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SECURITIES PURCHASE AGREEMENT
BETWEEN
THE CONTINENTAL CORPORATION
AND
TCC-PS LIMITED PARTNERSHIP
Dated as of October 13, 1994
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TABLE OF CONTENTS
Page
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1. DEFINITIONS: CERTAIN REFERENCES . . . . . . . . . 1
2. CLOSING . . . . . . . . . . . . . . . . . . . . . 6
2.1 Time and Place of the Closing . . . . . . . 6
2.2 Transactions at the Closing . . . . . . . . 7
2.3 Fees . . . . . . . . . . . . . . . . . . . . 7
3. CONDITIONS TO THE CLOSING . . . . . . . . . . . . 7
3.1 Conditions Precedent to the Obligations of
the Purchaser . . . . . . . . . . . . . . . 7
3.1.1 Compliance by the Company . . . . . . 7
3.1.2 No Legal Action . . . . . . . . . . . 7
3.1.3 Election of Officer. . . . . . . . . 8
3.1.4 Certificate of Amendment . . . . . . 8
3.1.5 Stock Exchange Listing . . . . . . . 8
3.1.6 Regulatory Matters . . . . . . . . . 8
3.1.7 Legal Opinions . . . . . . . . . . . 9
3.1.8 Registration Rights Agreement . . . . 9
3.1.9 Option . . . . . . . . . . . . . . . 9
3.1.10 Other . . . . . . . . . . . . . . . . 9
3.1.11 Hart-Scott-Rodino . . . . . . . . . . 9
3.1.12 Exemption from Special Voting
Requirements . . . . . . . . . . . . 10
3.1.13 Change of Control . . . . . . . . . . 10
3.1.14 Amendments to Loan Agreements . . . . 10
3.1.15 Credit Agreement Amendment and
Waiver; Relationship with Lenders . . 10
3.1.16 Confirmation of A.M. Best . . . . . . 11
3.1.17 Absence of Material Adverse Effect . 11
3.1.18 Board of Directors; Amendment to
By-laws . . . . . . . . . . . . . . . 11
3.1.19 Tax Sharing Agreements . . . . . . . 13
3.1.20 Reserves . . . . . . . . . . . . . . 13
3.2 Conditions Precedent to Obligations of the
Company . . . . . . . . . . . . . . . . . . . 13
3.2.1 Compliance by the Purchaser . . . . . 13
3.2.2 No Legal Action . . . . . . . . . . . 13
3.2.3 Regulatory Matters . . . . . . . . . 13
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3.2.4 Certificate of Amendment . . . . . . 14
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . 14
4.1 Organization, Good Standing, Power,
Authority, Etc. . . . . . . . . . . . . . . 14
4.2 Capitalization of the Company . . . . . . . 15
4.3 Registration Rights . . . . . . . . . . . . 16
4.4 SEC Documents . . . . . . . . . . . . . . . 16
4.5 Authority and Qualification of the Company . 17
4.6 Subsidiaries . . . . . . . . . . . . . . . . 17
4.7 Outstanding Securities . . . . . . . . . . . 18
4.8 No Contravention, Conflict, Breach, Etc. . . 18
4.9 Consents . . . . . . . . . . . . . . . . . . 19
4.10 No Existing Violation, Default, Etc. . . . . 19
4.11 Licenses and Permits . . . . . . . . . . . . 20
4.12 Title to Properties . . . . . . . . . . . . 20
4.13 Environmental Matters . . . . . . . . . . . 21
4.14 Taxes . . . . . . . . . . . . . . . . . . . 22
4.15 Litigation . . . . . . . . . . . . . . . . . 22
4.16 Labor Matters . . . . . . . . . . . . . . . 22
4.17 Contracts . . . . . . . . . . . . . . . . . 23
4.18 Finder's Fees . . . . . . . . . . . . . . . 23
4.19 Financial and Statutory Statements . . . . . 23
4.20 Employee Benefits . . . . . . . . . . . . . 24
4.21 Contingent Liabilities . . . . . . . . . . . 25
4.22 No Material Adverse Change . . . . . . . . . 25
4.23 Investment Company . . . . . . . . . . . . . 26
4.24 Exemption from Registration; Restrictions
on Offer and Sale of Same or Similar
Securities . . . . . . . . . . . . . . . . . 26
4.25 Use of Proceeds . . . . . . . . . . . . . . 26
4.26 Information with Respect to Reserves . . . . 27
4.27 No Bank Regulatory Oversight . . . . . . . . 27
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . 27
5.1 Organization, Good Standing, Power,
Authority, Etc. . . . . . . . . . . . . . . 27
5.2 No Conflicts; No Consents . . . . . . . . . 27
5.3 Acquisition for Own Account . . . . . . . . 28
5.4 Available Funds . . . . . . . . . . . . . . 28
6. COVENANTS OF THE PARTIES . . . . . . . . . . . . . 29
6.1 Restrictions on Transfer . . . . . . . . . . 29
6.2 Certificates for Shares and Conversion
Shares To Bear Legends . . . . . . . . . . . 30
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6.3 Removal of Legends . . . . . . . . . . . . . 32
6.4 Voting of Shares. . . . . . . . . . . . . 32
6.5 Pre-Closing Activities . . . . . . . . . . . 33
6.6 No Inconsistent Agreements . . . . . . . . . 35
6.7 Information . . . . . . . . . . . . . . . . 35
6.8 Hart-Scott-Rodino . . . . . . . . . . . . . 36
6.9 Acquisition Proposals . . . . . . . . . . . 36
6.10 Permitted Disposition . . . . . . . . . . . 37
6.11 Access . . . . . . . . . . . . . . . . . . . 38
6.12 Publicity . . . . . . . . . . . . . . . . . 39
6.13 Restricted Payments. . . . . . . . . . . . 39
6.14 Reservation of Shares . . . . . . . . . . . 39
6.15 Issuance of New Preferred Stock or New
Senior Notes . . . . . . . . . . . . . . . . 39
6.16 Shareholders Rights Plan . . . . . . . . . . 40
6.17 Board Representation . . . . . . . . . . . . 40
6.18 Specified Corporate Action . . . . . . . . . 44
6.19 Regulatory Approvals . . . . . . . . . . . . 44
6.20 Regulatory Documents . . . . . . . . . . . . 45
7. STANDSTILL . . . . . . . . . . . . . . . . . . . . 45
7.1 Prohibited Activities. . . . . . . . . . . . 45
7.2 Voting and Other Rights. . . . . . . . . . 48
7.3 Standstill Period. . . . . . . . . . . . . 48
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . 51
8.1 Indemnification by the Company . . . . . . . 51
8.2 Notification . . . . . . . . . . . . . . . . 52
8.3 Registration Rights Agreement . . . . . . . 53
9. TERMINATION . . . . . . . . . . . . . . . . . . . 53
9.1 Termination . . . . . . . . . . . . . . . . 53
9.2 Effect of Termination. . . . . . . . . . . . 54
10. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS . . . . . . . . . . . . . . . . . . . . 54
11. PERFORMANCE; WAIVER . . . . . . . . . . . . . . . 54
12. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . 55
13. MISCELLANEOUS . . . . . . . . . . . . . . . . . . 55
13.1 Notices . . . . . . . . . . . . . . . . . . 55
13.2 Expenses . . . . . . . . . . . . . . . . . . 56
Page
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13.3 Governing Law . . . . . . . . . . . . . . . 57
13.4 Severability . . . . . . . . . . . . . . . . 57
13.5 Headings; Interpretation . . . . . . . . . . 57
13.6 Entire Agreement . . . . . . . . . . . . . . 57
13.7 Counterparts . . . . . . . . . . . . . . . . 58
13.8 Letter Agreement. . . . . . . . . . . . . . 58
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT ("AGREEMENT") dated
as of October __, 1994, between THE CONTINENTAL CORPORATION,
a New York corporation (including its successors and
permitted assigns, the "Company"), and TCC-PS LIMITED
PARTNERSHIP, a Delaware limited partnership (including its
successors and permitted assigns, the "Purchaser").
WHEREAS, the Company desires to sell to the
Purchaser, and the Purchaser desires to purchase, an
aggregate of (A) such number of shares of the Company's
Cumulative Convertible Preferred Stock, Series E, par value
$4.00 per share ("Series E Preferred Stock"), as shall be
convertible on the Closing Date into 19.9% of the Common
Stock outstanding on the Closing Date and (B) such number of
shares of the Company's Cumulative Preferred Stock,
Series F, par value $4.00 per share ("Series F Preferred
Stock"), having an aggregate liquidation preference equal to
$200,000,000 less the aggregate liquidation preference of
the Series E Preferred Stock (collectively, the "Shares"),
for the consideration and upon the terms and subject to the
conditions set forth herein. The Company also desires to
grant to the Purchaser an option to purchase 1,250,000
shares (the "Option Shares") of the Company's Cumulative
Preferred Stock, Series G, par value $4.00 per share (the
"Series G Preferred Stock").
NOW, THEREFORE, in consideration of the premises
and of the respective representations, warranties,
covenants, agreements and conditions contained herein, each
of the Company and the Purchaser agrees as follows:
1. DEFINITIONS: CERTAIN REFERENCES.
The terms defined in this Section 1, whenever
used in this Agreement, shall have the following meanings
for all purposes of this Agreement:
"Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated
thereunder.
"Affiliate" has the meaning set forth in
Rule 12b-2 under the Exchange Act.
"Annual Report" means the Company's Annual Report
on Form 10-K for the year ended December 31, 1993, as filed
with the SEC.
"Bank Regulatory Arrangements" has the meaning set
forth in Section 6.19.
"CAM" means Continental Asset Management Corp.
"CAM Agreement" means the Asset Purchase
Agreement, dated as of the date hereof, by and among CAM
Investment Management, L.P., CAM and the Company.
"Casualty" means Casualty Insurance Company, an
Illinois corporation.
"Certificate of Amendment" means the Certificate
of Amendment of the Certificate of Incorporation of the
Company to be filed by the Company with the Department of
State of the State of New York on or prior to the date and
time of the Closing, substantially in the form attached as
Exhibit A hereto.
"Certificate of Incorporation" means the Certifi-
cate of Incorporation of the Company as filed for record by
the Department of State of the State of New York, as amended
through the date hereof.
"Change of Control" means: (A) the sale or other
disposition, directly or indirectly, by the Company or any
of its Subsidiaries (other than any sale or other disposi-
tion by the Company or any of its Subsidiaries to the
Company or any of its wholly owned Subsidiaries) in one or a
series of related transactions of (i) 30% or more of the
gross premiums written by the Company and its Subsidiaries
in the four immediately preceding fiscal quarters (whether
by reinsurance, the sale of assets, the sale of securities
of entities holding the same, or otherwise), calculated in a
manner consistent with the Company's historical financial
practices, (ii) Marine Office of America Corporation (or all
or substantially all of its assets), (iii) 50% or more of
2
the Company's Commercial Lines business (whether by the sale
of assets, the sale of securities of entities holding the
same, or otherwise) or (iv) 40% or more of the Company's
Special Operations Group (whether by the sale of assets, the
sale of securities of entities holding the same, or other-
wise); or (B) the occurrence of a Specified Corporate
Action.
"Closing" has the meaning set forth in Section 2.1
of this Agreement.
"Closing Date" has the meaning set forth in
Section 2.1 of this Agreement.
"Common Stock" means the common stock, par value
$1.00 per share, of the Company.
"Company" has the meaning set forth in the first
recital of this Agreement.
"Conversion Price" shall have the meaning
specified in the Certificate of Amendment.
"Conversion Shares" means the shares of Common
Stock issuable or issued upon conversion of the Series E
Preferred Stock pursuant to the terms of this Agreement and
the Certificate of Amendment.
"Encumbrance" has the meaning set forth in
Section 4.6 of this Agreement.
"Environmental Laws" has the meaning set forth in
Section 4.13 of this Agreement.
"ERISA" has the meaning set forth in Section 4.20
of this Agreement.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations
promulgated thereunder.
