INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this "Agreement"), dated as of May 11, 2000, by
and among Omega Healthcare Investors, Inc., a Maryland corporation (the
"Company"), and Explorer Holdings, L.P., a Delaware limited partnership
("Purchaser").
I. SHARE PURCHASE
1.1 Share Purchase.
(a) The Board of Directors of the Company has authorized the issuance and
sale to Purchaser hereunder of 1,000,000 newly issued shares of Series C
Preferred Stock of the Company, par value $1.00 per share (the "Series C
Preferred Stock" and such shares, the "Shares"), having the designations,
voting powers, preferences and relative, participating, optional and other
special rights, qualifications, limitations and restrictions thereof, set
forth in the Articles Supplementary attached hereto as Exhibit A (the
"Series C Articles Supplementary").
(b) On the terms and subject to the conditions hereinafter set forth, at
the Closing, the Company will issue and sell to Purchaser, and Purchaser
will purchase from the Company, for an aggregate price equal to $100.0
million (the "Purchase Price"), the Shares.
(c) As an inducement for the Company and the Purchaser to enter into this
Agreement and to consummate the transactions contemplated hereby, Purchaser
will under certain circumstances make available to the Company, and the
Company will under certain circumstances issue and sell to Purchaser, up to
$50.0 million (which may be increased by $50.0 million by Purchaser under
certain circumstances) in Common Stock or newly issued shares of Series C
Preferred Stock (provided, however, if at the time of such issuance, the
Fair Market Value (as defined in the Series C Articles Supplementary) of
one share of Common Stock is less than $6.25 (as adjusted to the same
extent the Conversion Price for the Series C Preferred issued on the
Closing Date has been previously adjusted pursuant to Section 8.4 of the
Series C Articles Supplementary) such additional shares of Series C
Preferred Stock shall be issued as a sub-series of Series C Preferred Stock
with a Conversion Price (as defined in the Series C Articles Supplementary)
equal to the Fair Market Value of one share of Common Stock calculated as
of the date of issuance of such Series C Preferred), in each such case such
issuance to be on the terms and subject to the conditions and use of
proceeds limitations set forth on Exhibit B (the "Additional Equity
Financing"). Notwithstanding any other provision hereof, the parties
acknowledge that (i) until the entire amount of Additional Equity Financing
otherwise available under this Section 1.1(c) shall have been invested or,
if applicable, the period therefor shall have expired, the Company shall
not arrange any alternative source or form of equity financing for any
Acquisition (defined in Exhibit B) if Purchaser would be required to
purchase Common Stock in respect of such Acquisition pursuant to the
Initial Growth Equity Commitment or the Increased Additional Growth Equity
Commitment, if any and (ii) the Company shall use the proceeds of any
Additional Equity Financing solely for Acquisitions in accordance with the
limitations in Exhibit B and will not, directly or indirectly, use such
proceeds for, without limitation, paying or refinancing any indebtedness
(other than indebtedness of the acquired entity) or for working capital
purposes, except solely on the terms and subject to the conditions of
Section 2 of Exhibit B.
1.2 Purchase Price. The Purchase Price will be payable on the terms and
subject to the conditions hereof in cash by bank wire transfer of
immediate available funds to an account of the Company designated by
the Company by written notice to Purchaser at least two Business Days
prior to the Closing Date.
1.3 Closing. The closing (the "Closing") of the purchase and sale of the
Shares will take place at the offices of Jones, Day, Reavis & Pogue,
599 Lexington Avenue, New York, New York at 10:00 a.m. local time on
the second Business Day after satisfaction or waiver of the conditions
(other than the conditions to be satisfied concurrently with the
Closing) set forth in Article V (or such other date, time and place to
which the parties may agree). The date on which the Closing occurs is
the "Closing Date."
1.4 Closing Deliveries.
(a) At or prior to the Closing, Purchaser will deliver to the Company:
(i) the Purchase Price, in accordance with Section 1.2;
(ii) a certificate executed by the general partner of Purchaser
certifying that the conditions set forth in Section 5.2(a) have
been satisfied;
(iii)a Stockholders Agreement in the form attached hereto as Exhibit C
(the "Stockholders Agreement"), duly executed by Purchaser
(iv) a Registration Rights Agreement in the form attached hereto as
Exhibit D (the "Registration Rights Agreement"), duly executed by
Purchaser; and
(v) an Advisory Agreement in the form attached hereto as Exhibit E
(the "Advisory Agreement"), duly executed by an Affiliate of
Purchaser.
(b) At or prior to the Closing, the Company will deliver to Purchaser:
(i) such number of validly issued stock certificates evidencing the
Shares as Purchaser requests at least two Business Days before
the Closing Date;
(ii) a certificate executed by each of the Chief Executive Officer and
Chief Financial Officer of the Company certifying that the
conditions set forth in Section 5.3(a) have been satisfied;
(iii) the Stockholders Agreement duly executed by the Company; (iv)
the Registration Rights Agreement duly executed by the Company;
(v) the Advisory Agreement, duly executed by the Company;
(vi) an Indemnification Agreement in the form attached hereto as
Exhibit F, duly executed by the Company;
(vii) Director Indemnification Agreements in the form attached hereto
as Exhibit G for each director designee of the Purchaser, duly
executed by the Company; and
(viii) the legal opinion of Powell, Goldstein, Frazer & Murphy LLP,
counsel to the Company, addressed to Purchaser and dated as of
the Closing Date, generally as to the matters set forth in
Sections 2.1 (as to the Company only), 2.2, 2.3(a), 2.4 and
2.7(a)(i) and (ii).
(c) At or prior to the Closing, the Company and Purchaser will
deliver to each other such other supporting documents and
certificates as the other party may reasonably request.
1.5 Use of Proceeds. The Company shall use the proceeds from the issuance
and sale of the Series C Preferred sold at the Closing (i) first, to
pay all amounts outstanding under the Senior Unsecured Notes and (ii)
second, for general working capital purposes.
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser, except as set
forth in the letter, dated the date hereof, from the Company to Purchaser
specifically referencing this Agreement and delivered prior to the execution of
this Agreement and initialed by the parties hereto (the "Company Disclosure
Letter"), as follows:
2.1 Existence; Good Standing; Corporate Authority. The Company is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Maryland. The Company is
duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of each state
in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified or to be
in good standing would not have a Company Material Adverse
Effect. The Company has all requisite corporate power and
authority to own, operate and lease its properties and carry on
its business as now conducted. The copies of the Company's
articles of incorporation and bylaws previously made available to
Purchaser are true, correct and complete. As used in this
Agreement, the term "Company Material Adverse Effect" means any
change, effect, event or condition that has had or could
reasonably be expected to (i) have a material adverse effect on
the business, results of operations or financial condition of the
Company and its Subsidiaries, taken as a whole, or (ii) prevent
or materially delay the Company's ability to consummate the
transactions contemplated hereby; provided, however, that without
waiving any representation, warranty or covenant in no event will
any of the following constitute a Company Material Adverse
Effect: (a) a change in the trading prices of any of the
Company's securities, in and of itself; (b) effects, changes,
events, circumstances or conditions generally affecting the
long-term care or real estate finance industries or arising from
changes in general business or economic conditions, provided that
the effect thereof is not materially disproportionate on the
Company and its Subsidiaries than the effect on similarly
situated companies; (c) effects, changes, events, circumstances
or conditions directly attributable to out-of-pocket fees and
expenses (including without limitation legal, accounting,
investigatory, investment banking and other fees and expenses)
incurred in connection with the transactions contemplated by the
Transaction Documents; (d) any effects, changes, events,
circumstances or conditions resulting from the announcement or
pendency of any of the transactions provided for in the
Transaction Documents; (e) any effects, changes, events,
circumstances or conditions resulting from compliance by
Purchaser or the Company with the terms of, or the taking of any
actions specifically required to be taken in, the Transaction
Documents; (f) the effect of the financial condition of any
operator of any of the Company Properties described in Section
2.1 of the Company Disclosure Letter; (g) the effect of any
operator of any of the Company Properties in bankruptcy
proceedings as of the date hereof rejecting leases to Company
Properties or Material Contacts; and (h) the effect of any
matters specifically disclosed in the Company Disclosure Letter
except with respect to items 1 and 9 of Section 2.10 of the
Company Disclosure Letter to the extent the ultimate liability
associated therewith shall exceed $15.0 million in the aggregate
after application of any available insurance proceeds and
reimbursement available to the Company as a result of rights of
contribution, subrogation and other similar sources of
reimbursement for such liabilities and provided, however, that
any change, effect, event or condition arising after the date
hereof in any of the matters specifically disclosed in the
Company Disclosure Letter shall not be excluded from the
definition of Company Material Adverse Effect for purposes of
Section 5.3. As used in this Agreement, the term "Subsidiary" (i)
when used with respect to any party, means any corporation or
other organization, whether incorporated or unincorporated, of
which such party directly or indirectly owns or controls more
than 50% of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions and (ii) when
used with respect to the Company, shall also include each of the
following entities: (1) Bayside Street II, Inc., a Delaware
corporation, (2) Bayside Alabama Healthcare Second, Inc., an
Alabama corporation, (3) Bayside Arizona Healthcare Second, Inc.,
an Arizona corporation, and (4) Bayside Colorado Healthcare
Second, Inc., a Colorado corporation.
2.2 Authorization, Validity and Effect of Agreement. The Company has
the requisite corporate power and authority to execute and
deliver this Agreement and all agreements and documents
contemplated hereby to be executed and delivered by it. This
Agreement and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action. This Agreement has been duly and validly
executed and delivered by the Company and constitutes, and the
Stockholders Agreement, the Registration Rights Agreement, the
Indemnification Agreement, the Director Indemnification Agreement
and the Advisory Agreement (together with this Agreement,
referred to collectively as the "Transaction Documents")
contemplated hereby to be executed and delivered by the Company
(when executed and delivered pursuant hereto) will constitute,
the valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms,
except that (i) such enforceability may be subject to applicable
bankruptcy, insolvency or other similar laws now or hereinafter
in effect affecting creditors' rights generally, (ii) the
availability of the remedy of specific performance or injunctive
or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court
before which any proceeding therefor may be brought, and (iii)
rights to indemnification may be limited by public policy
considerations.
2.3 Capitalization; Rights Agreement. (a) The authorized capital
stock of the Company consists of 100,000,000 shares of the
Company's common stock, par value $0.10 per share (the "Common
Stock"), 2,300,000 shares of 9.25% Series A Preferred Stock, par
value $1.00 per share (the "Series A Preferred Stock"), 2,000,000
shares of 8.625% Series B Preferred Stock, par value $1.00 per
share (the "Series B Preferred Stock"), and 100,000 shares of
Series A Junior Participating Preferred Stock, par value $1.00
per share. As of the close of business on the last Business Day
immediately preceding the date hereof (the "Measurement Date"),
(i) 20,129,626 shares of Common Stock were issued and
outstanding, each of which was duly authorized, validly issued,
fully paid and nonassessable and issued free of any preemptive
rights, (ii) 1,100,000 shares of Common Stock were reserved for
issuance under the stock option plans listed in Section 2.3 of
the Company Disclosure Letter (the "Stock Option Plans"), (iii)
options to purchase not more than 349,000 shares of Common Stock
in the aggregate were outstanding under the Stock Option Plans as
more particularly described in Section 2.3 of the Company
Disclosure Letter (including the holders thereof, the expiration
date, the exercise prices thereof and the dates of grant), (iv)
an aggregate of not more than 42,600 Deferred Compensation Units
are issued and outstanding pursuant to the Company's 1993
Deferred Compensation Plan, (v) 2,300,000 shares of Series A
Preferred Stock were issued and outstanding, each of which was
duly authorized, validly issued, fully paid and nonassessable and
issued free of any preemptive rights, (vi) 2,000,000 shares of
Series B Preferred Stock were issued and outstanding, each of
which was duly authorized, validly issued, fully paid and
nonassessable and issued free of any preemptive rights, and (vii)
$48,405,000 principal amount of the Company's 8.5% Convertible
Debentures due January 24, 2001 (the "Company Convertible
Debentures"), were issued and outstanding. Since the Measurement
Date, no additional shares of capital stock of the Company have
been issued and no other options, warrants or other rights to
acquire shares of the Company's capital stock (collectively, the
"Rights To Acquire") have been granted. Except as described in
the second preceding sentence, the Company has no outstanding
bonds, debentures, notes or other securities or obligations the
holders of which have the right to vote or which are or were
convertible into or exercisable for, voting securities, capital
stock or other equity ownership interests in the Company. Except
as set forth in Section 2.3 of the Company Disclosure Letter,
there are not at the date of this Agreement any existing options,
warrants, calls, subscriptions, convertible securities or other
Rights To Acquire which obligate the Company or any of its
Subsidiaries to issue, exchange, transfer or sell any shares of
capital stock of the Company or any of its Subsidiaries other
than shares of Common Stock issuable under the Stock Option Plans
or awards granted pursuant thereto. There are no outstanding
contractual or legal obligations of the Company or any of its
Subsidiaries (x) to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its
Subsidiaries, or (y) to vote or to dispose of any shares of the
capital stock of any of its Subsidiaries. Except as contemplated
by this Agreement or the transactions contemplated hereby, after
the purchase of the Shares by Purchaser, none of the Company or
any of its Subsidiaries will have any obligation to issue,
transfer or sell any shares of the capital stock or other
securities of the Company.
(b) The Company has taken all necessary action so that neither the
execution, delivery and performance of this Agreement nor the
consummation of the transactions contemplated hereby shall (i)
cause Purchaser or any of its Affiliates to become an "Acquiring
Person" or (ii) result in the occurrence of a "Triggering Event"
or "Distribution Date" (as such terms are defined in the Company
Rights Agreement, dated as of May 12, 1999 (the "Company Rights
Agreement"), between the Company and First Chicago Trust Company,
as rights agent). The board of directors of the Company (the
"Company Board") has approved, and the Company and First Chicago
Trust Company have entered into, an amendment to the Company
Rights Agreement having such effect, a copy of which has been
delivered to Purchaser (the "Rights Amendment"). Pursuant to the
Rights Amendment, among other things, neither the execution,
delivery and performance of this Agreement nor the consummation
of the transactions contemplated hereby will (x) result in the
distribution of separate certificates representing Rights, (y)
cause the Rights to become exercisable, or (z) result in the
occurrence of a "Triggering Event" or a "Distribution Date" (as
such terms are defined the Company Rights Agreement).
2.4 Validity of Shares, Etc. Each of the Shares have been duly
authorized for issuance and, when issued to Purchaser for the
consideration set forth herein and as otherwise provided herein,
will be duly and validity issued, fully paid, non-assessable and
free of preemptive rights. Upon conversion of the Shares from
time to time, Purchaser will acquire good and valid title to such
shares of Common Stock, free and clear of any and all liens,
claims, security interests, encumbrances, restrictions on voting
or alienation or otherwise, or adverse interests (collectively,
"Liens"), except as may be created by Purchaser, the Transaction
Documents or by applicable securities Laws.
2.5 Subsidiaries. Section 2.5 of the Company Disclosure Letter lists
all of the Subsidiaries of the Company. Each of the Company's
Subsidiaries is a corporation, partnership or limited liability
company duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or
organization, has the corporate, partnership or similar power and
authority to own its properties and to carry on its business as
it is now being conducted, and is duly qualified to do business
and is in good standing in each jurisdiction in which the
ownership of its property or the conduct of its business requires
such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not
have a Company Material Adverse Effect. The Company owns,
directly or indirectly, all of the outstanding shares of capital
stock (or other ownership interests having by their terms
ordinary voting power to elect a majority of directors or others
performing similar functions with respect to such Subsidiary) of
each of the Company's Subsidiaries, free and clear of all Liens,
except as set forth in Section 2.5 of the Company Disclosure
Letter. Each of the outstanding shares of capital stock (or such
other ownership interests) of each of the Company's Subsidiaries
is duly authorized, validly issued, fully paid and nonassessable.
Section 2.5 of the Company Disclosure Letter sets forth the
following information for each Subsidiary of the Company: (i) its
jurisdiction of incorporation or organization, (ii) its
authorized capital stock or share capital, and (iii) the number
and holder of record of all issued and outstanding shares of
capital stock, share capital or other equity interests.
2.6 Other Interests. Except for interests in the Company's
Subsidiaries and as set forth in Section 2.5 of the Company
Disclosure Letter, neither the Company nor any of the Company's
Subsidiaries owns, directly or indirectly, any interest or
investment (whether equity or debt) in any domestic or foreign
corporation, company, partnership, joint venture, business, trust
or entity, other than investments of less than $2.0 million in
the aggregate.
2.7 No Conflict; Required Filings and Consents. (a) Except as set
forth in Section 2.7 of the Company Disclosure Letter, the
execution, delivery and performance of this Agreement by the
Company do not, and the consummation by the Company of the
transactions contemplated hereby will not, (i) conflict with or
violate the articles of incorporation or bylaws or equivalent
organizational documents of the Company or any of its
Subsidiaries, (ii) subject to the Company making any filings,
notifications or registrations and obtaining any approvals
identified in Section 2.7(b), conflict with or violate any
domestic or foreign statute, rule, regulation or other legal
requirement ("Law") or order, judgment, injunction or decree
("Order") applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, or (iii) result in any breach
of or constitute a default (or an event which with or without
notice or lapse of time or both would become a default) under,
result in the loss of a material benefit under, or give to others
any right of purchase or sale, or any right of termination,
amendment, acceleration, increased payments or cancellation of,
or result in the creation of a Lien on any property or asset of
the Company or any of its Subsidiaries pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any property or asset of
the Company or any of its Subsidiaries is bound or affected,
except, in the case of clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults, events, losses,
rights, payments, cancellations, encumbrances or other
occurrences that, individually or in the aggregate, would not
have a Company Material Adverse Effect, or (iv) result in the
loss of the Company's status as a real estate investment trust
("REIT") under Section 856 of the Internal Revenue Code of 1986,
as amended (the "Code").
(b) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement and the consummation
by the Company of the transactions contemplated hereby will not,
require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory
authority, domestic or foreign, including without limitation any
quasi-governmental, supranational, statutory, environmental
entity and any stock exchange, court or arbitral body (each a
"Governmental Entity"), except (i) for (A) applicable
requirements, if any, of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (B) the applicable notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, if any, and the rules and regulations
thereunder (the "HSR Act"), and (C) the consents, approvals and
authorizations set forth in Section 2.7 of the Company Disclosure
Letter, and (ii) where the failure to obtain any such consent,
approval, authorization or permit, or to make any such filing or
notification, would not, individually or in the aggregate, have a
Company Material Adverse Effect.
2.8 Compliance with Laws. Except as set forth in Section 2.8 of the
Company Disclosure Letter, neither the Company nor any of its
Subsidiaries is in conflict with, or in default or violation of,
(a) any Law or Order applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected (provided that no
representation or warranty is made in this Section 2.8 with
respect to Environmental Laws) or (b) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any property or asset of the Company or any of
its Subsidiaries is bound or affected, and to the Knowledge of
the Company, neither the Company nor any of its Subsidiaries is
under review or investigation with respect to or has been
threatened to be charged with or given notice of any violation of
any Law or Order, except in each case for such conflicts,
defaults, violations, reviews or investigations that would not,
individually or in the aggregate, have a Company Material Adverse
Effect. The Company and its Subsidiaries hold all licenses,
permits orders, registrations and other authorizations
("Permits") and have taken all actions required by applicable Law
or regulations of any Governmental Entity in connection with
their business as now conducted, except where the failure to
obtain any such item or to take any such action would not,
individually or in the aggregate, have a Company Material Adverse
Effect.
2.9 SEC Documents. (a) The Company has timely filed all forms,
reports and documents required to be filed by it with the
Securities and Exchange Commission (the "SEC") since January 1,
1997 (collectively, the "Company Reports"). As of their
respective dates, the Company Reports and any such reports, forms
and other documents filed by the Company with the SEC after the
date of this Agreement and until the Closing Date (i) complied,
or will comply, in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act and the rules and regulations
thereunder and (ii) did not, and will 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
made therein, in the light of the circumstances under which they
were made, not misleading. The representation in clause (ii) of
the preceding sentence does not apply to any misstatement or
omission in any Company Report filed prior to the date of this
Agreement which was superseded by a subsequent Company Report
filed prior to the date of this Agreement. No Subsidiary of the
Company is required to file any periodic reports with the SEC
under the Exchange Act.
(b) Each of the financial statements included in or incorporated by
reference into the Company Reports (including the related notes
and schedules) (the "Company Financial Statements") presents
fairly, in all material respects, the consolidated financial
position of the Company and its Subsidiaries as of its date and,
to the extent applicable, the results of operations, retained
earnings or cash flows, as the case may be, of the Company and
its Subsidiaries for the periods set forth therein (subject, in
the case of unaudited statements, to normal recurring year-end
audit adjustments, none of which will be material in kind or
amount), in each case in accordance with United States generally
accepted accounting principles consistently applied ("GAAP")
during the periods involved, except as may be noted therein.
2.10 No Undisclosed Material Liabilities. There are no material
liabilities or obligations of the Company or any of its
Subsidiaries of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise that would result
in such a liability, other than (a) liabilities or obligations
disclosed in the Company Financial Statements or in Section 2.10
of the Company Disclosure Letter and (b) liabilities or
obligations incurred in the ordinary course of business
consistent with past practices since January 1, 2000 that would
not have, individually or in the aggregate, a Company Material
Adverse Effect.
2.11 Litigation. Except as disclosed in Section 2.11 of the Company
Disclosure Letter or such of the following as would not have a
Company Material Adverse Effect, and other than personal injury
and other routine tort litigation arising from the ordinary
course of operations of the Company and its Subsidiaries which
are covered by adequate insurance, as of the date of this
Agreement, there are no actions, suits or proceedings pending,
publicly announced or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its
Subsidiaries and there are no Orders of any Governmental Entity
outstanding against the Company or any of its Subsidiaries.
2.12 Absence of Certain Changes. From April 1, 2000 through the date
of this Agreement, the Company and its Subsidiaries have
conducted their respective businesses in the ordinary course
consistent with past practice and there has not been (a) any
Company Material Adverse Effect or (b) any action that if taken
after the date hereof would be a violation of Section 4.1.
