<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 4)
Under the Securities Exchange Act of 1934
PhyCor, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, no par value
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(Title of Class of Securities)
71940F10
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(CUSIP Number of Class of Securities)
Patrick T. Hackett
E.M. Warburg, Pincus & Co., LLC
466 Lexington Avenue
New York, New York 10017
(212) 878-0600
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copies to:
Steven J. Gartner, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
(212) 728-8000
June 15, 1999
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(Date of Event which Requires
Filing of this Schedule)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following: [ ]
<PAGE>
SCHEDULE 13D
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CUSIP No. 71940F10 Page 2 of 31 Pages
- ------------------ ------------------
- ----------- --------------------------------------------------------------------
1 NAME OF REPORT PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Warburg, Pincus Equity Partners, L.P. I.D. #13-3986317
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
- ----------- --------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- ----------- --------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------- --------- ------------------------------------------------
7 SOLE VOTING POWER
7,255,135
--------- ------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING 0
PERSON WITH
--------- ------------------------------------------------
9 SOLE DISPOSITIVE POWER
7,255,135
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- ----------- --------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
7,597,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- ----------- --------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.96%
- ----------- --------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- ----------- --------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
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CUSIP No. 71940F10 Page 3 of 31 Pages
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- ----------- --------------------------------------------------------------------
1 NAME OF REPORT PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Warburg, Pincus & Co. I.D. #13-6358475
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- ----------- --------------------------------------------------------------------
3 SEC USE ONLY
- ----------- --------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A
- ----------- --------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- ----------- --------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- --------------------- --------- ------------------------------------------------
7 SOLE VOTING POWER
7,597,000
--------- ------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING 0
PERSON WITH
--------- ------------------------------------------------
9 SOLE DISPOSITIVE POWER
7,597,000
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- ----------- --------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
7,597,000
- ----------- --------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- ----------- --------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.96%
- ----------- --------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- ----------- --------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
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CUSIP No. 71940F10 Page 4 of 31 Pages
- ------------------ ------------------
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1 NAME OF REPORT PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
E.M. Warburg, Pincus & Co., LLC I.D. #13-3536050
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- ----------- --------------------------------------------------------------------
3 SEC USE ONLY
- ----------- --------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A
- ----------- --------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- ----------- --------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- --------------------- --------- ------------------------------------------------
7 SOLE VOTING POWER
7,597,000
--------- ------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING 0
PERSON WITH
--------- ------------------------------------------------
9 SOLE DISPOSITIVE POWER
7,597,000
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- ---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
7,597,000
- ---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- ---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.96%
- ---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- ---------- ---------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
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CUSIP No. 71940F10 Page 5 of 31 Pages
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1 NAME OF REPORT PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Warburg, Pincus Netherlands Equity Partners I, C.V.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- ----------- --------------------------------------------------------------------
3 SEC USE ONLY
- ----------- --------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A
- ----------- --------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- ----------- --------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
The Netherlands
- --------------------- --------- ------------------------------------------------
7 SOLE VOTING POWER
227,910
--------- ------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING 0
PERSON WITH
--------- ------------------------------------------------
9 SOLE DISPOSITIVE POWER
227,910
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- ----------- --------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
7,597,000
- ----------- --------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- ----------- --------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.96%
- ----------- --------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- ----------- --------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE,RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
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CUSIP No. 71940F10 Page 6 of 31 Pages
- ------------------ ------------------
- ----------- --------------------------------------------------------------------
1 NAME OF REPORT PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Warburg, Pincus Netherlands Equity Partners II, C.V.
- ----------- --------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- ----------- --------------------------------------------------------------------
3 SEC USE ONLY
- ----------- --------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A
- ----------- --------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- ----------- --------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
The Netherlands
- --------------------- --------- ------------------------------------------------
7 SOLE VOTING POWER
151,940
--------- ------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING 0
PERSON WITH
--------- ------------------------------------------------
9 SOLE DISPOSITIVE POWER
151,940
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- ----------- --------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
7,597,000
- ----------- --------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- ----------- --------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.96%
- ----------- --------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- ----------- --------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
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CUSIP No. 71940F10 Page 7 of 31 Pages
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- ----------- --------------------------------------------------------------------
1 NAME OF REPORT PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Warburg, Pincus Netherlands Equity Partners III, C.V.
- ----------- --------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- ----------- --------------------------------------------------------------------
3 SEC USE ONLY
- ----------- --------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A
- ----------- --------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- ----------- --------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
The Netherlands
- --------------------- --------- ------------------------------------------------
7 SOLE VOTING POWER
37,985
--------- ------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING 0
PERSON WITH
--------- ------------------------------------------------
9 SOLE DISPOSITIVE POWER
37,985
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- ----------- --------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
7,597,000
- ----------- --------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- ----------- --------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.96%
- ----------- --------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- ----------- --------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
This Amendment No. 4 amends the Schedule 13D filed on December 28, 1998
(the "Initial Filing"), as amended by Amendment No. 1 to the Schedule 13D filed
on January 4, 1999, Amendment No. 2 to the Schedule 13D filed on January 13,
1999 and Amendment No. 3 to the Schedule 13D filed on March 8, 1999
(collectively with the Initial Filing, the "Schedule 13D"), on behalf of
Warburg, Pincus Equity Partners, L.P., a Delaware limited partnership ("WPEP"),
Warburg, Pincus & Co., a New York general partnership ("WP"), and E.M. Warburg,
Pincus & Co., LLC, a New York limited liability company ("EMW"). In addition,
Warburg, Pincus Netherlands Equity Partners I, C.V. ("WPNEPI"), Warburg, Pincus
Netherlands Equity Partners II, C.V. ("WPNEPII") and Warburg, Pincus Netherlands
Equity Partners III, C.V. ("WPNEPIII" and, together with WPNEPI, WPNEPII and
WPEP, the "Investors") are included as Reporting Entities in this Amendment No.
4.
Unless otherwise indicated herein, each capitalized term used but not
defined herein shall have the meaning assigned to such term in the Initial
Filing.
Item 2
------
Item 2 of the Schedule 13D is hereby amended and restated in its entirety
to read as follows:
(a) This statement is filed by WPEP, WP, EMW, WPNEPI, WPNEPII and WPNEPIII
(collectively, the "Reporting Entities"). The Reporting Entities are deemed to
be a group within the meaning of
Page 8 of 31 Pages
<PAGE>
Rule 13d-5. The sole general partner of each of the Investors is WP. EMW manages
each of the Investors. Lionel I. Pincus is the managing partner of WP and the
managing member of EMW and may be deemed to control both WP and EMW. WP has a
20% interest in the profits of each of the Investors as the general partner. The
general partners of WP and the members of EMW are described in Schedule I
hereto.
(b) The address of the principal business and principal office of each of
the Reporting Entities is 466 Lexington Avenue, New York, New York 10017.
(c) The principal business of each of the Investors is that of a
partnership engaged in making venture capital and related investments. The
principal business of WP is acting as general partner of each of the Investors,
Warburg, Pincus Ventures International, L.P., Warburg, Pincus Ventures, L.P.,
Warburg Pincus Investors, L.P. and Warburg, Pincus Capital Company, L.P. The
principal business of EMW is acting as manager of each of the Investors,
Warburg, Pincus Ventures International, L.P., Warburg, Pincus Ventures, L.P.,
Warburg, Pincus Investors, L.P. and Warburg, Pincus Capital Company, L.P.
(d) None of the Reporting Entities, nor, to the best of their knowledge,
any of the directors, executive officers, general partners or members referred
to in paragraph (a) has, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) None of the Reporting Entities nor, to the best of their knowledge, any
of the directors, executive officers, general
Page 9 of 31 Pages
<PAGE>
partners or members referred to in paragraph (a) above has, during the last five
years, been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
(f) Except for WPNEPI, WPNEPII, WPNEPIII, which are organized under the
laws of The Netherlands, and except as otherwise indicated on Schedule I hereto,
each of the individuals referred to in paragraph (a) above is a United States
citizen.
Item 3
------
Item 3 of the Schedule 13D is hereby amended by adding the following:
The total amount of funds required by the Investors to purchase the Notes
(as defined in Item 4) will be $127,500,000, and will be furnished from the
working capital of the Investors.
Item 4
------
Item 4 is hereby amended and restated in its entirety to read as follows:
The purchases by the Investors of Common Stock were effected because of the
Reporting Entities' belief that the Company represented, and that the Company
continues to represent, an attractive investment. WP has followed the Company
and the
Page 10 of 31 Pages
<PAGE>
industry for many years. WP views the investment as attractive based on the
Company's business prospects and strategy, and is very supportive of the
management team and its ability to execute this strategy. The Company and WP
have had discussions concerning a significant investment by WP in the Company,
including a possible acquisition of the Company by the Investors. These
discussions resulted in the Purchase Agreement (as defined below). Subject to
the terms of the Standstill (as defined below) and depending on prevailing
market, economic and other conditions, the Reporting Entities may from time to
time engage in discussions with the Company concerning further acquisitions of
shares of the Company or further investments by them in the Company. The
Reporting Entities intend to review their investment in the Company on a
continuing basis and, depending upon the price and availability of shares of
Common Stock, subsequent developments affecting the Company, the Company's
business and prospects, other investment and business opportunities available to
the Reporting Entities, general stock market and economic conditions, tax
considerations and other factors considered relevant, may decide at any time not
to increase, or to decrease (subject to the restrictions contained in the
Purchase Agreement), the size of their investment in the Company.
AGREEMENT TO PURCHASE ZERO COUPON
CONVERTIBLE SUBORDINATED NOTES
On June 15, 1999, the Investors and WP entered into a Securities Purchase
Agreement with the Company (the "Purchase Agreement") pursuant to which the
Company agreed to issue and sell
Page 11 of 31 Pages
<PAGE>
and the Investors agreed to purchase Zero Coupon Convertible Subordinated Notes
due 2014 (the "Notes") in the total principal amount at maturity of
$404,451,562.
The purchase of the Notes is subject to the satisfaction or waiver of
certain conditions, including certain regulatory approvals.
The Investors may convert the Notes into shares of Common Stock, no par
value per share, of the Company (the "Common Stock") at any time on or before
the final maturity date of the Notes at an initial conversion price of $8.375
per share, subject to certain anti-dilution adjustments. If the Notes were
outstanding on the date of this filing, the Notes would be convertible into
15,223,961 shares of the Common Stock.
Standstill Agreement. Under the Purchase Agreement, each of the Investors
and WP have agreed that, for a period of five years from June 15, 1999, WP, the
Investors and any entity controlled by the Investors or WP, or others with whom
WP is acting in concert, will not take any of the following action without the
prior written consent of the Company's Board of Directors (the "Standstill"):
(1) acquire or agree to acquire, publicly offer, or make any public
proposal with respect to the possible acquisition of (A) beneficial
ownership of any securities of the Company in excess the sum of (i) the
Page 12 of 31 Pages
<PAGE>
number of shares of Common Stock beneficially owned by the Investors as of
the date of the Purchase Agreement (before giving effect to the
transactions contemplated thereby), (ii) the number of shares of Common
Stock issuable from time to time upon conversion of the Notes and (iii)
Permitted Acquisitions (as defined under the subheading "Permitted
Acquisitions" below), (B) any Company business or any substantial part of
the Company's assets, or any subsidiary or division thereof or successor to
the Company, or (C) any rights or options to acquire any of the foregoing
from any person;
(2) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote or seek to advise or influence any
person or entity with respect to the voting of any voting securities of the
Company;
(3) make any public announcement with respect to any transaction or
proposed or contemplated transaction between the Company or any of its
security holders and the Investors or WP, including, without limitation,
any tender or exchange offer, merger or other business combination or
acquisition of a material portion of the assets of the Company;
Page 13 of 31 Pages
<PAGE>
(4) publicly propose or publicly disclose an intent to propose any form of
business combination, acquisition, restructuring, recapitalization or other
similar transaction relating to the Company;
(5) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to the Company in
connection with any of matters referred to in clauses (1)-(4) above;
(6) publicly disclose any intention, plan or arrangement inconsistent with
the foregoing;
(7) publicly request the Company, directly or indirectly, to amend or waive
any provisions of this paragraph's provisions; or
(8) take any action which would be reasonably likely to require the Company
to make a public announcement regarding a possible transaction involving
the Company.
Page 14 of 31 Pages
<PAGE>
Permitted Acquisitions. Under the Purchase Agreement, the Company has
agreed to permit the Investors to make acquisitions of its Common Stock
("Permitted Acquisitions") provided that (i) the Permitted Acquisitions are made
no later than six (6) months after the closing date under the Purchase
Agreement, (ii) the aggregate consideration for such Permitted Acquisitions does
not exceed $72,500,000 (excluding transaction costs and expenses and brokerage
commissions) and (iii) the Permitted Acquisitions do not exceed 15,000,000
shares of Common Stock (subject to appropriate adjustment for any stock split or
similar event). The Investors currently intend to make the Permitted
Acquisitions in open-market purchases or otherwise. The actual timing and amount
of such purchases will depend on the receipt of all required regulatory
approvals and prevailing market conditions at the time of such purchases.
Restrictions on Transfer; Right of First Refusal. Under the Purchase
Agreement, the Investors have agreed not to sell, transfer or otherwise dispose
of ("Transfer") any of the Notes or the shares of Common Stock issuable upon
conversion of the Notes (the "Securities") owned by them unless the Investors
first make an offer to sell such Securities to the Company and such offer is not
accepted by the Company.
Notwithstanding the foregoing, the Investors may Transfer Securities (i)
after the seventh anniversary of the issuance of the Notes, (ii) to their
affiliates, (iii) in pro rata distributions to their partners, (iv) in
underwritten sales
Page 15 of 31 Pages
<PAGE>
made pursuant to effective registrations under the Securities Act of 1933, as
amended (the "Securities Act") (v) pursuant to Rule 144 under the Securities
Act, (vi) pursuant to a merger, consolidation or similar transaction approved by
the Board of Directors, or (vii) to any person if, after giving effect to such
Transfer, such person would not own beneficially more than 5% of the outstanding
Common Stock.
Board Representation. Pursuant to the Purchase Agreement, the Company has
agreed to cause two directors designated by the Investors to be elected to the
Board of Directors of the Company on the closing date. For so long as the Notes
are outstanding and owned by one or more of the Investors, the Company will
nominate and use its best efforts to elect and to cause to remain as directors
on the Board of Directors two individuals designated by the Investors. In
addition, for so long as the Investors, individually or in the aggregate, own
beneficially at least 12.5% of the outstanding shares of Common Stock, the
Company will nominate and use its best efforts to elect and to cause to remain
as directors on the Board of Directors at least one individual designated by the
Investors. In the event the Investors, individually or in the aggregate, own
beneficially more than 10% but less than 12.5% of the outstanding shares of
Common Stock, the Investors shall only be entitled to designate a director if
they own, individually or in the aggregate, own at least 50% of the shares of
Common Stock beneficially owned by them on the date six months following the
issuance of the Notes. The nominees for directors must be
Page 16 of 31 Pages
<PAGE>
certain individuals previously approved by the Company or other individuals who
are reasonably acceptable to the Company.
Takeover Statutes and Defenses. The Purchase Agreement provides that if any
corporate takeover provision under the laws of Tennessee (other than any health
maintenance organization or insurance change of control statute) becomes
applicable to the transactions under the Purchase Agreement, the Company will
grant such approvals and take such actions as are necessary so that the
transactions contemplated by the Purchase Agreement may be consummated as
promptly as practicable on the terms contemplated by the Purchase Agreement and
that the Company will act to eliminate or minimize the effects of such statute
or regulation on the transactions contemplated by the Purchase Agreement.
The Purchase Agreement also provides that if any of the transactions
contemplated by it would otherwise trigger the Company's shareholder rights
plan, the Company will promptly cause the shareholder rights plan to be amended
so that the transactions contemplated by the Purchase Agreement do not trigger
the shareholder rights plan.
The foregoing summary of the Purchase Agreement is qualified in its
entirety by reference to the Purchase Agreement, a copy of which is set forth as
Exhibit 3 and is incorporated herein by reference.
Page 17 of 31 Pages
<PAGE>
Except as set forth above, none of the Reporting Entities nor, to the best
of their knowledge, any person listed in Schedule I hereto, has any plans or
proposals which relate to or would result in: (a) the acquisition by any person
of additional securities of the Company, or the disposition of securities of the
Company; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries;
(c) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries; (d) any change in the present Board of Directors or management
of the Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board; (e) any material
change in the present capitalization or dividend policy of the Company; (f) any
other material change in the Company's business or corporate structure; (g)
changes in the Company's charter, By-laws or instruments corresponding thereto
or other actions which may impede the acquisition of control of the Company by
any person; (h) causing a class of securities of the Company to be delisted from
a national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or
(j) any action similar to any of those enumerated above.
Page 18 of 31 Pages
<PAGE>
Item 5
------
Paragraph (a) of Item 5 of the Schedule 13D is hereby amended and restated
in its entirety to read as follows:
As of June 17, 1999, the Reporting Entities beneficially owned 7,597,000
shares of Common Stock. In addition, 101,387 shares of Common Stock are held by
advisory accounts managed on a discretionary basis by Warburg Pincus Asset
Management, Inc. ("WPAM"), which is controlled by WP. WP has entered into an
agreement for the sale of WPAM that is expected to close in July 1999.
By reason of their respective relationships with Investors, each of the
Reporting Entities may be deemed under Rule 13d-3 under the Exchange Act to own
beneficially all of the shares of Common Stock which each of the Investors
beneficially owns. As of June 17, 1999, 7,597,000 shares of Common Stock
represented approximately 9.96% of the outstanding shares of Common Stock, based
on the 76,292,550 shares of Common Stock outstanding as of June 10, 1999, as
represented by the Company to the Investors in the Purchase Agreement. Upon the
acquisition of the Notes in accordance with the terms of the Purchase Agreement,
the Reporting Entities will beneficially own 22,820,961 shares of Common Stock,
which will represent approximately 24.94% of the shares of Common Stock
outstanding.
Paragraph (b) of Item 5 of the Schedule 13D is hereby amended and restated
in its entirety to read as follows:
Page 19 of 31 Pages
<PAGE>
WPEP has sole power to dispose of and vote 7,255,135 shares of Common
Stock; WPNEPI has sole power to dispose of and vote 227,910 shares of Common
Stock; WPNEPII has sole power to dispose and vote 151,940 shares of Common Stock
and WPNEPIII has sole power to dispose of and vote 37,985 shares of Common
Stock. As general partner of each of the Investors, WP has sole power to dispose
of and vote all of the shares beneficially owned by them, and as the manager of
each of the Investors, EMW may be deemed to have sole power to dispose of and
vote all of the shares beneficially owned by them. As controlling shareholder of
WPAM, WP has the power to dispose of and vote the 101,387 shares of Common Stock
held by WPAM.
Item 6
------
Item 6 of the Schedule 13D is hereby amended by adding the following:
The information set forth under the heading "Agreement to Purchase of Zero
Coupon Convertible Subordinated Notes" in Item 4 is incorporated herein by
reference.
Pursuant to the Purchase Agreement, prior to the issuance of the Notes the
Company and the Investors will enter into a Registration Rights Agreement (the
"Registration Rights Agreement"). Pursuant to the Registration Rights Agreement,
the Company will grant certain "demand" and "piggyback" registration rights to
the Investors with respect to the shares of Common
Page 20 of 31 Pages
<PAGE>
Stock issuable upon conversion of the Notes and any additional shares of Common
Stock acquired by the Investors. The foregoing summary of the Registration
Rights Agreement is qualified in its entirety by reference to the form of
Registration Rights Agreement, a copy of which is set forth as Exhibit 5 and is
incorporated herein by reference.
Item 7
------
Item 7 of the Schedule 13D is hereby amended to add the following:
3. Securities Purchase Agreement, dated as of June 15, 1999, by and among
the Company, Warburg, Pincus Equity Partners, L.P., Warburg, Pincus Netherlands
Equity Partners I, C.V., Warburg, Pincus Netherlands Equity Partners II, C.V.
and Warburg, Pincus Netherlands Equity Partners III, C.V., together with form of
Note.
4. Form of Registration Rights Agreement by and among the Company, Warburg,
Pincus Equity Partners, L.P., Warburg, Pincus Netherlands Equity Partners I,
C.V., Warburg, Pincus Netherlands Equity Partners II, C.V. and Warburg, Pincus
Netherlands Equity Partners III, C.V.
5. Joint Filing Agreement, dated June 17, 1999.
Page 21 of 31 Pages
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: June 17, 1999 WARBURG, PINCUS EQUITY
PARTNERS, L.P.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Stephen Distler
-----------------------
Stephen Distler
Partner
Dated: June 17, 1999 WARBURG, PINCUS & CO.
By: /s/ Stephen Distler
-----------------------
Stephen Distler
Partner
Dated: June 17, 1999 E.M. WARBURG, PINCUS & CO., LLC
By: /s/ Stephen Distler
-----------------------
Stephen Distler
Member
Dated: June 17, 1999 WARBURG, PINCUS NETHERLANDS
EQUITY PARTNERS I, C.V.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Stephen Distler
-----------------------
Stephen Distler
Partner
Page 22 of 31 Pages
<PAGE>
Dated: June 17, 1999 WARBURG, PINCUS NETHERLANDS
EQUITY PARTNERS II, C.V.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Stephen Distler
-----------------------
Stephen Distler
Partner
Dated: June 17, 1999 WARBURG, PINCUS NETHERLANDS
EQUITY PARTNERS III, C.V.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Stephen Distler
-----------------------
Stephen Distler
Partner
Page 23 of 31 Pages
<PAGE>
SCHEDULE I
Set forth below is the name, position and present principal occupation of each
of the general partners of Warburg, Pincus & Co. ("WP") and each of the members
of E.M. Warburg, Pincus & Co., LLC ("EMW"). The sole general partner of Warburg,
Pincus Equity Partners, L.P. ("WPEP") is WP. WP, EMW and WPEP are hereinafter
collectively referred to as the "Reporting Entities." Except as otherwise
indicated, the business address of each of such persons is 466 Lexington Avenue,
New York, New York 10017, and each of such persons is a citizen of the United
States.
General Partners of WP
Present Principal Occupation
in Addition to Position with
WP, and Positions with the
Reporting Entities
----------------------------
Name
Joel Ackerman Managing Director and Member, EMW
Alvaro J. Aguirre Managing Director and Member, EMW
Harold Brown Senior Managing Director and Member, EMW
W. Bowman Cutter Managing Director and Member, EMW
Elizabeth B. Dater Managing Director and Member, EMW
Cary J. Davis Managing Director and Member, EMW
Stephen Distler Managing Director, Member and
Treasurer, EMW
Harold W. Ehrlich Managing Director and Member, EMW
John L. Furth Managing Director and Member, EMW
Page 24 of 31 Pages
<PAGE>
Stewart K.P. Gross Managing Director and Member, EMW
Patrick T. Hackett Managing Director and Member, EMW
Jeffrey A. Harris Managing Director and Member, EMW
William H. Janeway Managing Director and Member, EMW
Robert Janis Managing Director and Member, EMW
Douglas M. Karp Managing Director and Member, EMW
Charles R. Kaye Managing Director and Member, EMW
Henry Kressel Managing Director and Member, EMW
Joseph P. Landy Managing Director and Member, EMW
Sidney Lapidus Managing Director and Member, EMW
Kewsong Lee Managing Director and Member, EMW
Reuben S. Leibowitz Managing Director and Member, EMW
S. Joshua Lewis Managing Director and Member, EMW
David E. Libowitz Managing Director and Member, EMW
Brady T. Lipp Managing Director and Member, EMW
Stephen J. Lurito Managing Director and Member, EMW
Lynn S. Martin Managing Director and Member, EMW
Nancy Martin Managing Director and Member, EMW
Page 25 of 31 Pages
<PAGE>
Edward J. McKinley Managing Director and Member, EMW
Rodman W. Moorhead III Senior Managing Director and Member, EMW
Maryanne Mullarkey Managing Director and Member, EMW
Howard H. Newman Managing Director and Member, EMW
Gary D. Nusbaum Managing Director and Member, EMW
Sharon B. Parente Managing Director and Member, EMW
Dalip Pathak Managing Director and Member, EMW
Lionel I. Pincus Chairman of the Board, CEO,
and Managing Member, EMW; and
Managing Partner, Pincus & Co.
Eugene L. Podsiadlo Managing Director and Member, EMW
Ernest H. Pomerantz Managing Director and Member, EMW
Brian S. Posner Managing Director and Member, EMW
Arnold M. Reichman Managing Director and Member, EMW
Roger Reinlieb Managing Director and Member, EMW
John D. Santoleri Managing Director and Member, EMW
Steven G. Schneider Managing Director and Member, EMW
Donald C. Schulteis Managing Director and Member, EMW
Sheila N. Scott Managing Director and Member, EMW
Page 26 of 31 Pages
<PAGE>
Harold Sharon Managing Director and Member, EMW
Eugene J. Siembieda Managing Director and Member, EMW
Barbara Tarmy Managing Director and Member, EMW
James E. Thomas Managing Director and Member, EMW
Donna M. Vandenbulcke Managing Director and Member, EMW
John L. Vogelstein Vice Chairman of the Board and Member,
EMW
Elizabeth H. Weatherman Managing Director and Member, EMW
Pincus & Co.*
NL & Co.**
* New York limited partnership; its primary activity is ownership interest in
WP and EMW.
** New York limited partnership; its primary activity is ownership interest in
WP.
Page 27 of 31 Pages
<PAGE>
MEMBERS OF EMW
--------------
Present Principal Occupation
in Addition to Position with
EMW, and Positions with the
Name Reporting Entities
- ---- ----------------------------
Joel Ackerman Partner, WP
Alvaro J. Aguirre Partner, WP
Harold Brown Partner, WP
W. Bowman Cutter Partner, WP
Elizabeth B. Dater Partner, WP
Cary J. Davis Partner, WP
Stephen Distler Partner, WP
P. Nicholas Edwards(2) Partner, WP
Harold W. Ehrlich Partner, WP
John L. Furth Partner, WP
Kyle F. Frey Partner, WP
Stewart K.P. Gross Partner, WP
Patrick T. Hackett Partner, WP
Jeffrey A. Harris Partner, WP
William H. Janeway Partner, WP
Robert Janis Partner, WP
Douglas M. Karp Partner, WP
Charles R. Kaye Partner, WP
Richard H. King(2)
Henry Kressel Partner, WP
Rajiv B. Lall(4)
Joseph P. Landy Partner, WP
Page 28 of 31 Pages
<PAGE>
Sidney Lapidus Partner, WP
Kewsong Lee Partner, WP
Reuben S. Leibowitz Partner, WP
S. Joshua Lewis Partner, WP
Scott T. Lewis
David E. Libowitz Partner, WP
Brady T. Lipp Partner, WP
Stephen J. Lurito Partner, WP
John W. MacIntosh(1) Partner, WP
Lynn S. Martin Partner, WP
Nancy Martin Partner, WP
Edward J. McKinley Partner, WP
James McNaught-Davis(2)
Rodman W. Moorhead III Partner, WP
Maryanne Mullarkey Partner, WP
Howard H. Newman Partner, WP
Gary D. Nusbaum Partner, WP
Sharon B. Parente Partner, WP
Dalip Pathak Partner, WP
Lionel I. Pincus Managing Partner, WP; Chairman
of the Board and CEO, EMW;
Managing Partner, Pincus & Co.