"Exchange Notes" means, collectively, the
Convertible Subordinated Notes of the Company issuable or
issued in exchange for the Series E Preferred Stock, the
Subordinated Notes of the Company issuable or issued in
exchange for the Series F Preferred Stock and the
Subordinated Notes of the Company issuable or issued in
3
exchange for the Series G Preferred Stock, in each case
pursuant to the Certificate of Amendment.
"Initial Purchaser" means, collectively, the
original purchaser or purchasers of the Shares and any
Affiliate thereof, any limited liability company of which
Insurance Partners, L.P and/or Insurance Partners Offshore
(Bermuda), L.P. is a member or any partner of Insurance
Partners, L.P. or Insurance Partners Offshore (Bermuda),
L.P. to which it transfers any Shares, Option Shares,
Conversion Shares or Exchange Notes or any portion of the
Option.
"Initial Purchaser Representative" means Insurance
Partners Advisors, L.P. or any other single Affiliate of the
Initial Purchaser designated as Initial Purchaser
Representative by written notice from the Initial Purchaser
to the Company.
"Licenses" has the meaning set forth in
Section 4.11 of this Agreement.
"Mandatory Redemption Date" has the meaning set
forth in the Certificate of Amendment.
"Material Adverse Effect" means a material adverse
effect on the assets, results of operations, business,
prospects or condition (financial or otherwise) of the
Company and its Subsidiaries, taken as a whole.
"Material Subsidiaries" means those Subsidiaries
of the Company set forth on Schedule 1 hereto.
"New Preferred Stock" has the meaning set forth in
the Certificate of Amendment.
"New Senior Notes" has the meaning set forth in
the Certificate of Amendment.
"Nominating Committee" has the meaning set forth
in Section 3.1.18.
"Operating Committee" means the Operating
Committee of the Board of Directors of the Company, which
shall be composed of the person identified in Section 3.1.3,
the Chief Executive Officer of the Company and the President
of the Company.
4
"Option" means the Stock Option to be dated as of
the Closing delivered by the Company to the Purchaser
substantially in the form of Exhibit B hereto, as amended,
supplemented and modified form time to time in accordance
with the terms thereof.
"Option Shares" has the meaning set forth in the
first recital of this Agreement.
"Permitted Dividend" shall have the meaning
specified in the Certificate of Amendment.
"Purchase Price" means $200,000,000.
"Purchaser" has the meaning set forth in the first
recital of this Agreement.
"Purchaser Designee" shall have the meaning
specified in Section 3.1.18.
"Purchaser Group" means the original purchaser or
purchasers of the Shares, Insurance Partners, L.P.,
Insurance Partners Offshore (Bermuda), L.P., Keystone, Inc.,
Centre Reinsurance Holdings Limited and any entity that any
of the foregoing has the power to direct or cause the
direction of the management or policies of which (whether
through the ownership of voting securities, by contract or
otherwise).
"Quarterly Reports" means the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1994 and
the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, each as filed with the SEC.
"Registrable Securities" shall have the meaning
specified in the Registration Rights Agreement.
"Registration Rights Agreement" means the
Registration Rights Agreement to be dated as of the date of
the Closing between the Company and the Initial Purchaser,
substantially in the form attached as Exhibit C hereto, as
amended, supplemented and modified from time to time in
accordance with the terms thereof.
"Restricted Payment" shall have the meaning
specified in the Certificate of Amendment.
5
"Restricted Securities" has the meaning set forth
in Section 7.1 of this Agreement.
"SEC" means the Securities and Exchange
Commission.
"SEC Documents" means all documents filed by the
Company with the SEC since January 1, 1993.
"Series E Preferred Stock" has the meaning set
forth in the first recital of this Agreement.
"Series F Preferred Stock" has the meaning set
forth in the first recital of this Agreement.
"Series G Preferred Stock" has the meaning set
forth in the first recital of this Agreement.
"Shares" has the meaning set forth in the first
recital of this Agreement.
"Specified Corporate Action" shall have the
meaning specified in the Certificate of Amendment.
"Standstill Period" has the meaning set forth in
Section 7.3 of this Agreement.
"Subsidiary" means, with respect to any person,
any corporation, limited or general partnership, joint
venture, association, joint stock company, trust, unincor-
porated organization, or other entity analogous to any of
the foregoing of which a majority of the equity ownership
(whether voting stock or comparable interest) is, at the
time, owned, directly or indirectly by such person.
"Transaction Documents" means the Certificate of
Amendment, the Option and the Registration Rights Agreement.
"Transaction Expenses" means the expenses of the
Purchaser, the Initial Purchaser, CAM Investment Manage-
ment, L.P., Insurance Partners, L.P., Insurance Partners
Offshore (Bermuda), L.P. or any of their respective
Affiliates (whether or not incurred prior to the date
hereof), including without limitation, the fees, disburse-
ments and other expenses of lawyers, accountants, actuaries,
investment bankers and any other advisors thereto, arising
out of, relating to or incidental to the discussion, evalua-
tion, negotiation, documentation and closing or potential
6
closing of the transactions contemplated hereby (and, as
used in Section 6.10, the transactions contemplated by the
CAM Agreement and the potential acquisition by an Affiliate
of the Purchaser of Casualty), and shall mean and include,
with respect to fees of professionals based on hourly rates,
such fees to the extent they are based on the standard
hourly rates of such professionals.
"Transfer" means, with respect to any Share,
Conversion Share or Exchange Note issued with respect to the
Shares, any sale, assignment, transfer, disposition by gift,
including without limitation, any distribution in liquida-
tion or otherwise by a corporation or partnership; provided,
--------
however, that "Transfer" does not mean, with respect to any
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such Share, Conversion Share or Exchange Note, any pledge,
mortgage, hypothecation or grant of a security interest
therein or a transfer thereof through the granting of
participation rights.
2. CLOSING.
2.1 Time and Place of the Closing. The
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Closing (the "Closing") shall take place at the offices of
Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, New York 10019-6064, at 10:00 A.M., New
York time, on the fifth business day following the first
date on which the conditions to Closing set forth in each of
Section 3.1.6 and Section 3.2.3 have first been satisfied or
waived; provided, however, that the Closing Date shall be
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extended until no later than February 28, 1995 if (A) any of
the other conditions to the Closing have not been satisfied
or waived as of such date, (B) the applicable party is using
its best efforts to satisfy such condition or conditions and
(C) such condition or conditions may reasonably be satisfied
on or prior to February 28, 1995. The Company shall give to
the Purchaser two business days' prior written notice of the
date the Closing is scheduled to occur. The "Closing Date"
shall be the date the Closing occurs.
2.2 Transactions at the Closing. At the
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Closing, subject to the terms and conditions of this Agree-
ment, the Company shall issue and sell to the Purchaser, and
the Purchaser shall purchase, the Shares. At the Closing,
the Company shall deliver to the Purchaser certificates
representing the Shares, each registered in the name of the
Purchaser or its nominee against payment of the Purchase
Price with respect thereto by wire transfer of immediately
7
available funds to an account or accounts previously desig-
nated by the Company.
2.3 Fees. At the Closing, subject to the
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terms and provisions of this Agreement, the Company shall
pay to an Affiliate or Affiliates of the Purchaser desig-
nated by the Purchaser (A) a funding fee of $4,000,000 and
(B) a consulting fee of $2,000,000, in each case by wire
transfer of immediately available funds to an account or
accounts previously designated by the Purchaser.
3. CONDITIONS TO THE CLOSING.
3.1 Conditions Precedent to the Obligations
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of the Purchaser. The obligations of the Purchaser to be
----------------
discharged under this Agreement on or prior to the Closing
are subject to satisfaction of the following conditions at
or prior to the Closing (unless expressly waived in writing
by the Purchaser at or prior to the Closing):
3.1.1 Compliance by the Company. All
-------------------------
of the terms, covenants and conditions of this Agreement to
be complied with and performed by the Company at or prior to
the Closing shall have been complied with and performed by
it in all material respects, and the representations and
warranties made by the Company in this Agreement shall be
true and correct in all material respects at and as of the
Closing, with the same force and effect as though such
representations and warranties had been made at and as of
the Closing, except for changes expressly contemplated by
this Agreement and except for representations and warranties
that are made as of a specific time, which shall be true and
correct in all material respects only as of such time.
3.1.2 No Legal Action. No action,
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suit, investigation or other proceeding shall have been
instituted or threatened before any court or by any govern-
mental authority or body (A) relating to the transactions
contemplated hereby that presents a substantial risk of the
restraint or prohibition of the transactions contemplated
hereby or the obtaining of material damages or other
material relief in connection therewith or (B) that, after
consultation between the parties, presents a substantial
risk of causing a Material Adverse Effect.
3.1.3 Election of Officer. Richard M.
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Haverland shall have been elected Chairman and Chief
Executive Officer of the Company, the Company and such
8
person shall have executed an employment agreement and such
agreement shall be in full force and effect and no default
shall have occurred thereunder.
3.1.4 Certificate of Amendment. The
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Certificate of Amendment shall have been filed by the
Department of State of the State of New York and shall have
become effective.
3.1.5 Stock Exchange Listing. The
----------------------
Conversion Shares shall have been approved for listing,
subject to notice of issuance, by the New York Stock
Exchange, Inc. and each other securities exchange on which
the Common Stock is listed.
3.1.6 Regulatory Matters.
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(A) The Purchaser shall be
satisfied that there shall have been received, and
shall be in full force and effect without conditions or
limitations reasonably unacceptable to the Purchaser,
all requisite approvals under the statutes and
regulations of each jurisdiction (x) in the United
States of America or any state, territory or possession
thereof and (y) each other jurisdiction wherever
located that is material to the conduct of the business
conducted by the Company and its Subsidiaries, taken as
a whole, in each case with respect to the purchase and
holding by the Purchaser of the Shares, the Option, the
Option Shares, the Conversion Shares and the Exchange
Notes (including the receipt of such approvals or
advice from regulatory authorities with respect thereto
as the Purchaser may reasonably determine).
(B) The Purchaser shall be
satisfied that there shall have been received, and
shall be in full force and effect without conditions or
limitations unacceptable to the Purchaser, all
requisite approvals under the statutes and regulations
of each jurisdiction (x) in the United States of
America or any state, territory or possession thereof
and (y) each other jurisdiction wherever located that
is material to the conduct of the business conducted by
the Company and its Subsidiaries, taken as a whole, in
each case with respect to certain transactions to be
entered into by the Company and certain of its
Affiliates in the third and fourth calendar quarters of
1994 pursuant to which capital contributions shall be
9
made to The Buckeye Union Insurance Company, The
Fidelity & Casualty Company of New York, The
Continental Insurance Company and Fireman's Insurance
Company of Newark, New Jersey. All short-term notes
issued in connection with such transactions shall have
been repaid by the earlier of (i) November 15, 1994 and
(ii) the Closing Date; provided, however, that
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$20,000,000 of such notes may remain outstanding after
November 15, 1994, but shall in any event be repaid
prior to the earlier of (A) December 31, 1994 and
(B) the Closing Date. Without limiting the generality
of the foregoing, the Purchaser shall be satisfied that
there shall have been received, and shall be in full
force and effect, written approvals by all applicable
insurance regulatory authorities of the proposed
accounting treatment of such transactions, which
written approvals shall be satisfactory to the
Purchaser.
3.1.7 Legal Opinions.
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(A) The Company shall have
furnished to the Purchaser on the Closing Date the
opinion of William F. Gleason, Jr., Senior Vice
President, General Counsel and Secretary of the
Company, dated the Closing Date, substantially in the
form of Exhibit D hereto.
(B) The Company shall have
furnished to the Purchaser on the Closing Date the
opinion of Debevoise & Plimpton, special counsel for
the Company, dated the Closing Date, substantially in
the form of Exhibit E hereto.
3.1.8 Registration Rights Agreement.
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The Company shall have executed and delivered at the Closing
for the benefit of the Purchaser the Registration Rights
Agreement.
3.1.9 Option. The Company shall have
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executed and delivered at the Closing the Option.
3.1.10 Other. The Company shall have
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furnished to the Purchaser such executed and conformed
copies of such other opinions and such certificates, letters
and documents as the Purchaser may reasonably request and as
are customary for transactions such as those contemplated by
this Agreement.