2.13 Taxes. (a) Each of the Company and its Subsidiaries and any
consolidated, combined, unitary or aggregate group for tax
purposes of which the Company or any Subsidiary of the Company is
or has been a member has timely filed all Tax Returns required to
be filed by it (after giving effect to any extension properly
granted by a Tax Authority having authority to do so) and has
timely paid (or the Company has timely paid on its behalf) all
material Taxes required to be paid by it (whether or not shown on
such Tax Returns), except Taxes that are being contested in good
faith by appropriate proceedings and for which the Company or the
applicable Subsidiary of the Company shall have set aside on its
books adequate reserves. Each such Tax Return is complete and
accurate in all material respects. The most recent audited
financial statements contained in the Company Reports reflect an
adequate reserve for all material Taxes payable by the Company
and its Subsidiaries for all taxable periods and portions thereof
through the date of such financial statements. The Company has
incurred no material liability for Taxes under Sections 857(b),
857(f), 860(c) or 4981 of the Code, including without limitation
any Tax on net income from foreclosure property described in
Section 857(b)(4) of the Code or arising from a prohibited
transaction described in Section 857(b)(6) of the Code, and
neither the Company nor any of its Subsidiaries has incurred any
material liability for Taxes other than in the ordinary course of
business. No event has occurred, and no condition or circumstance
exists, which would present a risk that any material Tax
described in the preceding sentence will be imposed upon the
Company or any Subsidiary of the Company. No material
deficiencies for any Taxes have been proposed, asserted or
assessed in writing against the Company or any Subsidiary of the
Company, and no requests for waivers of the time to assess any
such Taxes are pending and no extensions of time to assess any
such Taxes are in effect and no Tax Returns of the Company or any
of its Subsidiaries are currently being audited by any applicable
Tax Authority or are threatened with any such audit. All material
Taxes required to be withheld, collected and paid over to any Tax
Authority by the Company and any Subsidiary of the Company have
been timely withheld, collected and paid over to the proper Tax
Authority. No Tax Authority has imposed a Lien against the
Company or any of its Subsidiaries or any Company Property for
any Taxes payable pending actions or proceedings by any Tax
Authority for assessment or collection of any Tax. Complete
copies of all federal, state and local income or franchise Tax
Returns that have been filed by the Company and each Subsidiary
of the Company for all taxable years beginning on or after
January 1, 1996, all extensions filed with any Tax Authority that
are currently in effect and all written communications with a Tax
Authority relating thereto have been made available to Purchaser
and its representatives. No written claim has been made by a Tax
Authority in a jurisdiction where the Company or any Subsidiary
of the Company does not file Tax Returns that it is or may be
subject to taxation by the jurisdiction. Neither the Company nor
any Subsidiary of the Company holds any material asset (A) the
disposition of which would be subject to rules similar to Section
1374 of the Code as a result of an election under Internal
Revenue Service Notice 88-19 or (B) that is subject to a consent
filed pursuant to Section 341(f) of the Code and the regulations
thereunder. The Company has no C corporation earnings and profits
and did not have any C corporation earnings and profits at the
end of any REIT tax year. Neither the Company nor any Subsidiary
of the Company is obligated to make after the Closing any payment
that would not be deductible under Section 162(m) of the Code.
Neither the Company nor any Subsidiary of the Company is party
to, nor has any liability under (including liability with respect
to any predecessor entity), any indemnification, allocation or
sharing agreement with respect to Taxes.
(b) The Company (i) for all taxable years commencing with its initial
taxable year through December 31, 1999, has been properly subject
to taxation as a REIT within the meaning of Section 856 of the
Code and has qualified as a REIT for such years, (ii) has
operated since December 31, 1999, and will continue to operate to
the Closing, in such a manner as to qualify as a REIT (determined
without regard to the dividends paid deduction requirements for
the current year) for the taxable year beginning January 1, 2000
determined as if the taxable year of the REIT ended as of the
Closing, and (iii) has not taken or omitted to take any action
that would result in loss of or a challenge to its status as a
REIT, and no such challenge is pending or, to the Company's
Knowledge, threatened. Each Subsidiary of the Company that is a
partnership, joint venture or limited liability company has been
since its formation and continues to be treated for federal
income tax purposes as a partnership or disregarded as a separate
entity, as the case may be, and has not been treated for federal
income tax purposes as a corporation or an association taxable as
a corporation. Neither the Company, any Subsidiary of the Company
that is a partnership, joint venture or limited liability
company, nor any Subsidiary that is a qualified REIT subsidiary
has owned any assets (including, without limitation, securities)
that could cause the Company to violate Section 856(c)(4) of the
Code. The Company has complied, and reasonably expects to
continue complying, with the income qualification tests set out
in Section 856(c)(2) and (3) of the Code. Neither the Company nor
any Subsidiary has received, or reasonably expects to receive,
any material rent that does not qualify as "rents from real
property" within the meaning of Section 856(d) of the Code,
including rent attributable to personal property under Section
856(d)(1)(C), any contingent rent under Section 856(d)(2)(A) of
the Code, or any rent from a related-party tenant under Section
856(d)(2)(B) of the Code. Neither the Company nor any Subsidiary
has received, or reasonably expects to receive, any contingent
interest that does not qualify as "interest" under Section 856(f)
of the Code or any income from a shared appreciation provision,
as described under Section 856(j) of the Code, that is subject to
the prohibited transaction tax under Section 857(b)(6). The fair
market value of the real property securing each mortgage loan
held by the Company or any Subsidiary at the time the loan was
entered into has exceeded the highest outstanding principal
balance of the loans at any time. The Company has not elected to
pay Tax on any capital gain recognized on or after January 1,
2000. Each Subsidiary of the Company that is a corporation and of
which the Company owns more than 9.9% of the capital stock has
been since it became a Subsidiary a qualified REIT subsidiary
under Section 856(i) of the Code.
(c) For purposes of this Agreement, (i) "Taxes" means all taxes,
charges, fees, levies or other assessments imposed by any United
States Federal, state, or local taxing authority or by any
non-U.S. taxing authority, including, but not limited to, income,
gross receipts, excise, property, sales, use, transfer, payroll,
license, ad valorem, value added, withholding, social security,
national insurance (or other similar contributions or payments),
franchise, estimated, severance, stamp, and other taxes
(including any interest, fines, penalties or additions
attributable to or imposed on or with respect to any such taxes,
charges, fees, levies or other assessments), (ii) "Tax Return"
means any return, report, information return or other document
(including any related or supporting information and, where
applicable, profit and loss accounts and balance sheets) with
respect to Taxes, and (iii) "Tax Authority" shall mean the
Internal Revenue Service and any other domestic or foreign
bureau, department, entity, agency or other Governmental Entity
responsible for the administration of any Tax.
2.14 Properties. (a) Except as would not have a Company Material
Adverse Effect, the Company or one of its Subsidiaries owns
marketable fee simple or leasehold title to, or a valid first
priority mortgage Lien on, the real properties identified in
Section 2.14 of the Company Disclosure Letter (collectively with
all buildings, structures and other improvements thereon, the
"Company Properties" and each, collectively with all buildings,
structures and other improvements thereon, a "Company Property"),
which are all of the real properties that are owned or leased by
the Company and its Subsidiaries, or on which the Company holds a
mortgage Lien, in either case as of the date hereof. The Company
Properties are not subject to any rights of way, written
agreements, Laws, ordinances and regulations affecting building
use or occupancy or reservations of an interest in title
(collectively, "Property Restrictions") or Liens (including Liens
for Taxes), mortgages or deeds of trust, claims against title,
charges which are Liens, security interests or other encumbrances
on title (the "Encumbrances"), except for (i) Property
Restrictions and Encumbrances set forth in Section 2.14 of the
Company Disclosure Letter, (ii) Property Restrictions imposed or
promulgated by Law or any Governmental Entity with respect to
real property, including zoning regulations, which do not
adversely affect in any material respect the current use of the
applicable property, (iii) Encumbrances and other Property
Restrictions disclosed on existing title reports or current
surveys (in either case copies of which title reports and surveys
have been delivered or made available to Purchaser), (iv)
mechanics', carriers', workmen's, repairmen's Liens and other
Encumbrances and Property Restrictions, if any, which,
individually and in the aggregate, are not substantial in amount,
do not materially interfere with the present use of any of the
Company Properties subject thereto or affected thereby, and do
not otherwise materially impair business operations conducted by
the Company and its Subsidiaries, and (v) such other Property
Restrictions and Encumbrances that, together with all Property
Restrictions and Encumbrances described in clauses (i) through
(iv) in this Section 2.14(a), would not have a Company Material
Adverse Effect.
(b) Except for such exceptions as would not have a Company Material
Adverse Effect, the Company has obtained title insurance insuring
the Company's or the applicable Company Subsidiary's fee simple
title to each of the Company Properties owned by it and leasehold
title to each of the Company's Properties leased by it, in each
case, subject only to the matters disclosed in such policies, in
clause (a) above and in Section 2.14 of the Company Disclosure
Letter, the Company has not received any written notice that any
such policy is not in full force and effect. Except as set forth
in Section 2.14(b) of the Company Disclosure Letter, no claim has
been made against any such policy in excess of $100,000.
(c) Each material certificate, permit or license from any
Governmental Entity having jurisdiction over any of the Company
Properties and each agreement, easement or other right which is
necessary to permit the lawful use and operation of the buildings
and improvements on any of the Company Properties or which is
material to the operation of the property have been obtained and
are in full force and effect, except to the extent that the
failure to obtain or maintain any such certificate, permit,
license, agreement, easement or other right would not have a
Company Material Adverse Effect. Neither the Company nor any of
its Subsidiaries has received written notice of any violation of
any Law with respect to any of the Company Properties which,
individually or in the aggregate, would have a Company Material
Adverse Effect. To the Knowledge of the Company, no Governmental
Entity having jurisdiction over any Company Properties under
development has denied or rejected any applications by the
Company for a certificate, permit or license with respect to such
Company Property, except to the extent that the denial or
rejection of such application would not have a Company Material
Adverse Effect.
(d) Neither the Company nor any of its Subsidiaries has received any
written notice with respect to any Company Property to the effect
that any condemnation or rezoning proceedings are pending or
threatened, except as set forth in Section 2.14 of the Company
Disclosure Letter.
2.15 Contracts; Debt Instruments. (a) There have been made available
to Purchaser true, correct and complete copies of all of the
following contracts to which Company or any of its Subsidiaries
is a party or by which any of them is bound (collectively, the
"Material Contracts"): (i) the agreements pursuant to which the
Company or its Subsidiaries holds or grants a leasehold interest
in or otherwise has an economic interest in any real property;
(ii) contracts with any current or former officer or director of
the Company or any of its Subsidiaries; (iii) contracts (A) for
the sale of any of the material assets of the Company or any of
its Subsidiaries or the acquisition of any material amount of
assets by the Company or any of its Subsidiaries, other than
contracts entered into in the ordinary course of business, or (B)
for the grant to any person of any rights to purchase any of its
material assets; (iv) contracts which restrict the Company or any
of its Subsidiaries from competing in any line of business or
with any person in any geographical area in any material manner
or which restrict any other person from competing with the
Company or any of its Subsidiaries in any line of business or in
any geographical area in any material manner; (v) loan
commitments, indentures, credit agreements, security agreements,
mortgages, guarantees, promissory notes, letters of credit,
hedging obligations, capitalized lease obligations, take or pay
contracts and other contracts relating to Indebtedness (whether
owed by or held by the Company or any Subsidiary) in an amount in
excess of $1,000,000 (each note and mortgage of such type, a
"Mortgage"); (vi) all joint venture agreements; and (vii) any
material contract not made in the ordinary course of business.
For purposes of this Section 2.15, "Indebtedness" means (i)
indebtedness for borrowed money, whether secured or unsecured,
(ii) obligations under conditional sale or other title retention
agreements relating to property purchased by such Person, (iii)
capitalized lease obligations, (iv) obligations under interest
rate cap, swap, collar or similar transaction or currency hedging
transactions (valued at the termination value thereof), and (v)
guarantees of any such indebtedness of any other Person
(including any Subsidiary).
(b) All of the Material Contracts are in full force and effect and
are the legal, valid and binding obligations of the Company
and/or its Subsidiaries, enforceable against them in accordance
with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar Laws affecting
creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity). Except as set forth in
Section 2.15 of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries is in breach or default under
any Material Contract nor, to the Knowledge of the Company, is
any other party to any Material Contract in breach or default
thereunder, in either case except for such breaches and defaults
of any Material Contract, either individually or in the
aggregate, that would not have a Company Material Adverse Effect.
(c) Each Mortgage (or equivalent document) related to Indebtedness
held by the Company or any Subsidiary creates in such entity a
valid security interest in the property described therein. Except
as would not have a Company Material Adverse Effect, valid
policies of title insurance have been issued insuring the first
priority mortgage of the Company or a wholly owned Subsidiary of
the Company in each Mortgage and equivalent documents relating to
a Mortgage. To the Knowledge of the Company, the borrower under
each Mortgage has no valid defense that prevents the holder
thereof or its assigns from enforcing the payment provisions
thereof, or from foreclosing against the property subject to such
Mortgage. To the Knowledge of the Company, such Mortgage is not
subject to any valid right of rescission, setoff, abatement,
diminution, counterclaim or defense that prevents the holder
thereof or its assigns from enforcing the payment provisions of
the Mortgage, if any, or from foreclosing against the mortgaged
property subject to such Mortgage, and no such claims have been
asserted. Except as set forth on Schedule 2.15 of the Company
Disclosure Letter, the Company or the Subsidiary is the sole
owner of and holds legal title to each Mortgage, and no Mortgage
has been assigned or pledged and each Mortgage is owned by the
Company or the Subsidiary free and clear of any right, interest
or claim of any third party.
2.16 Environmental Matters. (a) Except as disclosed in Section 2.16 of
the Company Disclosure Letter and for such exceptions to any of
the following that, individually or in the aggregate, would not
have a Company Material Adverse Effect, (A) none of the Company
nor any of its Subsidiaries nor any other Person has caused or
permitted (i) the presence of any Hazardous Substances on any of
the Company's Properties, (ii) any spills, releases, discharges
or disposal of Hazardous Substances to have occurred or be
presently occurring on or from the Company Properties as a result
of any construction on or operation and use of the Company
Properties, (B) (i) the Company and its Subsidiaries have
complied with all applicable local, state and federal
Environmental Laws, including all regulations, ordinances and
administrative and judicial orders relating to the generation,
recycling, reuse, sale, storage, handling, transport and disposal
of any Hazardous Substances, (ii) the Company and its
Subsidiaries have obtained, currently maintain and, as currently
operating are in compliance with, all Permits necessary under any
Environmental Law ("Environmental Permits") for the conduct of
the business and operations of the Company and its Subsidiaries
in the manner now conducted, and, to the knowledge of the
Company, there are no actions or proceedings pending or
threatened to revoke or materially modify such Permits; (iii) no
Hazardous Substances have been used, stored, manufactured,
treated, processed or transported to or from any such Company
Property by the Company and its Subsidiaries or any other Person,
except as necessary to the customary conduct of business and in
compliance with Law and in a manner that does not result in
liability under applicable Environmental Laws; (iv) the Company
and its Subsidiaries have not received any written notice of
potential responsibility, letter of inquiry or written notice of
alleged liability from any Person regarding such Company Property
or the business conducted thereon; (v) no investigation, action
or review is pending or, to the Knowledge of the Company,
threatened by any Governmental Entity or other Person under any
Environmental Law, and (vi) all underground storage tanks located
on any Company Property have been removed or closed to the extent
required under any applicable Environmental Law. For the purposes
of this Section 2.16 only, "Company Properties" shall be deemed
to include all property formerly owned, operated or leased by the
Company or its current or former Subsidiaries, solely, however,
as to the period of time when such property was so owned,
operated or leased by the Company or its current or former
Subsidiaries. Except as described in Section 2.16 of the Company
Disclosure Letter, the Company has previously made available to
Purchaser complete copies of all final versions of environmental
investigations and testing or analysis (other than those which
have been superseded by more recent investigations, testing or
analyses) that are in the possession, custody or control of any
of the Company or any of its Subsidiaries with respect to the
environmental condition of the Company Properties.
(b) For purposes of this Agreement, the term (i) "Environmental Laws"
means any national, federal, state or local Law (including,
without limitation, common law), Order, Permit or any agreement
with any Governmental Entity or other third party (whether
domestic or foreign) relating to: (A) releases or threatened
releases of Hazardous Substances or materials containing
Hazardous Substances; (B) the manufacture, processing,
distribution, handling, transport, use, treatment, storage or
disposal of Hazardous Substances or materials containing
Hazardous Substances; or (C) pollution of the environment, and
(ii) "Hazardous Substances" means: (A) those materials,
pollutants and/or substances defined in or regulated under the
following federal statutes and their state counterparts, as each
may be amended from time to time, and all regulations thereunder:
the Hazardous Materials Transportation Act of 1980, the Resource
Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act,
the Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Toxic Substances
Control Act and the Clean Air Act; (B) petroleum and petroleum
products including crude oil and any fractions thereof; (C)
natural gas, synthetic gas and any mixtures thereof; (D) radon;
(E) asbestos; (F) any other contaminant; and (G) any materials,
pollutants and/or substance with respect to which any
Governmental Entity requires environmental investigation,
monitoring, reporting or remediation.
2.17 Company Benefit Plans; ERISA Compliance. (a) Except as disclosed
in Section 2.17(a) of the Company Disclosure Letter, there are no
compensation, bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock
purchase, stock option or other stock related rights, fringe
benefit, retirement, vacation, disability, death benefit,
supplemental unemployment benefits, hospitalization, medical,
dental, life, severance, post-employment benefits or other plan,
agreement, arrangement, policies or understanding, or employment
severance, retention, consulting, change of control or similar
agreement whether formal or informal, oral or written, providing
benefits to any current or former employee, officer, director or
shareholder of the Company or any of its Subsidiaries or to which
the Company or any of its Subsidiaries contributes or is or was
obligated to contribute (collectively, the "Company Benefit
Plans," which will include each "employee benefit plan" (within
the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), whether or not
subject to ERISA, but shall not include any Multiemployer Plan
(as defined below)). Section 2.17(a) of the Company Disclosure
Letter contains a true and complete list of all agreements or
plans providing for termination or severance pay to any officer,
director or employee of the Company.
(b) Each Company Benefit Plan has been administered in accordance
with its terms, all applicable Laws, including ERISA and the
Code, except to the extent that the failure to so administer the
applicable plan would not have a Company Material Adverse Effect.
Each Company Benefit Plan is in compliance with all applicable
Laws, including the applicable provisions of ERISA, and the Code.
Each Company Benefit Plan that is intended to be qualified under
Section 401(a) or 401(k) of the Code is so qualified and each
trust established in connection with any Company Benefit Plan
that is intended to be exempt from federal income taxation under
Section 501(a) of the Code is so exempt. No fact or event has
occurred which is reasonably likely to affect adversely the
qualified status of any such Company Benefit Plan or the exempt
status of any such trust, except for any occurrence that would
not, individually or in the aggregate, have a Company Material
Adverse Effect. All contributions to, and payments from, each
Company Benefit Plan and Multiemployer Plan that are required to
be made in accordance with such Plans and applicable Laws
(including ERISA and the Code) have been timely made.
(c) No Company Benefit Plan is or at any time was (i) subject to
Title IV of ERISA or (ii) subject to the minimum funding
standards of Section 302 of ERISA or Section 412 of the Code.
Except as set forth in Section 2.17(c) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries
contributes to any "multiemployer plan" within the meaning of
Section 3(37) of ERISA or a "multiple employer plan" within the
meaning of Section 3(40) of ERISA (each a "Multiemployer Plan").
(d) No Company Benefit Plan provides medical benefits (whether or not
insured) with respect to current or former employees, officers or
directors after retirement or other termination of service.
(e) Except as set forth on Section 2.17(e) of the Company Disclosure
Letter, the consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another
event, (i) entitle any current or former employee, officer or
director of the Company to severance pay, unemployment
compensation or any other payment or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation,
equity rights or benefits due any such employee, officer or
director.
(f) With respect to each Company Benefit Plan, the Company has
delivered or made available to Purchaser a true and complete copy
of: (A) each writing constituting a part of such Company Benefit
Plan, including without limitation all Company Benefit Plan
documents and trust agreements; (B) the most recent Annual Report
(Form 5500 Series) and accompanying schedule, if any; (C) the
most recent annual financial report, if any; (D) the most recent
actuarial report, if any; and (E) the most recent determination
letter from the IRS, if any.
(g) With respect to each Company Benefit Plan, there have been no
prohibited transactions or breaches of any of the duties imposed
on "fiduciaries" (within the meaning of Section 3(21) of ERISA)
by ERISA with respect to the Company Benefit Plans that would
result in any liability or excise tax under ERISA or the Code.
(h) There has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any of
its Subsidiaries relating to, or change in employee participation
or coverage under, any Company Benefit Plan which would increase
materially the expense of maintaining such Company Benefit Plan
above the level of the expense incurred in respect thereof for
the 12 months ended on the date of the most recent balance sheet
for the Company and its Subsidiaries.
(i) All contributions and payments due under each Company Benefit
Plan have either been discharged and paid or are adequately
reflected as a liability on the most recent balance sheet for the
Company and its Subsidiaries in accordance with GAAP.
(j) Except as set forth on Section 2.17(j) of the Company Disclosure
Letter, (i) neither the Company nor any of its Subsidiaries is a
party to or subject to any union contract or collective
bargaining agreement, (ii) the Company and its Subsidiaries are
in compliance in all material respects with all currently
applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, and are
not engaged in any unfair labor practice that would affect the
Company in any material respect, and (iii) there is no unfair
labor practice complaint pending or, to the Knowledge of the
Company, threatened against the Company or any of its
Subsidiaries before the National Labor Relations Board that would
affect the Company in any material respect.
(k) The execution, delivery or performance of the transactions
contemplated by the Transaction Documents does not constitute (i)
a "Change in Control" as defined in the Company's Change in
Control Agreements, dated as of March 22, 2000, with any of Essel
W. Bailey, David A. Stover, F. Scott Kellman, Laurence D. Rich or
Susan Allene Kovach (collectively, the "Senior Executive
Officers" and such agreements, the "Company Change in Control
Agreements") or (ii) "Change of Control" as defined in any of the
Stock Option Plans, in each case as in effect on the date of this
Agreement. 2.18 Related Party Transactions. Except for such of
the following as were filed as Exhibits to the Company's Annual
Report on Form 10-K for the year ended December 31, 1999 (the
"1999 Company 10-K"), set forth in Section 2.18 of the Company
Disclosure Letter is a list of all written arrangements,
agreements and contracts entered into by the Company or any of
its Subsidiaries with any Person who is an officer, director or
Affiliate of the Company, or any lineal descendent of any of the
foregoing, or any entity in which any of the foregoing has an
economic interest (excluding ownership of stock of publicly owned
companies), except those of a type described in Section 2.17.
2.19 No Brokers. The Company has not entered into any contract,
arrangement or understanding with any Person or firm which may
result in the obligation of the Company or Purchaser to pay any
investment banker's or finder's fees, brokerage or agent's
commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby, except that the Company has
retained J.P. Morgan & Co., Incorporated as its financial
advisor, the arrangements with which have been disclosed to
Purchaser prior to the date hereof. The Company will pay all
amounts owed pursuant to the foregoing arrangements.
2.20 Proxy Statement. The proxy statement to be mailed to the
stockholders of the Company (the "Company Stockholders") in
connection with the meeting of the Stockholders to approve the
issuance of the Shares to Purchaser on the Closing Date and the
shares of Common Stock and Series C Preferred Stock pursuant to
the Additional Equity Financing, to elect the Purchaser Designees
and the Independent Director to the Company Board pursuant to
Section 4.10, and to authorize the Additional Option Shares (the
"Company Stockholders Meeting", and such proxy statement, as
amended or supplemented, the "Proxy Statement"), at the date
mailed to the Company Stockholders and at the time of the Company
Stockholders Meeting (i) will comply in all material respects
with the applicable requirements of the Exchange Act and the
rules and regulations thereunder and (ii) will not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading.
2.21 Voting Requirements. The affirmative vote of no more than the
holders of a majority of the issued and outstanding shares of
Common Stock, voting as a single class, at the Company
Stockholders Meeting to approve the issuance of the Shares to
Purchaser on the Closing Date and shares of Common Stock and
Series C Preferred Stock to Purchaser pursuant to the Additional
Equity Financing, to elect the Purchaser Designees and the
Independent Director to the Company Board pursuant to Section
4.10, and to authorize the Additional Option Shares (the "Company
Stockholder Approval"), is the only vote of the holders of any
class or series of the Company's capital stock necessary to
approve the transactions contemplated hereby.