Eugene L. Podsiadlo Partner, WP
Ernest H. Pomerantz Partner, WP
Brian S. Posner Partner, WP
Arnold M. Reichman Partner, WP
Roger Reinlieb Partner, WP
John D. Santoleri Partner, WP
Page 29 of 31 Pages
<PAGE>
Steven G. Schneider Partner, WP
Donald C. Schulteis Partner, WP
Sheila N. Scott Partner, WP
Harold Sharon Partner, WP
Dominic H. Shorthouse(2)
Eugene J. Siembieda Partner, WP
Chang Q. Sun(3)
Barbara Tarmy Partner, WP
James E. Thomas Partner, WP
Donna M. Vandenbulcke Partner, WP
John L. Vogelstein Partner, WP
Elizabeth H. Weathermen Partner, WP
Jeremy S. Young(2)
Pincus & Co.*
(1) Citizen of Canada
(2) Citizen of United Kingdom
(3) Citizen of People's Republic of China
(4) Citizen of India
* New York limited partnership; its primary activity is ownership interest in
WP and EMW.
Page 30 of 31 Pages
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
99.1 Securities Purchase Agreement, dated as of June 15, 1999, by and
among the Company, Warburg, Pincus Equity Partners, L.P.,
Warburg, Pincus Netherlands Equity Partners I, C.V., Warburg,
Pincus Netherlands Equity Partners II, C.V. and Warburg, Pincus
Netherlands Equity Partners III, C.V., together with form of
Note.
99.2 Form of Registration Rights Agreement by and among the Company,
Warburg, Pincus Equity Partners, L.P., Warburg, Pincus
Netherlands Equity Partners I, C.V., Warburg, Pincus Netherlands
Equity Partners II, C.V. and Warburg, Pincus Netherlands Equity
Partners III, C.V.
99.3 Joint Filing Agreement, dated June 17, 1999.
Page 31 of 31 pages
<PAGE>
================================================================================
PHYCOR, INC.
- --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
Zero Coupon Convertible Subordinated Notes due 2014
Dated as of June 15, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
1. ISSUANCE OF NOTES...........................................................1
1.1. Authorization; Conversion of Notes into Common
Stock; Etc....................................................1
1.2. Purchase and Sale of Notes; the Closing.........................1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................2
2.1. Organization, Qualification, Authorization......................2
2.2. Capital Stock...................................................3
2.3. Incorporation, Good Standing and Ownership of
Subsidiaries..................................................3
2.4. Consents and Approvals..........................................4
2.5. SEC Reports; Financial Statements...............................5
2.6. Absence of Changes..............................................6
2.7. No Undisclosed Liabilities......................................6
2.8. Absence of Defaults, etc........................................7
2.9. Material Contracts..............................................7
2.10. Litigation and Orders...........................................7
2.11. Compliance with Law.............................................8
2.12. Taxes...........................................................9
2.13. Title to Properties............................................10
2.14. Compliance with ERISA..........................................10
2.15. Private Offering...............................................10
2.16. Investment Company Act and Holding Company
Status, Etc..................................................11
2.17. Environmental Matters..........................................11
2.18. Insurance......................................................12
2.19. Registration Rights............................................12
2.20. Brokerage......................................................13
2.21. Takeover Statute; Rights Plan..................................13
2.22. Y2K Compliance.................................................13
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS............................13
3.1. Purchase of Notes..............................................13
3.2. Organization, Qualification, Authorization.....................14
3.3. Accredited Investor Status, etc................................14
3.4. Brokerage......................................................14
4. INVESTOR CLOSING CONDITIONS................................................15
4.1. Representations and Warranties; No Default.....................15
4.2. Injunction.....................................................15
4.3. Counsel's Opinion..............................................15
4.4. Adverse Development............................................15
4.5. Election of Directors..........................................15
4.6. Consents and Approvals.........................................16
4.7. Secretary's Certificate........................................16
4.8. Officer's Certificate..........................................16
4.9. Registration Rights Agreement..................................16
4.10. Amendments to Bank Debt........................................16
(i)
<PAGE>
4.11. Approval of Proceedings........................................17
5. COMPANY CLOSING CONDITIONS.................................................17
5.1. Representations and Warranties.................................17
5.2. Injunction.....................................................17
5.3. Consents and Approvals.........................................17
5.4. Investors' Certificate.........................................17
5.5. Amendments to Bank Debt........................................18
6. COVENANTS..................................................................18
6.1. Resale of Securities...........................................18
6.2. Covenants Pending Closing......................................18
6.3. Board Nominees.................................................19
6.4. Use of Proceeds................................................19
6.5. Standstill.....................................................20
6.6. Additional Purchases of Common Stock...........................21
6.7. Restrictions on Transfer.......................................21
6.8. Reasonable Efforts; Cooperation................................23
6.9. Financial and Business Information.............................24
6.10. Inspection.....................................................26
6.11. Confidentiality................................................26
6.12. Takeover Statute...............................................27
6.13. Rights Agreement Inapplicable..................................27
6.14. Hart-Scott Filings.............................................27
6.15. Conduct of Business; Negative Covenants........................27
7. TERMS OF NOTES; PREPAYMENTS OF NOTES; PURCHASE OF NOTES....................28
7.1. General Terms of Notes.........................................28
7.2. Optional Redemption by the Company.............................29
7.3. Repurchase at Option of the Holder Upon a
Change in Control............................................30
7.4. Purchase of Notes at the Option of the Holder..................31
7.5. Further Conditions for Purchase at the Option
of Holders Upon a Change in Control and
Purchase of Notes at the Option of the Holder................37
7.6. Conversion of Notes............................................38
7.7. Adjustments to Conversion Rate.................................40
7.8. Miscellaneous Provisions Relating to
Conversion...................................................48
8. DEFINITIONS................................................................51
8.1. Definitions....................................................51
8.2. Accounting Terms...............................................60
9. EVENTS OF DEFAULT; REMEDIES................................................60
9.1. Events of Default; Acceleration of Maturity
and Rescission...............................................60
9.2. Suits for Enforcement..........................................62
9.3. Remedies Cumulative............................................62
9.4. Remedies Not Waived............................................62
10. SUBORDINATION OF NOTES....................................................63
(ii)
<PAGE>
10.1. Securities Subordinated to Senior
Indebtedness.................................................63
10.2. Notes Subordinated to Prior Payment of All
Senior Indebtedness on Dissolution,
Liquidation, Reorganization, etc., of the
Company......................................................63
10.3. Holders of Notes to be Subrogated to Right of
Holders of Senior Indebtedness...............................65
10.4. Obligations of the Company Unconditional.......................65
10.5. Company Not to Make Payment with Respect to
Notes in Certain Circumstances...............................65
10.6. Subordination Rights Not Impaired by Acts or
Omissions of Company or Holders of Senior
Indebtedness.................................................67
10.7. Section 10 Not to Prevent Events of Default....................67
11. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES;
RESTRICTIVE LEGENDS TRANSFER RESTRICTIONS................................67
12. LOST, ETC., NOTES.........................................................68
13. AMENDMENT AND WAIVER......................................................68
14. TERMINATION...............................................................69
15. PAYMENTS..................................................................70
16. CERTAIN TAXES.............................................................70
17. MISCELLANEOUS.............................................................70
17.1. Expenses.......................................................70
17.2. Reliance on and Survival of Representations....................70
17.3. Successors and Assigns.........................................71
17.4. Communications.................................................71
17.5. Consent to Jurisdiction; Service of Process;
Waiver of Jury Trial.........................................71
17.6. Indemnification................................................72
17.7. Governing Law..................................................72
17.8. Headings.......................................................73
17.9. Counterparts...................................................73
SCHEDULE I -- Names and Addresses of Purchasers
EXHIBIT A -- FORM OF NOTE
EXHIBIT B -- FORM OF OPINION OF SPECIAL COUNSEL
TO THE COMPANY
EXHIBIT C -- FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT D -- FORM OF OFFICERS' CERTIFICATE OF THE COMPANY
SCHEDULE 2.2B -- LIENS ON SHARES ISSUED UPON CONVERSION OF THE NOTES
SCHEDULE 2.2C -- OUTSTANDING CONVERTIBLE SECURITIES,
OPTIONS, ETC.
(iii)
<PAGE>
SCHEDULE 2.3 -- SIGNIFICANT SUBSIDIARIES
SCHEDULE 2.4 -- CONSENTS AND APPROVALS
SCHEDULE 2.6 -- ABSENCE OF CHANGES
SCHEDULE 2.7 -- UNDISCLOSED LIABILITIES
SCHEDULE 2.9 -- MATERIAL AGREEMENTS; SENIOR INDEBTEDNESS
SCHEDULE 2.10 -- LITIGATION
SCHEDULE 2.11 -- COMPLIANCE WITH LAW
SCHEDULE 2.13 -- TITLE TO PROPERTIES
SCHEDULE 2.14 -- COMPLIANCE WITH ERISA
SCHEDULE 2.17 -- ENVIRONMENTAL MATTERS
SCHEDULE 2.19 -- REGISTRATION RIGHTS
SCHEDULE 2.20 -- BROKERAGE
SCHEDULE 4.10 -- AMENDMENTS TO BANK DEBT
SCHEDULE 6.3 -- LIST OF APPROVED NOMINEES
SCHEDULE 7.7 -- SUBJECT LITIGATION
(iv)
<PAGE>
PHYCOR, INC.
30 Burton Hills Boulevard
Suite 400
Nashville, TN 37215
SECURITIES PURCHASE AGREEMENT
As of June 15, 1999
TO THE INVESTORS WHOSE NAMES
APPEAR ON THE SIGNATURE PAGES HERETO
Ladies and Gentlemen:
PHYCOR, INC., a Tennessee corporation (the "Company"), hereby agrees with
you as follows:
1. ISSUANCE OF NOTES.
1.1. Authorization; Conversion of Notes into Common Stock; Etc.
The Company has duly authorized the issue and sale of Zero Coupon
Convertible Subordinated Notes due 2014 (the "Notes"), each such Note to be
substantially in the form of Exhibit A attached hereto. As used herein, the term
"Notes" means all notes originally issued pursuant to this Agreement and all
notes delivered in substitution or exchange for any such notes and, where
applicable, includes the singular number as well as the plural. Certain
capitalized and other terms used in this Agreement are defined in Section 8.
As provided in Section 7, the Notes are convertible into shares of Common
Stock, no par value, of the Company (the "Common Stock").
1.2. Purchase and Sale of Notes; the Closing.
Subject to the terms and conditions hereof, the Company hereby agrees to
sell to each Investor, and each Investor agrees to purchase from the Company,
Notes in the aggregate Principal Amount at Final Maturity as set forth opposite
such Investor's name in Schedule I attached hereto. Each Note will be issued at
an issue price of $315.24 per $1,000 Principal Amount at Final Maturity. The
closing of such purchase shall be held at 10:00 A.M., New York time, on the
third Business Day following the satisfaction or waiver of the conditions set
forth in Sections 4 and 5 hereto or on such later Business Day as may be agreed
to by you and the Company (the "Closing Date"), at the offices of Willkie Farr &
Gallagher, 787 Seventh Avenue, New York, NY 10019.
<PAGE>
On the Closing Date, the Company will deliver to each Investor one or more
Notes, dated the Closing Date and registered in such Investor's name or in the
name of one or more of such Investor's nominees, in any denominations (in a
minimum amount of $500,000) and in the aggregate principal amount to be
purchased by the Investors, all as the Investors may specify by timely notice to
the Company (or, in the absence of such notice, one Note registered in each
Investor's name), in each case against delivery to the Company of immediately
available funds in the amount of the purchase price of such Notes, such delivery
to be by wire transfer to such account as the Company may direct in writing.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants, as of the date hereof and as of the
Closing Date, to each of the Investors as follows:
2.1. Organization, Qualification, Authorization.
A. The Company is a corporation duly incorporated and validly existing
under the laws of the State of Tennessee and has the corporate power and
authority to own or hold under lease the property it owns or holds under lease,
to transact the business it transacts, to execute and deliver this Agreement,
the Notes and the Registration Rights Agreement and to perform the provisions
hereof and thereof. The Company is duly qualified as a foreign corporation and
is in good standing as a foreign corporation in each jurisdiction in which the
character of the properties owned or held under lease by it or the nature of the
business transacted by it requires such qualification, except where the failure
to be so qualified individually and in the aggregate would not have a Material
Adverse Effect.
B. The execution and delivery by the Company of the Transaction Documents,
the issuance of the Notes, the performance by the Company of its obligations
hereunder and thereunder and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Company. This Agreement is, and the Notes and the
Registration Rights Agreement when executed and delivered by the Company will
be, legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as enforceability may
be limited by bankruptcy, insolvency or other similar laws relating to or
affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and except as enforceability of the indemnity
provisions contained in the Registration Rights Agreement may be limited by
public policy considerations.
-2-
<PAGE>
2.2. Capital Stock.
A. The authorized capital stock of the Company consists of 250,000,000
shares of its Common Stock, no par value per share (the "Common Stock") and
10,000,000 shares of preferred stock, no par value per share, 500,000 shares of
which have been designated "Series A Junior Participating Preferred Stock". As
of June 10, 1999, (i) 76,292,550 shares of Common Stock were issued and
outstanding, (ii) no shares of preferred stock were issued and outstanding,
(iii) 15,167,218 shares of Common Stock were issuable upon exercise of stock
options and (iv) 5,172,413 shares of Common Stock were issuable for issuance
upon conversion of the Existing Convertible Debentures and (v) 611,127 shares of
Common Stock were issuable upon conversion of other promissory notes of the
Company. As of the date hereof, there are no bonds, debentures, notes or other
evidences of indebtedness having the right to vote on any matters on which the
Company's shareholders may vote issued or outstanding.
B. All the outstanding shares of capital stock of the Company have been
duly and validly issued and are fully paid and non-assessable, and were issued
in accordance with the registration or qualification requirements of the
Securities Act and any relevant state securities laws or pursuant to valid
exemptions therefrom. Upon their issuance in accordance with the terms of this
Agreement and the Notes, the shares of Common Stock issuable upon conversion of
the Notes will be duly authorized, validly issued, fully paid and non-assessable
shares of the capital stock of the Company, free and clear of any Lien, except
for those provided for herein or set forth on Schedule 2.2B and other than
restrictions on transfer imposed by federal or state securities laws. The
Company has reserved for issuance the number of shares of Common Stock initially
issuable upon conversion of the Notes.
C. Except as set forth in Section 2.2A or on Schedule 2.2C and except for
the Notes, on the Closing Date there will be no shares of Common Stock or any
other equity security of the Company issuable upon conversion or exchange of any
security of the Company or any Subsidiary of the Company nor will there be any
rights, options, calls or warrants outstanding or other agreements to acquire
shares of Common Stock nor will the Company be contractually obligated to
purchase, redeem or otherwise acquire any of its outstanding shares. No
shareholder of the Company is entitled to any preemptive or similar rights to
subscribe for shares of capital stock of the Company.
2.3. Incorporation, Good Standing and Ownership of Subsidiaries.
A. Schedule 2.3 is a list of the Significant Subsidiaries of the Company,
showing, as to each Significant Subsidiary, the correct name thereof, the
jurisdiction of its organization and the percentage of shares of each class of
-3-
<PAGE>
securities of such Significant Subsidiary owned by the Company and each other
Subsidiary of the Company. All of the outstanding shares of each of the
Significant Subsidiaries shown in Schedule 2.3 as being owned by the Company and
its Significant Subsidiaries have been validly issued, are fully paid and
nonassessable and, except as set forth in Schedule 2.3, are owned by the Company
or another Subsidiary free and clear of any Lien. No shares of the Company are
owned by any of its Significant Subsidiaries.
B. Each Significant Subsidiary is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and is duly qualified as a foreign corporation and is in good
standing as a foreign corporation in each jurisdiction in which the character of
the properties owned or held under lease by it or nature of the business
transacted by it requires such qualification, except where the failure to be so
qualified individually and in the aggregate would not have a Material Adverse
Effect. Each Significant Subsidiary has the corporate power and authority to own
or hold under lease the property it owns or holds under lease and to transact
the business it transacts.
2.4. Consents and Approvals.
A. Except as set forth in Schedule 2.4, the execution and delivery by the
Company of the Transaction Documents, the issuance of the Notes, the performance
by the Company of its obligations hereunder and thereunder and the consummation
by the Company of the transactions contemplated hereby and thereby do not
require the Company or any of its Subsidiaries to obtain any consent, approval,
clearance or action of, or make any filing, submission or registration with, or
give any notice to, any Governmental Body or any other Person, except where the
failure to obtain such consents, approvals, clearance or action would not have a
Material Adverse Effect.
B. Except as set forth in Schedule 2.4, the execution and delivery by the
Company of the Transaction Documents, the issuance of the Notes, the performance
by the Company of its obligations hereunder and thereunder and the consummation
by the Company of the transactions contemplated hereby and thereby will not: (i)
conflict with the Restated Charter or Amended Bylaws of the Company or any
Subsidiary; (ii) result in any breach of, or constitute a default under, or
result in the creation of any Lien in respect of any property of the Company or
any Subsidiary under, any Material Agreement to which the Company or any
Subsidiary is a party or by which their respective properties may be bound or
affected; or (iii) conflict with or result in a breach of any of the terms,
conditions or provisions of any Order of any court, arbitrator or Governmental
Body applicable to the Company or any Subsidiary or violate any provision of any
law, statute, rule or regulation of any Governmental Body applicable
-4-
<PAGE>
to the Company or any Subsidiary which, in the case of clauses (ii) or (iii)
would have a Material Adverse Effect.
C. The execution and delivery by the Company of the Transaction Documents,
the issuance of the Notes, the performance by the Company of its obligations
hereunder and thereunder and the consummation by the Company of the transactions
contemplated hereby and thereby will not result in, pursuant to the terms of any
contractual arrangement, (i) the acceleration of the vesting of any outstanding
option, warrant, call, commitment, agreement, conversion right, preemptive right
or other right to subscribe for, purchase or otherwise acquire any of the shares
of the capital stock of the Company or any of the stock of the Company or any of
its Subsidiaries, or debt securities of the Company or any of its Subsidiaries
(collectively "Commitments", and each individually a "Commitment"), (ii) any
obligation of the Company to grant, extend or enter into any Commitment, or
(iii) any right in favor of any Person to terminate or cancel any Material
Agreement.
2.5. SEC Reports; Financial Statements.
A. The Company has furnished the Investors with complete copies of the
Company's (i) Annual Reports on Form 10-K for the fiscal years ended December
31, 1996, December 31, 1997 and December 31, 1998, as filed with the Commission,
(ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, as
filed with the Commission, (iii) proxy statements related to all meetings of its
shareholders (whether annual or special) held since January 1, 1997, and (iv)
all other reports filed with or registration statements declared effective by
the Commission since January 1, 1997, except registration statements on Form S-8
relating to employee benefit plans, which are all the documents (other than
preliminary material) that the Company was required to file with the Commission
since that date (clauses (i) through (iv) being referred to herein collectively
as the "Company SEC Reports"). As of their respective dates of filing, the
Company SEC Reports were duly filed and complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the Commission thereunder applicable to such
Company SEC Reports. As of their respective dates of filing, the Company SEC
Reports filed with the Commission after January 1, 1999 and through the date
hereof did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except for such statements or omissions, if any, as have been
modified by or included in subsequent filings with the Commission prior to the
date hereof.
B. The audited consolidated financial statements and unaudited interim
financial statements of the Company included in the Company SEC Reports comply
as to form in all material
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respects with applicable accounting requirements of the Securities Act and with
the published rules and regulations of the Commission with respect thereto. The
financial statements included in the Company SEC Reports (i) have been prepared
in accordance with GAAP applied on a consistent basis (except as may be
indicated therein or in the notes thereto), (ii) present fairly, in all material
respects, the financial position of the Company and its Subsidiaries as at the
dates thereof and the results of their operations and cash flow for the periods
then ended subject, in the case of the unaudited interim financial statements,
to normal year-end audit adjustments and any other adjustments described therein
and the fact that certain information and notes have been condensed or omitted
in accordance with the Exchange Act and the rules promulgated thereunder, and
(iii) are in all material respects, in accordance with the books of account and
records of the Company except as indicated therein.
2.6. Absence of Changes.
Except as disclosed in the Company SEC Reports or on Schedule 2.6, since
December 31, 1998, there has been no (i) change or event which would have a
Material Adverse Effect, (ii) declaration, setting aside or payment of any
dividend or other distribution with respect to the capital stock of the Company,
(iii) issuance of capital stock (other than pursuant to the exercise of options,
warrants, or convertible securities outstanding at such date) or options,
warrants or rights to acquire capital stock (other than the rights granted to
the Investors hereunder), (iv) material loss, destruction or damage to any
material amount of property of the Company or any Subsidiary, that was not
insured, (v) acceleration or prepayment of any indebtedness of the Company for
borrowed money or the refunding of any such indebtedness, (vi) loan or extension
of credit to any officer or employee of the Company or any Subsidiary other than
advances for travel-related expenses and similar advances to officers and
employees of the Company in the ordinary course of business or (vii) acquisition
or disposition of any material assets (or any contract or arrangement therefor),
or any other material transaction by the Company or any Subsidiary otherwise
than for fair value in the ordinary course of business. No event that would
constitute an Event of Default has occurred and is continuing.
2.7. No Undisclosed Liabilities.
Except as set forth on Schedule 2.7, neither the Company nor any of its
Subsidiaries has any debt, obligation or liability (whether accrued, absolute,
contingent, liquidated or otherwise, or whether due or to become due) including,
without limitation, unfunded past service liabilities under any pension, profit
sharing or similar plan, except liabilities disclosed in the Company SEC
Reports, liabilities incurred in the ordinary course of business since December
31, 1998, and obligations under
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Material Agreements to which the Company or any of its Subsidiaries are a party
or agreements entered into by the Company or any of its Subsidiaries, in the
usual and ordinary course of business, other than debts, obligations or
liabilities which (individually or in the aggregate) would not have a Material
Adverse Effect.
2.8. Absence of Defaults, etc.
Neither the Company nor any of its Subsidiaries is in default under or in
violation of (and no event has occurred and no condition exists which, upon
notice or the passage of time (or both), would constitute a default under) (i)
its Restated Charter or Amended Bylaws, (ii) any Material Agreement to which the
Company or any Subsidiary is a party or by which their respective properties may
be bound or affected, or (iii) any order, writ, injunction or decree of any
court or any Federal, state, municipal or other domestic or foreign governmental
department, commission, board, bureau, agency or instrumentality except, in the
case of clause (ii), for defaults or violations which would not have a Material
Adverse Effect.
2.9. Material Contracts.
A. All Material Agreements to which the Company or any of its Subsidiaries
is a party are set forth on Schedule 2.9 or have been filed as exhibits to the
Company SEC Reports. Each Material Agreement that is currently in effect is
valid, binding and enforceable against the Company or such Subsidiary and, to
the Company's knowledge, the other parties thereto, in accordance with its
terms, and in full force and effect on the date hereof.
B. Schedule 2.9 is a list of all Senior Indebtedness as of the date hereof.
2.10. Litigation and Orders.
Except as set forth on Schedule 2.10 or as disclosed in the Company SEC
Reports, there is no action, suit, arbitration or other legal, administrative or
other governmental investigation, inquiry or proceeding (whether federal, state,
local or foreign) pending or, to the Company's knowledge, threatened against the
Company or any Subsidiary or any of their respective properties, assets or
businesses, except for actions, suits, arbitrations, investigation, inquiries or
proceedings that would not have a Material Adverse Effect. To the Company's
knowledge, there is no fact not known to the Investors which might result in or
form the basis for any such action, suit, arbitration, investigation, inquiry or
other proceeding which would have a Material Adverse Effect. Neither the Company
nor any Subsidiary is subject to any Order which would have a Material Adverse
Effect.
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2.11. Compliance with Law.
A. The Company and each of its Subsidiaries are in compliance in all
material respects with, and are not in violation or default in any material
respect under, all federal, state and local laws, ordinances, government rules
and regulations applicable to their business operations, properties, or assets,
including without limitation laws or regulations relating to: occupational
health and safety; insurance companies; HMOs; third party administrators; the
provision or arrangement for the provision of health services; work place
safety; equal employment opportunity and race; and religious, sex and age
discrimination, except where the failure to comply, individually or in the
aggregate, would not have a Material Adverse Effect. No material expenditures,
to the Company's knowledge, are or will be required in order to cause the
current operations or properties of the Company or any of its Subsidiaries to
comply with any applicable laws, ordinances, governmental rules or regulations
at either Closing.
B. The Company and each of its Subsidiaries have all licenses, permits,
franchises or other governmental authorizations ("Approvals") necessary to the
ownership of their property and to the operation of their respective businesses,
which if violated or not obtained would have a Material Adverse Effect. Neither
the Company nor any Subsidiary has finally been denied any application for any
such Approvals necessary for their property or for the operation of their
business. There is no action pending, or to the knowledge of the Company,
threatened by appropriate state or federal agencies having jurisdiction thereof,
to either revoke, withdraw, or suspend any such Approvals, or which would
materially affect such Approvals, or to terminate the participation of any of
the Company's Subsidiaries in Medicare, Medicaid, or other government program,
or any decision not to renew any such Approvals, which action or decision not to
renew would have a Material Adverse Effect.
C. Except as set forth on Schedule 2.11, to the extent applicable to them,
the Company and its Subsidiaries have complied in all material respects with all
laws, rules, conditions of participation, and regulations governing all
Medicare, Medicaid, and any other arrangements with any Governmental Body and
have filed all returns, cost reports and other filings in any manner prescribed
thereby except where the failure to so comply, together with all other such
failures, would not have a Material Adverse Effect. All returns, cost reports
and other filings made by the Company and its Subsidiaries since January 1, 1997
to Medicare, Medicaid or any other Governmental Entity or third party payor are
true and complete except where the failure to be so true and complete, together
with all other such failures, would not have a Material Adverse Effect.
D. In each state in which the Company or any of its Subsidiaries operates
HMOs, PPOs, point of service plans,
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insurance plans or other health care plans, the Company and each of its
Subsidiaries has filed copies of its (i) standard employer and other individual
and group subscriber agreements, (ii) contracts with physicians, hospitals and
other health care entities, and (iii) contracts for management and
administrative services with the applicable state authorities to the extent
required by law, including, but not limited to contracts required to be filed
with the state Departments of Insurance, Departments of Health or the agencies
responsible for each state's Medicaid program. The Company and each of its
Subsidiaries are not providing services under any such agreements that have not
been filed and approved by the state regulatory authorities except where the
failure to so file would not have a Material Adverse Effect.
