.1. Organization of the Company. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease, and
operate its properties and to carry on its business as presently being
conducted. No actions or proceedings to dissolve the Company are pending or, to
the Knowledge of the Company, threatened. The copies of the Certificate of
Incorporation and Bylaws heretofore delivered by the Company to the Purchasers
are accurate and complete as of the date hereof. The Company is duly qualified
or licensed to do business as a foreign corporation and is in good standing in
each jurisdiction in which the property owned, leased, or operated by it or the
conduct of its business requires such qualification or licensing, except where
the failure to do so taken in the aggregate would not have a Material Adverse
Effect on the Company.
4.2. Capitalization of the Company.
-----------------------------
(a) The authorized capital stock of the Company as of the date
hereof, consists of 100,000,000 shares of Common Stock and 180,000 shares of
preferred stock, of which 24,000 shares have been designated Convertible
Exchangeable Preferred Stock. As of August 23, 1996, 36,540,675 shares of Common
Stock and 24,000 shares of Convertible Exchangeable Preferred Stock are
outstanding (represented by 2,400,000 publicly traded depository shares). As of
August 23, 1996, 6,548,700 shares of Common Stock are reserved for issuance upon
exercise of outstanding employee stock options and 10,273,920 shares of Common
Stock are reserved for issuance upon conversion of the Convertible Exchangeable
Preferred Stock. Schedule 4.2 contains the aggregate number of outstanding
--------
options to purchase shares of Common Stock, the weighted average exercise price
with respect to such options and the plan or other arrangements pursuant to
which such options were issued. All outstanding shares of capital stock of the
Company have been validly issued and are fully paid and nonassessable, and no
shares of capital stock of the Company are subject to, nor have any been issued
in violation of, any preemptive or similar rights.
(b) Except as set forth above in paragraph (a) of this Section 4.2,
as contemplated by this Agreement and as set forth on Schedule 4.2 hereof,
------------
there are outstanding (i)
10
<PAGE>
no shares of capital stock or other voting securities of the Company; (ii) no
securities of the Company convertible into or exchangeable for shares of capital
stock or other voting securities of the Company; (iii) no subscriptions,
options, warrants, calls, commitments, preemptive rights or other rights of any
kind to acquire from the Company, and no obligation of the Company to issue or
sell, any shares of capital stock or other voting securities of the Company or
any securities of the Company convertible into or exchangeable for such capital
stock or voting securities; and (iv) other than employee compensation plans
based on the Company's earnings and executive officer employment agreements, no
equity equivalents, interests in the ownership or earnings or other similar
rights of or with respect to the Company. There are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any shares
of Common Stock or any other securities of the type described in clauses (i)-
(iv) of the preceding sentence. There are no restrictions upon the voting or
transfer of any share of the capital stock or other voting securities of the
Company pursuant to the Certificate of Incorporation, the Bylaws or other
governing documents or any agreement or other instrument to which the Company is
a party or by which the Company is bound other than restricted stock held by
certain employees. Schedule 4.2 contains a true and correct list of all persons
------------
holding restricted stock (as defined under any plan or arrangement pursuant to
which it was issued), the number of shares of restricted stock held by such
persons and the document or documents which describe such restrictions.
4.3. Authorization of Issuance. Upon consummation of the
-------------------------
transactions contemplated hereby, the Securities acquired by the Purchasers from
the Company will be duly authorized and validly issued, fully paid and not
subject to any preemptive or similar rights. Upon consummation of the
transactions contemplated hereunder, the Conversion Shares will be duly
authorized and reserved for issuance and upon conversion in accordance with the
terms of the Cumulative Preferred Stock will be validly issued, fully paid and
nonassessable and not subject to any preemptive or similar rights. Upon
consummation of the transactions, the Warrant Shares will be duly authorized and
reserved for issuance and, upon exercise of the Warrants, and when issued and
paid for in accordance with the terms of the Warrants, will be validly issued,
fully paid and nonassessable and not subject to any preemptive or similar
rights.
4.4. Authorization. The Company has full corporate power and
-------------
authority to execute and deliver this Agreement and the Ancillary Agreements and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery by the Company of this Agreement and the Ancillary Agreements, and
the consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action of the Company (other
than the approval of the transactions contemplated in this Agreement by the
stockholders of the Company in accordance with Applicable Law, the Certificate
of Incorporation and the rules of the New York Stock Exchange). This Agreement
has been duly executed and delivered by the Company and constitutes, and each
Ancillary Agreement executed or to be executed by the Company has been, or when
executed will be, duly executed and delivered by the Company and constitutes, or
when executed and delivered will constitute, a valid and legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting
creditors' rights generally, and (ii) general
11
<PAGE>
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.5. Noncontravention. Assuming compliance with the matters
----------------
referred to in Section 6.1 and the approval of the Company's stockholders as
contemplated therein, the execution and delivery by the Company of this
Agreement and the Ancillary Agreements and the performance by it of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or result in a violation of any provision of the Certificate of
Incorporation or the Bylaws, or the charter, bylaws, or other governing
instruments of any Subsidiary, (ii) conflict with or result in a violation of
any provision of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or without the
giving of notice or the passage of time or both) to any loss of material
benefit, or of any right of termination, cancellation, or acceleration under,
any Material Agreement, except the Credit Facility, (iii) result in the creation
or imposition of any Encumbrance upon the properties of the Company or any
Subsidiary, or (iv) violate any Applicable Law binding upon the Company or any
Subsidiary, except, in the case of clauses (ii), (iii) and (iv) above, for any
such conflicts, violations, defaults, terminations, cancellations,
accelerations, or Encumbrances which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or on the ability of
the Company to consummate the transactions contemplated hereby.
4.6. Consents and Approvals. No consent, approval, order,
----------------------
authorization of, or declaration, filing, or registration with, any Governmental
Entity is required to be obtained or made by the Company or any Subsidiary in
connection with the execution and delivery by the Company of this Agreement and
the Ancillary Agreements or the consummation of the transactions contemplated
hereby and thereby, other than (i) filings under the HSR Act and expiration or
termination of any applicable waiting period required thereunder; (ii) the
filing of the Certificate Amendments with the Secretary of State of the State of
Delaware; (iii) compliance with any applicable requirements of the Securities
Act; (iv) compliance with any applicable requirements of the Exchange Act; (v)
compliance with any applicable state securities laws; and (vi) such consents,
approvals, orders, or authorizations which, if not obtained, and such
declarations, filings, or registrations which, if not made, would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
Except as set forth on Schedule 4.6, no consent or approval of any person other
------------
than any Governmental Entity is required to be obtained or made by the Company
or any Subsidiary in connection with the execution and delivery by the Company
of this Agreement and the Ancillary Agreements or the consummation of the
transactions contemplated hereby and thereby, other than (a) approval of the New
York Stock Exchange, (b) such approvals as are required to be received from the
holders of Common Stock, (c) approvals under the Credit Facility, and (d) such
consents, approvals, orders, or authorizations which, if not obtained, and such
declarations, filings, or registrations which, if not made, would not,
individually or in the aggregate, have a Material Adverse Effect.
4.7. Subsidiaries.
------------
(a) Except as otherwise set forth on Schedule 4.7, the
------------
Company does not own, directly or indirectly, more than five percent of the
capital stock or other securities of
12
<PAGE>
any corporation or partnership or have any direct or indirect equity or
ownership interest of more than five percent in any other person, other than its
Subsidiaries. Schedule 4.7 lists each Subsidiary of the Company as of the date
------------
hereof and its respective jurisdiction of incorporation. Each Material
Subsidiary is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. Each such
Material Subsidiary has all requisite corporate authority to own, lease, and
operate its properties and to carry on its business as now being conducted.
Except as otherwise indicated on Schedule 4.7, no actions or proceedings to
------------
dissolve any Material Subsidiary are pending.
(b) Except as otherwise indicated on Schedule 4.7, all the
------------
outstanding capital stock or other equity interests of each Subsidiary of the
Company is owned directly or indirectly by the Company, free and clear of all
Encumbrances and restrictions on voting, sale, transfer or disposition. All
outstanding shares of capital stock of each Subsidiary of the Company have been
validly issued and are fully paid and nonassessable. No shares of capital stock
or other equity interests of any Subsidiary of the Company are subject to, nor
have any been issued in violation of, preemptive or similar rights.
(c) Except for shares of Common Stock owned by the Company or any
Subsidiary and as set forth above on Schedule 4.7, there are outstanding (i) no
------------
shares of capital stock or other voting securities of any Subsidiary of the
Company; (ii) no securities of any Subsidiary of the Company convertible into or
exchangeable for shares of capital stock or other voting securities of any of
any Subsidiary of the Company; (iii) no subscriptions, options, warrants, calls,
commitments, preemptive rights or other rights of any kind to acquire from any
Subsidiary of the Company, and no obligation of any Subsidiary of the Company to
issue or sell, any shares of capital stock or other voting securities of any
Subsidiary of the Company or any securities of any Subsidiary of the Company
convertible into or exchangeable for such capital stock or voting securities;
and (iv) no equity equivalents, interests in the ownership or earnings, or other
similar rights of or with respect to any Subsidiary of the Company. There are no
outstanding contractual obligations of any Subsidiary of the Company to
repurchase, redeem or otherwise acquire any shares of capital stock or any other
securities of the type described in clauses (i)-(iv) of the preceding sentence.
4.8. Employee Benefit Plans and Other Agreements.
-------------------------------------------
(a) Disclosure; Delivery of Copies of Relevant Documents and
--------------------------------------------------------
Other Information. Schedule 4.8 contains a complete list of Employee Plans
- ----------------- ------------
which cover or have covered present or former employees, directors or
consultants of the Company or any of its Subsidiaries (with respect to their
relationship with such entities) (each, a "Company Employee Plan"). True and
complete copies of each of the following Company Employee Plan documents have
been delivered or made available by the Company to the Purchasers: (i) each
Company Employee Plan document (and, if applicable, related trust agreements and
all annuity contracts or other funding instruments) and all amendments thereto,
all reasonably available written descriptions thereof which have been
distributed to the Company's employees and those of its ERISA Affiliates during
the last 36 months and a complete description of any Company Employee Plan which
is not in writing (including a description of the number and level of employees
covered
13
<PAGE>
thereby), (ii) the most recent determination or opinion letter issued by the
Internal Revenue Service with respect to each Pension Plan and each Welfare Plan
(other than a Multiemployer Plan which covers or has covered employees of the
Company or any of its ERISA Affiliates (with respect to their relationship with
such entities), (iii) for the three most recent plan years, Annual Reports on
Form 5500 Series required to be filed with any governmental agency for each
Pension Plan which covers or has covered employees or former employees of the
Company or any of its ERISA Affiliates (with respect to their relationship with
such entities) (each, a "Company Pension Plan"), (iv) a tabulation of age,
salary, service and related data as of the last day of the last plan year for
employees of the Company or any of its Subsidiaries and (v) a description
setting forth the amount of any liability of the Company as of the Closing Date
for payments more than thirty (30) calendar days past due with respect to each
Welfare Plan which covers or has covered employees or former employees of the
Company or any of its Subsidiaries.
(b) Employee Plans.
--------------
(i) Pension Plans.
-------------
(A) The funding method used in connection with each
Pension Plan which is subject to the minimum funding requirements of ERISA
is acceptable and the actuarial assumptions used in connection with funding
each such plan are reasonable. As of the last day of the last plan year of
each Pension Plan and as of the Closing Date, the "amount of unfunded
benefit liabilities" as defined in Section 4001(a)(18) of ERISA (but
excluding from the definition of "current value" of "assets" of such
Pension Plan, accrued but unpaid contributions) did not and will not exceed
zero. No "accumulated funding deficiency" (for which an excise tax is due
or would be due in the absence of a waiver) as defined in Section 412 of
the Code or as defined in Section 302(a)(2) of ERISA, whichever may apply,
has been incurred with respect to any Pension Plan with respect to any plan
year, whether or not waived. Neither the Company nor any ERISA Affiliate
has failed to pay when due any "required installment", within the meaning
of Section 412(m) of the Code and Section 302(e) of ERISA, whichever may
apply, with respect to any Pension Plan. Neither the Company nor any ERISA
Affiliate is subject to any lien imposed under Section 412(n) of the Code
or Section 302(f) of ERISA, whichever may apply, with respect to any
Pension Plan. Neither the Company nor any ERISA Affiliate has any liability
for unpaid contributions with respect to any Pension Plan.
(B) Neither the Company nor any ERISA Affiliate is
required to provide security to any Company Pension Plan under Section
401(a)(29) of the Code.
(C) Each Company Pension Plan and each related trust
agreement, annuity contract or other funding instrument is qualified and
tax-exempt under the provisions of Code Sections 401(a) (or 403(a), as
appropriate) and 501(a) and has been so qualified during the period from
its adoption to date.
14
<PAGE>
(D) Each Company Pension Plan and each related trust
agreement, annuity contract or other funding instrument presently complies
and has been maintained in compliance, in all material respects, with its
terms and, both as to form and in operation, with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such plans, including without limitation ERISA and the Code.
(E) The Company has paid all premiums (and interest
charges and penalties for late payment, if applicable) due the PBGC with
respect to each the Company Pension Plan for each plan year thereof for
which such premiums are required. Neither the Company nor any ERISA
Affiliate has engaged in, or is a successor or parent corporation to an
entity that has engaged in, a transaction described in Section 4069 of
ERISA. There has been no "reportable event" (as defined in Section 4043(b)
of ERISA and the PBGC regulations under such Section) with respect to any
Pension Plan. No filing has been made by the Company or any ERISA Affiliate
with the PBGC, and no proceeding has been commenced by the PBGC, to
terminate any Pension Plan. No condition exists and no event has occurred
that could constitute grounds for the termination of any Pension Plan by
the PBGC. Neither the Company nor any ERISA Affiliate has, at any time, (1)
ceased operations at a facility so as to become subject to the provisions
of Section 4062(e) of ERISA, (2) withdrawn as a substantial employer so as
to become subject to the provisions of Section 4063 of ERISA, or (3) ceased
making contributions on or before the Closing Date to any Pension Plan
subject to Section 4064(a) of ERISA to which the Company or any ERISA
Affiliate made contributions during the six years prior to the Closing
Date.
(ii) Multiemployer Plans.
-------------------
(A) Neither the Company nor any ERISA Affiliate has,
at any time within the last 72 months, maintained, contributed to or been
obligated to maintain or contribute to, or withdrawn from, a Multiemployer
Plan.
(iii) Welfare Plans
-------------
(A) Each Welfare Plan presently complies and has been
maintained in compliance, in all material respects, with its terms and,
both as to form and operation, with the requirements prescribed by any and
all statutes, orders, rules and regulations which are applicable to such
Welfare Plan, including without limitation ERISA and the Code.
(B) Except as disclosed on Schedule 4.8, none of the
------------
Company, any ERISA Affiliate or any Welfare Plan has any present or future
obligation to make any payment to, or with respect to any present or former
employee of the Company or any ERISA Affiliate pursuant to, any retiree
medical benefit plan, or other retiree Welfare Plan, and no condition
exists which would prevent the Company from amending or terminating any
such benefit plan or Welfare Plan.
15
<PAGE>
(C) Each Welfare Plan which is a "group health plan,"
as defined in Section 607(1) of ERISA, has been operated in compliance with
provisions of Part 6 of Title I, Subtitle B of ERISA and 4980B of the Code
at all times.
(iv) Benefit Arrangements. Each Benefit Arrangement has
--------------------
been maintained in compliance, in all material respects, with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Benefit Arrangement, including
without limitation, the Code. Except as set forth in Schedule 4.8 and
------------
except as provided by law, the employment of all persons presently employed
or retained by the Company is terminable at will.
(v) Unrelated Business Taxable Income. No Employee Plan
---------------------------------
(or trust or other funding vehicle pursuant thereto) is subject to any tax
under Code Section 511.
(vi) Deductibility of Payments. Except as disclosed in
-------------------------
Schedule 4.8, there is no contract, agreement, plan or arrangement covering
any present or former employee, director or consultant of the Company or
any of its Subsidiaries (with respect to his or her relationship with such
entities) that, individually or collectively, provides for the payment by
the Company of any amount (i) that is not deductible under Section
162(a)(1) or 404 of the Code or (ii) that is an "excess parachute payment"
pursuant to Section 280G of the Code.
(vii) Fiduciary Duties and Prohibited Transactions. Neither
--------------------------------------------
the Company nor any plan fiduciary of any Welfare Plan or Pension Plan, has
engaged in any transaction in violation of Sections 404 or 406 of ERISA or
any "prohibited transaction," as defined in Section 4975(c)(1) of the Code,
for which no exemption exists under Section 408 of ERISA or Section
4975(c)(2) or (d) of the Code, or has otherwise violated the provisions of
Part 4 of Title I, Subtitle B of ERISA. The Company has not Knowingly
participated in a violation of Part 4 of Title I, Subtitle B of ERISA by
any plan fiduciary of any Welfare Plan or Pension Plan and has not been
assessed any civil penalty under Section 502(l) of ERISA.
(viii) Validity and Enforceability. Each Employee Welfare
---------------------------
Plan related trust agreement, annuity contract or other funding instrument
is legally valid and binding and in full force and effect.
(ix) Litigation. There is no action, order, writ,
----------
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, arbitral action, governmental audit or investigation relating
to or seeking benefits under any Employee Plan that is pending, threatened
or anticipated against the Company, any ERISA Affiliate or any Employee
Plan other than routine claims for benefits.
(x) No Amendments. Except as disclosed in Schedule 4.8,
------------- ------------
neither the Company nor any ERISA Affiliate has any announced plan or
legally binding
16
<PAGE>
commitment to create any additional Employee Plans which are intended to
cover present or former employees, directors or consultants of the Company
or any of its Subsidiaries (with respect to their relationship with such
entities) or to amend or modify any existing Company Employee Plan.
(xi) No Other Material Liability. No event has occurred
---------------------------
in connection with which the Company or any ERISA Affiliate or any Employee
Plan, directly or indirectly, could be subject to any material liability
(A) under any statute, regulation or governmental order relating to any
Employee Plan or (B) pursuant to any obligation of Seller to indemnify any
person against liability incurred under any such statute, regulation or
order as they relate to the Employee Plans.
(xii) Unpaid Contributions. Neither the Company nor any
--------------------
ERISA Affiliate has any liability for unpaid contributions under Section
515 of ERISA with respect to any Multiemployer Plan.
(xiii) Insurance Contracts. Neither the Company nor any
-------------------
Employee Plan (other than a Multiemployer Plan) holds as an asset of any
Employee Plan any interest in any annuity contract, guaranteed investment
contract or any other investment or insurance contract issued by an
insurance company that is the subject of bankruptcy, conservatorship or
rehabilitation proceedings.
(xiv) No Acceleration or Creation of Rights. Except as
-------------------------------------
disclosed on Schedule 4.8, neither the execution and delivery of this
------------
Agreement by the Company nor the consummation of the transactions
contemplated hereby will result in the acceleration or creation of any
rights of any person to benefits under any Employee Plan (including,
without limitation, the acceleration of the vesting or exercisability of
any stock options, the acceleration of the vesting of any restricted stock,
the acceleration of the accrual or vesting of any benefits under any
Pension Plan or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
4.9. SEC Filings. The Company has filed with the Commission all
-----------
forms, reports, schedules, statements, and other documents required to be filed
by it under the Securities Act, the Exchange Act, and all other Federal
securities laws and the rules and regulations promulgated thereunder, during the
period from March 31, 1993 to the date of this Agreement (the "SEC Filings").
-----------
Each SEC Filing was prepared in accordance with, and at the time of filing
complied in all material respects with, the requirements of the Securities Act,
the Exchange Act or other applicable Federal securities law and the rules and
regulations promulgated thereunder, as the case may be, except as the same was
corrected or superseded in an amendment to such SEC Filing filed with the
Commission. None of the SEC Filings, including, without limitation, any
financial statements or schedules included therein, at the time filed, contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading, except as the same was corrected or superseded in a subsequent
document duly filed with the Commission. The consolidated financial statements
17
<PAGE>
(including, in each case, any related notes thereto) contained in the SEC
Filings have been prepared in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis (except as described therein)
and each presents fairly the consolidated financial position of the Company and
its consolidated Subsidiaries at the respective dates thereof and the
consolidated results of its operations and changes in cash flows for the period
indicated (subject to normal year-end audit adjustments in the case of any
unaudited interim financial statements).
4.10. Absence of Undisclosed Liabilities; Guarantees.
----------------------------------------------
(a) Except as set forth on Schedule 4.10 or to the extent
-------------
disclosed in the SEC Filings filed prior to the date hereof: (i) as of March 29,
1996, neither the Company nor any Subsidiary had any liabilities or obligations
(whether accrued, absolute, contingent, unliquidated, or otherwise) which are
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, and (ii) since March 29, 1996, neither the
Company nor any Subsidiary has incurred any such material liabilities or
obligations, other than those incurred in the ordinary course of business
consistent with past practice or pursuant to or as contemplated by this
Agreement.
(b) Except as set forth on Schedule 4.10 or to the extent
-------------
disclosed in the SEC Filings filed prior to the date hereof: neither the Company
nor any Subsidiary is a party to: (i) any Material Agreement relating to the
making of any advance to, or investment in, any Person; or (ii) any Material
Agreement providing for a guaranty or other contingent liability with respect to
any indebtedness for money borrowed or similar obligation of any Person.
4.11. Absence of Certain Changes. Except as set forth on Schedule
-------------------------- --------
4.11 or to the extent disclosed in the Company's Form 10-K for the fiscal year
- ----
ended March 29, 1996, or in SEC Filings filed since March 29, 1996, (i) there
has not been any event or occurrences, or series of events or occurrences, which
have had, or which are reasonably likely to have, a Material Adverse Effect on
the Company, (ii) neither the Company nor any Subsidiary has incurred any
liability or engaged in any transaction that is material to the Company and its
Subsidiaries taken as a whole, or entered into any Material Agreement, except in
the ordinary course of business consistent with past practice, or as
contemplated by this Agreement, or (iii) neither the Company nor any Subsidiary
is in default under (and no event has occurred which with the lapse of time or
action by a third party could result in a default under) any Material Agreement
(except with respect to the Credit Facility).
4.12. Compliance With Laws. Except as set forth on Schedule 4.12,
-------------------- -------------
(i) the Company and its Subsidiaries are in compliance with all Applicable Laws
other than violations which, do not and will not, individually or in the
aggregate, have a Material Adverse Effect on the Company; (ii) each of the
Company and its Subsidiaries has obtained and holds all material permits,
licenses, variances, exemptions, orders, franchises, approvals and
authorizations of all Governmental Entities necessary for the lawful conduct of
its business or the lawful ownership, use and operation of its assets, except
when the failure to do so does not and will not, individually or in the
aggregate, have a Material Adverse Effect on the Company; (iii) neither the
Company nor any of its Subsidiaries has received any written notice of violation
of any Applicable Law,
18
<PAGE>
which has not been dismissed or otherwise disposed of, that the Company or any
Subsidiary has not so complied other than with respect to violations of
Applicable Law which do not and will not, individually or in the aggregate, have
a Material Adverse Effect on the Company; and (iv) neither the Company nor any
of its Subsidiaries is charged or, to the best Knowledge of the Company,
threatened with, or, to the best Knowledge of the Company, under investigation
with respect to, any violation of any Applicable Law, including Environmental
Laws, relating to any aspect of the business of the Company or any Subsidiary
other than violations which do not and will not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
4.13. Litigation. The Company has delivered to the Purchasers an
----------
accurate list of all Proceedings pending or, to the best Knowledge of the
Company, threatened against or involving the Company or any Subsidiary (or any
of their respective directors or officers in connection with the business or
affairs of the Company or any Subsidiary) or any properties or rights of the
Company or any Subsidiary as of the date hereof. Any and all liabilities of the
Company and the Subsidiaries under such Proceedings that are probable and
subject to reasonable estimation within the meaning of generally accepted
accounting principles are adequately covered (except for standard deductible
amounts) by the existing insurance maintained by the Company or estimates in
accordance with generally accepted accounting principles for the uninsured costs
thereof are reflected in the financial statements of the Company. Except as set
forth on Schedule 4.13, the Company has no Knowledge of any facts that are
-------------
likely to give rise to any additional Proceedings that would reasonably be
expected to have a Material Adverse Effect on the Company. As of the date
hereof, there are no Proceedings (including with respect to Environmental Laws)
pending or, to the best Knowledge of the Company, threatened seeking to
restrain, prohibit, or obtain damages or other relief in connection with this
Agreement , the Ancillary Agreements or the transactions contemplated hereby or
thereby.
4.14. True and Complete Disclosure. The representations and
----------------------------
warranties of the Company set forth with this Agreement, the information
included in the Schedules, and in any certificates delivered pursuant to Section
7.3 of this Agreement are true and accurate in all material respects on the date
as of which such information is dated and not incomplete by omitting to state
any material fact necessary to make the statements of fact contained therein, in
the light of the circumstances under which they were made, not misleading at
such date. All financial projections prepared and furnished by the Company to
the Purchasers were prepared in good faith on the basis of assumptions believed
to be reasonable at the time such projections were prepared.
4.15. Taxes.
-----
(a) Except as set forth on Schedule 4.15:
-------------
(i) The Company and its Subsidiaries have filed, or been
included in, all Tax Returns required to be filed by them on or before the
Closing Date (taking into account all extensions for filing such Tax
Returns) and all such Tax Returns are correct and complete in all material
respects. Each affiliated group with which any of the Company and its
Subsidiaries files a consolidated or combined Tax Return has filed all such
Tax Returns that it was required to file for each taxable period during
which any of
19
<PAGE>
the Company and its Subsidiaries was a member of the group. All such
consolidated and combined Tax Returns were correct and complete in all
materials respects;
(ii) All material Taxes due and payable by the Company
and/or its Subsidiaries (whether or not shown on any Tax Return) have been
timely paid in full. All material income Taxes owed by any affiliated group
with which any of the Company and its Subsidiaries files a consolidated or
combined Tax Return (whether or not shown on any Tax Return) have been paid
for each taxable period during which any of the Company and the
Subsidiaries was a member of the group;
(iii) There are no liens or encumbrances related to Taxes
on any of the assets of the Company or its Subsidiaries (other than for
current Taxes net yet due and payable);
(iv) The Company and its Subsidiaries have withheld all
material Taxes required to have been withheld and paid by them or on their
behalf in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party, and
such withheld Taxes have either been duly paid to the proper governmental
authority or set aside in accounts for such purpose;
(v) None of the Company and its Subsidiaries (A) has
been a member of any affiliated group filing a consolidated federal income
Tax Return (other than a group the common parent of which is the Company)
and (B) has any liability for the Taxes of any person as defined in Section
7701(a)(1) of the Code (other than the Company and its Subsidiaries) under
Treas. Reg. (S) 1.1502-6 (or any similar provision of state, local, or
foreign tax), as a transferee or successor, by contract, or otherwise;
(vi) The charges, accruals and reserves for Taxes
(including deferred Taxes) currently reflected on the Financial Statements
in accordance with GAAP are adequate in the reasonable estimation of the
Company to cover all unpaid Taxes accruing or payable by the Company and
its Subsidiaries in respect of taxable periods that end on or before the
Closing Date and for any taxable periods that begin before the Closing Date
and end thereafter to the extent such Taxes are attributable to the portion
of such period ending on the Closing Date (determined under the closing of
the books method of allocation);
(vii) The Company and its Subsidiaries have no Tax
deficiency or claim assessed or, to the best of the Company's Knowledge,
proposed or threatened (whether orally or in writing) against any of them,
except to the extent that adequate liabilities or reserves with respect
thereto are accrued on the Financial Statements in accordance with GAAP or
(i) such deficiency or claim is being contested in good faith by
appropriate proceedings, (ii) no such accrual is required by GAAP and (iii)
the nature and amount of the disputed Tax is set forth on Schedule 4.15.
-------------
20
<PAGE>
(viii) None of the Company or any of its Subsidiaries has
made any payments, nor is any of them obligated to make any payments, and
is not a party to any agreements that could obligate it to make any
payments, that will not be deductible under Code Section 280G.
(b) Schedule 4.15 lists all federal, state, local, and
-------------
foreign Tax Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. Correct and complete copies of all federal
Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by the Company or any of its Subsidiaries since March 31,
1992 have been delivered to Purchaser.
4.16. Environmental Matters.
---------------------
(a) For purposes of this Section, the term "Company" shall
-------
include (i) the Company, (ii) any Affiliates of the Company, (iii) the Business,
(iv) all partnerships, joint ventures and other entities or organizations in
which Company or the Business was at any time or is a partner, joint venturer,
member or participant, and (v) all predecessor or former corporations,
partnerships, joint ventures, organizations, businesses or other entities,
whether in existence as of the date hereof or at any time prior to the date
hereof, the assets or obligations of which have been acquired or assumed by
Company or the Business or to which Company or the Business has succeeded.
(b) Except as disclosed in Schedule 4.16, the Company and its
-------------
Subsidiaries: (i) are, and within the period of all applicable statutes of
limitation have been, in compliance with all applicable Environmental Laws; (ii)
hold all Environmental Permits (each of which is in full force and effect)
required for any of their current or intended operations or for any property
owned, leased or otherwise operated by any of them; (iii) are, and within the
period of all applicable statutes of limitation have been, in compliance with
all of their Environmental Permits; and (iv) reasonably believe that each of
their Environmental Permits will be renewed effective prior to the expiration of
such Environmental Permit currently in effect, except where the failure to so
comply with such Environmental Laws, hold or comply with such Environmental
Permits or timely renew such Environmental Permits is not reasonably expected to
have a Material Adverse Effect.
(c) Except as set forth on Schedule 4.16, the Company and its
-------------
Subsidiaries have not received any notice of alleged, actual or potential
responsibility for, or any inquiry or investigation regarding, any Environmental
Condition except where such Environmental Condition is not reasonably expected
to have a Material Adverse Effect. The Company has not received any notice of
any other claim, demand or action by any individual or entity alleging any
actual or threatened injury or damage to any person, property, natural resource
or the environment arising from or relating to any Release or threatened Release
of any Hazardous Materials at, on, under, in, to or from any Facility or any
former Facilities, or in connection with any operations or activities of the
Company or any of its Subsidiaries except with respect to any claim, demand or
action which is not reasonably expected to have a Material Adverse Effect on the
Company.
21
<PAGE>
(d) Except as disclosed in Schedule 4.16 or with respect to
-------------
such matters as have been fully and finally resolved and as to which there are
no remaining obligations Known or reasonably anticipated, neither the Company
nor any of its Subsidiaries has entered into or agreed to any consent decree,
order, or settlement or other agreement, nor is subject to any judgment, decree,
or order or other agreement, in any judicial, administrative, arbitral, or other
forum, relating to compliance with or liability under any Environmental Law,
except where such obligations, consent decrees, orders, settlement or other
agreements is not reasonably expected to have a Material Adverse Effect.
(e) Except as disclosed in Schedule 4.16 or, for real
-------------
property formerly owned or leased by the Company, for actions of third parties
occurring after the Company's disposition, Hazardous Materials have not been
transported, disposed of, emitted, discharged or otherwise Released or
threatened to be Released, to or at any real property presently or formerly
owned or leased by the Company or any of its Subsidiaries, or, to the Knowledge
of the Company, any other location, which Hazardous Materials are reasonably
expected to (i) give rise to liability of the Company or any Subsidiary under
any applicable Environmental Law, except where such liability is not reasonably
expected to have a Material Adverse Effect, or (ii) interfere with the Company's
or any Subsidiary's continued operations, except where such interference is not
reasonably expected to have a Material Adverse Effect or (iii) impair the fair
saleable value of any real property owned or leased by the Company or any
Subsidiary, except for such impairment as is not reasonably expected to have a
Material Adverse Effect.
(f) Except as disclosed in Schedule 4.16, neither the Company
-------------
nor any of its Subsidiaries has assumed or retained, by contract or operation of
law in connection with the sale or transfer of any assets or business,
liabilities arising from or associated with or otherwise in connection with such
assets or business of any kind, fixed or contingent, Known or not Known, under
any applicable Environmental Law, except where such liabilities are not
reasonably expected to have a Material Adverse Effect.
(g) True, complete and correct copies of the written reports,
and all parts thereof, of all environmental audits or assessments which have
been conducted in respect of any Facility or any former Facility within the past
five years, either by the Company or any attorney, environmental consultant or
engineer engaged for such purpose, have been delivered to the Purchasers and a
list of all such reports, audits and assessments and any other similar report,
audit or assessment of which the Company has Knowledge is included on Schedule
--------
4.16.
- ----
4.17. Insurance. Schedule 4.17 sets forth a list of the insurance
--------- -------------
policies held by, or for the benefit of, the Company and its Subsidiaries. Each
of the Company and its Subsidiaries carry, and will continue to carry, insurance
with reputable insurers (except as to self-insurance) with respect to such of
their respective properties and business, in such amounts and against such risks
as is customarily maintained by other entities of similar size engaged in
similar businesses (which may include self-insurance in amounts customarily
maintained by companies similarly situated or has been maintained in the past by
the Company and its Subsidiaries). None of such insurance was obtained through
the use of materially false or misleading information or the failure to provide
the insurer with all material information requested in order to evaluate the
liabilities
22
<PAGE>
and risks insured. Neither the Company nor any of its Subsidiaries has received
any notice of cancellation or non-renewal of any insurance policies or binders.
4.18. Title to Assets, Etc. Except for Permitted Encumbrances, the
--------------------
Company and its Subsidiaries have good and marketable title to or valid and
subsisting leasehold interests in all assets material to their businesses as
currently conducted and, except as set forth on Schedule 4.18, none of the
material assets is subject to any Encumbrance, except for Encumbrances which,
individually or in the aggregate, are not substantial in amount and do not
materially detract from the value of the property or assets of the Company and
its Subsidiaries taken as a whole or interfere with the present use of such
property or assets (taken as a whole) and have not arisen other than in the
ordinary course of business. The Company and each Subsidiary has in all material
respects performed all the obligations required to be performed by it with
respect to all material assets leased by it through the date hereof, except
where the failure to perform would not have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole. All such leases are valid,
binding and enforceable with respect to the Company and its Subsidiaries in
accordance with their terms and are in full force and effect; no event of
default has occurred which constitutes a default thereunder on the part of the
Company or any Subsidiary and the Company has no Knowledge of the occurrence of
any event of default which constitutes a default thereunder by any other party
which defaults are reasonably likely to have a Material Adverse Effect on the
Company.