2.22 State Takeover Statues. The limitations on "business
combinations" (as defined in Subtitle 6 of Title 3 of the
Maryland General Corporation Law ("MGCL")) and the limitations on
voting rights of shares of stock acquired in a "control share
acquisition" (as defined in Subtitle 7 of Title 3 of the MGCL)
are not applicable to the transactions contemplated hereby. There
is no other provision of the MGCL or the Company's bylaws or
charter under which special voting or waiting period requirements
would become applicable, or Purchaser would not have rights
possessed by other stockholders, had the Company issued to
Purchaser all Company securities contemplated herein prior to the
date hereof.
2.23 Statements True and Correct. The representations made by the
Company pursuant to this Agreement, the certificate provided for
in Section 1.4(b)(ii) and the Company Disclosure Letter do not or
will not contain as of the date made any untrue statement of
material fact or do not omit or will not omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
3.1 Existence; Good Standing; Corporate Authority. Purchaser is a
limited partnership duly formed, validly existing and in good
standing under the laws of the State of Delaware. Purchaser is
duly licensed or qualified to do business as a limited
partnership and is in good standing in each jurisdiction in which
the character of the properties owned or leased by it or in which
the transaction of its business makes such qualification
necessary, except where the failure to be so qualified or to be
in good standing would not have a Purchaser Material Adverse
Effect. A "Purchaser Material Adverse Effect" means any change,
effect, event or condition that has had or could reasonably be
expected to (i) have a material adverse effect on the business,
results of operations or financial condition of Purchaser and its
Subsidiaries, taken as a whole, provided, however, that no event
referred to in clauses (b), (c), (d) or (e) of the proviso to the
definition of Company Material Adverse Effect will, as applied to
Purchaser, constitute a Purchaser Material Adverse Effect, or
(ii) prevent or materially delay Purchaser's ability to
consummate the transactions contemplated hereby. Purchaser has
all requisite limited partnership power and authority to own,
operate and lease its properties and carry on its business as now
conducted.
3.2 Authorization, Validity and Effect of Agreement. Purchaser has
all requisite limited partnership power and authority to execute
and deliver this Agreement and all agreements and documents
contemplated hereby and thereby to be executed respectively by
it. This Agreement and the consummation by Purchaser of the
transactions contemplated hereby have been duly and validly
authorized by the general partner of Purchaser and the applicable
governing body of Purchaser's general partner, and no other
action on the part of Purchaser or Purchaser's general partner is
necessary to authorize this Agreement or to consummate the
transactions contemplated hereby or thereby. This Agreement
constitutes, and all Transaction Documents contemplated hereby to
be executed and delivered by Purchaser (when executed and
delivered pursuant hereto) will constitute, the valid and binding
obligations of Purchaser, enforceable against it in accordance
with their respective terms, except that (i) the enforceability
hereof and thereof may be subject to applicable bankruptcy,
insolvency or other similar laws now or hereinafter in effect
affecting creditors' rights generally, (ii) the availability of
the remedy of specific performance or injunctive or other forms
of equitable relief may be subject to equitable defenses and
would be subject to the discretion of the court before which any
proceeding therefor may be brought, and (iii) rights to
indemnification may be limited by public policy considerations.
3.3 No Conflict; Required Filings and Consents. (a) The execution and
delivery of this Agreement by Purchaser do not, and the
consummation by Purchaser of the transactions contemplated hereby
will not, (i) conflict with or violate the articles of
incorporation, bylaws or other similar constituent documents of
Purchaser or any of its Subsidiaries, (ii) subject Purchaser to
making any filings, notifications or registrations and obtaining
any approvals, consents or authorizations identified in Section
3.3(b), conflict with or violate any Law or Order applicable to
Purchaser or any of its Subsidiaries or by which any property or
asset of Purchaser or any of its Subsidiaries is bound or
affected, or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss of a material
benefit under, or give to others any right of termination,
amendment, acceleration, increased payments or cancellation of,
or result in the creation of a Lien on any property or asset of
Purchaser or any of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Purchaser or
any of its Subsidiaries is a party or by which Purchaser or any
of its Subsidiaries or any property or asset of Purchaser or any
of its Subsidiaries is bound or affected, except in the case of
clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults, events, losses, rights, payments,
cancellations, encumbrances or other occurrences that would not,
individually or in the aggregate, have a Purchaser Material
Adverse Effect.
(b) The execution and delivery of this Agreement by Purchaser does
not, and the performance of this Agreement and the consummation
of the transactions contemplated hereby by it will not, require
any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Entity, except (i) for (A)
applicable requirements, if any, of the Exchange Act, and (B) the
applicable notification requirements of the HSR Act, and (ii)
where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not,
individually or in the aggregate, have a Purchaser Material
Adverse Effect.
3.4 No Brokers. Purchaser has not entered into any contract,
arrangement or understanding with any Person or firm which may
result in the obligation of the Company or any Subsidiary of the
Company to pay any investment banker's or finder's fees,
brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby, any such
amounts to be the sole liability of Purchaser.
3.5 Proxy Statement. None of the information provided by Purchaser or
its officers, directors, representatives, agents or employees
specifically for inclusion in the Proxy Statement will, on the
date the Proxy Statement is first mailed to the Company
Stockholders or at the time of the Company Stockholders Meeting,
contain any untrue statement of a material fact, or will omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
3.6 Sufficient Funds. After giving effect to the payment by Purchaser
of the Purchase Price which will be funded pursuant to valid,
binding and enforceable commitments in effect on the date hereof,
Purchaser will have sufficient funds available to (a) pay all
amounts required to be paid pursuant to this Agreement when due
and (b) pay all nonreimbursable fees, costs and expenses incurred
by Purchaser in connection with this Agreement and the
transactions contemplated herein.
3.7 Investment Intent. Purchaser is purchasing the Shares to be
purchased by it for its own account and for investment purposes,
and does not intend to redistribute the Shares (except in a
transaction or transactions exempt from registration under the
federal and state securities laws or pursuant to an effective
registration statement under such laws). Purchaser acknowledges
that the Shares have not been registered under the Securities Act
or any state blue sky or securities Laws and that the transfer of
the Shares may be subject to compliance with such Laws (in
addition to the restrictions set forth in the Stockholders
Agreement).
3.8 Investor Sophistication; Etc. Purchaser is an "accredited
investor" as defined in Regulation D under the Securities Act and
has such knowledge and experience in financial business matters
that it is capable of evaluating the merits and risks of an
investment in the Shares. Purchaser is not an "investment company
within the meaning of the Investment Company Act of 1940, as
amended.
IV. COVENANTS
4.1 Conduct of Business by the Company. During the period from the
date of this Agreement to the Closing Date, the Company will, and
will cause its Subsidiaries to, carry on their respective
businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the
extent consistent therewith, use all commercially reasonable
efforts to keep available the services of their current officers
and other key employees and preserve their relationships with all
key customers, suppliers and other Persons having business
dealings with them to the end that their goodwill and ongoing
businesses will not be materially impaired at the Closing Date.
The Company will confer on a regular basis with one or more
representatives of Purchaser to report operational matters of
materiality and any proposals to engage in material transactions.
Without limiting the generality or effect of the foregoing,
except as specifically described in Section 4.1 of the Company
Disclosure Letter or as expressly provided by this Agreement,
during the period from the date of this Agreement to the Closing
Date, the Company will not, and will not permit any of its
Subsidiaries to, without the prior written consent of Purchaser:
(a) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly owned Subsidiary of
the Company to its parent and quarterly distributions with
respect to the Series A Preferred Stock or Series B Preferred
Stock in the amounts provided for in the Articles Supplementary
in respect of such Series A Preferred Stock or Series B Preferred
Stock, as the case may be, and consistent with past practice and
regular quarterly dividends not in excess of $0.25 per share of
Common Stock which shall commence no earlier than the regular
dividend pay date in the third quarter of 2000, (i) declare, set
aside or pay any dividends on, or make any other distributions in
respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (iii) purchase,
redeem or otherwise acquire any shares of capital stock of the
Company or any of its Subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such
shares or other securities; provided, however, that the foregoing
restrictions shall not apply to the extent a distribution by the
Company is necessary for the Company to maintain REIT status or
to prevent the Company from having to pay federal income or
excise tax;
(b) except for the issuance of securities pursuant to the exercise of
options that are outstanding on the Measurement Date and are
listed in Section 2.3 of the Company Disclosure Letter, issue,
deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire,
any such shares, voting securities or convertible securities;
(c) except for filing the Series C Articles Supplementary with the
Maryland Secretary of State, amend its articles of incorporation
or bylaws;
(d) acquire by merging or consolidating with, or by purchasing all or
substantially all of the assets of, or in any other manner, any
business or any corporation, limited liability company,
partnership, joint venture, association or other business
organization or division thereof in a transaction or series of
related transactions involving a total purchase price (determined
in accordance with GAAP) in excess of $1,000,000;
(e) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or
assets, other than sales of assets which do not individually or
in the aggregate exceed $1,000,000;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities
or warrants or other rights to acquire any debt securities of the
Company or any of its Subsidiaries, guarantee any debt securities
of another Person, enter into any "keep well" or other agreement
to maintain any financial statement condition of another Person
or enter into any arrangement having the economic effect of any
of the foregoing or enter into any "keep well" or other agreement
to maintain any financial statement condition of another Person
or enter into any arrangement having the economic effect of any
of the foregoing, other than in any such case pursuant to the
Company's existing contractual obligations or in accordance with
the Company's 2000 operating plan previously provided to
Purchaser;
(g) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to the Company or
any wholly owned Subsidiary of the Company or to officers and
employees of the Company or any of its Subsidiaries for travel,
business or relocation expenses in the ordinary course of
business;
(h) except in accordance with the Company's 2000 operating plan
previously provided to Purchaser, make any capital expenditures,
unless required in order to cause any Company Property to comply
with applicable Law or to maintain Medicare or Medicaid
certification.
(i) make any change to its accounting methods, principles or
practices, except as may be required by GAAP, or make or change
any Tax election or settle or compromise any material Tax
liability or refund;
(j) except as required by Law or contemplated hereby, enter into,
adopt or amend in any material respect or terminate any Company
Benefit Plan or any other agreement, plan or policy involving the
Company or any of its Subsidiaries and one or more of their
directors, officers or employees;
(k) hire or terminate the employment of any executive officer or key
employee or increase the compensation of any director, executive
officer or other key employee or pay any benefit or amount not
required by a plan or arrangement as in effect on the date of
this Agreement to any such Person;
(l) increase the compensation of any employee other than in the
ordinary course of business;
(m) pay, discharge or settle any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) other than in the ordinary course of
business consistent with past practice and not in an amount in
excess of the amount reserved for in the Company Financial
Statements;
(n) authorize, recommend, propose or announce an intention to adopt a
plan of complete or partial liquidation or dissolution of the
Company or any of its Subsidiaries;
(o) amend the terms of, relinquish any material right under or
terminate any Material Contract, other than in the ordinary
course of business;
(p) enter into any material agreement not in the ordinary course of
business;.
(q) make, rescind or revoke any material express or deemed election
relative to Taxes (unless required by law or necessary to
preserve the Company's status as a REIT or the status of any
Subsidiary of the Company as a partnership for federal income tax
purposes or as a qualified REIT subsidiary under Section 856(i)
of the Code, as the case may be); or
(r) authorize, or commit or agree to take, any of the foregoing
actions or take any action which would make any of the
representations or warranties of the Company contained in this
Agreement untrue in any material respect as of the date when made
or as of a future date.
4.2 No Solicitation. (a) Prior to the earlier of (i) the Closing and
(ii) the termination of this Agreement in accordance with its
terms, the Company, its Affiliates and their respective officers,
directors, employees, representatives and agents will immediately
cease any existing discussions or negotiations, if any, with any
parties with respect to any Alternative Proposal, take the
necessary steps to inform such parties of the obligations
undertaken in this Section 4.2, and request that such parties
promptly return all documents (and all copies thereof) furnished
to them by the Company or its representatives in connection with
such discussions and negotiations or certify that any such
materials have been rendered unusable. The Company will not, nor
will it permit any of its Subsidiaries, nor any of their
respective officers, directors, employees, investment bankers,
financial advisors, attorneys, accountants or other
representatives, directly or indirectly to, (i) solicit,
initiate, encourage (including without limitation by way of
furnishing information or providing access to the books, records,
properties or assets of the Company or any of its Subsidiaries),
or knowingly facilitate the making of any proposal which
constitutes an Alternative Proposal, (ii) participate in any
discussions or negotiations regarding any Alternative Proposal,
or (iii) grant any waiver or release under any standstill or
similar agreement with respect to any class of equity securities
of the Company or any of its Subsidiaries; provided, however,
that if, at any time prior to the Closing Date, the Company Board
determines in good faith that it has received an Alternative
Proposal that the Company Board determines is reasonably likely
to result in a Superior Proposal, the Company may, (A) furnish
information with respect to the Company and any of its
Subsidiaries to such Person following compliance with its
obligations under this Section 4.2(b) pursuant to a customary
confidentiality agreement and (B) participate in discussions and
negotiations with such Person regarding such Alternative
Proposal. For purposes of this Agreement, "Alternative Proposal"
means (1) any proposal or offer from any Person relating to any
direct or indirect acquisition or purchase of assets or equity or
debt securities (or rights to purchase such securities), of the
Company and its Subsidiaries for aggregate gross proceeds in
excess of $35 million individually or when aggregated with other
proposals, offers or transactions, any tender offer or exchange
offer for any class of equity securities of the Company or any of
its Subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its
Subsidiaries, other than the transactions contemplated by this
Agreement, the incurrence of more than $25 million in principal
amount of indebtedness (other than indebtedness incurred in
connection with the permitted acquisition of assets that is
secured only by the assets acquired and other than any
transaction described in Schedule 4.2) and (2) any other
transaction that is conditioned upon the termination of this
Agreement or that would be reasonably expected, if consummated,
to frustrate the completion of the transactions contemplated
hereby, other than any such transactions described on Schedule
4.2. "Superior Proposal" means any bona fide, unsolicited written
Alternative Proposal that did not result from a breach of this
Section 4.2 and that involves payment of consideration to all of
the Company's stockholders in respect of the Common Stock and
other terms and conditions that, taken as a whole, the Company
Board determines in good faith, after consulting with a financial
advisor of nationally recognized reputation, and taking into
account all the terms and conditions of the Alternative Proposal,
including the nature and amount of any consideration, interest
rates, break-up fees, expense reimbursement provisions, the
conditions to consummation and the likelihood of completion, are
more favorable and provide greater value to the Company's
stockholders than as provided hereunder and for which financing,
to the extent required, is then fully committed or available. The
Company shall notify Purchaser promptly (but in no event later
than 24 hours) after receipt by the Company (or any of its
advisors) of any Alternative Proposal or any request for access
to the business, properties, assets, books or records of the
Company or any of its Subsidiaries by any Person that may be
considering making, or has made, an Alternative Proposal. The
Company shall provide such notice orally and in writing and shall
identify in reasonable detail the Person making, and the material
terms and conditions of, any such Alternative Proposal,
indication or request. The Company shall keep Purchaser fully
informed, on a current basis, of the status and material details
of any such Alternative Proposal, indication or request. Prior to
furnishing confidential information to, or entering into
discussions or negotiations with, any other Persons with respect
to an Alternative Proposal, the Company must obtain from such
other Persons an executed confidentiality agreement with terms no
more favorable to such Person than those contained in the
confidentiality agreement between the Company and Affiliates of
Purchaser, but which confidentiality agreement may not include
any provision calling for an exclusive right to negotiate with
such Persons, and the Company must advise Purchaser of the nature
of such confidential information delivered to such other Person
reasonably promptly following its delivery to the requesting
party.
(b) Except as expressly permitted by this Section 4.2(b), neither the
Company Board nor any committee thereof may (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner
adverse to Purchaser, the approval or recommendation by the
Company Board or such committee of this Agreement or the
transactions contemplated hereby, (ii) approve or recommend, or
propose publicly to approve or recommend, any Alternative
Proposal, or (iii) cause the Company to enter into any letter of
intent, agreement in principle or other agreement related to any
Alternative Proposal (each, a "Company Agreement").
Notwithstanding the foregoing, in the event that prior to the
Closing Date, the Company has received a Superior Proposal, the
Company Board may, subject to Section 7.5(b), withdraw or modify
its approval or recommendation of this Agreement or the
transactions contemplated hereby, approve or recommend a Superior
Proposal or terminate this Agreement pursuant to Section 7.3(c),
provided, however, that not fewer than five Business Days prior
to such termination, the Company will (i) notify Purchaser of its
intention to take such action, (ii) provide Purchaser with a
reasonable opportunity to respond to any such Alternative
Proposal, and (iii) negotiate in good faith with Purchaser with
respect to any modification to the terms of this Agreement.
(c) Nothing contained in this Section 4.2 will prohibit the Company,
following its receipt of a Superior Proposal, from taking and
disclosing to its Stockholders a position required by law,
including pursuant to Rule 14e-2(a) promulgated under the
Exchange Act.
4.3 Filings, Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties will
use all commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective,
in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including without limitation (i)
obtaining of all necessary actions or nonactions, waivers,
consents and approvals from Governmental Entities and making of
all necessary registrations and filings (including filings with
Governmental Entities) and taking of all reasonable steps as may
be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) obtaining,
in writing, of all necessary consents, approvals or waivers from
third parties in form reasonably satisfactory to Purchaser, (iii)
performing its obligations under the Amended Fleet Facility and
(iv) execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement.
4.4 Inspection of Records. From the date hereof to the Closing Date,
the Company will (i) allow all designated officers, attorneys,
accountants and other representatives of Purchaser reasonable
access at all reasonable times to the officers, key employees,
accountants and other representatives of the Company and its
Subsidiaries and the books and records of the Company and its
Subsidiaries, (ii) furnish to Purchaser and its counsel,
financial advisors, auditors and other authorized representatives
such financial and operating data and other information as such
Persons may reasonably request, and (iii) allow a representative
of Purchaser to attend each meeting of the Company Board,
provided that such representative shall not be allowed to attend
at any time in which the Company Board is discussing matters
relating to Purchaser, the Transaction Documents, or an
Alternative Proposal.
4.5 Publicity. The initial press release relating to this Agreement
will be in the form of a joint press release previously agreed
between Purchaser and the Company and thereafter the Company and
Purchaser will, subject to their respective legal obligations
(including requirements of stock exchanges and other similar
regulatory bodies), consult with each other, and use reasonable
efforts to agree upon the text of any press release, before
issuing any such press release or otherwise making public
statements with respect to the transactions contemplated hereby
and in making any filings with any Governmental Entity or with
any national securities exchange with respect thereto.
4.6 Proxy Statement; NYSE Listing. (a) The Company will promptly
prepare the Proxy Statement and file it with the SEC as soon as
practicable after the date hereof and will use its commercially
reasonable best efforts to have the Proxy Statement cleared by
the SEC on or prior to June 14, 2000 and promptly thereafter and
after Purchaser has waived the conditions set forth in Sections
5.3(g) and 5.3(h) will mail the Proxy Statement to the Company
Stockholders in order for the Company Stockholders Meeting to
occur on or prior to July 14, 2000. Purchaser will use its
commercially reasonable best efforts to cooperate with the
Company in the preparation and finalization of the Proxy
Statement. Any Proxy Statement will disclose the recommendation
of the Company Board as of the date hereof that the Company
Stockholders approve the transactions contemplated hereby,
including the issuance and sale of the Shares to Purchaser on the
Closing Date and the possible subsequent shares of Common Stock
and Series C Preferred Stock to the Purchaser pursuant to the
Additional Equity Financing (subject to the conditions set forth
in Exhibit B), the election of the Purchaser Designees and the
Independent Director to the Company Board in accordance with
Section 4.10 and an increase in the number of shares of Common
Stock reserved for issuance under the Stock Option Plans (the
"Additional Option Shares"). The Company agrees not to mail the
Proxy Statement to the Stockholders until Purchaser confirms that
the information provided by Purchaser continues to be accurate.
If at any time prior to the Company Stockholders Meeting any
event or circumstance relating to the Company or any of its
Subsidiaries or Affiliates, or its or their respective officers
or directors, should be discovered by the Company that is
required to be set forth in a supplement to any Proxy Statement,
the Company will inform Purchaser, supplement such Proxy
Statement and mail such supplement to the Company Stockholders.
The Company will promptly advise the Purchaser of any oral or
written comments to the Proxy Statement from the SEC or the
issuance of any stop order with respect to the Proxy Statement.
The Company will provide the Purchaser and its counsel with a
reasonable opportunity to review and comment on the Proxy
Statement and any amendment or supplement thereto prior to filing
such with the SEC, and will provide the Purchaser with a copy of
all such filings made with the SEC.
(b) The Company will use its best efforts to cause the shares of the
Common Stock to be issued upon the conversion of the Series C
Preferred Stock to be approved for listing on the NYSE, subject
to official notice of issuance, prior to the Closing Date.
4.7 Company Stockholders Meeting. The Company will take all action
necessary in accordance with applicable Law and its articles of
incorporation and bylaws to duly call, give notice of, after the
Purchaser has waived the conditions set forth in Sections 5.3(g)
and 5.3(h), convene and hold a special meeting of the Company
Stockholders as promptly as practicable (but in no event later
than July 14, 2000) and to include for consideration and vote at
the Company Stockholders Meeting the approval of the issuance of
the Shares to Purchaser on the Closing Date, the reservation of
the Additional Option Shares for issuance under the Stock Option
Plans, the possible subsequent issuance of the Common Stock and
the Series C Preferred Stock pursuant to the Additional Equity
Financing (subject to the conditions set forth in Exhibit B), and
the election of the Purchaser Designees and the Independent
Director to the Company Board pursuant to Section 4.10. Subject
to Section 4.2, the Company Board will recommend such approval
and adoption and the Company will take all lawful action to
solicit such approval, including without limitation timely
mailing of the Proxy Statement.
4.8 Reserved.
4.9 REIT-Related Matters. (a) The Company will take such further
actions and engage in such further transactions as Purchaser
reasonably requests to preserve the Company's status as a REIT
under the Code (including with respect to the period following
the Closing Date) and to avoid the payment of any Taxes under
Sections 857(b), 859(f), 860(c) or 4981 of the Code. The Company
will not make or rescind any express or deemed election relative
to Taxes (unless required by Law or necessary to preserve the
Company's status as a REIT or the status of any Subsidiary as a
partnership for federal income Tax purposes or as a qualified
REIT subsidiary under Section 856(i) of the Code, as the case may
be).
(b) The Company Board will take no action that would render Section 4
of Article V of the Company's articles of incorporation
applicable to, and will not exercise any right provided under
such section with respect to, Purchaser or to the transactions
contemplated by this Agreement.