E. The Company and each of its Subsidiaries has filed all reports, filings
and notices required to be filed with all applicable Departments of Insurance,
Departments of Health and HMO regulatory bodies since January 1, 1995 except
where the failure to so file would not have a Material Adverse Effect (as such
documents have since the time of their filing been amended, the "DOI Reports").
As of their respective dates, the DOI Reports complied in all material respects
with the requirements of the laws, rules and regulations applicable to such DOI
Reports, and none of the DOI Reports contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the material statements therein, in light of the
circumstances under which they were made, not misleading, except for such
statements, if any, as have been modified by subsequent filings prior to the
date hereof.
F. Neither the Company nor any of its Subsidiaries, nor the officers,
directors, employees or agents of the Company or any of its Subsidiaries has
received any written notice alleging that it has engaged in any activities which
are prohibited, or are cause for civil penalties or mandatory or permissive
exclusion from Medicare or Medicaid, under ss.ss. 1320a-7, 1320a-7a, 1320a-7b,
or 1395nn of Title 42 of the United States Code, the federal CHAMPUS statute, or
the regulations promulgated pursuant to such statutes or regulations or related
state or local statutes or, to the Company's knowledge, which are prohibited by
any private accrediting organization from which the Company or any of its
Subsidiaries seeks accreditation which would have a Material Adverse Effect.
2.12. Taxes.
The Company and its Subsidiaries have filed all material tax returns in all
jurisdictions in which such returns are required to have been filed by them and
have paid all taxes, assessments, fees and governmental charges due and payable
with respect to such returns to the extent the same have become due and payable
and before they have become delinquent, other than
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those being contested in good faith and with respect to which the Company or a
Subsidiary, as the case may be, has set aside on its books adequate reserves in
conformity with GAAP.
2.13. Title to Properties.
Except as disclosed in the Company SEC Reports or on Schedule 2.13, the
Company and each Subsidiary has good and marketable title to their respective
real properties and own free and clear of any Liens their respective other
properties reflected in the consolidated balance sheet as at March 31, 1999, or
acquired by the Company or such Subsidiary after said date (other than
properties and assets disposed of in the ordinary course of business), except
for such imperfections of title and encumbrances as would not be individually or
in the aggregate Material.
2.14. Compliance with ERISA.
A. Except as set forth on Schedule 2.14, the Company and each ERISA
Affiliate have operated and administered each Plan in compliance with all
applicable laws except for such instances of noncompliance as have not resulted
in and would not result in a Material Adverse Effect. Except as set forth on
Schedule 2.14, neither the Company nor any ERISA Affiliate has incurred any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to any Plan other than such liabilities as would
not be individually or in the aggregate Material, and to the Company's
knowledge, no event, transaction or condition has occurred or exists that could
reasonably be expected to result in the incurrence of any such liability by the
Company or any ERISA Affiliate, or in the imposition of any Lien on any of the
rights, properties or assets of the Company or any ERISA Affiliate, in either
case pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate Material.
B. Except as set forth on Schedule 2.14, the Company and its ERISA
Affiliates have not incurred withdrawal liabilities under Section 4201 of ERISA
and are not subject to contingent withdrawal liabilities under section 4201 or
4204 of ERISA in respect of Multiemployer Plans that individually or in the
aggregate are Material.
2.15. Private Offering.
Neither the Company nor anyone acting on its behalf has offered the Notes
or any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
Person other than the Investors. Neither the Company nor anyone acting on its
behalf has taken, or will take, any action which would
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cause an exemption from the registration requirements of Section 5 of the
Securities Act to be inapplicable to the issuance or sale of the Notes or the
shares of Common Stock issuable upon conversion of the Notes. Based upon the
representations of the Investors set forth in Section 3, the offer, issuance and
sale of the Notes are and will be exempt from the registration and prospectus
delivery requirements of the Securities Act, and have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities laws.
2.16. Investment Company Act and Holding Company Status, Etc.
Neither the Company nor any Subsidiary is subject to regulation under the
Investment Company Act of 1940, as amended, the Public Utility Holding Company
Act of 1935, as amended, or the Federal Power Act, as amended.
2.17. Environmental Matters.
A. The operations of the Company and its Subsidiaries comply with all
applicable Environmental Laws, except where the failure so to comply
individually and in the aggregate would not have a Material Adverse Effect.
B. In addition and without limitation to the foregoing, except as set forth
on Schedule 2.17:
(1) during the ownership or occupation by the Company or any
Subsidiary, neither the Company nor any Subsidiary, nor any property or
operations currently owned or leased by the Company or any Subsidiary, is
subject to any Order from or agreement with any court, arbitrator or
Governmental Body of competent jurisdiction or subject to any judicial or
docketed administrative proceeding respecting (x) any Environmental Law or
any other environmental or health or safety Requirement of Law, (y) any
action required to clean up, remove, treat or in any other way address
Contaminants in the environment or (z) any written claim under any
Environmental Law arising from the release or threatened release of a
Contaminant into the environment, which individually or in the aggregate
would have a Material Adverse Effect;
(2) all necessary authorizations, consents, permissions, licenses and
agreements required by Environmental Laws (collectively "Environmental
Consents") have been lawfully obtained by the Company and its Subsidiaries
except Environmental Consents the failure of which to obtain would not have
a Material Adverse Effect, and all Environmental Consents are valid and are
in full force and effect;
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(3) to the Company's knowledge, the Company and its Subsidiaries have
complied in all material respects with all conditions attaching to
Environmental Consents and there are no circumstances which would render it
impossible for the Company or any Subsidiary to comply with such conditions
in the future;
(4) neither the Company nor any Subsidiary has received any written
notice, Order, correspondence or written communication from any
Governmental Body concerning any Environmental Consent revoking,
suspending, modifying or varying the same, or threatening to do so, and the
Company does not know of any reason for any Environmental Consent to be
revoked, suspended, modified or varied;
(5) neither the Company nor any Subsidiary has received any written
communication in any form from any Governmental Body concerning any
violation of any Environmental Law; and the Company is not aware of any
circumstances which would be reasonably expected to give rise to such a
communication being received, or of any intention on the part of any
competent authority to deliver any such communication;
(6) to the Company's knowledge, no site owned or occupied by the
Company or any Subsidiary has been used for the deposit of waste during the
ownership or occupation of the Company or any Subsidiary except for such
usage in accordance with Environmental Law or pursuant to all requisite
material consents thereunder;
(7) to the Company's knowledge, all Contaminants produced in the
course of the businesses of the Company and its Subsidiaries have been
lawfully disposed of; and
(8) to the Company's knowledge, the Company and its Subsidiaries have
at all times supplied to the competent authorities such information as is
required by Environmental Laws, and all such information given was correct
at the time such information was supplied.
2.18. Insurance.
The Company and its Subsidiaries and their respective properties are
insured in such amounts, against such losses and with such insurers as are
prudent when considered in light of the nature of the properties and businesses
of the Company and its Subsidiaries and customary in light of the Company's
exposure. No notice of any termination or threatened termination of any of such
policies has been received.
2.19. Registration Rights.
Except as set forth in Schedule 2.19 and as
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contemplated by this Agreement and the Registration Rights Agreement, no Person
has the right to cause the Company to effect the registration under the
Securities Act of any shares of Common Stock or any other securities (including
securities evidencing debt) of the Company.
2.20. Brokerage.
Except as set forth on Schedule 2.20, there are no claims for brokerage
commissions or finder's fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement made by or
on behalf of the Company and the Company agrees to indemnify and hold the
Investors harmless against any costs or damages incurred as a result of any such
claim.
2.21. Takeover Statute; Rights Plan.
None of the Investors is, as a result of its execution and delivery of this
Agreement, the performance of its obligations hereunder or the acquisition of
any Notes or shares of Common Stock contemplated by this Agreement, an
"interested shareholder" prohibited from entering into a business combination
with the Company or any subsidiary pursuant to Section 48-103-205 of the
Business Combination Act of the State of Tennessee or an "Acquiring Person"
within the meaning of the Rights Agreement. A "Distribution Date" (as defined in
the Rights Agreement) shall not be deemed to have occurred and the Rights (as
defined in the Rights Agreement) shall not separate from the Common Stock as a
result of any of the transactions contemplated hereby. No other Takeover Statute
is applicable to the transactions contemplated hereby.
2.22. Y2K Compliance.
Except as set forth in the Company SEC Reports, the Company has established
and is implementing an enterprise-wide program intended to provide (x) that the
change of the year from 1999 to the year 2000 would not have a Material Adverse
Effect and (y) that the impacts of such change on the material vendors and
customers of the Company and the Subsidiaries would not have a Material Adverse
Effect.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each of the Investors represents and warrants to the Company as follows:
3.1. Purchase of Notes.
It is acquiring the Notes for its own account for investment and not with a
view towards the resale, transfer or distribution thereof, nor with any present
intention of distributing the Notes, but subject, nevertheless, to any
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requirement of law that the disposition of such Investor's property shall at all
times be within such Investor's control, and without prejudice to such
Investor's right at all times to sell or otherwise dispose of all or any part of
such securities under a registration under the Securities Act or under an
exemption from said registration available under the Securities Act.
3.2. Organization, Qualification, Authorization.
A. It is a validly existing limited partnership, duly organized under the
laws of its jurisdiction of organization.
B. It has full power and legal right to execute and deliver this Agreement
and to perform its obligations hereunder.
C. It has taken all partnership action necessary for the authorization,
execution, delivery, and performance of this Agreement and its obligations
hereunder. This Agreement is, and the Registration Rights Agreement when
executed and delivered by it will be, legal, valid and binding obligations of
such Investor enforceable against such Investor in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency or other similar laws relating to or affecting the enforcement of
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law),
and except as enforceability of the indemnity provisions contained in the
Registration Rights Agreement may be limited by public policy considerations.
3.3. Accredited Investor Status, etc.
A. It has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of its investment in the
Company as contemplated by this Agreement, and is able to bear the economic risk
of such investment for an indefinite period of time. It has been furnished
access to such information and documents as it has requested and has been
afforded an opportunity to ask questions of and receive answers from
representatives of the Company concerning the terms and conditions of this
Agreement and the purchase of the Notes and the shares of Common Stock
contemplated hereby.
B. It is an "accredited investor" as defined under Regulation D of the
Securities Act.
3.4. Brokerage.
Except for BT Alex. Brown Incorporated (whose fees and expenses will be
paid by the Investors), there are no claims for brokerage commissions or
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement
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based on any arrangement made by or on behalf of the Investors and the Investors
agree to indemnify and hold the Company harmless against any costs or damages
incurred as a result of any such claim.
4. INVESTOR CLOSING CONDITIONS.
The Investors obligation to purchase and pay for the Notes to be purchased
by them hereunder is subject to the satisfaction on or before the Closing Date
of the following conditions:
4.1. Representations and Warranties; No Default.
The representations and warranties contained in Section 2 shall (except as
expressly affected by the transactions contemplated hereby) be true and correct
in all material respects on and as of the Closing Date as if made on and as of
the Closing Date; the Company shall have performed in all material respects all
agreements to be performed by it under this Agreement on or before the Closing
Date; and there shall exist on the Closing Date no Default or Event of Default.
4.2. Injunction.
There shall be no effective injunction, writ, preliminary restraining order
or any order of any nature issued by a court of competent jurisdiction directing
that the transactions provided for herein or any of them not be consummated as
herein provided.
4.3. Counsel's Opinion.
Each of the Investors shall have received from the Company's counsel,
Waller Lansden Dortch & Davis, A Professional Limited Liability Company, an
opinion, dated the Closing Date, substantially in the form of Exhibit B hereto.
4.4. Adverse Development.
There shall have been no developments in the business of the Company or any
of its Subsidiaries which since the date of this Agreement have had or are
reasonably likely to have a Material Adverse Effect.
4.5. Election of Directors.
Two directors designated by the Investors in accordance with Section 6.3
shall have been elected to the Board of Directors to serve as Class 1 and Class
3 directors, respectively, effective upon the Closing Date.
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4.6. Consents and Approvals.
All consents, waivers, authorizations, licenses, permits, certificates and
approvals of any Person required in connection with the execution, delivery and
performance of this Agreement, including, without limitation, the approval of
each entity set forth on Schedule 2.4 hereto shall have been duly obtained and
shall be in full force and effect on the Closing Date.
4.7. Secretary's Certificate.
Each Investor shall have received a certificate, dated the Closing Date, of
the Secretary of the Company attaching (i) a true and complete copy of the
Restated Charter of the Company as filed with the Secretary of State of the
State of Tennessee, with all amendments thereto, (ii) true and complete copies
of the Company's Amended Bylaws in effect as of such date, (iii) certificates of
good standing of the appropriate officials of the jurisdictions of incorporation
of the Company and of each state in which the Company is qualified to do
business as a foreign corporation and (iv) resolutions of the Board of Directors
authorizing the execution and delivery of this Agreement and the Transaction
Documents and the transactions contemplated hereby and thereby, the issuance of
the Notes and the reservation for issuance of the shares of Common Stock into
which the Notes are initially convertible, and the election of the directors as
provided by Section 4.5.
4.8. Officer's Certificate.
Each of the Investors shall have received a certificate, dated the Closing
Date, signed by each of the President and the Chief Financial Officer of the
Company, certifying that the conditions specified in the foregoing Sections 4.1,
4.4, 4.5, and 4.6 hereof have been fulfilled.
4.9. Registration Rights Agreement.
A Registration Rights Agreement, substantially in the form of Exhibit C
attached hereto (the "Registration Rights Agreement"), shall have been executed
and delivered by the Company and shall be in full force and effect.
4.10. Amendments to Bank Debt.
The Bank Credit Agreement (as defined in the Existing Indenture) shall have
been amended to provide for the terms set forth on Schedule 4.10, and otherwise
on terms reasonably acceptable to the Company, and the Investors shall have been
furnished evidence reasonably acceptable to them of such amendments.
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4.11. Approval of Proceedings.
All proceedings to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to the Investors and their special
counsel, Willkie Farr & Gallagher; and the Investors shall have received copies
of all documents or other evidence which they and Willkie Farr & Gallagher may
reasonably request in connection with such transactions and of all records of
corporate proceedings in connection therewith in form and substance reasonably
satisfactory to the Investors and Willkie Farr & Gallagher.
5. COMPANY CLOSING CONDITIONS.
The Company's obligation to issue and deliver the Notes to the Investors is
subject to the satisfaction on or before the Closing Date of the following
conditions:
5.1. Representations and Warranties.
The representations and warranties contained in Section 3 shall (except as
expressly affected by the transactions contemplated hereby) be true and correct
in all material respects on and as of the Closing Date as if made on and as of
the Closing Date; and each of the Investors shall have performed in all material
respects all agreements to be performed by it under this Agreement on or before
the Closing Date.
5.2. Injunction.
There shall be no effective injunction, writ, preliminary restraining order
or any order of any nature issued by a court of competent jurisdiction directing
that the transactions provided for herein or any of them not be consummated as
herein provided.
5.3. Consents and Approvals.
All consents, waivers, authorizations, licenses, permits, certificates and
approvals of any Person required in connection with the execution, delivery and
performance of this Agreement, including, without limitation, the approval of
each entity set forth on Schedule 2.4 hereto shall have been duly obtained and
shall be in full force and effect on the Closing Date.
5.4. Investors' Certificate.
The Company shall have received a certificate from each of the Investors,
dated the Closing Date, signed by a duly authorized representative of such
Investor, certifying that the conditions specified in the foregoing Section 5.1
hereof have been fulfilled.
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5.5. Amendments to Bank Debt.
The Bank Credit Agreement (as defined in the Existing Indenture) shall have
been amended on terms reasonably acceptable to the Company.
6. COVENANTS.
6.1. Resale of Securities.
A. Each of the Investors severally covenants that it will not sell or
otherwise transfer the Securities except pursuant to an effective registration
under the Securities Act, or pursuant to Rule 144 under the Securities Act, or
in a transaction which complies with the provisions of Section 6.7.
B. Until such time as the Securities are sold pursuant to an effective
registration statement under the Securities Act or pursuant to Rule 144 under
the Securities Act, the Securities will bear substantially the following legend
reflecting the foregoing restrictions on the transfer of such securities:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any state
securities law, and may not be sold, transferred or otherwise disposed of
except pursuant to an effective registration under the Act or in a
transaction which, in the opinion of counsel reasonably acceptable to the
Company, is exempt from such registration."
6.2. Covenants Pending Closing.
From the date hereof through the Closing Date, the Company will conduct and
will cause its Subsidiaries to conduct their respective businesses in the
ordinary course, and will not, and will not permit any of its Subsidiaries to,
without the prior written consent of the Investors, take any action which would
result in any of the representations or warranties contained in this Agreement
not being true in all material respects at and as of the time immediately after
such action, or in any of the covenants contained in this Agreement becoming
incapable of performance in all material respects. The Company will promptly
advise the Investors of any action or event of which it becomes aware which has
the effect of making incorrect in any material respect any of such
representations or warranties or which has the effect of rendering any of such
covenants incapable of performance in any material respect.
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6.3. Board Nominees.
For so long as the Notes are outstanding and owned by one or more of the
Investors, the Company will nominate and use its best efforts to elect and to
cause to remain as directors on the Board of Directors two individuals
designated by the Investors who are either (i) general partners of WP listed on
Schedule 6.3 or (ii) otherwise reasonably acceptable to the Company ("Approved
Designees"). For so long as the Investors, individually or in the aggregate, own
beneficially (within the meaning of Rule 13d-3 under the Exchange Act) at least
10.0% of the outstanding shares of Common Stock, the Company will nominate and
use its best efforts to elect and to cause to remain as directors on the Board
of Directors at least one individual designated by the Investors, who shall be
an Approved Designee; provided, however, that in the event the Investors,
individually or in the aggregate, own beneficially (within the meaning of Rule
13d-3 under the Exchange Act) more than 10% but less than 12.5% of the
outstanding shares of Common Stock, the Investors shall only be entitled to
designate an Approved Designee pursuant to this sentence if the Investors,
individually or in the aggregate, own at least 50% of the shares of Common Stock
beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by
them on the date six months following the Closing Date. Any vacancy created by
the death, disability, retirement or removal of any such individual may be
filled by the Investors.
6.4. Use of Proceeds.
The Company will use the proceeds of the issuance of the Notes to repay
existing debt, to repurchase shares of Common Stock and for general corporate
purposes; provided, however, that any repurchases of shares of Common Stock
hereunder (i) will be approved by the Board of Directors, (ii) will be made in
compliance with all applicable law, (iii) will be made within twelve months of
the Closing Date and (iv) will not exceed $27,500,000 in the aggregate; and
provided further that nothing herein shall prohibit, restrict or otherwise limit
the Company's ability to effect its $75,000,000 securities repurchase program
previously adopted by the Company as long as such securities repurchase program
is completed within 24 months of the Closing Date. Except as set forth in the
immediately preceding sentence, no part of the proceeds from the sale of the
Notes hereunder will be used, and no part of the proceeds of such existing debt
was used, directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 221, as amended), or for the purpose of buying or
carrying or trading in any securities under such circumstances as to involve the
Company in a violation of Regulation X of said Board (12 CFR 224) or to involve
any broker or dealer in a violation of Regulation T of said Board (12 CFR 220).
As used in this Section 6.4, the terms "margin stock" and "purpose of buying or
carrying" shall
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have the meanings assigned to them in the aforementioned
Regulation U.
6.5. Standstill.
A. Each of the Investors and Warburg, Pincus & Co., the sole general
partner of each of the Investors ("WP"), hereby agree that, for a period of five
years from the date of this Agreement, neither WP, the Investors nor any
Controlled Subsidiary or others with whom WP is acting in concert will, directly
or indirectly, and WP will not, for its own account, without the prior written
consent of the Board:
(1) acquire or agree to acquire, publicly offer, or make any public
proposal with respect to the possible acquisition of (A) beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of any
securities of the Company in excess of the Maximum Amount, (B) any Company
business or any substantial part of the Company's assets, or any subsidiary
or division thereof or successor to the Company, or (C) any rights or
options to acquire any of the foregoing from any Person;
(2) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are used in the rules
under the Exchange Act), or seek to advise or influence any person or
entity with respect to the voting of any voting securities of the Company;
(3) make any public announcement with respect to any transaction or
proposed or contemplated transaction between the Company or any of its
security holders and the Investors or WP, including, without limitation,
any tender or exchange offer, merger or other business combination or
acquisition of a material portion of the assets of the Company;
(4) publicly propose or publicly disclose an intent to propose any
form of business combination, acquisition, restructuring, recapitalization
or other similar transaction relating to the Company;
(5) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to the Company in
connection with any of matters referred to in clauses (1)-(4) above;
(6) publicly disclose any intention, plan or arrangement inconsistent
with the foregoing;
(7) publicly request the Company, directly or indirectly, to amend or
waive any provisions of this Section 6.5; or
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(8) take any action which would be reasonably likely to require the
Company to make a public announcement regarding a possible transaction
involving the Company.
B. Each of the Investors and WP acknowledge that money damages would not be
sufficient remedy for any breach of this Agreement by it and that in addition to
all other remedies the Company shall be entitled to specific performance and
injunctive and other equitable relief as a remedy for any such breach, and each
of the Investors and WP further agree to waive any requirement for the securing
or posting of any bond in connection with such remedy.
C. The letter from WP to the Company, dated March 8, 1999, shall terminate
and have no further force or effect following the Closing Date.
6.6. Additional Purchases of Common Stock.
A. The Investors currently intend to acquire additional shares of Common
Stock in open-market purchases or otherwise ("Permitted Acquisitions"). The
actual timing and amount of such purchases will depend on the receipt of all
required regulatory approvals and prevailing market conditions at the time of
such purchases.
B. The Company has agreed to permit the Investors to make the Permitted
Acquisitions provided that (i) the Permitted Acquisitions are made no later than
six (6) months after the Closing Date, (ii) the aggregate consideration for such
Permitted Acquisitions does not exceed $72,500,000 (excluding transaction costs
and expenses and brokerage commissions) and (iii) the number of shares of Common
Stock acquired pursuant to this Section 6.6 shall not exceed 15,000,000 (subject
to appropriate adjustment for any stock split or similar event).
6.7. Restrictions on Transfer.
A. No Investor shall Transfer any of the Securities owned by it unless the
Investor desiring to make the Transfer (hereinafter referred to as the
"Transferor") shall have first made the offers to sell to the Company
contemplated by this Section 6.7, and such offers shall not have been accepted.
B. Copies of the Transferor's offer shall be given to the Company and shall
consist of an offer to sell to the Company all of the Securities then proposed
to be transferred by the Transferor (the "Subject Securities") and the proposed
terms (including the price for the Subject Securities) of such Transfer (a "Sale
Notice").
C. Within 10 Business Days after the receipt of the offer described in
Section 6.7B, the Company may, at its option, elect to purchase all, but not
less than all, of the Subject
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Securities. The Company shall exercise such option by giving written notice
thereof to the Transferor within such 10-Business Day period (the "Exercise
Notice"). The Exercise Notice shall specify a date for the closing of the
purchase which shall not be more than 30 days after the date of the giving of
such Exercise Notice.
D. The purchase price per share for the Subject Securities shall be the
price specified by the Transferor in the Sale Notice. If the offer of Subject
Shares under this Section 6.7 is for consideration other than cash or cash plus
deferred payments of cash, the Company shall pay the present value cash
equivalent of such other consideration. If the Transferor and the Company cannot
agree on the amount of such cash equivalent within 10 days after the beginning
of the 10-Business Day period referred to above, any of such parties may, by
three days' written notice to the other, initiate appraisal proceedings under
Section 6.7E for determination of such cash equivalent.
E. If any party shall initiate an appraisal procedure to determine the
amount of the present value cash equivalent of any consideration for Subject
Securities under Section 6.7D, then the Transferor, on the one hand, and the
Company, on the other hand, shall each promptly appoint as an appraiser an
individual who shall be a member of a nationally-recognized investment banking
firm. Each appraiser shall, within 30 days of appointment, separately
investigate the value of the consideration for the Subject Securities as of the
proposed transfer date and shall submit a notice of an appraisal of that value
to each party. Each appraiser shall be instructed to determine such value
without regard to income tax consequences to the Transferor as a result of
receiving cash rather than other consideration. If the appraised values of such
consideration (the "Earlier Appraisals") vary by less than ten percent (10%),
the average of the two appraisals on a per share basis shall be controlling as
the amount of the cash equivalent. If the appraised values vary by more than ten
percent (10%), the appraisers, within 10 days of the submission of the last
appraisal, shall appoint a third appraiser who shall be member of a nationally
recognized investment banking firm. The third appraiser shall, within 30 days of
his appointment, appraise the value of the consideration for the Subject
Securities (without regard to the income tax consequences to the Transferor as a
result of receiving cash rather than other consideration) as of the proposed
transfer date and submit notice of his appraisal to each party. The value
determined by the third appraiser shall be controlling as the amount of the
present value cash equivalent unless the value is greater than the two Earlier
Appraisals, in which case the higher of the two Earlier Appraisals will control,
and unless that value is lower than the two Earlier Appraisals, in which case
the lower of the two Earlier Appraisals will control. If any party fails to
appoint an appraiser or if one of the two initial appraisers fails after
appointment to submit his appraisal within the required period, the appraisal
submitted by
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the remaining appraiser shall be controlling. The Transferor and the Company
shall each bear the cost of its respective appointed appraiser. The cost of the
third appraisal shall be shared one-half by the Transferor and one-half by the
Company.
F. The closing of the purchase shall take place at the office of the
Company or such other location as shall be mutually agreeable and the purchase
price, to the extent comprised of cash, shall be paid at the closing, and cash
equivalents and documents evidencing any deferred payments of cash permitted
pursuant to Section 6.7D above shall be delivered at the closing. At the
closing, the Transferor shall deliver to the Company the instruments or
certificates evidencing the Subject Securities to be conveyed, duly endorsed and
in negotiable form with all the requisite documentary stamps affixed thereto.
G. If the offer to sell is not accepted by the Company, the Transferor may
make a bona fide Transfer to any Person in accordance with the terms set forth
in the Sale Notice, provided that (A) such Transfer shall be made only in
accordance with the terms therein stated and (B) if the transferee would own
beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more than
10% of the outstanding Common Stock, the transferee agrees, in writing, to be
bound by the provisions of Section 6.5 and this Section 6.7. If the Transferor
shall fail to make such Transfer within 180 days following the expiration of the
time hereinabove provided for the election by the Company, such Subject
Securities shall again become subject to all the restrictions of this Section
6.7.