4.19. Condition of Tangible Assets. The Facilities of the Company
----------------------------
and its Subsidiaries and the Fixtures and Equipment are in good operating
condition and repair (except for ordinary wear and tear) are reasonably
sufficient for the operation of the business of the Company and its Subsidiaries
as presently conducted and are in conformity, in all material respects, with all
Applicable Laws, ordinances, orders, regulations and other requirements
(including applicable zoning, environmental, motor vehicle safety or standards,
occupational safety and health laws and regulations) relating thereto currently
in effect, except where the failure to conform would not have a Material Adverse
Effect on the Company.
4.20. Contracts and Commitments. Except for documents set forth on
-------------------------
Schedule 4.20 or listed as exhibits to the Company's Annual Report on Form 10-K
- -------------
for the fiscal year ended March 29, 1996, neither the Company nor any Subsidiary
is a party to any Material Agreement. Except as set forth on Schedule 4.20,
-------------
neither the Company nor any Subsidiary is (and, to the Knowledge of the Company,
no other party is) in material breach or violation of, or default under any
Material Agreement to which it is a party, the breach or violation of which is
reasonably likely to have a Material Adverse Effect on the Company.
4.21. Books and Records. The Company has made and kept (and given
-----------------
the Purchasers access to) books and records and accounts, which, in reasonable
detail, accurately and fairly reflect the activities of the Company and its
Subsidiaries, taken as a whole. The minute books of the Company and each
Subsidiary previously made available to the Purchasers accurately and adequately
reflect all action previously taken by the stockholders, the board of directors
and committees of the board of directors of the Company and each of the
Subsidiaries.
23
<PAGE>
4.22. Labor Matters. Since March 31, 1993, neither the Company nor
-------------
any of its Subsidiaries has experienced any attempt by organized labor or its
representatives to make the Company or such Subsidiary conform to demands of
organized labor relating to its employees or to enter into a binding agreement
with organized labor that would cover the employees of the Company or any
Subsidiary. The Company and its Subsidiaries are in compliance with all
Applicable Laws respecting employment practices, terms and conditions of
employment and wages and hours except where noncompliance would not have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole,
and, to the Company's Knowledge, are not engaged in any unfair labor practice.
There is no unfair labor practice charge or complaint against the Company or any
Subsidiary pending before the National Labor Relations Board or any other
governmental agency arising out of the activities of the Company or any of its
Subsidiaries, and the Company has no Knowledge of any facts or information which
would give rise thereto. There is no labor strike or labor disturbance pending
or, to the Company's Knowledge, threatened against the Company or any of its
Subsidiaries. There is no grievance currently being asserted and neither the
Company nor any Subsidiary has experienced since March 31, 1993, a work stoppage
or other labor difficulty which grievance, work stoppage or other labor
difficulty is reasonably likely to have a Material Adverse Effect on the
Company.
4.23. Payments. Neither the Company nor any of its Subsidiaries
--------
has, or indirectly, paid or delivered any fee, commission or other sum of money
or item of property, however characterized, to any finder, agent, government
official or other party, in the United States or any other country, which is in
any manner related to the business or operations of the Company or its
Subsidiaries and which the Company Knows or has reason to believe to have been
illegal under any federal, state or local laws of the United States (including,
without limitation the U.S. Foreign Corrupt Practices Act) or any other country
having jurisdiction; and neither the Company nor any of its Subsidiaries has
participated, directly or indirectly, in any boycotts or other similar practices
affecting any of its actual or potential customers.
4.24. Information. The information contained in the Proxy Material
-----------
(other than information with respect to the Purchasers, or any of their
Affiliates which shall have been supplied in writing by them or any of their
authorized representatives for use in or in preparing the Proxy Material) will
not, at the date of mailing to the Company's stockholders or at the date of the
Stockholders Meeting, contain any statement which, at the time and in light of
the circumstances under which it is made, is false or misleading with respect to
any material fact required to be stated therein or necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders Meeting. The Proxy Material will comply as to form
in all material respects with the Exchange Act and the rules and regulations of
the SEC thereunder.
4.25. Board Recommendations. By a vote of the directors present at
---------------------
a meeting of the board of directors of the Company (which meeting was duly
called and held and at which a quorum was present at all times), the board of
directors has (i) approved and adopted (A) this Agreement, including the
issuance of the Securities, (B) the Company's entering into the Ancillary
Agreements, and (C) the Certificate Amendments, and (ii) resolved to recommend
to the Company's stockholders approval of the transactions contemplated
hereunder and under the
24
<PAGE>
Ancillary Agreements, including issuance of the Securities to the Purchasers
pursuant to this Agreement.
4.26. Intellectual Property.
---------------------
(a) The Company and its Subsidiaries either own or have valid
licenses or other rights to use all patents, copyrights, trademarks, software,
databases, data, other technical information used in their businesses as
presently conducted ("Proprietary Rights"), subject to the limitations
------------------
contained in the agreements governing the use of the same, with such exceptions
as would not result in a Material Adverse Effect on the Company. There are no
limitations contained in the agreements of the type described in the immediately
preceding sentence which, upon consummation of the transactions contemplated
hereunder, will alter or impair any such rights, breach any such agreement with
any third party vendor, or require payments of additional sums thereunder,
except any such limitations that would not have a Material Adverse Effect on the
Company. The Company and its Subsidiaries are in compliance in all material
respects with such licenses and agreements and, except as set forth on Schedule
--------
4.26, there are no pending or, to the best Knowledge of the Company or any
- ----
Subsidiary, threatened Proceedings challenging or questioning the validity or
effectiveness of any license or agreement relating to such property or the right
of the Company or any Subsidiary to use, copy, modify or distribute the same.
(b) No person has a right, other than those set forth on
Schedule 4.26 to receive a royalty or similar payment in respect of any material
- -------------
Proprietary Rights whether or not pursuant to any contractual arrangements
entered into by the Company or its Subsidiaries.
4.27. Securities Offerings.
--------------------
(a) Except as set forth on Schedule 4.27, since March 31,
-------------
1993, the Company has not sold any securities other than securities registered
pursuant to the Securities Act.
(b) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act ("Regulation D")) of the Company
------------
has, directly or through any agent (provided that no representation is made as
to the Purchasers or any person acting on their behalf), (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of any security
(as defined in the Securities Act) that is or will be integrated with the
offering and sale of the Securities in a manner that would require the
registration of the Securities under the Securities Act or (ii) engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offering of the Securities.
4.28. No Other Agreements to Sell the Assets or the Company. Except
-----------------------------------------------------
as contemplated by this Agreement, none of the Company or any of its
Subsidiaries have any legal obligation, absolute or contingent, to any other
person or firm to sell the capital stock, material assets or business of the
Company or any Subsidiary or to effect any merger, consolidation, liquidation,
dissolution, recapitalization or other reorganization (except as to the
reorganization of
25
<PAGE>
the Company's operating units as previously disclosed to the Purchasers) of the
Company or any Subsidiary or to enter into any agreement with respect thereto.
4.29. No Brokers. The Company has not employed, and is not subject
----------
to the valid claim of, any broker, finder, consultant or other intermediary in
connection with the transactions contemplated hereby who might be entitled to a
fee or commission from the Company in connection with such transactions, except
for Donaldson, Lufkin & Jenrette Securities Corporation and Environmental
Financial Consulting Group, Inc.
4.30. Convertible Exchangeable Preferred Stock. The entering into
----------------------------------------
this Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, the filing of the Certificate Amendments with the
office of the Secretary of State of the State of Delaware, do not and will not
violate or conflict with the terms of, or require the approval of holders of,
the Convertible Exchangeable Preferred Stock.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
--------------------------------------------
Each Purchaser hereby represents and warrants to the Company as
follows:
5.1. Organization of Purchaser. Purchaser is a limited partnership
-------------------------
duly formed and validly existing and in good standing as a limited partnership
under the laws of its jurisdiction of formation and has full partnership power
and authority to carry on its business as currently being conducted.
5.2. Authorization. Purchaser has full partnership power and
-------------
authority to execute and deliver this Agreement and the Ancillary Agreements and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery by Purchaser of this Agreement and the Ancillary Agreements, and
the consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary partnership action of the Purchaser. This
Agreement has been duly executed and delivered by Purchaser and constitutes, and
each Ancillary Agreement executed or to be executed by Purchaser has been, or
when executed will be, duly executed and delivered by Purchaser and constitutes,
or when executed and delivered will constitute, a valid and legally binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, except that such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting
creditors' rights generally and (ii) general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.3. Noncontravention. The execution and delivery by Purchaser of
----------------
this Agreement and the Ancillary Agreements and the consummation by it of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or result in a violation of any provision of the agreement of limited
partnership or other governing agreement of Purchaser, (ii)
26
<PAGE>
conflict with or result in a violation of any provision of, or constitute (with
or without the giving of notice or the passage of time or both) a default under,
or give rise (with or without the giving of notice or the passage of time or
both) to any right of termination, cancellation, or acceleration under, any
bond, debenture, note, mortgage, indenture, lease, agreement, or other
instrument or obligation to which Purchaser is a party or by which Purchaser or
any of its properties may be bound, (iii) result in the creation or imposition
of any Encumbrance upon the properties of Purchaser, or (iv) violate any
Applicable Law binding upon Purchaser, except, in the case of clauses (ii),
(iii), and (iv) above, for any such conflicts, violations, defaults,
terminations, cancellations, accelerations, or Encumbrances which would not,
individually or in the aggregate, materially and adversely affect the ability of
the Purchaser to consummate the transactions contemplated hereby.
5.4. Consents and Appeals. No consent, approval, order or
--------------------
authorization of, or declaration, filing or registration with, any Government
Entity is required to be obtained or made by Purchaser in connection with the
execution and delivery by Purchaser of this Agreement and the Ancillary
Agreements or the consummation of the transaction contemplated hereby and
thereby other than (i) filings under the HSR Act and expiration or termination
of any applicable waiting period required thereunder and (ii) any filings
required under Section 13 of the Exchange Act and Rule 13d-1 under the Exchange
Act and (iii) such consents, approvals, orders or authorization which, if not
made, would not, individually or in the aggregate, materially and adversely
affect the ability of the Purchaser to consummate the transactions contemplated
hereby.
5.5. Purchase for Investment.
-----------------------
(a) Purchaser and each of its partners has been furnished with
all information that it has requested for the purpose of evaluating the proposed
acquisition of the Securities pursuant hereto, and Purchaser (and each of its
partners) has had an opportunity to ask questions of and receive answers from
the Company regarding the Company and its business, assets, results of
operations, financial condition and prospects and the terms and conditions of
the issuance of the Securities.
(b) Purchaser is acquiring the Securities solely by and for
its own account, for investment purposes only and not for the purpose of resale
or distribution; and neither Purchaser nor any of its partners has any contract,
undertaking, agreement or arrangement with any person or entity to sell,
transfer of pledge to such person or anyone else any Securities; and neither
Purchaser nor any of its partners has any present plans or intentions to enter
into any such contract, undertaking or arrangement.
(c) Purchaser and each of its partners acknowledges and
understands that (i) no registration statement relating to the Securities, the
Conversion Shares or the Warrant Shares has been or is to be filed with the
Commission under the Securities Act or pursuant to the securities laws of any
state; (ii) the Securities, the Conversion Shares and the Warrant Shares cannot
be sold or transferred without compliance with the registration provisions of
the Securities Act or compliance with exemptions, if any, available thereunder;
(iii) the certificates representing the respective Securities will include a
legend thereon that refers to the foregoing; and (iv) the
27
<PAGE>
Company has no obligation or intention to register the Securities, Conversion
Shares or the Warrant Shares under any federal or state securities act or law;
except to the extent, in each case, that the terms of the Registration Rights
Agreement shall otherwise provide.
(d) Purchaser and each of its partners (i) is an "accredited
investor" as defined in Rule 501 of Regulation D; (ii) has such knowledge and
experience in financial and business matters in general that it has the capacity
to evaluate the merits and risks of an investment in the Securities and to
protect its own interest in connection with an investment in the Securities;
(iii) has such a financial condition that it has no need for liquidity with
respect to its investment in the Securities to satisfy any existing or
contemplated undertaking, obligation or indebtedness; and (iv) is able to bear
the economic risk of its investment in the Securities for an indefinite period
of time.
5.6. Disclosure Documents. None of the information with respect to
--------------------
Purchaser or any of its Affiliates which shall have been supplied in writing by
Purchaser for inclusion in the Proxy Material will at the date of mailing of the
Proxy Material to the Company's stockholders contain any statement which, at the
time and in light of the circumstances under which it is made, is false or
misleading with respect to any material fact required to be stated therein or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders Meeting.
5.7. No Brokers. Purchaser has not employed, and is not subject to
----------
the valid claim of, any broker, finder, consultant or other intermediary in
connection with the transactions contemplated by this Agreement who might be
entitled to a fee or commission in connection with such transactions.
ARTICLE VI
ACTIONS BY THE COMPANY AND
--------------------------
THE PURCHASERS PRIOR TO THE CLOSING
-----------------------------------
The Company and each Purchaser covenants as follows for the period
from the date hereof through the Closing Date:
6.1. Meeting of Stockholders; Proxy Statement; Certificate
-----------------------------------------------------
Amendments.
- ----------
(a) The Company shall take all action necessary in accordance
with Applicable Law and the Certificate of Incorporation and Bylaws to duly
call, give notice of, convene and hold a meeting of its stockholders, which
meeting may be the Company's annual meeting of stockholders (the "Stockholders
Meeting") as promptly as practicable after the date hereof to consider and vote
upon the adoption and approval of the transaction as contemplated hereunder
(including, without limitation, the Certificate Amendments and proposals (the
"Ancillary Proposals") to amend the Certificate of Incorporation to (i) delete
-------------------
the classification of the Company's Board of Directors set forth in Article
Seventh of the Certificate of Incorporation and (ii) to delete the cumulative
voting for directors of the Company as set forth in Article Ninth
28
<PAGE>
of the Certificate of Incorporation). The stockholder vote required for the
adoption and approval of the transactions contemplated hereunder shall be the
vote or votes required by Applicable Law, the Certificate of Incorporation and
the rules of the New York Stock Exchange, as represented by the Company in
Section 4.6. Except as provided in Section 6.1(b) below, the board of directors
of the Company shall (i) recommend to the Company's stockholders that they vote
in favor of the adoption and approval of all matters necessary to effectuate the
transactions contemplated hereunder, (ii) use its reasonable best efforts to
solicit from the Company's stockholders proxies in favor of such adoption and
approval, and (iii) take all other action reasonably necessary to secure a vote
of the Company's stockholders in favor of such adoption and approval. The
Company shall also use its reasonable best efforts to obtain a statement from
all of its executive officers and directors who own shares of Common Stock that
such persons intend to vote all such shares of Common Stock in favor of the
transactions contemplated hereunder at the Stockholders Meeting.
(b) As promptly as practicable after the date hereof, the
Company shall take or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable to (i) prepare and file with the
Commission any documents or materials, including, but not limited to, the Proxy
Materials, pertaining to the issuance of the Securities and the Stockholders
Meeting, (ii) have the Proxy Materials cleared by the Commission (including with
respect to clauses (i) and (ii) by consulting with the Purchasers and responding
promptly to any comments from the Commission) and (iii) take such action as may
be required to be taken under applicable state securities or blue sky laws in
connection with the issuance of the Securities, the Conversion Shares or the
Warrant Shares. Except to the extent otherwise determined in good faith by the
Company's board of directors in the exercise of its fiduciary duties, taking
into account the advice of outside counsel, the Proxy Materials shall contain
the recommendation of the Board of Directors that stockholders of the Company
vote in favor of the adoption and approval of all matters necessary to
effectuate the transactions contemplated hereunder. The Company shall notify the
Purchasers promptly of the receipt of any comments on, or any requests for
amendments or supplements to, the Proxy Materials by the Commission, and the
Company shall supply the Purchasers with copies of all correspondence between it
and its representatives, on the one hand, and the Commission or members of its
staff, on the other, with respect to the Proxy Materials. The Company, after
consultation with the Purchasers, shall use its reasonable best efforts to
respond promptly to any comments made by the Commission with respect to the
Proxy Materials. The Company and the Purchasers shall cooperate with each other
in preparing the Proxy Materials, and the Company and the Purchasers shall each
use its reasonable best efforts to obtain and furnish the information required
to be included in the Proxy Materials. The Company and the Purchasers each
agrees promptly to correct any information provided by it for use in the Proxy
Statement if and to the extent that such information shall have become false or
misleading in any material respect, and the Company further agrees to take all
steps necessary to cause the Proxy Statement as so corrected to be filed with
the Commission and to be disseminated promptly to holders of shares of the
Common Stock, in each case as and to the extent required by Applicable Law.
29
<PAGE>
(c) As promptly as practicable after the date hereof, the
Company shall provide the Purchasers with the form of the Certificate Amendments
(excluding the Certificate of Designations) substantially in the form to be
included in the Proxy Materials and to be filed with the Secretary of State of
the State of Delaware. The form of Certificate Amendments are subject to the
approval of the Purchasers, which approval shall not be unreasonably withheld.
6.2. Stock Exchange Approval. The Company shall use its reasonable
-----------------------
best efforts and take all action necessary to obtain the confirmation of the New
York Stock Exchange that the transactions contemplated hereby (including the
Certificate Amendments) will not violate Section 313 of the New York Stock
Exchange Listed Company Manual.
6.3. Continuing Operations. From the date of this Agreement to the
---------------------
earlier of (i) the Closing Date or (ii) the termination of this Agreement in
accordance with its terms (the "Interim Period"), the Company and its
--------------
Subsidiaries shall conduct their business in the ordinary and usual course, and,
except as set forth on Schedule 6.3, neither the Company nor any Subsidiary
------------
shall, without the prior consent of Purchasers except as expressly contemplated
hereby:
(a) amend its charter or bylaws; split (including any reverse
split), combine, or reclassify any shares of its capital stock; adopt
resolutions authorizing a liquidation, dissolution, merger, consolidation,
restructuring, recapitalization, or other reorganization of the capital
structure of the Company or any Subsidiary; or make any other material changes
in its capital structure;
(b) except in the ordinary course of business consistent with
past practice, (i) incur any material liability or obligation, (ii) become
liable or responsible for the material obligations of any other Person (other
than wholly owned Subsidiaries) or (iii) pay, discharge, or satisfy any material
claims, liabilities, or obligations (whether accrued, absolute, contingent,
unliquidated, or otherwise, and whether asserted or unasserted), other than the
payment, discharge, or satisfaction, in the ordinary course of business
consistent with past practice, of liabilities reflected or reserved against in
the financial statements; provided that, in no event shall any of the Companies
enter into any settlement or compromise of any litigation or claims involving
liability in excess of $1,000,000, without the prior written approval of the
Purchasers;
(c) incur any indebtedness for borrowed money, other than
revolving debt and letters of credit under the Credit Facility and up to an
aggregate of $2,000,000 of debt for capital assets;
(d) make any loans or advances to any person, other than (i)
advances to employees in the ordinary and usual course of business and (ii)
transactions among or between the Company and its Subsidiaries with respect to
cash management conducted in the ordinary and usual course of business;
30
<PAGE>
(e) declare or pay any dividend or make any other distribution
with respect to its capital stock, other than dividends paid by any Subsidiary
to the Company or another Subsidiary in the ordinary and usual course of
business or to the holders of the Convertible Exchangeable Preferred Stock as
required pursuant to the terms of the Convertible Exchangeable Preferred Stock
Certificate of Designations;
(f) issue, sell, or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase,
or otherwise) any of its capital stock or other securities other than as
contemplated herein or pursuant to stock options issued and outstanding as of
the date hereof or purchase or otherwise acquire any of its capital stock,
employee or director stock options or debt securities;
(g) subject to Encumbrance any of its assets or properties,
other than Permitted Encumbrances and Encumbrances permitted under the Credit
Facility;
(h) other than in the ordinary course of business and sales of
non-core assets of up to $3,000,000 in the aggregate, sell, lease, transfer, or
otherwise dispose of, directly or indirectly, any assets, or waive, release,
grant, or transfer any rights of value;
(i) acquire (by merger, consolidation, acquisition of stock or
assets or otherwise) any corporation, partnership or other business organization
or division thereof, create or make any investment in any Subsidiary (other than
a wholly owned Subsidiary); or make any other investment or expenditure of a
capital nature or binding commitment therefor, other than in amounts already
included in the capital expenditure budget for the Company and its Subsidiaries
for the fiscal year ended March 29, 1997, as previously provided to and approved
by Purchasers;
(j) enter into, adopt, or (except as may be required by law)
amend or terminate any collective bargaining agreement or any Benefit Plan;
approve or implement any employment severance arrangements (other than payments
made under the Company's existing severance policy in accordance with past
practice) or retain or discharge any officers and executive management
personnel; authorize or enter into any employment, severance, consulting
services or other agreement with any directors, officers and executive
management personnel or any of their Affiliates; or change the compensation or
benefits provided to any director, officer, or employee as of March 29, 1996,
other than arrangements previously disclosed to Purchaser;
(k) enter into any contract, agreement or lease involving
total value or consideration or liability in excess of $50,000,000 or other
commitment (not including cost reimbursable contracts) which other commitment
involves any material risk of loss to the business, assets, properties, or
financial position of the Company and its Subsidiaries; or, except as provided
for in Section 6.12, amend, modify, or change in any materially adverse respect
any of the agreements pertaining to existing indebtedness or any other existing
contract agreement or lease involving total value or consideration or liability
in excess of $50,000,000, or other commitment which is material to the business,
assets, properties, or financial position of the Company and its Subsidiaries,
taken as a whole;
31
<PAGE>
(l) enter into any speculative or commodity swaps, hedges or
other derivatives transactions or purchase any securities for investment
purposes, other than in connection with cash management of the Company;
(m) grant any option or preferential right to purchase or
enter into any other agreements that could adversely affect the marketability of
any material asset of the Company or any Subsidiary.
6.4. Press Releases. Except as may be required by applicable law
--------------
by the rules of any national securities exchange, neither Purchasers nor the
Company shall issue any press release with respect to this Agreement or the
transactions contemplated hereunder without the prior consent of the Company in
the case of the Purchasers, and of Carlyle in the case of the Company (which
consent shall not be unreasonably withheld under the circumstances). Any such
press release required by applicable law or by the rules of any national
securities exchange shall only be made after reasonable notice to the other
party.
6.5. Additional Financial Statements. During the period from the
-------------------------------
date hereof through the Closing Date, as soon as reasonably practicable after
they become available, the Company shall furnish to the Purchasers (i) the
quarterly consolidated financial statements of the Company and its consolidated
Subsidiaries, which shall have been prepared in accordance with GAAP and on a
basis consistent with past practice and (ii) all monthly financial statements or
reports of the Company and its consolidated Subsidiaries, which shall have been
prepared in a manner consistent with past practice.
6.6. Investigations and Access. The Company agrees to permit the
-------------------------
Purchasers and their agents and representatives reasonable access during normal
business hours to (i) the premises of the Company and its Subsidiaries and (ii)
all the books, computer software application systems, files and records of the
Company and its Subsidiaries, including, but not limited to, lease, loan, real
estate, financial, tax and personnel files and records, and to furnish the
Purchasers such financial and operating data and other information with respect
to the business, assets and properties of the Company as the Purchasers shall
reasonably request. The Company will authorize its accountants to provide the
Purchasers, in accordance with such accountant's internal policies, with their
working papers for the Company's financial statements. The Company shall deliver
true, correct and complete copies of all resolutions, and minutes of all
meetings, reflecting any action taken by the Company stockholders, board of
directors or committees of the board of directors and by each Subsidiary during
the period from the date hereof through the Closing Date.
6.7. Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to the Purchasers, and the Purchasers shall give prompt notice to
the Company, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
any time from the date hereof to the Closing Date and (ii) any material failure
of the Company or the Purchasers, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder, and each party shall use all reasonable efforts to remedy such
failure. In addition, the Company shall give prompt notice to
32
<PAGE>
the Purchasers of any material developments involving the operations or
activities of the Company or its Subsidiaries.
6.8. No Solicitation. Prior to the Closing (or the earlier
---------------
termination of this Agreement by the Purchasers), neither the Company nor any of
its Affiliates nor any of their respective directors, officers, employees,
representatives or agents, shall directly or indirectly, solicit or initiate any
discussions, submissions of proposals or offers or negotiations with,
participate in any negotiations or discussions with, or provide any information
or data of any nature whatsoever to, or otherwise cooperate in any other way
with, or assist or participate in, facilitate or encourage any effort or attempt
by, any corporation, partnership, person or other entity or group, other than
Purchasers and their respective partners, employees, representatives, agents and
Affiliates, concerning any Alternative Transaction, provided, however, that
nothing contained in this Section 6.8 shall prohibit the Board of Directors of
the Company from (i) furnishing information or affording access to properties,
books or records to, or entering into discussions or negotiations with, any
person or entity in connection with any unsolicited bona fide proposal by such
person or entity to enter into any Alternative Transaction or entering into an
Alternative Transaction if, and only to the extent that, (A) such Board of
Directors, after consultation with outside legal counsel (which may include its
regularly engaged outside legal counsel) determines in good faith that such
action is required for the Board of Directors to comply with its fiduciary
duties imposed by applicable law and (B) prior to furnishing such information
to, or entering into discussions or negotiations with, such person or entity,
the Company provides written notice to the Purchasers to the effect that it is
furnishing information or affording access to properties, books or records to,
or entering into discussions or negotiations with, such person or entity and (y)
receives from such person or entity an executed confidentiality agreement on
terms and in form customary for similar transactions or (ii) complying with Rule
14e-2 promulgated under the Exchange Act, with regard to an Alternative
Transaction. For purposes of this Agreement, "Alternative Transaction" means
-----------------------
any merger, consolidation, sale of substantial assets, sale of shares of capital
stock or other equity securities, recapitalization, debt restructuring (other
than as provided in Section 6.12) or similar transaction involving the Company
or any Subsidiary, or any division of the Company or any Subsidiary. As part of
the written notice provided to the Purchaser pursuant to clause (i)(B) above,
the Company shall indicate the identity of the offeror and the terms and
conditions of any proposals or offers or the nature of any inquiries or
contacts, and thereafter shall use reasonable efforts to keep Purchasers
informed, on a current basis, of the status and terms of any such proposals or
offers and the status of any such discussions or negotiations. The Company
shall not release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which the Company is a party except
the Company may provide to any third party a release or waiver of any standstill
agreement to which the Company is a party which release or waiver is reasonably
necessary for such third party to make, and for the Board of Directors to
consider, any unsolicited bona fide proposal to enter into any Alternative
Transaction.
6.9. HSR Act Notification. To the extent it is determined that the
--------------------
HSR Act will be applicable to the transactions as contemplated hereunder, each
of the affected parties hereto shall (i) file or cause to be filed, as promptly
as practicable after the execution and delivery of this Agreement and in no
event later than ten business days after the date of this Agreement, with the
33
<PAGE>
Federal Trade Commission and the United States Department of Justice, all
reports and other documents required to be filed by such party under the HSR Act
concerning the transactions contemplated hereby and (ii) promptly comply with or
cause to be complied with any requests by the Federal Trade Commission or the
United States Department of Justice for additional information concerning the
Transaction, in each case so that the waiting period applicable to this
Agreement and the transaction contemplated hereby under the HSR Act shall expire
as soon as practicable after the execution and deliver), of this Agreement. Each
party hereto agrees to request, and to cooperate with the other party or parties
in requesting, early termination of any applicable waiting period under the HSR
Act.
6.10. Employee Matters.
----------------
(a) On or prior to the Closing, the Company shall use its
reasonable best efforts to enter into employment agreements with the individuals
listed on Schedule 6.10, the terms and conditions of which are summarized on
-------------
Schedule 6.10 and will include a reasonable and customary noncompetition
- -------------
agreement and an award to such individuals of incentive stock options. The
employment agreement, and all terms and conditions thereof, are subject to the
prior approval of the Purchasers. Such employment agreements shall supersede any
existing employment or severance agreements between the Company and such
employees.
(b) On or prior to the Closing, the Company shall adopt an
amendment to the Company's Non-Employee Directors Retirement Plan in the form
attached hereto as Exhibit D, and shall use its reasonable best efforts to
obtain from each person who is a beneficiary under such plan, in a form
reasonably satisfactory to the Purchasers, a consent to such amendment and such
person's agreement to forego any waiver of the age and service requirements
under such plan that may result from the execution of this Agreement and the
consummation of the transactions contemplated hereby. Additionally, the Company
shall use its reasonable best efforts to obtain from each non-employee director
a written waiver of all rights to the acceleration of vesting requirements under
any Non-Employee Director Non-Qualified Agreement under the 1991 Stock Incentive
Plan to which such director is a party.
(c) On or prior to the Closing, the Board of Directors shall
take all actions necessary to ensure that the acquisition of the Securities by
the Purchasers and the transactions contemplated herein shall not result in the
acceleration or creation of any rights of any person to benefits under any
Employee Plan (including, without limitation, the acceleration of the vesting or
exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any Pension Plan or the acceleration or creation of any rights under any
severance, parachute or change in control agreement), other than as may occur
under (i) outstanding stock options granted to employees of the Company and its
Subsidiaries under the 1983 Stock Incentive Plan and to non-employee directors
under the 1991 Stock Incentive Plan and (ii) the Non-Employee Directors
Retirement Plan.
34
<PAGE>
6.11. Action by the Company.
---------------------
(a) In the event that the Company's stockholders shall vote to
approve the transactions contemplated hereby, then, immediately prior to the
Closing, the Board of Directors shall take, or cause to be taken, all actions
necessary to (i) file with the Secretary of State of the State of Delaware the
Certificate Amendments, (ii) cause the board of directors of the Company as of
the Closing Date to consist of seven (7) directors, four (4) of which shall be
elected by the Purchasers by delivery of a written consent on the Closing Date,
and (iii) effect any amendment to the Bylaws necessary or advisable to
effectuate the transactions contemplated herein.
6.12. Amendment to Credit Facility. Notwithstanding anything in
----------------------------
Section 6.3 to the contrary, on or prior to the Closing, the Company shall use
its reasonable best efforts to enter into an amendment to the Credit Facility
upon terms and conditions reasonably satisfactory to Purchasers which amendments
will, among other things, (i) modify current covenants, (ii) increase the limits
on the Company's ability to make capital expenditures for contemplated
acquisitions and (iii) confirm that the entering into this Agreement, and the
consummation of the transactions contemplated hereby, including without
limitation, the acquisition of the Securities by the Purchasers, and the filing
of the Certificate Amendments with the Office of the Secretary of State of the
State of Delaware, do not and will not constitute a Change in Control or a
breach of or default under the Credit Facility.
6.13. Foreign Ownership, Control or Influence. If at any time
---------------------------------------
government contracting authorities notify the Company that it may not
participate in bidding or performing work under a Government Contract based on
the degree of foreign ownership, control or influence over the Company, the
Purchasers will use all reasonable efforts to cooperate with the Company in
attempting to appeal or overturn the decision of such government contracting
authority and, if such efforts are unsuccessful, will take other reasonable
measures to avoid or mitigate foreign influences so as to satisfy such
government contracting authority that classified information and "special
nuclear material" will not be compromised. This provision shall not obligate the
Purchasers to take any action which results in an impairment of the economic or
tax benefits of their investment in the Company.
6.14. Liability Insurance. On or prior to the Closing, the Company
-------------------
shall ensure that each person serving on the board of directors of the Company
on and after the Closing Date shall receive the same liability insurance
coverage as a member of the board of directors as the Company's directors
receive as of the date hereof (including coverage for liabilities arising before
the date of taking office to the extent arising from such person's status as a
prospective member of the board of directors) and that such policies shall be in
full force and effect in accordance with their terms as of the Closing Date.
ARTICLE VII
CONDITIONS TO CLOSING
---------------------
35
<PAGE>
7.1. Conditions to Each Party's Obligations. The respective
--------------------------------------
obligations of each party to consummate the transactions contemplated hereby on
the Closing Date is subject to the satisfaction or waiver, on or prior to the
Closing Date, of each of the following conditions:
(a) No Governmental or Other Proceedings or Litigation.
--------------------------------------------------
There shall be no injunction or court order restraining consummation of the
transactions contemplated hereunder and there shall be no pending or threatened
action or proceeding by or before a court or governmental body brought by or on
behalf of any Governmental Entity seeking to restrain or invalidate all or any
portion of the transactions contemplated hereunder, and there shall not have
been adopted any law or regulation making all or any portion of the transactions
contemplated hereunder illegal.
(b) Stockholder Approval. The holders of the requisite
--------------------
number of shares of outstanding Common Stock of the Company shall have duly and
validly approved all items necessary to effectuate the transactions contemplated
hereby and under the Ancillary Agreements, including without limitation, the
Certificate Amendments.
(c) HSR Act. To the extent that the HSR Act is applicable to
-------
the transactions contemplated hereunder, all waiting periods (and any extensions
thereof) applicable to any such transactions under the HSR Act shall have
expired or been terminated.
(d) NYSE Listing. The New York Stock Exchange shall have
------------
informed the Company that the transactions contemplated hereby will not violate
Section 313 of the New York Stock Exchange Listed Company Manual and the New
York Stock Exchange shall not have indicated any intention to delist the
Company's Common Stock.
7.2. Conditions to the Company's Obligations. The obligations of
---------------------------------------
the Company to consummate the transactions contemplated hereby on the Closing
Date is subject to the satisfaction or waiver on or prior to the Closing Date,
of each of the following conditions:
(a) Representations, Warranties and Covenants. All
-----------------------------------------
representations and warranties of the Purchasers contained in this Agreement
shall be true and correct in all material respects at and as of the Closing Date
as if such representations and warranties were made at and as of the Closing
Date, and the Purchasers shall have performed in all material respects all
agreements and covenants required hereby to be performed by it prior to or at
the Closing Date. There shall be delivered to the Company a certificate (signed
by a general partner of each Purchaser) to the foregoing effect.