10
3.1.11 Hart-Scott-Rodino. The waiting
-----------------
period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 shall have expired or been terminated, to the
extent applicable.
3.1.12 Exemption from Special Voting
-----------------------------
Requirements. The Board of Directors of the Company shall
------------
have irrevocably taken all action necessary under
Section 912 of the Business Corporation Law of the State of
New York to exempt future transactions between the Company
and its Subsidiaries, on the one hand, and the Purchaser and
its "affiliates" and "associates" (each as defined in such
Section 912) that are members of the Purchaser Group, on the
other hand, from the provisions of such Section 912
(provided, however, that such exemption shall be applicable
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only if the Purchaser and such "affiliates" and "associates"
shall have become "interested stockholders" (as defined in
such Section 912) as a result of the acquisition of securi-
ties of the Company in a manner and to an extent not pro-
hibited by this Agreement) and the Purchaser shall have
received evidence reasonably satisfactory to it that such
action shall have been taken.
3.1.13 Change of Control. No Change of
-----------------
Control shall have occurred on or after the date of this
Agreement and on or prior to the Closing; provided, however,
-------- -------
that a temporary reinsurance program that would otherwise be
within the meaning of clause (A) of the definition of
"Change of Control," the duration of which cannot exceed 180
days and that would not have, or could not reasonably be
expected to have, a Material Adverse Effect, shall not
constitute a Change of Control for the purposes of this
Section 3.1.13.
3.1.14 Amendments to Loan Agreements.
-----------------------------
All amendments to any loan agreement or other debt
instrument to which the Company or any Subsidiary of the
Company is party necessary to allow the Company to effect
the transactions contemplated hereby, including, without
limitation, the payment in full of all cash dividends on the
Shares and the Option Shares (except upon a default or event
of default thereunder or if the payment of such dividend
would cause a default or event of default thereunder) or
issuance of the Conversion Shares, shall have been effected
and the form and substance of such amendments shall be
reasonably acceptable to the Purchaser.
11
3.1.15 Credit Agreement Amendment and
------------------------------
Waiver; Relationship with Lenders.
---------------------------------
(A) (i) The Third Amendment, dated as of
September 29, 1994, to the Credit Agreement (the "Credit
Agreement"), dated as of December 30, 1993, among the
Company, the several lenders from time to time parties
thereto (the "Lenders"), Chemical Bank and Citibank, N.A.,
as Co-Agents and Chemical Bank, as Administrative Agent,
which, among other things, amends the Credit Agreement so as
to (1) increase the revolving credit commitments thereunder
to $210,000,000 and (2) extend the termination date thereof
to December 31, 1995 shall be in full force and effect and
(ii) the Company shall have obtained from the Lenders (w) a
waiver or further amendment of the Credit Agreement
reducing, until June 30, 1995, the amount specified in Sec-
tion 6.1(a) of the Credit Agreement to $1,400,000,000, (x) a
waiver of the application of, or a confirmation of the
inapplicability of, clause (i)(A) of Section 7(j) of the
Credit Agreement with respect to the acquisition of the
Shares by the Purchaser, (y) a confirmation that the Shares
and the Option Shares would be included within Consolidated
Capital (as defined in the Credit Agreement) and (z) a
waiver or further amendment of the Credit Agreement
reducing, until June 30, 1995, the percentage specified in
clause (ii)(A) of Section 6.1(b) of the Credit Agreement to
43%.
(B) The Purchaser shall be reasonably
satisfied that, after giving effect to the transactions
contemplated by this Agreement, no Event of Default (as
defined in the Credit Agreement) shall have occurred under
the Credit Agreement and that any actions with respect to
reserves described in the press release issued by the
Company in connection with the announcement of the
transactions contemplated by this Agreement and as
contemplated by Section 3.1.20 shall not cause an Event of
Default to occur under the Credit Agreement.
3.1.16 Confirmation of A.M. Best. The
-------------------------
Company shall have received confirmation from A.M. Best &
Co. (which confirmation may be delivered orally) that the
Subsidiaries of the Company engaged in the insurance
business will maintain a pooled rating of at least "A-"
after giving effect to the transactions contemplated by this
Agreement and such confirmation shall be reasonably
satisfactory to the Purchaser (taking into account any
conditions to which such confirmation may be subject).
12
3.1.17 Absence of Material Adverse
---------------------------
Effect. There shall not have occurred after June 30, 1994
------
any Material Adverse Effect.
3.1.18 Board of Directors; Amendment to
--------------------------------
By-laws.
-------
(A) The Company shall have taken all actions
necessary to provide that (i) the Board of Directors of the
Company shall consist of no less than thirteen or more than
seventeen members, (ii) the Nominating Committee of the
Board of Directors (the "Nominating Committee") shall con-
sist of either three or five members and (iii) the number of
members of the Board of Directors may be increased in
accordance with the Certificate of Amendment.
(B) The Company shall have caused (i) if the
Company's Board of Directors consists of thirteen or four-
teen members, three persons designated by the Initial
Purchaser ("Purchaser Designees") to be appointed thereto or
(ii) if the Company's Board of Directors consists of
fifteen, sixteen or seventeen members, four Purchaser
Designees to be appointed thereto, which appointment shall
be effective upon the Closing; provided, however, that if,
-------- -------
after customary investigation of any Purchaser Designee's
qualifications, the Board of Directors reasonably determines
in good faith that any Purchaser Designee is not qualified
or acceptable under standards applied fairly and equally to
all nominees to the Board of Directors, the Initial
Purchaser shall designate another person that meets such
standards.
(C) The Company shall have caused (i) (x) if
the Nominating Committee is composed of three members, one
Purchaser Designee to be appointed thereto or (y) if the
Nominating Committee is composed of five members, two
Purchaser Designees to be appointed thereto and (ii) such
number (which number shall be at least one and shall be
rounded to the nearest whole number) of Purchaser Designees
to be appointed to each other committee of the Board of
Directors equal to the product of the total number of
persons on such committee (including Purchaser Designees)
and a fraction the numerator of which is the number of
shares of Common Stock into which the shares of Series E
Preferred Stock to be issued at the Closing are convertible
and the denominator of which is the total number of out-
standing securities of the Company entitled to vote
generally in the election of directors (assuming conversion
13
of such shares of Series E Preferred Stock), with all such
appointments to be effective upon the Closing.
(D) The Board of Directors of the Company
shall have amended the By-laws of the Company to provide
that (A) the Board of Directors shall consist of no less
than thirteen or more than seventeen members, subject to
clause (C) below, (B) the Nominating Committee shall consist
of three or five members, (C) the number of members of the
Board of Directors may be increased in accordance with the
Certificate of Amendment and (D) so long as the Initial
Purchaser has the right to nominate at least one director,
none of the foregoing provisions of the Company's By-laws,
nor the provision contained in Section 8 of the Company's
By-laws providing that each committee of the Board of
Directors shall consist of no fewer than three members, may
be amended by the Board of Directors of the Company absent
the affirmative vote of 95% of the members of the Board of
Directors.
3.1.19 Tax Sharing Agreements. The
----------------------
Company shall have supplied to the Purchaser copies of the
tax sharing agreements to which it or any of its Subsidi-
aries are party and such agreements shall not have been
amended in any manner.
3.1.20 Reserves. Any actions or
--------
inactions, in total, taken by the Company in the fourth
quarter of 1994 with respect to reserves shall be acceptable
to the Purchaser.
3.2 Conditions Precedent to Obligations of
--------------------------------------
the Company. The obligations of the Company to be dis-
-----------
charged under this Agreement on or prior to the Closing are
subject to satisfaction of the following conditions at or
prior to the Closing (unless waived by the Company at or
prior to the Closing):
3.2.1 Compliance by the Purchaser. All
---------------------------
of the terms, covenants and conditions of this Agreement to
be complied with and performed by the Purchaser at or prior
to the Closing shall have been complied with and performed
by the Purchaser in all material respects, and the represen-
tations and warranties made by the Purchaser in this Agree-
ment shall be true and correct in all material respects at
and as of the Closing, with the same force and effect as
though such representations and warranties had been made at
14
and as of the Closing, except for changes contemplated by
this Agreement.
3.2.2 No Legal Action. No action,
---------------
suit, investigation or other proceeding relating to the
transactions contemplated hereby shall have been instituted
before any court or instituted or threatened by any govern-
mental body that presents a substantial risk of the
restraint or prohibition of the transactions contemplated
hereby or the obtaining of material damages or other
material relief in connection therewith.
3.2.3 Regulatory Matters.
------------------
(A) The Company shall be satisfied
that there shall have been received, and shall be in
full force and effect without conditions or limitations
reasonably unacceptable to the Company, all requisite
approvals under the statutes and regulations of each
jurisdiction (x) in the United States of America or any
state, territory or possession thereof and (y) each
other jurisdiction wherever located that is material to
the conduct of the business conducted by the Company
and its Subsidiaries, taken as a whole, in each case
with respect to the purchase and holding by the
Purchaser of the Shares, the Option, the Option Shares,
the Conversion Shares and the Exchange Notes (including
the receipt of such approvals or advice from regulatory
authorities with respect thereto as the Company may
reasonably determine).
(B) The Company shall be satisfied
that there shall have been received, and shall be in
full force and effect without conditions or limitations
unacceptable to the Company, all requisite approvals
under the statutes and regulations of each jurisdiction
(x) in the United States of America or any state,
territory or possession thereof and (y) each other
jurisdiction wherever located that is material to the
conduct of the business conducted by the Company and
its Subsidiaries, taken as a whole, in each case with
respect to certain transactions to be entered into by
the Company and certain of its Affiliates in the third
and fourth calendar quarters of 1994 pursuant to which
capital contributions shall be made to The Buckeye
Union Insurance Company, The Fidelity & Casualty
Company of New York, The Continental Insurance Company
and Fireman's Insurance Company of Newark, New Jersey
15
(including the receipt of such approvals or advice from
regulatory authorities with respect thereto as the
Company may determine).
3.2.4 Certificate of Amendment. The
------------------------
Certificate of Amendment shall have been filed by the
Department of State of the State of New York and shall have
become effective.
4. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.
The Company hereby represents and warrants to the
Purchaser that, except as specifically disclosed in the
single writing from the Company to the Purchaser that is
identified as such and is dated the date hereof (the
"Disclosure Letter"):
4.1 Organization, Good Standing, Power,
-----------------------------------
Authority, Etc. The Company is a corporation duly
---------------
organized, validly existing and in good standing under the
laws of the State of New York. The Company has the full
corporate power and authority to execute and deliver this
Agreement and each Transaction Document and to perform its
obligations under this Agreement and each Transaction
Document. The Company has taken all action required by law,
the Certificate of Incorporation, its By-Laws or otherwise
required to be taken by it to authorize the execution,
delivery and performance by it of this Agreement and each
Transaction Document. This Agreement is, and after the
Closing each Transaction Document will be, a valid and
binding obligation of the Company, enforceable against the
Company in accordance with their respective terms. True and
complete copies of the Certificate of Incorporation and the
By-Laws of the Company as in effect on the date hereof have
been provided by the Company to the Purchaser. No approval
or authorization of the shareholders and no further approval
of the Board of Directors of the Company will be required
under applicable law, Company's Certificate of Incorporation
or By-laws or the rules of the New York Stock Exchange, Inc.
for the execution and delivery of this Agreement and the
Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated by this Agree-
ment and each of the Transaction Documents, other than such
as have been obtained or made and are in full force and
effect. As of the Closing Date, future transactions between
the Company and its Subsidiaries, on the one hand, and the
Purchaser and its "affiliates" and "associates" (each as
16
defined in Section 912 of the Business Corporation Law of
the State of New York) that are members of the Purchaser
Group, on the other hand, shall be exempted from the provi-
sions of such Section 912; provided, however, that such
-------- -------
exemption shall be applicable only if the Purchaser and such
"affiliates" and "associates" shall have become "interested
stockholders" (as defined in such Section 912) as a result
of the acquisition of securities of the Company in a manner
and to an extent not prohibited by this Agreement.