H. The provisions of this Section 6.7 shall not apply to (i) Transfers of
Securities made after the seventh anniversary of the Closing Date, (ii)
Transfers of Securities by one Investor to an Affiliate of such Investor
(provided such Affiliate agrees in writing to be bound by the terms of this
Agreement), (iii) pro rata distributions of Securities by any Investors to its
partners by Investors, (iv) underwritten sales of Securities made pursuant to an
effective registration under the Securities Act, (v) sales of Securities made
pursuant to Rule 144 under the Securities Act, (vi) Transfers of Securities made
pursuant to a merger, consolidation or similar transaction approved by the Board
of Directors, or (vii) Transfers of Securities to any Person if, after giving
effect to such Transfer, such Person would not own beneficially (within the
meaning of Rule 13d-3 under the Exchange Act) more than 5% of the outstanding
Common Stock.
6.8. Reasonable Efforts; Cooperation.
Upon the terms and subject to the conditions hereof, each of the parties
hereto shall use all reasonable best efforts to obtain and furnish in a timely
manner all necessary waivers, consents and approvals and notices and to effect
all necessary notifications, registrations and filings (including, without
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limitation, all necessary applications and notifications to any insurance
regulatory authority), and to use all reasonable efforts to take, or cause to be
taken, all other actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement.
6.9. Financial and Business Information.
From and after the date hereof, the Company shall deliver to
the Investors so long as the Investors, individually or in the aggregate,
beneficially own (within the meaning of Rule 13d-3 under the Exchange Act) at
least 15% of the outstanding shares of Common Stock:
(1) Monthly and Quarterly Statements - as soon as practicable, and in
any event within 30 days after the close of each month of each fiscal year
of the Company other than at the end of a fiscal quarter of the Company in
the case of monthly statements and 45 days after the close of each of the
first three fiscal quarters of each fiscal year of the Company in the case
of quarterly statements, a consolidated balance sheet, statement of income
and statement of cash flows of the Company and any Subsidiaries as at the
close of such month or quarter and covering operations for such month or
quarter, as the case may be, and the portion of the Company's fiscal year
ending on the last day of such month or quarter, all in reasonable detail
and prepared in accordance with GAAP, subject to audit and year-end
adjustments, setting forth in each case in comparative form the figures for
the comparable period of the previous fiscal year.
(2) Annual Statements - as soon as practicable after the end of each
fiscal year of the Company, and in any event within 90 days thereafter,
duplicate copies of:
(a) consolidated and consolidating balance sheets of the Company
and any Subsidiaries at the end of such year; and
(b) consolidated and consolidating statements of income,
shareholders' equity and cash flows of the Company and any
Subsidiaries for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable
detail and accompanied by an opinion thereon of a "Big 5" public
accounting firm selected by the Company, which opinion shall state
that such financial statements fairly present the financial position
of the Company and any Subsidiaries on a consolidated basis and have
been prepared in accordance with GAAP (except for changes in
application in which such accountants concur) and that the examination
of such accountants in connection with
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such financial statements has been made in accordance with generally
accepted auditing standards, and accordingly included such tests of
the accounting records and such other auditing procedures as were
considered necessary in the circumstances.
(c) Annual Budget - no later than 30 days before the end of each
fiscal year of the Company, an annual budget for the Company in a form
consistent with the Company's past practice.
(d) Audit Reports - promptly upon receipt thereof, one copy of
each other financial report and internal control letter submitted to
the Company by independent accountants in connection with any annual,
interim or special audit made by them of the books of the Company.
(e) Other Reports - promptly upon their becoming available, one
copy of each financial statement, report, notice or proxy statement
sent by the Company to shareholders generally, of each financial
statement, report, notice or proxy statement sent by the Company or
any of its Subsidiaries to the Commission or any successor agency, if
applicable, of each regular or periodic report and any registration
statement, prospectus or written communication (other than transmittal
letters) in respect thereof filed by the Company or any Subsidiary
with, or received by such Person in connection therewith from, any
domestic or foreign securities exchange, the Commission or any
successor agency or any foreign regulatory authority performing
functions similar to the Commission, of any press release issued by
the Company or any Subsidiary, and of any material of any nature
whatsoever prepared by the Commission or any successor agency thereto
or any state blue sky or securities law commission which relates to or
affects in any way the Company or any Subsidiary.
(3) Requested Information - with reasonable promptness, the Company
shall furnish the Investors with such other data and information as from
time to time may be reasonably requested.
(4) Compliance Certificate - concurrently with each delivery of
financial statements or reports required to be furnished pursuant to (1)
and (2) above, a certificate of a Senior Financial Officer stating that,
based upon such examination or investigation and review of this Agreement
as in the opinion of the signer is necessary to enable the signer to
express an informed opinion with respect thereto, no Default or Event of
Default has occurred during such period, or, if any Default or Event of
Default shall have
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occurred, specifying all of the same and the nature and period of existence
thereof and what action the Company has taken, is taking or proposes to
take with respect thereto.
6.10. Inspection.
As long as the Investors, individually or in the aggregate, beneficially
own (within the meaning of Rule 13d-3 under the Exchange Act) at least 15% of
the outstanding shares of Common Stock, the Company shall permit the Investors
and their representatives and agents to visit and inspect any of the properties
of the Company and its Subsidiaries, to examine all its books of account,
records, reports and other papers not contractually required of the Company to
be confidential or secret, to make copies and extracts therefrom, and to discuss
its affairs, finances and accounts with its officers, directors, key employees
and independent public accountants or any of them (and by this provision the
Company authorizes said accountants to discuss with the Investors and their
representatives and agents the finances and affairs of the Company and any
Subsidiaries), all at such reasonable times and as often as may be reasonably
requested.
6.11. Confidentiality.
As to so much of the information and other material furnished under or in
connection with this Agreement (whether furnished before, on or after the date
hereof) as constitutes or contains confidential business, financial or other
information of the Company or any Subsidiary, each of the Investors covenants
for itself and its directors, officers and partners that neither it nor its
officers, directors, partners, employees, counsel, accountants and other
representatives will disclose such information to Persons other than their
respective authorized employees, counsel, accountants, shareholders, partners,
limited partners and other authorized representatives; provided, however, that
each Investor may disclose or deliver any information or other material
disclosed to or received by it should such Investor be advised by its counsel
that such disclosure or delivery is required by law, regulation or judicial or
administrative order but only after so much prior written notice as is
reasonably practicable under the circumstances to the Company that it proposes
to make such disclosures. In the event of any termination of this Agreement
prior to either Closing Date, each Investor shall return to the Company all
confidential material previously furnished to such Investor or its officers,
directors, partners, employees, counsel, accountants and other representatives
in connection with this transaction. The obligations set forth in this Section
6.11 shall survive the termination of this Agreement and shall remain in effect
until the information and other material furnished under or in connection with
this Agreement becomes generally available to the public other than through a
violation of the terms of this Agreement or two years from the date of this
Agreement, whichever
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occurs first. The previously executed Confidentiality Agreement between the
Company and E.M. Warburg, Pincus & Co., LLC shall terminate as of the Closing
Date.
6.12. Takeover Statute.
If any Takeover Statute shall become applicable to the transactions
contemplated hereby, the Company shall grant such approvals and take such
actions as are necessary so that the transactions contemplated hereby, including
without limitation the transactions contemplated by Section 6.6 or the
conversion of the Notes, may be consummated as promptly as practicable on the
terms contemplated hereby and otherwise act to eliminate or minimize the effects
of such statute or regulation on the transactions contemplated hereby. If any
takeover statute of any state other than the State of Tennessee shall become
applicable to the transactions contemplated hereby, the Company shall use its
reasonable efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby, including without
limitation the transactions contemplated by Section 6.6 or the conversion of the
Notes, may be consummated as promptly as practicable on the terms contemplated
hereby and otherwise act to eliminate or minimize the effects of such statute or
regulation on the transactions contemplated hereby.
6.13. Rights Agreement Inapplicable.
If the transactions contemplated hereby, including without
limitation the transactions contemplated by Section 6.6 or the conversion of any
of the Notes, would (a) result in the occurrence of a "Distribution Date" under
the Rights Agreement, (b) cause any Investor to become an "Acquiring Person" as
defined in the Rights Agreement or (c) otherwise cause the exercise of any
"Right" issued pursuant to the Rights Agreement or the issuance or exercise of
any "Rights Certificate" under the Rights Agreement, the Company will promptly
cause the Rights Agreement to be duly amended to prevent any such
characterization.
6.14. Hart-Scott Filings.
At the request of any of the Investors, the Company will promptly prepare
and file, or cause to be prepared and filed, any notification or response to any
request for additional information required to be filed under the HSR Act with
respect to the conversion of the Notes.
6.15. Conduct of Business; Negative Covenants.
For as long as the Notes are outstanding, unless the prior written consent
of the Investors shall have been obtained:
A. The Company will continue to engage in business of the same general type
as now conducted by it, and preserve, renew
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and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges, licenses and franchises
necessary or desirable in the normal conduct of its business.
B. The Company and its Subsidiaries will comply in all material respects
with all applicable laws, rules, regulations and orders except where the failure
to comply would not have a Material Adverse Effect.
C. The Company will maintain insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
is usually carried by companies of similar size and credit standing engaged in
similar business and owning similar properties, provided that such insurance is
and remains available to the Company at commercially reasonable rates.
D. The Company will keep proper books of record and account, in which full
and correct entries shall be made of all financial transactions and the assets
and business of the Company and its Subsidiaries in accordance with GAAP.
E. The Company will not, and will not permit any Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on or in
respect of, or make any distribution to the holders of, Capital Stock of the
Company, (ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company, other than purchases of Common Stock made in
accordance with the provisions of Section 6.4, or (iii) declare or pay any
dividend or make any distribution on or in respect of, or make any distribution
to holders of, Capital Stock of any Subsidiary (other than with respect to any
such Capital Stock held by the Company or any Wholly Owned Subsidiary) or
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
any Subsidiary (other than such Capital Stock held by the Company or any Wholly
Owned Subsidiary).
7. TERMS OF NOTES; PREPAYMENTS OF NOTES; PURCHASE OF NOTES.
7.1. General Terms of Notes.
A. The form of Note is attached hereto as Exhibit A. The aggregate
Principal Amount at Final Maturity of the Notes to be issued hereunder is
$404,451,562.
B. The aggregate Principal Amount at Final Maturity of the Notes shall be
payable on the Final Maturity Date unless earlier repaid or converted in
accordance with this Agreement.
C. The Notes shall be issued at an Issue Price of $315.24 per $1,000
Principal Amount at Final Maturity. There shall be no periodic payments of
interest on the Notes. The calculation of the accrual of Original Issue Discount
in the
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period during which each Note remains outstanding shall be on an annual basis
using a 360-day year composed of twelve 30-day months, and such accrual shall
commence on the Closing Date. In the event of the maturity, conversion, purchase
by the Company at the option of a Holder or redemption of a Note, Original Issue
Discount, if any, shall cease to accrue on such Note, under the terms and
subject to the conditions of this Agreement and the Notes.
D. All amounts payable in connection with the Notes shall be denominated
and payable in the lawful currency of the United States.
E. The Notes shall be payable and may be presented for conversion,
registration of transfer and exchange, without service charge, at the principal
executive office of the Company.
7.2. Optional Redemption by the Company.
A. Right to Redeem. The Company, at its option, may redeem the Notes in
accordance with the provisions of paragraphs 5 and 7 of the Notes. If the
Company elects to redeem Notes pursuant to paragraph 5 of the Notes, it shall
notify the Holders in writing of the Redemption Date, the Principal Amount at
Final Maturity of Notes to be redeemed and the Redemption Price.
B. Selection of Notes to be Redeemed. If any Note selected for partial
redemption is thereafter surrendered for conversion in part before termination
of the conversion right with respect to the portion of the Note so selected, the
converted portion of such Note shall be deemed (so far as may be), solely for
purposes of determining the aggregate Principal Amount at Final Maturity of
Notes to be redeemed by the Company, to be the portion selected for redemption.
Notes which have been converted during a selection of Notes to be redeemed may
be treated by the Company as outstanding for the purpose of such selection.
Nothing in this Section 7.2B shall affect the right of any Holder to convert any
Note pursuant to Sections 7.6, 7.7 and 7.8 before the termination of the
conversion right with respect thereto.
C. Notice of Redemption. At least 30 days but not more than 60 days before
a Redemption Date, the Company shall mail or cause to be mailed a notice of
redemption by first-class mail to each Holder of Notes to be redeemed at such
Holder's address as it appears on the Note Register.
The notice shall identify the Notes to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price;
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(c) the then current Conversion Rate;
(d) that Notes called for redemption must be presented and surrendered
to the Company to collect the Redemption Price;
(e) that the Notes called for redemption may be converted at any time
before the close of business on the Redemption Date;
(f) that Holders who wish to convert Notes must satisfy the
requirements in paragraph 9 of the Notes;
(g) that, unless the Company defaults in making the payment of the
Redemption Price on the Redemption Date, the only remaining right of the
Holder shall be to receive payment of the Redemption Price upon
presentation and surrender to the Company of the Notes;
(h) if fewer than all the outstanding Notes are to be redeemed, the
certificate number and Principal Amounts at Final Maturity of the
particular Notes to be redeemed; and
(i) that Original Issue Discount on Notes called for redemption shall
immediately cease to accrue on and after the Redemption Date; and
D. Effect of Notice of Redemption. Once notice of redemption is mailed,
Notes called for redemption become due and payable on the Redemption Date and at
the Redemption Price stated in the notice, except for Notes that are converted
in accordance with the provisions of Sections 7.6, 7.7 or 7.8. Upon presentation
and surrender to the Company, Notes called for redemption shall be paid at the
Redemption Price.
E. Sinking Fund. There shall be no sinking fund provided for the Notes.
7.3. Repurchase at Option of the Holder Upon a Change in Control.
A. If a Change in Control shall occur at any time prior to the Final
Maturity Date, each Holder of Notes shall have the right, at such Holder's
option, to require the Company to purchase such Holder's Notes on the date (the
"Change in Control Purchase Date") (or if such date is not a Business Day, the
next succeeding Business Day) that is 35 days after the date of the Change in
Control. The Notes shall be repurchased in integral multiples of $l,000 of
Principal Amount at Final Maturity. The Company shall purchase such Notes for
cash at a price (the "Change in Control Purchase Price") equal to the Issue
Price plus accrued Original Issue Discount to the Change in Control Purchase
Date. No Notes may be repurchased at the option of the Holders due to a Change
in Control if there has occurred and is continuing an Event of Default (other
than a default in the
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payment of the Change in Control Purchase Price with respect to such Notes).
B. The Company shall mail to all Holders a notice (a "Company Change in
Control Notice") of the occurrence of a Change in Control and of the repurchase
right arising as a result thereof on or before the tenth day after the
occurrence of such Change in Control.
C. For a Note to be so repurchased at the option of the Holder, the Company
must receive such Note with the form entitled "Change in Control Purchase
Notice" on the reverse thereof duly completed, together with such Note duly
endorsed for transfer, on or before the Change in Control Purchase Date. All
questions as to the validity, eligibility (including time of receipt) and
acceptance of any Note for redemption shall be determined by the Company, whose
determination shall be final and binding.
7.4. Purchase of Notes at the Option of the Holder.
A. General. On the tenth anniversary of the Closing Date (the "Purchase
Date"), at the purchase price specified in paragraph 6 of the Notes (the
"Purchase Price"), a Holder of Notes shall have the option to require the
Company to purchase any outstanding Notes held by such Holder, upon:
(1) delivery to the Company by the Holder of a written notice of
purchase (a "Purchase Notice") at any time from the opening of business on
the date that is 20 Business Days prior to the Purchase Date until the
close of business on the Business Day prior to such Purchase Date, stating:
(a) the certificate numbers of the Notes which the Holder shall
deliver to be purchased;
(b) the portion of the Principal Amount at Final Maturity of the Notes
which the Holder shall deliver to be purchased, which portion must be
$1,000 in Principal Amount at Final Maturity or a multiple thereof;
(c) that such Notes shall be purchased pursuant to the terms and
conditions specified in paragraph 6 of the Notes and in this Agreement; and
(d) if the Company elects, pursuant to a Company Notice, to pay the
Purchase Price to be paid as of such Purchase Date, in whole or in part, in
Common Stock but such portion of the Purchase Price shall ultimately be
payable to such Holder in cash because any of the conditions to the payment
of the Purchase Price in Common Stock are not satisfied prior to or on the
Purchase Date, as set forth in Section 7.4D, whether such Holder elects (x)
to withdraw such Purchase Notice as to some or all of the Notes to which
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such Purchase Notice relates (stating the Principal Amount at Final
Maturity and certificate numbers of the Notes as to which such withdrawal
shall relate), or (y) to receive cash in respect of the entire Purchase
Price for all Notes (or portions thereof) to which such Purchase Notice
relates; and
(2) delivery or book-entry transfer of such Notes to the Company prior
to, on or after the Purchase Date (together with all necessary
endorsements) at the offices of the Company, such delivery or transfer
being a condition to receipt by the Holder of the Purchase Price therefor;
provided, however, that such Purchase Price shall be so paid pursuant to
this Section 7.4 only if the Note so delivered or transferred to the
Company shall conform in all respects to the description thereof in the
related Purchase Notice. All questions as to the validity, eligibility
(including time of receipt) and acceptance of any Note for repurchase shall
be determined by the Company, whose determination shall be final and
binding.
If a Holder, in such Holder's Purchase Notice (and in any written notice of
withdrawal of a portion of a Holder's Notes previously submitted for purchase
pursuant to a Purchase Notice, the portion that remains subject to the Purchase
Notice), fails to indicate such Holder's choice with respect to the election set
forth in clause (d) of Section 7.4A(1), such Holder shall be deemed to have
elected to receive cash in respect of all Notes subject to such Purchase Notice
in the circumstances set forth in such clause (d).
The Company shall purchase from the Holder thereof, pursuant to this
Section 7.4, a portion of a Note if the Principal Amount at Final Maturity of
such portion is $1,000 or a multiple of $1,000. Provisions of this Agreement
that apply to the purchase of all of a Note also apply to the purchase of such
portion of such Note.
Any purchase by the Company contemplated pursuant to the provisions of this
Section 7.4 shall be consummated by the delivery of the consideration to be
received by the Holder promptly following the later of the Purchase Date, the
Deferred Purchase Date (if applicable) and the time of delivery of the Note.
Notwithstanding anything herein to the contrary, any Holder delivering to
the Company the Purchase Notice contemplated by this Section 7.4A shall have the
right at any time prior to the close of business on the Purchase Date (or the
Deferred Purchase Date, if applicable) to withdraw such Purchase Notice (in
whole or in part) by delivery of a written notice of withdrawal to the Company
in accordance with Section 7.5A.
B. Company's Right to Elect Manner of Payment of Purchase Price. The
Company may elect to pay the Purchase Price
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in respect of the Notes to be purchased pursuant to Section 7.5A as of the
Purchase Date, in cash or Common Stock, or in any combination of cash and Common
Stock, subject to the conditions set forth in Sections 7.4C and 7.4D. The
Company shall designate, in the Company Notice delivered pursuant to Section
7.4E, whether the Company shall purchase the Notes for cash or Common Stock, or,
if a combination thereof, the percentages of the Purchase Price of Notes in
respect of which it shall pay in cash and/or Common Stock; provided that the
Company shall pay cash for fractional interests in Common Stock. For purposes of
determining the existence of potential fractional interests, all Notes subject
to purchase by the Company held by a Holder shall be considered together (no
matter how many separate certificates are to be presented). Each Holder whose
Notes are purchased pursuant to this Section 7.4 shall receive the same
percentage of cash and/or Common Stock in payment of the Purchase Price for such
Notes, except (a) as provided in Section 7.4D with regard to the payment of cash
in lieu of fractional interests in Common Stock and (b) in the event that the
Company is unable to purchase the Notes of a Holder or Holders for Common Stock
because any necessary qualifications or registrations of the Common Stock under
applicable federal or state securities laws cannot be obtained, the Company may
purchase the Notes of such Holder or Holders for cash. Once the Company has
given its Company Notice to Holders, the Company may not change its election
with respect to the consideration (or components or percentages of components
thereof) to be paid except pursuant to this Section 7.4B or Section 7.4D.
C. Purchase with Cash. At the option of the Company, the Purchase Price of
Note in respect of which a Purchase Notice pursuant to Section 7.4A has been
given, or a specified percentage thereof, may be paid by the Company with cash
equal to the aggregate Purchase Price, or such specified percentage thereof, as
the case may be, of such Notes. No Notes may be purchased at the option of the
Holders with cash if there has occurred and is continuing an Event of Default
(other than a default in the payment of the Purchase Price with respect to such
Notes).
D. Payment by Issuance of Common Stock. At the option of the Company, the
Purchase Price of Notes in respect of which a Purchase Notice pursuant to
Section 7.4A has been given, or a specified percentage thereof, may be paid by
the Company by the issuance of a number of shares of Common Stock equal to the
quotient obtained by dividing (a) the amount of cash to which the Holders would
have been entitled had the Company elected to pay all or such specified
percentage, as the case may be, of the Purchase Price of such Notes in cash by
(b) the Market Price of a share of Common Stock on the date specified by the
Company pursuant to Section 7.4E(1)(a), subject to the next succeeding
paragraph.
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The Company shall not issue a fractional share of Common Stock in payment
of the Purchase Price. Instead the Company shall pay cash for the current market
value of the fractional share. The current market value of a fraction of a share
shall be determined by multiplying the Market Price by such fraction and
rounding the product to the nearest whole cent. It is understood that if a
Holder elects to have more than one Note purchased, the number of shares of
Common Stock shall be based on the aggregate amount of Notes to be purchased.
The Company's right to exercise its election to purchase the Notes pursuant
to Section 7.4 through the issuance of shares of Common Stock shall be
conditioned upon:
(1) the Company having given timely written notice in accordance with
Section 7.4E to the Holders of its election to purchase all or a specified
percentage of the Notes with Common Stock as provided herein;
(2) (i) the registration of the shares of Common Stock to be issued in
respect of the payment of the specified percentage of the Purchase Price
under the Securities Act or (ii) the issuance of the shares of Common Stock
in a transaction which is exempt from the registration requirements of the
Securities Act and which will not result in such shares of Common Stock
being deemed "restricted securities" under the Securities Act or otherwise;
(3) any necessary qualification or registration under applicable state
securities laws or the availability of an exemption from such qualification
and registration; and
(4) the receipt by the Holders of an Officers' Certificate in the form
attached as Exhibit D and an opinion of outside counsel to the Company each
stating that (i) the terms of the issuance of the Common Stock are in
conformity with this Agreement and (ii) the shares of Common Stock to be
issued by the Company in payment of the specified percentage of the
Purchase Price in respect of Notes have been duly authorized and, when
issued and delivered pursuant to the terms of this Agreement in payment of
the specified percentage of the Purchase Price in respect of Notes, shall
be validly issued, fully paid and nonassessable, and, in the case of such
Officers' Certificate, stating that conditions (1), (2) and (3) above have
been satisfied and, in the case of such opinion of counsel, stating that
conditions (2) and (3) above have been satisfied.
Such Officers' Certificate shall also set forth the number of shares of
Common Stock to be issued for each $1,000 Principal Amount at Final Maturity of
Notes and the Sale Price of a share of Common Stock on each Trading Day during
the period during which the Market Price is calculated. The Company may elect to
pay the Purchase Price (or any portion thereof) in
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Common Stock only if the information necessary to calculate the Market Price is
reported in a daily newspaper of national circulation. If any of the conditions
set forth in this Section 7.4D are not satisfied with respect to a Holder or
Holders prior to or on the Purchase Date and the Company elected to purchase the
Notes to be purchased as of such Purchase Date pursuant to this Section 7.4
through the issuance of shares of Common Stock, the Company shall pay the entire
Purchase Price in respect of such Notes of such Holder or Holders in cash.
Upon determination of the actual number of shares of Common Stock which the
Holder of each $1,000 Principal Amount at Final Maturity of the Notes shall
receive, the Company shall provide written notice of such determination to the
Holders.
E. Notice of Election. The Company's notices of election to purchase with
cash or Common Stock, or any combination thereof (each a "Company Notice"),
shall be sent to the Holders at their addresses shown in the Note Register not
less than 20 Business Days and not more than 40 Business Days prior to the
Purchase Date (the "Company Notice Date"). Such Company Notices shall state the
manner of payment elected and shall contain the following information:
(1) In the event the Company has elected to pay a Purchase Price (or a
specified percentage thereof) with Common Stock, the Company Notice shall:
(a) state that each Holder shall receive Common Stock with a Market
Price determined as of the fifth Trading Day before the Company Notice Date
equal to such specified percentage of the Purchase Price of the Notes held
by such Holder (except any cash amount to be paid in lieu of fractional
share); and
(b) set forth the method of calculating the Market Price.
(2) In any case, each Company Notice shall include a form of Purchase
Notice to be completed by a Holder and shall state:
(a) the Purchase Price and Conversion Rate;
(b) that Notes as to which a Purchase Notice has been given may be
converted only if the applicable Purchase Notice has been withdrawn in
accordance with the terms of this Agreement;
(c) that Notes must be surrendered to the Company to collect payment;
(d) that the Purchase Price for any Note as to which a Purchase Notice
has been given and not withdrawn shall be
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paid promptly following the later of the Purchase Date and the time of
surrender of such Note, provided, however, that in the event the Company
elects to purchase Notes with cash, the Company may defer payment for a
period of up to 90 days following the Purchase Date (the date on which such
deferred payment is made is herein referred to as the "Deferred Purchase
Date"), in which case Original Issue Discount shall continue to accrue
through the Deferred Purchase Date;
(e) the procedures the Holder must follow under Section 7.4;
(f) briefly, the conversion rights of the Notes; and
(g) the procedures for withdrawing a Purchase Notice (including,
without limitation, for a conditional withdrawal pursuant to the terms of
Section 7.4A(1)(d)).
F. Covenants of the Company. All shares of Common Stock delivered upon
conversion or purchase of the Notes shall be newly issued shares or treasury
shares, shall be fully paid and nonassessable and shall be free from preemptive
rights and free of any Lien or adverse claim.
The Company shall cause to have listed or quoted all such shares of Common
Stock on each United States national securities exchange or over-the counter or
other domestic market on which the Common Stock is then listed or quoted.
G. Procedure Upon Purchase. Payment of the Purchase Price for the Notes to
be purchased pursuant to this Section 7.4 shall be made as soon as practicable
following the later of the Purchase Date (or the Deferred Purchase Date, if
applicable) or the delivery of such Note. If the Company is delivering Common
Stock, the Company shall deliver to each Holder entitled to receive Common Stock
a certificate for the number of full shares of Common Stock, as applicable,
issuable in payment of such Purchase Price and cash in lieu of any fractional
interests. The Person in whose name the certificate for Common Stock is
registered shall be treated as a holder of record following the Purchase Date.