(b) Consents. All consents, approvals, Permits and waivers
--------
from Governmental Entities and other parties necessary to permit the Company to
consummate the transactions contemplated hereby including, but not limited to,
the approval of the New York Stock Exchange to the transactions contemplated
hereby, shall have been obtained, unless the failure to obtain any such consent,
approval, Permit or waiver would not have a Material Adverse Effect upon the
Company and its Subsidiaries, taken as a whole.
36
<PAGE>
(c) Opinion of Counsel. The Purchasers shall have delivered
------------------
to the opinions of Latham & Watkins counsel to Purchasers, with regard to the
matters set forth on Exhibit E hereto, in form and substance reasonably
acceptable to the Company.
(d) Certificates. Each Purchaser will furnish the Company
------------
with such certificates of its general partner and others to evidence compliance
with the conditions set forth in this Article VII as may be reasonably requested
by the Company.
(e) Average Stock Price. The average of the average of the
-------------------
daily high and low sales price for a share of Common Stock on the New York Stock
Exchange for each ten (10) New York Stock Exchange trading day period commencing
on the date hereof and ending prior to the Closing Date shall be greater than or
equal to $1.75.
7.3. Conditions to the Purchasers' Obligations. The obligation of
-----------------------------------------
the Purchasers to consummate the transactions contemplated hereby on the Closing
Date is subject to the satisfaction or waiver on or prior to the Closing Date of
each of the following conditions:
(a) Representations, Warranties and Covenants. All
-----------------------------------------
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects at and as of the Closing Date as if
such representations and warranties were made at and as of the Closing Date, and
the Company shall have performed in all material respects all agreements and
covenants required hereby to be performed prior to or at the Closing Date. There
shall be delivered to the Purchasers a certificate (signed by the President and
Chief Executive Officer and the Secretary of the Company) to the foregoing
effect.
(b) Consents. All consents, approvals, Permits and waivers
--------
from Governmental Entities and other parties necessary to permit the Purchasers
and the Company to consummate the transactions contemplated hereby shall have
been obtained, unless the failure to obtain any such consent, approval, Permit
or waiver would not have a Material Adverse Effect upon the Company, taken as a
whole, or the Purchasers.
(c) Opinion of Counsel. The Company shall have delivered to
------------------
the Purchasers the opinions of Gibson, Dunn & Crutcher LLP, counsel for the
Company with respect to the matters set forth on Exhibit F hereto.
(d) Certificates. The Company shall furnish the Purchasers
------------
with such certificates of the Chief Executive Officer and the Secretary of the
Company and others to evidence compliance with the conditions set forth in this
Article VIII as may be reasonably requested by the Purchasers.
(e) No Adverse Changes. Since the date of this Agreement,
------------------
there shall not have been any Material Adverse Effect on the Company.
(f) Resignations and Elections of Directors. All actions
---------------------------------------
shall have been taken by the Company, its stockholders and board of directors so
that, immediately upon the Purchasers' purchase of the Securities, the board of
directors shall consist of seven (7) directors
37
<PAGE>
and the Purchasers may, by execution and delivery of a written consent, elect
four (4) members of the board of directors of the Company effective as of the
Closing Date.
(g) Amendment of Certificate and Bylaws. The Certificate of
-----------------------------------
Incorporation and the Bylaws will have been amended on or prior to the Closing
Date in a form acceptable to the Purchasers in order to effectuate the
transactions contemplated herein. None of the provisions of the Certificate of
Incorporation or Bylaws shall prohibit or restrict the authority of the board of
directors of the Company, by action of a majority of its members, from amending
the Bylaws.
(h) Liability Insurance. The Company shall have provided to
-------------------
the Purchasers a copy of the insurance policies together with the riders and
schedules thereto which evidence compliance with the provisions set forth in
Section 6.14.
(i) Average Stock Price. The average of the average of the
-------------------
daily high and low sales price for a share of Common Stock on the New York Stock
Exchange for each ten (10) New York Stock Exchange trading day period commencing
on the date hereof and ending prior to the Closing Date shall be greater than or
equal to $1.75.
(j) Employment Agreements. The Company and the applicable
---------------------
employees shall have entered into the employment agreements contemplated by
Section 6.10(a).
(k) Directors Waivers and Consents. The Company shall have
------------------------------
obtained each of the waivers and consents contemplated by Section 6.10(b).
(l) Credit Facility Amendments. The Company shall have
--------------------------
entered into the amendments to the Credit Facility specified in Section 6.12.
ARTICLE VIII
ADDITIONAL AGREEMENTS
---------------------
8.1. Subscription for Warrants. On the Closing Date, the Company
-------------------------
and the Purchasers shall enter into the Warrant Agreement pursuant to which the
Company shall issue to the Purchasers, the Warrants, at an exercise price of
$3.00 per share. The Warrants shall be evidenced by one or more warrant
certificates in the form attached as an exhibit to the Warrant Agreement (the
"Warrant Certificate").
-------------------
8.2. Registration Rights Agreement. On the Closing Date, the
-----------------------------
Company and the Purchasers shall enter into the Registration Rights Agreement.
ARTICLE IX
INDEMNIFICATION
---------------
38
<PAGE>
9.1. Survival of Representations, Etc. The representations,
--------------------------------
warranties, covenants and agreements of the parties hereto contained herein
shall survive the Closing, but shall terminate on the date eighteen months from
the Closing Date; provided, however, that there shall be no such termination
-------- -------
with respect to any representation or warranty as to which a bona fide claim has
been asserted prior to such date.
9.2. Indemnification by the Company. The Company shall indemnify
------------------------------
and hold harmless each of the Purchasers and its Affiliates, directors,
officers, advisors, agents and employees (the "Purchaser Indemnified Parties")
-----------------------------
to the fullest extent lawful, from and against any and all demands, losses,
damages, penalties, claims, liabilities, obligations, actions, causes of action,
and reasonable expenses (including without limitation, costs of investigating,
preparing or defending any such claim or action and reasonable legal fees and
expenses) (collectively, "Losses"), (i) arising out of or in connection with
------
this Agreement, the transactions contemplated hereby, and/or the delivery,
enforcement and performance of this Agreement or the Ancillary Agreements, or
(ii) arising by reason of or resulting from any breach of any warranty,
representation, covenant or agreement of the Company contained in this Agreement
or in any certificate delivered pursuant thereto; provided, however, that no
-------- -------
Purchaser Indemnified Party shall be entitled to indemnification by the Company
hereunder with respect to any Losses arising solely from the bad faith or gross
negligence (as finally determined by a court of competent jurisdiction) of such
Purchaser Indemnified Party or any Affiliate, director, officer, agent, or
employee of such Purchaser Indemnified Party.
9.3. Indemnification by the Purchasers. Each Purchaser shall
---------------------------------
indemnify and hold harmless the Company and its Affiliates, directors, officers,
advisors, agents and employees (the "Company Indemnified Parties" and, together
---------------------------
with the Purchasers Indemnified Parties, the "Indemnified Parties") to the
-------------------
fullest extent lawful, from and against any and all Losses arising by reason of
or resulting from any breach of any warranty, representation, covenant or
agreement of such Purchaser contained in this Agreement or in any certificate
delivered pursuant thereto, provided, however, that no Company Indemnified Party
shall be entitled to indemnification by any Purchaser hereunder with respect to
any Losses arising solely from the bad faith or gross negligence (as finally
determined by a court of competent jurisdiction) of such Company Indemnified
Party, or any Affiliate, director, officer, agent or employee of such Company
Indemnified Party.
9.4. Limitation on Indemnities. No claim may be made against an
-------------------------
indemnifying party for indemnification pursuant to either Section 9.2 or Section
9.3 until the aggregate dollar amount of all Losses indemnifiable pursuant to
such section exceeds $1,500,000. The indemnification obligations of the Company
pursuant to Section 9.2 and the indemnification obligations of the Purchasers
pursuant to Section 9.3 shall be effective only until the dollar amount paid in
respect of the Losses indemnified against under such clause of this Agreement
aggregates to an amount equal to $45,000,000.
9.5. Losses. The term "Losses" as used in this Section 9 is not
------
limited to matters asserted by third parties, but includes Losses incurred or
sustained by an Indemnified Party in the absence of third party claims. Payments
by an Indemnified Party of amounts for
39
<PAGE>
which such Indemnified Party is indemnified hereunder shall not necessarily be a
condition precedent to recovery.
9.6. Defense of Claims. If a claim for Losses (a "Claim") is to be
----------------- -----
made by an Indemnified Party, such Indemnified Party shall give written notice
(a "Claim Notice") to the indemnifying party as soon as practicable after such
------------
Indemnified Party becomes aware of any fact, condition or event which may give
rise to Losses for which indemnification may be sought under this Section 9. If
any lawsuit or enforcement action is filed against any Indemnified Party
hereunder, notice thereof (a "Third Party Notice") shall be given to the
------------------
indemnifying party as promptly as practicable (and in any event within fifteen
(15) calendar days after the service of the citation or summons). The failure of
any indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After receipt of a Third
Party Notice, if the indemnifying party shall acknowledge in writing to the
indemnified party that the indemnifying party shall be obligated under the terms
of its indemnity hereunder in connection with such lawsuit or action, then the
indemnifying party shall be entitled, if it so elects, (i) to take control of
the defense and investigation of such lawsuit or action, (ii) to employ and
engage attorneys of its own choice to handle and defend the same, at the
indemnifying party's cost, risk and expense unless the named parties to such
action or proceeding include both the indemnifying party and the indemnified
party and the indemnified party has been advised in writing by counsel that
there may be one or more legal defenses available to such indemnified party that
are different from or additional to those available to the indemnifying party,
and (iii) to compromise or settle such claim, which compromise or settlement
shall be made only with the written consent of the indemnified party, such
consent not to be unreasonably withheld. The indemnified party shall cooperate
in all reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; and the indemnified party may, at its own cost, participate
in the investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom and appoint its own counsel therefor, at its own cost. The
parties shall also cooperate with each other in any notifications to insurers.
If the indemnifying party fails to assume the defense of such claim within
fifteen (15) calendar days after receipt of the Third Party Notice, the
Indemnified Party against which such claim has been asserted will (upon
delivering notice to such effect to the indemnifying party) have the right to
undertake the defense, compromise or settlement of such claim and the
indemnifying party shall have the right to participate therein at its own cost;
provided, however, that such claim shall not be compromised or settled without
- -------- -------
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. In the event the indemnified party assumes the defense of
the claim the Indemnified Party will keep the indemnifying party reasonably
informed of the progress of any such defense, compromise or settlement.
Notwithstanding the foregoing, the indemnifying party shall not be liable for
the reasonable fees and expenses of more than one separate firm of attorneys at
any time for any and all Indemnified Parties (which firm shall be designated in
writing by such Indemnified Party or Parties) in connection with any one such
action or proceeding arising out of the same general allegations or
circumstances.
9.7. Tax Treatment of Indemnity. The parties agree that any
--------------------------
indemnification payments made pursuant to this Agreement shall be treated for
Tax purposes as an adjustment to
40
<PAGE>
the consideration for the purchase of the Securities, unless otherwise required
by applicable law, in which event indemnification payments shall be made in an
amount sufficient to indemnify the party on a net after-Tax basis.
ARTICLE X
MISCELLANEOUS
-------------
10.1. Termination. Prior to the Closing, this Agreement may be
terminated:
(a) by mutual written consent of the Company and the
Purchasers;
(b) by the Purchasers or the Company if (i) the Closing shall
not have occurred on or before December 31, 1996; provided however, that this
-------- -------
provision shall not be available to the Purchaser if the Company has the right
to terminate this Agreement under Section 10.1(d), and this provision shall not
be available to the Company if Purchaser has the right to terminate this
Agreement under Section 10.1(c); or (ii) the stockholders of the Company shall
have rejected at the Stockholders Meeting any matter contained in the Proxy
Materials relating to the adoption and approval of the Certificate Amendments or
the transactions contemplated under this Agreement and the Ancillary Agreements;
(c) by the Purchasers, if there is a breach of any
representation or warranty set forth in Article 4 hereof or any covenant or
agreement to be complied with or performed by the Company pursuant to the terms
of this Agreement except for any breach which would not have a Material Adverse
Effect on the Company or the Purchasers, provided that the Purchasers may not
--------
terminate this Agreement prior to the Closing if the Company has not had an
adequate opportunity to cure such failure;
(d) by the Company, if there is a material breach of any
representation or warranty set forth in Article 5 hereof or of any covenant
or agreement to be complied with or performed by the Purchasers pursuant to
terms of this Agreement except for any breach which would not have a
Material Adverse Effect on the Company, provided that the Company may not
--------
terminate this Agreement prior to the Closing if the Purchasers have not had an
adequate opportunity to cure such failure;
(e) by the Company or the Purchasers, if at any time prior to
the Closing the Board of Directors of the Company has, pursuant to Section 6.8
in the exercise of its fiduciary obligations, entered into a definitive
agreement with respect to an Alternative Transaction; and
41
<PAGE>
(f) by the Company or the Purchasers, if at any time prior to
the Closing Date, the average of the average of the daily high and low sales
price for a share of Common Stock on the New York Stock Exchange for any ten
(10) New York Stock Exchange trading day period commencing on or after the date
hereof and ending prior to the Closing Date shall be less than $1.75.
10.2. In the Event of Termination: In the event of termination of
---------------------------
this Agreement:
(a) Each party will redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof to the party
furnishing the same;
(b) The provisions of Section 10.3 shall continue in full
force and effect; and
(c) No party hereto shall have any liability or further
obligation to any other party relating to the transactions contemplated hereby,
provided that no such termination shall relieve any party from liability or a
prior breach of this Agreement.
10.3. Fees and Expenses. The Company shall be responsible for the
-----------------
payment of all expenses incurred by the Company in connection with the
transactions contemplated hereunder, regardless of whether such transactions
close, including, without limitation, all fees and expenses incurred in
connection with the Proxy Materials and the fees and expenses of the Company's
legal counsel and all third party consultants engaged by the Company to assist
in the transactions. On the Closing Date, the Company shall reimburse the
Purchasers for the Carlyle Transaction Expenses. In the event that the Agreement
is terminated, other than pursuant to Section 10.1(d) or Section 10.1(e) hereof,
the Company shall reimburse the Purchasers for the Carlyle Transaction Expenses.
In the event that (x) the Agreement is terminated pursuant to Section 10.1(e)
hereof, or (y) the transactions as contemplated hereunder are not consummated
for any reason other than a termination by the Company pursuant to Section
10.1(d) and the Company thereafter successfully closes an Alternative
Transaction other than to an Affiliate of the Company on or prior to June 30,
1997, the Company shall pay to Carlyle the greater of (i) three percent (3%) of
the consideration for securities and/or assets of the Company agreed to between
the parties as part of the Alternative Transaction or (ii) the Carlyle
Transaction Expenses. In addition, if the Closing does not occur for any reason
and the Company successfully closes at a later date an acquisition as to which
Carlyle has provided significant advisory services, the Company shall pay a
standard investment banking fee and reimburse Carlyle for all the Carlyle
Transaction Expenses.
10.4. Minority Protection. During any period in which the Carlyle
-------------------
Affiliates collectively beneficially own shares of capital stock of the Company
having 20% or more of the votes that may be cast generally at annual or special
meetings of stockholders (a) any contract or transaction between the Company and
any Carlyle Affiliate (as defined therein) shall be voidable by the Company
unless the board of directors, in good faith, authorizes the contract or
transaction
42
<PAGE>
by the affirmative vote of a majority of the directors of the Company not
elected as directors by the holders of the Convertible Preferred Stock voting as
a separate class (the "Non-Preferred Stock Directors"), (b) any acquisition of
-----------------------------
capital stock of the Company by any Carlyle Affiliate, the result of which shall
cause one or more Carlyle Affiliates to beneficially own, in the aggregate,
shares of capital stock in the Company having 75% or more of the votes that may
be cast generally at annual or special meetings of stockholders, shall be
subject to the prior approval of the Non-Preferred Stock Directors, provided
that, for purposes of subparagraphs (a) and (b), the Non-Preferred Stock
Directors may be counted in determining the presence of a quorum at a meeting of
the board of directors which authorizes the contract or transaction, and (c) no
Carlyle Affiliate shall consummate any "going private" transaction (within the
meaning of Rule 13e-3 under the Exchange Act) without the prior approval of (i)
the board of directors by the affirmative vote of a majority of the Non-Carlyle
Preferred Stock Directors and (ii) a majority of the shares of Common Stock held
by persons other than Carlyle Affiliates.
10.5. Injunctive Relief. The parties hereto acknowledge and agree
-----------------
that irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement, and shall be entitled to enforce specifically the provisions of this
Agreement, in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the parties may be
entitled under the Agreement or at law or in equity.
10.6. Independent Determination. From and after the Closing Date,
-------------------------
all decisions on behalf of the Company as to payment of indemnification pursuant
hereto and otherwise regarding the Company's rights and obligations pursuant to
this Agreement and the Ancillary Agreements shall be made by a committee of the
board of directors consisting of all directors not elected by the holders of the
Convertible Preferred Stock voting as a separate class and a decision of a
majority of such directors shall be the decision of the committee. Nothing
contained in this Section 10.5 shall prevent any Indemnified Party from
receiving indemnification pursuant to some other source (such as, by way of
example, the bylaws of the Company in the event that such Indemnified Party is a
director of the Company and such director seeks indemnification due to
circumstances that do not pertain to an alleged breach of this Agreement), and
the determination as to whether indemnification pursuant to such other source is
available shall be made in accordance with the procedures applicable thereto.
10.7. Brokers, etc.
------------
(a) The Company shall be solely responsible for any amounts
owed to Donaldson, Lufkin & Jenrette Securities Corporation and Environmental
Financial Consulting Group. Inc. and any of their financial advisor, broker,
agent, finder or similar intermediary retained by or acting on behalf of the
Company in connection with the sale and purchase of the Securities as
contemplated herein.
43
<PAGE>
(b) The Company shall reimburse the Purchasers for all cost of
making any filing under the HSR Act, including the cost of all filing fees
payable thereunder.
10.8. Assignment. Neither this Agreement nor any of the rights or
----------
obligations hereunder may be assigned by the Company without the prior written
consent of the Purchasers, or by the Purchasers without the prior written
consent of the Company, except that each Purchaser may, without such consent,
assign, in whole or in part, the right to acquire the Securities hereunder to an
Affiliate of such Purchaser. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, and no other person shall have any right, benefit or
obligation hereunder.
10.9. Notices. Unless otherwise provided herein, any notice,
-------
request, instruction or other document to be given hereunder by any party to the
other shall be in writing and delivered by hand-delivery, registered first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery, as
follows:
If to the Company:
International Technology Corporation
23456 Hawthorne Boulevard
Torrance, California 90505
Telephone: (310) 378-9933
Facsimile: (310) 791-4770
Attn: President
with a copy to: Secretary
With an additional copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Telephone: (213) 229-7159
Facsimile: (213) 229-7520
Attn: Andrew E. Bogen
44
<PAGE>
If to any Purchaser:
c/o The Carlyle Group
1001 Pennsylvania Avenue, N.W.
Suite 2205
Washington, D.C. 20004
Telephone: (202) 347-2626
Facsimile: (202) 347-9250
Attn: Daniel A. D'Aniello
With a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
Telephone: (202) 637-2200
Facsimile: (202) 637-2201
Attn: Bruce E. Rosenblum
or to such other place and with such other copies as either party may designate
as to itself by written notice to the other.
All such notices, requests, instructions or other documents shall be
deemed to have been duly given; at the time delivered by hand, if personally
delivered; four business days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged by
addressee, if by telecopier transmission; and on the next business day if timely
delivered to an air courier guaranteeing overnight delivery.
10.10. Choice of Law. This Agreement shall be construed,
-------------
interpreted and the rights of the parties determined in accordance with the
internal laws of the State of California, without regard to the conflict of law
principles thereof, except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a party to or the
subject of this Agreement, and as to those matters the law of the jurisdiction
under which the respective entity derives its powers shall govern.
10.11. Entire Agreement; Amendments and Waivers. This Agreement,
----------------------------------------
including all schedules attached hereto (each, a "Schedule" and, collectively,
the "Schedules") constitutes the entire agreement among the parties pertaining
to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties, including the written summary of proposed terms between the Company and
the Purchasers. Capitalized terms used in the Schedules but not defined therein
shall have the respective meanings ascribed to such terms in this Agreement. Any
item disclosed in one Schedule shall be deemed to have been disclosed in all
other Schedules.
45
<PAGE>
10.12. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.13. Invalidity. In the event that any one or more of the
----------
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or any other such instrument.
10.14. Headings. The headings of the Articles and Sections herein
--------
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
10.15. Limitation of Liability. In no event shall any partner or
-----------------------
representative of `any Purchaser (except for any Purchaser which is a general
partnership) or of any partnership which is a partner of any Purchaser or any
partner of any such partnership, or any direct or indirect stockholder, officer,
director, partner, employee or any other such person, be personally liable for
any obligation of the Purchasers under this Agreement. In no event shall any
direct or indirect stockholder, officer, director, partner, employee or
salesperson of the Company or any Subsidiary or any other such person, be
personally liable for any obligation of the Company under this Agreement.
46
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
INTERNATIONAL TECHNOLOGY CORPORATION
By: /s/ Anthony J. DeLuca
---------------------
Name: Anthony J. DeLuca
-----------------
Title: President and Acting Chief
--------------------------
Executive Officer
-----------------
CARLYLE PARTNERS II, L.P.
By: TC Group, L.L.C., its General Partner
By: /s/ Daniel A. D'Aniello
-----------------------
Name: Daniel A. D'Aniello
-------------------
Title: Managing Director
-----------------
CARLYLE PARTNERS III L.P.
By: TC Group, L.L.C., its General Partner
By: /s/ Daniel A. D'Aniello
-----------------------
Name: Daniel A. D'Aniello
-------------------
Title: Managing Director
-----------------
CARLYLE INTERNATIONAL PARTNERS II, L.P.
By: TC Group, L.L.C., its General Partner
By: /s/ Daniel A. D'Aniello
-----------------------
Name: Daniel A. D'Aniello
-------------------
Title: Managing Director
-----------------
47
<PAGE>
CARLYLE INTERNATIONAL PARTNERS III, L.P.
By: TC Group, L.L.C., its General Partner
By: /s/ Daniel A. D'Aniello
-----------------------
Name: Daniel A. D'Aniello
-------------------
Title: Managing Director
-----------------
C/S INTERNATIONAL PARTNERS
By: TC Group, L.L.C., its General Partner
By: /s/ Daniel A. D'Aniello
-----------------------
Name: Daniel A. D'Aniello
-------------------
Title: Managing Director
-----------------
48
<PAGE>
EXHIBIT A
FORM OF
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING.
OPTIONAL AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
CUMULATIVE CONVERTIBLE PARTICIPATING
PREFERRED STOCK
OF
INTERNATIONAL TECHNOLOGY CORPORATION
<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS AND
QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
CUMULATIVE CONVERTIBLE PARTICIPATING
PREFERRED STOCK
OF
INTERNATIONAL TECHNOLOGY CORPORATION
_________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
_________________________
THE UNDERSIGNED, being, respectively, the President and Secretary of
International Technology Corporation, a Delaware corporation (the "Corporation")
do hereby certify that pursuant to the authority contained in Article Fourth of
its Certificate of Incorporation, as amended, (the "Certificate of
Incorporation") and in accordance with the provisions of Section 151(g) of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation at a meeting duly called and held on _____________, 1996 adopted the
following resolution, which resolution remains in full force and effect on the
date hereof:
RESOLVED, that there is hereby established a series of authorized
preferred stock, having a par value of $100 per share, which series shall be
designated as "Cumulative Convertible Participating Preferred Stock" (the
"Convertible Preferred Stock"), shall consist of 46,375 shares and shall have
the following voting powers, preferences and relative, participating, optional
and other special rights, and qualifications, limitations and restrictions
thereof as follows:
1. Certain Definitions.
-------------------
Unless the context otherwise requires, the terms defined in this
paragraph 1 shall have, for all purposes of this resolution, the meanings herein
specified (with terms defined in the singular having comparable meanings when
used in the plural).
"Affiliate" means (i) with respect to any Person, any other Person
---------
that directly or indirectly controls or manages, is controlled or managed by, or
is under common control or management with such Person, whether through the
ownership of equity interests, by contract or
A-1
<PAGE>
otherwise; and (ii) with respect to an individual, in addition to any Person
specified in clause (i), the spouse, any parent or any child of such individual
and any trust for the benefit of such individual's spouse, parent or child.
"Applicable Dividend Rate" means the following per annum percentages
------------------------
of Liquidation Preference: (i) zero percent (0%) with respect to dividends
payable on the first four Dividend Payment Dates following the Initial Issuance
Date, (ii) three percent (3%) with respect to dividends payable on the fifth
through eighth Dividend Payment Dates following the Initial Issuance Date, and
(iii) six percent (6%) with respect to dividends payable thereafter.
"Business Day" means a day other than a Saturday or Sunday or any
------------
federal, New York or California holiday.
"Carlyle Affiliate" means, at any time, any of Carlyle Partners II,
-----------------
L.P., a Delaware limited partnership, Carlyle Partners III, L.P., a Delaware
limited partnership, Carlyle International Partners II, L.P. a Cayman Islands
limited partnership, Carlyle International Partners III, L.P., a Cayman Islands
limited partnership, C/S International Partners, a Cayman Islands limited
partnership, and any of their Affiliates at such time, including, but not
limited to, The Carlyle Group, L.P., TC Group LLC and their respective
affiliates.
"Commission" means the United States Securities and Exchange
----------
Commission.
"Common Equity" means all shares now or hereafter authorized of any
-------------
class of common stock of the Corporation, including the Common Stock, and any
other stock of the Corporation, howsoever designated, authorized after the
Initial Issue Date, which has the right (subject always to prior rights of any
class or series of preferred stock) to participate in the distribution of the
assets and earnings of the Corporation without limit as to per share amount.
"Common Stock" means the common stock, par value $1.00 per share, of
------------
the Corporation.
"Conversion Date" shall have the meaning set forth in subparagraph
---------------
5(b) below.
"Conversion Price" shall initially mean $2.00 and thereafter shall be
----------------
subject to adjustment from time to time pursuant to the terms of paragraph 5
below, provided, however, that on the eighth anniversary of the Initial Issue
Date, the Conversion Price shall be adjusted to equal one half of the then
current Conversion Price per share of Common Stock, subject thereafter to
further adjustment pursuant to paragraph 5 below.
"Convertible Exchangeable Preferred Stock" means the 7% Cumulative
----------------------------------------
Convertible Exchangeable Preferred Stock, $100 par value per share, of the
Corporation.
"Convertible Exchangeable Preferred Stock Certificate of Designation"
-------------------------------------------------------------------
means the Certificate of Designation of the 7% Cumulative Convertible
Exchangeable Preferred Stock, $100 par value per share, of the Corporation.
"Convertible Preferred Stock" has the meaning set forth in paragraph 2
---------------------------
below.
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<PAGE>
"Current Market Price" means, for a share of Common Stock on any date,
--------------------
the average of Quoted Prices for thirty (30) consecutive Trading Days commencing
forty-five (45) Trading Days before the date in question.
"Director" means a member of the Corporation's Board of Directors.
--------
"Dividend Payment Date" has the meaning set forth in subparagraph 3(c)
---------------------
below.
"Dividend Period" means the period from, and including, the Initial
---------------
Issue Date to, but not including, the first Dividend Payment Date and
thereafter, each quarterly period from, and including, each Dividend Payment
Date to, but not including, the next Dividend Payment Date.
"Five Year Period" means the period commencing on the Initial Issue
----------------
Date and ending on the fifth anniversary of the Initial Issue Date.
"Initial Issue Date" means the date that shares of Convertible
------------------
Preferred Stock are first issued by the Corporation.
"Junior Stock" means Common Equity, and any class or series of stock
------------
of the Corporation authorized after the Initial Issue Date which is not entitled
to receive any dividends in any Dividend Period unless all dividends required to
have been paid or declared and set apart for payment on the Cumulative Preferred
Stock and any other Parity Stock shall have been so paid or declared and set
apart for payment, and for purposes of paragraph 4 below, shall mean Common
Equity and any class or series of stock of the Corporation authorized after the
Initial Issue Date which is not entitled to receive any assets upon liquidation,
dissolution or winding up of the affairs of the Corporation until the
Convertible Preferred Stock and any other Parity Stock shall have received the
entire amount to which such stock is entitled upon such liquidation, dissolution
or winding up.
"Liquidation Preference" shall mean $1,000 per share.
----------------------
"Market Capitalization" means, as of any date, the product of the
---------------------
Current Market Price of the Common Stock as of such date multiplied by the
number of shares of Common Stock outstanding as of such date.
"Non-Preferred Stock Director" means a Director of the Corporation
----------------------------
other than a Preferred Stock Director.
"Parity Stock" means, for purposes of paragraph 3 below, the
------------
Convertible Exchangeable Preferred Stock, and any other class or series of stock
of the Corporation authorized after the Initial Issue Date which is entitled to
receive payment of dividends on a parity with the Convertible Preferred Stock
without preference or priority of one over the other and, for purposes of
paragraph 4 below, shall mean the Convertible Exchangeable Preferred Stock and
any class or series of stock of the Corporation authorized after the Initial
Issue Date which is entitled to receive assets upon liquidation, dissolution or
winding up of the affairs of the Corporation on a parity with the Convertible
Preferred Stock without preference or priority of one over the other.
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<PAGE>
"Person" means any individual, corporation, association, partnership,
------
joint venture, limited liability company, trust, estate or other entity or
corporation.
"PIK Dividends" has the meaning set forth in subparagraph 3(b) below.
-------------
"Preferred Stock Director" has the meaning set forth in paragraph 7(d)
------------------------
below.
"Quoted Price" means, with respect to Common Stock, the last reported
------------
sales price for Common Stock as reported by the National Association of
Securities Dealers, Inc. Automatic Quotations System -- National Market System,
or, if the Common Stock is listed or admitted for trading on a securities
exchange, the last reported sales price of the Common Stock on the principal
exchange on which the Common Stock is listed or admitted for trading (which
shall be for consolidated trading if applicable to such exchange), or if not so
reported or listed or admitted for trading, the last reported bid price of the
applicable security in the over-the-counter market. In the event that the
Quoted Price cannot be determined as aforesaid, the Board of Directors (by a
vote of the majority of the Non-Preferred Stock Directors), of the Corporation
shall determine the Quoted Price on the basis of such quotations as it in good
faith considers appropriate. Such determination may be challenged in good faith
by holders of a majority of the shares of Convertible Preferred Stock then
outstanding, and any dispute shall be resolved at the Corporation's cost, by the
determination of an investment banking firm of recognized national standing
selected by the Corporation and acceptable to such holders of Convertible
Preferred Stock, which determination shall be made in good faith and be
conclusive absent manifest error; provided, however, that in the event that the
determination of the Quoted Price by the investment banking firm deviates by no
more than 5% from the Company's determination of the Quoted Price, then the cost
to the Corporation of the retention of the investment banking firm shall be
borne by the holders of the Convertible Preferred Stock challenging the
Corporation's determination.
"Record Date" means the date designated by the Board of Directors of
-----------
the Corporation at the time a dividend is declared; provided, however, that such
Record Date shall not be more than sixty (60) days nor less than ten (10) days
prior to the respective Dividend Payment Date or such other date designated by
the Board of Directors for the payment of dividends.
"Redemption Date" means any date fixed by the Corporation pursuant to
---------------
subparagraph 6(b) for redemption of the Convertible Preferred Stock.
"Redemption Price" means a price per share equal to the Liquidation
----------------
Preference per share, plus an amount equal to all cumulative dividends accrued
and unpaid on such share to the Redemption Date.
"Rights" means any rights, options or warrants entitling a holder
------
thereof to substitute for or purchase any share of Common Stock of the
Corporation.
A-4
<PAGE>
"Trading Day" means, with respect to any security, any day on which
-----------
any market in which the applicable security is then traded and in which a Quoted
Price may be ascertained is open for business.
2. Number of Shares and Designation. 46,375 shares of the preferred
--------------------------------
stock, $100 par value per share, of the Corporation are hereby constituted as a
series of the preferred stock designated as Cumulative Convertible Participating
Preferred Stock (the "Convertible Preferred Stock").
3. Dividends.
---------
(a) The record holders of Convertible Preferred Stock shall be
entitled to receive dividends, when, as and if declared by the Board of
Directors of the Corporation, out of funds legally available for payment of
dividends. Such dividends shall be payable by the Corporation at the Applicable
Dividend Rate.
(b) Dividends on the Convertible Preferred Stock payable during
the period beginning on the first Dividend Payment Date on or following the
first anniversary of the Initial Issue Date and ending on the first Dividend
Payment Date on or following the second anniversary of the Initial Issue Date,
shall be paid in fully paid and nonassessable shares of Convertible Preferred
Stock (such dividends paid in kind being herein called "PIK Dividends").
Dividends on the Convertible Preferred Stock payable thereafter shall be paid in
cash. Dividends of additional shares of Convertible Preferred Stock shall be
paid by delivering to the record holders of Convertible Preferred Stock a number
of shares of Convertible Preferred Stock determined by dividing the total amount
of the cash dividend which otherwise would be payable on the Dividend Payment
Date to such holders (rounded to the nearest whole cent) by the Liquidation
Preference. The issuance of any such PIK Dividend in such amount shall
constitute full payment of such dividend. The Corporation shall not issue
fractional shares of Convertible Preferred Stock to which holders may become
entitled pursuant to this subparagraph, but in lieu thereof, the Corporation
shall deliver its check in an amount equal to the applicable fraction of the
Liquidation Preference. Any additional shares of Convertible Preferred Stock
issued pursuant to this paragraph shall be governed by this resolution and shall
be subject in all respects, except as to the date of issuance and date from
which dividends accrue and cumulate as set forth below, to the same terms as the
shares of Convertible Preferred Stock originally issued hereunder.