4.2 Capitalization of the Company. After
-----------------------------
giving effect to the Certificate of Amendment, the
authorized capital stock of the Company will at the Closing
consist of: (A) 100,000,000 shares of Common Stock, par
value $1.00 per share, 55,467,995 of which shares are out-
standing on the date hereof; and (B) 10,000,000 shares of
preferred stock, par value $4.00 per share, of which
(i) 2,750,000 shares have been designated as $2.50
Cumulative Convertible Preferred Stock, Series A, 27,997 of
which shares are outstanding on the date hereof,
(ii) 1,094,096 shares have been designated $2.50 Cumulative
Preferred Stock, Series B, 25,563 of which shares are out-
standing on the date hereof, (iii) 20,500 shares were
designated $150 Cumulative Convertible Preferred Stock,
Series C, all of which shares have been redeemed and are not
outstanding, (iv) 40,000 shares were designated Cumulative
Preferred Stock, Series D, all of which shares have been
redeemed and are not outstanding, (v) such number of shares
as are described in clause (A) of the first recital of this
Agreement will be designated Series E Preferred Stock, all
of which shares will be issued and outstanding at the
Closing, (vi) such number of shares as are described in
clause (B) of the first recital of this Agreement will be
designated Series F Preferred Stock, all of which shares
will be issued and outstanding at the Closing and
(vii) 1,250,000 shares will be designated Series G Preferred
Stock, all of which shares will be reserved for issuance
pursuant to the Option. No other capital stock of the
Company is, or at the Closing will be, authorized and no
other capital stock is issued. Since June 30, 1994, the
Company has only issued shares of Common Stock in accordance
with the terms of its employee benefit plans as in existence
on June 30, 1994, in all cases in the ordinary course of
business and in a manner and in amounts consistent with past
practice. At the Closing, all of the Shares will be duly
authorized and, when issued in accordance with this Agree-
ment, will be validly issued, fully paid and nonassessable
and entitled to the benefits of, and have the terms and
17
conditions set forth in, the Certificate of Amendment. At
the Closing, all of the Option Shares will be duly
authorized and, when issued in accordance with the Option,
will be validly issued, fully paid and nonassessable and
entitled to the benefits of, and have the terms and condi-
tions set forth in, the Certificate of Amendment. The
Conversion Shares are duly authorized and, when issued in
accordance with the Certificate of Amendment, will be
validly issued, fully paid and nonassessable. All outstand-
ing shares of capital stock of the Company have been duly
authorized, are validly issued, fully paid and nonassessable
and have been issued in compliance with applicable federal
and state securities laws. The shareholders of the Company
have no preemptive or similar rights with respect to the
securities of the Company.
4.3 Registration Rights. The Purchaser
-------------------
shall, by virtue of its purchase of Shares hereunder, be
entitled to the rights of a holder under the Registration
Rights Agreement.
4.4 SEC Documents.
-------------
(A) The Company has delivered to the Purchaser
true and complete copies of: (i) the Annual Report and its
Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, as filed with the SEC, (ii) the Quarterly
Reports, (iii) its Current Reports on Form 8-K filed with
the SEC since January 1, 1993, (iv) its proxy or information
statements relating to meetings of, or actions without a
meeting by, the stockholders of the Company held since
January 1, 1993 and (v) all other SEC Documents.
(B) As of its filing date, each SEC Document
(including all exhibits and schedules thereto and documents
incorporated by reference therein) referred to in clauses
(A)(i) through (v) filed, and each SEC Document (including
all exhibits and schedules thereto and documents incor-
porated by reference therein) that will be filed by the
Company prior to the Closing Date, as amended or supple-
mented, if applicable, pursuant to the Exchange Act
(i) complied or will comply in all material respects with
the applicable requirements of the Exchange Act and (ii) did
not or will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order
to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
18
(C) Each such final registration statement
(including all exhibits and schedules thereto and documents
incorporated by reference therein) referred to in clause
(A)(v) filed, and each final registration statement
(including all exhibits and schedules thereto and documents
incorporated by reference therein) that will be filed by the
Company prior to the Closing Date, as amended or supple-
mented, if applicable, pursuant to the Act, as of the date
such statement or amendment became or will become effective
(i) complied or will comply in all material respects with
the applicable requirements of the Act and (ii) did not or
will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading (in the case of any prospectus, in light of the
circumstances under which they were made).
(D) The Company has (i) delivered to the
Purchaser true and complete copies of all correspondence
between the SEC and the Company or its legal counsel,
accountants or other advisors since January 1, 1993, and
(ii) disclosed to the Purchaser in writing the content of
all material discussions between the SEC and the Company or
its legal counsel, accountants or other advisors concerning
the adequacy or form of any SEC Document filed with the SEC
since January 1, 1993. The Company is not aware of any
issues raised by the SEC with respect to any of the SEC
Documents, other than those disclosed to the Purchaser
pursuant to clause (i) or (ii) of this Section 4.4(D).
4.5 Authority and Qualification of the
----------------------------------
Company. The Company has the corporate power and authority
-------
to own, lease and operate its properties and to conduct its
business as described in the SEC Documents and as currently
owned or leased and conducted. The Company is duly
qualified to transact business as a foreign corporation and
is in good standing (if applicable) in each jurisdiction in
which the conduct of its business or its ownership, leasing
or operation of property requires such qualification, other
than any failure to be so qualified or in good standing as
would not singly or in the aggregate with all such other
failures reasonably be expected to have a Material Adverse
Effect.
4.6 Subsidiaries. Exhibit 21 to the Annual
------------
Report is a true, accurate and correct statement of all of
the information required to be set forth therein by the
regulations of the SEC. Each Subsidiary of the Company has
19
been duly incorporated or organized and is validly existing
as a corporation or other legal entity in good standing
under the laws of the jurisdiction of its incorporation or
formation, has the corporate or other power and authority to
own, lease and operate its properties and to conduct its
business as described in the SEC Documents and as currently
owned or leased and conducted and is duly qualified to
transact business as a foreign corporation or other legal
entity and is in good standing (if applicable) in each
jurisdiction in which the conduct of its business or its
ownership, leasing or operation of property requires such
qualification, other than any failure to be so qualified or
in good standing as would not singly or in the aggregate
with all such other failures reasonably be expected to have
a Material Adverse Effect. Except as disclosed in the SEC
Documents filed with the SEC prior to the date of this
Agreement, all of the outstanding capital stock of each
Subsidiary of the Company has been duly authorized and
validly issued, is fully paid and nonassessable and is owned
by the Company, directly or through other Subsidiaries of
the Company (other than directors' qualifying shares), free
and clear of any mortgage, pledge, lien, security interest,
restrictions upon voting or transfer, claim or encumbrance
of any kind ("Encumbrance") (other than such transfer
restrictions as may exist under federal and state securities
laws or any Encumbrances between or among the Company and/or
any Subsidiary of the Company), and there are no rights
granted to or in favor of any third party (whether acting in
an individual, fiduciary or other capacity), other than the
Company or any Subsidiary of the Company, to acquire any
such capital stock, any additional capital stock or any
other securities of any such Subsidiary. There exists no
restriction, other than those pursuant to applicable law or
regulation, on the payment of cash dividends by any Material
Subsidiary.
4.7 Outstanding Securities. Except as set
----------------------
forth in the SEC Documents filed with the SEC prior to the
date of this Agreement and except as contemplated by this
Agreement, there are no outstanding (A) securities or
obligations of the Company convertible into or exchangeable
for any capital stock of the Company, (B) warrants, rights
or options to subscribe for or purchase from the Company any
such capital stock or any such convertible or exchangeable
securities or obligations or (C) obligations of the Company
to issue such shares, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or
options.
20
4.8 No Contravention, Conflict, Breach, Etc.
----------------------------------------
The execution, delivery and performance of each of this
Agreement and each of the Transaction Documents by the
Company and the consummation of the transactions herein and
therein contemplated will not (A) conflict with or result in
a breach or violation of any of the terms and provisions of,
or constitute a default under, or result in the creation or
imposition of any Encumbrance upon any assets or properties
of it or of any of its Subsidiaries under any statute, rule,
regulation, order or decree of any governmental agency or
body or any court having jurisdiction over it or any such
Subsidiary or any of its or their respective properties,
assets or operations, or any indenture, mortgage, loan
agreement, note or other agreement or instrument for
borrowed money, any guarantee of any agreement or instrument
for borrowed money or any lease, permit, license or other
agreement or instrument to which it or any of such
Subsidiaries is a party or by which it or any such Subsidi-
ary is bound or to which any of the properties, assets or
operations of it or any such Subsidiary is subject, which
conflict, breach, violation, default, creation or imposition
has, or will have, individually or in the aggregate, a
Material Adverse Effect or (B) contravene any provision of
the Certificate of Incorporation, By-Laws or other organiza-
tional documents of it or of any of its Subsidiaries.
4.9 Consents. No consent, approval,
--------
authorization, order, registration, filing or qualification
of or with any (A) court, (B) government agency or body,
(C) stock exchange on which the securities of the Company
are traded or (D) other third party (whether acting in an
individual, fiduciary or other capacity) is required to be
made or obtained by the Company or any of its Subsidiaries
for the consummation of the transactions contemplated by
this Agreement or by any of the Transaction Documents,
except such as may be required under the Act and state
securities laws in connection with the performance by the
Company of its obligations under the Registration Rights
Agreement.
4.10 No Existing Violation, Default, Etc.
------------------------------------
Neither the Company nor any of its Subsidiaries is in
violation of (A) its Certificate of Incorporation, By-Laws
or other organization documents or (B) any applicable law,
ordinance, administrative, governmental or stock exchange
rule or regulation, which violation has or could reasonably
be expected to have a Material Adverse Effect or (C) any
order, decree or judgment of any court or governmental
21
agency or body having jurisdiction over the Company or any
such Subsidiary, which violation has or could reasonably be
expected to have a Material Adverse Effect. Except as set
forth in SEC Documents filed with the SEC prior to the date
of this Agreement, no event of default or event that, but
for the giving of notice or the lapse of time or both, would
constitute an event of default exists or, upon the consumma-
tion by the Company of the transactions contemplated by this
Agreement or any of the Transaction Documents, will exist
under any indenture, mortgage, loan agreement, note or other
agreement or instrument for borrowed money, any guarantee of
any agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any
such Subsidiary is bound or to which any of the properties,
assets or operations of the Company or any such Subsidiary
is subject, which event of default, or event that, but for
the giving of notice or the lapse of time or both, would
constitute an event of default, has or could reasonably be
expected to have a Material Adverse Effect.
4.11 Licenses and Permits. The Company and
--------------------
its Subsidiaries have such certificates, permits, licenses,
franchises, consents, approvals, orders, authorizations and
clearances from appropriate governmental agencies and bodies
("Licenses") as are necessary to own, lease or operate their
properties and to conduct their businesses in the manner
described in the SEC Documents and as currently owned or
leased and conducted and all such Licenses are valid and in
full force and effect except such licenses that the failure
to have or to be in full force and effect individually or in
the aggregate do not have, and are not reasonably expected
to have, a Material Adverse Effect. Neither the Company nor
any of its Subsidiaries has received any written notice that
any violations are being or have been alleged in respect of
any such License and no proceeding is pending or, to the
best of the Company's knowledge, after due inquiry,
threatened, to suspend, revoke or limit any such License.
To the best of the Company's knowledge, after due inquiry,
the Company and its Subsidiaries are in compliance in all
material respects with their respective obligations under
such Licenses, with such exceptions as individually or in
the aggregate do not have, and are not reasonably expected
to have, a Material Adverse Effect, and no event has
occurred that allows, or after notice or lapse of time would
allow, revocation, suspension, limitation or termination of
such Licenses, except such events as would have not have, or
could not reasonably be expected to have, a Material Adverse
Effect.
22
4.12 Title to Properties. The Company and
-------------------
its Subsidiaries have sufficient title to all material
properties (real and personal) owned by the Company and any
such Subsidiary that are necessary for the conduct of the
business of the Company and such Subsidiaries as described
in the SEC Documents and as currently conducted, free and
clear of any Encumbrance that may materially interfere with
the conduct of the business of the Company and such Subsidi-
aries, taken as a whole, and to the best of the Company's
knowledge, after due inquiry, all material properties held
under lease by the Company or the Subsidiaries are held
under valid, subsisting and enforceable leases.