Subject to Section 7.4D, no payment or adjustment shall be made for dividends on
the Common Stock the Record Date for which occurred on or prior to the Purchase
Date. On the Business Day following the Purchase Date (or the Deferred Purchase
Date, if applicable), such Note shall cease to be outstanding and Original Issue
Discount on such Note shall cease to accrue, whether or not such Note is
delivered to the Company, and all other rights of the Holder shall terminate
(other than the right to receive the Purchase Price upon delivery or transfer of
the Note), unless the Company shall default in the payment of the Purchase Price
in accordance with the terms of this Section 7.4.
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H. Taxes. If a Holder of a Note is paid in Common Stock, the Company shall
pay any documentary, stamp or similar issue or transfer tax due on such issue of
shares of Common Stock. However, the Holder shall pay any such tax which is due
because the Holder requests the shares of Common Stock to be issued in a name
other than the Holder's name. The Company may refuse to deliver the certificates
representing the Common Stock being issued in a name other than the Holder's
name until the Company receives a sum sufficient to pay any tax which shall be
due because the shares of Common Stock are to be issued in a name other than the
Holder's name. Nothing herein shall preclude any income tax withholding required
by law or regulations.
7.5. Further Conditions for Purchase at the Option of Holders Upon a Change in
Control and Purchase of Notes at the Option of the Holder.
A. Effect of Purchase Notice or Change in Control Purchase Notice. Upon
receipt by the Company of the Purchase Notice or Change in Control Purchase
Notice specified in Section 7.4A or Section 7.3C, as applicable, the Holder of
the Note in respect of which such Purchase Notice or Change in Control Purchase
Notice, as the case may be, was given shall (unless such Purchase Notice or
Change in Control Purchase Notice is withdrawn as specified in the following two
paragraphs) thereafter be entitled to receive solely the Purchase Price or
Change in Control Purchase Price, as the case may be, with respect to such Note.
Such Purchase Price or Change in Control Purchase Price shall be paid to such
Holder promptly following the later of (x) the Purchase Date, the Deferred
Purchase Date or the Change in Control Purchase Date, as the case may be, with
respect to such Note (provided the conditions in Section 7.4A or Section 7.3C,
as applicable, have been satisfied) and (y) the time of delivery of such Note to
the Company by the Holder thereof in the manner required by Section 7.4A or
Section 7.3C, as applicable. Notes in respect of which a Purchase Notice or
Change in Control Purchase Notice, as the case may be, has been given by the
Holder thereof may not be converted for shares of Common Stock on or after the
date of the delivery of such Purchase Notice (or Change in Control Purchase
Notice, as the case may be), unless such Purchase Notice (or Change in Control
Purchase Notice, as the case may be) has first been validly withdrawn as
specified in the following two paragraphs.
A Purchase Notice or Change in Control Purchase Notice, as the case may be,
may be withdrawn by means of a written notice of withdrawal delivered to the
Company at any time prior to the close of business on the Purchase Date (or the
Deferred Purchase Date, if applicable) or the Change in Control Purchase Date,
as the case may be, to which it relates specifying:
(1) the certificate number of the Note in respect of which such notice
of withdrawal is being submitted,
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(2) the Principal Amount at Final Maturity of the Note with respect to
which such notice of withdrawal is being submitted, and
(3) the Principal Amount at Final Maturity, if any, of such Note which
remains subject to the original Purchase Notice or Company Change in
Control Notice, as the case may be, and which has been or shall be
delivered for purchase by the Company.
A written notice of withdrawal of a Purchase Notice may be in the form of
(i) a conditional withdrawal contained in a Purchase Notice pursuant to the
terms of Section 7.4A(1)(d) or (ii) a conditional withdrawal containing the
information set forth in Section 7.4A(1)(d) and the preceding paragraph and
contained in a written notice of withdrawal delivered to the Company as set
forth in the preceding paragraph.
There shall be no purchase of any Notes pursuant to Section 7.4 (other than
through the issuance of Common Stock in payment of the Purchase Price, including
cash in lieu of any fractional shares) or redemption pursuant to Section 7.3 if
there has occurred prior to, on or after, as the case may be, the giving, by the
Holders of such Notes, of the required Purchase Notice (or Change in Control
Purchase Notice, as the case may be) and is continuing an Event of Default
(other than a default in the payment of the Purchase Price or Change in Control
Purchase Price, as the case may be, with respect to such Notes).
B. Notes Purchased in Part. Any Note that is to be purchased only in part
shall be surrendered at the office of the Company (with, if the Company so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing) and the Company shall execute and
deliver to the Holder of such Note, without service charge, a new Note or Notes,
of any authorized denomination as requested by such Holder in aggregate
Principal Amount at Final Maturity equal to, and in exchange for, the portion of
the Principal Amount at Final Maturity of the Note so surrendered which is not
purchased or redeemed.
7.6. Conversion of Notes.
A. Right to Convert. A Holder of a Note may convert such Note for Common
Stock at any time during the period stated in paragraph 9 of the Notes. The
number of shares of Common Stock issuable upon conversion of a Note per $1,000
of Principal Amount at Final Maturity (the "Conversion Rate") shall be that set
forth in paragraph 9 in the Notes, subject to adjustment as herein set forth.
A Holder may convert a portion of the Principal Amount at Final Maturity of
a Note if the portion is $1,000 or a
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multiple of $1,000. Provisions of this Agreement that apply to conversion of all
of a Note also apply to conversion of a portion of a Note.
B. Conversion Procedures. To convert a Note a Holder must satisfy the
requirements in paragraph 9 of the Notes. The date on which the Holder of Notes
satisfies all those requirements is the conversion date (the "Conversion Date").
As soon as practicable, but in no event later than the seventh Business Day,
after the Conversion Date the Company shall deliver to the Holder a certificate
for the number of full shares of Common Stock issuable upon the conversion and
cash in lieu of any fractional share determined pursuant to Section 7.6C. The
Person in whose name the certificate is registered shall be treated as a
shareholder of record on and after the Conversion Date; provided, however, that
no surrender of a Note on any date when the stock transfer books of the Company
shall be closed shall be effective to constitute the Person or Persons entitled
to receive the shares of Common Stock upon such conversion as the record holder
or holders of such shares of Common Stock on such date, but such surrender shall
be effective to constitute the Person or Persons entitled to receive such shares
of Common Stock as the record holder or holders thereof for all purposes at the
close of business on the next succeeding day on which such stock transfer books
are open; such conversion shall be at the Conversion Rate in effect on the date
that such Note shall have been surrendered for conversion, as if the stock
transfer books of the Company had not been closed. Upon conversion of a Note,
such Person shall no longer be a Holder of such Note.
No payment or adjustment shall be made for dividends on or other
distributions with respect to any Voting Stock except as provided in Section
7.7. On conversion of a Note, that portion of accrued Original Issue Discount
attributable to the period from the Issue Date of the Note to the Conversion
Date with respect to the converted Note shall not be canceled, extinguished or
forfeited, but rather shall be deemed to be paid in full to the Holder thereof
through delivery of the Common Stock (together with the cash payment, if any, in
lieu of fractional shares) in exchange for the Note being converted pursuant to
the provisions hereof.
If a Holder converts more than one Note at the same time, the number of
shares of Common Stock issuable upon the conversion shall be based on the total
Principal Amount at Final Maturity of the Notes converted.
Upon surrender of a Note that is converted in part, the Company shall
execute and deliver to the Holder a new Note in an authorized denomination equal
in Principal Amount at Final Maturity to the unconverted portion of the Note
surrendered.
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If the last day on which a Note may be converted is not a Business Day, the
Note may be surrendered on the next succeeding Business Day.
C. Cash Payments in Lieu of Fractional Shares. The Company shall not issue
a fractional share of Common Stock upon conversion of a Note. Instead the
Company shall deliver cash for the current market value of the fractional share.
The current market value of a fractional share shall be determined to the
nearest 1/10,000th of a share by multiplying the Market Price of a full share of
Common Stock by the fractional amount and rounding the product to the nearest
whole cent.
D. Taxes on Conversion. If a Holder converts a Note, the Company shall pay
any documentary, stamp or similar issue or transfer tax due on the issue of
shares of Common Stock upon the conversion. However, the Holder shall pay any
such tax which is due because the Holder requests the shares to be issued in a
name other than the Holder's name. The Company may refuse to deliver the
certificates representing the Common Stock being issued in a name other than the
Holder's name until the Company receives a sum sufficient to pay any tax which
shall be due because the shares are to be issued in a name other than the
Holder's name. Nothing herein shall preclude any tax withholding required by law
or regulations.
E. Company to Provide Stock. The Company shall, prior to issuance of any
Notes hereunder, and from time to time as may be necessary, reserve out of its
authorized but unissued Common Stock a sufficient number of shares of Common
Stock to permit the conversion of the Notes.
All shares of Common Stock delivered upon conversion of the Notes shall be
newly issued shares or treasury shares, shall be duly and validly issued and
fully paid and nonassessable and shall be free from preemptive rights and free
of any Lien or adverse claim.
The Company shall endeavor promptly to comply with all federal and state
securities laws regulating the order and delivery of shares of Common Stock upon
the conversion of Notes, if any, and shall cause to have listed or quoted all
such shares of Common Stock on each United States national securities exchange
or over-the counter or other domestic market on which the Common Stock is then
listed or quoted.
7.7. Adjustments to Conversion Rate.
The Conversion Rate shall be adjusted from time to time by the Company as
follows:
A. In case the Company shall (a) pay a dividend, or make a distribution, in
shares of its Voting Stock, on its Voting Stock, (b) subdivide its outstanding
Voting Stock into a greater
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number of shares, or (c) combine its outstanding Voting Stock into a smaller
number of shares, the Conversion Rate in effect immediately prior thereto shall
be adjusted so that the holder of any Note thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock of the Company
which such holder would have owned or have been entitled to receive after the
happening of any of the events described above had such Note been converted
immediately prior to the happening of such event. If any dividend or
distribution of the type described in clause (a) above is not so paid or made,
the Conversion Rate shall again be adjusted to the Conversion Rate which would
then be in effect if such dividend or distribution had not been declared. An
adjustment made pursuant to this Section 7.7 shall become effective immediately
after the Record Date in the case of a dividend and shall become effective
immediately after the effective date in the case of subdivision or combination.
B. In order to prevent dilution of the right granted hereunder, the
Conversion Rate shall be subject to adjustment from time to time in accordance
with this Section 7.7. For purposes of this Section 7.7, the term "Number of
Common Shares Deemed Outstanding" at any given time shall mean the sum of (x)
the number of shares of Common Stock outstanding at such time, and (y) the
number of shares of the Common Stock deemed to be outstanding under Sections
7.7B(1) to (7), inclusive, at such time.
Except as provided in Section 7.7A, 7.7C, 7.7D or 7.7E, if and whenever on
or after either Closing Date, the Company shall issue or sell, or shall in
accordance with Sections 7.7B(1) to (7), inclusive, be deemed to have issued or
sold any shares of its Common Stock for a consideration per share less than the
average Market Price for the 10 Trading Days immediately preceding such issuance
or sale, then forthwith upon such issue or sale (the "Triggering Transaction"),
the Conversion Rate shall, subject to Section 7.7B(1) to (7), be adjusted so
that the same shall equal the Conversion Rate determined by multiplying the
Conversion Rate in effect immediately prior to the Triggering Transaction by a
fraction, the numerator of which shall be the sum of (x) the Number of Shares
Deemed Outstanding immediately prior to such Triggering Transaction plus (y) the
number of additional shares of Common Stock offered or sold and the denominator
of which shall be the sum of (x) the Number of Shares Deemed Outstanding
immediately prior to such Triggering Transaction plus (y) the number of shares
of Common Stock which the aggregate consideration received by the Company upon
such Triggering Transaction would purchase at the Market Price immediately
preceding such Triggering Transaction.
For purposes of determining the adjusted Conversion Rate under this Section
7.7, the following subsections (1) to (7), inclusive, shall be applicable:
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(1) In case the Company at any time shall in any manner grant (whether
directly or by assumption in a merger or otherwise) any rights to subscribe
for or to purchase, or any options for the purchase of, Common Stock or any
stock or other securities convertible into or exchangeable for Common Stock
(such rights or options being herein called "Options" and such convertible
or exchangeable stock or securities being herein called "Convertible
Securities"), whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable and
the price per share for which the Common Stock is issuable upon exercise,
conversion or exchange (determined by dividing (x) the total amount, if
any, received or receivable by the Company as consideration for the
granting of such Options, plus the aggregate amount of additional
consideration payable to the Company upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible Securities,
the aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (y) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or the conversion or exchange of
such Convertible Securities) shall be less than the Market Price in effect
immediately prior to the time of the granting of such Option, then the
total maximum amount of Common Stock issuable upon the exercise of such
Options or in the case of Options for Convertible Securities, upon the
conversion or exchange of such Convertible Securities, shall (as of the
date of granting of such Options) be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. No adjustment
of the Conversion Price shall be made upon the actual issue of such shares
of Common Stock or such Convertible Securities upon the exercise of such
Options, except as otherwise provided in subparagraph (3) below.
(2) In case the Company at any time shall in any manner issue (whether
directly or by assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange (determined by dividing (x) the
total amount received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus the aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (y) the total maximum number of shares
of Common Stock issuable upon the conversion or exchange of all such
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Convertible Securities) shall be less than the Market Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of
all such Convertible Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. No adjustment
of the Conversion Price shall be made upon the actual issue of such Common
Stock upon exercise of the rights to exchange or convert under such
Convertible Securities, except as otherwise provided in subparagraph (3)
below.
(3) If the purchase price provided for in any Options referred to in
subparagraph (1), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in
subparagraphs (1) or (2), or the rate at which any Convertible Securities
referred to in subparagraph (1) or (2) are convertible into or exchangeable
for Common Stock shall change at any time (other than under or by reason of
provisions designed to protect against dilution of the type set forth in
this Section 7.7), the Conversion Rate in effect at the time of such change
shall forthwith be readjusted to the Conversion Rate that would have been
in effect at such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold. If the purchase price provided for in any Option
referred to in subparagraph (1) or the rate at which any Convertible
Securities referred to in subparagraphs (1) or (2) are convertible into or
exchangeable for Common Stock, shall be reduced at any time under or by
reason of provisions with respect thereto designed to protect against
dilution, then in case of the delivery of Common Stock upon the exercise of
any such Option or upon conversion or exchange of any such Convertible
Security, the Conversion Rate then in effect hereunder shall forthwith be
adjusted to such respective amount as would have been obtained had such
Option or Convertible Security never been issued as to such Common Stock
and had adjustments been made upon the issuance of the shares of Common
Stock delivered as aforesaid, but only if as a result of such adjustment
the Conversion Rate then in effect hereunder is hereby reduced.
(4) On the expiration of any Option or the termination of any right to
convert or exchange any Convertible Securities, the Conversion Rate then in
effect hereunder shall forthwith be increased to the
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Conversion Rate which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination,
never been issued.
(5) In case any Options shall be issued in connection with the issue
or sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to have
been issued without consideration.
(6) In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the
amount received by the Company therefor. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair value of such consideration
as determined in good faith by the Board of Directors. In case any shares
of Common Stock, Options or Convertible Securities shall be issued in
connection with any merger in which the Company is the surviving
corporation, the amount of consideration therefor shall be deemed to be the
fair value of such portion of the net assets and business of the
non-surviving corporation as shall be attributed by the Board of Directors
in good faith to such Common Stock, Options or Convertible Securities, as
the case may be as determined in good faith by the Board of Directors.
(7) The number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of the
Company, and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock for the purpose of this Section
7.7.
C. In case the Company shall, by dividend or otherwise, distribute to all
holders of any class or series of its Voting Stock (excluding any distribution
in connection with the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary) any shares of any class of capital stock of
the Company (other than Voting Stock) or evidences of its indebtedness or assets
(other than cash) or rights or warrants to subscribe for or purchase any of its
Notes (excluding those referred to in Section 7.7B hereof) (any of the foregoing
hereinafter in this Section 7.7C called the "Distributed Securities"), then, the
Conversion Rate shall be
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adjusted so that the same shall equal the Conversion Rate determined by
multiplying the Conversion Rate in effect immediately prior to the date of such
distribution by a fraction of which the numerator shall be the Market Price of
the Common Stock on the Record Date mentioned below, and the denominator shall
be the Market Price of the Common Stock on such Record Date less the fair market
value on such Record Date (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the Distributed Securities
so distributed applicable to one share of Voting Stock. Such adjustment shall
become effective immediately after the Record Date for the determination of
shareholders entitled to receive such distribution. Notwithstanding the
foregoing, in the event the then fair market value (as so determined) of the
portion of the Distributed Securities so distributed applicable to one share of
Voting Stock is equal to or greater than the Market Price of the Common Stock on
the Record Date, in lieu of the foregoing adjustment, adequate provision shall
be made so that each Holder shall have the right to receive upon conversion the
amount of Distributed Securities such Holder would have received had such Holder
converted each Note on such Record Date. In the event that such distribution is
not so paid or made, the Conversion Rate shall again be adjusted to the
Conversion Rate which would then be in effect if such distribution had not been
declared.
Notwithstanding the foregoing provisions of this Section 7.7C, no
adjustment shall be made thereunder for any distribution of Distributed
Securities if the Company makes proper provision so that each Holder of a Note
who converts such Note (or any portion thereof) after the Record Date for such
distribution shall be entitled to receive upon such conversion, in addition to
the shares of Common Stock issuable upon such conversion, the amount and kind of
Distributed Securities that such Holder would have been entitled to receive if
such Holder had, immediately prior to such Record Date, converted such Note for
Common Stock; provided that, with respect to any Distributed Securities that are
convertible, exchangeable or exercisable, the foregoing provision shall only
apply to the extent (and so long as) the Distributed Securities receivable upon
conversion of such Note would be convertible, exchangeable or exercisable, as
applicable, without any loss of rights or privileges for a period of at least 60
days following conversion of such Note.
D. In case the Company shall, by dividend or otherwise, distribute to all
holders of any class of its Voting Stock cash (excluding any cash that is
distributed upon a merger or consolidation to which Section 7.8F applies or as
part of a distribution referred to in Section 7.7C) in an aggregate amount that,
combined together with (i) the aggregate amount of any other such distributions
to all holders of any class of its Voting Stock made exclusively in cash within
the 12 months preceding the date of payment of such distribution, and in respect
of which no adjustment pursuant to this Section 7.7D has been made, and (ii) the
aggregate of any cash plus the fair
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market value (as determined by the Board of Directors, whose determination shall
be conclusive and described in a resolution of the Board of Directors) of
consideration payable in respect of any tender offer by the Company for all or
any portion of any class of its Voting Stock concluded within the 12 months
preceding the date of payment of such distribution, and in respect of which no
adjustment pursuant to Section 7.7E has been made, exceeds 10% of the product of
the Market Price of the Common Stock on the Record Date with respect to such
distribution and the number of shares of Voting Stock outstanding on such date,
then, and in each such case, immediately after the close of business on such
date, the Conversion Rate shall be increased so that the same shall equal the
Conversion Rate determined by multiplying the Conversion Rate in effect
immediately prior to the record date by a fraction of which the numerator shall
be such Market Price of the Common Stock and the denominator shall be the Market
Price of the Common Stock on such Record Date less the amount of cash so
distributed (and not excluded as provided above) applicable to one share of
Voting Stock, such increase to be effective immediately prior to the opening of
business on the day following such Record Date; provided, however, that, if the
portion of the cash so distributed applicable to one share of Voting Stock is
equal to or greater than the Market Price of the Common Stock on such Record
Date, in lieu of the foregoing adjustment, adequate provision shall be made so
that each Holder shall have the right to receive upon conversion the amount of
cash such Holder would have received had such Holder converted such Note
immediately prior to such Record Date. If such dividend or distribution is not
so paid or made, the Conversion Rate shall again be adjusted to be the
Conversion Rate which would then be in effect if such dividend or distribution
had not been declared. If any adjustment is required to be made as set forth in
this Section 7.7D as a result of a distribution that is a quarterly dividend,
such adjustment shall be based upon the amount by which such distribution
exceeds the amount of the quarterly cash dividend permitted to be excluded
pursuant hereto. If an adjustment is required to be made as set forth in this
Section 7.7D above as a result of a distribution that is not a quarterly
dividend, such adjustment shall be based upon the full amount of the
distribution.
E. In case a tender offer made by the Company or any of its subsidiaries
for all or any portion of any class of its Voting Stock expires and such tender
offer (as amended upon the expiration thereof) requires the payment to
shareholders (based on the acceptance (up to any maximum specified in the terms
of the tender offer) of Purchased Shares) of an aggregate consideration having a
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of Directors)
that, combined together with (a) the aggregate of the cash plus the fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors), as of the
expiration of such tender
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offer, of consideration payable in respect of any other tender offers, by the
Company or any of its subsidiaries for all or any portion of any class of its
Voting Stock expiring within the 12 months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to this Section 7.7E
has been made, and (b) the aggregate amount of any distributions to all holders
of the Voting Stock made exclusively in cash within 12 months preceding the
expiration of such tender offer and in respect of which no adjustment pursuant
to Section 7.7D has been made, exceeds 10% of the product of the Market Price of
the Common Stock as of the last time (the "Expiration Time") tenders could have
been made pursuant to such tender offer (as it may be amended) and the number of
shares of Voting Stock outstanding (including any tendered shares) at the
Expiration Time, then, and in each such case, immediately prior to the opening
of business on the day after the date of the Expiration Time, the Conversion
Rate shall be increased so that the same shall equal the Conversion Rate
determined by multiplying the Conversion Rate in effect immediately prior to the
Expiration Time by a fraction of which the numerator shall be the product of the
number of shares of Voting Stock outstanding (less any Purchased Shares) on the
Expiration Time and the Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time and the denominator shall be (x) the number of
shares of Voting Stock outstanding (including any tendered or exchanged shares)
on the Expiration Time multiplied by the Market Price of the Common Stock on the
Trading Day next succeeding the Expiration Time less (y) the fair market value
(determined as aforesaid) of the aggregate consideration payable to shareholders
based on the acceptance (up to an maximum specified in the terms of the tender
or exchanged offer) of all shares validly tendered or exchanged and not
withdrawn as of the Expiration Time (the shares deemed so accepted, up to any
such maximum, being referred to as the "Purchased Shares"), such increase to
become effective immediately prior to the opening of business on the day
following the Expiration Time. If the Company is obligated to purchase shares
pursuant to any such tender offer, but the Company is permanently prevented by
applicable law from effecting any such purchases or all such purchases are
rescinded, the Conversion Rate shall again be adjusted to be the Conversion Rate
which would then be in effect if such tender offer had not been made.
F. In the event the litigation referred to in Schedule 7.7 (the "Subject
Litigation") is settled by the Company or a final judgment is entered against
the Company or the Company otherwise is liable to make payments (whether
pursuant to indemnification arrangements or otherwise), which payments shall
include fees and expenses payable by the Company, in an amount in excess of $30
million on a pre-tax basis (the "Adjustment Threshold"), without regard to
insurance coverage which may be available to the Company (a "Special Adjustment
Event"), then the Conversion Rate then in effect shall be further adjusted
pursuant to this Section 7.7F. Upon the occurrence of a Special Adjustment
Event, the Conversion Rate shall be adjusted to the
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Conversion Rate obtained by dividing $315.24 by the New Factor. For purposes
hereof, the "New Factor" shall be equal to the difference between (x) the
quotient obtained by dividing $315.24 by the Conversion Rate in effect
immediately prior to the Special Adjustment Event and (y) the Adjustment Factor.
For purposes hereof, the "Adjustment Factor" shall equal $0.0111 for each $1
million in after-tax costs or expense payable by the Company in connection with
the Special Adjustment Event in excess of the Adjustment Threshold, plus
$0.006568 for every 1,000,000 shares of Common Stock acquired by the Investors
pursuant to Section 6.6 within six months of the Closing Date (with adjustments
to the Adjustment Factor by linear interpolation for amounts greater or less
than $1 million or 1,000,000, as the case may be).
G. For purposes of this Section 7.7, the number of shares of Voting Stock
at any time outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Voting Stock. The Company shall not pay
any dividend or make any distribution on shares of Voting Stock held in the
treasury of the Company.
H. The provisions of this Section 7.7 shall not apply to any Common Stock
issued, issuable or deemed outstanding under Sections 7.7B(1) to (7) inclusive:
(i) to any person pursuant to any stock option, stock purchase or similar plan
or arrangement for the benefit of employees, consultants or directors of the
Company or its Subsidiaries in effect on the Closing Dates or thereafter adopted
by the Board of Directors (or physicians or providers contracting with the
Company or any of its Subsidiaries), (ii) pursuant to options, warrants and
conversion rights in existence on the Closing Dates, (iii) on conversion of a
Note or (iv) in connection with underwritten public offerings for cash pursuant
to a registration statement filed under the Securities Act relating to Common
Stock, Options or Convertible Securities.
7.8 Miscellaneous Provisions Relating to Conversion.
A. When Adjustment May be Deferred. No adjustment in the Conversion Rate
need be made unless the adjustment would require an increase or decrease of at
least 1% in the Conversion Rate then in effect provided that any adjustment that
would otherwise be required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under Sections 7.6, 7.7
and 7.8 shall be made to the nearest cent or to the nearest 1/10,000th of a
share, as the case may be.
B. When No Adjustment Required. No adjustment need be made for rights to
purchase Voting Stock pursuant to a Company plan for reinvestment of dividends
or interest. No adjustment need be made for a change in the par value or no par
value of the Voting Stock. To the extent the Notes become convertible into
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cash, assets, property or Notes (other than capital stock of the Company), no
adjustment need be made thereafter as to the cash, assets, property or such
Notes. Interest shall not accrue on the cash.
C. Notice of Adjustment. Whenever the Conversion Rate is adjusted, the
Company shall promptly mail to Holders a notice of the adjustment. The
certificate shall, absent manifest error, be conclusive evidence that the
adjustment is correct.
D. Voluntary Increase. The Company may make such increases in the
Conversion Rate, in addition to those required by Section 7.7, as the Board of
Directors considers to be advisable to avoid or diminish any income tax to
holders of Voting Stock or rights to purchase Voting Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. Whenever the Conversion Rate is so
increased, the Company shall mail to Holders a notice of such increase.