(c) Dividends on shares of Convertible Preferred Stock shall
accrue and be cumulative from and including the Initial Issue Date to and
including the date on which such shares shall have been converted into Common
Stock or redeemed pursuant to paragraph 6 hereof. Such dividends shall accrue
whether or not there shall be (at the time such dividend becomes payable or at
any other time) profits, surplus or other funds of the Corporation legally
available for the payment of dividends. Dividends shall be payable quarterly in
arrears when and as declared by the Board of Directors of the Corporation on
_________, ___________, ___________, and __________ of each year [NOTE: THE
FOREGOING DATES WILL BE AT QUARTERLY INTERVALS FROM THE CLOSING DATE] (a
"Dividend Payment Date"), commencing on ____________, 1997, and for shares paid
as PIK Dividends, commencing on the first Dividend Payment Date after such
shares are issued. If any Dividend Payment Date occurs on a day that is not a
Business Day, any accrued dividends otherwise payable on such
A-5
<PAGE>
Dividend Payment Date shall be paid on the next succeeding Business Day. The
amount of dividends payable on Convertible Preferred Stock for each full
Dividend Period shall be computed by dividing by four (4) the annual dividend at
the Applicable Dividend Rate set forth in subparagraph 3(a) above. Dividends
shall be paid to the holders of record of the Convertible Preferred Stock as
their names shall appear on the share register of the Corporation on the Record
Date for such dividend. Dividends payable in any Dividend Period which is less
than a full Dividend Period in length will be computed on the basis of a ninety
(90) day quarterly period and actual days elapsed in such Dividend Period.
Dividends on account of arrears for any past Dividend Periods may be declared
and paid at any time to holders of record on the Record Date therefor. For any
Dividend Period in which dividends are not paid in full on the Dividend Payment
Date first succeeding the end of such Dividend Period, then on such Dividend
Payment Date such accrued and unpaid dividends shall be added (solely for the
purpose of calculating dividends payable on the Convertible Preferred Stock) to
the Liquidation Preference of the Convertible Preferred Stock effective at the
beginning of the Dividend Period succeeding the Dividend Period as to which such
dividends were not paid and shall thereafter accrue additional dividends in
respect thereof at the rate set forth in subparagraph 3(a) above until such
accrued and unpaid dividends have been paid in full.
(d) So long as any shares of Convertible Preferred Stock shall be
outstanding, the Corporation shall not declare, pay or set apart for payment on
any Junior Stock any dividends whatsoever, whether in cash, property or
otherwise (other than dividends payable in shares of the class or series upon
which such dividends are declared or paid, or payable in shares of Common Stock
with respect to Junior Stock other than Common Stock, together with cash in lieu
of fractional shares), nor shall the Corporation make any distribution on any
Junior Stock, nor shall any Junior Stock be purchased, redeemed or otherwise
acquired by the Corporation or any of its subsidiaries of which it owns not less
than a majority of the outstanding voting power (except as currently required
pursuant to the terms of the Corporation's 401(k) plan, Non-Employee Directors
Retirement Plan or any other similar plan or program for employees and/or
directors, whether now existing or hereafter created, that provides for actions
that would not otherwise be permitted under this subparagraph (d)) nor shall any
monies be paid or made available for a sinking fund for the purchase or
redemption of any Junior Stock, unless (i) all dividends to which the holders of
Convertible Preferred Stock shall have been entitled for all previous Dividend
Periods shall have been paid or declared and a sum of money or PIK Dividends, as
applicable (as provided in subparagraph 3(b)) sufficient for the payment thereof
has been set apart and (ii) the holders of at least sixty-seven percent (67%) of
all of the outstanding shares of Convertible Preferred Stock have given their
consent to the payment of such dividends (given in person or by proxy, either by
written consent pursuant to section 228 of the Delaware General Corporation Law
or by a vote at a special meeting of stockholders called for such purpose or at
any annual meeting of stockholders, with the holders of Convertible Preferred
Stock voting as a class and with each share of Convertible Preferred Stock
having one vote). In addition, in the event that the Corporation declares or
pays any dividend or other distribution on the Common Stock (other than a
dividend payable solely in shares of Common Stock), the Corporation shall, at
the time of such declaration and payment, declare and pay a dividend or other
distribution on the Convertible Preferred Stock consisting of the dividend or
distribution that would have been payable on the shares of Common Stock had the
Cumulative Preferred Stock been converted into Common Stock immediately prior to
the date on the record date for such dividend or distribution, or, if no such
record was taken, the date as of which the record holders of Common Stock
entitled to such dividend or distribution
A-6
<PAGE>
were determined. Any such dividend or distribution declared, or required to be
declared or to be paid, on the Cumulative Preferred Stock shall be deemed to
have "accrued" on the Preferred Stock for all purposes of this Paragraph 3 and
shall remain an "accrued dividend" on the Cumulative Preferred Stock for all
purposes of this Section until paid.
(e) In the event that full dividends are not paid or made
available to the holders of all outstanding shares of Convertible Preferred
Stock and of any Parity Stock and funds available for payment of dividends shall
be insufficient to permit payment in full to holders of all such stock of the
full preferential amounts to which they are then entitled, then the entire
amount available for payment of dividends shall be distributed ratably among all
such holders of Convertible Preferred Stock and of any Parity Stock in
proportion to the full amount to which they would otherwise be respectively
entitled.
(f) Notwithstanding anything contained herein to the contrary, no
dividends on shares of Convertible Preferred Stock shall be declared by the
Board of Directors of the Corporation or paid or set apart for payment by the
Corporation at such time as the terms and provisions of any agreement of the
Corporation, including any agreement relating to its indebtedness, prohibits
such declaration, payment or setting apart for payment or provides that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or payment shall be
restricted or prohibited by law.
4. Distributions Upon Liquidation, Dissolution or Winding Up.
---------------------------------------------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or other winding up of the affairs of the Corporation (in connection
with the bankruptcy or insolvency of the Corporation or otherwise), before any
payment or distribution of the assets of the Corporation (whether capital or
surplus) shall be made to or set apart for the holders of Junior Stock, the
holders of Convertible Preferred Stock shall be entitled to be paid out of the
assets of the Corporation in cash or property at its fair market value as
determined by the Board of Directors of the Corporation an amount per share
equal to the Liquidation Preference plus an amount equal to all dividends
accrued and unpaid thereon to the date of such liquidation or dissolution or
such other winding up. Except as provided in this paragraph, holders of
Convertible Preferred Stock shall not be entitled to any distribution in the
event of liquidation, dissolution or winding up of the affairs of the
Corporation.
(b) If, upon any such liquidation, dissolution or other winding
up of the affairs of the Corporation, the assets of the Corporation shall be
insufficient to permit the payment in full of the Liquidation Preference per
share plus an amount equal to all dividends accrued and unpaid on the
Convertible Preferred Stock and the full liquidating payments on all Parity
Stock, then the assets of the Corporation or the proceeds thereof shall be
ratably distributed among the holders of Convertible Preferred Stock and of any
Parity Stock in proportion to the full amounts to which they would otherwise be
entitled if all amounts payable thereon were paid in full. Neither the
consolidation or merger of the Corporation into or with another corporation or
corporations, nor the sale, lease, transfer or conveyance of all or
substantially all of the assets of the Corporation to another corporation or any
other entity for cash, securities or other property shall be deemed a
liquidation, dissolution or winding up of the affairs of the Corporation within
the meaning of this paragraph 4.
A-7
<PAGE>
(c) Written notice of any liquidation, dissolution or winding up
of the Corporation, stating the payment date or dates when and the place where
the amounts distributable in such circumstances shall be payable, shall be given
by first class mail, postage prepaid, not less than 30 days prior to any payment
date stated therein, to the holders of record of the shares of Convertible
Preferred stock at their address as the same shall appear in the records of the
Corporation.
5. Conversion Rights.
-----------------
(a) A holder of shares of Convertible Preferred Stock shall have
the right, at such holder's option, to convert all or any portion of its shares
of Convertible Preferred Stock into Common Stock at any time before the close of
business on the Business Day preceding the Redemption Date (unless the
Corporation shall default in payment of the Redemption Price, in which case, the
right of conversion shall be reinstated). For the purposes of conversion, each
share of Convertible Preferred Stock shall be valued at the Liquidation
Preference plus all accrued and unpaid dividends through the Conversion Date,
which shall be divided by the Conversion Price in effect on the Conversion Date
to determine the number of shares issuable upon conversion. Immediately
following such conversion, the rights of the holders of converted Convertible
Preferred Stock shall cease and the persons entitled to receive the Common Stock
upon the conversion of Convertible Stock shall be treated for all purposes as
having become the owners of such Common Stock.
(b) To convert Convertible Preferred Stock, a holder must (i)
surrender the certificate or certificates evidencing the shares of Convertible
Preferred Stock to be converted, duly endorsed in a form satisfactory to the
Corporation, at the office of the Corporation or transfer agent for the
Convertible Preferred Stock, if any, (ii) notify the Corporation at such office
that he elects to convert Convertible Preferred Stock, and the number of shares
he wishes to convert, (iii) state in writing the name or names in which he
wishes the certificate or certificates for shares of Common Stock to be issued,
and (iv) pay any transfer or similar tax if required (provided, however, that no
such payment shall be required if the Common Stock issuable upon conversion is
to be issued in the name of the converting holder of Convertible Preferred
Stock). In the case of lost or destroyed certificates evidencing ownership of
shares of Convertible Preferred Stock to be surrendered for conversion, the
holder shall submit proof of loss or destruction, and such indemnity as shall be
reasonably required by the Corporation. In the event that a holder fails to
notify the Corporation of the number of shares of Convertible Preferred Stock
which he wishes to convert, he shall be deemed to have elected to convert all
shares represented by the certificate or certificates surrendered for
conversion. The date on which the holder satisfies all those requirements is the
"Conversion Date." As soon as practicable after the Conversion Date, the
Corporation shall deliver or shall deliver through its transfer agent a
certificate for the number of full shares of Common Stock issuable upon the
conversion, a check for any fractional share and a new certificate representing
the unconverted portion, if any, of the shares of Convertible Preferred Stock
represented by the certificate or certificates surrendered for conversion. The
person in whose name the Common Stock certificate is registered shall be treated
as the stockholder of record on and after the Conversion Date. All shares of
Common Stock issuable upon conversion of the Convertible Preferred Stock shall
be fully paid and nonassessable and shall rank pari passu with the other shares
---- -----
of Common Stock outstanding from time to time. In the case of Convertible
Preferred Stock that has been converted after any Record Date but before the
next succeeding Dividend Payment Date, dividends that are payable on such
Dividend Payment Date shall be payable on such Dividend Payment Date
notwithstanding such conversion, and such dividends shall
A-8
<PAGE>
be paid to the holder of such Convertible Preferred Stock on such Record Date
(and shall not constitute "accrued and unpaid dividends" for purposes of
paragraph 5(a)). No other payment or adjustment for dividends, or for any
dividends in respect of shares of Common Stock shall be made upon conversion.
Holders of Common Stock issued upon conversion shall not be entitled to receive
any dividend payable to holders of Common Stock as of any record time before the
close of business on the Conversion Date. If a holder of Convertible Preferred
Stock converts more than one share at a time the number of full shares of Common
Stock issuable upon conversion shall be based on the total value of all shares
of Convertible Preferred Stock converted.
(c) The Corporation shall not issue a fractional share of Common
Stock upon conversion of Convertible Preferred Stock. Instead, the Corporation
shall deliver a check for an amount equal to the value of the fractional share.
The value of a fraction of a share is determined by multiplying the Current
Market Price of the Common Stock as of the Conversion Date by the fraction,
rounded to the nearest cent.
(d) A holder delivering Convertible Preferred Stock for
conversion will not be required to pay any taxes or duties in respect of the
issue or delivery of Common Stock on conversion but will be required to pay any
tax or duty that may be payable in respect of any transfer involved in the issue
or delivery of the shares of Common Stock. Certificates representing shares of
Common Stock will not be issued or delivered unless all taxes and duties, if
any, payable by the holder have been paid.
(e) The Corporation has reserved and shall continue to reserve
out of its authorized but unissued Common Stock or its Common Stock held in
treasury enough shares of Common Stock to permit the conversion of the
Convertible Preferred Stock in full. All shares of Common Stock which may be
issued upon conversion of Convertible Preferred Stock shall be fully paid and
nonassessable. The Corporation will use its best efforts to comply with all
securities laws regulating the offer and delivery of shares of Common Stock upon
conversion of Convertible Preferred Stock and will use its best efforts to list
such shares on each national securities exchange on which the Common Stock is
listed.
(f) If the Corporation:
(i) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Equity;
(ii) subdivides its outstanding shares of Common Stock into
a greater number of shares;
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares; or
(iv) issues by reclassification of its Common Stock any
shares of its capital stock;
then the Conversion Price and the number and kind of shares of capital stock of
the Company issuable upon conversion (as in effect immediately prior to such
action) shall be proportionately adjusted so that
A-9
<PAGE>
the holder of Convertible Preferred Stock thereafter converted may receive for
the same aggregate Conversion Price the aggregate number and kind of shares of
capital stock of the Corporation that he would have owned immediately following
such action if he had converted Convertible Preferred Stock immediately prior to
such action. The adjustment shall become effective immediately after the record
date in the case of dividend or distribution and immediately after the effective
date of a subdivision, combination or reclassification. Such adjustment shall be
made successively whenever any event listed above shall occur. If, after an
adjustment referred to in clauses (i) through (iv) above, a holder of
Convertible Preferred Stock upon conversion of it may receive shares of two or
more classes of capital stock of the Corporation, the Corporation shall
determine the allocation of the Conversion Price between the classes of capital
stock. After such allocation, the conversion rights and the Conversion Price
with respect to each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
subparagraph 5(f).
(g) If the Corporation distributes any Rights to all holders of
its Common Stock entitling them to purchase shares of Common Stock at a price
per share less than the Current Market Price per share on the date of
distribution of such Rights, the Conversion Price shall be adjusted in
accordance with the formula:
NxP
---
C'= C x O + M
-----
O + N
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares of Common
Stock.
M = the Current Market Price per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such Rights are issued
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such Rights. If at the end of
the period during which such Rights are exercisable, not all Rights shall have
been exercised, the Conversion Price shall be immediately readjusted to what it
would have been if "N" in the above formula had been the number of shares
actually issued.
(h) If the Corporation distributes to all holders of shares of
its Common Stock (i) any shares of any class of capital stock of the Corporation
other than its Common Equity, (ii) any evidence of indebtedness or other
securities of the Corporation or any subsidiary of the Corporation, or (iii)
cash or any other assets of the Corporation (including securities, but excluding
(x) those dividends, Rights and distributions referred to above in subparagraphs
5(f) and 5(g) and in subparagraphs 5(i) and 5(j), (y) dividends and
distributions paid exclusively in cash and (z) distributions
A-10
<PAGE>
upon mergers or consolidations to which paragraph 5(m) applies), the Conversion
Price shall be adjusted in accordance with the formula:
C'= C x M - F
-----
M
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
M = the Current Market Price per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date of the capital stock,
indebtedness, other securities, cash or assets distributed per
share of Common Stock.
The adjustment shall be made successively whenever any such distribution is made
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution.
(i) If the Corporation issues shares of Common Stock for a
consideration per share less than the Current Market Price per share on the date
the Corporation issues such additional shares, the Conversion Price shall be
adjusted in accordance with the formula:
P
-
C'= C x O + M
-----
A
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
M = the Current Market Price per share on the date of issuance of
such additional shares.
A = the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance. This
subparagraph 5(i) does not apply to (i) any transaction or issuance described in
subparagraphs 5(f), 5(g) or 5(h) above or subparagraph 5(j) below, (ii) the
conversion of Convertible Preferred Stock or Convertible Exchangeable Preferred
Stock, or the exercises of the warrants to purchase Common Stock issued to
Carlyle Affiliates on the Initial Issue Date, or the conversion, exchange or
exercise of other securities whose issuance was the subject of an adjustment
pursuant to subparagraph 5(g) or
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<PAGE>
5(h) above or subparagraph 5(j) below, (iii) Common Stock issued to the
Corporation's employees under bona fide employee benefit plans adopted by the
Board of Directors of the Corporation and approved by the holders of Common
Stock when required by law, if such Common Stock would otherwise by covered by
this subparagraph 5(i), but only to the extent that (x) such shares are issued
pursuant to employee stock options with an exercise price not less than the
Current Market Price on the date of issuance of such option or (y) the aggregate
number of shares otherwise excluded hereby (together with the aggregate number
of shares issuable upon conversion, exchange or exercise of the securities
excluded by clause (iii) of subparagraph 5(j) below) and issued after the
Initial Issue Date do not exceed 5% of the Common Stock outstanding at the time
of any such issuance, (iv) Common Stock issued to acquire, or in the acquisition
of, all or any portion of a business as a going concern, in an arm's-length
transaction between the Corporation and an unaffiliated third party, whether
such acquisition shall be effected by purchase of assets, exchange of
securities, merger, consolidation or otherwise, or (v) Common Stock issued in a
bona fide public offering pursuant to a firm commitment underwriting.
(j) If the Corporation issues any Rights (other than Convertible
Preferred Stock or securities issued in transactions described in subparagraph
5(g) or 5(h) above) and for a consideration per share of Common Stock initially
deliverable upon conversion, exchange or exercise of such Rights that is less
than the Current Market Price per share on the date of issuance of such Rights,
the Conversion Price shall be adjusted in accordance with the formula:
P
-
C'= C x O + M
-----
O + D
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such Rights.
P = the aggregate consideration received for the issuance of such
Rights.
M = the Current Market Price per share of Common Stock on the date
of issuance of such Rights.
D = the maximum number of shares deliverable upon conversion or in
exchange for or upon exercise of such Rights at the initial
conversion, exchange or exercise rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance. If all of
the Common Stock deliverable upon conversion, exchange or exercise of such
Rights has not been issued when such Rights are no longer outstanding, then the
Conversion Price shall promptly be readjusted to the Conversion Price that would
then be in effect had the adjustment upon the issuance of such Rights been made
on the basis of the actual number of shares of Common Stock issued upon
conversion, exchange or exercise of such Rights. This subparagraph 5(j) does not
apply to (i) the issuance of any such securities to acquire, or in the
acquisition of, all or any portion of a business as a going concern, in an
arm's-length transaction
A-12
<PAGE>
between the Corporation and an unaffiliated third party, whether such
acquisition shall be effected by purchase of assets, exchange of securities,
merger, consolidation or otherwise, (ii) the issuance of any such securities in
a bona fide public offering pursuant to a firm commitment underwriting, (iii)
the issuance of any such securities to the Corporation's employees under bona
fide employee benefit plans adopted by the Board of Directors of the Corporation
and approved by the holders of Common Stock when required by law, if such
securities would otherwise by covered by this subparagraph 5(j) (but only to the
extent that the aggregate number of shares issuable upon the conversion,
exchange or exercise of the aggregate number of securities excluded hereby
(together with the aggregate number of shares excluded by clause (iii)(y) of
subparagraph 5(i) above) and issued after the Initial Issue Date shall not
exceed 5% of the Common Stock outstanding at the time of any such issuance), or
(iv) shares issued as PIK Dividends.
(k) In case the Corporation or any of its subsidiaries shall, by
dividend or otherwise, make distributions exclusively in cash (excluding any
cash that is distributed upon a merger or consolidation to which Section 5(m)
applies or as part of a distribution covered by Section 5(h)) to all the holders
of Common Stock in an aggregate amount that, combined together with (i) the
aggregate amount of all other such all-cash distributions to all holders of its
Common Stock made within the 12 months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to this Section 5(k)
or Section 5(l) has been made and (ii) the aggregate of any cash plus the fair
market value of other consideration payable in respect of any tender or exchange
offer or other stock repurchase program by the Corporation or any of its
subsidiaries for all or any portion of the Common Stock concluded within the 12
months preceding the date of payment of such distribution and in respect of
which no adjustment pursuant to this Section 5(k) or Section 5(l) has been made
exceeds 12.5% of the Corporation's Market Capitalization on the record date for
such distribution then, and in each such case, immediately after the close of
business on such date of such determination, the Conversion Price shall be
adjusted in accordance with the formula:
C'= C x M - E
-----
M
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
M = the Current Market Price per share of Common Stock on the date
fixed for determination times the number of shares of Common
Stock outstanding on such date.
E = the total amount of cash to be distributed at such time to
holders of Common Stock.
(l) In the case of the consummation of a tender offer, exchange
offer (other than an odd-lot offer) or other stock repurchase program made by
the Corporation or any subsidiary thereof for all or any portion of the Common
Stock involving the payment by the Corporation or such subsidiary of an
aggregate consideration that, together with (i) any cash or other consideration
payable in a tender offer, exchange offer or other stock repurchase program by
the Corporation or any of its subsidiaries for Common Stock consummated within
12 months preceding the consummation of such tender offer, exchange offer or
other stock repurchase program (the
A-13
<PAGE>
"Expiration Time") in respect of which no adjustment has been made pursuant to
this paragraph 5(l) or Section 5(k) and (ii) the aggregate amount of all such
all-cash distributions referred to in Section 5(k) above to all holders of
Common Stock within the 12 months preceding such Expiration Time in respect of
which no adjustments have been made, exceeds 12.5% of the Corporation's Market
Capitalization as of the Trading Day next succeeding the Expiration Time, the
Conversion Price shall be reduced in accordance with the formula:
C'= C x M - E
-----
N
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
M = the Current Market Price per share of Common Stock on the
Trading Day next succeeding the Expiration Time times the number
of shares of Common Stock outstanding at the Expiration Time
(including any tendered, exchanged or purchased shares).
N = the Current Market Price per share of Common Stock on the
Trading Day next succeeding the Expiration Time times the number
of shares of the Common Stock outstanding at the Expiration
Time, less any shares purchased in such tender offer, exchange
offer or other stock repurchase program.
E = the fair market value of the aggregate consideration payable
to stockholders upon consummation of such tender offer, exchange
offer or other stock repurchase program.
The reduction shall become effective immediately prior to the opening of
business on the day following the Expiration Time.
(m) In case of any consolidation, amalgamation, arrangement or
merger of the Corporation with or into another Person or any merger of another
Person with or into the Corporation (other than a transaction to which paragraph
5(f) applies), or in case of any sale or transfer of all or substantially all of
the assets of the Corporation, each share of Convertible Preferred Stock then
outstanding will, without the consent of the holder of any Convertible Preferred
Stock, become convertible only into the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock (and other securities, if
applicable) into which such Convertible Preferred Stock was convertible
immediately prior thereto (assuming such holder of Common Stock (and other
securities, if applicable) failed to exercise any rights of election and that
such Convertible Preferred Stock was then convertible). Concurrently with the
consummation of such transaction, the corporation formed by or surviving any
such consolidation or merger if other than the Company, or the person to which
such sale or conveyance shall have been made, shall enter into a supplemental
agreement so providing and further providing for adjustments which shall be as
equivalent as may be practicable to the adjustments provided for in this
Section.
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<PAGE>
(n) In addition, in the event that any other transaction or event
occurs as to which the foregoing adjustment provisions are not strictly
applicable but the failure to make any adjustment would adversely affect the
conversion rights represented by the Convertible Preferred Stock in accordance
with the essential intent and principles of such provisions, then, in each such
case, either (i) the Corporation shall appoint an investment banking firm of
recognized national standing, or any other financial expert that does not (or
whose directors, officers, employees, affiliates or stockholders do not) have a
direct or material indirect financial interest in the Corporation or any of
subsidiaries, who has not been, and, at the time it is called upon to give
independent financial advice to the Corporation, is not (and none of its
directors, officers, employees, affiliates or stockholders are) a promoter,
director or officer of the Corporation or any of its subsidiaries, which will
give their opinion upon or (ii) the Board of Directors (by a majority of the
Non-Preferred Stock Directors) shall determine, consistent with such directors'
fiduciary duties to the Corporation's stockholders, the adjustment, if any, on a
basis consistent with the essential intent and principles established in the
foregoing conversion price adjustment provisions, necessary to preserve, without
dilution, the conversion rights represented by the Convertible Preferred Stock.
Upon receipt of such opinion or determination, the Corporation shall promptly
mail a copy thereof to the holders of the Convertible Preferred Stock and will
make the adjustments described therein.
(o) For purposes of any computation respecting consideration
received pursuant to a transaction described or contemplated by this paragraph
5, the following shall apply:
(i) in case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Corporation for any underwriting of the issue or
otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof
(irrespective of the accounting treatment thereof);
(iii) whenever this Certificate of Designation calls for the
determination of "fair market value," such fair market value shall be
determined in good faith by the Board of Directors (by a majority of the
Non-Preferred Stock Directors) as evidenced by a written resolution
thereof, and subject to the provisions of subparagraph 5(v) below; and
(iv) in the case of the issuance of Rights, the aggregate
consideration received therefor shall be deemed to be the consideration
received by the Corporation for the issuance of such Rights plus the
additional minimum consideration, if any, to be received by the Corporation
upon the conversion or exchange or exercise thereof (the consideration in
each case to be determined in the same manner as provided in clauses (i)
and (ii) of this subparagraph 5(o)).
(p) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Conversion Price. Any adjustments which by reason of this subparagraph (p)
are not required to be made shall be carried
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<PAGE>
forward and taken into account in any subsequent adjustment. All calculations
under this paragraph 5 shall be made to the nearest cent or to the nearest
1/100th of a share, as the case may be.
(q) No adjustment in the Conversion Price need be made under this
paragraph 5 for (i) rights to purchase Common Stock pursuant to a Corporation
plan for reinvestment of dividends or interest, or (ii) any change in the par
value or no par value of the Common Stock. The Corporation shall take no action
that would cause any adjustment under this paragraph 5 that would reduce the
Conversion Price below the par value of the Common Stock. If an adjustment is
made to the Conversion Price upon the establishment of a record date for a
distribution subject to subparagraphs 5(g) or 5(h) above and if such
distribution is subsequently canceled, the Conversion Price then in effect shall
be readjusted, effective as of the date when the Board of Directors of the
Corporation determines to cancel such distribution, to the Conversion Price
which would have been in effect if such record date had not been fixed. No
adjustment in the Conversion Price need be made under subparagraphs 5(h), 5(k)
and 5(l) above if the Corporation issues or distributes to each holder of
Convertible Preferred Stock the shares of capital stock, evidences of
indebtedness, other securities of the Corporation or any subsidiary of the
Corporation, assets, Rights or cash, referred to in those subparagraphs that
each holder would have been entitled to receive had Convertible Preferred Stock
been converted into Common Stock prior to the happening of such event or the
record date with respect thereto.
(r) Whenever the Conversion Price is adjusted, the Corporation
shall promptly mail to holders of Convertible Preferred Stock, first class,
postage prepaid, a notice of the adjustment and a certificate from the
Corporation's independent public accountants briefly stating the facts requiring
the adjustment and the manner of computing it. Subject to subparagraph 5(v)
below, the certificate shall be conclusive evidence that the adjustment is
correct.
(s) The Corporation from time to time may, by a vote of the Board
of Directors (by a majority of the Non-Preferred Stock Directors) reduce the
Conversion Price by any amount for any period of time if the period is at least
twenty (20) Business Days and if the reduction is irrevocable during the period,
but in no event may the Conversion Price be less than the par value of a share
of Common Stock. Whenever the Conversion Price is so reduced, the Corporation
shall mail to holders of Convertible Preferred Stock a notice of the reduction.
The Corporation shall mail the notice first class, postage prepaid, at least 20
days before the date the reduction in the Conversion Price is to take effect.
The notice shall state the reduced Conversion Price and the period it will be in
effect. A reduction of the Conversion Price pursuant to this subparagraph 5(s)
does not change or adjust the Conversion Price otherwise in effect for purposes
of subparagraphs 5(f), 5(g), 5(h), 5(i), 5(j), 5(k) and 5(l) above.
(t) If:
(i) the Corporation takes any action that would require an
adjustment in the Conversion Price pursuant to subparagraph 5(g) or 5(h)
above, or clause (iv) of subparagraph 5(f) above;
A-16
<PAGE>
(ii) the Corporation consolidates or merges with, or
transfers all or substantially all of its assets to, another corporation,
and stockholders of the Corporation must approve the transaction; or
(iii) there is a dissolution or liquidation of the
Corporation;
a holder of Convertible Preferred Stock may want to convert such stock into
shares of Common Stock prior to the record date for or the effective date
of the transaction so that he may receive the Rights, assets or securities
which a holder of shares of Common Stock on that date may receive.
Therefore, the Corporation shall mail to such holders a notice, first
class, postage prepaid, stating the proposed record or effective date, as
the case may be. The Corporation shall mail such notice at least twenty
(20) days before such date. Failure to mail the notice or any defect in
such notice shall not affect the validity of any transaction referred to in
clause (i), (ii) or (iii) of this subparagraph 5(t).
(u) In any case in which this paragraph 5 shall require that an
adjustment as a result of any event become effective from and after a record
date, the Corporation may elect to defer until after the occurrence of the event
triggering the adjustment (i) the issuance to the holder of any shares of
Convertible Preferred Stock converted after such record date and before the
occurrence of such event of the additional shares of Common Stock or other
capital stock issuable upon such conversion over and above the shares issuable
on the basis of the Conversion Price in effect immediately prior to adjustment
and (ii) a check for any remaining fractional shares of Common Stock as provided
in subparagraph 5(c) above; provided, however, that the Company shall deliver to
-------- -------
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares and cash upon the occurrence of the
event requiring the adjustment.
(v) Except as provided in the immediately following sentence, any
determination that the Corporation or its Board of Directors (including by a
majority of the Non-Preferred Stock Directors) must make pursuant to this
paragraph 5 shall be conclusive. Whenever the Corporation or its Board of
Directors (including by a majority of the Non-Preferred Stock Directors) shall
be required to make a determination under this paragraph 5, such determination
shall be made in good faith and may be challenged in good faith by the holders
of a majority of the shares of Convertible Preferred Stock then outstanding
(with any shares held by the Corporation or any of its Affiliates not being
considered to be outstanding for purposes of this Certificate of Designation),
and any dispute shall be resolved, at the Corporation's expense, by an
investment banking firm of recognized national standing selected by the
Corporation and acceptable to such holders of Convertible Preferred Stock;
provided, however, that in the event the determination by such investment
- -------- -------
banking firm deviates by no more than 5% from the Corporation's determination,
then the cost to the Corporation of the retention of the investment banking firm
shall be borne by the holders of the Convertible Preferred Stock challenging the
Corporation's determination.
(w) All shares of Convertible Preferred Stock converted pursuant
to this paragraph 5 shall be retired and shall be restored to the status of
authorized and unissued shares of preferred stock, without designation as to
series and may thereafter be reissued as shares of any series of preferred stock
other than Convertible Preferred Stock.
A-17
<PAGE>
(x) In the event that all holders of Convertible Exchangeable
Preferred Stock shall not have waived their rights that accrue pursuant to
Section 8 of the Convertible Exchangeable Preferred Stock Certificate of
Designations as a result of the Company's issuance of Convertible Preferred
Stock on the Initial Issuance Date, then (i) the Company shall send to the
holders of the Convertible Exchangeable Preferred Stock not providing such
waiver, as promptly as possible following the Closing Date, the Special
Conversion Notice (as defined in the Convertible Exchangeable Preferred Stock
Certificate of Designation) and (ii) upon expiration of the forty-five (45) day
period following the provision of such Special Conversion Notice, the Conversion
Price shall be adjusted in accordance with the following formula to adjust for
the effects of the conversion of Convertible Exchangeable Preferred Stock at the
Special Conversion Price (as defined in the Convertible Exchangeable Preferred
Stock Certificate of Designation):
C'= C x (O/(O + P - ((D/0.135)/X)))
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of shares of Common Stock outstanding immediately
prior to the conversion of shares of Convertible Exchangeable
Preferred Stock into Common Stock at the Special Conversion
Price.
P = the number of shares of Common Stock issued upon conversion of
shares of Convertible Exchangeable Preferred Stock at the Special
Conversion Price.
D = the amount of annual dividends payable on the shares of
Convertible Exchangeable Preferred Stock converted into Common
Stock at the Special Conversion Price.
X = the regular Conversion Price of the Convertible Exchangeable
Preferred Stock (i.e., $5.84).
6. Redemption by the Corporation.
-----------------------------
(a) The Convertible Preferred Stock may be redeemed in whole, but
not in part, at any time after , 2003 at the option of the Corporation,
as determined by the Board of Directors (by a majority of the Non-Preferred
Stock Directors), at the Redemption Price. If the Redemption Date is on or after
a Record Date and on or before the related Dividend Payment Date, the dividend
payable shall be paid to the holder in whose name the Convertible Preferred
Stock is registered at the close of business on such record date.
(b) Notice of any redemption shall be sent by or on behalf of the
Corporation not more than sixty (60) days nor less than thirty (30) days prior
to the Redemption Date, by first class mail, postage prepaid, to all holders of
record of the Convertible Preferred Stock at their respective last addresses as
they shall appear on the books of the Corporation; provided, however, that no
failure to give such notice or any defect therein or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any shares of
Convertible Preferred Stock except as to the holder to whom the Corporation has
failed to give notice or except as to the
A-18
<PAGE>
holder to whom notice was defective. In addition to any information required by
law or by the applicable rules of any exchange upon which Convertible Preferred
Stock may be listed or admitted to trading, such notice shall state: (i) the
Redemption Date; (ii) the Redemption Price; (iii) the place or places in the
United States where certificates for such shares are to be surrendered for
payment of the Redemption Price; (iv) that dividends on the shares to be
redeemed will cease to accrue on the Redemption Date; (v) the Conversion Price;
(viii) that Convertible Preferred Stock called for redemption may be converted
at any time before the close of business on the Redemption Date; and (vi) that
holders of Convertible Preferred Stock must satisfy the requirements of
paragraph 5 above if such holders desire to convert such shares. Upon the
mailing of any such notices of redemption, the Corporation shall become
obligated to redeem at the time of redemption specified thereon all shares
called for redemption.