4.13 Environmental Matters. Neither the
---------------------
Company nor any of its Subsidiaries is the subject of any
federal, state, local or foreign investigation, and neither
the Company nor any of its Subsidiaries has received any
notice or claim (or is aware of any facts that would form a
reasonable basis for any claim), nor entered into any
negotiations or agreements with any third party, relating to
any material liability or remedial action or potential
material liability or remedial action under Environmental
Laws (as defined below) (other than in respect of or related
to insurance policies issued by or of the Company or any of
its Subsidiaries), except such liability or remedial action
as has not had, or could not reasonably be expected to have,
a Material Adverse Effect, nor are there any pending,
reasonably anticipated or, to the best knowledge of the
Company, threatened actions, suits or proceedings against or
affecting the Company, any of the Subsidiaries or their
properties, assets or operations in connection with any such
Environmental Laws (other than in respect of or related to
insurance policies issued by or of the Company or any of its
Subsidiaries), except such actions, suits or proceedings as
have not had, or could not reasonably be expected to have, a
Material Adverse Effect. The properties, assets and
operations of the Company and its Subsidiaries are in
compliance in all material respects with all applicable
federal, state, local and foreign laws, rules and regula-
tions, orders, decrees, judgments, permits and licenses
relating to public and worker health and safety and to the
protection and clean-up of the natural environment and
activities or conditions related thereto, including, without
limitation, those relating to the generation, handling,
disposal, transportation or release of hazardous materials
(collectively, "Environmental Laws"), other than any such
failure to be in compliance as would not singly or in the
aggregate with all such other failures have a Material
23
Adverse Effect. With respect to such properties, assets and
operations, including any previously owned, leased or
operated properties, assets or operations, to the best
knowledge of the Company, after due inquiry, there are no
past, present or reasonably anticipated future events,
conditions, circumstances, activities, practices, incidents,
actions or plans of the Company or any of its Subsidiaries
that may interfere with or prevent compliance or continued
compliance in all material respects with applicable
Environmental Laws, other than any such interference or
prevention as would not singly or in the aggregate with any
such other interference or prevention reasonably be expected
to have a Material Adverse Effect. The term "hazardous
materials" shall mean those substances that are regulated by
or form the basis for liability under any applicable
Environmental Laws.
4.14 Taxes. The Company and its
-----
Subsidiaries have filed or caused to be filed, or have
properly filed extensions for, all income tax returns that
are required to be filed and have paid or caused to be paid
all taxes as shown on said returns and on all assessments
received by it to the extent that such taxes have become
due, except taxes the validity or amount of which is being
contested in good faith by appropriate proceedings and with
respect to which adequate reserves, in accordance with
generally accepted accounting principles, have been set
aside. The Company and its Subsidiaries have paid or caused
to be paid, or have established reserves that the Company or
such Subsidiaries reasonably believes to be adequate in all
material respects, for all income tax liabilities applicable
to the Company and its Subsidiaries for all fiscal years
that have not been examined and reported on by the taxing
authorities (or closed by applicable statutes). United
States Federal income tax returns of the Company and its
Subsidiaries have been examined and closed through the
fiscal year ended December 31, 1978.
4.15 Litigation. Except as set forth in SEC
----------
Documents filed with the SEC prior to the date of this
Agreement, there are no pending actions, suits, proceedings,
arbitrations or investigations against or affecting the
Company or any of its Subsidiaries or any of their respec-
tive properties, assets or operations, or with respect to
which the Company or any such Subsidiaries is responsible by
way of indemnity or otherwise, that are required under the
Exchange Act to be described in such SEC Documents, that
questions the validity of this Agreement or any of the
24
Transaction Documents or any action to be taken pursuant to
this Agreement or any of the Transaction Documents, or that
would singly, or in the aggregate, taken net of claims
reserves established and after giving effect to reinsurance,
with all such other actions, suits, investigations or
proceedings, reasonably be expected to have, a Material
Adverse Effect or a Material Adverse Effect on the ability
of the Company to perform its obligations under this
Agreement or any of the Transaction Documents; and, to the
best knowledge of the Company, after due inquiry, except as
set forth in SEC Documents filed with the SEC prior to the
date of this Agreement, no such actions, suits, proceedings
or investigations are threatened or contemplated and there
is no basis for any such action, suit, proceeding or
investigation.
4.16 Labor Matters. No labor disturbance by
-------------
the employees of the Company or any of its Subsidiaries that
has had or that is reasonably expected to have a Material
Adverse Effect exists or, to the best knowledge of the
Company, after due inquiry, is threatened.
4.17 Contracts. All of the material con-
---------
tracts of the Company or any of its Subsidiaries that are
required to be described in the SEC Documents or to be filed
as exhibits thereto are described in the SEC Documents or
filed as exhibits thereto and are in full force and effect.
True and complete copies of all such material contracts have
been delivered by the Company to the Purchaser. Neither the
Company nor any of its Subsidiaries nor, to the best know-
ledge of the Company, any other party is in breach of or in
default under any such contract except for such breaches and
defaults as in the aggregate have not had and are not
reasonably expected to have a Material Adverse Effect.
Except as described in the Disclosure Letter, no contract or
agreement to which the Company or any Material Subsidiary is
a party contains any restriction with respect to, or any
provision that could restrict, the payment of cash dividends
on the Shares or the Option Shares.
4.18 Finder's Fees. No broker, finder or
-------------
other party is entitled to receive from the Company, any of
its Subsidiaries or any other person any brokerage or
finder's fee or any other fee, commission or payment as a
result of the transactions contemplated by this Agreement
for which the Purchaser would have any liability or
responsibility.
25
4.19 Financial and Statutory Statements.
----------------------------------
(A) The audited consolidated financial
statements and related schedules and notes included in the
SEC Documents comply in all material respects with the
requirements of the Exchange Act and the Act and the rules
and regulations of the SEC thereunder, were prepared in
accordance with generally accepted accounting principles
consistently applied throughout the period involved and
fairly present the financial condition, results of opera-
tions, cash flows and changes in stockholders' equity of the
Company and its Subsidiaries at the dates and for the
periods presented. The unaudited quarterly consolidated
financial statements and the related notes included in the
SEC Documents present fairly the financial condition,
results of operations and cash flows of the Company and its
Subsidiaries at the dates and for the periods to which they
relate, subject to year-end audit adjustments (consisting
only of normal recurring accruals), have been prepared in
accordance with generally accepted accounting principles
applied on a consistent basis except as otherwise stated
therein and have been prepared on a basis consistent with
that of the audited financial statements referred to above
except as otherwise stated therein.
(B) The Company has heretofore
delivered to the Purchaser true and complete copies of the
Annual Statements and Quarterly Statements of each of the
Subsidiaries of the Company engaged in the insurance
business as filed with the applicable insurance regulatory
authority for the years ended December 31, 1992 and
December 31, 1993 and for the quarterly periods ended
March 31, 1994 and June 30, 1994, including all exhibits,
interrogatories, notes, schedules and any actuarial
opinions, affirmations or certifications or other supporting
documents filed in connection therewith (collectively, the
"Statutory Statements"). The Statutory Statements were
prepared in conformity with statutory accounting practices
prescribed or permitted by the applicable insurance regula-
tory authority consistently applied for the periods covered
thereby and present fairly the statutory financial position
of such Subsidiary as at the respective dates thereof and
the results of operations of such Subsidiary for the respec-
tive periods then ended. The Statutory Statements complied
in all material respects with all applicable laws, rules and
regulations when filed, and no material deficiency has been
asserted with respect to any Statutory Statements by the
applicable insurance regulatory body or any other govern-
26
mental agency or body. The statutory balance sheets and
income statements included in the Statutory Statements have
been audited by KPMG Peat Marwick, and the Company has
delivered to the Buyer true and complete copies of all audit
opinions related thereto.
4.20 Employee Benefits. Except for the
-----------------
plans set forth in the Disclosure Letter (the "Benefit
Plans"), there are no employee benefit plans or arrangements
of any type (including, without limitation, plans described
in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended and the regulations thereunder
("ERISA")), under which the Company or any of its Subsidi-
aries has or in the future could have directly, or indi-
rectly through a Commonly Controlled Entity (within the
meaning of Sections 414(b), (c), (m) and (o) of the Internal
Revenue Code of 1986, as amended (the "Code")), any lia-
bility with respect to any current or former employee of the
Company, any of its Subsidiaries, or any Commonly Controlled
Entity. No such Benefit Plan is a "multiemployer plan"
(within the meaning of ERISA Section 4001(a)(3)). With
respect to each Benefit Plan the Company has delivered or
made available to the Purchaser complete and accurate copies
of (A) all plan texts and agreements, (B) all material
employee communications (including summary plan descrip-
tions), (C) the most recent annual report, (D) the most
recent annual and periodic accounting of plan assets, (E)
the most recent determination letter received from the
Internal Revenue Service and (F) the most recent actuarial
valuation. With respect to each Benefit Plan: (i) such
Benefit Plan has been maintained and administered at all
times in material compliance with its terms and applicable
law and regulation; (ii) no event has occurred and there
exists no circumstance under which the Company or any of its
Subsidiaries could directly, or indirectly through a Com-
monly Controlled Entity, incur any material liability under
ERISA, the Code or otherwise (other than routine claims for
benefits and other liabilities arising in the ordinary
course pursuant to the normal operation of such Benefit
Plan); (iii) there are no actions, suits or claims (other
than routine claims for benefits) pending or, to the knowl-
edge of the Company, threatened, with respect to any Benefit
Plan or against the assets of any Benefit Plan; (iv) all
contributions and premiums due and owing have been made or
paid on a timely basis; and (v) all contributions made under
any Benefit Plan have met the requirements for deductibility
under the Code, and all contributions that have not been
made have been properly recorded on the books of the Company
27
or a Commonly Controlled Entity thereof in accordance with
generally accepted accounting principles.
4.21 Contingent Liabilities. Except as
----------------------
fully reflected or reserved against in the financial state-
ments included in the Annual Report or the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1994, or disclosed in the footnotes contained in such finan-
cial statements, the Company and its Subsidiaries had no
liabilities (including tax liabilities) at the date of such
financial statements, absolute or contingent, that were
material either individually or in the aggregate to the
Company and its Subsidiaries taken as a whole.
4.22 No Material Adverse Change. Since the
--------------------------
latest date as of which information is given in the SEC
Documents filed prior to the date immediately preceding the
date hereof: (A) the Company and its Subsidiaries have not
incurred any material liability or obligation (indirect,
direct or contingent), or entered into any material oral or
written agreement or other transaction, that is not in the
ordinary course of business or that could reasonably be
expected to result in a Material Adverse Effect; (B) the
Company and its Subsidiaries have not sustained any loss or
interference with its business or properties from fire,
flood, windstorm, accident or other calamity (whether or not
covered by insurance) that has had or that could reasonably
be expected to have a Material Adverse Effect; (C) there has
been no material change in the indebtedness of the Company
and its Subsidiaries (except as contemplated by Sec-
tion 3.1.15 and except for changes relating to intercompany
indebtedness of the Company and/or its Subsidiaries), no
change in the stock of the Company, except for the issuance
of shares of Common Stock pursuant to options or conversion
rights in existence at the date of this Agreement, and no
dividend or distribution of any kind declared, paid or made
by the Company or any of its Subsidiaries (other than
dividends or distributions declared, paid or made by a
wholly owned Subsidiary of the Company or First Insurance
Company of Hawaii, Ltd. on any class of its stock;
(D) neither the Company nor any of its Subsidiaries has made
(nor does it propose to make) (i) any material change in its
accounting or reserving methods or practices or (ii) any
material change in the depreciation or amortization policies
or rates adopted by it, in either case, except as may be
required by law or applicable accounting standards; and (E)
there has been no event causing a Material Adverse Effect,
nor any development that could, singly or in the aggregate,
28
reasonably be expected to result in a Material Adverse
Effect.