4.10 Company Board. (a) The Company shall take all necessary action so
that, as of the Closing, the Company Board shall be constituted
as follows: (i) Essel Bailey, (ii) three individuals who are
directors of the Company on the date of this Agreement and who
are acceptable to Purchaser, (iii) four individuals designated by
Purchaser (the "Purchaser Designees"), and (iv) one additional
person acceptable to Purchaser and the existing Board who shall
satisfy the qualification requirements as an "independent"
director and as a member of the audit committee of both the
Company and Purchaser under the rules and regulations of the New
York Stock Exchange (assuming for such purpose that Purchaser was
a NYSE-listed company) (the "Independent Director"). In the event
the Independent Director or any of the Purchaser Designees shall
be unable to serve as a director as of the Closing, a replacement
for such director shall be designated by the same party which
designated such individual and in the same manner as set forth in
this Section 4.10.
(b) Effective as of the Closing, the Company will amend its bylaws to
provide that (i) each committee of the Company Board will be
comprised of that number of Purchaser Designees equal to the
product (rounded to the nearest whole number in accordance with
established mathematical convention) of the number of directors
on such committee multiplied by a fraction, the numerator of
which is the number of Purchaser Designees and the denominator of
which is the number of directors on the entire Company Board;
provided, however, that the number of Purchaser Designees shall
not constitute a majority of the members of any committee unless
the Purchaser Designees also constitute a majority of the members
of the Company Board, and (ii) the total number of directors will
not exceed nine. Such amendment may not be further amended by the
Company Board without the approval of a majority of the Purchaser
Designees.
(c) On the Closing Date, in the event any of the Purchaser Designees
or the Independent Director shall not have been elected to the
Company Board at the Company Stockholders Meeting, the Company
shall use its best efforts to cause the directors of the Company
or any Subsidiaries of the Company to submit their resignations
from such positions as may be necessary to appoint the Purchaser
Designees and the Independent Director to the Company Board in
accordance with Section 4.10, effective as of the Closing Date.
4.11 Additional Rights. From and after the date hereof, neither the
Company nor the Company Board will declare or distribute any
additional Rights or take any other action that would adversely
discriminate against Purchaser based on its ownership of shares
of capital stock of the Company.
4.12 Further Action. Each of the parties hereto will use all
commercially reasonable efforts to take, or cause to be taken,
all appropriate action, do or cause to be done all things
reasonably necessary, proper or advisable under applicable law,
and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and the
other documents contemplated hereby and consummate and make
effective the transactions contemplated hereby and thereby.
4.13 Amended Fleet Facility; Management Compensation Arrangements;
Provident Waiver. The Company will use commercially reasonable
efforts to enter into the Amended Fleet Facility, the Management
Compensation Arrangements and the Provident Waiver within ten
Business Days after the date of this Agreement and, in any event,
prior to mailing the Proxy Statement to the Company Stockholders.
V. CONDITIONS TO CLOSING
5.1 Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at
or prior to the Closing Date of the following conditions:
(a) The Company Stockholder Approval shall have been obtained; and
(b) No Order or Law enacted, entered, promulgated, enforced or issued
by any court of competent jurisdiction or other Governmental
Entity or other legal restraint or prohibition preventing the
consummation of the transactions contemplated by this Agreement
shall be in effect.
5.2 Conditions to Obligations of the Company. The obligations of the
Company to consummate the transactions contemplated by this
Agreement are subject to the satisfaction or waiver, at or prior
to the Closing of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of Purchaser contained in this Agreement shall
have been true and correct when made and shall be true and
correct in all material respects (other than those qualified by
materiality or Purchaser Material Adverse Effect, which shall be
true and correct in all respects) as of the Closing, with the
same force and effect as if made as of the Closing, other than
such representations and warranties as are made as of another
date (which shall be so true and correct as of such other date)
(provided that the foregoing condition shall be deemed satisfied
so long as any failures of such representations and warranties to
be true and correct, taken together, would not, individually or
in the aggregate, reasonably be expected to have a Company
Material Adverse Effect), and the covenants and agreements
contained in this Agreement to be complied with by Purchaser as
of or before the Closing Date shall have been complied with in
all material respects.
(b) Deliveries. All items set forth in Section 1.4(a) hereof shall
have been delivered to the Company.
5.3 Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated by this
Agreement are subject to the satisfaction or waiver, at or prior
to the Closing of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Company contained in this Agreement shall
have been true and correct when made and shall be true and
correct in all material respects (other than those qualified by
materiality or Company Material Adverse Effect, which shall be
true and correct in all respects) as of the Closing, with the
same force and effect as if made as of the Closing, other than
such representations and warranties as are made as of another
date (which shall be so true and correct as of such other date)
(provided that the foregoing condition shall be deemed satisfied
so long as any failures of such representations and warranties to
be true and correct, taken together, would not, individually or
in the aggregate, reasonably be expected to have a Company
Material Adverse Effect), and the covenants and agreements
contained in this Agreement to be complied with by the Company as
of or before the Closing Date shall have been complied with in
all material respects.
(b) Litigation. No action, suit or proceeding shall have been
commenced or threatened in writing by or before any court or
other Governmental Entity against Purchaser, the Company or any
of their respective Affiliates, seeking to restrain or materially
and adversely alter the transactions contemplated hereby or by
the other documents contemplated hereby, which (i) is reasonably
likely to render it impossible or unlawful to consummate the
transactions contemplated hereby or thereby, (ii) in the good
faith judgment of Purchaser could reasonably be expected to have
a Company Material Adverse Effect or materially limit or restrict
the rights of the Purchaser under the Transaction Documents, or
(iii) seeks material damages.
(c) Consents and Approvals. Purchaser and the Company shall have
received, each in form and substance satisfactory to Purchaser in
its reasonable good faith determination, all authorizations,
consents, orders, permits, licenses and approvals of all
Governmental Entities and all third party consents and waivers
set forth on Schedule 5.3(c), including a permanent waiver from
The Provident Bank (the "Provident Waiver") of the requirement
that the Company apply any proceeds from the sale of any company
securities (including, without limitation, securities sold to
Purchaser pursuant to this Agreement) to the repayment of any
indebtedness of the Company or to apply such proceeds other than
as set forth in Section 1.5.
(d) No Material Adverse Effect. Except as specifically disclosed in
the Company Reports filed prior to the date hereof, since January
1, 2000, no event or events shall have occurred with respect to
the Company or any Subsidiary, or be reasonably likely to occur
with respect to any thereof, which could reasonably be expected
to have a Company Material Adverse Effect.
(e) Deliveries. All items set forth in Section 1.4(b) hereof shall
have been delivered to Purchaser.
(f) Rights Amendment. The Rights Amendment shall continue to be in
effect and no "Triggering Event," "Distribution Date" or "Stock
Acquisition Date" shall have occurred pursuant to and as defined
in the Company Rights Agreement.
(g) Amended Fleet Facility. The Company and Fleet Bank, N.A.
("Fleet") shall have entered into agreements contemplated by the
commitment letter of Fleet, dated May 5, 2000, attached hereto as
Exhibit H (the "Amended Fleet Facility") containing, without
limitation, terms previously disclosed in writing to the Company
by Purchaser, all the terms of the Amended Fleet Facility to be
acceptable to Purchaser in Purchaser's sole discretion; provided
that if Purchaser has not delivered to the Company a written
waiver, on or before 5:30 p.m. (New York City time) on the third
Business Day after receipt by Purchaser of a written request by
the Company to waive in writing the condition set forth in this
Section 5.3(g) as it applies to the final and definitive
documentation for the Amended Fleet Facility received by the
Company, (i) the restrictions set forth in Section 4.2 of this
Agreement and (ii) the Purchaser's right to terminate this
Agreement pursuant to Section 7.4(c) shall be rendered
inapplicable and of no force and effect until a written waiver
from the Purchaser with respect to this Section 5.3(g) has been
delivered to the Company which written waiver may be given at any
time within or after such three-day period, in which event the
foregoing Sections will, without further action, be reinstated.
(h) Management Compensation Arrangements. The Company and each of the
Senior Executive Officers shall have entered into salary, bonus,
severance and incentive compensation arrangements approved by the
Compensation Committee of the Company Board and the full Company
Board and on terms acceptable to Purchaser in Purchaser's sole
discretion (the "Management Compensation Arrangements"); provided
that if Purchaser has not delivered to the Company a written
waiver, on or before 5:30 p.m. (New York City time) on the third
Business Day after receipt by Purchaser of a written request by
the Company to waive in writing the condition set forth in this
Section 5.3(h) as it applies to the final and definitive
agreements evidencing the Management Compensation Arrangements,
(i) the restrictions set forth in Section 4.2 of this Agreement
and (ii) the Purchaser's right to terminate this Agreement
pursuant to Section 7.4(c) shall be rendered inapplicable and of
no force and effect until a written waiver from the Purchaser
with respect to this Section 5.3(h) has been delivered to the
Company which written waiver may be given at any time within or
after such three-day period, in which event the foregoing
Sections will, without further action, be reinstated.
(i) REIT Matters. (i) There shall have not been a "change of law"
such that the Company would not qualify (prior to or after the
Closing Date) as a REIT. For this purpose, the term "change of
law" will mean any amendment to or change (including any
announced prospective change having a proposed effective date at
or prior to the Closing Date) in the federal tax laws of the
United States, including any statute, regulation or proposed
regulation or any official administrative pronouncement
(consisting of the issuance or revocation of any revenue ruling,
revenue procedure, notice, private letter ruling or technical
advice memorandum) or any judicial decision interpreting such
federal tax laws (whether or not such pronouncement or decision
is issued to, or in connection with, a proceeding involving the
Company or a Subsidiary of the Company or is subject to review or
appeal) and (ii) Purchaser shall have received an opinion of
Argue, Pearson, Harbison & Myers, LLP Purchaser, dated as of the
Closing Date, in the form attached hereto as Exhibit I, to the
effect that (A) commencing with its taxable year ended the end of
the Company's first REIT tax year, the Company was organized and
has operated in conformity with the requirements for
qualification as a REIT under the Code and (B) the transactions
contemplated by this Agreement will not prevent the Company from
continuing to operate in conformity with the requirements for
qualification as a REIT under the Code.
(j) NYSE Listing. The NYSE shall have approved for listing the Common
Stock issuable upon conversation of the Series C Preferred Stock,
subject to official notice of issuance.
(k) Company Board. The Company Board shall have been reconstituted in
the manner described in Section 4.10 and the Purchaser Designees
and the Independent Director shall have been elected to the
Company Board at the Company Stockholders Meeting or shall have
been appointed to the Company Board in accordance with Section
4.10, and such election shall have been approved by at least
two-thirds of the Incumbent Directors (as defined in the Company
Change in Control Agreements).
(l) Fleet Loan Closing. The transactions contemplated under the
Amended Fleet Facility shall have closed prior to, or
simultaneously on, the Closing Date. (m) Series C Articles
Supplementary. The Series C Articles Supplementary shall have
been filed and accepted for record by the appropriate Maryland
governmental authority, and shall have become effective in
accordance with the laws of the State of Maryland.
VI. INDEMNIFICATION
6.1 Indemnification of Purchaser. (a) Right of Indemnification.
Subject to the terms of this Article VI, the Company covenants
and agrees to indemnify and hold harmless each of Purchaser and
its Affiliates and their respective partners, members, officers,
directors, employees, attorneys, advisors and agents controlling,
and any person or entity controlling, controlled by or under
common control with, any of the foregoing within the meaning of
either Section 15 of the Securities Act or Section 20 of the
Exchange Act, including without limitation [Hampstead] and its
Affiliates (collectively, the "Indemnified Parties"), from and
against all losses, claims, liabilities, damages, costs
(including without limitation costs of preparation and reasonable
attorneys' fees and charges) and reasonable expenses (including
without limitation expenses incurred in connection with
investigating, preparing or defending any action, claim or
proceeding, whether or not in connection with pending or
threatened litigation in which any Indemnified Party is a party)
or actions in respect thereof (each such individual occurrence is
hereinafter referred to as a "Loss" and collectively, as
"Losses") suffered by any Indemnified Party, directly or
indirectly, arising out of (i) any inaccuracy in or breach of any
of the representations, warranties, covenants or agreements made
by the Company in this Agreement or in any other document
contemplated hereby or (ii) any actual or threatened claim
against such Indemnified Party by a person or entity related to
or arising out of or in connection with this Agreement, the
Registration Rights Agreement, the Advisory Agreement, the
Stockholders Agreement or any other transaction document or any
actions taken by any Indemnified Party pursuant hereto or thereto
or in connection with the transactions contemplated hereby or
thereby (whether or not the transactions contemplated hereby or
thereby are consummated) (collectively, "Transactional Losses").
(b) Transactional Losses. The Company will not be liable to any
Indemnified Party for any Transactional Losses to the extent, but
only to the extent, that it is finally judicially determined by a
court of competent jurisdiction (which determination is not
subject to appeal) that such Transactional Losses resulted
primarily from (i) such Indemnified Party's breach of this
Agreement or (ii) a misstatement or omission contained in a
report filed by such Indemnified Party pursuant to the Exchange
Act, the Securities Act or any other Law unless such misstatement
or omission relates to information furnished or confirmed by or
on behalf of the Company. The indemnification provisions of this
Section 6.1 are expressly intended to cover Transactional Losses
relating to an Indemnified Party's own negligence. The Company
will promptly reimburse each Indemnified Party for all such
Transactional Losses as they are incurred. If the foregoing
indemnity is unavailable to any Indemnified Party or insufficient
to hold any Indemnified Party harmless, then the Company will
contribute to the amount paid or payable by such Indemnified
Party as a result of such Transactional Loss in such proportion
as is appropriate to reflect the relative fault of the Company,
on the one hand, and such Indemnified Party, on the other, as
well as any other relevant equitable considerations. The relative
fault of the Company, on the one hand, and any Indemnified Party,
on the other, will be determined by reference to, among other
things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or
alleged omission to state a material fact, has been taken by, or
relates to information supplied by, the Company or such
Indemnified Party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent any
such action, statement or omission. The amount paid or payable by
a party as a result of any Transactional Losses will be deemed to
include any reasonable legal or other fees or expenses incurred
by such party in connection with any action, suit or proceeding.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this paragraph were determined by
prorata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to
above. No person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will
be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(c) Threshold. No Indemnified Party will be entitled to
indemnification pursuant to this Section 6.1 with respect to any
Losses in respect of breaches of representations and warranties
until the aggregate amount of all such Losses suffered by
Indemnified Parties in the aggregate exceeds $500,000 (the
"Threshold"), whereupon Indemnified Parties will be entitled to
indemnification pursuant to this Section 6.1 from the Company for
the full amount of all such Losses suffered by Indemnified
Parties (regardless of the Threshold) up to an aggregate total
amount of the Purchase Price and any amounts paid by Purchaser
pursuant to the Additional Equity Financing (the "Cap"). The
foregoing provision of this Section 6.1(c) notwithstanding, the
Threshold and the Cap will not apply with respect to any Loss or
Losses relating directly or indirectly to claims of any nature
whatsoever (i) relating to, resulting from or arising out of any
breach of any covenant or agreement made by the Company in this
Agreement or in any Transaction Documents or (ii) against any
Indemnified Party or Parties made by or on behalf of any director
or officer of the Company or any of its Subsidiaries.
(d) Survival. No Indemnified Party will be entitled to give a Notice
of Claim with respect to any actual or alleged breach of any
representation or warranty herein after the third anniversary of
the date of the Closing.
6.2 Procedure for Claims. (a) Notice of Claim. After obtaining
knowledge of any claim or demand which has given rise to, or
could reasonably give rise to, a claim for indemnification under
this Article VI (referred to herein as an "Indemnification
Claim"), an Indemnified Party will be required to give written
notice to the Company of such Indemnification Claim ("Notice of
Claim"). A Notice of Claim will be given with respect to all
Indemnification Claims, whether or not the Threshold has been
reached; provided, however, that the failure to give Notice of
Claim to the Company will not relieve the Company from any
liability that it may have to an Indemnified Party hereunder to
the extent that the Company is not prejudiced by such failure.
The Notice of Claim will be required to set forth the amount (or
a reasonable estimate) of the Loss or Losses suffered, or which
may be suffered, by an Indemnified Party as a result of such
Indemnification Claim, whether or not the Threshold has been
reached, and a brief description of the facts giving rise to such
Indemnification Claim. The Indemnified Party will furnish to the
Company such information (in reasonable detail) it may have with
respect to such Indemnification Claim (including copies of any
summons, complaint or other pleading which may have been served
on it and any written claim, demand, invoice, billing or other
document evidencing or asserting the same).
(b) Third Party Claim. (i) If the claim or demand set forth in the
Notice of Claim is a claim or demand asserted by a third party (a
"Third Party Claim"), the Company will have 15 calendar days
after the date of receipt by the Company of the Notice of Claim
(the "Notice Date") to notify the Indemnified Parties in writing
of the election by the Company to defend the Third Party Claim on
behalf of the Indemnified Parties, provided, however, that the
Company will be entitled to assume the defense of any such Third
Party Claim only if it unconditionally and irrevocably undertakes
to indemnify all Indemnified Parties in respect thereof (subject
to any applicable limitations set forth in Section 6.1).
(ii) If the Company elects to defend a Third Party Claim on behalf of
the Indemnified Parties, the Indemnified Parties will make
available to the Company and their agents and representatives all
records and other materials in their possession which are
reasonably required in the defense of the Third Party Claim, and
the Company will pay all expenses payable in connection with the
defense of the Third Party Claim as they are incurred (subject to
any applicable limitations set forth in Section 6.1).
(iii) In no event may the Company settle or compromise any Third Party
Claim without the Indemnified Parties' consent, which may not be
unreasonably withheld, provided, however, that if a settlement is
presented by the Company to the Indemnified Parties for approval
and the Indemnified Parties withhold their consent thereto, then
any amount by which the final Losses (including reasonable
attorneys' fees and charges) resulting from the resolution of the
matter exceeds the sum of the rejected settlement amount plus
attorneys' fees incurred to such date will be excluded from the
amount covered by the indemnification provided for in this
Agreement and shall be borne by the Indemnified Parties.
(iv) If the Company elects to defend a Third Party Claim, the
Indemnified Parties will have the right to participate in the
defense of the Third Party Claim, at the Indemnified Parties'
expense (and without the right to indemnification for such
expense under this Agreement), provided, however, that the
reasonable fees and expenses of counsel retained by the
Indemnified Parties will be at the expense of the Company if (A)
the use of the counsel chosen by the Company to represent the
Indemnified Parties would present such counsel with a conflict of
interest; (B) the parties to such proceeding include both
Indemnified Parties and the Company and there may be legal
defenses available to Indemnified Parties which are different
from or additional to those available by the Company; (C) within
10 calendar days after being advised by the Company of the
identity of counsel to be retained to represent Indemnified
Parties, they shall have objected to the retention of such
counsel for valid reasons (which shall be stated in a written
notice to the Company), and the Company shall not have retained
different counsel satisfactory to the Indemnified Parties; or (D)
the Company shall have authorized the Indemnified Parties to
retain a single separate counsel at the expense of the Company,
such authorization to be made by the directors who are not
designees of Purchaser or its Affiliates.
(v) If the Company does not elect to defend a Third Party Claim, or
does not defend a Third Party Claim in good faith, the
Indemnified Parties will have the right, in addition to any other
right or remedy it may have hereunder, at the sole and exclusive
expense of the Company, to defend such Third Party Claim.
(c) Cooperation in Defense. The Indemnified Parties will cooperate
with the Company in the defense of a Third Party Claim and make
reasonably available the facts relating to the Third Party Claim.
Subject to the foregoing, (i) no Indemnified Party will have any
obligation to participate in the defense of or to defend any
Third Party Claim and (ii) no Indemnified Parties' defense of, or
their participation in, the defense of any Third Party Claim will
in any way diminish or lessen their right to indemnification as
provided in this Agreement.
6.3 Indemnification of the Company. Purchaser will indemnify and hold
harmless the Company and its current and future officers,
directors, employees and agents from and against all Losses
suffered by any of them as a result of any inaccuracy in or
breach of any of the representations, warranties or covenants
made by Purchaser hereunder. The procedures for and limits on
indemnification in respect of the obligations of Purchaser under
this Section 6.3 will be the same as those set forth in Section
6.1 and 6.2.
6.4 Non-Exclusivity of Indemnification. The rights of any Indemnified
Party hereunder will not be exclusive of the rights of any
Indemnified Party under any other agreement or instrument to
which the Company is a party. Nothing in such other agreement or
instrument will be interpreted as limiting or otherwise adversely
affecting an Indemnified Party's rights hereunder and nothing in
this Agreement will be interpreted as limiting or otherwise
adversely affecting the Indemnified Party's rights under any such
other agreement or instrument; provided, however, that no
Indemnified Party will be entitled hereunder to recover more than
its indemnified Losses. The indemnity, contribution and expense
reimbursement obligation of the Company in this Agreement will be
in addition to any liability the Company may otherwise have. The
obligations of the Company to each Indemnified Party will be
separate obligations, and the liability of the Company to any
Indemnified Party will not be extinguished solely because any
other Indemnified Party is not entitled to indemnity or
contribution hereunder.
6.5 Survival of Indemnification. The provisions of this Article VI
will survive notwithstanding any termination hereof or the
Closing of any of the transactions contemplated hereby.
VII. TERMINATION AND WAIVER
7.1 Termination by Mutual Consent. This Agreement may be terminated
at any time prior to the Closing Date, whether or not the Company
Stockholder Approval has been obtained, by the mutual consent of
Purchaser and the Company.
7.2 Termination by Either Purchaser or Company. This Agreement may be
terminated by action of the Board of Directors (or similar
governing body) of either Purchaser or the Company, whether or
not the Company Stockholder Approval has been obtained, if:
(a) the Closing shall not have occurred on or before August 31, 2000
(the "Outside Date"); provided, however, that no party may
terminate this Agreement pursuant to this Section 7.2(a) if such
party's failure to fulfill any of its obligations under this
Agreement shall have been the reason that the Closing shall not
have occurred on or before said date; or
(b) the Company Stockholder Approval shall not have been obtained
upon the taking of such vote at the Company Stockholder Meeting
or at any adjournment thereof; or
(c) any Governmental Entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the consummation of this
Agreement or any of the other transactions contemplated by this
Agreement and such order, decree or ruling or other action shall
have become final and nonappealable.
7.3 Termination by Company. This Agreement may be terminated at any
time prior to the Closing Date by action of the Company Board,
if:
(a) Purchaser shall have materially breached any provision of this
Agreement and as a result thereof the conditions to the Company's
obligations set forth in Section 5.2(a) shall not be capable of
being fulfilled; provided that any breach(s) of any
representation or warranty that individually or in the aggregate
shall give rise to a Purchaser Material Adverse Effect and
providing the basis for such termination is not curable or, if
curable, is not cured within ten calendar days after written
notice of such breach is given by the Company to Purchaser; or
(b) there has been a material breach or failure to perform of any of
the covenants set forth in this Agreement on the part of
Purchaser, which breach is not curable or, if curable, is not
cured within ten calendar days after written notice of such
breach is given by the Company to Purchaser; or
(c) (i) the Company Board shall have authorized the Company, subject
to complying with the terms of this Agreement, to enter into a
Company Agreement with respect to a Superior Proposal and the
Company shall have complied with its obligations under Section
4.2(b), (ii) Purchaser shall not have made, within five Business
Days of receipt of the Company's written notification of its
intention to enter into a Company Agreement with respect to a
Superior Proposal, an offer that the Company Board determines in
good faith, after consultation with its financial advisors, is at
least as favorable, from a financial point of view, to the
Stockholders as such Superior Proposal, and (iii) the Company
prior to such termination pursuant to this clause (c) shall have
paid to Purchaser in immediately available funds the fees
required to be paid pursuant to Section 7.5; or
(d) The Company shall have complied with its obligations under
Sections 5.3(g), 5.3(h) and 4.13, and Purchaser shall not have
waived the conditions set forth in Sections 5.3(g) and 5.3(h)
within ten Business Days after written request to do so by the
Company.