(c) If notice has been mailed in accordance with subparagraph
6(b) above and provided that on or before the Redemption Date specified in such
notice, all funds necessary for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds in trust for the pro rata
benefit of the holders of the shares so called for redemption, so as to be, and
to continue to be available therefor, then, from and after the Redemption Date,
dividends on the shares of the Convertible Preferred Stock so called for
redemption shall cease to accrue, and said shares shall no longer be deemed to
be outstanding and shall not have the status of shares of Convertible Preferred
Stock, and all rights of the holders thereof as shareholders of the Corporation
(except the right to receive from the Corporation the Redemption Price) shall
cease. Upon surrender, in accordance with said notice, of the certificates for
any shares so redeemed (properly endorsed or assigned for transfer, if the
Corporation shall so require and the notice shall so state), such shares shall
be redeemed by the Corporation at the Redemption Price.
(d) Any funds deposited with a bank or trust Corporation for the
purpose of redeeming Convertible Preferred Stock shall be irrevocable except
that:
(i) the Corporation shall be entitled to receive from such
bank or trust Corporation the interest or other earnings, if any, earned on
any money so deposited in trust, and the holders of any shares redeemed
shall have no claim to such interest or other earnings; and
(ii) any balance of monies so deposited by the Corporation
and unclaimed by the holders of the Convertible Preferred Stock entitled
thereto at the expiration of two (2) years from the applicable Redemption
Date shall be repaid, together with any interest or other earnings earned
thereon, to the Corporation, and after any such repayment, the holders of
the shares entitled to the funds so repaid to the Corporation shall look
only to the Corporation for payment without interest or other earnings.
(e) No Convertible Preferred Stock may be redeemed except with
funds legally available for the payment of the Redemption Price.
(f) All shares of Convertible Preferred Stock redeemed pursuant
to this paragraph 6 shall be retired and shall be restored to the status of
authorized and unissued shares of
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<PAGE>
preferred stock, without designation as to series and may thereafter be reissued
as shares of any series of preferred stock other than shares of Convertible
Preferred Stock.
7. Voting Rights.
--------------
In addition to any voting rights provided by law, the holders of
shares of Convertible Preferred Stock shall have the following voting rights:
(a) So long as any shares of the Convertible Preferred Stock
remain outstanding, each share of Convertible Preferred Stock shall entitle the
holder thereof to vote on all matters voted on by holders of Common Stock
(except during the Five Year Period with respect to the election of the Non-
Preferred Stock Directors), voting together with the Common Stock as a single
class (together with all other classes and series of stock of the Corporation
that are entitled to vote as a single class with the Common Stock) at all
meetings of the stockholders of the Corporation. In any vote with respect to
which the Convertible Preferred Stock shall vote with the holders of Common
Stock as a single class together with all other classes and series of stock of
the Corporation that are entitled to vote as a single class with the Common
Stock, each share of Convertible Preferred Stock shall entitle the holder
thereof to cast the 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 Convertible Preferred Stock is convertible on the date of such
vote. Such voting right of the holders of the Convertible Preferred Stock may be
exercised at any annual meeting of stockholders, any special meeting of
stockholders, or by written consent of the minimum number of shares required to
take such action pursuant to Section 228 of the Delaware General Corporation.
(b) On any matter on which the holders of Convertible Preferred
Stock are entitled by law or under the Certificate of Incorporation to vote
separately as a class, each such holder shall be entitled to one vote for each
share held, and such matter shall be determined by a majority of the votes cast
unless Delaware law or this Certificate of Designations requires approval by a
higher percentage.
(c) During such time as any shares of Convertible Preferred
Stock are outstanding, the Corporation will not, without the affirmative vote or
consent of the holders of at least a majority of the issued and outstanding
shares of Convertible Preferred Stock voting together as a separate class, (i)
create, authorize or issue (including on conversion or exchange of any
convertible or exchangeable securities or by reclassification) any class or
series of shares ranking on a parity with or prior to the Convertible Preferred
Stock, either as to dividends or redemption or upon voluntary or involuntary
liquidation, dissolution or winding up, (ii) increase the authorized shares of,
or issue (including on conversion or exchange of any convertible or exchangeable
securities or by reclassification) any shares of Convertible Preferred Stock,
except for the issuance of PIK Dividends in accordance with Section 3(b), (iii)
amend, alter, waive the application of, or repeal (whether by merger,
consolidation or otherwise) any provision of the Certificate of Incorporation of
the Corporation, enter into any agreement or take any other corporate action
which in any manner would alter, change, or otherwise adversely affect the
powers, rights or preferences of the Convertible Preferred Stock, (iv) effect
the reorganization, recapitalization, liquidation, dissolution or winding up of
the Corporation, or the sale, lease, conveyance or exchange of all or
substantially all of the assets, property or business of the Corporation, or the
merger or consolidation of the Corporation with or into any other corporation,
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<PAGE>
if such transaction in any manner would alter, change or otherwise adversely
affect the powers, rights, or preferences of the Convertible Preferred Stock or
(v) take any action which would cause a dividend or other distribution to be
deemed to be received by the holders of the Convertible Preferred Stock for
federal income tax purposes unless such dividend or other distribution is
actually received by such holders.
(d) Unless and until Carlyle Affiliates cease collectively to
beneficially own shares of capital stock having 20% or more of the votes that
may be cast generally at annual or special meetings of stockholders, then the
number of Directors comprising the Board of Directors shall at all times be an
odd number, and the holders of Convertible Preferred Stock, voting separately as
a class, shall have the exclusive right to elect (i) during the Five Year
Period, the smallest number of Directors that constitutes a majority of the
Board of Directors and (ii) subsequent to the Five Year Period, the greatest
number of Directors that constitutes a minority of the Board of Directors (each
such Director, a "Preferred Stock Director") at any special meeting of
stockholders called for such purpose, at each annual meeting of stockholders and
in any written consent of stockholders pursuant to Section 228 of the Delaware
General Corporation Law. So long as the holders of the Convertible Preferred
Stock have the right to elect Preferred Stock Directors pursuant to the
preceding sentence, then (i) during the Five Year Period, the holders of the
Common Stock, voting separately as a class, will have the exclusive right
(subject to the rights of the holders of Convertible Exchangeable Preferred
Stock pursuant to Section 10 of the Convertible Exchangeable Preferred Stock
Certificate of Designations) to elect the Non-Preferred Stock Directors and (ii)
subsequent to the Five Year Period (subject to the rights of the holders of
Convertible Exchangeable Preferred Stock pursuant to Section 10 of the
Convertible Exchangeable Preferred Stock Certificate of Designations) each share
of Convertible Preferred Stock shall entitle the holder thereof to vote,
together with the Common Stock as a single class (together with all other
classes and series of stock of the Corporation that are entitled to vote as a
single class with the Common Stock) for the election of the Non-Preferred Stock
Directors at any such meeting and in any written consent of stockholders
pursuant to Section 228 of the Delaware General Corporation Law. From and after
the date on which Carlyle Affiliates cease collectively to beneficially own
shares of capital stock having 20% or more of the votes that may be cast
generally at annual or special meetings of stockholders, the right of the
holders of the Convertible Preferred Stock to elect the Preferred Stock
Directors shall terminate in the manner set forth in subparagraph 7(e) and each
share of Convertible Preferred Stock shall thereafter entitle the holder thereof
to vote together with the Common Stock as a single class (together with all
other classes and series of stock of the Corporation that are entitled to vote
as a single class with the Common Stock) for the election of all directors of
the Corporation as provided in subparagraph 7(a) (subject to the provisions of
subparagraph 7(f) below and Section 10 of the Convertible Exchangeable Preferred
Stock Certification of Designations).
(e) The Preferred Stock Directors elected as provided herein
shall serve until the next annual meeting or until their respective successors
shall be elected and shall qualify. Any Preferred Stock Director may be removed
with or without cause by, and shall not be removed other than by, the vote of
the holders of a majority of the outstanding shares of Convertible Preferred
Stock, voting separately as a class, at a meeting called for such purpose or by
written consent in accordance with Section 228 of the Delaware General Corporate
Law. If the office of any Preferred Stock Director becomes vacant by reason of
death, resignation, retirement, disqualification or removal from office or
otherwise, the remaining Preferred Stock Directors, by majority vote, may elect
a successor, or, alternatively, the holders of a majority of the outstanding
shares of Convertible Preferred Stock,
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<PAGE>
voting separately as a class, at a meeting called for such purpose or by written
consent in accordance with Section 228 of the Delaware General Corporation Law
may elect a successor. Any such successor shall hold office for the unexpired
term in respect of which such vacancy occurred. Upon any termination of the
right of the holders of Convertible Preferred Stock to vote for and elect
Preferred Stock Directors as herein provided, the Preferred Stock Directors then
serving on the Board of Directors may continue to hold their office for the
remainder of their term. Only Non-Preferred Stock Directors shall have the right
to vote in the election of any person to fill any vacancy created by the death,
resignation, retirement, disqualification or removal from office or otherwise of
any Non-Preferred Stock Director and all such rights with respect to the Non-
Preferred Stock Directors shall be exercised for and on behalf of the Board of
Directors by a majority of the Non-Preferred Stock Directors. This subparagraph
(e) may not be amended without (x) the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock and (y) the affirmative vote
of the holders of a majority of the outstanding shares of Convertible Preferred
Stock.
(f) (i) Whenever, at any time or times when the Convertible
Preferred Stock is no longer entitled to elect Preferred Stock Directors
pursuant to subparagraph 7(d), dividends payable on the shares of Preferred
Stock at the time outstanding shall be cumulatively in arrears for six Dividend
Periods (whether or not consecutive), the holders of Convertible Preferred Stock
shall have the exclusive right, voting separately as a class with holders of
shares of any Parity Stock upon which like voting rights have been conferred and
are exercisable (the Convertible Preferred Stock and any such Parity Stock,
collectively for purposes of this subparagraph 7(f), the "Defaulted Preferred
Stock"), to elect two Directors at the Corporation's next annual meeting of
stockholders and at each subsequent annual meeting of stockholders; provided,
--------
however, that if such voting rights shall become vested more than 90 days or
- -------
less than 20 days before the date prescribed for the annual meeting of
stockholders, thereupon the holders of the shares of Defaulted Preferred Stock
shall be entitled to exercise their voting rights at a special meeting of the
holders of shares of Defaulted Preferred Stock as set forth in clauses (ii) and
(iii) of this subparagraph 7(f). At elections for such Directors, each holder of
Preferred Stock shall be entitled to one hundred votes for each share held (the
holders of shares of any other series of Defaulted Preferred Stock ranking on
such a parity being entitled to such number of votes, if any, for each share of
stock held as may be granted to them). Upon the vesting of such right of the
holders of Defaulted Preferred Stock, the maximum authorized number of members
of the Board of Directors shall automatically be increased by two and the two
vacancies so created shall be filled by vote of the holders of outstanding
Defaulted Preferred Stock as hereinafter set forth. The right of holders of
Defaulted Preferred Stock, voting separately as a class without regard to
series, to elect members of the Board of Directors as aforesaid shall continue
until such time as all dividends accumulated on Defaulted Preferred Stock shall
have been paid or declared and funds set aside for payment in full, at which
time such right shall terminate, except as herein or by law expressly provided,
subject to revesting in the event of each and every subsequent default of the
character above mentioned.
(ii) Whenever such voting right shall have vested, such
right may be exercised initially either at a special meeting of the holders of
shares of Defaulted Preferred Stock called as hereinafter provided, or at any
annual meeting of stockholders held for the purpose of electing Directors, and
thereafter at such meetings or by the written consent of such holders pursuant
to Section 228 of the General Corporation Law of the State of Delaware.
A-22
<PAGE>
(iii) At any time when such voting right shall have vested
in the holders of shares of Defaulted Preferred Stock entitled to vote thereon,
and if such right shall not already have been initially exercised, an officer of
the Corporation shall, upon the written request of holders of record of 10% of
the voting power represented by the shares of such Defaulted Preferred Stock
then outstanding, addressed to the Treasurer of the Corporation, call a special
meeting of holders of shares of such Defaulted Preferred Stock. Such meeting
shall be held at the earliest practicable date upon the notice required for
annual meetings of stockholders at the place for holding annual meetings of
stockholders of the Corporation or, if none, at a place designated by the
Treasurer of the Corporation. If such meeting shall not be called by the proper
officers of the Corporation within 30 days after the personal service of such
written request upon the Treasurer of the Corporation, or within 30 days after
mailing the same within the United States, by registered mail, addressed to the
Treasurer of the Corporation at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal authorities), then the
holders of record of 10% of the voting power represented by the shares of
Defaulted Preferred Stock then outstanding may designate in writing any person
to call such meeting at the expense of the Corporation, and such meeting may be
called by such person so designated upon the notice required for annual meetings
of stockholders and shall be held at the same place as is elsewhere provided in
this paragraph. Any holder of shares of Defaulted Preferred Stock then
outstanding that would be entitled to vote at such meeting shall have access to
the stock books of the Corporation for the purpose of causing a meeting of
stockholders to be called pursuant to the provisions of this paragraph.
Notwithstanding the provisions of this paragraph, however, no such special
meeting shall be called or held during a period within 45 days immediately
preceding the date fixed for the next annual meeting of stockholders.
(iv) The directors elected pursuant to this subparagraph
7(f) shall serve until the earlier of (i) the next annual meeting or until their
respective successors shall be elected and shall qualify or (ii) until such time
as all dividends accumulated on Defaulted Preferred Stock shall have been paid
or declared and funds set aside for payment in full; any Director elected by the
holders of Defaulted Preferred Stock may be removed by, and shall not be removed
otherwise than by, the vote of the holders of a majority of the voting power of
the outstanding shares of the Defaulted Preferred Stock who were entitled to
participate in such election of directors, voting as a separate class, at a
meeting called for such purpose or by written consent as permitted by law and
the Certificate of Incorporation and Bylaws of the Corporation. If the office of
any Director elected by the holders of Defaulted Preferred Stock, voting as a
class, becomes vacant by reason of death, resignation, retirement,
disqualification or removal from office or otherwise, the remaining Director
elected by the holders of Defaulted Preferred Stock, voting as a class, may
choose a successor who shall hold office for the unexpired term in respect of
which such vacancy occurred. Upon any termination of the right of the holders of
Defaulted Preferred Stock to vote for directors as herein provided, the term of
office of all Directors then in office elected by the holders of Defaulted
Preferred Stock, voting as a class, shall terminate immediately. Whenever the
terms of office of the Directors elected by the holders of Defaulted Preferred
Stock, voting as a class, shall so terminate and the special voting powers
vested in the holders of Defaulted Preferred Stock shall have expired, the
number of Directors shall be such number as may be provided for in the Bylaws or
Certificate of Incorporation irrespective of any increase made pursuant to the
provisions of this subparagraph 7(f).
A-23
<PAGE>
8. Exclusion of Other Rights. Except as may otherwise be required by
-------------------------
law, the shares of Convertible Preferred Stock shall not have any voting powers,
preferences and relative, participating, optional or other special rights, other
than those specifically set forth in this resolution (as such resolution may be
amended from time to time) and in the Certificate of Incorporation. The shares
of Convertible Preferred Stock shall have no preemptive or subscription rights
in respect of any securities of the Corporation.
9. Financial Statements.
--------------------
(a) Whether or not required by the rules and regulations of the
Commission, so long as any shares of Convertible Preferred Stock are
outstanding, the Corporation shall furnish to the holders of Convertible
Preferred Stock (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Corporation were required to file such Forms, including "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the
Corporation's certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Corporation were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Corporation shall
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, for so long as any Convertible Preferred Stock remains
outstanding, the Corporation shall furnish to the holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(b) The Corporation shall, so long as any of the shares of
Convertible Preferred Stock are outstanding, deliver to the holders of
Convertible Preferred Stock, forthwith upon any Executive Officer of the
Corporation becoming aware of any default under this Certificate of
Designations, an Officers' Certificate specifying such default and what action
the Corporation is taking or proposes to take with respect thereto.
10. Ranking. With regard to rights to receive dividends, redemption
-------
payments and distributions upon liquidation, dissolution or winding up of the
Corporation, the Convertible Preferred Stock shall rank pari passu with any
---- -----
Parity Stock and senior to the Common Stock and any other equity securities or
other securities into which any convertible indebtedness is convertible which
are issued by the Corporation after the date of this Certificate of Designation.
The Convertible Preferred Stock shall not be subject to the creation of capital
stock senior with regards to the right to receive dividends, redemption payments
and distribution upon liquidation, dissolution or winding up of the Corporation.
11. Modification and Waiver.
-----------------------
(a) Except as otherwise provided above, the terms of this
Certificate of Designation may be amended and the rights hereunder may be waived
with the consent of holders of a majority of the shares of the Convertible
Preferred Stock then outstanding, provided, that no such
--------
A-24
<PAGE>
modification or waiver shall change the dividend rights or the terms for
conversion of the Convertible Preferred Stock without the consent of each holder
of Convertible Preferred Stock.
(b) The Convertible Preferred Stock shall also be subject to the
miscellaneous provisions regarding the Corporation's preferred stock set forth
in the Certificate of Incorporation, as amended.
12. Headings of Subdivisions. The headings of the various
------------------------
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
13. Severability of Provisions. If any voting powers, preferences and
--------------------------
relative, participating, optional and other special rights of the Convertible
Preferred Stock and qualifications, limitations and restrictions thereof set
forth in this resolution (as such resolution may be amended from time to time)
is invalid, unlawful or incapable of being enforced by reason of any rule of law
or public policy, all other voting powers, preferences and relative,
participating, optional and other special rights of the Convertible Preferred
Stock and any qualifications, limitations and restrictions thereof set forth in
this resolution (as so amended) which can be given effect without the invalid,
unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of the Convertible Preferred
Stock or qualifications, limitations and restrictions thereof shall,
nevertheless, remain in full force and effect, and no voting powers, preferences
and relative, participating, optional or other special rights of the Convertible
Preferred Stock or qualifications, limitations and restrictions thereof herein
set forth shall be deemed dependent upon any other such voting powers,
preferences and relative, participating, optional or other special rights of
Convertible Preferred Stock or qualifications, limitations and restrictions
thereof unless so expressed herein.
14. Record Holders. The Corporation and the transfer agent for the
--------------
Convertible Preferred Stock may deem and treat the record holder of any shares
of Preferred Stock as the true and lawful owner thereof for all purposes, and
neither the Company nor the transfer agent shall be affected by any notice to
the contrary.
15. Notice. Except as may otherwise be provided for herein, all
------
notices referred to herein shall be in writing, and all notices hereunder shall
be deemed to have been given upon receipt, in the case of a notice of conversion
given to the Corporation as contemplated in Section 5(b) hereof, or, in all
other cases, upon the earlier of receipt of such notice or three Business Days
after the mailing of such notice if sent by registered mail (unless first-class
mail shall be specifically permitted for such notice under the terms of this
Certificate) with postage prepaid, addressed: if to the Corporation, to its
offices at 23456 Hawthorne Boulevard, Torrance, California 90505 Attention:
Secretary or to an agent of the Corporation designated as permitted by this
Certificate, or, if to any holder of the Convertible Preferred Stock, to such
holder at the address of such holder of the Convertible Preferred Stock as
listed in the stock record books of the Corporation (which may include the
records of any transfer agent for the Preferred Stock); or to such other address
as the Company or holder, as the case may be, shall have designated by notice
similarly given.
A-25
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
duly executed by [NAME AND TITLE OF OFFICER] and attested by [NAME OF SECRETARY]
its secretary, this day of , 199 .
---- ---------- -
INTERNATIONAL TECHNOLOGY CORPORATION
By:
---------------------------------
ATTEST: Name:
----------------------------
Title:
---------------------------
By:
------------------------
Name:
----------------------
Secretary
A-26
<PAGE>
EXHIBIT B
FORM OF
REGISTRATION RIGHTS AGREEMENT
<PAGE>
================================================================================
INTERNATIONAL TECHNOLOGY CORP.
____________________
REGISTRATION RIGHTS AGREEMENT
DATED AS OF ______________, 1996
================================================================================
<PAGE>
<TABLE>
<S> <C>
1. DEFINITIONS.......................................................... 1
2. DEMAND REGISTRATIONS................................................. 4
(a) Timing Of Demand Registrations.............................. 4
(b) Number of Demand Registrations.............................. 4
(c) Required Thresholds......................................... 4
(d) Participation............................................... 4
(e) Underwriter's Cutback....................................... 4
(f) Managing Underwriter........................................ 5
3. PIGGYBACK REGISTRATIONS.............................................. 5
(a) Participation............................................... 5
(b) Underwriter's Cutback....................................... 5
(c) Company Control............................................. 6
4. HOLD-BACK AGREEMENTS................................................. 6
(a) By Holders of Registrable Securities........................ 6
(b) By the Company and Others................................... 6
5. REGISTRATION PROCEDURES.............................................. 7
6. REGISTRATION EXPENSES................................................ 11
(a) Demand Registrations........................................ 11
(b) Piggyback Registrations..................................... 11
(c) Company Expenses............................................ 11
7. INDEMNIFICATION...................................................... 11
(a) Indemnification by Company.................................. 11
(b) Indemnification Procedures.................................. 12
(c) Indemnification by Holder of Registrable Securities......... 13
(d) Contribution................................................ 13
8. EXCHANGE ACT REPORTING REQUIREMENTS.................................. 14
9. REQUIREMENTS FOR PARTICIPATION IN UNDERWRITTEN OFFERINGS............. 15
10. SUSPENSION OF SALES.................................................. 15
11. FUTURE REGISTRATION RIGHTS AGREEMENTS................................ 15
12. MISCELLANEOUS........................................................ 16
(a) Remedies.................................................... 16
(b) No Inconsistent Agreements.................................. 16
(c) Amendments and Waivers...................................... 17
(d) Notices..................................................... 17
(e) Successors and Assigns...................................... 17
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
(f) Counterparts................................................ 17
(g) Table of Contents and Headings.............................. 18
(h) Governing Law............................................... 18
(i) Severability................................................ 18
(j) Forms....................................................... 18
(k) Entire Agreement............................................ 18
</TABLE>
ii
<PAGE>
INTERNATIONAL TECHNOLOGY CORP.
23456 HAWTHORNE BOULEVARD, TORRANCE, CALIFORNIA 90505
This Registration Rights Agreement ("Agreement") is made and entered into
as of ________ __, 1996, by and among International Technology Corporation, a
Delaware corporation (the "Company"), and the investors (herein referred to
collectively as the "Investors" and individually as an "Investor") constituting
the "Purchasers" under the Securities Purchase Agreement dated as of August 28,
1996 (the "Purchase Agreement"). In order to induce the Investors to enter into
the Purchase Agreement, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Board of Directors: The Board of Directors of the Company.
Claim: Any loss, claim, damages, liability or expense (including the
reasonable costs of investigation and legal fees and expenses).
Common Stock: The common stock, par value $1.00 per share, of the Company.
Demand Registration: A registration pursuant to Section 2 hereof.
Equity Security: Any capital stock of the Company or any security
convertible, with or without consideration, into any such stock, or any security
carrying any warrant or right to subscribe to or purchase any such stock, or any
such warrant or right.
Exchange Act: The Securities Exchange Act of 1934, as from time to time
amended.
Firm Commitment Underwritten Offering: An offering in which the
underwriters agree to purchase securities for distribution pursuant to a
registration statement under the Securities Act and in which the obligation of
the underwriters is to purchase all the securities being offered if any are
purchased.
Holder: The beneficial owner of a security. For all purposes of this
Agreement, the Company shall be entitled to treat the record owner of a security
as the beneficial owner of such security unless the Company has been given
written notice of the existence and identity of a different beneficial owner. A
Holder of Preferred Stock shall be deemed to be the Holder of the Common Stock
into which such Preferred Stock could be converted.
B-1
<PAGE>
Indemnified Holder: Any Holder of Registrable Securities, any officer,
director, employee or agent of any such Holder and any Person who controls any
such Holder within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act.
Misstatement: An untrue statement of a material fact or an omission to
state a material fact required to be stated in a Registration Statement or
Prospectus or necessary to make the statements in a Registration Statement,
Prospectus or preliminary prospectus not misleading.
Person: A natural person, partnership, corporation, business trust,
association, joint venture or other entity or a government or agency or
political subdivision thereof.
Piggyback Registration: A registration pursuant to Section 3 hereof.
Preferred Stock: The Cumulative Convertible Participating Preferred Stock
of the Company being issued and sold pursuant to the Purchase Agreement.
Prospectus: The prospectus included in any Registration Statement, as
supplemented by any and all prospectus supplements and as amended by any and all
post-effective amendments and including all material incorporated by reference
in such prospectus.
Registration: A Demand Registration or a Piggyback Registration.
Registration Expenses: The out-of-pocket expenses of a Registration,
including:
(1) all registration and filing fees (including fees with respect to
filings required to be made with the National Association of Securities
Dealers);
(2) fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel for the underwriters or
selling holders in connection with blue sky qualifications of the
Registrable Securities and determinations of their eligibility for
investment under the laws of such jurisdictions as the managing
underwriters or holders of a majority of the Registrable Securities being
sold may designate);
(3) printing, messenger, telephone and delivery expenses;
(4) fees and disbursements of counsel for the Company, counsel for
the underwriters and of not more than one firm of attorneys for the sellers
of the Registrable Securities;
(5) fees and disbursements of all independent certified public
accountants of the Company incurred in connection with such Registration
(including the expenses of any special audit and "cold comfort" letters
incident to such registration);
(6) fees and disbursements of underwriters (excluding discounts,
commissions, fees or expenses of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating to the
distribution of the Registrable Securities);
B-2
<PAGE>
(7) premiums and other costs of securities acts liability insurance
if the Company so desires or if the underwriters or selling holders of
Registrable Securities so require; and
(8) fees and expenses of any other Persons retained by the Company.
Registration Statement: Any registration statement under the Securities
Act on an appropriate form (which form shall be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution thereof and shall include all financial statements required by the
SEC to be filed therewith) which covers Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus included in such
registration statement, amendments (including post-effective amendments) and
supplements to such registration statement, and all exhibits to and all material
incorporated by reference in such registration statement.
Registrable Securities: (a) The shares of Common Stock issued or issuable
upon conversion of the Preferred Stock, whether or not owned by the Investors,
(b) the shares of Common Stock issued or issuable upon exercise of any Warrants,
whether or not owned by the Investors , and (c) any securities issued or
issuable with respect to such Common Stock by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or reorganization; provided that any such share or other security
shall be deemed to be Registrable Securities only if and so long as it is a
Transfer Restricted Security.
Securities Act: The Securities Act of 1933, as from time to time amended.
SEC: The Securities and Exchange Commission.
Transfer Restricted Security: A security that has not been sold to or
through a broker, dealer or underwriter in a public distribution or other public
securities transaction or sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Rule 144
promulgated thereunder (or any successor rule). The foregoing notwithstanding,
a security shall remain a Transfer Restricted Security until (i) all stop
transfer instructions or notations and restrictive legends with respect to such
security have been lifted or removed and (ii) the Holder of such security has
received at Company expense an opinion of counsel to the Company (which counsel
and opinion are reasonably satisfactory to such Holder), to the effect that such
shares in such Holder's hands are freely transferable in any public or private
transaction without registration under the Securities Act (or such Holder has
waived receipt of such opinion).
Underwritten registration or underwritten offering: A registration in
which securities of the Company are sold to an underwriter for distribution to
the public.
Warrants: The warrants to purchase Common Stock issued pursuant to that
certain Warrant Agreement dated of even date herewith by and among the Company
and the Investors.
B-3
<PAGE>
2. DEMAND REGISTRATIONS
(a) TIMING OF DEMAND REGISTRATIONS
Holders of Registrable Securities constituting at least 20% of the
Registrable Securities then outstanding may request at any time that the Company
file a registration statement under the Securities Act on an appropriate form
(which form shall be available for the sale of the Registrable Securities in
accordance with the intended method or methods of distribution thereof and shall
include all financial statements required by the SEC to be filed herewith)
covering the shares of Registrable Securities that are the subject of such
request.
(b) NUMBER OF DEMAND REGISTRATIONS
The Company shall be obligated to prepare, file and cause to become
effective pursuant to this Section 2 no more than five Registration Statements;
provided, however, that a Registration Statement shall not be counted as one of
the five Demand Registrations hereunder unless it becomes effective and is
maintained effective in accordance with the requirements specified in Section
5(a).
(c) REQUIRED THRESHOLDS
The Company shall not be obligated to prepare, file and cause to
become effective pursuant to this Section 2 a Registration Statement unless the
proposed aggregate public offering price of the securities to be included in
such Demand Registration is at least $5 million. Nor shall the Company be
obligated to prepare, file or cause to become effective such Registration
Statement upon a demand made by the Holders of less than 50% the Registrable
Securities then outstanding if such demand is made less than six months after
the effective date of the Company's most recent registration statement for
shares of Common Stock (other than a Registration Statement on Form S-4 or Form
S-8 or any successor forms thereto).
(d) PARTICIPATION
The Company shall promptly give written notice to all Holders of
Registrable Securities upon receipt of a request for a Demand Registration
pursuant to Section 2(a) above. The Company shall include in such Demand
Registration such shares of Registrable Securities for which it has received
written requests to register such shares within 30 days after such written
notice has been given.
(e) UNDERWRITER'S CUTBACK
If the public offering of Registrable Securities is to be underwritten
and, in the good faith judgment of the managing underwriter, the inclusion of
all the Registrable Securities requested to be registered hereunder would
interfere with the successful marketing of a smaller number of such shares of
Registrable Securities, the number of shares of Registrable Securities to be
included shall be reduced to such smaller number with the participation in such
offering to be pro rata among the Holders of Registrable Securities requesting
such registration, based upon the number of shares of Registrable Securities
owned by such Holders.
B-4
<PAGE>
Any shares that are thereby excluded from the offering shall be
withheld from the market by the Holders thereof for a period (not to exceed 30
days prior to the effective date and 90 days thereafter) that the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering.
The Company and, subject to the requirements of Section 11 hereof,
other Holders of securities of the Company may include such securities in such
Registration if, but only if, the managing underwriter concludes that such
inclusion will not interfere with the successful marketing of all the
Registrable Securities requested to be included in such registration.
(f) MANAGING UNDERWRITER
The managing underwriter or underwriters of any underwritten public
offering covered by a Demand Registration shall be selected by the Holders of a
majority of the shares of Registrable Securities to be included in such
registration, subject to the approval of the Board of Directors (by a majority
of the Directors not elected by the holders of the Cumulative Convertible
Preferred Stock of the Company, voting as a separate class (the "Non-Preferred
Stock Directors")), which approval shall not be unreasonably withheld.
3. PIGGYBACK REGISTRATIONS
(a) PARTICIPATION
Each time the Company decides to file a registration statement under
the Securities Act (other than registrations on Forms S-4 or S-8 or any
successor form thereto, and other than a Demand Registration) covering the offer
and sale by it or any of its security holders of any of its securities for
money, the Company shall give written notice thereof to all Holders of
outstanding Registrable Securities. The Company shall include in such
registration statement such shares of Registrable Securities for which it has
received written requests to register such shares within 30 days after such
written notice has been given. If the registration statement is to cover an
underwritten offering, such Registrable Securities shall be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters.
(b) UNDERWRITER'S CUTBACK
Subject to the requirements of Section 11 hereof, if in the good faith
judgment of the managing underwriter of such offering the inclusion of all of
the shares of Registrable Securities and any other Common Stock requested to be
registered would interfere with the successful marketing of a smaller number of
such shares, then the number of shares of Registrable Securities and other
Common Stock to be included in the offering shall be reduced to such smaller
number with the participation in such offering to be in the following order of
priority: (1) first, the shares of Common Stock which the Company proposes to
sell for its own account, (2) second, the shares of Registrable Securities
requested to be included, and (3) third, any other shares of Common Stock
requested to be included. Any necessary allocation among the Holders of shares
within each of the foregoing groups shall be pro
B-5
<PAGE>
rata among such Holders requesting such registration based upon the number of
shares of Common Stock and Registrable Securities owned by such Holders.
All shares so excluded from the underwritten public offering shall be
withheld from the market by the Holders thereof for a period (not to exceed 30
days prior to the effective date and 120 days thereafter) that the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering.
(c) COMPANY CONTROL
The Company may decline to file a Registration Statement after giving
notice to any Holder pursuant to Section 3(a) above, or withdraw a Registration
Statement after filing and after such notice, but prior to the effectiveness
thereof, provided that the Company shall promptly notify each Holder in writing
of any such action and provided further that the Company shall bear all expenses
incurred by such Holder or otherwise in connection with such withdrawn
Registration Statement.
4. HOLD-BACK AGREEMENTS
(a) BY HOLDERS OF REGISTRABLE SECURITIES
Upon the written request of the managing underwriter of any
underwritten offering of the Company's securities, a Holder of Registrable
Securities shall not sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Registrable Securities (other than
those included in such registration) without the prior written consent of such
managing underwriter for a period (not to exceed 30 days before the effective
date and 120 days thereafter) that such managing underwriter reasonably
determines is necessary in order to effect the underwritten public offering;
provided that each of the officers and directors of the Company shall have
entered into substantially similar holdback agreements with such managing
underwriter covering at least the same period.
(b) BY THE COMPANY AND OTHERS
The Company agrees:
(1) not to effect any public or private sale or distribution of its
Equity Securities during the 30-day period prior to, and during the 120-day
period after, the effective date of each underwritten offering made
pursuant to a Demand Registration or a Piggyback Registration, if so
requested in writing by the managing underwriter (except as part of such
underwritten offering, pursuant to registrations on Forms S-4 or S-8 or any
successor forms thereto or pursuant to the terms of the Company's Non-
Employee Directors Retirement Plan or private issuances of Equity
Securities as consideration for any acquisition by the Company or a
subsidiary of assets or Capital Stock of any unaffiliated third party), and
(2) not to issue any Equity Securities other than for sale in a
registered public offering unless each of the Persons to which such
securities are issued has entered a written agreement binding on its
transferees not to effect any public sale or distribution of such
securities during such period, including without limitation a sale pursuant
to Rule 144 under the
B-6
<PAGE>
Securities Act (except as part of such underwritten registration, if and to
the extent permitted hereunder).