E. Notice to Holders Prior to Certain Actions. In case:
(1) the Company shall declare a dividend (or any other distribution)
on its Voting Stock that would require an adjustment in the Conversion Rate
pursuant to Section 7.7;
(2) the Company shall authorize the granting to all or substantially
all the Holders of its Voting Stock of rights or warrants to subscribe for
or purchase any share of any class or any other rights or warrants;
(3) of any reclassification or reorganization of the Voting Stock of
the Company (other than a subdivision or combination of its outstanding
Voting Stock, or a change in par value, or from par value to no par value,
or from no par value to par value), or 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 sale or transfer of all or substantially
all of the assets of the Company; or
(4) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company shall cause to be mailed to each Holder of Notes at his address
appearing on the Note Register, as promptly as possible but in any event at
least 15 days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Voting Stock of record to be entitled
to such dividend, distribution, or rights or warrants are to be determined, or
(y) the date on which
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such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occur, and the date
as of which it is expected that holders of Voting Stock of record shall be
entitled to exchange their Voting Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of such dividend,
distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
F. Effect of Reclassification, Consolidation, Merger or Sale. If any of the
following events occur, namely (a) any reclassification or change of outstanding
shares of Voting Stock (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), (b) any consolidation, merger or combination of the Company
with another corporation as a result of which holders of Voting Stock shall be
entitled to receive stock, Notes or other property or assets (including cash)
with respect to or in exchange for such Voting Stock, or (c) any sale or
conveyance of the properties and assets of the Company as, or substantially as,
an entirety to any other corporation as a result of which holders of Voting
Stock shall be entitled to receive stock, Notes or other property or assets
(including cash) with respect to or in exchange for such Voting Stock, then the
Company or the successor or purchasing corporation, as the case may be, shall
make adequate provision so that each Note shall be convertible into the kind and
amount of shares of stock and other Notes or property or assets (including cash)
receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a holder of a number of shares of Voting
Stock issuable upon conversion of such Notes immediately prior to such
reclassification, change, consolidation, merger, combination, sale or
conveyance. Such adequate provision shall include an undertaking on the part of
the Company, the surviving corporation or the purchaser, as the case may be, to
make adjustments which shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 7.8F.
The above provisions of this Section shall similarly apply to successive
reclassifications, changes, consolidations, mergers, combinations, sales and
conveyances.
If this Section 7.8F applies to any event or occurrence, Section 7.7 shall
not apply.
G. Simultaneous Adjustments. In the event that Sections 7.6, 7.7 or 7.8
require adjustments to the Conversion Rate under more than one of Sections 7.7A,
7.7B, 7.7C or 7.7D, and the Record Dates for the distributions giving rise to
such adjustments shall occur on the same date, then such adjustments shall be
made by applying, first, the provisions of Section 7.7C,
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second, the provisions of Section 7.7D, third, the provisions of Section 7.7A,
and fourth, the provisions of Section 7.7B.
H. Successive Adjustments. After an adjustment to the Conversion Rate under
Sections 7.6, 7.7 or 7.8, any subsequent event requiring an adjustment under
Sections 7.6, 7.7 or 7.8 shall cause an adjustment to the Conversion Rate as so
adjusted.
I. General Considerations. Whenever successive adjustments to the
Conversion Rate are called for pursuant to Sections 7.6, 7.7 or 7.8, such
adjustments shall be made to the Market Price as may be necessary or appropriate
to effectuate the intent of Sections 7.6, 7.7 or 7.8 and to avoid unjust or
inequitable results as determined in good faith by the Board of Directors.
8. DEFINITIONS.
8.1. Definitions.
Except as otherwise specified or as the context may otherwise require, the
following terms shall have the respective meanings set forth below whenever used
in this Agreement and shall include the singular as well as the plural:
"Affiliate" of any specified Person means any other Person which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such Person. Notwithstanding the foregoing, in
no event shall the Investors or any of their Affiliates or any other holder of
any Notes be deemed to be an Affiliate of the Company solely by reason of the
ownership of the Notes or the shares of Common Stock acquired upon the
conversion of the Notes.
"Board of Directors" means the Board of Directors of the Company or any
committee of directors lawfully exercising the relevant powers of said Board or
Directors.
"Business Day" means any day other than a Saturday or Sunday or a day on
which commercial banks are required or authorized by law to be closed in New
York, New York.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests (however designated) in stock issued by that
corporation.
"Change in Control" means such time as
(i) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), other than any of the Investors or a "group"
which includes any of the Investors, (A) becomes the "beneficial owner" (as
defined in
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Rule 13d-3 under the Exchange Act) of more than 50% of the total then
outstanding voting power of the Voting Stock of the Company or (B) has the
right or the ability by voting right, contract or otherwise to elect or
designate for election a majority of the entire Board of Directors;
(ii) (A) the Company consolidates with or merges into any other Person
or conveys, transfers, sells or leases all or substantially all of its
assets as an entirety to any Person or (B) any Person merges into the
Company, in either event pursuant to a transaction in which Voting Stock of
the Company representing more than 50% of the total voting power of the
Company outstanding immediately prior to the effectiveness thereof is
reclassified or changed into or exchanged for cash, securities or other
property; provided that any consolidation, merger, conveyance, transfer,
sale or lease between the Company and any of its Subsidiaries (including
without limitation the reincorporation of the Company in another
jurisdiction) shall be excluded from the operation of this clause (ii); or
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors, or whose
nomination for election by the shareholders of the Company, as the case may
be, was approved by a vote of 66 2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors then in office.
"Change in Control Purchase Date" has the meaning specified in Section
7.3A.
"Change in Control Purchase Notice" has the meaning specified in Section
7.3C.
"Change in Control Purchase Price" has the meaning specified in Section
7.3A.
"Closing Date" has the meaning specified in Section 1.2.
"Closing Price" on any Trading Day with respect to the per share price of
the Common Stock means the last reported sales price regular way or, in case no
such reported sale takes place on such Trading Day, (i) the reported closing bid
price regular way on the Nasdaq Stock Market's National Market if the Common
Stock is listed or admitted to trading on such National Market, or (ii) if the
Common Stock is not listed or admitted to trading on the Nasdaq Stock Market's
National Market, the average of the reported closing bid and asked prices
regular way on the
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principal national securities exchange on which the Common Stock is listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, the closing bid price in the over-the-counter market as
furnished by any New York Stock Exchange member firm that is selected from time
to time by the Company for that purpose and is reasonably acceptable to the
Majority Holders.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission and any successor
agency of the United States federal government having similar powers.
"Common Stock" has the meaning specified in Section 2.2.
"Company Change in Control Notice" has the meaning specified in Section
7.3B.
"Company Notice" has the meaning specified in Section 7.4E.
"Company SEC Reports" means the meaning specified in Section 2.5.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special or toxic waste, petroleum or
petroleum-derived substance or waste, or any constituent of any such substance
or waste regulated under any Environmental Law.
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Controlled Subsidiary" means any entity as to which WP or the Investors,
individually or in the aggregate, are the beneficial owner of 50% or more of the
voting securities or as to which WP or the Investors, individually or in the
aggregate, have the right to appoint a majority of the directors or persons
exercising similar authority.
"Conversion Rate" has the meaning specified in Section 7.6A.
"Convertible Securities" has the meaning specified in Section 7.7B.
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"Default" means an event which, with the lapse of time and/or the giving of
notice, would constitute an Event of Default.
"Deferred Purchase Date" has the meaning specified in Section 7.4E(2)(d).
"Environmental Laws" means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment, or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that is treated as a single employer together with the Company under section 414
of the Code.
"Event of Default" has the meaning specified in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Existing Convertible Debentures" means the Company's 4.5% Convertible
Subordinated Debentures due 2003 issued under the Existing Indenture.
"Existing Indenture" means the indenture, dated as of February 15, 1996,
between the Company and First American National Bank, relating to the Existing
Convertible Debentures, as the same may be amended or modified from time to
time.
"Final Maturity" or "Final Maturity Date" means the fifteenth anniversary
of the Closing Date.
"GAAP" means generally accepted accounting principles from time to time in
the United States.
"Governmental Body" means any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
"Holder" means any Person in whose name the Notes are registered from time
to time on the books and records of the Company.
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"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Issue Price" of any Note means, in connection with the original issuance
of such Note, the initial issue price at which the Note is issued as set forth
on the face of the Note.
"knowledge of the Company" or "Company's knowledge" means the best
knowledge of each of the following individuals: John K. Crawford, Thompson S.
Dent, N. Carolyn Forehand, Joseph C. Hutts, Derril W. Reeves, Fred W. Ewing,
Oliver V. Rogers, Glen N. Marconcini, Herbert A. Fritch and W. Carl Whitmer.
"Lien" means any mortgage, pledge, encumbrance, security interest,
conditional sale or other title retention agreement or other similar lien or
encumbrance.
"Majority Holders" means the holder or holders of at least a majority of
the aggregate unpaid principal amount of the Notes at the time outstanding.
"Market Price" means the average of the daily Sale Prices of the Common
Stock for the 10 Trading Days period ending on (if the third Business Day prior
to the applicable date in question is a Trading Day or, if not, then on the last
Trading Day prior to) the third Business Day prior to the applicable date in
question, appropriately adjusted to take into account the occurrence during the
period commencing on the first of such Trading Days during such 10 Trading Day
period and ending on such date in question any event that would result in an
adjustment of the Conversion Rate with respect to the Common Stock.
"Material" means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of the Company and its
Subsidiaries taken as a whole.
"Material Agreements" mean any indenture, mortgage, deed of trust, bank
loan or credit agreement, or any other "material contract" of the Company (as
such term is defined in Regulation 601(b)(10) of Regulation S-K of the
Commission).
"Material Adverse Effect" means any change in or effect on that is
materially adverse to (A) the business, operations, properties, condition
(financial or other), prospects, assets or liabilities of the Company and its
Subsidiaries taken as a whole (including any change in any Requirement of Law
applicable to the business of the Company or its Subsidiaries), (B) the ability
of the Company to perform its obligations under this Agreement and the other
Transaction Documents or (C) the legality, validity or enforceability of this
Agreement or the other Transaction Documents, excluding any changes and effects
resulting from changes in economic or political conditions or changes and
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effects previously disclosed in the Company SEC Reports or in the Schedules
hereto.
"Maximum Amount" means the sum of (i) the number of shares of Common Stock
beneficially owned by the Investors as of the date of this Agreement (before
giving effect to the transactions contemplated hereby), (ii) the number of
shares of Common Stock issuable from time to time upon conversion of the Notes
and (iii) during a period of six months from the Closing Date, the number of
shares of Common Stock that the Investors may purchase in accordance with the
provisions of Section 6.6.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such
term is defined in section 4001(a)(3) of ERISA).
"Non-Payment Event of Default" means a default on the Senior Indebtedness
of which the Company has received notice (other than a Payment Event of Default)
that occurs and is continuing and that permits the holders of Senior
Indebtedness to accelerate the maturity of such Senior Indebtedness.
"Notes" has the meaning specified in Section 1.1.
"Note Register" has the meaning specified in Section 11.
"Officer's Certificate" means a certificate of a Senior Financial Officer
or of any other officer of the Company whose responsibilities extend to the
subject matter of such certificate.
"Options" has the meaning specified in Section 7.7B.
"Order" means any written order, writ, injunction, decree, judgment, award,
penalty, determination, direction or demand.
"Original Issue Discount" of any Note means the difference between the
Issue Price and the Principal Amount at Final Maturity of the Note as set forth
on the face of the Note.
"Payment Event of Default" means a default in the payment of principal of
(or premium, if any), or interest on Senior Indebtedness beyond any applicable
grace period with respect thereto.
"Permitted Acquisitions" has the meaning specified in Section 6.6A.
"Person" or "person" means and includes an individual, a partnership, a
joint venture, a corporation, a limited liability company, a trust, an
association, a joint-stock company, an unincorporated organization and a
Governmental Body.
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"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"Principal", "Principal Amount" or "principal" of any Note, means the
principal of the security, including any accrued Original Issue Discount on the
Note.
"Purchase Date" has the meaning specified in Section 7.4A.
"Purchase Notice" has the meaning specified in Section 7.4A.
"Purchase Price" has the meaning specified in Section 7.4A.
"Record Date" means, with respect to any dividend, distribution or other
transaction or event in which the holders of Voting Stock have the right to
receive any cash, securities or other property or in which the Voting Stock (or
other applicable security) is exchanged for or converted into any combination of
cash, securities or other property, the date fixed for determination of
shareholders entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by statute, contract or
otherwise).
"Redemption Date" means the date fixed for such redemption by or pursuant
to this Agreement.
"Redemption Price" means the price at which the Notes are to be redeemed
pursuant to this Agreement.
"Registration Rights Agreement" has the meaning specified in Section 4.9.
"Requirement of Law" means, as to any Person, each law, rule or regulation,
including Environmental Laws and ERISA, or Order, decree or other determination
of an arbitrator or a court or other Governmental Body applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
"Rights Agreement" means the Rights Agreement, dated as of February 18,
1994, between the Company and First Union National Bank of North Carolina, as
rights agent.
"Sale Price" of the Common Stock on any date means the average of the high
and low per share sale price (or if no sale prices are reported, the average of
the bid and ask prices or, if
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more than one in either case, the average of the average bid and average ask
prices) on such date as reported in the composite transactions reported on the
principal United States securities exchange on which the Common Stock is listed
or, if the Common Stock is not listed on a United States national or regional
stock exchange, as reported by the National Association of Securities Dealers
Automated Quotation System.
"Securities" means the Notes or the shares of Common Stock issuable upon
conversion of the Notes. "Securities Act" means the Securities Act of 1933, as
amended.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Company.
"Senior Indebtedness" means (a) the principal of and premium, if any, and
interest (including, without limitation, any interest accruing subsequent to the
filing of a petition or other action concerning bankruptcy or other similar
proceedings, whether or not constituting an allowed claim in any such
proceedings) on the following, whether presently outstanding or hereafter
incurred or created: all indebtedness or obligations of the Company for money
borrowed (other than that evidenced by the Notes) or assets acquired and which
is evidenced by a note, bond, debenture or similar instrument (including a
purchase money mortgage) given in connection with the acquisition of any
property or assets (other than inventory or other similar property acquired in
the ordinary course of business) including securities, (b) all obligations
constituting Bank Debt (as defined in the Existing Indenture)(including without
limitation principal, interest, fees and expenses); (c) all obligations of the
Company: (i) for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (ii) under interest rate
swaps, caps, collars, options and similar arrangements, and (iii) under any
foreign exchange contact, currency swap agreement, futures contract, currency
option contract, or other foreign currency hedge; (d) all obligations for the
payment of money relating to a capitalized lease obligation; (e) any liabilities
of others described in the preceding clauses (a), (b), (c) and (d) which the
Company has guaranteed or which are otherwise its legal liability; and (f)
renewals, extensions, refundings, restructurings, amendments and modifications
of any such indebtedness or guarantee. Notwithstanding anything to the contrary
in this Agreement or the Notes, "Senior Indebtedness" shall not include (v) the
Existing Convertible Debentures, (w) subordinated indebtedness previously issued
in connection with clinic acquisitions, (x) future clinic acquisition
subordinated indebtedness of the Company, provided that such subordinated
indebtedness by its terms or the terms of the instrument creating or evidencing
it expressly provides that such subordinated
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indebtedness shall not be senior in right of payment to the Securities, (y) any
indebtedness of the Company to a Subsidiary except to the extent any such
indebtedness is pledged by such Subsidiary as security for any Bank Debt, or (z)
any indebtedness or guarantee of the Company which by its terms or the terms of
the instrument creating or evidencing it is not superior in right of payment to
the Notes. The Notes will rank pari passu with the Existing Subordinated
Debentures and any subordinated indebtedness of the Company previously issued in
connection with clinic acquisitions.
"Significant Subsidiary" has the meaning specified in Regulation 1-02(w) of
Regulation S-X of the Commission.
"Subject Securities" has the meaning specified in Section 6.7B.
"Subsidiary" of any Person means any corporation or other entity a majority
of the total combined voting power of all classes of Voting Stock of which
shall, at the time as of which any determination is being made, be owned by such
Person and/or one or more of its Subsidiaries. Except as otherwise expressly
indicated herein, references to Subsidiaries shall mean Subsidiaries of the
Company.
"Takeover Statute" shall mean any corporate takeover provision under laws
of the State of Tennessee except any health maintenance organization or
insurance change of control statute.
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday, other than any day on which securities are not traded on the
applicable securities exchange or in the applicable securities market.
"Transaction Documents" means this Agreement, the Notes and the
Registration Rights Agreement.
"Transfer" means any sale, transfer or other disposition.
"Transferor" has the meaning specified in Section 6.7A.
"Voting Stock" means, with respect to any Person, any shares of stock or
other equity interests of any class or classes of such Person whose holders are
entitled under ordinary circumstances (irrespective of whether at the time stock
or other equity interests of any other class or classes shall have or might have
voting power by reason of the happening of any contingency) to vote for the
election of a majority of the directors, managers, trustees or other governing
body of such Person.
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"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which
(other than directors' qualifying shares) is owned by the Company or another
Wholly Owned Subsidiary.
"WP" has the meaning specified in Section 6.5.
8.2. Accounting Terms.
All accounting terms used herein which are not expressly defined in this
Agreement have the meanings respectively given to them in accordance with GAAP.
Except as otherwise specifically provided herein, all computations made pursuant
to this Agreement shall be made in accordance with GAAP and all balance sheets
and other financial statements with respect thereto shall be prepared in
accordance with GAAP consistently applied. Except as otherwise expressly
provided, any consolidated financial statement or financial computation shall be
done in accordance with GAAP; and, if at the time that any such statement or
computation is required to be made the Company shall not have any Subsidiary,
such terms shall mean a financial statement or a financial computation, as the
case may be, with respect to the Company only.
9. EVENTS OF DEFAULT; REMEDIES.
9.1. Events of Default; Acceleration of Maturity and Rescission.
If any of the following Events of Default (each an "Event of Default")
shall occur and be continuing for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise):
A. a default by the Company in the payment of the Principal (including
accrued Original Issue Discount), Redemption Price, Purchase Price, or Change in
Control Purchase Price due with respect to the Notes;
B. a default by the Company or any Subsidiary with respect to its
obligation to pay indebtedness for borrowed money (other than indebtedness which
is non-recourse to the Company or the Subsidiary), which default shall have
resulted in the acceleration of, or be a failure to pay at final maturity,
indebtedness aggregating more than $10 million;
C. a material failure to perform any other covenant or warranty of the
Company herein or in the Notes, which continues for 30 days after written notice
from any Holder;
D. final judgments or orders are rendered against the Company or any of its
Subsidiaries which require the payment by the Company or any of its Subsidiaries
of an amount (to the extent not covered by insurance) in excess of $10 million
and
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such judgments or orders remain unstayed or unsatisfied for more than 60 days
and are not being contested in good faith by appropriate proceedings; or
E. the Company shall (1) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property, (2) admit in writing its
inability to pay its debts as such debts become due, (3) make a general
assignment for the benefit of its creditors, (4) commence a voluntary case under
any law relating to bankruptcy, insolvency or reorganization, (5) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, or (6) fail to controvert in a timely or appropriate manner (but within
30 days in any event), or acquiesce in writing to, any petition filed against it
in an involuntary case under any law relating to bankruptcy, insolvency or
reorganization; or
F. a proceeding or case shall be commenced against the Company, without the
application or consent of the Company in any court of competent jurisdiction
seeking (1) its liquidation, reorganization, dissolution or winding up, or
composition or readjustment of its debts, (2) the appointment of a trustee,
receiver, custodian, liquidator, encumbrancer or the like of it or of all or any
substantial part of its assets or (3) similar relief in respect of it under any
law providing for the relief of debtors, and such proceeding or case shall
continue undismissed, or unstayed and in effect, for a period of 60 days; or an
order for relief shall be entered in an involuntary case under any law relating
to bankruptcy, insolvency or reorganization against the Company;
then (i) upon the occurrence of any Event of Default described in Subsection E
or F, the unpaid principal amount of all Notes, together with the interest
accrued thereon, shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by the Company, or (ii) upon the occurrence and during
the continuance of any other Event of Default, the holders of at least 25% of
the Principal Amount of the Notes at the time may, by written notice to the
Company, declare the Principal Amount of all Notes to be, and the same shall
forthwith become, due and payable, together with the interest accrued thereon,
without presentment, further demand, protest or other requirements of any kind,
all of which are hereby expressly waived by the Company.
The provisions of this Section 9.1 are subject, however, to the condition
that if, at any time after any Note shall have become declared due and payable,
the Company shall pay all arrears of interest on the Notes and all payments on
account of the principal of and premium (if any) on the Notes which shall have
become due otherwise than by acceleration (with interest on such principal,
premium (if any) and, to the extent permitted by
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law, on overdue payments of interest, at the respective rates specified in the
Notes with respect to overdue payments) and an additional amount sufficient to
reimburse the holders of the Notes for the reasonable costs and expenses
incurred in connection with any such declaration, and all Events of Default
(other than nonpayment of principal of, premium, if any, and accrued interest on
Notes due and payable solely by virtue of acceleration) shall be remedied or
waived, then, and in every such case, the Majority Holders, by written notice to
the Company, may rescind and annul any such acceleration of Notes and its
consequences; but no such action shall affect any subsequent Default or Event of
Default or impair any right consequent thereon.
9.2. Suits for Enforcement.
If any Event of Default shall have occurred and be continuing, the holder
of any of the Notes may proceed to protect and enforce its rights, either by
suit in equity or by action at law, or both, whether for the specific
performance of any covenant or agreement contained in this Agreement or in the
other Transaction Documents or in aid of the exercise of any power granted in
this Agreement or in the other Transaction Documents, or the holder of any Note
may proceed to enforce the payment of all sums due upon such Note or to enforce
any other legal or equitable right of the holder of such Note.
The Company covenants that, if default shall be made in the making of any
payment due under any Note or in the performance or observance of any agreement
contained in this Agreement or the other Transaction Documents, the Company will
pay to each holder of Notes such further amounts, to the extent lawful, as shall
be sufficient to pay all costs and expenses of collection or of otherwise
enforcing such holder's rights under this Agreement or the other Transaction
Documents, including counsel fees.
9.3. Remedies Cumulative.
No remedy herein conferred upon you or the holder of any Note is intended
to be exclusive of any other remedy and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
9.4. Remedies Not Waived.
No course of dealing between the Company and you or the holder of any Note
and no delay or failure in exercising any rights hereunder or under any other
Transaction Document in respect of such Note shall operate as a waiver of any of
your rights or the rights of any holder of such Note.
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10. SUBORDINATION OF NOTES.
10.1. Securities Subordinated to Senior Indebtedness.
A. The Company covenants and agrees, and each Investor likewise covenants
and agrees, that all Notes shall be issued subject to the provisions of this
Section 10; and each Holder, whether upon original issue or upon transfer or
assignment thereof, accepts and agrees to be bound by such provisions.
B. The payment of the Principal Amount and the premium, if any, on all
Notes issued hereunder shall, to the extent and in the manner hereinafter set
forth, be subordinated and subject in right of payment to the indefeasible prior
payment in full, in cash, of all Senior Indebtedness, whether outstanding at the
date of this Agreement or thereafter created, incurred, assumed or guaranteed.
10.2. Notes Subordinated to Prior Payment of All Senior Indebtedness on
Dissolution, Liquidation, Reorganization, etc., of the Company.
Upon any payment or distribution of the assets of the Company of any kind
or character, whether in cash, property or securities (including any collateral
at any time securing the Notes), to creditors upon any dissolution, winding-up,
total or partial liquidation, or reorganization of the Company (whether
voluntary or involuntary, or in bankruptcy, insolvency, reorganization,
liquidation, receivership proceedings, or upon an assignment for the benefit of
creditors, or any other marshalling of the assets and liabilities of the
Company, or otherwise), then in such event:
(a) all Senior Indebtedness (including principal thereof, interest thereon
and fees and expenses relating thereto) shall first be paid in full, in cash, or
have provision made for such payment in a manner reasonably satisfactory to the
holders of Senior Indebtedness, before any payment is made on account of the
Principal Amount or premium, if any, of the Notes;
(b) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than securities of the
Company as reorganized or readjusted, or securities of the Company or any other
company, trust or corporation provided for by a plan of reorganization or
readjustment, junior, or the payment of which is otherwise subordinate, at least
to the extent provided in this Section 10, with respect to the Notes, to the
payment of all Senior Indebtedness at the time outstanding and to the payment of
all securities issued in exchange therefor to the holders of the Senior
Indebtedness at the time outstanding), to which the Holders would be entitled
except for the provisions of this Section 10, including any such payment or
distribution which may
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be payable or deliverable by reason of the payment of another debt of the
Company being subordinated to the payment of the Notes, shall be paid or
delivered by any debtor, custodian or other person making such payment or
distribution, directly to the holders of the Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the principal of, interest on and fees and
expenses relating to the Senior Indebtedness held or represented by each for
application to payment of all Senior Indebtedness on a pro rata basis according
to the outstanding amount of Senior Indebtedness (including interest, fees and
expenses), to the extent necessary to pay all Senior Indebtedness in full, in
cash, after giving effect to any concurrent payment or distribution, or
provision therefor, to the holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing provisions of this
Section 10, any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than securities of the
Company as reorganized or readjusted, or securities of the Company or any other
company, trust or corporation provided for by a plan of reorganization or
readjustment, junior, or the payment of which is otherwise subordinate, at least
to the extent provided for in this Section 10, with respect to the Notes, to the
payment in full, in cash, of all Senior Indebtedness at the time outstanding and
to the payment of all securities issued in exchange therefor to the holders of
Senior Indebtedness at the time outstanding), shall be received by the Holders
before all Senior Indebtedness is paid in full, in cash, or provision made for
their payment in a manner reasonably satisfactory to the holders of Senior
Indebtedness, such payment or distribution (subject to the provisions of
Sections 10.6 and 10.7) shall be held in trust for the benefit of, and shall be
immediately paid or delivered to the holders of Senior Indebtedness remaining
unpaid or unprovided for, or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Indebtedness may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of the principal
of, interest on and fees and expenses relating to the Senior Indebtedness held
or represented by each, for application to the payment of all Senior
Indebtedness remaining unpaid on a pro rata basis according to the outstanding
amount of Senior Indebtedness (including interest, fees and expenses), to the
extent necessary to pay all Senior Indebtedness in full, in cash, after giving
effect to any concurrent payment or distribution, or provision therefor, to the
holders of such Senior Indebtedness.
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10.3. Holders of Notes to be Subrogated to Right of Holders of Senior
Indebtedness.
Subject to the prior payment in full, in cash, of all Senior Indebtedness
then due, the Holders shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of assets of the Company
applicable to the Senior Indebtedness until the Principal Amount of the Notes
shall be paid in full, and for purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness of assets, whether in cash,
property or securities, distributable to the holders of Senior Indebtedness
under the provisions hereof to which the Holders would be entitled except for
the provisions of this Section 10, and no payment pursuant to the provisions of
this Section 10 to the holders of Senior Indebtedness by the Holders shall, as
among the Company, its creditors other than the holders of Senior Indebtedness,
and the Holders, be deemed to be a payment by the Company to or on account of
Senior Indebtedness, it being understood that the provisions of this Section 10
are, and are intended, solely for the purpose of defining the relative rights of
the Holders, on the one hand, and the holders of Senior Indebtedness, on the
other hand.