7.4 Termination by Purchaser. This Agreement may be terminated at any
time prior to the Closing Date by action of Purchaser, if:
(a) the Company shall have materially breached any provision of this
Agreement and as a result thereof the conditions to Purchaser's
obligations set forth in Section 5.3(a) shall not be capable of
being fulfilled; provided that any breach(s) of any
representation or warranty that individually or in the aggregate
shall give rise to a Company Material Adverse Effect and
providing the basis for such termination is not curable or, if
curable, is not cured within ten calendar days after written
notice of such breach is given by Purchaser to the Company; or
(b) there has been a material breach or failure to perform of any of
the covenants set forth in this Agreement on the part of the
Company, which breach is not curable or, if curable, is not cured
within ten calendar days after written notice of such breach is
given by Purchaser to the Company; or
(c) (i) the Company Board or any committee thereof shall have (A)
following receipt of an Alternative Proposal, failed to reconfirm
within ten Business Days of a written request by Purchaser to do
so, or at any time withdrawn or modified in a manner adverse to
Purchaser, its approval or recommendation of this Agreement and
the transactions contemplated hereby or (B) approved or
recommended, or proposed publicly to approve or recommend, any
Alternative Proposal or shall have resolved to do any of the
foregoing, or (ii) the Company shall have entered into a Company
Agreement or the Company Board shall have authorized the Company
to do so; or
(d) (i) any person, entity or group (as defined in Section 13(d)(3)
of the Exchange Act) shall have acquired beneficial ownership of
more than 10% of the voting securities of the Company through the
acquisition of voting securities, the formation of a group or
otherwise, or shall have been granted any option, right or
warrant, conditional or otherwise, to acquire beneficial
ownership of more than 10% of the voting securities of the
Company and (ii) the Company Board shall not have exercised its
rights under Section 4 of Article V of the Company's articles of
incorporation to limit such ownership within five Business Days
after notice of such acquisition; or
(e) the indebtedness under the Senior Unsecured Notes shall have
matured and become due prior to the Closing Date or there shall
have been a default or event of default as to more than $1.0
million of the Company's indebtedness, including without
limitation the indebtedness under the Fleet Loan Documents, which
is not then subject to a valid and binding agreement of the
lenders thereof waiving such default or event of default.
7.5 Effect of Termination and Abandonment; Termination Fee. (a) In
the event of termination of this Agreement pursuant to this
Article VII, all obligations of the parties hereto will
terminate, except the obligations of the parties pursuant to this
Section 7.5, Section 4.5, Article VI and Article VIII.
(b) The Company will pay to Purchaser an amount equal to $6.0 million
(the "Company Termination Fee") plus the Purchaser Expenses if:
(i) this Agreement is terminated pursuant to Section 7.3(c), Section
7.4(c), or Section 7.4(d); or
(ii) this Agreement is terminated pursuant to Section 7.2(b), Section
7.4(a) or Section 7.4(b) and each of the following shall have
occurred:
(A) at any time after the date of this Agreement and at or before the
date of the Company Stockholder Meeting, an Alternative Proposal
shall have been publicly announced or publicly communicated (a
"Prior Alternative Proposal"); and
(B) within 18 months of the date of the termination of this
Agreement, the Company enters into a definitive agreement with
respect to (1) such Prior Alternative Proposal or any other
Alternative Proposal with any party or Affiliate of any party who
made a Prior Alternative Proposal or (2) any Alternative Proposal
with any other Person; or
(iii)(A) this Agreement is terminated pursuant to Section 7.3(d) and
(B) within 18 months of the date of the termination of this
Agreement, the Company enters into a definitive agreement with
respect to an Alternative Proposal.
(c) The Company acknowledges that the agreements contained in this
Section 7.5 are an integral part of the transactions contemplated
by this Agreement, and that, without these agreements, Purchaser
would not enter into this Agreement; accordingly, if the Company
fails promptly to pay any amount due pursuant to this Section
7.5, and, in order to obtain such payment, Purchaser commences a
suit which results in a judgment against the Company for any
amounts set forth in this Section 7.5, the Company will pay to
Purchaser its costs and expenses (including attorneys' fees and
expenses) in connection with such suit, together with interest on
the amount of the fee at the prime rate of Citibank, N.A. in
effect on the date such payment was required to be made plus two
percent. This Section 7.5 will survive any termination of this
Agreement.
(d) As used in this Agreement, "Purchaser Expenses" shall be an
amount equal to all out-of-pocket costs and expenses of Purchaser
and Purchaser's partners incurred in connection with this
Agreement and the transactions contemplated hereby and any
litigation associated therewith (including, without limitation,
all fees and expenses payable to accountants, counsel,
consultants and due diligence expenses, but expressly excluding
the costs of Purchaser's employees and Purchaser's overhead), not
to exceed $2.5 million in the aggregate. "Purchaser Expenses"
shall not include any out-of-pocket costs and expenses of
Purchaser for which Purchaser would be entitled to
indemnification pursuant to Article VI.
VIII. GENERAL PROVISIONS
8.1 Notices. Any notice or other communication required to be given
hereunder shall be in writing, and sent by reputable courier
service (with proof of service), by hand delivery or by facsimile
(followed on the same day by delivery by courier service (with
proof of delivery) or by hand delivery), addressed as follows:
If to Purchaser:
Explorer Holdings, L.P.
4200 Texas Commerce Tower West
2200 Ross Avenue
Dallas, Texas 75201
Attn: William T. Cavanaugh, Jr.
Fax No.: (214) 220-4949
With copies to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attn: Thomas W. Bark
Fax No.: (212) 755-7306
If to the Company:
Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
Attn: Susan Allene Kovach
Fax No.: (734) 887-0322
With copies to:
Powell, Goldstein, Frazer & Murphy LLP 191 Peachtree Street,
N.E.
Suite 1600
Atlanta, Georgia 30303
Attn: Rick Miller or Eliot Robinson
Fax No.: (404) 572-6999
or to such other address as any party will specify by written notice so given,
and such notice will be deemed to have been delivered as of the date so
telecommunicated or personally delivered.
8.2 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned by
any party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other party, except that
Purchaser will have the right to assign to any direct or indirect
wholly owned subsidiary of Purchaser or to the partners of
Purchaser any and all rights and obligations of Purchaser under
this Agreement, provided, that any such assignment will not
relieve Purchaser from any of its obligations hereunder. Any
assignment not granted in accordance with the foregoing shall be
null and void. Subject to the first sentence of this Section 8.2,
this Agreement will be binding upon and will inure to the benefit
of the parties hereto and their respective successors and
assigns. Notwithstanding anything contained in this Agreement to
the contrary, except for the provisions of Article VI, nothing in
this Agreement, expressed or implied, is intended to confer on
any Person other than the parties hereto or their respective
heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason
of this Agreement.
8.3 Entire Agreement. This Agreement, the Company Disclosure Letter
and any documents delivered by the parties in connection herewith
or therewith, constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect
thereto, including, without limitation, any draft letter of
intent with respect to the transactions contemplated herein.
8.4 Amendment. This Agreement may be amended by the parties hereto,
by action taken by their respective Boards of Directors, or other
equivalent governing bodies, at any time before or after approval
of matters presented to the Company Stockholders, but after any
such Company Stockholder approval, no amendment will be made
which by Law requires the further approval of the Company
Stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
8.5 Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of Delaware, without
regard to its conflict of laws principles.
8.6 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed
and delivered will be an original, but all such counterparts will
together constitute one and the same instrument. Each counterpart
may consist of a number of copies hereof each signed by less than
all, but together signed by all of the parties hereto. A
facsimile copy of a signature page shall be deemed to be an
original signature page.
8.7 Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and will be given no
substantive or interpretive effect whatsoever.
8.8 Certain Definitions/Interpretations. (a) For purposes of this
Agreement:
(i) An "Affiliate" of any Person means another Person that, directly
or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first
Person;
(ii) "Business Day" means any day other than a Saturday, Sunday or day
on which banks in New York, New York are authorized or required
by Law to close;
(iii) "Fleet Loan Documents" means the "Loan Documents" (as defined in
the Second Amended and Restated Loan Agreement among the Company,
the Banks signatory thereto and Fleet, as agent for such Banks,
as amended).
(iv) "key employee" means any employee whose current base salary
exceeds $100,000 per annum;
(v) "Knowledge" of any Person which is not an individual means the
actual knowledge of any of such Person's officers after
reasonable inquiry
(vi) "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust,
unincorporated organization or other entity; and
(vii) "Senior Unsecured Notes" means the Company's 7.4% and 10% senior
unsecured notes due July 15, 2000.
(b) When a reference is made in this Agreement to an Article,
Section, Exhibit or Annex, such reference will be to an Article
or Section of, or an Annex or Exhibit to, this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or
"including" are used in this Agreement, they will be deemed to be
followed by the words "without limitation." The words "hereof,"
"herein" and "hereunder" and words of similar import when used in
this Agreement will refer to this Agreement as a whole and not to
any particular provision of this Agreement. All terms used herein
with initial capital letters have the meanings ascribed to them
herein and all terms defined in this Agreement will have such
defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument
that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable
successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a Person are also
to its permitted successors and assigns.
8.9 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including without limitation any
investigation by or on behalf of any party, will be deemed to
constitute a waiver by the party taking such action of compliance
with any representations, warranties, covenants or agreements
contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder will not operate or be
construed as a waiver of any prior or subsequent breach of the
same or any other provision hereunder. At any time prior to the
Closing Date, any party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
8.10 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction will, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision
will be interpreted to be only so broad as is enforceable.
8.11 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement was not performed in accordance with
its specific terms or was otherwise breached. It is accordingly
agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof, this being in
addition to any other remedy to which they are entitled at law or
in equity.
8.12 Expenses. Without limiting the generality or effect of any other
provision hereof, including without limitation Section 6.1 or any
agreement or instrument contemplated hereby, whether or not the
Closing occurs, the Company will from time to time upon request
by Purchaser promptly reimburse Purchaser for all Purchaser
Expenses, such reimbursement not to exceed $1.0 million prior to
the earlier of the Closing or the termination of this Agreement.
8.13 Jurisdiction; Consent to Service of Process. (a) Each party
hereby irrevocably and unconditionally submits, for itself and
its property, to the exclusive jurisdiction of the Chancery Court
of the State of Delaware (a "Delaware Court"), and any appellate
court from any such court, in any suit, action or proceeding
arising out of or relating to this Agreement, or for recognition
or enforcement of any judgment resulting from any such suit,
action or proceeding, and each party hereby irrevocably and
unconditionally agrees that all claims in respect of any such
suit, action or proceeding may be heard and determined in a
Delaware Court.
(b) It will be a condition precedent to each party's right to bring
any such suit, action or proceeding that such suit, action or
proceeding, in the first instance, be brought in a Delaware Court
(unless such suit, action or proceeding is brought solely to
obtain discovery or to enforce a judgment), and if each such
court refuses to accept jurisdiction with respect thereto, such
suit, action or proceeding may be brought in any other court with
jurisdiction; provided that the foregoing will not apply to any
suit, action or proceeding by a party seeking indemnification or
contribution pursuant to this Agreement or otherwise in respect
of a suit, action or proceeding against such party by a third
party if such suit, action or proceeding by such party seeking
indemnification or contribution is brought in the same court as
the suit, action or proceeding against such party.
(c) No party may move to (i) transfer any such suit, action or
proceeding from a Delaware Court to another jurisdiction, (ii)
consolidate any such suit, action or proceeding brought in a
Delaware Court with a suit, action or proceeding in another
jurisdiction, or (iii) dismiss any such suit, action or
proceeding brought in a Delaware Court for the purpose of
bringing the same in another jurisdiction.
(d) Each party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, (i) any
objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or
relating to this Agreement in a Delaware Court, (ii) the defense
of an inconvenient forum to the maintenance of such suit, action
or proceeding in any such court, and (iii) the right to object,
with respect to such suit, action or proceeding, that such court
does not have jurisdiction over such party. Each party
irrevocably consents to service of process in any manner
permitted by law.
8.14 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT,
AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
8.15 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly
by the parties hereto, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
[Remainder of page intentionally blank]
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
OMEGA HEALTHCARE INVESTORS, INC.
By: /s/ Essel W. Bailey, Jr.
------------------------
Essel W. Bailey, Jr.
Chief Executive Officer
EXPLORER HOLDINGS, L.P.
By: Explorer Holdings GenPar, LLC,
its General Partner
By: /s/ William T. Cavanaugh
------------------------
William T. Cavanaugh
Vice President
Exhibit A
OMEGA HEALTHCARE INVESTORS, INC.
FORM OF ARTICLES SUPPLEMENTARY
FOR SERIES C CONVERTIBLE PREFERRED STOCK
OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation (the
"Company"), hereby certifies to the State Department of Assessments and Taxation
of Maryland that:
FIRST: Pursuant to authority contained in the charter of the
Company (the "Charter"), 2,000,000 shares of authorized but unissued shares of
the Company's Preferred Stock have been duly classified by the Board of
Directors of the Company (the "Board") as authorized but unissued shares of the
Company's Series C Preferred Stock.
SECOND: A description of the Series C Preferred Stock is as
follows:
1. Designation and Number. A series of Preferred Stock, designated the "Series C
Convertible Preferred Stock" (the "Series C Preferred Stock"), is hereby
established. The number of shares of the Series C Preferred Stock shall be
2,000,000 subject to automatic increase in the event the Company pays any
dividend in shares of Series C Preferred Stock in accordance with Section 4.
2.Maturity. The Series C Preferred Stock has no stated maturity.
3. Rank. The Series C Preferred Stock will, with respect to dividend rights and
rights upon liquidation, dissolution or winding up of the Company, rank (i)
senior to all
classes or series of Common Stock of the Company, and to all equity securities
ranking junior to the Series C Preferred Stock with respect to dividend rights
or rights upon liquidation, dissolution or winding up of the Company, (ii) on a
parity with the Series A Preferred Stock, Series B Preferred Stock and all other
equity securities issued by the Company the terms of which specifically provide
that such equity securities rank on a parity with the Series C Preferred Stock
with respect to dividend rights or rights upon liquidation, dissolution or
winding up of the Company, and (iii) junior to all existing and future
indebtedness of the Company. The term "equity securities" does not include
convertible debt securities, which will rank senior to the Series C Preferred
Stock prior to conversion.
4. Dividends. (a) Except as set forth in Section 4(b), holders of shares of the
Series C Preferred Stock are entitled to receive, out of funds legally available
for the payment of dividends, preferential cumulative dividends at the greater
of (i) 10% per annum of the Liquidation Preference per share (equivalent to a
fixed annual amount of $10.00 per share)and (ii) the amount per share declared
or paid or set aside for payment based on the number of shares of Common Stock
into which such shares of Series C Preferred Stock are then convertible in
accordance with Section 8 (disregarding Section 8.17 for such purpose).
Dividends on each share of the Series C Preferred Stock shall be cumulative
commencing from the date of issuance of such share of Series C Preferred Stock
and shall be payable in arrears for each period ended July 31, October 31,
January 31 and April 30 (each a "Dividend Period")on or before the 15th day of
August, November, February and May of each year, or, if not a Business Day, the
next succeeding Business Day (each, a "Dividend Payment Date"). The first
dividend will be paid on November 15, 2000, with respect to the period
commencing on the date of first issuance of Series C Preferred Stock (the "Issue
Date") and ending on October 31, 2000. Any dividend payable on shares of the
Series C Preferred Stock for any partial period will be computed based on the
actual number of days elapsed (commencing with and including the date of
issuance of such shares) and on the basis of a 360-day year consisting of twelve
30-day months. Dividends will be payable to holders of record as they appear in
the stock records of the Company at the close of business on the applicable
record date, which shall be the last day of the preceding calendar month prior
to the applicable Dividend Payment Date or on such other date designated by the
Board that is not more than 30 nor less than 10 days prior to such Dividend
Payment Date (each, a "Dividend Record Date").
(b) For any Dividend Period ending prior to February 1, 2001, dividends
will be payable, at the election of the Board, (i) by the issuance as of the
relevant Dividend Payment Date of additional shares of fully paid, nonassessable
Series C Preferred Stock having an aggregate liquidation preference equal to the
amount of such accrued dividends or (ii) in cash. In the event that dividends
are declared and paid pursuant to clause (i), (A) such dividends will be deemed
paid in full and will not accumulate and (B) the number of authorized shares of
Series C Preferred Stock will be deemed, without further action, to be increased
by the number of shares so issued. The Company will deliver certificates
representing shares of Series C Preferred issued pursuant to this Section 4(b)
promptly after the relevant Dividend Payment Date. For any Dividend Period
ending after February 1, 2001, dividends will be payable in cash.
(c) No dividends on shares of Series C Preferred Stock shall be declared by
the Board or paid or set apart for payment by the Company at such time as the
terms and provisions of any agreement of the Company, including any agreement
relating to its indebtedness, prohibits such declaration, payment or setting
apart for payment or provides that such declaration, payment or setting apart
for payment would constitute a breach thereof or a default thereunder, or if
such declaration or payment shall be restricted or prohibited by law.
(d) Notwithstanding the foregoing, dividends on the Series C Preferred
Stock will accrue whether or not the Company has earnings, whether or not there
are funds legally available for the payment of such dividends and whether or not
such dividends are declared. Accrued but unpaid dividends on the Series C
Preferred Stock will not bear interest and holders of the Series C Preferred
Stock will not be entitled to any distributions in excess of full cumulative
distributions described above. Except as set forth in the next sentence, no
dividends will be declared or paid or set apart for payment on any capital stock
of the Company or any other series of Preferred Stock ranking, as to dividends,
on a parity with or junior to the Series C Preferred Stock (other than a
dividend in shares of the Company's Common Stock or in shares of any other class
of stock ranking junior to the Series C Preferred Stock as to dividends and upon
liquidation) for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for such payment on the Series C Preferred Stock
for all past dividend periods and the then current dividend period. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon the Series C Preferred Stock and the shares of any other
series of Preferred Stock ranking on a parity as to dividends with the Series C
Preferred Stock, all dividends declared upon the Series C Preferred Stock and
any other series of Preferred Stock ranking on a parity as to dividends with the
Series C Preferred Stock shall be declared pro rata so that the amount of
dividends declared per share of Series C Preferred Stock and such other series
of Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Series C Preferred Stock and such other
series of Preferred Stock (which shall not include any accrual in respect of
unpaid dividends for prior dividend periods if such Preferred Stock does not
have a cumulative dividend) bear to each other.
(e) Except as provided in the immediately preceding paragraph,
unless full cumulative dividends on the Series C Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for payment for all past dividend periods and the
then current dividend period, no dividends (other than in shares of Common Stock
or other shares of capital stock ranking junior to the Series C Preferred Stock
as to dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Series C Preferred Stock as to dividends or upon liquidation,
nor shall any shares of Common Stock, or any other shares of capital stock of
the Company ranking junior to or on a parity with the Series C Preferred Stock
as to dividends or upon liquidation be redeemed, purchased or otherwise acquired
for any consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any such shares) by the Company (except by conversion
into or exchange for other capital stock of the Company ranking junior to the
Series C Preferred Stock as to dividends and upon liquidation or redemption or
for the purpose of preserving the Company's qualification as a real estate
investment trust under the Internal Revenue Code of 1986, as amended). Holders
of shares of the Series C Preferred Stock shall not be entitled to any dividend,
whether payable in cash, property or stock, in excess of full cumulative
dividends on the Series C Preferred Stock as provided above. Any dividend
payment made on shares of the Series C Preferred Stock shall first be credited
against the earliest accrued but unpaid dividend due with respect to such shares
which remains payable.
5. Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, the holders of shares
of Series C Preferred Stock are entitled to be paid out of the assets of the
Company legally available for distribution to its shareholders the Liquidation
Preference (as defined in Section 10) before any distribution of assets is made
to holders of Common Stock or any other class or series of capital stock of the
Company that ranks junior to the Series C Preferred Stock as to liquidation
rights. The Company will promptly provide to the holders of Series C Preferred
Stock written notice of any event triggering the right to receive such
Liquidation Preference. After payment of the full amount of the Liquidation
Preference, plus any accrued and unpaid dividends to which they are entitled,
the holders of Series C Preferred Stock will have no right or claim to any of
the remaining assets of the Company. The consolidation or merger of the Company
with or into any other corporation, trust or entity or of any other corporation
with or into the Company in a manner that constitutes a Change in Control (as
defined in Section 10), or the sale, lease or conveyance of all or substantially
all of the property or business of the Company, shall be deemed to constitute a
liquidation, dissolution or winding up of the Company.
In determining whether a distribution (other than upon voluntary or involuntary
liquidation) by dividend, redemption or other acquisition of shares of stock of
the Company or otherwise is permitted under the Maryland General Corporation Law
(the "MGCL"), no effect shall be given to amounts that would be needed if the
Company would be dissolved at the time of the distribution, to satisfy the
preferential rights upon distribution of holders of shares of stock of the
Company whose preferential rights upon distribution are superior to those
receiving the distribution.
6. Redemption. The Series C Preferred Stock is not redeemable subject, however,
to the provisions in paragraph (9) of these Articles Supplementary.
7. Voting Rights. (a) Holders of the Series C Preferred Stock will not have any
voting rights, except as set forth below. Notwithstanding the provisions of this
Section 7, no holder of Series C Preferred Stock shall be entitled to vote any
shares of Series C Preferred Stock that would result in such holder and any of
its affiliates controlled by it or any group (as such term is used in Section
13(d)(3) of the Exchange Act) of which any of them is a member voting in excess
of 49.9% of the then-outstanding Voting Stock, except in any separate class vote
consisting solely of any one or more classes of preferred stock.
(b) Each holder of shares of Series C Preferred Stock shall be entitled to
notice of any stockholder meeting in accordance with the bylaws of the Company
(the "Bylaws"), shall be entitled to a number of votes equal to the number of
shares of Common Stock into which the shares of Series C Preferred Stock held by
such holder could then be converted pursuant to Section 8 (giving effect to the
limitations on conversion in Section 8.17), shall have voting rights and powers
equal to the voting rights and powers of the holders of Common Stock, and shall
vote together as a single class with holders of Common Stock, except as
expressly required by law. Fractional votes shall not be permitted, and any
fractional voting rights resulting from the right of any holder of Series C
Preferred Stock to vote on an as converted basis (after aggregating the shares
into which all shares of Series C Preferred Stock held such holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward). The holders of Series C Preferred Stock shall have no separate
class or series vote on any matter except as expressly required by law or as
otherwise set forth in these Articles Supplementary.