5. REGISTRATION PROCEDURES
If and whenever the Company is required to register Registrable
Securities in a Demand Registration or a Piggyback Registration, the Company
will use its best efforts to effect such registration to permit the sale of such
Registrable Securities in accordance with the intended plan of distribution
thereof, and pursuant thereto the Company will as expeditiously as possible:
(a) prepare and file with the SEC as soon as practicable a
Registration Statement with respect to such Registrable Securities and use its
best efforts to cause such Registration Statement to become effective and remain
continuously effective until the date earlier to occur of (i) the date six
months from the date such Registration Statement was declared effective, and
(ii) the date the last of the Registrable Securities covered by such
Registration Statement have been sold, provided that before filing a
Registration Statement or Prospectus or any amendments or supplements thereto,
the Company shall furnish to the Holders of the Registrable Securities covered
by such Registration Statement and the underwriters, if any, draft copies of all
such documents proposed to be filed, which documents will be subject to the
review of such Holders and underwriters, and the Company shall not file any
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto to which the Holders of a majority of the Registrable Securities covered
by such Registration Statement or the underwriters, if any, shall reasonably
object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement, and such supplements to the
Prospectus, as may be requested by any Holder of Registrable Securities or any
underwriter of Registrable Securities or as may be required by the rules,
regulations or instructions applicable to the registration form used by the
Company or by the Securities Act or rules and regulations thereunder to keep the
Registration Statement effective until all Registrable Securities covered by
such Registration Statement are sold in accordance with the intended plan of
distribution set forth in such Registration Statement or supplement to the
Prospectus;
(c) promptly notify the selling Holders of Registrable Securities and
the managing underwriter, if any, and (if requested by any such Person) confirm
such advice in writing,
(1) when the Prospectus or any supplement or post-effective
amendment has been filed, and, with respect to the Registration Statement
or any post-effective amendment, when the same has become effective,
(2) of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus or for additional information,
(3) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose,
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(4) if at any time the representations and warranties of the
Company contemplated by clause (1) of paragraph (o) below cease to be
accurate in all material respects,
(5) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose, and
(6) of the existence of any fact which results in the
Registration Statement, the Prospectus or any document incorporated therein
by reference containing a Misstatement;
(d) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible time;
(e) if requested by the managing underwriter or a Holder of
Registrable Securities being sold in connection with an underwritten offering,
immediately incorporate in a supplement or post-effective amendment such
information as the managing underwriter and the Holders of a majority of the
Registrable Securities being sold agree should be included therein relating to
the sale of the Registrable Securities, including, without limitation,
information with respect to the number of shares of Registrable Securities being
sold to underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten offering of
the Registrable Securities to be sold in such offering; and make all required
filings of such supplement or post-effective amendment as soon as notified of
the matters to be incorporated in such supplement or post-effective amendment;
(f) promptly prior to the filing of any document which is to be
incorporated by reference into the Registration Statement or the Prospectus
(after initial filing of the Registration Statement) provide copies of such
document to counsel to the selling Holders of Registrable Securities and to the
managing underwriter, if any, and make the Company's representatives available
for discussion of such document and make such changes in such document prior to
the filing thereof as counsel for such selling Holders or underwriters may
reasonably request;
(g) furnish to each selling Holder of Registrable Securities and the
managing underwriter, without charge, at least one signed copy of the
Registration Statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(h) deliver to each selling Holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of each Prospectus (and
each preliminary prospectus) as such Persons may reasonably request (the Company
hereby consenting to the use of each such Prospectus (or preliminary prospectus)
by each of the selling Holders of Registrable Securities and the underwriters,
if any, in connection with the offering and sale of the Registrable Securities
covered by such Prospectus (or preliminary prospectus);
(i) prior to any public offering of Registrable Securities, register
or qualify or cooperate with the selling Holders of Registrable Securities, the
underwriters, if any, and their
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<PAGE>
respective counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions as such selling Holders or underwriters may designate in
writing and do anything else necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by the Registration
Statement; provided that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action which would subject it to general service of process in any such
jurisdiction where it is not then so subject;
(j) cooperate with the selling Holders of Registrable Securities and
the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing the
Registrable Securities to be sold and cause such Registrable Securities to be in
such denominations and registered in such names as the managing underwriter may
request at least three business days prior to any sale of Registrable Securities
to the underwriters;
(k) use its best efforts to cause the Registrable Securities covered
by the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof or the underwriters, if any, to consummate the disposition of
such Registrable Securities;
(l) if the Registration Statement or the Prospectus contains a
Misstatement, prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, the Prospectus will
not contain a Misstatement;
(m) cause all Registrable Securities covered by the Registration
Statement to be listed on any national securities exchange or authorized for
quotation on NASDAQ or in the National Market System, if requested by the
Holders of a majority of such Registrable Securities or the managing
underwriter, if any;
(n) provide a CUSIP number for all Registrable Securities not later
than the effective date of the Registration Statement;
(o) enter into such agreements (including an underwriting agreement)
and do anything else necessary or advisable in order to expedite or facilitate
the disposition of such Registrable Securities, and in such connection, whether
or not the registration is an underwritten registration:
(1) make such representations and warranties to the Holders of
such Registrable Securities and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters in
primary underwritten offerings;
(2) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriter, if any, and the
Holders of a majority of the Registrable Securities being sold) addressed
to each selling Holder and the underwriter, if any, covering the matters
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<PAGE>
customarily covered in opinions delivered to underwriters in primary
underwritten offerings and such other matters as may be reasonably
requested by such Holders or underwriters;
(3) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the selling
Holders of Registrable Securities and the underwriters, if any, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in connection
with primary underwritten offerings;
(4) if an underwriting agreement is entered into, cause the same
to include the indemnification and contribution provisions and procedures
of Section 7 hereof with respect to all parties to be indemnified pursuant
to said Section (or, with respect to the indemnification of such
underwriters, such similar indemnification and contribution provisions as
such underwriters shall customarily require); and
(5) deliver such documents and certificates as may be requested
by the Holders of a majority of the Registrable Securities being sold and
the managing underwriter, if any, to evidence compliance with clause (1)
above and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company.
The above shall be done at each closing under such underwriting or similar
agreement or as and to the extent otherwise reasonably requested by the Holders
of a majority of the Registrable Securities being sold;
(p) make available for inspection by representatives of the Holders
of a majority of the Registrable Securities being sold, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney or accountant retained by the sellers or any such underwriter, all
financial and other records and pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with the Registration; provided that any
records, information or documents that are designated by the Company in writing
as confidential shall be kept confidential by such Persons unless disclosure of
such records, information or documents is required by court or administrative
order; and
(q) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to its security
holders earnings statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 days after the end of any 12-month period (or
90 days, if such period is a fiscal year) (x) commencing at the end of any
fiscal quarter in which Registrable Securities are sold to underwriters in an
underwritten offering, or, if not sold to underwriters in such an offering, (y)
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Registration Statement, which statements shall
cover said 12-month periods.
Notwithstanding the foregoing, the Company shall, upon written notice delivered
to the Holders of Registrable Securities, be entitled to postpone the filing or
declaration of effectiveness of a Registration
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Statement required or proposed to be filed hereunder (i) upon the happening of
any event of the kind described in Section 5(c)(6), or (ii) if, in the
reasonable determination of the Company, there exists circumstances not yet
disclosed to the public, which would be required to be disclosed in such
Registration Statement and the disclosure of which would be materially harmful
to the Company. The Company shall use its best efforts to minimize the length of
any postponement or discontinuance provided that the Company may postpone for a
period of sixty (60) days the disclosure of any circumstances if, in the
reasonable determination of the Company, such disclosure would be materially
harmful to the Company. In no event, however, shall the aggregate period of time
that the Company postpones the filing or declaration of effectiveness of, or
suspends sales of Registrable Securities pursuant to Section 10 under any
Registration Statement, taken together with all such other periods with respect
to such Registration Statement exceed, in the aggregate, sixty (60) days.
6. REGISTRATION EXPENSES
(a) DEMAND REGISTRATIONS
The Company shall bear all Registration Expenses incurred in
connection with the first four of the five Demand Registrations and of any
Registrations which do not become or are not maintained effective in accordance
with the requirements specified in Section 5(a) other than any Registration
terminated prior to effectiveness at the request of , or solely as a result of
the actions of holders whose Registrable Securities are included in such
registration. The Registration Expenses of the fifth Demand Registration shall
be borne by the Holders of the Registrable Securities whose Registrable
Securities are included in such Registration, pro rata in accordance with the
amount of Registrable Securities sold by such holders.
(b) PIGGYBACK REGISTRATIONS
The Company shall bear all Registration Expenses incurred in
connection with all Piggyback Registrations.
(c) COMPANY EXPENSES
The Company also will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with any listing of the
securities to be registered on a securities exchange, and the fees and expenses
of any Person, including special experts, retained by the Company.
7. INDEMNIFICATION
(a) INDEMNIFICATION BY COMPANY
The Company agrees to indemnify and hold harmless each Indemnified
Holder from and against all Claims arising out of or based upon any Misstatement
or alleged Misstatement, except insofar as such Misstatement or alleged
Misstatement was based upon information furnished in writing to the Company by
such Indemnified Holder expressly for use in the document containing such
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Misstatement or alleged Misstatement. This indemnity shall not be exclusive and
shall be in addition to any liability which the Company may otherwise have.
The foregoing notwithstanding, the Company shall not be liable to the
extent that any such Claim arises out of or is based upon a Misstatement or
alleged Misstatement made in any preliminary prospectus if (i) such Indemnified
Holder failed to send or deliver a copy of the Prospectus with or prior to the
delivery of written confirmation of the sale of Registrable Securities giving
rise to such Claim and (ii) the Prospectus would have corrected such untrue
statement or omission.
In addition, the Company shall not be liable to the extent that any
such Claim arises out of or is based upon a Misstatement or alleged Misstatement
in a Prospectus, (x) if such Misstatement or alleged Misstatement is corrected
in an amendment or supplement to such Prospectus and (y) having previously been
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented, such Indemnified Holder thereafter fails to deliver
such Prospectus as so amended or supplemented prior to or concurrently with the
sale to the person who purchased a Registrable Security from such Indemnified
Holder and who is asserting such Claim.
The Company shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in a
distribution covered by a Registration Statement, their officers and directors
and each Person who controls such Persons (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Indemnified Holders of
Registrable Securities.
(b) INDEMNIFICATION PROCEDURES
If any action or proceeding (including any governmental investigation
or inquiry) shall be brought or asserted against an Indemnified Holder in
respect of which indemnity may be sought from the Company, such Indemnified
Holder shall promptly notify the Company in writing, and the Company shall
assume the defense thereof, including the employment of counsel satisfactory to
such Indemnified Holder and the payment of all expenses.
Such Indemnified Holder shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such separate counsel shall be the expense of such
Indemnified Holder unless (i) the Company has agreed to pay such fees and
expenses, (ii) the Company shall have failed to assume the defense of such
action or proceeding or has failed to employ counsel satisfactory to such
Indemnified Holder in any such action or proceeding or (iii) the named parties
to any such action or proceeding (including any impleaded parties) include both
such Indemnified Holder and the Company, and such Indemnified Holder shall have
been advised by counsel that there may be one or more legal defenses available
to such Indemnified Holder that are different from or additional to those
available to the Company.
If such Indemnified Holder notifies the Company in writing that it
elects to employ separate counsel at the expense of the Company as permitted by
the provisions of the preceding paragraph, the Company shall not have the right
to assume the defense of such action or proceeding on behalf of such Indemnified
Holder. The foregoing notwithstanding, the Company shall not be liable for
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<PAGE>
the reasonable fees and expenses of more than one separate firm of attorneys at
any time for such Indemnified Holder and any other Indemnified Holders (which
firm shall be designated in writing by such Indemnified Holders) in connection
with any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances.
The Company shall not be liable for any settlement of any such action
or proceeding effected without its written consent, but if settled with its
written consent, or if there be a final judgment for the plaintiff in any such
action or proceeding, the Company agrees to indemnify and hold harmless such
Indemnified Holders from and against any loss or liability by reason of such
settlement or judgment.
(c) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES.
Each Holder of Registrable Securities agrees to indemnify and hold
harmless the Company, its directors and officers and each Person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Holder, but only with respect to information
relating to such Holder furnished in writing by such Holder expressly for use in
any Registration Statement, Prospectus or preliminary prospectus. In no event,
however, shall the liability hereunder of any selling Holder of Registrable
Securities be greater than the dollar amount of the proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
In case any action or proceeding shall be brought against the Company
or its directors or officers or any such controlling person, in respect of which
indemnity may be sought against a Holder of Registrable Securities, such Holder
shall have the rights and duties given the Company and the Company or its
directors or officers or such controlling person shall have the rights and
duties given to each Holder by Sections 7(a) and 7(b) above.
The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration Statement.
(d) CONTRIBUTION
If the indemnification provided for in this Section 7 is unavailable
to an indemnified party under Section 7(a) or Section 7(c) above (other than by
reason of exceptions provided in those Sections) in respect of any Claims
referred to in such Sections, then each applicable indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Claims in such proportion
as is appropriate to reflect the relative fault of the Company on the one hand
and of the Indemnified Holder on the other in connection with the statements or
omissions which resulted in such Claims as well as any other relevant equitable
considerations. The amount paid or payable by a party as a result of the Claims
referred to above shall
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be deemed to include, subject to the limitations set forth in Section 7(b), any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim.
The relative fault of the Company on the one hand and of the
Indemnified Holder on the other shall be determined by reference to, among other
things, whether the Misstatement or alleged Misstatement relates to information
supplied by the Company or by the Indemnified Holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such Misstatement or alleged Misstatement.
The Company and each Holder of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 7(d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 7(d), an Indemnified
Holder shall not be required to contribute any amount in excess of the amount by
which (i) the total price at which the securities that were sold by such
Indemnified Holder and distributed to the public were offered to the public
exceeds (ii) the amount of any damages which such Indemnified Holder has
otherwise been required to pay by reason of such Misstatement.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
8. EXCHANGE ACT REPORTING REQUIREMENTS
From and after the date hereof, the Company shall (whether or not it
shall then be required to do so) timely file such information, documents and
reports as the Commission may require or prescribe under Section 13 or 15(d)
(whichever is applicable) of the Exchange Act. In addition, the Company shall
take such other measures and file such other information, documents and reports,
as shall hereafter be required by the Commission as a condition to the
availability of Rule 144 under the Securities Act (or any successor provision)
and the use of Form S-3.
From and after the date hereof, the Company shall forthwith upon
request furnish any Holder of Registrable Securities (i) a written statement by
the Company that it has complied with such reporting requirements, (ii) a copy
of the most recent annual or quarterly report of the Company, and (iii) such
other reports and documents filed by the Company with the Commission as such
Holder may reasonably request in availing itself of an exemption for the sale of
Registrable Securities without registration under the Securities Act.
The purpose of the foregoing requirements are (x) to enable any such
Holder to comply with the current public information requirements contained in
paragraph (c) of Rule 144 under the Securities Act (or any successor provision)
and (y) to qualify the Company for the use of registration statements on Form
S-3.
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<PAGE>
9. REQUIREMENTS FOR PARTICIPATION IN UNDERWRITTEN OFFERINGS
No Person may participate in any underwritten offering pursuant to a
Registration hereunder unless such Person (a) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
10. SUSPENSION OF SALES
Upon receipt of written notice from the Company that (i) a
Registration Statement or Prospectus contains a Misstatement, or (ii) in the
reasonable determination of the Company, there exists circumstances not yet
disclosed to the public which would be required to be disclosed in such
Registration Statement and the disclosure of which would be materially harmful
to the Company, each Holder of Registrable Securities shall forthwith
discontinue disposition of Registrable Securities until such Holder has received
copies of the supplemented or amended Prospectus required by Section 5(1)
hereof, or until such Holder is advised in writing by the Company that the use
of the Prospectus may be resumed, and, if so directed by the Company, such
Holder shall deliver to the Company (at the Company's expense) all copies, other
than permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice. The Company shall use its reasonable best efforts to minimize the length
of such suspension of sales, provided, that the Company may require the
suspension of sales for a period of sixty (60) days in the event that the
disclosure of any circumstances, in the reasonable determination of the Company
would be materially harmful to the Company. In no event, however, shall the
aggregate period of time that the Company postpones the filing or declaration of
effectiveness of any Registration Statement pursuant to Section 5, or suspends
sales of Registrable Securities pursuant to Section 10 under any Registration
Statement, taken together with all such other periods with respect to such
Registrations Statement exceed, in the aggregate, sixty (60) days.
11. FUTURE REGISTRATION RIGHTS AGREEMENTS
Except for an underwriting agreement between the Company and one or
more professional underwriters of securities, the Company shall not agree to
register any Equity Securities under the Securities Act unless such agreement
specifically provides that:
(a) the Holder of such Equity Securities may not participate in any
Demand Registration without the consent of the Holders of a majority of the
shares of the Registrable Securities included in such registration unless:
(i) the offering of the Registrable Securities is to be a Firm
Commitment Underwritten Offering and the managing underwriter concludes
that the public offering or sale of such Equity Securities would not
interfere with the successful marketing of all Registrable Securities
requested to be sold and
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(ii) the Holders of Registrable Securities shall have the right
to participate, to the extent they may request, in any registration
statement initiated under a demand registration right exercised by the
Holder of such Equity Securities, except that if the managing underwriter
of a public offering made pursuant to such a demand registration limits the
number of shares of Common Stock to be sold, the participation of the
Holders of the Registrable Securities and the Holders of all other Common
Stock (other than the Equity Securities held by such Holder of Equity
Securities) shall be determined as set forth in Section 3 hereof.
(b) the Holder of such Equity Securities may not participate in any
Piggyback Registration if the sale of Registrable Securities is to be
underwritten unless, if the managing underwriter limits the total number of
shares to be sold, the Holders of such Equity Securities and the Holders of
Registrable Securities are entitled to participate in such underwritten
distribution based on the order of priority set forth in Section 3 hereof, and
(c) all Equity Securities excluded from any Registration as a result
of the foregoing limitations may not be publicly offered or sold for a period
(not to exceed at least 30 days prior to the effective date and 90 days
thereafter) that the managing underwriter reasonably determines is necessary in
order to effect the underwritten public offering of Registrable Securities
registered pursuant to this Agreement.
12. MISCELLANEOUS
(a) REMEDIES
Each Holder of Registrable Securities, in addition to being entitled
to exercise all rights provided herein, in the Purchase Agreement and granted by
law, including recovery of damages, shall be entitled to specific performance of
its rights under this Agreement. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Agreement and hereby agrees to waive the defense in
any action for specific performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS
The Company shall not on or after the date of this Agreement enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof.
Other than as disclosed on Schedule I attached hereto, the Company has
not previously entered into any agreement with respect to its securities
granting any registration rights to any Person. The rights granted to the
Holders of Registrable Securities hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
securities under any such agreements.
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<PAGE>
(c) AMENDMENTS AND WAIVERS
The provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the Company has
obtained the written consent of the Holders of at least a majority of the
outstanding shares of Registrable Securities. The foregoing notwithstanding, a
waiver or consent to departure from the provisions hereof that relates
exclusively to the rights of Holders of shares of Registrable Securities whose
shares are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders of shares of
Registrable Securities may be given by the Holders of a majority of the shares
of Registrable Securities being sold.
(d) NOTICES
All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder of Registrable Securities, at the most
current address given by such Holder to the Company in accordance with the
provisions hereof, which address initially is, with respect to each
Investor, the address set forth on such Investor's signature page of the
Purchase Agreement, with a copy to Latham & Watkins, 1001 Pennsylvania
Avenue, N.W., Suite 1300, Washington, D.C. 20004, Attention: Bruce E.
Rosenblum, Esq.; and
(ii) if to the Company, initially at its address set forth in the
Purchase Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions hereof, with a copy to Gibson, Dunn
& Crutcher, 333 South Grand Ave., Los Angeles, California 90071, Attention:
Andrew E. Bogen, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery. The Company shall promptly provide a list of the most current
addresses of the Holders of Registrable Securities given to it in accordance
with the provisions hereof to any such Holder for the purpose of enabling such
Holder to communicate with other Holders in connection with this Agreement.
(e) SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties.
(f) COUNTERPARTS
This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
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(g) TABLE OF CONTENTS AND HEADINGS
The table of contents and headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
(i) SEVERABILITY
In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(j) FORMS
All references in this Agreement to particular forms of registration
statements are intended to include all successor forms which are intended to
replace, or to apply to similar transactions as, the forms herein referenced.
(k) ENTIRE AGREEMENT
This Agreement and the Purchase Agreement are intended by the parties
as the final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein or therein with respect to the registration rights granted by the Company
with respect to the securities sold pursuant to the Purchase Agreement. This
Agreement and the Purchase Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
[signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
INTERNATIONAL TECHNOLOGY CORPORATION
By: _______________________________________
Name: ________________________________
Title: ________________________________
CARLYLE PARTNERS II, L.P.
By: TC Group, L.L.C., its General Partner
By: _______________________________________
Name: ________________________________
Title: ________________________________
CARLYLE PARTNERS III L.P.
By: TC Group, L.L.C., its General Partner
By: _______________________________________
Name: ________________________________
Title: ________________________________
CARLYLE INTERNATIONAL PARTNERS II, L.P.
By: TC Group, L.L.C., its General Partner
By: _______________________________________
Name: ________________________________
Title: ________________________________
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CARLYLE INTERNATIONAL PARTNERS III, L.P.
By: TC Group, L.L.C., its General Partner
By: _______________________________________
Name: ________________________________
Title: ________________________________
C/S INTERNATIONAL PARTNERS
By: TC Group, L.L.C., its General Partner
By: _______________________________________
Name: ________________________________
Title: ________________________________
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EXHIBIT C
FORM OF
WARRANT AGREEMENT
<PAGE>
WARRANT AGREEMENT
BY AND AMONG
INTERNATIONAL TECHNOLOGY CORPORATION
AND
CERTAIN WARRANT HOLDERS DEFINED HEREIN
DATED AS OF _________, 1996
<PAGE>
WARRANT AGREEMENT dated as of ______ ___, 1996 between International
Technology Corporation, a Delaware corporation (the "Company") and Carlyle
Partners II, L.P., a Delaware limited partnership ("CP II"), Carlyle Partners
-----
III, L.P., a Delaware limited partnership ("CP III"), Carlyle International
------
Partners II, L.P. a Cayman Islands limited partnership ("CIP II"), Carlyle
------
International Partners III, L.P., a Cayman Islands limited partnership ("CIP
---
III"), C/S International Partners, a Cayman Islands limited partnership ("C/S
- --- ---
IP"), each of which is a limited partnership of which TC Group, L.L.C. is the
- --
general partner (collectively, the "Warrant Holders").
WHEREAS, the Company and the Warrant Holders have entered into that
certain Securities Purchase Agreement dated as of August 28, 1996 (the "Purchase
Agreement") pursuant to which the Company proposes, in part, to issue to the
Warrant Holders, or their designees, warrants (the "Warrants") to purchase up to
an aggregate of five million (5,000,000) shares of Common Stock, $1.00 par value
per share of the Company (the "Common Stock," and the Common Stock issuable on
exercise of the Warrants being referred to herein as the "Warrant Shares").
Certain terms used herein and not elsewhere defined are defined in the Purchase
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Warrant Certificates. The certificates evidencing the
--------------------
Warrants (the "Warrant Certificates") to be delivered pursuant to this Warrant
Agreement shall be in registered form only and shall be substantially in the
form set forth in Exhibit A attached hereto.
SECTION 2. Execution of Warrant Certificates. Warrant Certificates
---------------------------------
shall be signed on behalf of the Company by its Chairman of the Board or its
President or a Vice President and by its Secretary or an Assistant Secretary
under its corporate seal. Each such signature upon the Warrant Certificates may
be in the form of a facsimile signature of the present or any future Chairman of
the Board, President, Vice President, Secretary or Assistant Secretary and may
be imprinted or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board of Directors, President, Vice President,
Secretary or Assistant Secretary, notwithstanding the fact that at the time the
Warrant Certificates shall be delivered or disposed of he shall have ceased to
hold such office. The seal of the Company may be in the form of a facsimile
thereof and may be impressed, affixed, imprinted or otherwise reproduced on the
Warrant Certificates.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be delivered or disposed of as though such person
had not ceased to be such officer of the Company; and any Warrant Certificate
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Warrant Certificate, shall be a proper officer of the
Company to sign such Warrant Certificate, although at the date of the execution
of this Warrant Agreement any such person was not such officer.
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SECTION 3. Registration. The Company shall number and register the
------------
Warrant Certificates in a register as they are issued. The Company may deem and
treat the registered holder(s) of the Warrant Certificates as the absolute
owner(s) thereof (notwithstanding any notation of ownership or other writing
thereon made by anyone) for all purposes, and shall not be affected by any
notice to the contrary.
SECTION 4. Registration of Transfers and Exchanges. The Company shall
---------------------------------------
from time to time register the transfer of any outstanding Warrant Certificates
in a Warrant register to be maintained by the Company upon surrender thereof
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company, duly executed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled and disposed of by the Company.
The Warrant holders agree that prior to any proposed transfer of the
Warrants or of the Warrant Shares, if such transfer is not made pursuant to an
effective Registration Statement under the Securities Act of 1933, as amended
(the "Act"), or an opinion of counsel, reasonably satisfactory in form and
substance to the Company, that the Warrant or Warrant Shares may be sold
publicly without registration under the Act, the Warrant holder will, if
requested by the Company, deliver to the Company:
(1) an investment representation reasonably satisfactory to the
Company signed by the proposed transferee;
(2) an agreement by such transferee to the impression of the
restrictive investment legend set forth below on the Warrant or the
Warrant Shares;
(3) an agreement by such transferee that the Company may place a
notation in the stock books of the Company or a "stop transfer order"
with any transfer agent or registrar with respect to the Warrant
Shares; and
(4) an agreement by such transferee to be bound by the
provisions of this Section 4 relating to the transfer of such Warrant
or Warrant Shares.
The Warrant holders agree that each certificate representing Warrants
or Warrant Shares will bear the following legend until such Warrants or Warrant
Shares have been sold pursuant to an effective registration statement under the
Act:
"THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE
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ABSENCE OF REGISTRATION UNDER SAID ACT AND THE RULES AND REGULATIONS
THEREUNDER AND OF ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS
OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ALL APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS."
Warrant Certificates may be exchanged at the option of the holder(s)
thereof, when surrendered to the Company at its office for another Warrant
Certificate or other Warrant Certificates of like tenor and representing in the
aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange shall be canceled and disposed of by the Company.
SECTION 5. Warrants; Exercise of Warrants. Subject to the terms of
------------------------------
this Agreement, each Warrant holder shall have the right, which may be exercised
during the period commencing on the date hereof until 5:00 p.m., Eastern Time on
_________, 2001 [NOTE: THE FIFTH ANNIVERSARY OF THE CLOSING DATE] (the "Exercise
----
Period"), to receive from the Company the number of fully paid and nonassessable
Warrant Shares which the holder may at the time be entitled to receive on
exercise of such Warrants and payment of the Exercise Price (as defined below)
then in effect for such Warrant Shares. In the alternative, each Warrant holder
may exercise its right, during the Exercise Period, to receive Warrant Shares on
a net basis, such that, without the exchange of any funds, the Warrant holder
receives that number of Warrant Shares otherwise issuable (or payable) upon
exercise of its Warrants less that number of Warrant Shares having an aggregate
fair market value (as defined below) at the time of exercise equal to the
aggregate Exercise Price that would otherwise have been paid by the holder of
the Warrant Shares. For purposes of the foregoing sentence, "fair market value"
of the Warrant Shares will be determined in good faith by the Board of Directors
(by a majority of the directors not elected by the holders of the Cumulative
Convertible Preferred Stock of the Company, voting as a separate class ("Non-
Preferred Stock Directors)), as of the date of any such exercise. Such
determination may be challenged in good faith by holders of a majority of the
Warrants, and any dispute shall be resolved at the Company's cost, by
determination of an investment banking firm of recognized national standing
selected by the Company and acceptable to such Warrant holder, which shall be
made in good faith and be conclusive about manifest error; provided, however,
-------- -------
that in the event that the determination by the investment banking firm deviates
from the Company's determination by no more than 5%, then the cost to the
Company of the retention of the investment banking firm shall be borne by the
Warrant holders challenging the Company's determination. Each Warrant not
exercised prior to 5:00 p.m., Eastern Standard Time, on _________, 2001 [NOTE:
----
THE FIFTH ANNIVERSARY OF THE CLOSING DATE] shall become void and all rights
thereunder and all rights in respect thereof under this agreement shall cease as
of such time. No adjustments as to dividends will be made upon exercise of the
Warrants.
A Warrant may be exercised upon surrender to the Company at its office
designated for such purpose (the address of which is set forth in Section 14
hereof) of the certificate or certificates evidencing the Warrants to be
exercised with the form of election to purchase on the reverse thereof duly
filled in and signed, and upon payment to the Company of the exercise price (the
"Exercise Price") which is set forth in the form of Warrant Certificate
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<PAGE>
attached hereto as Exhibit A as adjusted as herein provided, for the number of
Warrant Shares in respect of which such Warrants are then exercised. Payment of
the aggregate Exercise Price shall be made (i) in cash or by certified or
official bank check payable to the order of the Company or (ii) in the manner
provided in the first paragraph of this Section 5.
Subject to the provisions of Section 6 hereof, upon such surrender of
Warrants and payment of the Exercise Price, the Company shall issue and cause to
be delivered with all reasonable dispatch to or upon the written order of the
holder and in such name or names as the Warrant holder may designate, a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants together with cash as provided in Section 11;
provided, however, that if any consolidation, merger or lease or sale of assets
- -------- -------
is proposed to be effected by the Company as described in Subsection 10(o)
hereof, or a tender offer or an exchange offer for shares of Common Stock of the
Company shall be made, upon such surrender of Warrants and payment of the
Exercise Price as aforesaid, the Company shall, as soon as possible, but in any
event not later than two business days thereafter, issue and cause to be
delivered the full number of Warrant Shares issuable upon the exercise of such
Warrants in the manner described in this sentence together with cash as provided
in Section 11. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of record of such Warrant Shares as of the date of the surrender
of such Warrants and payment of the Exercise Price.
The Warrants shall be exercisable, at the election of the holders
thereof, either in full or from time to time in part and, in the event that a
certificate evidencing Warrants is exercised in respect of fewer than all of the
Warrant Shares issuable on such exercise at any time prior to the date of
expiration of the Warrants, a new certificate evidencing the remaining Warrant
or Warrants will be issued and delivered by the Company and at its expense
pursuant to the provisions of this Section and of Section 2 hereof.
All Warrant Certificates surrendered upon exercise of Warrants shall
be canceled and disposed of by the Company. The Company shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by the holders during normal business hours at its office.
SECTION 6. Payment of Taxes. The Company will pay all documentary
-----------------
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; provided, however, that the Company shall not be required
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to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue of any Warrant Certificates or any certificates for Warrant Shares
in a name other than that of the registered holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
SECTION 7. Mutilated or Missing Warrant Certificates. In case any of
-----------------------------------------
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may issue, in exchange and substitution for and upon cancellation of the
mutilated Warrant Certificate, or in
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lieu of and substitution for the Warrant Certificate lost, stolen or destroyed,
a new Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant Certificate and
indemnity, if requested, also reasonably satisfactory to it. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
SECTION 8. Reservation of Warrant Shares. The Company will at all
-----------------------------
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company or, if appointed, the transfer agent for the Common Stock
(the "Transfer Agent") and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Company will furnish such Transfer Agent a copy of all notices of
adjustments and certificates related thereto, transmitted to each holder
pursuant to Section 13 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 10 hereof to reduce the Exercise Price below the then par value (if any)
of the Warrant Shares, the Company will take any corporate action which may, in
the opinion of its counsel (which may be counsel employed by the Company), be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Price as so adjusted.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof.
SECTION 9. Stock Exchange Listings. The Company will from time to
-----------------------
time take all action, at its expense, which may be necessary so that the Warrant
Shares, immediately upon their issuance upon the exercise of Warrants, will be
listed and maintained on the principal securities exchanges and markets within
the United States of America, if any, on which other shares of Common Stock are
then listed and register under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), all shares of Common Stock from time to time issuable upon
exercise if and at the time that any existing shares of the Company's capital
stock are so registered.
SECTION 10. Adjustment of Exercise Price and Number of Warrant Shares
---------------------------------------------------------
Issuable. The Exercise Price and the number and kind of Warrant Shares issuable
- --------
upon the
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<PAGE>
exercise of each Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 10. For purposes of this
Section 10, "Common Equity" means all shares now or hereafter authorized of any
class of common stock of the Company (including the Common Stock) and any other
stock of the Company, however designated, authorized after the date hereof,
which has the right (subject always to prior rights of any class or series of
preferred stock) to participate in any distribution of the assets or earnings of
the Company without limit as to per share amount.
(a) Adjustment for Change in Capital Stock.
--------------------------------------
If the Company:
(1) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Equity;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares; or
(4) issues by reclassification of its Common Stock any shares of
its capital stock;
then the Exercise Price and the number and kind of shares of capital stock of
the Company issuable upon the exercise of a Warrant (as in effect immediately
prior to such action) shall be proportionately adjusted so that the holder of
any Warrant thereafter exercised may receive for the same aggregate Exercise
Price the aggregate number and kind of shares of capital stock of the Company
that he would have owned immediately following such action if such Warrant had
been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event listed
above shall occur. If, after an adjustment referred to in clauses (1) through
(4) above, a holder of Warrants upon exercise of such Warrant may receive shares
of two or more classes of capital stock of the Company, the Company shall
determine the allocation of the Exercise Price between the classes of capital
stock. After such allocation, the exercise privilege and the Exercise Price
with respect to each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section 10(a).
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(b) Adjustment for Rights Issue.