4.23 Investment Company. The Company is not
------------------
an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
4.24 Exemption from Registration; Restric-
-------------------------------------
tions on Offer and Sale of Same or Similar Securities.
-----------------------------------------------------
Assuming the representations and warranties of the Purchaser
set forth in Section 5.3 hereof are true and correct in all
material respects, the offer and sale of the Shares made
pursuant to this Agreement, the offer and sale of the Option
and the issuance and sale of the Option Shares will be
exempt from the registration requirements of the Act.
Neither the Company nor any person acting on its behalf has,
in connection with the offering of the Shares, the Option or
the Option Shares, engaged in (A) any form of general
solicitation or general advertising (as those terms are used
within the meaning of Rule 502(c) under the Act), (B) any
action involving a public offering within the meaning of
Section 4(2) of the Act, or (C) any action that would
require the registration under the Act of the offering and
sale of the Shares pursuant to this Agreement, the offering
and sale of the Option or the issuance and sale of the
Option Shares or that would violate applicable state
securities or "blue sky" laws. The Company has not made and
will not make, directly or indirectly, any offer or sale of
Shares or shares of Series G Preferred Stock or of
securities of the same or a similar class as the Shares or
the Option Shares if as a result the offer and sale of the
Shares contemplated hereby or the offer and sale of the
Option could fail to be entitled to exemption from the
registration requirements of the Act. As used herein, the
terms "offer" and "sale" have the meanings specified in
Section 2(3) of the Act.
4.25 Use of Proceeds. The net proceeds of
---------------
the sale of the Shares will be used by the Company and its
Subsidiaries for general corporate purposes, which may
include, without limitation, contribution to the common
equity of one or more of the Company's Subsidiaries.
4.26 Information with Respect to Reserves.
------------------------------------
The Company has supplied to the Purchaser all material
information in the possession of the Company with respect to
the Company's or its Subsidiaries' reserves for losses,
losses incurred but not reported and loss adjustment
29
expenses and the collectibility of reinsurance receivables
or recoverables.
4.27 No Bank Regulatory Oversight. Upon the
----------------------------
taking of the actions described in Section 6.19 and the
consummation of the transactions contemplated by this
Agreement, neither the Purchaser nor any of its Affiliates
shall, as the result of the consummation of the transactions
contemplated by this Agreement, be subject to regulation or
oversight by any federal or state bank regulatory authority
nor will the approval of any such regulatory authority be
required to be obtained by the Company, any Subsidiary of
the Company, the Purchaser or any Affiliate thereof in order
to consummate the transactions contemplated by this
Agreement, except in accordance with the Bank Regulatory
Arrangements.
5. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER.
The Purchaser hereby represents and warrants to
the Company that:
5.1 Organization, Good Standing, Power,
-----------------------------------
Authority, Etc. The Purchaser has the full power and
---------------
authority to execute and deliver this Agreement and the
Registration Rights Agreement, and to perform its obliga-
tions under this Agreement and the Registration Rights
Agreement. The Purchaser has taken all action required by
law, its organizational documents or otherwise required to
be taken by it to authorize the execution and delivery of
this Agreement and the Registration Rights Agreement and the
consummation of the transactions contemplated to be per-
formed by it hereby and thereby. Each of this Agreement and
the Registration Rights Agreement is a valid and binding
agreement of the Purchaser, enforceable against the
Purchaser in accordance with their respective terms.
5.2 No Conflicts; No Consents. Neither the
-------------------------
execution and delivery of this Agreement and the Registra-
tion Rights Agreement nor the consummation by the Purchaser
of the purchase contemplated hereby will (A) conflict with,
or result in a breach of, any provision of its organiza-
tional documents or (B) violate any statute or law or any
judgment, order, writ, injunction, decree, rule or regula-
tion applicable to the Purchaser. No consent, authorization
or approval of, or declaration, filing or registration with,
or exemption by, any governmental or regulatory authority is
30
required in connection with the execution and delivery of,
and the performance by the Purchaser of its obligations
under, this Agreement or the Registration Rights Agreement
or the consummation by the Purchaser of the transactions to
be performed by it as contemplated hereby and thereby,
except such as will have been obtained and made and will be
in full force and effect as of the Closing.
5.3 Acquisition for Own Account. The Shares
---------------------------
to be acquired by the Purchaser pursuant to this Agreement
and the Option are being acquired by it for its own account
and with no intention of distributing or reselling the
Shares, the Option or the Option Shares or any part thereof
in any transaction that would be in violation of the Act or
the securities laws of any state, without prejudice, how-
ever, to the rights of the Purchaser at all times to sell or
otherwise dispose of all or any part of the Shares, the
Option, the Option Shares, the Conversion Shares or the
Exchange Notes under an effective registration statement
under the Act, under an exemption from such registration
available under the Act or pursuant to the Certificate of
Amendment, and subject, nevertheless, to the disposition of
the Purchaser's property being at all times within its
control. The Purchaser (A) has such knowledge, sophistica-
tion and experience in business and financial matters that
it is capable of evaluating the merits and risks of an
investment in the Shares, (B) fully understands the nature,
scope and duration of the limitations on transfer contained
in this Agreement and (C) can bear the economic risk of an
investment in the Shares and can afford a complete loss of
such investment. The Purchaser acknowledges receipt of the
SEC Documents and that it has been afforded the opportunity
to ask such questions as it deemed necessary, and to receive
answers from, representatives of the Company concerning the
merits and risks of investing in the Shares, the Option and
the Option Shares and to obtain such additional information
that the Company possesses or can acquire without unreason-
able effort or expense that is necessary to verify the
accuracy and completeness of the information contained in
the SEC Documents. Notwithstanding the foregoing, nothing
contained in this Section 5.3 shall affect or be deemed to
modify any representation or warranty made by the Company.
5.4 Available Funds. The Purchaser will at
---------------
the Closing have available to it sufficient funds to
Purchase the Shares pursuant to this Agreement. Each of
Insurance Partners, L.P., Insurance Partners Offshore
(Bermuda), L.P., Insurance GenPar, L.P., Insurance GenPar
31
(Bermuda), L.P. and each other Affiliate of the Purchaser
whose consent is necessary to consummate the transactions
contemplated by this Agreement has the full legal right and
power and all corporate or partnership authority and
approvals required to consummate the transactions contem-
plated by this Agreement, and no further corporate or part-
nership action on the part of any of such entities is
required for this purpose.
6. COVENANTS OF THE PARTIES.
6.1 Restrictions on Transfer. The Purchaser
------------------------
agrees that it will not effect any Transfer (including any
Transfer upon foreclosure of a pledge or other security
interest), pledge, mortgage, hypothecation or grant of a
security interest of or in the Shares, the Conversion Shares
or the Exchange Notes issued with respect to the Shares that
under applicable law requires prior regulatory approval
until such regulatory approval has been obtained. The
Purchaser agrees with the Company that the Purchaser will
not Transfer, pledge, mortgage, hypothecate or grant a
security interest in any of the Shares, Conversion Shares or
Exchange Notes issued with respect to the Shares (unless,
with respect to such Conversion Shares or Exchange Notes,
such Conversion Shares or Exchange Notes were previously
issued pursuant to an effective registration statement under
the Act) except pursuant to (A) an effective registration
statement under the Act or (B) an applicable exemption from
registration under the Act. In connection with any Transfer
by the Purchaser pursuant to clause (B) of the immediately
preceding sentence, the Purchaser shall furnish to the
Company an opinion of counsel reasonably satisfactory to the
Company to the effect that the proposed Transfer would not
be in violation of the Act. The Purchaser further agrees
that, during the period (the "Restricted Period") ending
upon the earliest to occur of (i) the third anniversary of
the Closing Date, (ii) a Change of Control, (iii) a breach
by the Company of any of its obligations under any of
Sections 6.6, 6.13, 6.14, 6.16, 6.17 or 6.18 or any of its
material obligations under the Registration Rights
Agreement, and (iv) the date on which the full amount of
dividends payable on the Series E Preferred Stock, the
Series F Preferred Stock or the Series G Preferred Stock for
any two quarterly dividend periods shall not have been paid,
the Purchaser will not Transfer any of the Shares,
Conversion Shares or Exchange Notes issued with respect to
the Shares, except (1) to an Affiliate of the Purchaser or a
partner of Insurance Partners, L.P. or Insurance Partners
32
Offshore (Bermuda), L.P., in each case who agrees to be
bound by the restrictions of this Section 6.1 (and, in the
case of a transferee who is an Initial Purchaser, agrees to
be bound by the restrictions of Section 6.4), (2) to a
person or entity who agrees to be bound by the restrictions
of this Section 6.1 and Section 6.4, the Transfer to whom
has been approved in advance by the Board of Directors of
the Company, (3) to a person or entity who after such
Transfer will beneficially own (to the knowledge of the
Purchaser, based solely on the representation and warranty
of such person or entity, and knowledge available from a
review of publicly available filings made by such person or
entity with respect to the beneficial ownership of Common
Stock under Section 13 of the Exchange Act) less than 5% of
the Common Stock of the Company on a fully diluted basis,
(4) pursuant to Rule 144 under the Act, (5) in a public
offering registered under the Act pursuant to which, if such
offering is not an underwritten offering, no one person or
entity obtains (to the knowledge of the Purchaser, based
solely on the representation and warranty of such person or
entity, and knowledge available from a review of publicly
available filings made by such person or entity with respect
to the beneficial ownership of Common Stock under Section 13
of the Exchange Act) more than 5% of the Common Stock of the
Company on a fully diluted basis or (6) pursuant to a tender
offer (a) commenced by the Company or (b) commenced by any
other person or entity with respect to which the Board of
Directors of the Company shall send to shareholders a state-
ment that the Board of Directors (x) recommends approval of
such tender offer, or (y) is neutral with respect to such
tender offer. Nothing contained in this Section 6.1 shall
restrict or prohibit the Purchaser from pledging, mortgag-
ing, hypothecating or granting a security interest in, or
granting participation rights in, the Shares, the Conversion
Shares or the Exchange Notes issued with respect to the
Shares; provided, however, that if a pledgee, mortgagee or
-------- -------
holder of such security interest forecloses on such Shares,
Conversion Shares or Exchange Notes, it may do so only if
such pledgee, mortgagee or holder of such security interest
agrees to be bound by the restrictions of this Section 6.1
and Section 6.4. Notwithstanding the foregoing, if none of
the events specified in any of clauses (ii), (iii) or (iv)
above has occurred (whether before or after termination of
the Restricted Period), then the Purchaser shall not, prior
to the fifth anniversary of the Closing Date, Transfer any
Shares, Conversion Shares or Exchange Notes issued with
respect to the Shares to any person or entity who after such
Transfer will own (to the knowledge of the Purchaser, based
33
solely on the representation and warranty of such person or
entity, and knowledge available from a review of publicly
available filings made by such person or entity with respect
to the beneficial ownership of Common Stock under Section 13
of the Exchange Act) more than 5% of the Common Stock of the
Company on a fully diluted basis, unless such person or
entity agrees to be bound by the terms and restrictions of
Sections 6.4 and 7 and this final sentence of this
Section 6.1.
6.2 Certificates for Shares and Conversion
--------------------------------------
Shares To Bear Legends. (A) So long as the Shares are
----------------------
Registrable Securities, they shall be subject to a
stop-transfer order and the certificates therefor shall bear
the following legend by which each holder thereof shall be
bound:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
AND ANY SECURITIES ISSUABLE UPON CONVERSION OR
EXCHANGE HEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, OR
(ii) AN APPLICABLE EXEMPTION FROM REGISTRATION
THEREUNDER. ANY SALE PURSUANT TO CLAUSE (ii) OF
THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER OF THESE SECURITIES TO THE EFFECT THAT SUCH
SALE IS NOT IN VIOLATION OF THE ACT. IN ADDITION,
THE VOTING, SALE OR TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS FURTHER SUBJECT
TO RESTRICTIONS WHICH ARE CONTAINED IN A
SECURITIES PURCHASE AGREEMENT DATED AS OF
OCTOBER 13, 1994, A COPY OF WHICH IS ON FILE WITH
THE ISSUER OF THESE SECURITIES AND WILL BE
FURNISHED BY THE ISSUER OF THESE SECURITIES TO THE
STOCKHOLDER ON REQUEST AND WITHOUT CHARGE."