(c) Whenever dividends on any shares of Series C Preferred Stock shall be in
arrears for four or more Dividend Periods (a "Preferred Dividend Default"), the
number of directors then constituting the Board shall be increased, if
necessary, by such number that would, if such number were added to the number of
directors already designated by the holders of the Series C Preferred Stock
(whether pursuant to the Stockholders Agreement or otherwise), constitute a
majority of the Board (if not already increased by reason of a similar arrearage
with respect to any Parity Preferred (as hereinafter defined)). The holders of
such shares of Series C Preferred Stock (voting separately as a class with all
other series of Preferred Stock ranking on a parity with the Series C Preferred
Stock as to dividends or upon liquidation ("Parity Preferred") upon which like
voting rights have been conferred and are exercisable) will be entitled to vote
separately as a class, in order to fill the vacancies thereby created, for the
election of such additional number directors of the Company determined pursuant
to the first sentence of this Section 7(c) (the "Additional Preferred Stock
Directors") at a special meeting called by the holders of record of at least 20%
of the Series C Preferred Stock or the holders of record of at least 20% of any
series of Parity Preferred so in arrears (unless such request is received less
than 90 days before the date fixed for the next annual or special meeting of the
shareholders) or at the next annual meeting of shareholders, and at each
subsequent annual meeting until all dividends accumulated on such shares of
Series C Preferred Stock and Parity Preferred for the past dividend periods and
the dividend for the then current dividend period shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside. In any such
election for additional directors, each holder of shares of Series C Preferred
Stock or share of Parity Preferred will be entitled to one vote for each $1.00
amount of Liquidation Preference attributable to the aggregate number of such
shares held by such holder. In the event the directors of the Company are
divided into classes, each such vacancy shall be apportioned among the classes
of directors to prevent stacking in any one class and to insure that the number
of directors in each of the classes of directors, are as equal as possible. Each
Additional Preferred Stock Director, as a qualification for election as such
(and regardless of how elected) shall submit to the Board a duly executed,
valid, binding and enforceable letter of resignation from the Board, to be
effective upon the date upon which all dividends accumulated on such shares of
Series C Preferred Stock and Parity Preferred for the past dividend periods and
the dividend for the then current dividend period shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside for payment,
whereupon the terms of office of all persons elected as Additional Preferred
Stock Directors by the holders of the Series C Preferred Stock and any Parity
Preferred shall, upon the effectiveness of their respective letters of
resignation, forthwith terminate, and the number of directors then constituting
the Board shall be reduced accordingly. A quorum for any such meeting shall
exist if at least a majority of the outstanding shares of Series C Preferred
Stock and shares of Parity Preferred upon which like voting rights have been
conferred and are exercisable are represented in person or by proxy at such
meeting. Such Additional Preferred Stock Directors shall be elected upon the
affirmative vote of a plurality of the shares of Series C Preferred Stock and
such Parity Preferred present and voting in person or by proxy at a duly called
and held meeting at which a quorum is present. If and when all accumulated
dividends and the dividend for the then current dividend period on the Series C
Preferred Stock shall have been paid in full or declared and a sum sufficient
for the payment thereof in full shall have been set aside the holders thereof
shall be divested of the foregoing voting rights (subject to revesting in the
event of each and every Preferred Dividend Default) and, if all accumulated
dividends and the dividend for the then current dividend period have been paid
in full or sufficient funds shall have been set aside, on all series of Parity
Preferred upon which like voting rights have been conferred and are exercisable,
the term of office of each Additional Preferred Stock Director so elected shall
terminate. Any Additional Preferred Stock Director may be removed at any time
with or without cause by, and shall not be removed otherwise than by the vote
of, the holders of record of a majority of the outstanding shares of the Series
C Preferred Stock when they have the voting rights described above (voting
separately as a class with all series of Parity Preferred upon which like voting
rights have been conferred and are exercisable). So long as a Preferred Dividend
Default shall continue, any vacancy in the office of an Additional Preferred
Stock Director may be filled by written consent of the Additional Preferred
Stock Directors remaining in office, or if none remains in office, by a vote of
the holders of record of a majority of the outstanding shares of Series C
Preferred Stock when they have the voting rights described above (voting
separately as a class with all series of Parity Preferred upon which like voting
rights have been conferred and are exercisable). The Additional Preferred Stock
Directors shall each be entitled to one vote per director on any matter. (d) So
long as any shares of Series C Preferred Stock remain outstanding, the Company
will not, without the affirmative vote or consent of the holders of at least
two-thirds of the shares of the Series C Preferred Stock outstanding at the
time, given in person or by proxy, either in writing or at a meeting (voting
separately as a class together with any other classes of preferred stock
adversely affected in the same manner), amend, alter or repeal the provisions of
the Charter or the Articles Supplementary, whether by merger, consolidation or
otherwise (an "Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of the Series C Preferred Stock or the
holders thereof, including without limitation, the creation of any series of
Preferred Stock ranking senior to the Series C Preferred Stock with respect to
payment of dividends or the distribution of assets upon liquidation, dissolution
or winding up, but not including the creation or issuance of Parity Preferred.
(e) Except as expressly stated in these Articles Supplementary, the Series C
Preferred Stock shall not have any relative, participating, optional or other
special voting rights and powers and the consent of the holders thereof shall
not be required for the taking of any corporate action, including but not
limited to, any merger or consolidation involving the Corporation or a sale of
all or substantially all of the assets of the Corporation, irrespective of the
effect that such merger, consolidation or sale may have upon the rights,
preferences or voting power of the holders of the Series C Preferred Stock.
8. Conversion. The holders of Series C Preferred Stock shall have the following
conversion rights with respect to such shares:
8.1 Optional Conversion. Subject to the limitations on conversion in Section
8.17, each share of Series C Preferred Stock (including all accrued and unpaid
dividends thereon, to the extent declared) may be converted, at any time at the
option of the holder thereof, into fully paid and nonassessable shares of Common
Stock (and any other securities or property expressly provided in this Section
8) as set forth in this Section 8.
8.2 Conversion Price. Subject to the limitations on conversion in Section 8.17,
each share of Series C Preferred Stock may be converted into such number of
shares of Common Stock as is equal to the quotient obtained by dividing the
Original Issue Price for such share by the Conversion Price (as defined below)
in effect at the time of conversion. The Conversion Price initially shall be
equal to the $6.25 per share of Common Stock, subject to adjustment from time to
time as provided below (the "Conversion Price").
8.3 Mechanics of Conversion. A holder of Series C Preferred Stock who desires to
convert the same into Common Stock shall surrender the certificate or
certificates representing such shares, duly endorsed, at the office of the
Company or at the office of any transfer agent for the Series C Preferred Stock
or Common Stock, and shall give written notice to the Company at such office
that such holder elects to convert the same and shall state therein both the
number of shares of Series C Preferred Stock being converted and the name or
names in which the holder wishes the certificate or certificates for Common
Stock to be issued. The Company shall, as soon as practicable after such
surrender, issue and deliver at such office to such holder a certificate or
certificates representing the number of shares of Common Stock to which such
holder is entitled and a new certificate or certificates representing the number
of shares of Series C Preferred Stock represented by the certificate or
certificates surrendered by the holder minus the number of Series C Preferred
Stock so converted by the holder. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the certificate representing the Series C Preferred Stock to be converted, and
the Person entitled to receive the Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such Common Stock on
such date. Any Series C Preferred Stock converted into Common Stock shall be
retired and may not be reissued by the Company.
8.4 Adjustment for Stock Splits and Combinations. If the Company at any time or
from time to time after the Issue Date effects a subdivision of the outstanding
Common Stock, the Conversion Price then in effect immediately before that
subdivision shall be proportionately decreased, and conversely, if the Company
at any time or from time to time after the Issue Date combines the outstanding
Common Stock into a smaller number of shares, the Conversion Price then in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this Section 8.4 shall become effective at the close of
business on the date such subdivision or combination becomes effective.
8.5 Adjustment for Certain Dividends and Distributions. If the Company at any
time or from time to time after the Issue Date makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional Common Stock, then and in each such
event the Conversion Price then in effect shall be decreased as of the time of
such issuance or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying the Conversion Price then in effect
by a fraction (1) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (2) the denominator of which
shall be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in payment of
such dividend or distribution; provided, however, that if such record date is
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Conversion Price shall be adjusted pursuant to this Section 8.5 as of the time
of actual payment of such dividends or distributions.
8.6 Adjustments for Other Dividends and Distributions. In the event the Company
at any time or from time to time after the Issue Date makes, or fixes a record
date for the determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in securities of the Company other than
Common Stock or other assets or property of the Company (other than ordinary
cash dividends and any special dividends necessary to preserve the Company's
qualification as a REIT), then and in each such event provision shall be made so
that the holders of Series C Preferred Stock shall receive upon conversion
thereof, in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Company or other assets or property
of the Company which they would have received had their Series C Preferred Stock
been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
conversion date, retained such securities or other assets or property of the
Company receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 8 with respect to
the rights of the holders of the Series C Preferred Stock.
8.7 Adjustment for Reclassification, Exchange and Substitution. In the event
that at any time or from time to time after the Issue Date, the Common Stock or
other securities as provided herein issuable upon the conversion of the Series C
Preferred Stock are changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger, consolidation or sale of assets, provided for
elsewhere in this Section 8), then and in any such event each holder of Series C
Preferred Stock shall have the right thereafter to convert such Series C
Preferred Stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or other
change, by holders of Common Stock or other securities as provided herein into
which such shares of Series C Preferred Stock could have been converted
immediately prior to such recapitalization, reclassification or change, all
subject to further adjustment as provided herein.
8.8 Reorganizations, Mergers, Consolidations or Transfers of Assets. If at any
time or from time to time after the Issue Date there is a capital reorganization
of the Common Stock or other securities issuable upon conversion of Series C
Preferred Stock as provided herein (other than a recapitalization, subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
this Section 8) or a merger or consolidation or statutory binding share exchange
of the Company with or into another Person, or the transfer of all or
substantially all of the Company's properties and assets to any other person and
such capital reorganization, merger, consolidation or transfer does not
constitute a Change in Control, then, as a part of such capital reorganization,
merger, consolidation, exchange or transfer (subject to the provisions of
Section 9), provision shall be made so that the holders of the Series C
Preferred Stock shall thereafter be entitled to receive upon conversion of
Series C Preferred Stock the number of shares of stock or other securities, cash
or property to which a holder of the number of Common Stock or other securities
deliverable upon conversion would have been entitled on such capital
reorganization, merger, consolidation, exchange or transfer. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 8 with respect to the rights of the holders of the Series C
Preferred Stock after the capital reorganization, merger, consolidation,
exchange or transfer to the end that the provisions of this Section 8 (including
adjustment of the Conversion Price then in effect and the number of shares
receivable upon conversion of the Series C Preferred Stock) shall be applicable
after that event and be as nearly equivalent as may be practicable.
8.9 Sale of Shares Below Fair Market Value. (a) If at any time or from time to
time after the Issue Date, the Company issues or sells, or is deemed by the
express provisions of this subsection (i) to have issued or sold, Additional
Common Stock (as defined below), other than as a dividend or other distribution
on any class of stock as provided in Section 8.5 above and other than upon a
subdivision or combination of Common Stock as provided in Section 8.4 above, for
an Effective Price (as defined below) less than the Fair Market Value, then and
in each such case the then existing Conversion Price shall be reduced, as of the
opening of business on the date of such issue or sale, to a price determined by
multiplying that Conversion Price by a fraction (i) the numerator of which shall
be equal to the sum of (A) the number of shares of Common Stock issued and
outstanding at the close of business on the Business Day immediately preceding
the date of such issue or sale, (B) the number of shares of Common Stock which
the aggregate consideration received (or by the express provisions hereof is
deemed to have been received) by the Company for the total number of shares of
Additional Common Stock so issued or sold would purchase at such Fair Market
Value, (C) the number of shares of Common Stock into which all outstanding
Series C Preferred Stock are convertible at the close of business on the
Business Day immediately preceding the date of such issuance or sale, and (D)
the number of shares of Common Stock underlying all Convertible Securities (as
defined below) at the close of business on the Business Day immediately
preceding the date of such issue or sale, and (ii) the denominator of which
shall be equal to the sum of (A) the number of shares of Common Stock issued and
outstanding at the close of business on the date of such issuance or sale after
giving effect to such issuance or sale of Additional Common Stock, (B) the
number of shares of Common Stock into which all outstanding Series C Preferred
Stock are convertible at the close of business on the Business Day immediately
preceding the date of such issuance or sale, and (C) the number of shares of
Common Stock underlying all Convertible Securities at the close of business on
the Business Day immediately preceding the date of such issuance or sale.
(b) For the purpose of making any adjustment required under this Section
8.9, the consideration for any issue or sale of securities shall be deemed to be
(A) to the extent it consists of cash, equal to the gross amount paid in such
issuance or sale, (B) to the extent it consists of property other than cash,
equal to the Fair Market Value of that property, and (C) if Additional Common
Stock, Convertible Securities (as defined below) or rights or options to
purchase either Additional Common Stock or Convertible Securities are issued or
sold together with other stock, securities or assets of the Company for a
consideration which covers both, that portion of the consideration so received
that is determined in good faith by the Board to be allocable to such Additional
Common Stock, Convertible Securities or rights or options.
(c) For the purpose of the adjustment required under this Section 8.9, if
the Company issues or sells any rights or options for the purchase of, or stock
or other securities convertible into or exchangeable or exercisable for,
Additional Common Stock (such convertible or exchangeable or exercisable stock
or securities being hereinafter referred to as "Convertible Securities") and if
the Effective Price of such Additional Common Stock is less than the Fair Market
Value, then in each case the Company shall be deemed to have (i) issued at the
time of the issuance of such rights or options or Convertible Securities the
number of shares of Additional Common Stock issuable upon exercise, conversion
or exchange thereof irrespective of whether the holders thereof have the fully
vested legal right to exercise, convert or exchange the Convertible Securities
for Additional Common Stock and (ii) received as consideration for the issuance
of such Additional Common Stock an amount equal to the total amount of the
consideration, if any, received by the Company for the issuance of such rights
or options or Convertible Securities, plus, in the case of such rights or
options, the consideration, if any, payable to the Company upon the exercise of
such rights or options, plus, in the case of Convertible Securities, the
consideration, if any, payable to the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
exercise, conversion or exchange thereof. No further adjustment of the
Conversion Price, as adjusted upon the issuance of such rights, options or
Convertible Securities, shall be made as a result of the actual issuance of
Additional Common Stock on the exercise of any such rights or options or the
conversion or exchange of any such Convertible Securities. If any such rights or
options or the conversion or exchange privilege represented by any such
Convertible Securities shall expire without having been exercised, the
Conversion Price as adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Conversion Price which would
have been in effect had an adjustment been made on the basis that the only
shares of Additional Common Stock so issued were the shares of Additional Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion or exchange of such Convertible Securities, and such
shares of Additional Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of the
rights or options whether or not exercised, plus the consideration received for
issuing or selling the Convertible Securities actually converted or exchanged,
plus the consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion or exchange of such Convertible Securities.
(d) "Additional Common Stock" shall mean all Common Stock issued or
issuable by the Company after the Issue Date, whether or not subsequently
reacquired or retired by the Company, other than (i) Common Stock issued or
issuable upon conversion of, or as a dividend on, any sub-series of Series C
Preferred Stock, (ii) Common Stock issued or issuable pursuant to any employee
benefit plan or similar plan or arrangement intended to provide compensation and
other benefits to officers, directors, employees and consultants of the Company
provided that such plans and any grants or awards thereunder have been approved
by the Board or a committee thereof, (iii) securities issued by the Company in
payment of a purchase price to the seller or any Person who beneficially owns
equity securities of such seller for any acquisition of assets or a business,
which acquisition is approved by the Board, or pursuant to the Additional Equity
Financing (as defined in the Investment Agreement dated as of May 11, 2000 (the
"Investment Agreement"), by and between Explorer Holdings, L.P. and the
Company), and (iv) securities issued pursuant to the Rights Offering (as defined
in Exhibit B to the Investment Agreement). The "Effective Price" of Additional
Common Stock shall mean the quotient determined by dividing the total number of
shares of Additional Common Stock issued or sold, or deemed to have been issued
or sold by the Company, by the aggregate consideration received, or deemed to
have been received, by the Company for such Additional Common Stock. The share
numbers in this Section 8.9(d) shall be appropriately adjusted for any stock
dividends, combinations, splits, reverse splits, recapitalizations and similar
events affecting the securities of the Company.
8.10 Certificate of Adjustment. In each case of an adjustment or readjustment of
the Conversion Price or the number of shares of Common Stock or other securities
issuable upon conversion of the Series C Preferred Stock, the Company, at its
expense, shall cause the Chief Financial Officer of the Company to compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
the Series C Preferred Stock at the holder's address as shown in the Company's
books. The certificate shall set forth such adjustment or readjustment, showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (1) the consideration received or deemed to be received
by the Company for any Additional Common Stock issued or sold or deemed to have
been issued or sold, (2) the Conversion Price in effect immediately prior to the
occurrence of the event giving rise to such adjustment, (3) the number of shares
of Additional Common Stock and (4) the type and amount, if any, of other
property which at the time would be received upon conversion of the Series C
Preferred Stock.
8.11 Notices of Record Date. In the event of (i) any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or (ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger or consolidation of the Company with or into any other entity, or any
transfer of all or substantially all of the assets of the Company to any other
person or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to each holder of Series C Preferred Stock
at least ten days prior to the record date specified therein, a notice
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (2) the date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up is
expected to become effective, and (3) the date, if any, that is to be fixed, as
to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their Common Stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up.
8.12 Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of Series C Preferred Stock. In lieu of any fractional share to
which the holder would otherwise be entitled, the Company shall pay cash equal
to the product of such fraction multiplied by the Fair Market Value of one share
of Common Stock on the date of conversion.
8.13 Reservation of Stock Issuable Upon Conversion. The Company shall at all
times reserve and keep available out of its authorized but unissued Common
Stock, solely for the purpose of effecting the conversion of the Series C
Preferred Stock, such number of shares of its Common Stock and other securities,
if any, issuable upon conversion thereof as expressly provided in Section 8 as
shall from time to time be sufficient to effect the conversion of all
outstanding Series C Preferred Stock.
8.14 Notices. Any notice required or permitted by this Section 8 to be given to
a holder of Series C Preferred Stock or to the Company shall be in writing and
be deemed given upon the earlier of actual receipt or five days after the same
has been deposited in the United States mail, by certified or registered mail,
return receipt requested, postage prepaid, and addressed (i) to each holder of
record at the address of such holder appearing on the books of the Company, or
(ii) to the Company at its registered office, or (iii) to the Company or any
holder, at any other address specified in a written notice given to the other
for the giving of notice.
8.15 Payment of Taxes. The Company will pay all taxes (other than taxes based
upon income) and other governmental charges that may be imposed with respect to
the issue and delivery of Common Stock upon conversion of Series C Preferred
Stock, including without limitation any tax or other charge imposed in
connection with the issue and delivery of Common Stock or other securities, if
any, issuable upon conversion thereof as expressly provided in Section 8 in a
name other than that in which the Series C Preferred Stock so converted were
registered.
8.16 Cancellation of Shares. Any shares of Series C Preferred Stock which are
converted in accordance with Section 8 or which are redeemed, repurchased or
otherwise acquired by the Company, shall be canceled and added to the authorized
but undesignated Preferred Stock of the Company but shall not be reissued as
Series C Preferred Stock.
8.17 Limitations on Conversions. Notwithstanding the provisions of this Section
8, no holder of Series C Preferred Stock shall be permitted to convert a number
of its shares of Series C Preferred Stock which would result in such holder and
its Affiliates or any group (as such term is used in Section 13(d)(3) of the
Exchange Act) of which any of them is a member having beneficial ownership,
after giving effect to such conversion, of more than 49.9% of the
then-outstanding Voting Stock.
9. Restrictions on Ownership and Transfer. Once there is a completed public
offering of the Series C Preferred Stock, if the Board shall, at any time and in
good faith, be of the opinion that actual or constructive ownership of at least
9.9% or more of the value of the outstanding capital stock of the Company has or
may become concentrated in the hands of one owner, the Board shall have the
power (i) by means deemed equitable by the Board, and pursuant to written
notice, to call for the purchase from any shareholder of the corporation a
number of shares of Series C Preferred Stock sufficient, in the opinion of the
Board, to maintain or bring the direct or indirect ownership of such beneficial
owner to no more than 9.9% of the value of the outstanding capital stock of the
corporation, and (ii) to refuse to transfer or issue shares of Series C
Preferred Stock to any person whose acquisition of such Series C Preferred Stock
would, in the opinion of the Board, result in the direct or indirect ownership
by that person of more than 9.9% of the value of the outstanding capital stock
of the Company. The purchase price for any shares of Series C Preferred Stock
shall be equal to the fair market value of the shares reflected in the closing
sales price for the shares, if then listed on a national securities exchange, or
if the shares are not then listed on a national securities exchange, the
purchase price shall be equal to the redemption price of such shares of Series C
Preferred Stock. Payment of the purchase price shall be made within thirty days
following the date set forth in the notice of call for purchase, and shall be
made in such manner as may be determined by the Board. From and after the date
fixed for purchase by the Board, as set forth in the notice, the holder of any
shares so called for purchase shall cease to be entitled to distributions and
other benefits with respect to such shares, excepting only the right to payment
of the purchase price fixed as aforesaid. Any transfer of Series C Preferred
Shares that would create an actual or constructive owner of more than 9.9% of
the value of the outstanding shares of capital stock of this Company shall be
deemed void ab initio and the intended transferee shall be deemed never to have
had an interest therein. If the foregoing provision is determined to be void or
invalid by virtue of any legal decision, statute, rule or regulation, then the
transferee of such Series C Preferred Shares shall be deemed, at the option of
the Company, to have acted as agent on behalf of the Company in acquiring such
shares and to hold such shares on behalf of the Company.
Notwithstanding anything herein to the contrary, the Company and its transfer
agent may refuse to transfer any shares of Series C Preferred Stock, passing
either by voluntary transfer, by operation of law, or under the last will and
testament of any shareholder if such transfer would or might, in the opinion of
the Board or counsel to the Company, disqualify the Company as a Real Estate
Investment Trust under the Internal Revenue Code. Nothing herein contained shall
limit the ability of the Company to impose or to seek judicial or other
imposition of additional restrictions if deemed necessary or advisable to
preserve the Company's tax status as a qualified Real Estate Investment Trust.
Nothing herein contained shall preclude settlement of any transaction entered
into through the facilities of the New York Stock Exchange.
10. Certain Defined Terms. In addition to the terms defined elsewhere in these
Articles Supplementary or the Charter, the following terms will have the
following meanings when used herein with initial capital letters:
(a) "Business Day" means any day (other than a day which is a Saturday,
Sunday or legal holiday in New York City, or any day on which banks in New York
City are authorized by law to close).
(b) "Change in Control" means the acquisition of the Company by means of
any transaction or series of related transactions (including, without
limitation, any reorganization, merger, consolidation or other business
combination transaction), unless the Company's stockholders of record as
constituted immediately prior to such acquisition will, immediately after such
acquisition (by virtue of securities issued as consideration for the Company's
acquisition or otherwise), hold at least 50% of the voting power of the
surviving or acquiring entity in approximately the same relative percentages
after such acquisition or sale as before such acquisition or sale.
(c) "Fair Market Value" of any security or other asset means:
(i) in the case of any security:
(A) if the security is traded on a securities exchange, the weighted
average trading volume of the per share closing prices of the security on
such exchange over the five trading day period ending three trading days
prior to the date on which such value is measured;
(B) if the security is traded over-the-counter, the weighted average
trading volume of the per share closing bid prices of the security over the
five trading day period ending three trading days prior to the date on
which such value is measured; or
(C) if there is no public market for such security that meets the
criteria set forth in (A) or (B) above, the Fair Market Value shall be the
per share fair market value of such security as of the date on which such
value is measured, as determined in good faith by the Board.