---------------------------
If the Company distributes any rights, options or warrants entitling a
holder thereof to substitute for or purchase any share of Common Stock of the
Company ("Rights") to all holders of its Common Stock entitling them to purchase
shares of Common Stock at a price per share less than the Current Market Price
(as defined in Subsection 10(h) below) per share on the date of distribution of
such Rights, the Exercise Price shall be adjusted in accordance with the
formula:
N x P
-----
E' = E x O + M
-----
O + N
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding on the record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares of Common
Stock.
M = the Current Market Price per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such Rights are
issued and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such Rights. If at the end of
the period during which such Rights are exercisable, not all Rights shall have
been exercised, the Exercise Price shall be immediately readjusted to what it
would have been if "N" in the above formula had been the number of shares
actually issued.
(c) Adjustment for Other Distributions.
----------------------------------
If the Company distributes to all holders of shares of its Common
Stock (i) any shares of any class of capital stock of the Company other than its
Common Equity, (ii) any evidence of indebtedness or other securities of the
Company or any subsidiary of the Company, or (iii) cash or any other assets of
the Company (including securities, but excluding (x) those dividends, Rights and
distributions referred to above in Subsections 10(a) and 10(b) and in Subsection
10(d) and 10(e), and (y) dividends and distributions paid exclusively in cash
and (z) distributions upon mergers or consolidations to which Subsection 10(o)
applies), the Exercise Price shall be adjusted in accordance with the formula:
E' = E x M - F
-----
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<PAGE>
M
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
M = the Current Market Price per share of Common Stock on the record date
mentioned below.
F = the fair market value on the record date of the capital stock,
indebtedness, other securities cash or assets distributed per share of
Common Stock.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
(d) Adjustment for Common Stock Issue.
---------------------------------
If the Company issues shares of Common Stock for a consideration per
share less than the Current Market Price per share on the date the Company
issues such additional shares, the Exercise Price shall be adjusted in
accordance with the formula:
P
-
E' = E x O + M
-----
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
M = the Current Market Price per share on the date of issuance of such
additional shares.
A = the number of shares of Common Stock outstanding immediately after the
issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance. This
Subsection 10(d) does not apply to (i) any transaction or issuance described in
Subsections 10(a), (b), (c) or (e); (ii) the exercise of Warrants, conversion of
the Company's 7% Cumulative Convertible Exchangeable Preferred
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Stock or Cumulative Convertible Participating Preferred Stock or the conversion,
exchange or exercise of, other securities whose issuance was the subject of an
adjustment pursuant to Subsections 10(b), (c) or (e); (iii) Common Stock issued
to the Company's employees under bona fide employee benefit plans adopted by the
Board of Directors and approved by the holders of Common Stock when required by
law, if such Common Stock would otherwise be covered by this Subsection 10(d),
but only to the extent that (x) such shares are issued pursuant to employee
stock options with an exercise price not less than the Current Market Price on
the date of issuance of such option or (y) the aggregate number of shares
otherwise excluded hereby (together with the aggregate number of shares issuable
upon conversion, exchange or exercise of the securities excluded by clause (iii)
of Subsection 10(e) below) and issued after the date hereof do not exceed 5% of
the Common Stock outstanding at the time of any such issuance; (iv) Common Stock
issued to acquire, or in the acquisition of, all or any portion of a business as
a going concern, in an arm's-length transaction between the Company and an
unaffiliated third party, whether such acquisition shall be effected by purchase
of assets, exchange of securities, merger, consolidation or otherwise, or (v)
Common Stock issued in a bona fide public offering pursuant to a firm commitment
underwriting.
(e) Adjustment for Convertible Securities Issue.
-------------------------------------------
If the Company issues any Rights (other than securities issued in
transactions described in Subsections 10(b) and (c) above) and for a
consideration per share of Common Stock initially deliverable upon conversion,
exchange or exercise of such Rights that is less than the Current Market Price
per share on the date of issuance of such Rights, the Exercise Price shall be
adjusted in accordance with this formula:
P
-
E' = E x O + M
-----
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding immediately prior to
the issuance of such Rights.
P = the aggregate consideration received for the issuance of such Rights.
M = the Current Market Price per share on the date of issuance of such
Rights.
D = the maximum number of shares deliverable upon conversion or in
exchange for or upon exercise of such Rights at the initial
conversion, exchange or exercise rate permissible thereunder.
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The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance. If all of
the Common Stock deliverable upon conversion, exchange or exercise of such
Rights has not been issued when such Rights are no longer outstanding, then the
Exercise Price shall promptly be readjusted to the Exercise Price that would
then be in effect had the adjustment upon the issuance of such Rights been made
on the basis of the actual number of shares of Common Stock issued upon
conversion, exchange or exercise of such Rights.
This Subsection 10(e) does not apply to (i) the issuance of any such
securities to acquire, or in the acquisition of, all or any portion of a
business as a going concern, in an arm's-length transaction between the Company
and an unaffiliated third party, whether such acquisition shall be effected by
purchase of assets, exchange of securities, merger, consolidation or otherwise;
(ii) the issuance of any such securities in a bona fide public offering pursuant
to a firm commitment underwriting; (iii) the issuance of any such securities to
the Company's employees under bona fide employee benefit plans adopted by the
Board of Directors and approved by the holders of Common Stock when required by
law, if such securities would otherwise be covered by this Subsection 10(e) (but
only to the extent that the aggregate number of shares issuable upon the
conversion, exchange or exercise of the aggregate number of securities excluded
hereby (together with the aggregate number of shares excluded by clause (iii)(y)
of Subsection 10(d) above) and issued after the Initial Issue Date shall not
exceed 5% of the Common Stock outstanding at the time of any such issuance), or
(iv) shares of Convertible Preferred Stock issued as PIK Dividends.
(f) In case the Company or any of its subsidiaries shall, by dividend
or otherwise, make distributions exclusively in cash (excluding any cash that is
distributed upon a merger or consolidation to which Subsection 10(o) applies or
as part of a distribution covered by Subsection 10(c)) to all the holders of
Common Stock in an aggregate amount that, combined together with (i) the
aggregate amount of all other such all-cash distributions to all holders of its
Common Stock made within the 12 months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to this Subsection
10(f) or Subsection 10(g) has been made and (ii) the aggregate of any cash plus
the fair market value of other consideration payable in respect of any tender or
exchange offer or other stock repurchase program by the Company or any of its
subsidiaries for all or any portion of the Common Stock concluded within the 12
months preceding the date of payment of such distribution and in respect of
which no adjustment pursuant to this Subsection 10(f) or Subsection 10(g) has
been made exceeds 12.5% of the Company's Market Capitalization, on the record
date for such distribution then, and in each such case, immediately after the
close of business on such date of determination, the Exercise Price shall be
adjusted in accordance with the formula:
E' = E x M - E
-----
M
where:
E = the adjusted Exercise Price.
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E = the then current Exercise Price.
M = the Current Market Price per share of Common Stock on the date fixed
for determination times the number of shares of Common Stock
outstanding on such date.
E = the total amount of cash to be distributed at such time to holders
of Common Stock.
"Market Capitalization" means, as of any date, the product of the Current Market
Price of the Common Stock, as of such date, multiplied by the number of shares
of Common Stock outstanding as of such date.
(g) In the case of the consummation of a tender offer, exchange offer
(other than an odd-lot offer) or other stock repurchase program made by the
Company or any subsidiary thereof for all or any portion of the Common Stock
involving the payment by the Company or such subsidiary of an aggregate
consideration that, together with (i) any cash or other consideration payable in
a tender offer, exchange offer or other stock repurchase program by the Company
or any of its subsidiaries for Common Stock consummated within 12 months
preceding the consummation of such tender offer, exchange offer or other stock
repurchase program (the "Expiration Time") in respect of which no adjustment has
been made pursuant to this Subsection 10(g) or Subsection 10(f), and (ii) the
aggregate amount of all such all-cash distributions referred to in Subsection
10(f) above to all holders of Common Stock within the 12 months preceding such
Expiration Time in respect of which no adjustments have been made, exceeds 12.5%
of the Company's Market Capitalization as of the Trading Day (as defined below)
next succeeding the Expiration Time, the Conversion Price shall be reduced in
accordance with the formula:
E' = E x M - E
-----
N
where:
E' = the adjusted Exercise Price
E = the then current Exercise Price.
M = the Current Market Price per share of Common Stock on the Trading Day
next succeeding the Expiration Time times the number of shares of
Common Stock outstanding at the Expiration Time (including any
tendered, exchanged or purchased shares).
N = the Current Market Price per share of Common Stock on the Trading Day
next succeeding the Expiration Time times the number of shares of the
Common Stock outstanding at the Expiration Time, less any shares
purchased in such tender offer, exchange offer or other stock
repurchase program.
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E = the fair market value of the aggregate consideration payable to
stockholders upon consummation of such tender offer, exchange offer or
other stock repurchase program.
The reduction shall become effective immediately prior to the opening of
business on the day following the Expiration Time.
(h) Current Market Price.
--------------------
In Subsections 10(b)-(g), the Current Market Price per share of Common
Stock on any date is the average of the Quoted Prices of the Common Stock for 30
consecutive Trading Days commencing 45 trading days before the date in question
(the "Current Market Price"). "Trading Day" means, with respect to any
security, any day on which any market in which the applicable security is then
traded and in which a Quoted Price may be ascertained is open for business. The
"Quoted Price" means, with respect to Common Stock, the last reported sales
price for Common Stock as reported by the NASD Automatic Quotations System,
National Market System, or, if the Common Stock is listed or admitted for
trading on a securities exchange, the last reported sales price of the Common
Stock on the principal exchange on which the Common Stock is listed or admitted
for trading (which shall be for consolidated trading if applicable to such
exchange), or if not so reported or listed or admitted for trading, the last
reported bid price of the applicable security in the over-the-counter market.
In the event that the Quoted Price cannot be determined as aforesaid, the Board
of Directors (by a majority of the Non-Preferred Stock Directors) shall
determine the Quoted Price on the basis of such quotations as it in good faith
considers appropriate. Such determination may be challenged in good faith by
the holders of a majority of the Warrants, and any dispute shall be resolved, at
the Company's cost, by the determination of an investment banking firm of
recognized national standing selected by the Company and acceptable to such
holders of Warrants, which determination shall be made in good faith and be
conclusive absent manifest error; provided, however, that in the event that the
-------- -------
determination of the Quoted Price by the investment banking firm deviates by no
more than 5% from the Company's determination of the Quoted Price, then the cost
to the Company of the retention of the investment banking firm shall be borne by
the holders of the Warrants challenging the Company's determination.
(i) Consideration Received.
-----------------------
For purposes of any computation respecting consideration received
pursuant to Section 10, the following shall apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash
C-12
<PAGE>
shall be deemed to be the fair market value thereof as determined in
good faith by the Board of Directors (by a majority of the Non-
Preferred Stock Directors), as evidenced by a written resolution
thereof, and subject to the provisions of Subsection 10(q) below;
(3) in the case of the issuance of Rights, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such Rights
plus the additional minimum consideration, if any, to be received by
the Company upon the conversion, exchange or exercise thereof (the
consideration in each case to be determined in the same manner as
provided in clauses (1) and (2) of this Subsection).
(j) When De Minimis Adjustment May Be Deferred.
------------------------------------------
No adjustment in the Exercise Price need be made unless the adjustment
would require an increase or decrease of at least 1% in the Exercise Price. Any
adjustments which, by reason of this Section 10(j), are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 10(j) shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.
(k) When No Adjustment Required.
---------------------------
No adjustment in the Exercise Price need be made for a transaction
referred to in Subsections 10(a)-(g) if Warrant holders are to participate in
the transaction on a basis and with notice that the Board of Directors
determines to be fair and appropriate in light of the basis and notice on which
holders of Common Stock participate in the transaction.
No adjustment in the Exercise Price need be made for (i) rights to
purchase Common Stock pursuant to a Company plan for reinvestment of dividends
or interest; and (ii) a change in the par value or no par value of the Common
Stock. The Corporation shall take no action that would cause any adjustment
under this Section 10 that would reduce the Exercise Price below the par value
of the Common Stock. If an adjustment is made to the Exercise Price upon the
establishment of a record date for a distribution subject to subsections 10(b)
or 10(c) above and if such distribution is subsequently canceled, the Exercise
Price then in effect shall be readjusted, effective as of the date when the
Board of Directors determines to cancel such distribution, to the Exercise Price
which would have been in effect if such record date had not been fixed. No
adjustment in the Exercise Price need be made under Subsections 10(c), 10(f) and
10(g) above if the Company issues or distributes to each holder of Warrants the
shares of capital stock, evidences of indebtedness, other securities of the
Company or any subsidiary of the Company, assets, Rights or cash referred to in
those subsections that each holder would have been entitled to receive had such
Warrants been exercised prior to the happening of such event or the record date
with respect thereto.
C-13
<PAGE>
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
(l) Notice of Adjustment.
--------------------
Whenever the Exercise Price and/or exercise privilege is adjusted, the
Company shall provide the notices required by Section 13 hereof.
(m) Voluntary Reduction.
-------------------
The Company from time to time may, by a vote of the Board of Directors
(by a majority of Non-Preferred Stock Directors), reduce the Exercise Price by
any amount for any period of time if the period is at least 20 business days and
if the reduction is irrevocable during the period; provided, however, that in no
-------- -------
event may the Exercise Price be less than the par value of a share of Common
Stock.
Whenever the Exercise Price is reduced, the Company shall mail to
Warrant holders a notice of the reduction. The Company shall mail the notice at
least 20 business days before the date the reduced Exercise Price takes effect.
The notice shall state the reduced Exercise Price and the period it will be in
effect.
A reduction of the Exercise Price pursuant to this Subsection 10(m)
does not change or adjust the Exercise Price otherwise in effect for purposes of
Subsections 10(a)-(g).
(n) Notice of Certain Transactions.
------------------------------
If:
(1) the Company takes any action that would require an
adjustment in the Exercise Price pursuant to Subsections 10(a), (c) or
(f) and if the Company does not arrange for Warrant holders to
participate pursuant to Subsection 10(k);
(2) the Company takes any action that would require a
supplemental Warrant Agreement pursuant to Subsection 10(o); or
(3) there is a liquidation or dissolution of the Company,
then the Company shall mail to Warrant holders a notice stating the
proposed record date for a dividend or distribution or the proposed
effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution.
The Company shall mail the notice at least 20 business days before
such date. Failure to mail the notice or any defect in it shall not
affect the validity of any such transaction.
C-14
<PAGE>
(o) Reorganization of Company.
-------------------------
In case of any consolidation, amalgamation, arrangement or merger of
the Company with or into another person or any merger of another person with or
into the Company (other than in a transaction to which Section 10(a) applies) or
in case of any sale, or transfers of all or substantially all the assets of the
Company, the Warrants shall automatically become exercisable for the kind and
amount of securities, cash or other assets which the holder of a Warrant would
have owned immediately after the consolidation, merger, sale or transfer if the
holder had exercised the Warrant immediately before the effective date of the
transaction. Concurrently with the consummation of such transaction, the
corporation formed by or surviving any such consolidation or merger if other
than the Company, or the person to which such sale or conveyance shall have been
made, shall enter into a supplemental Warrant Agreement so providing and further
providing for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section. The successor
shall mail to Warrant holders a notice describing the supplemental Warrant
Agreement.
If the issuer of securities deliverable upon exercise of Warrants
under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement.
If this Subsection 10(o) applies, Subsections 10(a)-(g) do not apply.
(p) In addition, in the event that any other transaction or event
occurs to which the foregoing adjustment provisions are not strictly applicable
but the failure to make any adjustment would adversely affect the rights
represented by the Warrants in accordance with the essential intent and
principles of such provisions, then, in each such case, either (i) the Company
shall appoint an investment banking firm of recognized national standing, or any
other financial expert that does not (or whose directors, officers, employees,
affiliates or stockholders do not) have a direct or material indirect financial
interest in the Company or any of its subsidiaries, who has not been, and, at
the time it is called upon to give independent financial advice to the Company,
is not (and none of its directors, officers, employees, affiliates or
stockholders are) a promoter, director or officer of the Company or any of its
subsidiaries, which will give their opinion upon or (ii) the Non-Preferred Stock
Directors shall determine, consistent with such directors' fiduciary duties to
the Company's stockholders, the adjustment, if any, on a basis consistent with
the essential intent and principles established in the foregoing Exercise Price
adjustment provisions, necessary to preserve, without dilution, the rights
represented by the Warrants. Upon receipt of such opinion or determination, the
Company shall promptly mail a copy thereof to the Warrant holders and will make
the adjustments described therein.
(q) Certain Determinations.
----------------------
Except as provided in the immediately following sentence, any
determination that the Company, its Board of Directors or a majority of the Non-
Preferred Stock Directors, as the case may be, must make pursuant to Subsection
10(a), (b), (c), (d), (e), (f), (g), (h), (i) or (k) shall be conclusive.
Whenever the Company, its Board of Directors or a majority of the Non-Preferred
C-15
<PAGE>
Directors shall be required to make a determination under this Section 10, such
determination shall be made in good faith and may be challenged in good faith by
the holders of a majority of Warrants (with any Warrants held by the Company or
any of its Affiliates not being considered to be outstanding for purposes of
this Agreement), and any dispute shall be resolved at the Company's expense, by
an investment banking firm of recognized national standing selected by the
Company and acceptable to such Warrant holders; provided, however, that in the
-------- -------
event the determination by such investment banking firm deviates by no more than
5% from the Company's determination, then the cost to the Company of the
retention of the investment banking firm shall be borne by the Warrant holders
challenging the Company's determination.
(r) When Issuance or Payment May Be Deferred.
----------------------------------------
In any case in which this Section 10 shall require that an adjustment
in the Exercise Price be made effective as of a record date for a specified
event, the Company may elect to defer until after the occurrence of such event
(i) issuing to the holder of any Warrant exercised after such record date the
Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise Price
in effect immediately prior to such adjustment and (ii) paying to such holder
any amount in cash in lieu of a fractional share pursuant to Section 11;
provided, however, that the Company shall deliver to such holder a due bill or
- -------- -------
other appropriate instrument evidencing such holder's right to receive such
additional Warrant Shares, other capital stock and cash upon the occurrence of
the event requiring such adjustment.
(s) Adjustment in Number of Shares.
------------------------------
Upon each adjustment of the Exercise Price pursuant to this Section
10, each Warrant outstanding prior to the making of the adjustment in the
Exercise Price shall thereafter evidence the right to receive upon payment of
the adjusted Exercise Price that number of shares of Common Stock (calculated to
the nearest hundredth) obtained from the following formula:
N' = N x E
-----
E'
where:
N' = the adjusted number of Warrant Shares issuable upon exercise of a
Warrant by payment of the adjusted Exercise Price.
E = the number or Warrant Shares previously issuable upon exercise of a
Warrant by payment of the Exercise Price prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(t) Special Conversion of Convertible Exchangeable Preferred Stock.
--------------------------------------------------------------
C-16
<PAGE>
In the event that all the holders of the Company's 7% Cumulative
Convertible Exchangeable Preferred Stock ("Convertible Exchangeable Preferred
Stock") shall not have waived their rights that accrue pursuant to Section 8 of
the Certificate of Designations of the Convertible Exchangeable Preferred Stock
("Convertible Exchangeable Preferred Stock Certificate of Designations") as a
result of the Company's issuance of its Cumulative Convertible Participating
Preferred Stock on the date hereof, then, (i) the Company shall send to the
holders of the Convertible Exchangeable Preferred Stock not providing such
waiver, as promptly as possible following the Closing Date, the Special
Conversion Notice (as defined in the Convertible Exchangeable Preferred Stock
Certificate of Designations) and (ii) upon expiration of the 45 day period
following the provision of such Special Conversion Notice, the Exercise Price
shall be adjusted in accordance with the following formula to adjust for the
effects of the conversion of Convertible Exchangeable Preferred Stock at the
Special Conversion Price (as defined in the Convertible Exchangeable Preferred
Stock Certificate of Designations:
E'=E x (O/(O+P-((D/0.135)/X)))
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding immediately prior to
the conversion of shares of Convertible Exchangeable Preferred Stock
into Common Stock at the Special Conversion Price.
P = the number of shares of Common Stock issued upon conversion of shares
of Convertible Exchangeable Preferred Stock at a conversion price
equal to the Special Conversion Price.
D = the amount of annual dividends payable on the shares of Convertible
Exchangeable Preferred Stock converted into Common Stock at the
Special Conversion Price.
X = the regular Conversion Price of the Convertible Exchangeable Preferred
Stock (i.e, $5.84).
(u) Form of Warrants.
----------------
Irrespective of any adjustments in the Exercise Price or the number or
kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 11. Fractional Interests. The Company shall not be required
--------------------
to issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 11,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in
C-17
<PAGE>
cash equal to the Exercise Price on the day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction.
SECTION 12. Financial Statements.
--------------------
(a) Whether or not required by the rules and regulations of the
Securities and Exchange Commission (the "Commission"), so long as any
of the Warrants remain outstanding, the Company shall furnish to the
Warrant Holders (i) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission
on Forms 10-Q and 10-K if the Company were required to file such
Forms, including "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company
were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Company
shall file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In
addition, for so long as any Warrant remains outstanding, the Company
shall furnish to the Warrant Holders and to securities analysts and
prospective investors, upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(b) The Company shall, so long as any of the Warrants are
outstanding, deliver to the Warrant Holders, forthwith upon any
Executive Officer of the Corporation becoming aware of any default
under this Agreement, an Officers' Certificate specifying such default
and what action the Company is taking or proposes to take with respect
thereto.
SECTION 13. Notices to Warrant holders. Upon any adjustment of the
--------------------------
Exercise Price or exercise privileges pursuant to Section 10, the Company shall
promptly thereafter (i) cause to be filed with the Company a certificate of a
firm of independent public accountants of recognized standing selected by the
Board of Directors (who may be the regular auditors of the Company) setting
forth the Exercise Price after such adjustment and setting forth in reasonable
detail the method of calculation and the facts upon which such calculations are
based and setting forth the number of Warrant Shares (or portion thereof)
issuable after such adjustment in the Exercise Price, which certificate shall,
subject to Section 10(q) above, be conclusive evidence of the correctness of the
matters set forth therein, upon exercise of a Warrant and payment of the
adjusted Exercise Price, and (ii) cause to be given to each of the registered
holders of the Warrant Certificates at his address appearing on the Warrant
register written notice of such adjustments by first-class mail, postage
prepaid. Where appropriate, such notice may be given in advance and included as
a part of the notice required to be mailed under the other provisions of this
Section 13.
C-18
<PAGE>
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of Rights to subscribe for or purchase shares
of Common Stock or of any other subscription rights or warrants; or
(b) the Company shall authorize the distribution to all holders
of shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares
of Common Stock or distributions referred to in Subsection 10(a)
hereof); or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is
required, or of the conveyance or transfer of the properties and
assets of the Company substantially as an entirety, or of any
reclassification or change of Common Stock issuable upon exercise of
the Warrants (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for
shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any action (other than actions
of the character described in Subsection 10(a)) which would require an
adjustment of the Exercise Price pursuant to Section 10;
then the Company shall cause to be given to each of the registered holders of
the Warrant Certificates at his address appearing on the Warrant register, at
least 20 days prior to the applicable record date hereinafter specified, or
promptly in the case of events for which there is no record date, by first-class
mail, postage prepaid, a written notice stating (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any such
Rights or distribution are to be determined, or (ii) the initial expiration date
set forth in any tender offer or exchange offer for shares of Common Stock, or
(iii) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up. The failure to give the notice required by this Section 13 or any defect
therein shall not affect the legality or validity of any distribution, right,
option, warrant, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive
C-19
<PAGE>
notice as shareholders in respect of the meetings of shareholders or the
election of Directors of the Company or any other matter, or any rights
whatsoever as shareholders of the Company.
SECTION 14. Notices to Company and Warrant Holder. Any notice or
-------------------------------------
demand authorized by this Agreement to be given or made by the registered holder
of any Warrant Certificate to or on the Company shall be sufficiently given or
made when and if deposited in the mail, first class or registered, postage
prepaid, addressed to the office of the Company expressly designated by the
Company at its office for purposes of this Agreement (until the Warrant holders
are otherwise notified in accordance with this Section by the Company), as
follows:
International Technology Corporation
23456 Hawthorne Blvd.
Torrance, California 90505
Telephone (310) 378-9933
Facsimile: (310) 791-4770
Attention: President
With a copy to: Secretary
Any notice pursuant to this Agreement to be given by the Company to
the registered holder(s) of any Warrant Certificate shall be sufficiently given
when and if deposited in the mail, first-class or registered, postage prepaid,
addressed (until the Company is otherwise notified in accordance with this
Section by such holder) to such holder at the address appearing on the Warrant
register of the Company.
SECTION 15. Supplements and Amendments. The Company may from time to
--------------------------
time supplement or amend this Agreement without the approval of any holders of
Warrant Certificates in order to cure any ambiguity or to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company may deem necessary or desirable
and which shall not in any way adversely affect the interests of the holders of
Warrant Certificates.
SECTION 16. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its respective successors and assigns hereunder.
SECTION 17. Termination. This Agreement shall terminate at 5:00 p.m.,
-----------
Eastern Standard Time on ______, 2001. Notwithstanding the foregoing, this
Agreement will terminate on any earlier date if all Warrants have been
exercised.
SECTION 18. Governing Law. This Agreement and each Warrant
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of California and for all purposes shall be construed in
accordance with the internal laws of said State.
C-20
<PAGE>
SECTION 19. Benefits of This Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any person or corporation other than the Company
and the registered holders of the Warrant Certificates any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company and the registered holders of the
Warrant Certificates.
SECTION 20. HSR Act. Promptly (but in no event later than five days)
-------
after receipt of notice from any Warrant Holder of its intention to exercise any
Warrants, the Company shall make all filings required to be made under the Hart-
Scott-Rodino Improvements Act of 1976 (the "HSR Act") in connection with such
exercise. The applicable waiting period, including any extension thereof, under
the HSR Act shall have expired or been terminated prior to the issuance of any
Warrant Shares upon exercise of Warrants.
SECTION 21. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
[Signature Page Follows]
C-21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
INTERNATIONAL TECHNOLOGY CORPORATION
By: _______________________________________
Name: ________________________________
Title: ________________________________
CARLYLE PARTNERS II, L.P.
By: TC Group, L.L.C., its General Partner
By: _________________________________
Name:____________________________
Title:___________________________
CARLYLE PARTNERS III L.P.
By: TC Group, L.L.C., its General Partner
By: _________________________________
Name:____________________________
Title:___________________________
CARLYLE INTERNATIONAL PARTNERS II, L.P.
By: TC Group, L.L.C., its General Partner
By: _________________________________
Name:____________________________
Title:___________________________
C-22
<PAGE>
CARLYLE INTERNATIONAL PARTNERS III, L.P.
By: TC Group, L.L.C., its General Partner
By: _________________________________
Name:____________________________
Title:___________________________
C/S INTERNATIONAL PARTNERS
By: TC Group, L.L.C., its General Partner
By: _________________________________
Name:____________________________
Title:___________________________
C-23
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
"THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SAID ACT AND THE
RULES AND REGULATIONS THERE-UNDER AND OF ALL APPLICABLE STATE SECURITIES OR
"BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ALL APPLICABLE
STATE SECURITIES OR "BLUE SKY" LAWS."
EXERCISABLE ON OR BEFORE AUGUST ___, 2001
No. _____ Warrants
Warrant Certificate
INTERNATIONAL TECHNOLOGY CORPORATION
This Warrant Certificate certifies that [ ] or registered
assigns, is the registered holder of Warrants expiring August ___, 2001 (the
"Warrants") to purchase Common Stock, $1.00 par value (the "Common Stock"), of
International Technology Corporation, a Delaware corporation (the "Company").
Each Warrant entitles the holder upon exercise to receive from the Company on or
before 5:00 p.m. Eastern Standard Time on August ___, 2001, one fully paid and
nonassessable share of Common Stock (a "Warrant Share") at the exercise price of
$_______ (the "Exercise Price"), payable in lawful money of the United States of
America upon surrender of this Warrant Certificate and payment of the Exercise
Price at the office of the Company designated for such purpose, but only subject
to the conditions set forth herein and in the Warrant Agreement. The Exercise
Price and number and kind of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events set
forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., Eastern Time on _______,
2001, and to the extent not exercised by such time such Warrants shall become
void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by
the Company, as such term is used in the Warrant Agreement.
i
<PAGE>
IN WITNESS WHEREOF, ____________________________ has caused this
Warrant Certificate to be signed by its President and by its Secretary and has
caused its corporate seal to be affixed hereunto or imprinted hereon.
Dated:
INTERNATIONAL TECHNOLOGY
CORPORATION
By ______________________
President
By ______________________
Secretary
ii
<PAGE>
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring _______, 2001 entitling the holder on
exercise to receive shares of Common Stock, $1.00 par value, of the Company (the
"Common Stock"), and are issued or to be issued pursuant to a Warrant Agreement
dated as of _________, 1996 (the "Warrant Agreement"), duly executed and
delivered by the Company, which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants
(the "Warrant Holders"). A copy of the Warrant Agreement may be obtained by the
holder hereof upon written request to the Company.
Warrants may be exercised at any time on or before _______, 2001.
The holder of Warrants evidenced by this Warrant Certificate may exercise them
by surrendering this Warrant Certificate, with the form of election to purchase
set forth hereon properly completed and executed, together with payment of the
Exercise Price in cash at the office of the Company designated for such purpose.
In the alternative, each Warrant Holder may exercise its right, during the
Exercise Period, as defined in the Warrant Agreement, to receive Warrant Shares
on a net basis, such that, without the exchange of any funds, the Warrant Holder
receives that number of Warrant Shares otherwise issuable (or payable) upon
exercise of its Warrants less that number of Warrant Shares having an aggregate
fair market value (as defined below) at the time of exercise equal to the
aggregate Exercise Price that would otherwise have been paid by the Warrant
Holder of the Warrant Shares. For purposes of the foregoing sentence, "fair
market value" of the Warrant Shares will be determined in the manner set forth
in the Warrant Agreement. In the event that upon any exercise of Warrants
evidenced hereby the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the holder hereof
or his assignee a new Warrant Certificate evidencing the number of Warrants not
exercised. Except as provided in Section 10 of the Warrant Agreement, no
adjustment shall be made for any dividends on any Common Stock issuable upon
exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
The holders of the Warrants are entitled to certain registration
rights with respect to the Common Stock purchasable upon exercise thereof. Said
registration rights are set forth in full in a Registration Rights Agreement
dated as of ______, 1996, between the Company and the certain Warrant Holders.
A copy of the Registration Rights may be obtained by the holder hereof upon
written request to the Company.
iii
<PAGE>
Warrant Certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Company a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
iv
<PAGE>
[FORM OF ELECTION TO PURCHASE]
(TO BE EXECUTED UPON EXERCISE OF WARRANT)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive __________ shares of Common
Stock and herewith tenders payment for such shares to the order of International
Technology Corporation in the amount of $______ or by delivery of ___ Warrants
or in accordance with the terms hereof. The undersigned requests that a
certificate for such shares be registered in the name of ________________, whose
address is _______________________________ and that such shares be delivered to
________________ whose address is ___________ ______________________. If said
number of shares is less than all of the shares of Common Stock purchasable
hereunder after giving effect to any delivery of Warrants in payment of the
Exercise Price, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of
______________, whose address is _________________________, and that such
Warrant Certificate be delivered to _________________, whose address is
__________________.
Signature:
Date:
v
<PAGE>
EXHIBIT D
FORM OF
AMENDMENT TO
NON-EMPLOYEE DIRECTORS' RETIREMENT PLAN
<PAGE>
EXHIBIT E
FORM OF
LEGAL OPINIONS OF
COUNSEL TO
THE PURCHASERS
<PAGE>
EXHIBIT F
FORM OF
LEGAL OPINIONS OF
COUNSEL TO
THE COMPANY
<PAGE>
EXHIBIT 10.2
CONFORMED COPY
--------------
CONSENT and WAIVER, dated as of August 30, 1996 (this "Consent and
-----------
Waiver"), to (i) the Credit Agreement, dated as of October 24, 1995 (as amended,
- ------
supplemented or otherwise modified from time to time, the "Credit Agreement"),
----------------
among IT CORPORATION, a California corporation (the "Borrower"), the several
--------
banks and other financial institutions from time to time parties thereto (the
"Lenders") and The Chase Manhattan Bank (formerly known as Chemical Bank), a New
- --------
York banking corporation, as administrative agent for the Lenders thereunder (in
such capacity, the "Agent") and (ii) the several Note Purchase Agreements, each
-----
dated as of October 24, 1995 (collectively, the "Note Agreements"), between the
---------------
Borrower and the respective Purchasers thereunder.
W I T N E S S E T H :
-------------------
WHEREAS, the parties hereto wish to waive certain provisions of the
Credit Agreement and the Note Agreements on the terms set forth herein;
NOW, THEREFORE, in consideration of the premise contained herein, the
parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
-------------
used herein shall have the meanings ascribed to them in the Credit Agreement and
the Note Agreements (collectively, the "Agreements").
----------
2. Limited Waiver; Limitation on Loans. (a) Subject to the
-----------------------------------
provisions of paragraph 2(d) hereof, compliance with Section 2 of Schedule III
is hereby waived to the extent, and only to the extent, that such non-compliance
results from the inclusion of the Senior Notes as Current Liabilities, solely
for the purpose of calculating the Current Ratio as at June 28, 1996.
(b) Subject to the provisions of paragraph 2(d) hereof, compliance
with Section 5(a) of Schedule III of the Agreements is hereby waived to the
extent, and only to the extent, that the ratio of (i) EBIT for the nine-month
period ending June 28, 1996 to (ii) the sum of (A) Interest Expense for such
period plus (B) all dividends on Preferred Stock paid during such period is less
than 1.50 to 1.00, provided that such ratio is not less than 0.65 to 1.00.