(B) So long as the Conversion Shares
are Registrable Securities, they shall, unless
previously issued pursuant to an effective registration
statement under the Act, be subject to a stop-transfer
order and the certificates representing any such
Conversion Shares shall bear the following legend by
which each holder thereof shall be bound:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
AND ANY SHARES OR OTHER SECURITIES ISSUABLE UPON
EXCHANGE HEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
34
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATE-
MENT UNDER THE SECURITIES ACT OF 1933, OR (ii) AN
APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER.
ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING
SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER OF
THESE SECURITIES TO THE EFFECT SUCH SALE IS NOT IN
VIOLATION OF THE ACT. IN ADDITION, THE SALE OR
TRANSFER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS FURTHER SUBJECT TO RESTRICTIONS
WHICH ARE CONTAINED IN A SECURITIES PURCHASE
AGREEMENT DATED AS OF OCTOBER 13, 1994, A COPY OF
WHICH IS ON FILE WITH THE ISSUER OF THESE
SECURITIES AND WILL BE FURNISHED BY THE ISSUER OF
THESE SECURITIES TO THE STOCKHOLDER ON REQUEST AND
WITHOUT CHARGE."
(C) So long as the Exchange Notes
issued with respect to the Shares are Registrable
Securities, they shall be subject to a stop-transfer
order and such Exchange Notes shall bear the following
legend by which each holder thereof shall be bound:
"THESE NOTES MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, OR
(ii) AN APPLICABLE EXEMPTION FROM REGISTRATION
THEREUNDER. ANY SALE PURSUANT TO CLAUSE (ii) OF
THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER OF THESE SECURITIES TO THE EFFECT THAT SUCH
EXEMPTION FROM REGISTRATION IS AVAILABLE IN
CONNECTION WITH SUCH SALE. IN ADDITION, THE SALE
OR TRANSFER OF THESE NOTES IS FURTHER SUBJECT TO
RESTRICTIONS WHICH ARE CONTAINED IN A SECURITIES
PURCHASE AGREEMENT DATED AS OF OCTOBER 13, 1994, A
COPY OF WHICH IS ON FILE WITH THE ISSUER OF THESE
SECURITIES AND WILL BE FURNISHED BY THE
CORPORATION TO THE HOLDER ON REQUEST AND WITHOUT
CHARGE."
6.3 Removal of Legends. After termination
------------------
of the requirement that all or part of such legend be placed
upon a certificate, the Company shall, upon receipt by the
Company of evidence reasonably satisfactory to it that such
requirement has terminated and upon the written request of
the holders of the Shares, Conversion Shares or Exchange
Notes issued with respect to the Shares, issue certificates
35
for such Shares or Conversion Shares or Exchange Notes, as
the case may be, that do not bear such legend.
6.4 Voting of Shares. If the holders of
----------------
Series E Preferred Stock, Series F Preferred Stock or
Series G Preferred Stock are entitled pursuant to applicable
law to vote separately as a single class with respect to the
approval of any transaction that constitutes a Specified
Corporate Action and at the time of such vote (A) the
Company has sufficient funds legally available to it (after
giving effect to such transaction) to redeem at the then
applicable price all outstanding shares of Series E
Preferred Stock, Series F Preferred Stock and Series G
Preferred Stock pursuant to the Certificate of Amendment,
(B) such redemption shall not be prohibited by any agreement
to which the Company or any of its Subsidiaries is a party,
by applicable law or otherwise, (C) the Board of Directors
of the Company, including a majority of the directors who
are not officers or employees of the Company, shall have
adopted a resolution confirming that such funds are avail-
able and that the holders of Series E Preferred Stock,
Series F Preferred Stock and Series G Preferred Stock have
the right to require such redemption and (D) the Company has
set aside sufficient funds to redeem through the Mandatory
Redemption Date all the Shares held by such holders (except
that no funds need be set aside with respect to such Shares
held by any such holder who has theretofore notified the
Company that it will not require redemption of such shares),
then the Initial Purchaser hereby agrees that in the
separate class vote of the shares of Series E Preferred
Stock, Series F Preferred Stock or Series G Preferred Stock
it will vote the shares of Series E Preferred Stock,
Series F Preferred Stock or Series G Preferred Stock held by
it in the same proportion as the votes cast by the holders
of Common Stock and all other holders (including holders of
Series E Preferred Stock) voting as a single class with the
Common Stock entitled to vote with respect to such trans-
action. The Initial Purchaser or any other person or entity
subject to this Section 6.4 may vote the shares of Series E
Preferred Stock held by it in any manner when voting as a
single class with the Common Stock. So long as the Initial
Purchaser shall have the right to designate any Purchaser
Designee pursuant to Section 6.17, each Initial Purchaser
will, at each meeting of shareholders of the Company to
elect directors, vote any and all the shares of Series E
Preferred Stock or Conversion Shares held by it to elect as
directors of the Company the slate of nominees that includes
the Purchaser Designees.
36
6.5 Pre-Closing Activities. From and after
----------------------
the date of this Agreement until the Closing, each of the
Company and the Purchaser shall act with good faith towards,
and shall use its reasonable efforts to consummate, the
transactions contemplated by this Agreement and the CAM
Agreement, and neither the Company nor the Purchaser will
take any action (other than as permitted under Section 6.10)
that would prohibit or impair its ability to consummate the
transactions contemplated by this Agreement or the CAM
Agreement. From the date hereof until the Closing, the
Company shall conduct the business of it and its
Subsidiaries in the ordinary course and shall use all
reasonable efforts to preserve intact its business organiza-
tions and relationships with third parties and, except as
otherwise provided herein, to keep available the services of
the present directors, officers and key employees. Without
limiting the generality of the foregoing, from the date
hereof until the Closing, except as contemplated by this
Agreement:
(A) without the Purchaser's prior written
consent:
(i) the Company shall not adopt or propose
(or agree to commit to) any change in the Certificate
of Incorporation or its By-Laws, except as contemplated
hereby or as required to effect the transactions
hereunder;
(ii) the Company shall, and shall cause
each of its Subsidiaries to, not take or agree to
commit to take any action that would make any
representation or warranty of the Company hereunder
required to be true at and as of the Closing as a
condition to the Purchaser's obligations to consummate
the transactions contemplated hereby inaccurate in any
material respect at the Closing; or
(iii) the Company shall, and shall cause
each of its Subsidiaries to, not enter into or agree or
commit to enter into any agreement that would impose
any limitation on the payment of dividends on the
Shares or the Option Shares or the payment of cash
dividends by any Material Subsidiary.
(B) without the prior approval of the Operating
Committee, the Company shall, and shall cause each of its
Subsidiaries to, not take any of the following actions (it
37
being understood that the term "material," as used in this
Section 6.5(B), shall mean "material to the Company and its
Subsidiaries, taken as a whole"):
(1) (i) make any material change in its
investment policies, underwriting standards, rates or
reinsurance arrangements; or (ii) make any material
change in its accounting methods, principles or
practices (including any material change with respect
to the establishment of reserves for unearned premiums,
losses (including incurred but not reported losses) and
loss adjustment expenses or any change in depreciation
or amortization policies or rates adopted by it), in
either case except as may be required by law or
applicable accounting standards;
(2) (i) grant to any employee any material
increase in salary or other remuneration or any
increase in severance or termination pay not consistent
with past practices; (ii) grant or approve any general
increase in salaries of all or a substantial portion of
its employees not consistent with past practices;
(iii) pay or award any material bonus, incentive,
compensation, service award or other like benefit for
or to the credit of any employee except in accordance
with written policy or consistent with past practice;
or (iv) enter into any material employment contract or
severance arrangement with any employee except in
accordance with written policy or consistent with past
practices or adopt or amend in any material respect any
of its employee benefit plans; or (v) change in any
material respect the compensation (whether in respect
of terms or method) of its agents;
(3) except as contemplated by
Section 3.1.15, (i) enter into any loan or other
agreement pursuant to which the Company or such
Subsidiary incurs indebtedness for borrowed money in
excess of $25,000,000 (other than any such agreement
among the Company and its wholly owned Subsidiaries or
among the Company's wholly owned Subsidiaries) or
(ii) amend in any material respect any such existing
agreement;
(4) other than as permitted by Section 6.9
or Section 6.10, sell any of the assets of the Company
or any of its Subsidiaries (or the securities of
38
entities holding the same) the total consideration for
which exceeds $10,000,000;
(5) enter into any new quota share or
reinsurance transaction pursuant to which $50,000,000
or more in gross written premiums are ceded by
Subsidiaries of the Company; or
(6) agree or commit to do any of the
foregoing.
6.6 No Inconsistent Agreements. Subject to
--------------------------
Section 6.10, neither the Company nor any of its
Subsidiaries shall enter into any loan or other agreement,
or enter into any amendment or other modification to any
currently existing agreement, that by its terms restricts or
prohibits the ability of the Company to issue Common Stock
upon the conversion of the Series E Preferred Stock or to
issue Common Stock upon conversion of the Exchange Notes
issued upon the exchange of the Series E Preferred Stock, in
each case in accordance with the Certificate of Amendment
and this Agreement.
6.7 Information. So long as any of the
-----------
Shares, the Option Shares, the Conversion Shares or the
Exchange Notes are outstanding or any portion of the Option
is outstanding, the Company shall file with the SEC the
annual reports and quarterly reports and the information,
documents and other reports that are required to be filed
with the SEC pursuant to Sections 13 and 15 of the Exchange
Act, whether or not the Company has or is required to have a
class of securities registered under the Exchange Act and
whether or not the Company is then subject to the reporting
requirements of the Exchange Act, at the time the Company is
or would be required to file the same with the SEC and,
promptly after the Company is or would be required to file
such reports, information or documents with the SEC, to mail
copies of such reports, information and documents to the
holders of the Shares, the Option Shares, the Conversion
Shares and the Exchange Notes and the holders of any portion
of the Option at their addresses set forth in the register
maintained by the transfer agent therefor.
6.8 Hart-Scott-Rodino. To the extent
-----------------
applicable, the Company and the Purchaser shall make all
filings and furnish all information required with respect to
the transactions contemplated by this Agreement by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
39
shall use their best efforts to obtain the early termination
of the waiting period thereunder; provided, however, that
-------- -------
neither the Company nor the Purchaser shall be required to
agree to dispose of or hold separate any portion of its
business or assets (except immaterial businesses or assets).
6.9 Acquisition Proposals. Subject to
---------------------
Section 6.10, prior to the Closing, the Company agrees that
neither the Company nor any of its Subsidiaries nor any of
the respective officers and directors of the Company or any
of its Subsidiaries shall, and the Company shall direct and
use its best efforts to cause its employees, agents and
representatives (including, without limitation, any invest-
ment banker, attorney or accountant retained by the Company
or any of its Subsidiaries) not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the
making of any proposal or offer (including, without limita-
tion, any proposal or offer to stockholders of the Company)
with respect to a merger, consolidation or similar trans-
action involving, or any purchase of any of the equity
securities of, the Company, any purchase of any of the
assets of the Company or any of its Subsidiaries (or the
securities of entities holding the same) the total con-
sideration for which would exceed $50,000,000, or purchase
of any of the assets or equity securities of CAM (other than
pursuant to the CAM Agreement) (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal,"
except that "Acquisition Proposal" shall not include any
such transaction among the Company and its wholly owned
Subsidiaries or among the Company's wholly owned
Subsidiaries or engage in any negotiations concerning, or
provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate directly or indirectly any
effort or attempt to make or implement an Acquisition
Proposal. The Company will immediately cease and cause to
be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with
respect to any of the foregoing. The Company will take the
necessary steps to inform the individuals or entities
referred to in the first sentence hereof of the obligations
undertaken in this Section 6.9. The Company will promptly
notify the Purchaser if any such inquiries or proposals are
received by, any such information is requested from, or any
such negotiations or discussions are sought to be initiated
or continued with the Purchaser. Nothing contained in this
Agreement shall prohibit the Company, its Subsidiaries and
its directors from (A) doing any of the foregoing with
40
respect to asset sales or sales of securities in the
ordinary course or (B) making to the stockholders any recom-
mendation and related filing with the SEC, as required by
Rules 14e-2 and 14d-9 under the Exchange Act, with respect
to any tender offer. Notwithstanding the foregoing, the
Company shall be entitled to sell or otherwise dispose of
all or any substantial portion of the capital stock of
Casualty, The Continental Insurance Company of Canada or
Lombard Insurance Company Limited, may have and continue
negotiations with respect thereto and may provide informa-
tion with regard thereto.