(ii) In the case of assets other than securities, the Fair Market Value
shall be the fair market value of such assets, as determined in good faith by
the Board.
(d) "Liquidation Preference" measured per share of Series C Preferred
Stock as of any date in question (the "Relevant Date"), means an amount
equal to the Original Issue Price of such share plus any declared but
unpaid dividends, but without interest, at the rate set forth in Section 4
hereof, if any, for such share of Series C Preferred Stock. In connection
with the determination of the Liquidation Preference of a share of Series C
Preferred Stock upon liquidation, dissolution or winding up of the Company,
the Relevant Date shall be the date of distribution of amounts payable to
stockholders in connection with any such liquidation, dissolution or
winding up.
(e) "Original Issue Price" means $100 per share of Series C Preferred
Stock, subject to appropriate adjustment to reflect any stock dividends,
combinations, splits, reverse splits, recapitalizations or similar events
affecting the Series C Preferred Stock after the Issue Date.
(f) "Person" means any individual, firm, corporation, partnership,
limited liability company, group (within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.
(g) "Stockholders Agreement" means the Stockholders Agreement by and
between Explorer Holdings, L.P. and the Company, dated the Issue Date.
(h) "Voting Stock" means, with respect to the Company, the shares of
any class or kind ordinarily having the power to vote for the election of
directors or other members of the governing body of the Company. For
avoidance of doubt, (i) Common Stock and Series C Preferred Stock both
constitute Voting Stock of the Company and (ii) no class of Preferred Stock
shall be deemed to be Voting Stock by virtue of the rights of such holder
upon any Preferred Dividend Default. 11. Effect of Mergers, Consolidations
and Other Business Combination Transactions. In the event of any merger,
consolidation or other business combination transaction, the limitations on
conversion in Section 8.17 and the limitations on voting in Section 7(a)
shall not impair, reduce or otherwise modify the rights of any holder of
Series C Preferred in such merger, consolidation or business combination
transaction, such holder being entitled to receive upon consummation of
such merger, consolidation or other transaction in respect of all shares of
Series C Preferred then held the consideration that is receivable with
respect to each share of Series C Preferred without regard to any
limitation otherwise imposed by Section 7(a) or 8.17.
THIRD: The classification of authorized but unissued shares as
set forth in these Articles Supplementary does not increase the authorized
capital of the Company or the aggregate par value thereof.
FOURTH: These Articles Supplementary have been approved by
the Board in the manner and by the vote required by law.
FIFTH: The undersigned Vice President of the Company
acknowledges these Articles Supplementary to be the corporate act of the Company
and, as to all matters or facts required to be verified under oath, the
undersigned Vice President of the Company acknowledges that to the best of his
or her knowledge, information and belief, these matters and facts are true in
all material respects and that this statement is made under the penalties for
perjury.
IN WITNESS WHEREOF, the Company has caused these Articles
Supplementary to be executed under seal in its name and on its behalf by its
Vice President and attested to by its Secretary on this ___ day of ___________,
2000.
ATTEST OMEGA HEALTHCARE INVESTORS, INC.
By:_________________________ By:________________________
Secretary Vice President
EXHIBIT B
Form of Additional Equity Financing
1. Equity Capital for Acquisitions. If the Company desires to acquire
additional skilled nursing, assisted living or healthcare assets or securities,
whether by purchase, merger or otherwise (collectively, an "Acquisition"), but
excluding any Acquisition in which the Company shall pay consideration
consisting entirely of the Company's capital stock, and the Company does not
have cash from operations and asset sales sufficient to fund the cash equity
capital required to effect such Acquisition and is unable to borrow such cash
under credit facilities then available to the Company on terms deemed acceptable
by the Board of Directors, then the Company will sell to Purchaser, and
Purchaser will purchase from the Company, Common Stock ("Additional Stock") in
an amount not to exceed $50.0 million, less any amount previously drawn pursuant
to the Liquidity Commitment (as defined below), to fund the portion of such cash
equity capital requirement that the Company is not otherwise so able to fund
(the "Initial Growth Equity Commitment", together with the Liquidity Commitment,
the "Additional Equity Commitment"). Purchaser's obligation to purchase
Additional Stock pursuant to the Initial Growth Equity Commitment is subject to
satisfaction of the following conditions:
(i) the issuance of such Additional Stock must occur on or before July
1, 2001;
(ii) the proceeds from such sale of Additional Stock must be escrowed
or otherwise set aside and directly applied to fund the cash equity capital
required to effect such Acquisition and, without limiting the generality or
effect of any other provision hereof or of the Investment Agreement, may
not be used to refinance or repay any indebtedness or to fund working
capital requirements;
(iii) the Acquisition must have been approved by the Board of
Directors of the Company and the Company expressly acknowledges that
applicable law does not preclude all Purchaser Designees from voting on
such Acquisition and no Purchaser Designees shall have been precluded from
voting on such Acquisition (unless the Purchaser Designees shall have
themselves determined not to vote or that they are not so eligible to vote
in which event this condition shall not apply);
(iv) the Company shall not be in default under any Indebtedness or
Material Contract and no event of default, circumstance, act or omission by
the Company shall have occurred that, with the passing of time or the
giving of notice or both would become a default or event of default under
any such Indebtedness or Material Contract, including this Agreement,
unless such default, event of default, circumstance, act or omission (or
the effect thereof) would not have a Company Material Adverse Effect or
would be cured in all material respects as a result of the application of
the proceeds received from Purchaser's purchase of such Additional Stock
(if such proceeds may be used for this purpose or the permitted application
thereof would otherwise have such effect); and
(v) Purchaser shall have made a good faith determination that the
Company has available adequate sources to repay or refinance all
Indebtedness coming due on or before December 31, 2001, which funding
sources may include unused portions of the Liquidity Commitment.
All Additional Stock issued and sold by the Company to Purchaser pursuant to the
Initial Growth Equity Commitment and the Increased Additional Growth Equity
Commitment (as defined below) will be issued and sold to Purchaser at a per
share price equal to the Fair Market Value (as defined in the Series C Articles
Supplementary) of the Common Stock, determined immediately prior to the date of
first public announcement or the date of consummation of the subject Acquisition
for which such Additional Stock is issued and sold, whichever is lower, less (i)
a discount that is mutually determined by Purchaser and the Company to be
consistent with the discount from Fair Market Value that typically applies to a
rights offering by a company to its shareholders to subscribe for shares of its
capital stock to its stockholders or (ii) if the parties are unable to agree on
such amount, 6%. The Company will provide Purchaser written notice of its intent
to draw on the Initial Growth Equity Commitment at least 30 calendar days prior
to the closing date of the Acquisition (a "Capital Call Notice"). The closing of
the issuance and sale of the subject Additional Stock shall occur no later than
60 calendar days following the date of the Capital Call Notice. In the event the
closing of the Acquisition does not occur within such 60 calendar day period,
Purchaser will be entitled to return to its investors the amount of capital
called in the Capital Call Notice ("Returned Capital"). If Purchaser is unable
to re-draw any Returned Capital, the Initial Growth Equity Commitment shall be
reduced by such amount of Returned Capital.
2. Capital for Certain Refinancings. Notwithstanding any other
provision hereof or of the Investment Agreement, if the Company is unable to
fund any portion of the Company's Convertible Debentures due January 2001 (the
"Convertible Debentures") or the Company's Senior Unsecured Notes due July 2000
(the "Senior Unsecured Notes") at the maturity thereof in accordance with the
terms thereof, then the Company must request Purchaser to purchase, and
Purchaser must purchase, such amount of a sub-series of Series C Preferred Stock
as is required to provide sufficient funds to discharge the Company's
obligations arising pursuant to the Convertible Debentures or the Senior
Unsecured Notes, not to exceed $50.0 million, less the sum of any amounts
previously drawn under the Initial Growth Equity Commitment or by which the
Initial Growth Equity Commitment has been reduced under Section 1 (the
"Liquidity Commitment"), provided the following conditions have been satisfied:
(i) the issuance of such Series C Preferred Stock must occur on or
before February 1, 2001;
(ii) the proceeds from such sale of Series C Preferred Stock must be
escrowed or otherwise set aside and directly applied to fund the discharge
of the Company's obligations arising pursuant to the Convertible Debentures
or the Senior Unsecured Notes;
(iii) the Company shall not be in default under any Indebtedness or
Material Contract and no event of default, circumstance, act or omission by
the Company shall have occurred that, with the passing of time or the
giving of notice or both would become a default or event of default under
any such Indebtedness or Material Contract, including this Agreement,
unless such default, event of default, circumstance, act or omission (or
the effect thereof) would not have a Company Material Adverse Effect or
would be cured in all material respects as a result of the application of
the proceeds received from Purchaser's purchase of such Series C Preferred
Stock (if such proceeds may be used for this purpose or the permitted
application thereof would otherwise have such effect);
(iv) Purchaser shall have made a good faith determination that the
Company has adequate available sources to repay or refinance all
Indebtedness coming due on or before December 31, 2001 (other than any
Indebtedness being repaid as a result of the application of the proceeds
received from Purchaser's purchase of such Series C Preferred Stock), the
Purchaser expressly acknowledging that such funding sources may include
unused portions of the Liquidity Commitment; and
(v) Purchaser shall have made a good faith determination that the
Company has liquidity and current assets adequate to enable the Company to
carry on its business in a manner consistent with past practice (including
the payment of a quarterly dividend of $0.25 per share of Common Stock).
The closing of the issuance and sale of the subject sub-series of Series C
Preferred Stock shall occur no sooner than 30 calendar days, and not more than
60 calendar days, after delivery by the Company to Purchaser of written notice
stating the Company's intent to draw on the Liquidity Commitment upon the
issuance of such Series C Preferred in the name of Purchaser or any Affiliate
designated by Purchaser against payment by Purchaser of the required amount by
wire transfer to an account designated by the Company. All such shares of Series
C Preferred Stock shall be issued with a Conversion Price that is the lower of
(i) the Fair Market Value of the Common Stock determined immediately prior to
the date of the issuance of such Series C Preferred Stock and (ii) $6.25 (as
adjusted to the same extent the Conversion Price for the Series C Preferred
issued on the Closing Date has been previously adjusted pursuant to Section 8.4
of the Series C Articles Supplementary).
3. Purchaser Option. Purchaser will have the right to increase the
Additional Equity Commitment by up to an additional $50 million (such increased
amount, the "Increased Additional Equity Commitment") on written notice to the
Company given not later than 30 calendar days after the earlier of (i) the date
on which the entire Additional Equity Commitment shall have been invested under
Sections 1 or 2 of this Exhibit B and (ii) July 1, 2001 (the earlier such date,
the "Extension Date"), in which event the Increased Additional Equity Commitment
will be available to fund Acquisitions on the terms and subject to the
conditions of Section 1 of this Exhibit B (but not for uses contemplated by
Section 2 of this Exhibit B), provided, however, that for all purposes thereof
the July 1, 2001 date in Section 1 of this Exhibit B will be extended to a date
that is 365 days after the Extension Date.
4. Rights Offerings. (a) If Purchaser exercises its option to provide
the Increased Additional Equity Commitment during the 90 calendar day period
commencing on the first to occur of 365 days after the Extension Date and the
funding in full by Purchaser of the Initial Growth Equity Commitment (or such
earlier time to which the parties agree that initiating a rights offering is
appropriate given Purchaser's additional investments in the Company), the
Company shall be permitted, in the Company's sole discretion, to initiate an
offering of non-transferable rights (the "Initial Rights Offering") pursuant to
which the holders of shares of Common Stock (other than Purchaser and its
Affiliates) will be entitled to purchase shares of Common Stock at a price per
share equal to the per share price paid by Purchaser in connection with the
issuance and sale of Common Stock pursuant to the Initial Growth Equity
Commitment. In the event that Purchaser shall have funded multiple draws under
the Initial Growth Equity Commitment, the per share price to be paid in the
Initial Rights Offering shall equal the weighted average price per share paid by
Purchaser in connection therewith. The number of shares available for purchase
pursuant to the Initial Rights Offering shall equal the product obtained by
multiplying the number of shares of Additional Stock acquired by Purchaser
pursuant to the Initial Growth Equity Commitment by a fraction, the numerator of
which will be the number of shares of Common Stock owned by all holders of
Common Stock (other than Purchaser and its Affiliates) and the denominator of
which shall be the total number of Voting Securities (as defined in the
Stockholders Agreement) outstanding, in each case calculated as of the record
date for the relevant Rights Offering. Each holder of Common Stock shall be
entitled to purchase his or her pro rata share of the shares of Common Stock
available for purchase in the Initial Rights Offering, excluding for purposes of
such calculation shares of Common Stock owned by Purchaser and its Affiliates.
The net proceeds received by the Company in the Initial Rights Offering shall be
used to repurchase shares of Common Stock acquired by Purchaser pursuant to the
Initial Growth Equity Commitment at a per share price equal to the price per
share paid by Purchaser, or, in the event there shall have been multiple draws
under the Initial Growth Equity Commitment, the weighted average price per share
paid by Purchaser plus, in either case, interest on the amount paid in an amount
equal to 10% per annum commencing on the date of Purchaser's acquisition of such
Common Stock to the date of repurchase by the Company (calculated on the basis
of a 360 day calendar year and based on the actual number of days elapsed).
(b) If Purchaser exercises its option to provide the Incremental
Additional Equity Commitment, then during the 90 calendar day period commencing
on the first to occur of 365 days after the Extension Date or the funding in
full by Purchaser of the Increased Additional Equity Commitment (or such earlier
time to which the parties agree that initiating a rights offering is appropriate
given Purchaser's additional investments in the Company), the Company shall be
permitted to initiate in the Company's sole discretion, an offering of
non-transferable rights (the "Second Rights Offering") pursuant to which the
holders of shares of Common Stock (other than Purchaser and its Affiliates) will
be entitled to purchase shares of Common Stock at a price per share equal to the
per share price paid by Purchaser pursuant to the Increased Additional Equity
Commitment or, in the case of multiple draws thereunder, the weighted average
price per share paid by Purchaser. The Second Rights Offering shall be conducted
in accordance with the procedures and methodology set forth above regarding the
Initial Rights Offering.
(c) In the Initial or Second Rights Offering, the Company shall
distribute to each record holder of shares of its outstanding Common Stock, as
of the close of business on a record date determined by the Company (the "Record
Date"), at no cost to the record holder, a number of rights determined as
provided hereinabove (the "Rights"). The Rights shall be non-transferable and
shall be evidenced by subscription certificates (the "Subscription
Certificates").
(d) No fractional Rights or cash in lieu of fractional Rights shall be
issued or paid, and the number of Rights distributed to each record holder of
Common Stock shall be rounded up to the nearest whole number. No Subscription
Certificate may be divided in such a way as to permit the record holders of
Common Stock to receive a greater number of Rights than the number to which such
Subscription Certificate entitles its holder, except that a depositary, bank,
trust company or securities broker or dealer holding Common Stock of record on
the Record Date for more than one beneficial owner may, upon proper showing to
the Company designated subscription agent (the "Subscription Agent"), exchange
its Subscription Certificate to obtain a Subscription Certificate for the number
of Rights to which all such beneficial owners in the aggregate would have been
entitled had each been a holder on the Record Date. The Company may refuse to
issue any such Subscription Certificate, if such issuance would, in the
Company's sole and absolute discretion, be inconsistent with the principles
underlying the Initial or Second Rights Offering.
(e) The Rights shall expire at 5:00 p.m., New York time, on a date
determined by the Company (the "Expiration Date"), which shall not be fewer than
30 days or more than 60 days after the Rights Offering commences. After the
Expiration Date, all unexercised Rights shall be null and void. The Company
shall not be obligated to honor any purported exercise of Rights received by the
Subscription Agent after the Expiration Date, regardless of when the documents
relating to such exercise were sent.
(f) The Subscription Price shall be payable in full by check or bank
draft drawn upon a U.S. bank or postal, telegraphic or express money order
payable to the Subscription Agent.
(g) Rights may be exercised by delivering to the Subscription Agent, on
or prior to 5:00 p.m., New York time, on the Expiration Date, the properly
completed and executed Subscription Certificate evidencing such Rights with any
required signature guaranties, together with payment in full of the Subscription
Price for the number of shares of Common Stock being acquired pursuant to the
exercise of such Rights. The Subscription Price shall be deemed to have been
received by the Subscription Agent only upon (i) clearance of any uncertified
checks or (ii) receipt by the Subscription Agent of any certified check or bank
draft drawn upon a U.S. bank or of any postal, telegraphic or express money
order.
(h) Subject to the terms hereof, the Rights Offering shall contain such
other terms as the Company shall in good faith determine to be appropriate.
EXHIBIT C
FORM OF
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of ________ __,
2000, between Explorer Holdings, L.P., a Delaware limited partnership
("Purchaser" and together with its Permitted Transferees, the "Investor"), and
Omega Healthcare Investors, Inc., a Maryland corporation (the "Company").
A. The Company and Purchaser have entered into an Investment Agreement,
dated as of May 11, 2000 (the "Investment Agreement"), pursuant to which, among
other things, on the terms and subject to the conditions thereof, Purchaser will
acquire shares of Series C Preferred Stock, par value $1.00 per share, of the
Company (the "Series C Preferred"), and shares of common stock, par value $0.10
per share, of the Company (the "Common Stock").
B. The Company and Purchaser desire to make certain provisions in
respect of their relationship.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
I. DEFINITIONS
1.1 Definitions. Capitalized terms used herein and not defined herein will have
the meaning set forth in the Investment Agreement. In addition to the terms
defined elsewhere herein, the following terms have the following meanings when
used herein with initial capital letters:
(a) "Affiliate" of any Person means any other Person, that, directly
or indirectly through one or more intermediaries, controls or is controlled
by, or is under common control with, such Person; and, for the purposes of
this definition only, "control" (including the terms "controlling",
"controlled by" and "under common control with") means the possession,
direct or indirect, of the power to direct or cause the direction of the
management, policies or activities of a Person whether through the
ownership of securities, by contract or agency or otherwise.
(b) "Assumption Agreement" means an agreement in writing in
substantially the form of Exhibit A hereto pursuant to which the party
thereto agrees to be bound by the terms and provisions of this Agreement.
(c) A Person will be deemed the "beneficial owner" of, and will be
deemed to "beneficially own", and will be deemed to have "beneficial
ownership" of:
(i) any securities that such Person or any of such Person's
Affiliates is deemed to "beneficially own" within the meaning
of Rule 13d-3 under the Exchange Act, as in effect on the date
of this Agreement; and
(ii) any securities (the "underlying securities") that such Person
or any of such Person's Affiliates has the right to acquire
(whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding (written or oral), or upon the exercise of
conversion rights, exchange rights, rights, warrants or
options, or otherwise (it being understood that such Person
will also be deemed to be the beneficial owner of the
securities convertible into or exchangeable for the underlying
securities).
(d) "Board" means the Board of Directors of the Company.
(e) "Board Approval" means the approval of a majority of the members
of the Board who neither (i) have been designated for election to the Board
by Purchaser pursuant to Article III hereof or the Articles Supplementary
setting forth the terms of the Series C Preferred nor (ii) are Affiliates
or associates of the Investors.
(f) "Closing Date" means the date on which the first closing of the
transactions contemplated by the Investment Agreement occurs.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
(h) "Permitted Acquisition" means (i) any acquisition of Voting
Securities pursuant to or as contemplated by the Investment Agreement,
including without limitation upon the conversion of the Series C Preferred,
(ii) any additional acquisition of up to 5% of the outstanding Voting
Securities, and (iii) any other acquisition of Voting Securities after
Purchaser has received prior Board Approval of such acquisition.
(i) "Permitted Transferees" means any Person to whom Voting Securities
are Transferred in a Transfer not in violation of this Agreement, which
includes any Person to whom a Permitted Transferee of any Investor (or a
Permitted Transferee of a Permitted Transferee) so further Transfers Voting
Securities and who is required to, and does, become bound by the terms of
this Agreement.
(j) "Person" means an individual, a corporation, a partnership, a
limited partnership, a limited liability company, an association, a trust
or other entity or organization, including without limitation a government
or political subdivision or an agency or instrumentality thereof.
(k) "Public Offering" means the sale of shares of any class of Voting
Securities to the public pursuant to an effective registration statement
(other than a registration statement on Form S-4 or S-8 or any similar or
successor form) filed under the Securities Act.
(l) "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, between Purchaser and the Company
and any other registration rights agreement entered into in accordance with
Article V hereof.
(m) "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
(n) "Standstill Period" means the period commencing on the date of
this Agreement and ending on the fifth anniversary thereof.
(o) "Transfer" means a transfer, sale, assignment, pledge,
hypothecation or disposition.
(p) "Voting Securities" means the Common Stock, the Series C Preferred
(on an as-converted basis), all other securities of the Company entitled to
vote generally in the election of directors of the Company, and all other
securities convertible into, exchangeable for or exercisable for any such
securities (whether immediately or otherwise).
II. STANDSTILL
2.1 Additional Ownership. Except in connection with a Permitted Acquisition,
during the Standstill Period, Purchaser will not purchase or otherwise acquire
beneficial ownership of any Voting Security.
2.2 Other Restrictions. Without prior Board Approval, except as otherwise
permitted hereunder, no Investor will do any of the following:
(a) solicit proxies from other stockholders of the Company in
opposition to, or prior to the issuance of, a recommendation of the Board
for any matter to be considered at any meeting of holders of securities of
the Company, except matters on which a class vote of Series C Preferred is
required;
(b) knowingly form, join or participate in or encourage the formation
of a "group" (within the meaning of Section 13(d)(3) of the Exchange Act)
with respect to any securities of the Company, other than a group
consisting solely of Affiliates of Purchaser;
(c) deposit any securities of the Company into a voting trust or
subject any such securities to any arrangement or agreement with respect to
the voting thereof, other than any such trust, arrangement or agreement (i)
the only parties to, or beneficiaries of, which are Affiliates of an
Investor; and (ii) the terms of which do not require or expressly permit
any party thereto to act in a manner inconsistent with this Agreement; or
(d) tender any securities in any tender offer involving the Company
unless such tender offer has received Board Approval.
2.3 Voting Cap. Without prior Board Approval, the Purchaser will not vote any
Voting Securities, whether at a meeting of stockholders or pursuant to a written
consent of stockholders, to the extent the aggregate amount of Voting Securities
beneficially owned by Purchaser and its Affiliates exceeds 49.9% of the
outstanding Voting Securities.