--------
(c) Subject to the provisions of paragraph 2(d) hereof, compliance
with Section 5(b) of Schedule III of the Agreements is hereby waived to the
extent, and only to the extent, that the ratio of (i) EBIT for the nine-month
period ending June 28, 1996 to (ii) the sum of (A) Interest Expense net of
interest income for such period plus (B) all dividends on Preferred Stock paid
during such period is less than 2.00 to 1.00, provided that such ratio is not
--------
less than 0.65 to 1.00.
<PAGE>
(d) Notwithstanding any of the foregoing, the waivers described in
paragraphs 2(a), (b) and (c) hereof shall only be effective through and
including October 4, 1996, and any Event of Default that would have existed and
been continuing but for the effect of this Consent and Waiver shall be
reinstated and shall thereafter continue to constitute an Event of Default
unless further expressly waived in writing in accordance with the Credit
Agreement and the Note Agreements.
(e) Notwithstanding anything in the Credit Agreement to the contrary,
during the period from the date hereof to and including October 4, 1996, no
Loans may be made or requested under the Credit Agreement. During such period,
the Commitments thereunder shall only be available for the issuance of Letters
of Credit, subject to all the other provisions of the Credit Agreement and to
the extent available to be issued in accordance with the Credit Agreement.
3. Effective Date. This Consent and Waiver will become effective as
--------------
of the date hereof upon its execution by the Agent and the Majority Creditors
and its acknowledgment by the Borrower.
4. Representations and Warranties; No Default. On and as of the
------------------------------------------
date hereof, and after giving effect to this Consent and Waiver, the Borrower
confirms, reaffirms and restates that the representations and warranties set
forth in Section 4 of the Credit Agreement, in the other Loan Documents (as
defined in the Credit Agreement) and in the Note Agreements are true and correct
in all material respects, provided that the references to the Credit Agreement
--------
or the Note Agreements therein shall be deemed to be references to this Consent
and Waiver and to the Credit Agreement or the Note Agreements, as the case may
be, as amended by this Consent and Waiver.
5. Limited Waiver. Except as expressly waived herein, the Credit
--------------
Agreement and each of the Note Agreements shall continue to be, and shall
remain, in full force and effect. This Consent and Waiver shall not be deemed
to be a waiver of, or consent to, or a modification or amendment of, any other
term or condition of the Credit Agreement, any other Loan Document, any of the
Note Agreements or any Senior Note or to prejudice any other right or rights
which the Lenders may now have or may have in the future under or in connection
with any thereof or any of the instruments or agreements referred to therein, as
the same may be amended from time to time.
6. GOVERNING LAW. THIS CONSENT AND WAIVER SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
7. Counterparts. This Consent and Waiver may be executed by the
------------
parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
2
<PAGE>
IN WITNESS HEREOF, the parties hereto have caused this Consent and
Waiver to be duly executed and delivered by their properly and duly authorized
officers as of the day and year first above written.
THE CHASE MANHATTAN BANK (formerly
known as Chemical Bank),
as Administrative Agent and as a Lender
By: /s/ John T. Zeller
------------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ J. Lee Harper
------------------------------------
Title: Vice President
SOCIETE GENERALE
By: /s/ David Brunson
------------------------------------
Title: First Vice President
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Stephen J. Blewitt
------------------------------------
Title: Investment Officer
JOHN HANCOCK LIFE INSURANCE COMPANY
OF AMERICA
By: /s/ Willma J. Davis
------------------------------------
Title: Vice President
3
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY
By: /s/ Patricia W. Wilson
------------------------------------
Title: Authorized Signatory
By: /s/ Steven M. Laude
------------------------------------
Title: Authorized Signatory
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Suzanne E. Walton
------------------------------------
Title: Managing Director
MONY LIFE INSURANCE COMPANY OF AMERICA
By: /s/ Suzanne E. Walton
------------------------------------
Title: Authorized Agent
ACKNOWLEDGED AND AGREED:
IT CORPORATION
By:
---------------------------------
Title: Vice President and Treasurer
4
<PAGE>
EXHIBIT 10.3
CONFORMED COPY
--------------
CONSENT, dated as of August 31, 1996 (this "Consent"), to (i) the
-------
Credit Agreement, dated as of October 24, 1995 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among IT
----------------
CORPORATION, a California corporation (the "Borrower"), the several banks and
--------
other financial institutions from time to time parties thereto (the "Lenders")
-------
and The Chase Manhattan Bank (formerly known as Chemical Bank), a New York
banking corporation, as administrative agent for the Lenders thereunder (in such
capacity, the "Agent") and (ii) the several Note Purchase Agreements, each dated
-----
as of October 24, 1995 (collectively, the "Note Agreements"), between the
---------------
Borrower and the respective Purchasers thereunder.
W I T N E S S E T H :
-------------------
WHEREAS, the parties hereto wish to waive certain provisions of the
Credit Agreement and the Note Agreements on the terms set forth herein;
NOW, THEREFORE, in consideration of the premise contained herein, the
parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
-------------
used herein shall have the meanings ascribed to them in the Credit Agreement and
the Note Agreements (collectively, the "Agreements").
----------
2. Consent. The undersigned parties hereby consent to the proposed
-------
transfer (the "NEPCCO Transaction") by the Borrower of the capital stock of IT
------------------
Environmental Services, Inc. ("NEPCCO") to a newly-created corporation ("Newco")
------ -----
to be jointly owned by the Parent and Photox Corporation, including to the
extent required under the terms of such transaction the investment of an amount
up to an additional $350,000.00 in Newco, provided that (i) the assets and
--------
liabilities of NEPCCO on the date of such transfer are substantially similar in
all material respects to those of NEPCCO on the date hereof and previously
disclosed to the Lenders in the information dated as of June 28, 1996 delivered
pursuant to Section 21(b) of Schedule III; (ii) the NEPCCO Transaction is
consummated within 30 days after the date hereof; (iii) the consideration
received by the Borrower on the date of such transfer comprises not less than
10% of the common stock of Newco and 8% Series A Preferred Stock issued by Newco
with an aggregate stated liquidation preference of not less than $1,550,000;
(iv) no liabilities or obligations are assumed, retained, created or entered
into in connection with the NEPCCO Transaction other than any of the foregoing
that would otherwise be permitted under the Agreements; (v) all capital stock
received by the Borrower in connection with the NEPCCO Transaction, including
that described in clause (iii) above, is pledged to the Collateral Agent, for
the benefit of the Credit Providers, under, or on terms substantially similar to
those set forth in, the existing Parent Pledge Agreement promptly, but in no
event later than five business days after the consummation of the NEPCCO
Transaction; and (vi) to the extent that at any time the Borrower has
availability to make Restricted Investments or Restricted Payments under Section
7(j) and 8(d) of Schedule
<PAGE>
2
III, the amount of the consideration received in the NEPCCO Transaction and any
amount invested in Newco up to $350,000.00 as permitted above, and then
outstanding shall be deemed to be a Restricted Investment for the purposes
thereof, and deducted from the first occurring any such availability; and
provided, further, that, notwithstanding any provision of the Agreements, after
- -------- -------
the consummation of the NEPCCO Transaction the Borrower shall make no
investments in, loans or advances to, or guarantees of or for the benefit of,
Newco in an aggregate amount in excess of $350,000.00.
3. Effective Date; Release. This Consent will become effective as of
-----------------------
the date hereof upon its execution by the Agent and the Credit Providers and its
acknowledgment by the Borrower. The Credit Providers hereby authorize the Agent
and the Collateral Agent, after the Effective Date and the consummation of the
NEPCCO Transaction, to take such actions (i) to release the Collateral
transferred thereby to Newco, (ii) to release NEPCCO from its obligations under
its Guarantee and the Subsidiaries Security Agreement and (iii) to amend the
Parent Pledge Agreement by replacing the existing Schedule I thereto with the
form of Amended and Restated Schedule I attached hereto, as the Borrower shall
reasonably request.
4. Representations and Warranties; No Default. On and as of the date
------------------------------------------
hereof, and after giving effect to this Consent, the Borrower confirms,
reaffirms and restates that the representations and warranties set forth in
Section 4 of the Credit Agreement, in the other Loan Documents (as defined in
the Credit Agreement) and in the Note Agreements are true and correct in all
material respects, provided that the references to the Credit Agreement or the
--------
Note Agreements therein shall be deemed to be references to this Consent and to
the Credit Agreement or the Note Agreements, as the case may be, as amended by
this Consent.
5. Limited Waiver. Except as expressly waived herein, the Credit
--------------
Agreement and each of the Note Agreements shall continue to be, and shall
remain, in full force and effect. This Consent shall not be deemed to be a
waiver of, or consent to, or a modification or amendment of, any other term or
condition of the Credit Agreement, any other Loan Document, any of the Note
Agreements or any Senior Note or to prejudice any other right or rights which
the Lenders may now have or may have in the future under or in connection with
any thereof or any of the instruments or agreements referred to therein, as the
same may be amended from time to time.
6. GOVERNING LAW. THIS CONSENT SHALL BE GOVERNED BY, AND CONSTRUED
-------------
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
7. Counterparts. This Consent may be executed by the parties hereto
------------
in any number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
<PAGE>
3
IN WITNESS HEREOF, the parties hereto have caused this Consent to be
duly executed and delivered by their properly and duly authorized officers as of
the day and year first above written.
THE CHASE MANHATTAN BANK (formerly known as
Chemical Bank),
as Administrative Agent and as a Lender
By: /s/ E.J. Hess
----------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ J. Lee Harper
----------------------------------
Title: Vice President
SOCIETE GENERALE
By: /s/ David Brunson
----------------------------------
Title: First Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Stephen J. Blewitt
----------------------------------
Title: Investment Officer
JOHN HANCOCK LIFE INSURANCE
COMPANY OF AMERICA
By: /s/ Stephen A. MacLean
----------------------------------
Title: Vice President - Investments
<PAGE>
4
ALLSTATE LIFE INSURANCE COMPANY
By: /s/ Patricia W. Wilson
----------------------------------
Title: Authorized Signatory
By: /s/ Steven M. Laude
----------------------------------
Title: Authorized Signatory
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Suzanne E. Walton
----------------------------------
Title: Managing Director
MONY LIFE INSURANCE COMPANY OF
AMERICA
By: /s/ Suzanne E. Walton
----------------------------------
Title: Authorized Agent
ACKNOWLEDGED AND AGREED:
IT CORPORATION
By: ___________________________________________
Title: Vice President and Treasurer
<PAGE>
EXHIBIT 10.4
SEPARATION AGREEMENT
This Separation Agreement (hereinafter the "Agreement") is entered into as
of the 30th day of September, 1996, by and between Eric Schwartz (hereafter
"Schwartz"), an individual, and International Technology Corporation, a Delaware
corporation (the "Company").
RECITALS
A. WHEREAS, Schwartz has been employed by the Company, has held the
position of Senior Vice President, Law & Administration, General Counsel and
Secretary of the Company, and has held positions as an officer of subsidiaries
of the Company;
B. WHEREAS, Schwartz and the Company wish to finally and forever resolve
all matters between them relative to Schwartz's employment and his entitlement
to severance pay and other additional forms of compensation and benefits, and to
provide for the termination of the employment relationship;
C. NOW, THEREFORE, in consideration of the aforementioned recitals and the
mutual covenants and conditions set forth below and in full settlement of any
and all claims for lost compensation including, without limitation, all claims
for back pay, severance pay, accrued vacation pay, continuation of health or
other benefits or any other payment in the nature of compensation attributable
to Schwartz's employment by the Company or any of its subsidiaries, and any and
all other claims which were or could have been raised by either party prior to
the date of this Agreement, Schwartz and the Company hereby agree as follows:
AGREEMENT
1. Resignation and Termination of Employment. Effective as of July 30,
-----------------------------------------
1996, Schwartz hereby resigns as an officer of the Company and of all
subsidiaries of the Company; provided, however that Schwartz shall continue to
be treated as an employee of the Company until September 29, 1997.
Notwithstanding the foregoing, Schwartz shall have no duties or responsibilities
to the Company after his resignation except such duties as may arise under the
terms of this Agreement.
2. Salary and Car Allowance. Through September 29, 1997, the Company will
------------------------
pay Schwartz at the rate of $250,000 per annum, less payroll deductions, in
equal bi-weekly payments. In addition to such amount, Schwartz shall receive
payment of $5,850 per annum, less payroll deductions, as a car allowance,
payable in bi-weekly payments.
3. Vacation Pay. The Company will pay Schwartz the sum of $19,512.16
------------
promptly upon the expiration of seven (7) days after the execution of this
Agreement by Schwartz, representing accrued vacation pay through July 30, 1996;
and thereafter no further vacation pay shall accrue or be payable.
4. Welfare Benefits. Until the earlier of December 31, 1998, or such date
----------------
as Schwartz shall become covered by another employer's medical benefits and not
subject to any
1
<PAGE>
pre-existing condition limitations for himself or his family members, Schwartz
shall continue, to the same extent and on the same basis as other executive
employees of the Company, to be eligible to participate in the Company's Group
Medical Insurance Plan. Until December 31, 1998, Schwartz shall continue to be
eligible to participate in the current Corporate Executive Medical Plan. If the
current Corporate Executive Medical Plan is terminated or if Schwartz shall
otherwise become ineligible to participate in the Plan, then the Company shall
reimburse Schwartz for such expenses that otherwise would have been covered
under the Plan. Until the earlier of September 29, 1997, or such date as
Schwartz shall become a full time employee of another person, Schwartz shall
continue, to the same extent and on the same basis as other executive employees
of the Company, to be eligible to participate in the Company's Group Life and
Accidental Death and Dismemberment Plan (the "Life Plan"); and the Company's
short and long term disability plans (together, the "Disability Plan"). During
such periods, Schwartz and the Company shall pay their respective costs for such
benefits in accordance with the terms and conditions of the applicable plans.
Assuming Schwartz has not become covered under another employer's health plan(s)
prior to December 31, 1998, then, after such date: (a) in connection with the
Medical Plan, Schwartz may elect to continue participation in such plan pursuant
to the terms of Section 4980B(f) of the Internal Revenue Code of 1986 and, to
the extent consistent therewith, the terms of such Plan; but (b) shall no longer
participate in the Life Plan and Disability Plan after September 29, 1997.
5. Retirement Plans. Schwartz shall continue to participate in the IT
----------------
Corporation Retirement Plan, the IT Corporation Restoration Plan and the IT
Corporation Deferred Compensation Plan through September 29, 1997, as a regular
employee of the Company, treating such date as his date of employment
termination with the Company for all purposes under such plans.
6. Restricted Stock Awards. The parties acknowledge that (a) on July 5,
-----------------------
1995 Schwartz was granted by the Company 10,666 shares of restricted stock
pursuant to the Special Turn-A-Round Plan (Fiscal 1995 Management Incentive
Plan)(the "STAR Plan Shares"), (b) on June 1, 1995 Schwartz was granted by the
Company 50,000 additional shares of restricted stock of the Company (the "1995
Shares"), and (c) on March 28, 1996 Schwartz was granted by the Company 50,000
additional shares of restricted stock of the Company (the "1996 Shares").
Notwithstanding any terms to the contrary in the restricted stock agreement
pertaining to the 10,666 STAR Plan Shares, such shares shall be fully vested on
September 29, 1997 and shall not be subject to forfeiture by reason of the
termination of Schwartz's employment with the Company. The parties further
acknowledge and agree that (x) of the 50,000 1995 Shares, 10,000 of such shares
have previously vested and an additional 20,000 shares shall vest on June 1,
1997 and such shares shall be retained by Schwartz and shall not be subject to
forfeiture by reason of the termination of Schwartz's employment with the
Company, and (y) the remaining 20,000 1995 Shares and the 50,000 1996 Shares
shall, on Schwartz's execution of this Agreement, be relinquished by Schwartz
and transferred back to the Company.
7. Stock Options. The parties acknowledge that Schwartz has unexercised
-------------
options granted pursuant to the Company's stock incentive plans covering an
aggregate of 149,000 shares of common stock of the Company, as follows: (a)
options to purchase 50,000 shares of common stock were granted on October 8,
1992 (the "1992 Options") and of such 50,000 options, 37,500
2
<PAGE>
have previously vested; (b) options to purchase 22,000 shares of common stock
were granted on June 3, 1993 (the "1993 Options") and of such 22,000 options,
16,500 have previously vested; and (c) options to purchase 77,000 shares of
common stock were granted on April 29, 1994 (the "1994 Options") and of such
77,000 options, 38,500 have previously vested. The parties acknowledge and agree
that (x) the remaining 12,500 1992 Options shall vest in accordance with their
terms on October 8, 1996, (y) the 5,500 remaining 1993 Options will vest in
accordance with their terms on June 3, 1997, and (z) of the 38,500 remaining
1994 Options, 19,250 options shall vest on April 29, 1997, in accordance with
their terms and the additional 19,250 options shall not vest and shall expire as
of September 29, 1997. Schwartz shall have the right to exercise the vested
options in accordance with the terms of the applicable Stock Option Agreements
during the remaining term of the options; provided, however, that
notwithstanding any terms to the contrary in the stock option agreements
evidencing such options, all options vested as of September 29, 1997 shall not
terminate by reason of the termination of Schwartz's employment with the Company
and shall remain exerciseable for the original terms.
8. Expenses Related to Seeking Employment. The Company will provide
--------------------------------------
Schwartz with an outplacement service at a cost not to exceed $25,000.
9. Other Expenses. The Company shall reimburse Schwartz for reasonable
--------------
business expenses incurred by Schwartz prior to his resignation, in accordance
with the Company's standard practices.
10. Sole Entitlement. Schwartz agrees that his sole entitlement to
----------------
compensation, payments of any kind, monetary and/or nonmonetary benefits and/or
perquisites with respect to his employment with, his services rendered to, and
all other matters between Schwartz and the Company or between Schwartz and any
subsidiary of the Company, is as expressly set forth in this Agreement.
11. Releases by Schwartz. Schwartz does hereby and forever release and
--------------------
discharge the Company and the past and present parent, subsidiary and affiliated
corporations of the Company as well as the successors, shareholders, officers
and directors of corporate shareholders, officers, directors, heirs,
predecessors, assigns, agents, employees, attorneys and representatives of each
of them, past or present, from any and all cause or causes of action, actions,
judgments, liens, indebtedness, damage, losses, claims, liabilities, and demands
of whatsoever kind or character, known or unknown, suspected to exist or not
suspected to exist, anticipated or not anticipated, whether or not heretofore
brought before any state or federal court or before any state or federal agency
or other governmental entity, whether statutory or common law, including without
limitation on the generality of the foregoing, any and all claims, demands or
causes of action attributable to, connected with, or incidental to the
employment of Schwartz by the Company or any subsidiary of the Company, the
separation of that employment and any dealings between the parties concerning
Schwartz's employment or any other matter existing prior to the date of
execution of this Agreement, excepting only any claims or causes of action
arising out of willful misconduct, dishonesty or gross negligence of the Company
or those obligations to be performed hereunder. This release is intended to
apply to any claims arising from federal, state or local laws which prohibit
discrimination on the basis of race, national origin, sex, religion, age,
marital status, pregnancy, handicap, disability, ancestry, sexual orientation,
family or personal
3
<PAGE>
leave or any other form of discrimination, or to laws such as workers'
compensation laws, which provide rights and remedies for injuries sustained in
the workplace or any common law claims of any kind, including, but not limited
to, breach of privacy, misrepresentation, defamation, wrongful termination,
tortious infliction of emotional distress, loss of consortium and breach of
fiduciary duty, violation of public policy and any other common law claim of any
kind whatever, any claims for severance pay, sick leave, family leave, vacation,
life insurance, bonuses, health insurance, disability or medical insurance or
any other fringe benefit or compensation, and all rights and claims arising
under the Employee Retirement Income Security Act of 1974 ("ERISA"), or
pertaining to ERISA regulated benefits.
12. Releases by Company. The Company does hereby release and forever
-------------------
discharge Schwartz from any and all cause or causes of action, actions,
judgments, liens, indebtedness, damages, losses, claims, liabilities, and
demands of whatsoever kind of character, known or unknown, suspected to exist or
not suspected to exist, anticipated or not anticipated, whether or not
heretofore brought before any state or federal court or before any state or
federal agency or other governmental entity, whether statutory or common law,
heretofore or hereafter arising out of , connected with or incidental to any
dealings between the parties prior to the date of this Agreement, including
without limitation on the generality of the foregoing, any and all claims,
demands or causes of action attributable to, connected with, or incidental to
the employment of Schwartz by the Company or any subsidiary of the Company, the
separation of that employment and any dealings between the parties concerning
Schwartz's employment or any other matter existing prior to the date of
execution of this Agreement, excepting only any claims or causes of action
arising out of willful misconduct, dishonesty, or gross negligence of Schwartz,
or those obligations to be performed hereunder.
13. Unknown Claims. Schwartz and Company specifically waive the benefits
--------------
of the provisions of section 1542 of the Civil code of the State of California
and any other analogous state or federal law or regulation. Said Section 1542
of the California Civil Code reads as follows:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor."
14. Continuing Fiduciary Obligations and Unfair Competition.
--------------------------------------------------------
(a) Schwartz acknowledges that he is obliged by contract and by
operation of law to maintain the confidentiality of the Company's trade secrets
and other confidential information not publicly known, and covenants and agrees
that he shall not use or divulge, disclose, or communicate to any other person,
firm, or corporation, any of the Company's trade secrets or confidential
information except as disclosure shall be compelled by judicial process.
Nothing contained in this paragraph is intended to preclude Schwartz from
working for a competitor of the Company or from using non-trade secrets and/or
non-confidential information learned by him in the course of his employment with
the Company.
4
<PAGE>
(b) Schwartz agrees that he shall not, for a period of twelve months
from the date of this Agreement, directly or indirectly (i) recruit, solicit or
induce, or attempt to induce any officer or employee (other than employees
engaged in secretarial or purely ministerial functions) of Company or any of its
affiliates, to terminate or fail to renew their employment or contract with, or
otherwise cease their relationship with, the Company or any of its affiliates or
(ii) hire any such person recruited in violation of (i) immediately above.
15. Prohibition Against Defamation and Willful Disparagement. The Company
--------------------------------------------------------
and Schwartz agree that they will not orally or in writing defame, criticize, or
willfully disparage, or in any manner undermine the reputation of the other, or
in the case of the Company, any subsidiary or affiliated corporation of the
Company, the Company itself, or any employee, officer or director of the Company
or any subsidiary or affiliate of the Company, except as required by compulsion
of law to truthfully testify. It is the intention of the parties that any
inquiries from potential employers of Schwartz as to Schwartz's job performance,
his interpersonal and other management skills and the reason for his departure
from employment at the Company be responded to by the appropriate Company
officers or members of the Company's Board of Directors in a manner that
provides a favorable recommendation of Schwartz to such inquiring potential
employer. In any such communication to a prospective employer of Schwartz, the
reason for Schwartz's departure shall be given as "for personal reasons". If
any director or officer or agent or employee of the Company fails in any manner
to follow this procedure or any other provision of this paragraph, Schwartz's
sole and exclusive remedy will be to request in writing that Company correct the
failure by means of a letter from one of the persons identified above, as set
forth above, which letter shall also retract or disclaim, as appropriate, any
information inconsistent with the provisions of this paragraph provided by any
director, officer, agent, or employee of the Company.
16. Litigation. Schwartz agrees to cooperate with the Company in
----------
connection with any future or currently pending litigation, including without
limitation, by making himself available to testify in actions as reasonably
requested by the Company. In the event that Schwartz is required to spend more
than an insignificant amount of time in any such activities, he shall be
compensated at an hourly rate of $123 per hour. In the event Schwartz is
required to defend himself with respect to events which relate to or occurred
during his employment with the Company or any subsidiary of the Company, or to
his service as an officer the Company, to the extent that Schwartz is not
otherwise covered by any insurance policy maintained by the Company, the Company
shall be responsible for providing a defense to, and indemnify, Schwartz, to the
same extent and under the same conditions as if he had remained an officer of
the Company.
17. Legal Advice. Each party has received independent legal advice from
------------
his or its attorneys with respect to the advisability of making the settlement
provided for herein, with respect to the advisability of executing this
Agreement and with respect to the meaning of California Civil code Section 1542.
18. Factual Investigation. Each party to this Agreement has made such
---------------------
investigation of the facts pertaining to the matters resolved by this Agreement
and of all the matters pertaining thereto as he or it deems necessary.
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<PAGE>
19. Later Discovered Facts. Each party hereto is aware that he or it may
----------------------
hereafter discover claims or facts in addition to or different from those he or
it now knows or believes to be true with respect to the matters resolved herein.
Nevertheless, it is the intention of each party to fully, finally and forever
settle and release all such matters and all claims relative thereto which may
exist or may heretofore have existed between them.
20. Confidentiality. This Agreement and its provisions are intended to be
---------------
confidential. Accordingly, except as may be required to satisfy the Company's
public disclosure or financial or accounting requirements or as may be compelled
by court order, neither the Company nor Schwartz shall disclose or publicize to
any person, firm or corporation the terms of this Agreement without the consent
of the other party. As reasonably necessary, Schwartz may discuss this
Agreement with his wife, attorney, financial advisor, tax advisor, benefit
advisor or compensation advisor and Company may discuss this Agreement with its
attorneys, officers, directors and managers provided, however, that each agrees
to be bound by the terms of this paragraph to keep the information confidential.
It shall not be a breach of this confidentiality provision for Schwartz to
advise any employer or prospective employer of the limitations set forth in
paragraph 14 above.
21. Assignment. Each of the parties represents and warrants that he or it
----------
has not heretofore assigned, transferred or granted or purported to assign,
transfer or grant any claims, matters, demands or causes of action herein
released, disclaimed, discharged or terminated, and agrees to indemnify and hold
harmless any other party from and against any and all costs, expense, loss or
liability incurred as a consequence of any such assignment.
22. Recitals and Paragraph Headings. Captions and paragraph headings are
-------------------------------
used herein for convenience only, are no part of this Agreement and shall not be
used in interpreting or construing it.
23. Additional Documents. The parties will execute all such further and
--------------------
additional documents and undertake all such other actions as shall be
reasonable, convenient, necessary or desirable to carry out the provisions of
this Agreement.
24. No Admissions. This Agreement effects the settlement of claims which
-------------
are denied, disputed and/or contested and nothing contained herein shall be
construed as an admission by any party hereto of any liability of any kind to
any other party. Each of the parties hereto denies any liability in connection
with any claim and intends merely to avoid the uncertainties and costs of
litigation and buy his or its peace.
25. California Law. This Agreement was negotiated, executed and delivered
--------------
within the State of California, and the rights and obligations of the parties
hereto shall be construed and enforced in accordance with and governed by the
laws of the State of California. Should any litigation arise concerning this
Agreement, it will be filed only in a court in the County of Los Angeles, State
of California, and then only if consistent with the parties' obligations under
paragraph 34 in regard to arbitration.
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26. Entire Agreement. This Agreement constitutes a single integrated
----------------
contract expressing the entire agreement of the parties with respect to the
subject matter hereof and supersedes all prior and contemporaneous oral and
written agreements and discussions with respect to the subject matter hereof.
There are no other agreements, written or oral, express or implied, between the
parties hereto, concerning the subject matter hereof, except as set forth
herein. This Agreement may be amended only by an agreement in writing.
27. Binding Effect. This Agreement is binding upon and shall inure to the
--------------
benefit of the parties hereto, their heirs, assignees and successors in interest
(including successors in any reorganization or merger with any other entity).
28. Construction of Agreement. Each party has cooperated in the drafting
--------------------------
and preparation of this Agreement, and, accordingly, in any construction or
interpretation of this Agreement, the same shall not be construed against any
party by reason of the source of drafting.
29. Costs and Attorneys' Fees. Each party is to bear its own costs and
-------------------------
attorneys' fees incurred in connection with the matters resolved by this
Agreement and in connection with the negotiation and the preparation of this
Agreement. However, in the event of litigation or arbitration relating to or
for the enforcement of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees and costs actually incurred.
30. Taxes. Schwartz acknowledges his responsibility for any and all taxes
-----
due with respect to the sums paid to him under this Agreement, represents that
he has received independent advice concerning his tax obligations, and states
that he has not relied upon representations or advice, if any, of the Company or
their counsel concerning the taxable or nontaxable nature of the, sums payable
hereunder. Schwartz agrees that he will indemnify and hold the Company harmless
from any and all claims for taxes, penalties and/or interest based upon the
payments to be made under this Agreement.
31. Counterparts. This Agreement may be executed in counterparts. When
------------
each party has signed and delivered at least one such counterpart, each
counterpart shall be deemed an original, and, when taken together with other
signed counterparts, shall constitute one Agreement which shall be binding upon
and effective as to all parties. No counterpart shall be effective until all
parties hereto have executed and exchanged an executed counterparts hereof.
32. No Waiver. The failure to enforce at any time any of the provisions
---------
of this Agreement, or to require at any time performance by the other party of
any of the provisions hereof, shall in no way be construed to be a waiver of
such provisions or to affect either the validity of this Agreement or any part
hereof or the right of either party thereafter to enforce each and every
provision in accordance with the terms of this Agreement.
33. Arbitration. Except in connection with an action by the Company for
-----------
injunctive or other equitable relief, any controversy, dispute, or claim between
the parties of this Agreement or any party released pursuant to it, including
any claim arising out of, in connection with, or in relation to the
interpretation, performance or breach of this Agreement shall be resolved
exclusively by arbitration conducted in Los Angeles, California, in accordance
with the then most
7
<PAGE>
applicable rules of the American Arbitration Association. In the event the
parties are unable to agree upon an arbitrator, the parties shall select a
single arbitrator from a list designated by the American Arbitration Association
of seven arbitrators, all of whom shall either be (a) retired judges of the
Superior or Appellate Courts resident in Los Angeles or Orange Counties who are
members of the "independent list" of retired judges or (b) members of the
National Academy of Arbitrators who are attorneys and are resident within 50
miles of the Company's headquarters. Four of the seven panel members proposed by
the American Arbitration Association shall be retired judges and three shall be
arbitrators, all of whom meet the qualifications set forth below. If the parties
are unable to select an arbitrator from the list provided by the American
Arbitration Association, then the parties shall each strike names alternatively
from the list, with the first strike being determined by lot. After each party
has used three strikes, the remaining name on the list shall be the arbitrator.
This agreement to resolve any disputes by binding arbitration shall extend to
claims against any shareholder of the Company, any subsidiary or affiliate of
the Company, any officers, directors, employees, or agents of the Company and
shall apply as well to claims arising out of state and federal statutes and
local ordinances as well as to claims arising under the common law. In the event
the parties are unable to agree upon a location for the arbitration, the
location (within Los Angeles County) shall be determined by the arbitrator. The
parties intend that this Agreement to arbitrate be valid, enforceable and
irrevocable and that it provide the exclusive remedy with respect to all
disputes within its scope.
34. Schwartz's Understanding. Schwartz states that he has carefully read
-------------------------
this Agreement, that it has been fully explained to him by his attorney, that he
fully understands its final and binding effect and understands that he is
releasing certain rights and entitlements, that the only promises made to him to
sign the Agreement are those stated above, and that he is signing this Agreement
voluntarily.
35. Age Discrimination in Employment Act Waiver. The waiver given below
-------------------------------------------
is given only in exchange for consideration in addition to anything of value to
which Schwartz is already entitled. The waiver set forth below does not waive
rights or claims which may arise after the date of execution of this Agreement.
Schwartz acknowledges that (i) this entire Agreement is written in a manner
calculated to be understood by Schwartz (ii) that he has been advised in writing
to consult with an attorney before executing this Agreement, and (iii) he was
given a period of 21 days within which to consider the Agreement, and (iv) to
the extent he executes this Agreement before the expiration of the 21 day
period, he does so knowingly and voluntarily and only after consulting with an
attorney. Schwartz shall have the right to cancel and revoke this Agreement
during a period of 7 days following his execution of the Agreement and this
Agreement shall not become effective, and no money shall be paid hereunder until
the expiration of such 7-day period. The 7-day period of revocation shall
commence upon the date of Schwartz's execution of this Agreement. In order to
revoke this Agreement, Schwartz shall deliver to the company, prior to the
expiration of said 7-day period, a written notice of cancellation.
In addition to the release set forth at Paragraph 11 hereof, Schwartz
hereby voluntarily and knowingly waives all rights or claims arising under the
Federal Age Discrimination in Employment Act.
8
<PAGE>
36. Obligations of Company Which Survive Schwartz's Death. The
-----------------------------------------------------
obligations of the Company set forth in paragraphs 2 and 3, and no others, shall
survive Schwartz's death. Upon Schwartz's death, the Company will make a cash
payment equivalent to its cost of providing the welfare and retirement benefits
Schwartz would have received but for his death pursuant to paragraphs 4 and 5,
subject to the exception in the following sentence. Payments pursuant to such
obligations shall be made to Schwartz's wife, Hendel M. Schwartz, or to his
estate in the event she shall no longer be living; except that in the event
Hendel M. Schwartz shall no longer be living, the payment in respect of welfare
benefits shall not be made.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective on the day and year first above written.
EXECUTION AND ACKNOWLEDGMENT BY ERIC SCHWARTZ
- ---------------------------------------------
I received this Separation Agreement on September 12, 1996. I understand
that I have twenty-one (21) days thereafter within which to consider this
Agreement with my legal counsel. I freely choose to sign this Separation
Agreement this 12 day of September, 1996. I understand that I will have seven
(7) days thereafter within which to revoke my acceptance of this Separation
Agreement and that the Separation Agreement shall not be effective under the
expiration of that seven (7) day period. Executed at L.A., California, this
12 day of September, 1996.
/s/ ERIC SCHWARTZ
-----------------------------------------
ERIC SCHWARTZ
EXECUTION AND ACKNOWLEDGMENT BY INTERNATIONAL TECHNOLOGY CORPORATION
Dated: , 1996
--------------
At: Torrance, California
INTERNATIONAL TECHNOLOGY CORPORATION
By: /s/ Anthony J. DeLuca
-----------------------------------
APPROVED AS TO FORM AND SUBSTANCE: FALK & SHARP, a Professional corporation
Date: 9/17 , 1996 By: /s/ Ethan J. Falk
--------------- -----------------------------------------
Ethan J. Falk, Authorized Officer
Attorneys for Eric Schwartz
9