10.4. Obligations of the Company Unconditional.
Nothing contained in this Section 10 or elsewhere in this Agreement or in
any Note is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the Holders, the obligation
of the Company, which is absolute and unconditional, to pay to the Holders the
Principal Amount on the Notes, as and when the same shall become due and payable
in accordance with the terms of the Notes, or to affect the relative rights of
the Holders and other creditors of the Company other than the holders of Senior
Indebtedness, nor shall anything herein or therein prevent any Holder from
exercising all remedies otherwise permitted by applicable law upon the happening
of an Event of Default under this Agreement, subject to the rights, if any,
under this Section 10 of the holders of Senior Indebtedness in respect of
assets, whether in cash, property or securities, of the Company received upon
the exercise of any such remedy.
10.5. Company Not to Make Payment with Respect to Notes in Certain
Circumstances.
A. Upon the occurrence of a Payment Event of Default, unless and until the
amount of such Senior Indebtedness then due shall have been paid in full, in
cash, or provision made therefor in a manner reasonably satisfactory to the
holders of such Senior Indebtedness, or such default shall have been cured or
waived or shall have ceased to exist, the Company shall not pay principal of
premium, if any, or interest on the Notes and shall not repurchase, redeem or
otherwise retire any Notes (collectively, "Pay the Securities").
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B. Unless Section 10.2 shall be applicable, upon (i) the occurrence of a
Non-Payment Event of Default and (ii) receipt by the Company from the
representative of the holders of Senior Indebtedness to which the Non-payment
Event of Default applies of written notice of such occurrence, then the Company
shall not Pay the Securities for a period (the "Payment Blockage Period")
commencing on the earlier of the date of receipt by the Company of such notice
from such representative and ending on the earlier of (subject to any blockage
of payments that may then be in effect under Section 10.5A) (x) the date 180
days after such date, (y) the date such Non-Payment Event of Default shall have
been cured or waived in writing or shall have ceased to exist or such Senior
Indebtedness shall have been discharged, or (z) the date such Payment Blockage
Period shall have been terminated by written notice to the Company from the
representative of the holders of the Senior Indebtedness initiating such Payment
Blockage Period, after which, in case of clause (x), (y) or (z), as the case may
be, the Company shall resume making any and all required payments.
Notwithstanding any other provision of this Agreement, only one Payment Blockage
Period may be commenced within any consecutive 365-day period, and no event of
default with respect to any Senior Indebtedness which existed or was continuing
on the date of the commencement of any Payment Blockage Period with respect to
the Senior Indebtedness the holders of which initiated such Payment Blockage
Period shall be, or can be made, the basis for the commencement of a second
Payment Blockage Period whether or not within a period of 365 consecutive days
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days. In no event will a Payment Blockage Period extend
beyond 179 days.
C. In the event that, notwithstanding the foregoing provisions of this
Section 10.5, any payment on account of Principal Amount on the Notes shall be
made by or on behalf of the Company and received by any Holder after the
happening of a default under any Senior Indebtedness, then, unless and until the
amount of such Senior Indebtedness then due shall have been paid in full in
cash, or provision made therefor or such default shall have been cured or
waived, such payment (subject, in each case, to the provisions of Sections 10.6
and 10.7) shall be held in trust for the benefit of, and shall be immediately
paid over to, the holders of Senior Indebtedness or their representative or
representatives or the trustee of trustees under any indenture under which any
instruments evidencing any of the Senior Indebtedness may have been issued,
ratably according to the aggregate amounts remaining unpaid on account of the
principal of and interest on the Senior Indebtedness held or represented by
each, for application to the payment of all Senior Indebtedness remaining unpaid
to the extent necessary to pay all Senior Indebtedness in accordance with its
terms, after giving effect to any concurrent payment or distribution to or for
the benefit of the holders of Senior Indebtedness.
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10.6. Subordination Rights Not Impaired by Acts or Omissions of Company or
Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness to
enforce subordination, as herein provided, shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Agreement, regardless or any knowledge thereof which any such holder may modify
or amend the terms of such Senior Indebtedness or any security therefor and
release, sell or exchange such security and otherwise deal freely with the
Company, all without affecting the liabilities and obligations of the parties to
this Agreement or the Holders. No provision in any amendment to this Agreement
which affects the superior position of the holders of the Senior Indebtedness
shall be effective against the holders of the Senior Indebtedness unless the
holders of such Senior Indebtedness (required pursuant to the terms of such
Senior Indebtedness to give such consent) have consented thereto.
10.7. Section 10 Not to Prevent Events of Default.
The failure to make a payment on account of Principal Amount on the Notes
by reason of any provision in this Section 10 shall not be construed as
preventing the occurrence of any Event of Default under Section 9.
11. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; RESTRICTIVE LEGENDS TRANSFER
RESTRICTIONS.
The Company will keep at the Company's principal office, or at such other
office or agency in the United States as the Company may from time to time
designate in writing to the holders of the Notes, a register (the "Note
Register") in which, subject to such reasonable regulations as it may prescribe,
but at its expense (other than transfer taxes, if any), it will provide for the
registration and transfer of Notes.
Whenever a Note shall be surrendered either at such office of the Company
or at the place of payment named in such Note, for transfer or exchange, within
5 Business Days thereafter the Company will execute and deliver in exchange
therefor a new Note or Notes, as may be requested by such holder, in the
aggregate unpaid principal amount as the series and unpaid principal amount of
the Note so surrendered. Each such new Note shall be payable to such Person as
such holder may request. Each Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
such holder's attorney duly authorized in writing. Any Note issued in exchange
for any other Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to
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accrue which were carried by the Note so exchanged or transferred, and neither
gain nor loss of interest shall result from any such transfer or exchange. Any
transfer tax relating to such transaction shall be paid by the holder requesting
the exchange.
The Company and any agent of the Company may deem and treat the Person in
whose name any Note is registered as the owner and holder of such Note for the
purpose of receiving payment of the principal of and premium, if any, and
interest on such Note and for all other purposes whatsoever, whether or not such
Note be overdue and the Company shall not be affected by notice to the contrary.
The certificates evidencing the Notes and any shares of Common Stock
issuable upon conversion of the Notes shall bear at the time of issuance a
legend in substantially the following form:
"This security has not been registered under the Securities Act of 1933, as
amended, or applicable state securities laws, and this security may not be
sold, transferred or otherwise disposed of in the absence of such
registration or an exemption therefrom under said Act and laws and the
respective rules and regulations thereunder. The transferability of this
security is also subject to restrictions contained in a Securities Purchase
Agreement which agreement the Company will furnish to the holder of this
security upon request."
12. LOST, ETC., NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Note, and (in case of loss,
theft or destruction) of indemnity reeasonably satisfactory to it, and upon
surrender and cancellation of such Note, if mutilated, within five Business Days
thereafter the Company will deliver in lieu of such Note a new Note in a like
unpaid principal amount, dated as of the date to which interest has been paid
thereon or dated the date of the lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon. The Company acknowledges that each
Investors unsecured agreement of indemnity shall be deemed satisfactory to the
Company.
13. AMENDMENT AND WAIVER.
A. Any provision of this Agreement or the other Transaction Documents may,
with the consent of the Company, be amended or waived (either generally or in a
particular instance and either retroactively or prospectively), by one or more
substantially concurrent written instruments signed by the Majority Holders,
provided that
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(1) no such amendment or waiver shall
(a) change the rate or time of payment of interest on any of the
Notes, change the number or the method of calculating the number of
shares of Common Stock that may be purchased upon conversion of any
Note or the Conversion Rate in respect of such Common Stock, without
the consent of the Holder of each Note so affected,
(b) modify any of the provisions of this Agreement with respect
to the payment or prepayment or purchase of Notes, or change the
percentage of the principal amount of the Notes the holders of which
are required with respect to any such amendment or to effectuate any
such waiver, or to accelerate any Note or Notes, without the consent
of the holders of all of the Notes then outstanding, and
(2) no such waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon.
B. Any amendment or waiver pursuant to Section 13A above shall apply
equally to all of the Holders of the Notes and shall be binding upon them, upon
each future holder of any such Note and upon the Company, in each case whether
or not a notation thereof shall have been placed on any Note.
C. For purposes of determining whether the Holders of outstanding Notes of
the requisite percentage of unpaid principal amount at any time have taken any
action authorized by this Section or otherwise by this Agreement, any Notes
owned by the Company, any Subsidiary or any Affiliate of the Company shall be
deemed not outstanding.
14. TERMINATION.
A. This Agreement may be terminated by (i) mutual consent of the parties,
(ii) the Investors, if any of the conditions set forth in Section 4 become
incapable of being satisfied or (iii) by the Company, if any of the conditions
set forth in Section 5 become incapable of being satisfied.
B. In the event of any termination of this Agreement, this Agreement shall
forthwith become void and there shall be no liability on the part of the
Investors or the Company, except that nothing herein shall relieve any party
from liability for the breach of this Agreement, other than as provided in
Section 14C.
C. If this Agreement is terminated by the Investors pursuant to Section
14A, as a result of the condition set forth in Section 4.1 being incapable of
being satisfied due to a breach
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by the Company of a representation or warranty made as of the date of this
Agreement, the Company shall, within five Business Days of the date of such
termination, pay the Investors $5,000,000 (the "Termination Fee"), which payment
shall be payable by wire transfer to an account specified by the Investors. Upon
such payment by the Company, the Investors shall have no further rights or
claims against the Company arising out of any breach of such representation or
warranty, it being understood that the Termination Fee is intended to be the
sole and exclusive remedy available to the Investors for such breach. The
Termination Fee is intended to compensate the Investors for their estimated fees
and expenses incurred in connection with the transactions contemplated hereby
and shall not be construed or interpreted to be a penalty.
15. PAYMENTS.
Notwithstanding anything to the contrary in this Agreement or the
Transaction Documents, so long as any Investor shall be the holder of any Note,
the Company shall pay all amounts which become due and payable on such Note by
wire or electronic funds transfer of immediately available funds to each
Investor at it address set forth in Schedule I on the date any such amounts
become due, or at such other place in the United States and in such other manner
as each Investor may designate by notice to the Company, without presentation or
surrender of such Note.
16. CERTAIN TAXES.
The Company agrees to pay all stamp, documentary or similar taxes which may
be payable in respect of the execution and delivery of this Agreement or the
other Transaction Documents (but not the transfer of any Note) or of any
amendment of, or waiver or consent under or with respect to, this Agreement or
any of the other Transaction Documents and will save the Investors and all
subsequent Holders harmless against any loss or liability resulting from
nonpayment or delay in payment of any such tax. The obligations of the Company
under this Section 16 shall survive the payment or conversion of the Notes.
17. MISCELLANEOUS.
17.1. Expenses.
Each of the parties hereto shall pay its own expenses in connection with
the transactions contemplated hereby, including the fees and disbursements of
counsel.
17.2. Reliance on and Survival of Representations.
All agreements, representations and warranties of the Company or any
Subsidiary contained herein and in any certificates or other instruments
delivered pursuant to this
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Agreement shall (A) be deemed to have been relied upon by you, notwithstanding
any investigation heretofore or hereafter made by you or on your behalf, and (B)
shall survive the execution and delivery of this Agreement and the delivery of
the Notes to you, and shall continue in effect so long as any Note is
outstanding and thereafter as provided herein.
17.3. Successors and Assigns.
This Agreement shall bind and inure to the benefit of and be enforceable by
the Company and its permitted successors and assigns hereunder and the Investors
and their permitted successors and assigns.
17.4. Communications.
Except as otherwise specifically provided herein, all notices and other
communications provided for in this Agreement shall be in writing and shall be
sent by confirmed facsimile transmission (hard copy to be sent by overnight mail
on the date of such transmission) or delivered by hand or sent by a reputable
overnight courier service prepaid (with confirmation of receipt)
A. if to the Company, at the address set forth at the beginning of
this Agreement, to the attention of its General Counsel, or at such other
address as the Company may hereafter designate by notice to you and to each
other Holder at the time outstanding,
B. if to an Investor, at its address as set forth in Schedule I or at
such other address as it may hereafter designate by notice to the Company,
or
C. if to any other Holder, at the address of such Holder as it appears
on the Note Register.
Any notice or other communication herein provided to be given to the
Holders shall be deemed to have been duly given if sent as aforesaid to each of
the registered holders of the Notes at the time outstanding at the address for
such purpose of such holder as it appears on Schedule I or the Note Register, as
the case may be.
17.5. Consent to Jurisdiction; Service of Process; Waiver of Jury Trial.
A. The Company irrevocably submits to the non-exclusive in personam
jurisdiction of any New York State or federal court sitting in the Borough of
Manhattan, The City of New York, over any suit, action or proceeding arising out
of or relating to this Agreement or the other Transaction Documents. To the
fullest extent permitted by applicable law, the Company irrevocably waives and
agrees not to assert, by way of motion, as a defense or otherwise, any claim
that it is not subject to the
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in personam jurisdiction of any such court, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
B. The Company consents to process being served in any suit, action or
proceeding of the nature referred to in Subsection A above by mailing a copy
thereof by registered or certified mail, postage prepaid, return receipt
requested, to the Company at its address specified in Section 17.4 or at such
other address of which you shall then have been notified pursuant to said
Section. The Company agrees that such service upon receipt (1) shall be deemed
in every respect effective service of process upon it in any such suit, action
or proceeding and (2) shall, to the fullest extent permitted by applicable law,
be taken and held to be valid personal service upon and personal delivery to the
Company. Notices hereunder shall be conclusively presumed received as evidenced
by a delivery receipt furnished by the United States Postal Service or any
reputable commercial delivery service.
C. Nothing in this Section 17.5 shall affect the right of any holder of
Notes to serve process in any manner permitted by law, or limit any right that
the holders of any of the Notes may have to bring proceedings against the
Company in the courts of any appropriate jurisdiction or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
D. THE COMPANY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH
RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN
CONNECTION HEREWITH OR THEREWITH.
17.6. Indemnification.
The Company agrees, to the fullest extent permitted by applicable law, to
indemnify, exonerate and hold you and each of your officers, directors,
employees and agents (collectively the "Indemnitees" and individually an
"Indemnitee") free and harmless from and against any and all actions, causes of
action, suits, losses, liabilities and damages, and expenses in connection
therewith, including without limitation reasonable counsel fees and
disbursements (collectively the "Indemnified Liabilities") incurred by the
Indemnitees or any of them as a result of, or arising out of, or relating to,
any breach of any representation or warranty of the Company contained herein.
The obligations of the Company under this Section 17.6 shall survive payment or
conversion of the Notes.
17.7. Governing Law.
This Agreement and the Notes shall be governed by and construed in
accordance with the laws of the State of New York.
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17.8. Headings.
The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect any of the terms hereof.
17.9. Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same instrument.
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<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance in the space below provided, whereupon this Agreement shall become a
binding agreement between each of the Investors and the Company.
Very truly yours,
PHYCOR, INC.
By /s/ Joseph C. Hutts
----------------------
Title: Chairman of the Board
The foregoing Agreement is
hereby accepted as of the
date first above written:
WARBURG, PINCUS EQUITY PARTNERS, L.P.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Joel Ackerman
---------------------
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I, C.V.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Joel Ackerman
---------------------
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II, C.V.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Joel Ackerman
---------------------
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III, C.V.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Joel Ackerman
---------------------
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<PAGE>
For purposes of Section 6.5 only:
WARBURG, PINCUS & CO.
By: /s/ Joel Ackerman
---------------------
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[FORM OF NOTE]
This security has not been registered under the Securities Act of 1933, as
amended, or applicable state securities laws, and this security may not be sold,
transferred or otherwise disposed of in the absence of such registration or an
exemption therefrom under said Act and laws and the respective rules and
regulations thereunder. The transferability of this security is also subject to
restrictions contained in a Securities Purchase Agreement which agreement the
Company will furnish to the holder of this security upon request.
PHYCOR, INC.
ZERO COUPON CONVERTIBLE SUBORDINATED NOTE DUE 2014
No. __
Issue Date: _______, 1999 Original Issue Discount: $684.76
Issue Price: $315.24 (for each $1,000 Principal Amount
(for each $1,000 Principal at Final Maturity)
Amount at Final Maturity)
PhyCor, Inc., a Tennessee corporation, promises to pay to __________ or
registered assigns, on __________, 2014 the Principal Amount of __________
Dollars ($__________).
This Note shall not bear periodic interest. Original Issue Discount shall
accrue as specified on the other side of this Note. This Note is convertible as
specified on the other side of this Note.
Additional provisions of this Note are set forth on the other side of this
Note.
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IN WITNESS WHEREOF, PhyCor, Inc. has caused this instrument to be duly
executed under its corporate seal.
PHYCOR, INC.
By: ___________________________
Title:
Attest:
By: ___________________________
Title:
[SEAL]
Dated: _______, 1999
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<PAGE>
PHYCOR, INC.
ZERO COUPON CONVERTIBLE SUBORDINATED NOTE DUE 2014
1. INTEREST
This Note shall not bear periodic interest, except that if the Principal
hereof or any portion of such Principal is not paid when due (whether upon
acceleration pursuant to Section 9 of the Securities Purchase Agreement, dated
as of June 15, 1999, between the Company and the Investors identified therein
(the "Agreement"), upon the date set for payment of the Redemption Price
pursuant to paragraph 5 hereof, upon the date set for payment of a Purchase
Price or Change in Control Purchase Price pursuant to paragraph 6 hereof or upon
the Final Maturity of this Note), then in each such case the overdue amount
shall bear interest at the rate of 10.0% per annum, compounded annually (to the
extent that the payment of such interest shall be legally enforceable), which
interest shall accrue from the date such overdue amount was due to the date
payment of such amount, including interest thereon, has been made or duly
provided for. All such interest shall be payable on demand. The accrual of such
interest on overdue amounts shall be in lieu of, and not in addition to, the
continued accrual of Original Issue Discount.
The Original Issue Discount (the difference between the Issue Price and the
Principal Amount at Final Maturity of the Note) in the period during which a
Note remains outstanding, shall accrue at 8.0% per annum, on an annual basis
using a 360-day year composed of twelve 30-day months, commencing on the Issue
Date of this Note.
2. METHOD OF PAYMENT
Subject to the terms and conditions of the Agreement, the Company shall
make payments in respect of the Notes to the Persons who are registered Holders
of Notes at the close of business on the Business Day preceding the Redemption
Date or Final Maturity, as the case may be, or at the close of business on a
Purchase Date or Change in Control Purchase Date, as the case may be. Holders
must surrender Notes to the Company to collect such payments in respect of the
Notes. The Company shall pay cash amounts in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may make such cash payments by check payable in such money.
3. PAYING AGENT, CONVERSION AGENT AND REGISTRAR
The Company may appoint and change any paying agent, conversion agent,
registrar or co-registrar without notice. The Company or any of its Subsidiaries
may act as paying agent, conversion agent, registrar or co-registrar.
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<PAGE>
4. SECURITIES PURCHASE AGREEMENT
The Notes were issued pursuant to the Agreement. Capitalized terms used
herein and not defined herein have the meanings ascribed thereto in the
Agreement. The Notes are subject to all the terms of the Agreement, and Holders
are referred to the Agreement for a statement of those terms.
The Notes are general unsecured obligations of the Company limited to
$404,451,562 aggregate Principal Amount at Final Maturity. The Agreement does
not limit other indebtedness (secured or unsecured) of the Company.
5. REDEMPTION AT THE OPTION OF THE COMPANY
No sinking fund is provided for the Notes. The Notes are redeemable as a
whole, or from time to time in part, at any time at the option of the Company at
the Redemption Prices set forth below, provided that (i) the Notes are not
redeemable by the Company prior to _________, 2002 [the third anniversary of the
Closing Date] and (ii) after _______, 2002 and prior to ________, 2009 [the
tenth anniversary of the Closing Date], the Notes are not redeemable by the
Company unless the Closing Price for the Common Stock for a period of 10
consecutive Trading Days commencing 20 Trading Days before the date of the
Company's notice pursuant to Section 7.2 of the Agreement in respect of such
prepayment was at least 150% of the Conversion Price then in effect. For
purposes hereof, the term "Conversion Price" shall mean the Issue Price divided
by the Conversion Rate then in effect.
The table below shows Redemption Prices of a Note per $1,000 Principal
Amount on the dates shown below and at Final Maturity, which prices reflect
accrued Original Issue Discount calculated to each such date. The Redemption
Price of a Note redeemed between such dates shall include an additional amount
reflecting the additional Original Issue Discount accrued since the next
preceding date in the table to but excluding the actual Redemption Date.
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(1) (2) (3)
Accrued
Original Redemption
Note Issue Discount Price
Redemption Date Issue Price at 8.00% (1) + (2)
- --------------- ----------- -------------- ----------
_______, 2002 $315.24 $ 81.87 $ 397.11
_______, 2003 $315.24 113.64 428.88
_______, 2004 $315.24 147.95 463.19
_______, 2005 $315.24 185.01 500.25
_______, 2006 $315.24 225.03 540.27
_______, 2007 $315.24 268.25 583.49
_______, 2008 $315.24 314.93 630.17
_______, 2009 $315.24 364.93 680.17
_______, 2010 $315.24 419.79 735.03
_______, 2011 $315.24 478.59 793.83
_______, 2012 $315.24 542.09 857.33
_______, 2013 $315.24 610.68 925.92
At Final Maturity $315.24 684.76 1,000.00
6. PURCHASE BY THE COMPANY AT THE OPTION OF THE HOLDER; PURCHASE AT THE OPTION
OF THE HOLDER UPON A CHANGE IN CONTROL
(a) Subject to the terms and conditions of the Agreement, a Holder of Notes
shall have the option to require the Company to purchase the Notes held by such
Holder on the following Purchase Date and at the following Purchase Price per
$1,000 Principal Amount at Final Maturity, upon delivery of a Purchase Notice
containing the information set forth in the Agreement, from the opening of
business on the date that is 20 Business Days prior to the Business Day prior to
the Purchase Date until the close of business on the Purchase Date and upon
delivery of the Notes to the Company by the Holder as set forth in the
Agreement. Such Purchase Price may be paid, at the option of the Company, in
cash or by the issuance and delivery of shares of Common Stock of the Company,
or in any combination thereof. In the event the Company elects to purchase Notes
with cash, the Company may defer payment for a period of up to 90 days following
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<PAGE>
the Purchase Date (the date on which such deferred payment is made is herein
referred to as the "Deferred Purchase Date"), in which case Original Issue
Discount shall continue to accrue through the Deferred Purchase Date.
Purchase Date Purchase Price
- ------------- --------------
_______, 2009.................................................. $ 680.17
Notes in denominations larger than $1,000 of Principal Amount at Final Maturity
may be purchased in part, but only in multiples of $1,000 of Principal Amount at
Final Maturity.
(b) If a Change in Control shall occur at any time prior to the Final
Maturity Date, each Holder of Notes shall have the right, at such Holder's
option and subject to the terms and conditions of the Agreement, to require the
Company to purchase such Holder's Notes on the Business Day that is 35 days
after the date of the Change in Control for a Change in Control Purchase Price
equal to the Issue Price plus accrued Original Issue Discount to the Change in
Control Purchase Date, which Change in Control Purchase Price shall be paid in
cash. Notes in denominations larger than $1,000 of Principal Amount at Final
Maturity may be redeemed in part in connection with a Change in Control, but
only in multiples of $1,000 of Principal Amount at Final Maturity.
(c) Holders have the right to withdraw any Purchase Notice or Change in
Control Purchase Notice, as the case may be, by delivery to the Company of a
written notice of withdrawal in accordance with the provisions of the Agreement.
(d) If cash sufficient to pay a Change in Control Purchase Price or cash
(and/or Common Stock if permitted under the Agreement) sufficient to pay a
Purchase Price, as the case may be, of all Notes or portions thereof to be
purchased as of the Purchase Date or the Change in Control Purchase Date, as the
case may be, is paid or delivered to the Holder following the Purchase Date or
the Change in Control Purchase Date, as the case may be, Original Issue Discount
ceases to accrue on such Notes (or portions thereof) on and after such date, and
the Holder thereof shall have no other rights as such (other than the right to
receive the Purchase Price or Change in Control Purchase Price, as the case may
be, upon surrender or such Notes).
7. NOTICE OF REDEMPTION AT THE OPTION OF THE COMPANY
Notice of redemption at the option of the Company shall be mailed at least
30 days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at the
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<PAGE>
Holder's registered address. If cash sufficient to pay the Redemption Price of
all Notes (or portions thereof) to be purchased is paid or delivered to the
Holder prior to or on the Redemption Date, then, immediately after such
Redemption Date, Original Issue Discount shall cease to accrue on such Notes (or
portions thereof). Notes in denominations larger than $1,000 Principal Amount at
Final Maturity may be redeemed in part but only in multiples of $1,000 or
Principal Amount at Final Maturity.
8. RANKING
The Notes shall be direct, unsecured obligations of the Company and shall
be subordinated to all Senior Indebtedness of the Company to the extent set
forth in the Agreement.
9. CONVERSION
Subject to the next two succeeding sentences, a Holder of a Note may
convert this Note for Common Stock of the Company at any time on or before the
close of business on _____, 2014. If this Note is called for redemption, the
Holder may convert it at any time before the close of business on the Redemption
Date. A Note in respect of which a Holder has delivered a notice of exercise of
the option to require the Company to purchase such Note or to purchase such Note
in the event of a Change in Control may be converted only if the notice of
exercise is withdrawn in accordance with the terms of the Agreement.
The initial Conversion Rate is 37.641 shares of Common Stock per $1,000
Principal Amount at Final Maturity, subject to adjustment in certain events
described in the Agreement. The Company shall deliver cash or a check in lieu of
any fractional share of Common Stock.
To convert this Note a Holder must (1) complete and manually sign the
conversion notice on the back of this Note (or complete and manually sign a
facsimile of such notice) and deliver such notice to the Company at the office
maintained by the Company for such purpose, (2) surrender this Note to the
Company, (3) furnish appropriate endorsements and transfer documents if required
by the Company and (4) pay any transfer or similar tax, if required.
A Holder may convert a portion of this Note if the Principal Amount at
Final Maturity of such portion is $1,000 or a multiple of $1,000. No payment or
adjustment shall be made for dividends on the Common Stock except as provided in
the Agreement. On conversion of this Note, that portion of accrued Original
Issue Discount attributable to the period from the Issue Date to the Conversion
Date with respect to the converted portion of this Note shall not be canceled,
extinguished or forfeited, but rather shall be deemed to be paid in full to the
Holder thereof through the delivery of the Common Stock (together with
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<PAGE>
any cash payment in lieu of fractional shares) in exchange for the portion of
this Note being converted pursuant to the terms hereof.
10. DENOMINATIONS; TRANSFER; EXCHANGE
The Notes are in registered form, without coupons, in denominations of
$1,000 of Principal Amount at Final Maturity and multiplies of $1,000. A Holder
may transfer or convert Notes in accordance with the Agreement. The Company may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Agreement. The Company need not transfer or exchange any Notes selected for
redemption (except, in the case of a Notes to be redeemed in part, the portion
of the Note not to be redeemed) or any Notes in respect of which a Purchase
Notice or Change in Control Purchase Notice has been given and not withdrawn
(except, in the case of a Note to be purchased in part, the portion of the Note
not to be purchased) or any Notes for a period of 15 days before any selection
of Notes to be redeemed.