III. BOARD REPRESENTATION; CONSULTATION
3.1 Nomination and Voting for Purchaser Designees and Independent Director. (a)
Effective as of the Closing Date, Purchaser will be entitled to designate from
time to time such number of directors to the Board (the "Purchaser Designees")
based on the percentage of the Company's total issued and outstanding Voting
Securities beneficially owned by Purchaser that were acquired by Purchaser
pursuant to the Investment Agreement, as set forth in the table below:
Percentage of Voting
Securities Beneficially
Owned by Purchaser Number of Purchaser Designees
------------------- ------------------------------
Less than 5.0% 0
5.00% - 16.67% 1
16.67% - 27.78% 2
27.78% - 38.89% 3
Greater than 38.89% 4
For as long as Purchaser beneficially owns at least 25% of the Series C
Preferred issued on the date hereof (or the Common Stock issued upon conversion
of the Series C Preferred) the Company shall use its best efforts to cause an
Independent Director selected in accordance with Section 4.10 of the Investment
Agreement to serve on the Company Board. The Company, at each meeting of
stockholders of the Company at which directors are elected or pursuant to which
such action is to be taken by written consent, will nominate for election as
directors of the Company the Purchaser Designees Purchaser is permitted to
designate pursuant to this Section 3.1(a). Ninety calendar days prior to any
such meeting or action by written consent, Purchaser will provide the Company
with the information required pursuant to Regulation 14A under the Exchange Act
with respect to each Purchaser Designee. The Company will solicit proxies from
its stockholders for such nominees, vote all proxies in favor of such nominees,
except for such proxies that specifically indicate to the contrary, and
otherwise use its best efforts to cause such nominees to be elected to the Board
as herein contemplated.
(b) Notwithstanding anything in this Section 3.1 to the contrary, (i)
for so long as the Purchaser and its Affiliates beneficially own at least
50% of the Series C Preferred issued on the date of this Agreement (or the
Common Stock issued upon conversion of the Series C Preferred), the
Purchaser shall be entitled to designate at least two Purchaser Designees
and (ii) for so long as the Purchaser and its Affiliates beneficially own
at least 25% of the Series C Preferred issued on the date of this Agreement
(or the Common Stock issued upon conversion of the Series C Preferred), the
Purchaser shall be entitled to designate at least one Purchaser Designee.
(c) The Company will take all actions as may be necessary to obtain
the approval of at least two thirds of the Incumbent Directors (as defined
in the Company Change of Control Agreements) to the election, reelection or
nomination of any Purchaser Designee or the Independent Director to the
Company Board.
(d) The Purchaser Designees will be apportioned among the three
classes of directors as equal as possible; provided, however, that in the
event that the number of Purchaser Designees determined pursuant to Section
3.1(a) is not evenly divisible by three, such additional Purchaser Designee
or Designees shall be nominated to the class or classes of directors with
the longest term of office. Each Purchaser Designee will serve until his
successor is elected and qualified or until his earlier resignation,
retirement, disqualification, removal from office, or death.
(e) If any Purchaser Designee ceases to be a director of the Company
for any reason, the Company will promptly upon the request of Purchaser
cause a person designated by Purchaser to replace such director if
Purchaser is so entitled.
(f) Purchaser agrees to cause a Purchaser Designee to promptly resign
in the event Purchaser's beneficial ownership of Voting Securities declines
such that Purchaser would no longer have the right to designate such
person.
(g) The Company covenants that (i) the total number of seats on the
Board (including any vacant seats) will in no event exceed nine and (ii)
the directors that are not Purchaser Designees will be reasonably
acceptable to both Purchaser and a majority of the current directors.
(h) At all times after the date hereof, the Company will take such
action to ensure that the Purchaser Designees are represented on each
committee of the Board in proportion to their representation on the entire
Board and that each committee will consist of at least three members;
provided, however, that for so long as the provisions of Article II are in
effect, in no event shall the Purchaser Designees constitute a majority of
any such committee.
3.2 Voting for Company Nominees. Each Investor shall vote all Voting Securities
that it beneficially owns for the election of directors nominated by the
Nominating Committee of the Board at each stockholder meeting at which directors
are elected, or shall execute written consents for such purpose at the request
of the Company; provided that no Investor shall be required to perform its
obligations under this Section 3.2 during any period in which any of the
Purchaser Designees or the Independent Director required to be nominated to the
Board is not so elected to the Board.
3.3 Other Voting Rights. Purchaser and the Company agree that under applicable
law, including without limitation Section 2-419 of the MGCL, and pursuant to the
Company's constituent documents, neither the Purchaser nor the Purchaser
Designees would be precluded, and the Company agrees that it will not assert
that the Purchaser or any of the Purchaser Designees is precluded, from voting
with respect to any acquisition or investment by the Company by virtue of such
acquisition or investment being funded in whole or in part with proceeds from
the Additional Equity Financing or any other transaction contemplated by the
Transaction Documents following appropriate disclosure to the then directors of
any circumstances that could provide the basis for an assertion of a conflict of
interest.
3.4 Access. The Company will, and will cause its subsidiaries and each of the
Company's and its subsidiaries' officers, directors, employees, agents,
representatives, accountants and counsel to: (a) afford the officers, employees
and authorized agents, accountants, counsel, financing sources and
representatives of Purchaser reasonable access, during normal business hours, to
the offices, properties, other facilities, books and records of the Company and
each subsidiary and to those officers, directors, employees, agents, accountants
and counsel of the Company and of each subsidiary who have any knowledge
relating to the Company or any subsidiary and (b) furnish to the officers,
employees and authorized agents, accountants, counsel, financing sources and
representatives of Purchaser, such additional financial and operating data and
other information regarding the assets, properties and goodwill of the Company
and its subsidiaries (or legible copies thereof) as Purchaser may from time to
time reasonably request (other than information and material from the Company's
counsel which is subject to the attorney/client privilege, which information and
material shall be made available to the Purchaser Designees in their capacity as
members of the Board).
IV. TRANSFER OF SECURITIES
4.1 Transferability. (a) Each Investor agrees that such Investor will not
Transfer any Voting Securities beneficially owned by it, except in strict
compliance with the terms of this Article IV.
(b) Any Investor may Transfer all or any part of the Voting Securities
beneficially owned by it at any time, without compliance with Section 4.2,
to any Affiliate of such Investor; provided that, prior to such Transfer,
(i) notice of such Transfer is given to the Company and (ii) the Affiliate
to whom such Voting Securities are to be Transferred enters into an
Assumption Agreement.
(c) From and after the first anniversary of the Closing Date, any
Investor may Transfer all or any part of the Voting Securities beneficially
owned by it, without compliance with Section 4.2, pursuant to a Public
Offering or in open-market sales in accordance with Rule 144 under the
Securities Act.
(d) Subject to compliance with the requirements of Section 4.2 hereof,
from and after July 1, 2001, any Investor may Transfer all or any part of
the Voting Securities beneficially owned by it, following compliance with
Section 4.2, to a "qualified institutional buyer" (as defined in Rule 144A
of the Securities Act); provided, that with respect to any such Transfer
involving 9.9% or more of the outstanding Voting Securities, such Transfer
shall be conditioned on the Transferee agreeing (i) to be bound by the
provisions of Article II of this Agreement for a period ending on the fifth
anniversary of the Closing Date and (ii) not to acquire more than 2% of the
outstanding Voting Securities during any twelve-month period.
(e) In the event of any purported Transfer by any Investor of any
Voting Security not made in compliance with this Section 4.1, such
purported Transfer will be void and of no effect and the Company will not
give effect to such Transfer. The Company shall be entitled to treat the
prior owner as the holder of any such securities not Transferred in
accordance with this Agreement.
(f) Each certificate representing Voting Securities issued to any
Investor will bear a legend on the face thereof substantially to the
following effect (with such additions thereto or changes therein as the
Company may be advised by counsel are required by law (the "Legend")):
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A STOCKHOLDERS AGREEMENT BETWEEN THE COMPANY AND EXPLORER
HOLDINGS, L.P., A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS
AGREEMENT."
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED
UNDER THAT ACT OR ANY OTHER APPLICABLE LAW OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE."
The Legend will be removed by the Company by the delivery of substitute
certificates without such Legend in the event of (i) a Transfer permitted by
Section 4.1 to any Person who is not required to enter into an Assumption
Agreement as a condition to such Transfer or (ii) the termination of this
Article IV pursuant to the terms of this Agreement, provided, however, that the
second paragraph of such Legend will only be removed if at such time a legal
opinion from counsel to the Transferee shall have been obtained to the effect
that such legend is no longer required for purposes of applicable securities
laws. In connection with the foregoing, the Company agrees that, if the Company
is required to file reports under the Exchange Act, for so long as and to the
extent necessary to permit any Investor to sell any Voting Securities pursuant
to Rule 144, the Company will use its reasonable efforts to file, on a timely
basis, all reports required to be filed with the SEC by it pursuant to Section
13 of the Exchange Act, furnish to the Investors upon request a written
statement as to whether the Company has complied with such reporting
requirements during the 12 months preceding any proposed sale under Rule 144 and
otherwise use its reasonable efforts to permit such sales pursuant to Rule 144.
4.2 Right of First Offer. (a) Prior to any Investor effecting a Transfer
described in Section 4.1(d) (a "Third-Party Sale"), such Investor (the "Offering
Stockholder") will deliver to the Company a written Notice (an "Offer Notice")
specifying the amount of consideration (the "Offer Price") and the other
material terms pertaining to such Third Party Sale for which the Offering
Stockholder proposes to sell the Securities to be offered in such Third-Party
Sale (the "Offered Stock") and, to the extent known or contemplated, the
proposed purchaser of the Offered Stock.
(b) If the Company delivers to the Offering Stockholder a written
notice (an "Acceptance Notice") within 20 calendar days of receipt of the
Offer Notice (such 20 calendar day period being referred to herein as the
"ROFO Acceptance Period") stating that the Company or its designee (the
"ROFO Purchaser")is willing to purchase all of the Offered Stock for the
Offer Price and on the other terms set forth in the Offer Notice, the
Offering Stockholder will sell all of the Offered Stock to the ROFO
Purchaser, and the Company will purchase such Offered Stock from the
Offering Stockholder, on the proposed terms and subject to the conditions
set forth below.
(c) The consummation of any purchase of the Offered Stock by the ROFO
Purchaser pursuant to this Section 4.2 (the "ROFO Closing") will occur no
more than 45 calendar days following the delivery of the Acceptance Notice
(such 45 calendar day period being referred to herein as the "ROFO Closing
Period") at 10:00 a.m. (Eastern Time) at the Company's offices or at such
other time of day and place as may be mutually agreed upon by the Offering
Stockholder and the ROFO Purchaser. At the ROFO Closing, (i) the ROFO
Purchaser will deliver to the Offering Stockholder by wire transfer to an
account designated by the Offering Stockholder an amount in immediately
available funds equal to the Offer Price, (ii) the Offering Stockholder
will deliver one or more certificates evidencing the Offered Stock,
together with such other duly executed instruments or documents (executed
by the Offering Stockholder) as may be reasonably requested by the ROFO
Purchaser to acquire the Offered Stock free and clear of any and all
claims, liens, pledges, charges, encumbrances, security interests, options,
trusts, commitments and other restrictions of any kind whatsoever
(collectively, "Encumbrances"), except for Encumbrances created by this
Agreement, or federal or state securities laws ("Permitted Encumbrances"),
and (iii) in connection with foregoing the Offering Stockholder will
represent and warrant to the Company that, upon the ROFO Closing, the
Offering Stockholder will convey and the Company will acquire the entire
record and beneficial ownership of, and good and valid title to, the
Offered Stock, free and clear of any and all Encumbrances, except for
Permitted Encumbrances.
(d) If no Acceptance Notice relating to the proposed Third-Party Sale
is delivered to the Offering Stockholder prior to the expiration of the
ROFO Acceptance Period, or an Acceptance Notice is so delivered to the
Offering Stockholder but the ROFO Closing fails to occur prior to the
expiration of the ROFO Closing Period (unless the ROFO Purchaser was ready,
willing and able prior to the expiration of the ROFO Closing Period to
consummate the transactions to be consummated by the ROFO Purchaser at the
ROFO Closing), the Offering Stockholder may, during the 360 calendar day
period immediately following the expiration of the ROFO Acceptance Period
(in the event that no Acceptance Notice was timely delivered to the
Offering Stockholder) or the 360 calendar day period immediately following
the expiration of the ROFO Closing Period (in the event that an Acceptance
Notice was timely delivered to the Offering Stockholder but the ROFO
Closing failed timely to occur other than as a result of a failure by the
Offering Stockholder to perform its obligations under Section 4.2(c)
hereof) at a gross price at least equal to the Offer Price and on such
other terms no more favorable to the Transferee than those set forth in the
Offer Notice, consummate the Third-Party Sale in accordance with Section
4.1(d). After the applicable 360-day period, any Transfer pursuant to
Section 4.1(d) shall not be made unless the Investor again complies with
the provisions of this Section 4.2.
(e) For purposes of this Section 4.2, the value of any consideration
other than cash that is payable or receivable in the Third Party Sale will
be as determined by the Board in good faith or, if the Offering Stockholder
gives the Company written notice of its disagreement with such valuation
within ten Business Days after receipt of written notice of such value,
such value will be determined in accordance with the appraisal procedures
set forth on Exhibit B. The various time periods described above relating
to any actions regarding the exercise of a right of first offer will be
extended for the duration of any period in which the value of any non-cash
consideration is subject to dispute pursuant to Section 4.2(e).
V. REGISTRATION RIGHTS
Upon consummation of any Transfer of Securities constituting 5% or more
of the Voting Securities to one Transferee (or one Transferee together with its
Affiliates) (other than a Transfer in a Public Offering or pursuant to Rule 144
under the Securities Act) that is permitted by this Agreement, the Company and
the Transferee thereof will enter into a registration rights agreement
substantially in the form of the Registration Rights Agreement, with such
modifications thereto as are acceptable to such Transferee that do not
materially increase the Company's obligations thereunder (excluding the effects
of multiple parties).
VI. TERMINATION
6.1 Termination. The provisions of this Agreement specified below will
terminate, and be of no further force or effect (other than with respect to
prior breaches), as follows:
(a) Articles II and IV will terminate (but in the case of subparagraph
(ii) through (iv), only as to the Investor that has given the notice
contemplated thereby), upon the earliest to occur of the following dates or
events:
(i) five years after the date of this Agreement;
(ii) notice that an Investor has determined to terminate this
Agreement at any time following the consummation of a transaction that has
Board Approval that provides for or involves (A) the merger of the Company
with or into any other entity, (B) the sale of all or substantially all of
the assets of the Company, (C) a tender offer for at least a majority of
the Common Stock, (D) the reorganization or liquidation of the Company, or
(E) any similar transaction or event that is subject to approval by the
stockholders of the Company as a result of which, in the case of any
merger, consolidation, reorganization, recapitalization, tender offer or
similar transaction or event, the Stockholders of the Company shall not
hold at least a majority of the outstanding Voting Securities following the
closing of such transaction;
(iii) notice that an Investor has determined to terminate this
Agreement following the failure by the Board or the Company to observe any
of the provisions of this Agreement hereof which breach has continued for
at least 20 calendar days after notice thereof to the Company from
Purchaser, which notice shall specify with particularity the basis for such
alleged failure or breach; or
(iv) notice that an Investor has determined to terminate this
Agreement following either (A) the failure of the stockholders of the
Company to elect any director designated under this Agreement by Purchaser,
(B) the removal of any such recommended director from the Board and the
failure to replace such removed director with a designee designated by
Purchaser, (C) the failure of the Board to replace any director designated
by an Investor with a person designated by Purchaser, or (D) the failure of
the Board to effect without unreasonable delay and maintain the committee
appointments required under Section 3.1(g) which failure shall (a) not be
due to any Purchaser Designee failing to qualify to serve as a director of
the Company due to existence of any applicable law, rule or regulation
imposing or creating standards or eligibility criteria for individuals
serving as directors of organizations such as the Company and (b) have
continued for at least 30 calendar days following notice thereof to the
Company, which notice shall specify with particularity the basis for such
alleged failure;
(b) Article III will terminate on the tenth anniversary of the date of
this Agreement; and
(c) Any portion or all of this Agreement will terminate and be of no
further force and effect upon a written agreement of the parties to that
effect.
VII. MISCELLANEOUS
7.1 Specific Performance. The parties agree that any breach by any of them of
any provision of this Agreement would irreparably injure the Company or the
Investor, as the case may be, and that money damages would be an inadequate
remedy therefor. Accordingly, the parties agree that the other parties will be
entitled to one or more injunctions enjoining any such breach and requiring
specific performance of this Agreement and consent to the entry thereof, in
addition to any other remedy to which such other parties are entitled at law or
in equity, provided, however, that in the event the Company is legally excused
from and does not in fact comply with its obligations under Section 3.1, the
obligations of the Investors under Articles II and IV will immediately terminate
without further action.
7.2 Notices. All notices, requests and other communications to either party
hereunder will be in writing (including telecopy or similar writing) and will be
given:
If to the Company, to:
----------------------
Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
Attention: Susan Allene Kovach
Fax: (734) 887-0322
with a copy to:
---------------
Powell, Goldstein, Frazer & Murphy LLP 191 Peachtree
Street, N.E.
Suite 1600
Atlanta, Georgia 30303
Attention: Rick Miller or
Eliot Robinson
Fax: (404) 572-6999
If to Purchaser, to:
--------------------
Explorer Holdings, L.P.
c/o The Hampstead Group, L.L.C.
4200 Texas Commerce Tower West
2200 Ross Avenue
Dallas, Texas 75801
Attention: William T. Cavanaugh
Fax: (214) 220-4949
with a copy to:
---------------
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Thomas W. Bark
Fax: (212) 755-7306
or such other address or telecopier number as such party may hereafter specify
by notice to the other party hereto. Each such notice, request or other
communication shall be effective only when actually delivered at the address
specified in this Section 7.2, if delivered prior to 5:00 (local time) and such
day is a Business Day, and if not, then such notice, request or other
communication shall not be effective until the next succeeding Business Day.
7.3 Amendments: No Waivers. (a) Any provision of this Agreement may be amended
or waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by the Company and Purchaser (who shall have the
authority to bind all Investors), or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder will operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The rights and
remedies herein provided will be cumulative and not exclusive of any rights
or remedies provided by law.
7.4 Successors and Assigns. The provisions of this Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided, however, that none of the parties may assign,
delegate or otherwise transfer any of their rights or obligations under this
Agreement without the written consent of the other parties hereto. Neither this
Agreement nor any provision hereof is intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.
7.5 Counterparts; Effectiveness. This Agreement may be signed in any number of
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement will
become effective when each party hereto shall have received a counterpart hereof
signed by the other party hereto.
7.6 Entire Agreement. This Agreement, the Investment Agreement, the Registration
Rights Agreement and the documents contemplated thereby (and all schedules and
exhibits thereto) constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements, understandings
and negotiations, both written and oral, between the parties with respect
thereto.
7.7 Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware, without giving effect to the
principles of conflict of laws thereof.
7.8 Calculation of Beneficial Ownership. Any provision in this Agreement that
refers to a percentage of Voting Securities shall be calculated based on the
aggregate number of issued and outstanding shares of Common Stock at the time of
such calculation (including any shares of Common Stock that would then be
issuable upon the conversion of the Series C Preferred or any outstanding
convertible security), but shall not include any shares of Common Stock issuable
upon any options, warrants or other securities that are exercisable for Common
Stock.
7.9 Severability. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
7.10 Jurisdiction; Consent to Service of Process. (a) Each party hereby
irrevocably and unconditionally submits, for itself and its property, to the
exclusive jurisdiction of the Delaware state court located in Wilmington,
Delaware or the United States District for the District of Delaware (as
applicable, a "Delaware Court"), and any appellate court from any such court, in
any suit, action or proceeding arising out of or relating to this Agreement, or
for recognition or enforcement of any judgment resulting from any such suit,
action or proceeding, and each party hereby irrevocably and unconditionally
agrees that all claims in respect of any such suit, action or proceeding may be
heard and determined in the Delaware Court.
(b) It will be a condition precedent to each party's right to bring any
such suit, action or proceeding that such suit, action or proceeding, in the
first instance, be brought in the Delaware Court (unless such suit, action or
proceeding is brought solely to obtain discovery or to enforce a judgment), and
if each such court refuses to accept jurisdiction with respect thereto, such
suit, action or proceeding may be brought in any other court with jurisdiction.
(c) No party may move to (i) transfer any such suit, action or
proceeding from the Delaware Court to another jurisdiction, (ii) consolidate any
such suit, action or proceeding brought in the Delaware Court with a suit,
action or proceeding in another jurisdiction, or (iii) dismiss any such suit,
action or proceeding brought in the Delaware Court for the purpose of bringing
the same in another jurisdiction.
(d) Each party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, (i) any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in the Delaware Court,
(ii) the defense of an inconvenient forum to the maintenance of such suit,
action or proceeding in any such court, and (iii) the right to object, with
respect to such suit, action or proceeding, that such court does not have
jurisdiction over such party. Each party irrevocably consents to service of
process in any manner permitted by law.
7.11 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM,
WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY
RELATED TO THIS AGREEMENT.
7.12 No Strict Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
[Signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
EXPLORER HOLDINGS, L.P.
By: EXPLORER HOLDINGS GENPAR, L.L.C., its General Partner
By:
Name:
Title:
OMEGA HEALTHCARE INVESTORS, INC.
By:
Name:
Title:
EXHIBIT A
Form of Assumption Agreement
The undersigned hereby agrees, effective as of the date hereof, to
become a party to, and be bound by the provisions of, that certain Stockholders
Agreement (the "Agreement") dated as of ________ ___, 2000 by and between Omega
Healthcare, Inc. and the Explorer Holdings, L.P. and for all purposes of the
Agreement, the undersigned shall be included within the term "Investor" (as
defined in the Agreement). The address and facsimile number to which notices may
be sent to the undersigned is as follows:
Facsimile No._______________
[Name]
By: _____________________________
Name:
Title:
EXHIBIT B
Appraisal Procedures
If the ROFO Purchaser gives the Offering Stockholder written notice of
its disagreement as to the valuation of any non-cash consideration payable or
receivable in a Third Party Sale in accordance with Section 4.2(e) (the
"Agreement Deadline"), then appraisals hereunder shall be undertaken by two
Appraisers (as defined below), one selected by the ROFO Purchaser and one
selected by the Offering Stockholder, which appointment shall be made within 15
calendar days after the Agreement Deadline. Such Appraisers shall have 30
calendar days following the appointment of the last Appraiser to be appointed to
agree upon the value of the consideration other than cash proposed to be
received in the Third Party Sale pursuant to Section 4.2 of this Agreement (the
"Consideration Value"). In the event that such Appraisers cannot so agree within
such period of time, (x) if such Appraisers' valuations do not vary by more than
20%, then the Consideration Value shall be the average of the two valuations and
(y) if such Appraisers' valuations differ by more than 20%, such Appraisers
shall mutually agree on a third Appraiser who shall calculate the Consideration
Value independently. In the event that the two original Appraisers cannot agree
upon a third Appraiser within 30 calendar days following the end of the 30-day
period referred to above, then the third Appraiser shall be determined by
lottery from a group of two Appraisers, one of whom will be designated by the
ROFO Purchaser and one of whom will be designated by the Offering Stockholder.
The third Appraiser shall make its determination as to Consideration Value
within 30 calendar days of its appointment. The third Appraiser's valuation will
be the Consideration Value for all purposes hereof and will not be subject to
appeal or challenge by either the ROFO Purchaser or the Offering Stockholder.
For purposes of this Exhibit B, "Appraiser" means a nationally
recognized investment banking firm that (a) does not have a direct or indirect
material financial interest in the ROFO Purchaser or the Offering Stockholder,
(b) has not received in excess of $250,000 in fees or other compensation from
the ROFO Purchaser, the Offering Stockholder or any of their respective
subsidiaries in the preceding 360 days, and (c) is otherwise qualified to render
an appraisal of the Consideration Value.