11. PERSONS DEEMED OWNERS
The registered Holder of this Note may be treated as the owner of this Note
for all purposes.
12. AMENDMENT; WAIVER
Subject to certain exceptions set forth in the Agreement, (i) the Agreement
may be amended with the written consent of the Majority Holders and (ii) certain
defaults or noncompliance with certain provisions may be waived with the written
consent of the Majority Holders.
13. DEFAULTS AND REMEDIES
Under the Agreement, Events of Default include (i) a default by the Company
in the payment of any principal (including accrued Original Issue Discount),
Redemption Price, Purchase Price, or Change in Control Purchase Price due with
respect to the Notes; (ii) a default by the Company or any Subsidiary with
respect to its obligation to pay Indebtedness for borrowed money (other than
Indebtedness which is non-recourse to the Company or the Subsidiary), which
default shall have resulted in the acceleration of, or be a failure to pay at
final maturity, Indebtedness aggregating more than $10 million; (iii) a failure
to perform any other covenant or warranty of the Company herein or in the
Agreement, which continues for 30 days after written notice as provided in the
Agreement; (iv) final judgments or orders are rendered against the Company or
any of its Subsidiaries which require the payment by the Company or any of its
Subsidiaries of an amount (to the extent not covered by insurance) in excess of
$10 million and such judgments or orders remain unstayed or unsatisfied for more
than 60 days and are not
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being contested in good faith by appropriate proceedings; and (v) any event
described in Sections 9.1E or 9.1F of the Agreement with respect to the Company
or any of its Subsidiaries. If an Event of Default occurs and is continuing, the
Holders of at least 25% in aggregate Principal Amount of the Notes at the time
outstanding, may declare the Issue Price and accrued Original Issue Discount of
all the Notes to be due and payable immediately. Certain events of bankruptcy or
insolvency are Events of Default which shall result in the Notes being declared
due and payable immediately upon the occurrence of such Events of Default.
14. NO RECOURSE AGAINST OTHERS
A director, officer or employee, as such, of the Company or any subsidiary
of the Company or any stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Notes or the Agreement or
for any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Note, each Holder waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Notes.
15. GOVERNING LAW
The Agreement and the Notes shall be governed by and construed in
accordance with the laws of the State of New York.
The Company shall furnish to any Holder upon written request
and without charge a copy of the Agreement. Requests may be made to:
PhyCor, Inc.
30 Burton Hills Boulevard
Suite 400
Nashville, TN 37215
Attn: General Counsel
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<PAGE>
CONVERSION NOTICE
To: PhyCor, Inc.
The undersigned registered holder of this Note hereby exercises the option
to convert this Note, or portion hereof (which is $1,000 Principal Amount at
Final Maturity or a multiple thereof) designated below, for shares of Common
Stock of PhyCor, Inc. in accordance with the terms of the Agreement referred to
in this Note, and directs that the shares issuable and deliverable upon such
conversion, together with any check in payment for fractional shares and any
Note representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a Person other than the undersigned, the undersigned shall
pay all transfer taxes payable with respect thereto.
This notice shall be deemed to be an irrevocable exercise of the option to
convert this Note.
Dated:
____________________________
____________________________
Signature(s)
Fill in for registration of
shares if to be delivered,
and Notes if to be
issued other than to and in
the name of registered holder:
______________________________
(Name) Principal Amount at Final
Maturity to be converted
______________________________ (if less than all):
(Street Address)
$__,000
______________________________
(City, state and zip code) _________________________
Social Security or Other
Please print name and address Taxpayer Number
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<PAGE>
CHANGE IN CONTROL PURCHASE NOTICE
To: PHYCOR, INC.
The undersigned registered holder of this Note hereby acknowledges receipt
of a notice from PhyCor, Inc. (the "Company") as to the occurrence of a Change
in Control with respect to the Company and requests and instructs the Company to
repurchase this Note, or the portion hereof (which is $1,000 Principal Amount at
Final Maturity or a multiple thereof) designated below, in accordance with the
terms of the Agreement referred to in this Note and directs that the check in
payment for this Note or the portion thereof and any Notes representing any
unrepurchased principal amount hereof, be issued and delivered to the registered
holder hereof unless a different name has been indicated below. If any portion
of this Note not repurchased is to be issued in the name of a Person other than
the undersigned, the undersigned shall pay all transfer taxes payable with
respect thereto.
Dated:
___________________________________
Signature(s)
Fill in for registration of
shares if to be delivered, and
Notes if to be issued other
than to and in the name of
registered holder:
______________________________
(Name)
______________________________
(Street Address)
______________________________
(City, state and zip code)
Please print name and address
Principal Amount at Final Maturity
to be purchased (if less than all):
$__,000
___________________________________
Social Security or Other
Taxpayer Number
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<PAGE>
ASSIGNMENT
For value received __________ hereby sell(s), assign(s) and transfer(s)
unto __________ (Please insert social security or other Taxpayer Identification
Number of assignee) the within Note, and hereby irrevocably constitutes and
appoints __________ attorney to transfer the said Note on the books of the
Company, with full power of substitution in the premises.
Dated:
_______________________________________
Signature(s)
Signature(s) must be guaranteed by a
commercial bank or trust company or
a member firm of a major stock
exchange if shares of Common Stock
are to be issued, or Notes to be
delivered, other than to or in the
name of the registered holder.
_______________________________________
Signature Guarantee
NOTICE: The above signatures of the holder(s) hereof must correspond with the
name as written upon the face of the Note in every particular without alteration
or enlargement or any change whatever.
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<PAGE>
PHYCOR, INC.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of _____, 1999, among the investors
listed on Schedule I hereto (the "Investors") and PhyCor, Inc., a Tennessee
corporation (the "Company").
R E C I T A L S
- - - - - - - -
WHEREAS, the Investors have, pursuant to the terms of the Securities
Purchase Agreement, dated as of June 15, 1999, by and among the Company and the
Investors (the "Purchase Agreement"), agreed to purchase the Company's Zero
Coupon Convertible Subordinated Notes due 2014 (the "Notes"); and
WHEREAS, the Notes are convertible into shares of Common Stock, par value
$0.01 per share, of the Company; and
WHEREAS, the Company has agreed, as a condition precedent to the Investors'
obligations under the Purchase Agreement, to grant the Investors certain
registration rights; and
WHEREAS, the Company and the Investors desire to define the registration
rights of the Investors on the terms and subject to the conditions herein set
forth.
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms have the respective meaning
set forth below:
Commission: shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act;
Exchange Act: shall mean the Securities Exchange Act of 1934, as amended;
Holder: shall mean any holder of Registrable Securities as of the date
hereof and any Permitted Transferee;
Initiating Holder: shall mean any Holder or Holders who in the aggregate
are Holders of more than 50% of the then outstanding Registrable Securities;
<PAGE>
Permitted Transferee: shall mean any Person to whom at least 2,000,000
shares of Common Stock (or Notes convertible into such number of shares) are
transferred from any Holder in accordance with, and without violating the terms
and conditions of, the Purchase Agreement, who in each case, agrees in writing
to be bound by all obligations of Holders contained herein.
Person: shall mean an individual, partnership, joint-stock company,
corporation, trust or unincorporated organization, and a government or agency or
political subdivision thereof;
register, registered and registration: shall mean to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act (and any post-effective amendments filed or required to be filed)
and the declaration or ordering of effectiveness of such registration statement;
Registrable Securities: shall mean (A) shares of Common Stock issuable upon
conversion of the Notes, (B) any additional shares of Common Stock acquired by
the Investors and (C) any stock of the Company issued as a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
shares Common Stock referred to in clause (A) or (B);
Registration Expenses: shall mean all expenses incurred by the Company in
compliance with Sections 2(a) and (b) hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, fees and expenses of one counsel for all the Holders
(in an amount not to exceed $15,000) which shall initially be Willkie Farr &
Gallagher, but which may, upon written notice to the Company by the Investors be
another nationally recognized law firm experienced in securities law matters,
blue sky fees and expenses and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by the Company);
Security, Securities: shall have the meaning set forth in Section 2(1) of
the Securities Act;
Securities Act: shall mean the Securities Act of 1933, as amended; and
Selling Expenses: shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for each of the Holders other than fees and expenses of
one counsel for all the Holders in an amount not to exceed $15,000.
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2. REGISTRATION RIGHTS
(a) Requested Registration.
(i) Request for Registration. If the Company shall receive from an
Initiating Holder at any time after 180 days from the date hereof a written
request that the Company effect any registration with respect to all or a
part of the Registrable Securities, the Company , subject to the provisions
of Sections 2(a)(i)(B) and 2(e) below, will:
(A) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(B) as soon as reasonably practicable, use its reasonable best
efforts to effect such registration (including, without limitation,
the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations
issued under the Securities Act) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion
of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified in a
written request received by the Company within 10 business days after
the Holders receive written notice from the Company under Section
2(a)(i)(A) above; provided that the Company shall not be obligated to
effect, or take any action to effect, any such registration pursuant
to this Section 2(a):
(w) within 180 days of the effective date of any registration
statement; provided that the Holders were entitled to include
Registrable Securities in such registration pursuant to Section 2(b);
(x) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act or applicable rules or
regulations thereunder;
(y) After the Company has effected two (2) such registrations
pursuant to this Section 2(a) and such registrations have been
declared or ordered effective; or
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(z) If the Registrable Securities requested by all Holders to be
registered pursuant to such request do not have an anticipated
aggregate public offering price (before any underwriting discounts and
commissions) of not less than $30,000,000 as determined by the Company
in good faith and with reasonableness in active consultation with the
Investors and the investment bankers and other financial advisors and
each of the Company and the Investors (as applicable).
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Section 2(a)(ii) below, include other
securities of the Company which are held by Persons who, by virtue of agreements
with the Company existing on or after the date hereof, are entitled to include
their securities in any such registration ("Other Stockholders").
The registration rights set forth in this Section 2 may be assigned, in
whole or in part, to any Permitted Transferee.
(ii) Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request
made pursuant to Section 2(a).
If Other Stockholders request such inclusion, the Holders shall offer to
include the securities of such Other Stockholders in the underwriting and may
condition such offer on their acceptance of the further applicable provisions of
this Section 2. The Holders whose shares are to be included in such registration
and the Company shall (together with all Other Stockholders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by the Company and
reasonably acceptable to the Initiating Holders. Notwithstanding any other
provision of this Section 2(a), if the representative advises the Holders in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the securities of the Company held by Other Stockholders shall
be excluded from such registration to the extent so required by such limitation.
If, after the exclusion of such shares, further reductions are still required,
the number of shares included in the registration by each Holder shall be
reduced on a pro rata basis (based on the number of shares held by such Holder),
by such minimum number of shares as is necessary to comply with such request. No
Registrable Securities or any other securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. If any Other Stockholder who has requested inclusion in such
registration as provided above disapproves of the terms of the
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underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the underwriter and the Initiating Holders. The securities so
withdrawn shall also be withdrawn from registration. If the underwriter has not
limited the number of Registrable Securities or other securities to be
underwritten, the Company and officers and directors of the Company may include
its or their securities for its or their own account in such registration if the
representative so agrees and if the number of Registrable Securities and other
securities which would otherwise have been included in such registration and
underwriting will not thereby be limited.
(b) Incidental Registration.
(i) If the Company shall determine to register any of its equity
securities either for its own account or for the account of Other
Stockholders, other than a registration relating solely to employee benefit
plans, or a registration relating solely to a Commission Rule 145
transaction, or a registration on any registration on Form S-8 or S-4 or
any equivalent form then in effect, or any registration form which does not
permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company will:
(A) promptly give to each of the Holders a written notice thereof
(which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable
blue sky or other state securities laws); and
(B) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a
written request or requests, made by the Holders within ten (10) days
after receipt of the written notice from the Company described in
clause (i) above, except as set forth in Section 2(b)(ii) below. Such
written request may specify all or a part of the Holders' Registrable
Securities.
(ii) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise each of the Holders as a part of the written notice
given pursuant to Section 2(b)(i)(A). In such event, the right of each of
the Holders to registration pursuant to this Section 2(b) shall be
conditioned upon such Holders' participation in such underwriting and the
inclusion of such Holders' Registrable Securities in the underwriting to
the extent provided herein. The Holders whose shares are to be included in
such registration shall (together with the
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Company and the Other Stockholders distributing their securities through
such underwriting) enter into an underwriting agreement in customary form
with the representative of the underwriter or underwriters selected for
underwriting by the Company. Notwithstanding any other provision of this
Section 2(b), if the representative advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, then the securities of the Company held by the Holders shall
be excluded from such registration to the extent so required by such
limitation. The Company shall so advise all holders of securities
requesting registration. If any of the Holders or any officer, director or
Other Stockholder disapproves of the terms of any such underwriting, he may
elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
(c) Management of Offerings. Any registration and related offering shall be
managed by the Company; the Company shall have the power to select the managing
underwriter(s) (which selection shall be reasonably acceptable to the Initiating
Holders in the case of registrations under Section 2(a)) for such offering, and
shall in consultation with the managing underwriter(s) have the power to
determine the offering price, the underwriting discounts and commissions, the
terms of the underwriting agreement, the timing of the registration and related
offering, counsel to the Company, and all other administrative matters related
to the registration and related offering.
(d) Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section 2 shall be borne by the Company, and all Selling Expenses shall be borne
by the Holders of the securities so registered pro rata on the basis of the
number of their shares so registered; provided, however, that if, as a result of
the withdrawal of a request for registration by any of the Holders, as
applicable, the registration statement does not become effective, the Holders
and Other Stockholders requesting registration may elect to bear the
Registration Expenses (pro rata on the basis of the number of their shares so
included in the registration request, or on such other basis as such Holders and
Other Stockholders may agree), in which case such registration shall not be
counted as a registration pursuant to Section 2(a)(i)(B)(y).
(e) Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 2, the Company will keep the Holders, as
applicable, advised in writing as to the initiation of each registration and as
to the completion thereof. At its expense, the Company will:
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(i) keep such registration effective for a period of one hundred
twenty (120) days or until the Holders, as applicable, have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; provided, however, that (A) such 120-day period
shall be extended for a period of time equal to the period during which the
Holders, as applicable, refrain from selling any securities included in
such registration in accordance with provisions in Section 2(h) hereof; and
(B) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such
120-day period shall be extended until all such Registrable Securities are
sold, provided that Rule 415, or any successor rule under the Securities
Act, permits an offering on a continuous or delayed basis, and provided
further that applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (y) includes any prospectus required by
Section 10(a) of the Securities Act or (z) reflects facts or events
representing a material or fundamental change in the information set forth
in the registration statement, the incorporation by reference of
information required to be included in (y) and (z) above to be contained in
periodic reports filed pursuant to Section 12 or 15(d) of the Exchange Act
in the registration statement;
(ii) furnish such number of prospectuses and other documents incident
thereto as each of the Holders, as applicable, from time to time may
reasonably request;
(iii) notify each Holder of Registrable Securities covered by such
registration at any time when a prospectus relating thereto is required to
be delivered under the Securities Act of the happening of any event of
which it has knowledge as a result of which the prospectus included in such
registration statement, as then in effect, contains an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing; and
(iv) furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, upon written request by the
underwriters if such securities are being sold through underwriters or,
subject to applicable rules and guidelines under the Securities Act if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective,
(1) an opinion, dated as of such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in comparable underwritten public
offerings, addressed to the underwriters, if any, and
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to the Holders participating in such registration and (2) a letter, dated
as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in comparable underwritten
public offerings, addressed to the underwriters, if any, and if permitted
by applicable accounting standards, to the Holders participating in such
registration.
(f) Company Blackouts. Subject to the next sentence of this paragraph, the
Company shall be entitled to postpone, for a reasonable period of time, the
filing or effectiveness of, or suspend the rights of the Holders of the
Registrable Securities to make sales pursuant to any registration statement
otherwise required to be prepared, filed and kept effective by it under this
Agreement; provided, however, that (1) the duration of such postponement or
suspension may not exceed 90 days after the date of the determination of the
Board referred to in the next sentence and (2) the Company shall be entitled to
only one such postponement or suspension in any 365-day period. Such
postponement or suspension may only be effected if the Board determines in good
faith that the filing or effectiveness of, or sales pursuant to, such
registration statement would have or cause a materially adverse impact or effect
on the Company or the market perception of the Company, materially impede, delay
or interfere with any significant financing, offer or sale of securities,
acquisition, corporate reorganization or other significant transaction involving
the Company or any of its affiliates or require disclosure of material
information which the Company has a bona fide business purpose for preserving as
confidential. If the Company shall so postpone the filing or effectiveness of,
or suspend the rights of the Holders of the Registrable Securities to make sales
pursuant to, a registration statement, it shall, as promptly as possible, notify
the Holders of the Registrable Securities of such determination and the Holders
of the Registrable Securities shall (y) have the right, in the case of a
postponement of the filing or effectiveness of a registration statement to
withdraw the request for registration by giving written notice to the Company
within 10 days after receipt of such notice or (z) in the case of a suspension
of the right to make sales, receive an extension of the registration period
referred to in Section 2(f)(i) hereof equal to the number of days of the
suspension.
(g) Indemnification.
(i) In the event of a registration of any Registrable Securities pursuant
to this Agreement, the Company will indemnify each of the Holders, as
applicable, each of its officers, directors and partners, and each person who
controls each of the Holders within the meaning of the Securities Act, with
respect to each registration which has been effected pursuant to this Section 2
(but, in the case of an underwriter or a controlling
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<PAGE>
person of an underwriter, only if such underwriter indemnifies the persons
mentioned in subdivision (ii) of this Section 2(g) hereof in a manner set forth
therein), against all claims, losses, damages and liabilities (or actions in
respect thereof) caused by any untrue statement (or alleged untrue statement) of
a material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each of the Holders, each of its officers, directors and
partners, and each person controlling each of the Holders, each such underwriter
and each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable to any such persons in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information furnished to the
Company by the Holders or underwriter and stated to be specifically for use
therein.
(ii) Each of the Holders will, if Registrable Securities held by it are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter, each Other Stockholder and each of their officers, directors, and
partners, and each person controlling such Other Stockholder against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document made by such Holder, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements by such Holder therein not misleading, and will reimburse the
Company and such Other Stockholders, directors, officers, partners, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) was made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use
therein; provided, however, that the obligations of each of the Holders
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hereunder shall be limited to an amount equal to the net proceeds to such Holder
of securities sold as contemplated herein.
(iii) Each party entitled to indemnification under this Section 2(g) (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of counsel shall be at the expense of the Indemnifying Party),
and provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 2 unless the Indemnifying Party is materially prejudiced
thereby. No Indemnifying Party, in the defense of any such claim or litigation
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
(iv) If the indemnification provided for in this Section 2(g) is held by a
court of competent jurisdiction (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue (or alleged untrue) statement of a material fact or the
omission (or alleged
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omission) to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(v) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with any underwritten public offering contemplated by this
Agreement are in conflict with the foregoing provisions, the provisions in such
underwriting agreement shall be controlling.
(vi) The foregoing indemnity agreement of the Company and Holders is
subject to the condition that, insofar as they relate to any loss, claim,
liability or damage made in a preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the Commission at the time the
registration statement in question becomes effective or the amended prospectus
filed with the Commission pursuant to Commission Rule 424(b) (the "Final
Prospectus"), such indemnity or contribution agreement shall not inure to the
benefit of any underwriter or Holder if a copy of the Final Prospectus was
furnished to the underwriter and was not furnished to the person asserting the
loss, liability, claim or damage at or prior to the time such action is required
by the Securities Act.
(h) Information by the Holders. Each of the Holders holding securities
included in any registration shall promptly furnish to the Company any and all
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as may be required to be
disclosed in connection with any registration, qualification or compliance
referred to in this Section 2 in order to make any information previously
furnished to the Company by such Holders not misleading and any other
information regarding such Holders and the distribution of such Holders'
securities as may be required to be disclosed in connection with such
registration. Any sale of securities by any Holder in connection with any
registration, qualification or compliance referred to in this Section 2 shall
constitute a representation and warranty by such Holder that the information
relating to such Holder and its plan of distribution is as set forth in the
Prospectus or other applicable document delivered by such Holder in connection
with such disposition and does not include any untrue statement of a material
fact or omit to state a material fact required to be sated therein or necessary
to make the statements therein not misleading in light of the circumstances then
existing.
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(i) Rule 144 Reporting.
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of restricted securities
to the public without registration, the Company agrees to:
(i) cause public information with respect to the Company to be
available as those terms are understood and defined in Rule 144 under the
Securities Act ("Rule 144");
(ii) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject
to such reporting requirements; and
(iii) so long as the Holder owns any Registrable Securities, furnish
to the Holder upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so
filed as the Holder may reasonably request in availing itself of any rule
or regulation of the Commission allowing the Holder to sell any such
securities without registration.
(j) "Market Stand-off" Agreement. Each of the Holders agrees, if requested
by the Company and an underwriter of equity securities of the Company, not to
sell or otherwise transfer or dispose of any Registrable Securities held by such
Holder during the 180-day period following the effective date of a registration
statement of the Company filed under the Securities Act, provided that all
executive officers and directors of the Company enter into similar agreements.
If requested by the underwriters, the Holders shall execute a separate
agreement to the foregoing effect. The Company may impose stop-transfer
instructions with respect to the shares (or securities) subject to the foregoing
restriction until the end of said 180-day period. The provisions of this Section
2(j) shall be binding upon any transferee who acquires Registrable Securities.
(k) Termination. The registration rights set forth in this Section 2 shall
not be available to any Holder if, in the opinion of counsel to the Company, all
of the Registrable Securities then owned by such Holder could be sold in any
90-day period pursuant to Rule 144 (without giving effect to the provisions of
Rule 144(k)).
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3. MISCELLANEOUS
(a) Directly or Indirectly. Where any provision in this Agreement refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
(b) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee applicable to contracts made
and to be performed entirely within such State.
(c) Section Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
(d) Notices.
(i) All communications under this Agreement shall be in writing and
shall be delivered by hand or facsimile or mailed by overnight courier or
by registered or certified mail, postage prepaid:
(A) if to the Company, to PhyCor, Inc., 30 Burton Hills
Boulevard, Suite 400, Nashville, Tennessee 37215, Attention: General
Counsel, facsimile: (615) 665-8122, or at such other address as it may
have furnished in writing to the Investors;
(B) if to the Investors, at the address or facsimile number
listed on Schedule I hereto, or at such other address or facsimile
number as may have been furnished the Company in writing.
(ii) Any notice so addressed shall be deemed to be given: if delivered
by hand or facsimile, on the date of such delivery; if mailed by courier,
on the first business day following the date of such mailing; and if mailed
by registered or certified mail, on the third business day after the date
of such mailing.
(e) Reproduction of Documents. This Agreement and all documents relating
thereto, including, without limitation, any consents, waivers and modifications
which may hereafter be executed may be reproduced by the Investor by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and the Investors may destroy any original document so
reproduced. The parties hereto agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by the Investors in the regular course
of business) and that any enlargement, facsimile or further
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reproduction of such reproduction shall likewise be admissible in evidence.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties.
(g) Entire Agreement; Amendment and Waiver. This Agreement constitutes the
entire understanding of the parties hereto and supersedes all prior
understandings, whether written or oral, among such parties. This Agreement may
be amended, and the observance of any term of this Agreement may be waived, with
(and only with) the written consent of the Company and the Investors holding a
majority of the then outstanding Registrable Securities.
(h) Severability. In the event that any part or parts of this Agreement
shall be held illegal or unenforceable by any court or administrative body of
competent jurisdiction, such determination shall not effect the remaining
provisions of this Agreement which shall remain in full force and effect.
(i) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first set forth above.
PHYCOR, INC.
By:_________________________
Name:
Title:
INVESTORS:
WARBURG, PINCUS EQUITY PARTNERS, L.P.
By: Warburg, Pincus & Co.,
General Partner
By:________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY
PARTNERS I, C.V.
By: Warburg, Pincus & Co.,
General Partner
By:________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY
PARTNERS II, C.V.
By: Warburg, Pincus & Co.,
General Partner
By:________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY
PARTNERS III, C.V.
By: Warburg, Pincus & Co.,
General Partner
By:________________________
Name:
Title:
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SCHEDULE I
Names of Investors
Name and Address of Investor
- ----------------------------
Warburg, Pincus Equity Partners, L.P.
466 Lexington Avenue
New York, NY 10017
Attention: Patrick T. Hackett
Fax: 212-878-9361
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Attention: Steven J. Gartner
Fax: 212-728-8111
Warburg, Pincus Netherlands
Equity Partners I, C.V..
466 Lexington Avenue
New York, NY 10017
Attention: Patrick T. Hackett
Fax: 212-878-9361
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Attention: Steven J. Gartner
Fax: 212-728-8111
Warburg, Pincus Netherlands
Equity Partners II, C.V.
466 Lexington Avenue
New York, NY 10017
Attention: Patrick T. Hackett
Fax: 212-878-9361
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Attention: Steven J. Gartner
Fax: 212-728-8111
-16-
<PAGE>
Warburg, Pincus Netherlands
Equity Partners III, C.V.
466 Lexington Avenue
New York, NY 10017
Attention: Patrick T. Hackett
Fax: 212-878-9361
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Attention: Steven J. Gartner
Fax: 212-728-8111
-17-
<PAGE>
Joint Filing Agreement
The undersigned hereby agree that the statement on Schedule 13D with
respect to the shares of Common Stock of PhyCor, Inc. is, and any amendment
thereto signed by each of the undersigned shall be, filed on behalf of each
undersigned pursuant to and in accordance with the provisions of 13d-1(k) under
the Securities Exchange Act of 1934, as amended.
Dated: June 17, 1999 WARBURG, PINCUS EQUITY
PARTNERS, L.P.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Stephen Distler
-----------------------
Stephen Distler
Partner
Dated: June 17, 1999 WARBURG, PINCUS NETHERLANDS
EQUITY PARTNERS I, C.V.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Stephen Distler
-----------------------
Stephen Distler
Partner
Dated: June 17, 1999 WARBURG, PINCUS NETHERLANDS
EQUITY PARTNERS II, C.V.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Stephen Distler
-----------------------
Stephen Distler
Partner
<PAGE>
Dated: June 17, 1999 WARBURG, PINCUS NETHERLANDS
EQUITY PARTNERS III, C.V.
By: Warburg, Pincus & Co.,
General Partner
By: /s/ Stephen Distler
-----------------------
Stephen Distler
Partner
Dated: June 17, 1999 WARBURG, PINCUS & CO.
By: /s/ Stephen Distler
-----------------------
Stephen Distler
Partner
Dated: June 17, 1999 E.M. WARBURG, PINCUS & CO., LLC
By: /s/ Stephen Distler
-----------------------
Stephen Distler
Member
-2-