6.10 Permitted Disposition. Notwithstanding
---------------------
Section 6.9, prior to the Closing, the Company may continue
to solicit offers or proposals for a merger, consolidation
or business combination that would result in a change in
ownership of more than 50% of the securities of the Company
entitled to vote generally in the election of directors, to
sell all or substantially all of the Company's assets or to
sell more than 50% of the outstanding securities of the
Company entitled to vote generally in the election of
directors (each a "Control Transaction"). The Company will
promptly inform the Purchaser if any inquiries or proposals
with respect to a Control Transaction are received by it,
but will not be required to inform the Purchaser of the
identity of the person or entity that makes such inquiry or
proposal or the terms of such Control Transaction. The
Company or the Purchaser may at any time prior to the
Closing elect to terminate this Agreement if the Company has
entered into a definitive agreement with respect to a
Control Transaction, at which time neither party shall have
any further obligations hereunder (other than the repre-
sentation set forth in Section 4.18 and the covenants and
agreements set forth in this Section 6.10, Section 6.12,
Section 8, Section 13.1 or Section 13.2, which shall survive
any such termination), except that upon such termination,
the Company shall promptly (A) pay to the Purchaser a fee
equal to the greater of (i) $17.5 million or (ii) (1) 1-7/8%
multiplied by (2) the Applicable Consideration (as herein-
after defined) and (B) reimburse the Purchaser, the Initial
Purchaser, Insurance Partners, L.P., Insurance Partners
Offshore (Bermuda), L.P., CAM Investment Management, L.P.,
and any of their respective Affiliates for all Transaction
Expenses (including any costs of collection of such expenses
or the fee payable pursuant to clause (A)), not to exceed
(a) $6,000,000 with respect to any such expenses incurred on
or prior to the date hereof and (b) $4,000,000 with respect
to any such expenses incurred after the date hereof (of
41
which no more than $2,000,000 shall be expenses incurred in
connection with the potential acquisition by an Affiliate of
the Purchaser of Casualty. For the purposes of calculating
the Transaction Expenses reimbursable pursuant to clause (B)
of the immediately preceding sentence, the aggregate amount
of investment banking fees to be reimbursed shall be deemed
to be an amount equal to $250,000 for each weekly period (or
portion thereof) commencing on August 30, 1994 to (and
including) the date on which this Agreement is terminated
pursuant to this Section 6.10 (rounded up to the nearest
whole number) and shall in no event exceed (x) $1,000,000
with respect to any such investment banking fees incurred
prior to the date hereof and (y) $1,000,000 with respect to
any such investment banking fees incurred after the date
hereof. "Applicable Consideration" means (I) in the case of
the sale of the assets of the Company, the amount of the
cash and the Fair Market Value of any securities or other
property received by the Company as consideration for such
assets, plus the value of any assets not sold by the Company
(such value to be calculated utilizing the same multiple of
the book value that was used to determine the consideration
paid for the assets sold by the Company) and (II) in the
case of a sale of more than 50% of the securities of the
Company entitled to vote generally in the election of
directors or a merger, consolidation or business combination
of the Company, the product of (A) the amount of the cash
and the Fair Market Value of any securities or other
property received by the holders of Common Stock, in each
case calculated on a per share basis for each share sold or
exchanged in such transaction, and (B) the number of shares
of Common Stock outstanding on September 9, 1994. For the
purposes of clause (II), if the same consideration is not
received with respect to all shares of Common Stock sold or
exchanged in such transaction, then the Applicable
Consideration will be calculated on the basis of the
weighted average of the per share consideration received
with respect to all shares of Common Stock sold or exchanged
in such transaction. "Fair Market Value" means, with
respect to securities or other property, the fair market
value of such securities or other property as determined in
good faith by the Board of Directors of the Company.
6.11 Access. Upon reasonable notice prior
------
to the Closing, the Company shall (and shall cause each of
its Subsidiaries to) afford the officers, employees,
counsel, accountants and other authorized representatives of
the Purchaser or any of its Affiliates ("Representatives")
reasonable access during normal business hours to its
42
properties, books, contracts and records and personnel and
advisors (who will be instructed by the Company to cooper-
ate) and the Company shall (and shall cause each of the
Subsidiaries to) furnish promptly to the Purchaser all
information concerning its business, properties and per-
sonnel as the Purchaser or its Representatives may reason-
ably request, provided that any review will be conducted in
a way that will not interfere unreasonably with the conduct
of the Company's business, and provided, further, that no
review pursuant to this Section 6.11 shall affect or be
deemed to modify any representation or warranty made by the
Company. The Purchaser will keep all information and
documents obtained pursuant to this Section 6.11 on a
confidential basis in accordance with the Letter Agreement
referred to in Section 13.8.
6.12 Publicity. Except as required by law,
---------
regulation or stock exchange requirements, neither (A) the
Company or any of its Affiliates nor (B) the Purchaser or
any of its Affiliates shall, without the consent of the
other, make any public announcement or issue any press
release with respect to the transactions contemplated by
this Agreement. In no event will either (i) the Company or
any of its Affiliates or (ii) the Purchaser or any of its
Affiliates make any public announcement or issue any press
release without consulting with the other party, to the
extent possible, as to the content of such public
announcement or press release.
6.13 Restricted Payments. The Company shall
-------------------
not declare or make any Restricted Payment.
6.14 Reservation of Shares. The Company
---------------------
shall at all times reserve and keep available, out of its
authorized and unissued stock, solely for the purpose of
effecting the conversion of Series E Preferred Stock or the
Exchange Notes issued in exchange thereof, such number of
shares of Common Stock free of preemptive rights as shall
from time to time be sufficient to effect the conversion of
all shares of Series E Preferred Stock from time to time.
6.15 Issuance of New Preferred Stock or New
--------------------------------------
Senior Notes. Within 45 days of the Closing, the Company
------------
will deliver to the Purchaser a draft of either a Private
Placement Memorandum or Registration Statement on Form S-3
(if the Company is then eligible to use Form S-3) with
respect to the offering and sale of the New Preferred Stock
or the New Senior Notes pursuant to which the Company will
43
receive gross proceeds of at least $100,000,000. If the
Company shall propose to sell the New Preferred Stock or the
New Senior Notes, as applicable, in a public offering, such
Registration Statement on Form S-3 (if the Company is then
eligible to use Form S-3) shall be filed with the SEC within
30 days of the Closing Date. The Company shall use its best
efforts to consummate such private placement or public
offering within 210 days of the Closing. Notwithstanding
the foregoing, if the Company shall fail to perform any of
its obligations under this Section 6.15, the Purchaser's
sole remedy shall be the increase in the dividend rate on
the Shares and the Option Shares in accordance with the
Certificate of Amendment or the increase in the interest
rate of the Exchange Notes in accordance with the Exchange
Notes.
6.16 Shareholders Rights Plan. The Company
------------------------
shall not adopt a shareholders right plan, poison pill or
similar arrangement unless such plan or arrangement shall
provide that (A) each holder of a share of Series E
Preferred Stock shall be entitled to receive thereunder,
upon conversion of a share of Series E Preferred Stock (in
accordance with the terms of the Certificate of Amendment)
prior to the earlier to occur of either the date of redemp-
tion of the rights issued under such plan or the date of
expiration of the rights issued under the plan, rights for
each Conversion Share issued upon conversion of such share
of Series E Preferred Stock in an amount equal to the amount
of rights issued with respect to each outstanding share of
Common Stock pursuant to such plan, (B) holders of
Conversion Shares shall be paid the redemption price of any
rights issued thereunder when such rights are redeemed
(unless the Conversion Price with respect to such Conversion
Shares shall have been adjusted as a result of such
redemption as contemplated by the Certificate of Amendment)
and (C) the acquisition, ownership, voting or other exercise
of rights and privileges with respect thereto by members of
the Purchaser Group of Shares, Option Shares, Exchange
Notes, shares of Common Stock, the Option or any other
security of the Company or any of its Subsidiaries not
prohibited by this Agreement will not trigger any
distribution pursuant to such plan or otherwise cause the
Purchaser or the members of the Purchaser Group to be
treated in a manner differently from shareholders of the
Company generally. The provisions of clauses (A) and (B) of
this Section 6.16 shall inure to the benefits of all holders
of Series E Preferred Stock or Conversion Shares, whether or
not the Initial Purchaser.
44
6.17 Board Representation.
--------------------
(A) The Purchaser Designees appointed
to the Company's Board of Directors effective as of the
Closing Date (as contemplated by Section 3.1.18) shall be
appointed to serve until the next succeeding annual meeting
of shareholders of the Company to be held after such elec-
tion. Commencing with such annual meeting of shareholders
of the Company and at each annual meeting of shareholders of
the Company thereafter, the Initial Purchaser shall be
entitled to nominate to the Company's Board of Directors (in
addition to any rights granted to the holders of Shares or
Option Shares as set forth in the Certificate of Amendment)
(i) if the Company's Board of Directors consists of thirteen
or fourteen members, three directors or (ii) if the
Company's Board of Directors consists of fifteen, sixteen or
seventeen members, four directors. The Company shall cause
such Purchaser Designees (unless, after customary investiga-
tion of any Purchaser Designee's qualifications, the Board
of Directors reasonably determines in good faith that such
person is not qualified or acceptable under standards
applied fairly and equally to all nominees, in which event
the Initial Purchaser shall designate another person that
meets the foregoing standards) to be included in the slate
of nominees recommended by the Board of Directors or the
Nominating Committee to the Company's shareholders for
election as directors, and the Company shall use its best
efforts to cause the election of such designees, including
voting all shares for which the Company holds proxies
(unless otherwise directed by the shareholder submitting
such proxy) or is otherwise entitled to vote, in favor of
the election of such persons. Notwithstanding the fore-
going, the Initial Purchaser's right to nominate members of
the Board of Directors shall be reduced as follows, if, but
only if, the Initial Purchaser has Transferred shares of
Series E Preferred Stock, Conversion Shares or Exchange
Notes issued with respect to the Series E Preferred Stock
and as a result no longer holds at least 75% of the Original
Investment:
If the Board of Directors is composed of 15, 16 or
--------------------------------------------------
17 members:
----------
Number of Board
Members the
Percentage of Original Initial Purchaser
Investment Not Transferred Shall Have Right
by the Initial Purchaser to Designate
-------------------------- -----------------
45
Less than 75%,
but more than
50% 3
Less than 50%,
but more than
25% 2
Less than 25%,
but more than
10% 1
10% or less 0
If the Board of Directors is composed of 13 or
----------------------------------------------
14 members:
-----------
Number of Board
Members the
Original Investment Initial Purchaser
Not Transferred by the Shall Have Right
Initial Purchaser to Designate
---------------------- -----------------
Less than 66%,
but more than
33% 2
Less than 33%,
but more than
10% 1
10% or less 0
"Original Investment" shall mean the aggregate number of
shares of Series E Preferred Stock issued at the Closing,
the aggregate number of Conversion Shares into which such
shares could be converted, the aggregate principal amount of
Exchange Notes for which such shares could be exchanged, or
any combination of the foregoing; provided, however, that in
-------- -------
determining the amount of the Original Investment at any
time remaining, no shares of Series E Preferred Stock shall
be included to the extent that such Shares have been
converted into Conversion Shares or exchanged for Exchange
Notes and no Exchange Notes shall be included to the extent
that such Exchange Notes have been converted into Conversion
Shares.
46
(B) For so long as the Initial
Purchaser has the right to nominate at least one director,
commencing with the annual meeting of the Board of Directors
of the Company next succeeding the Closing, and at each
annual meeting of the Board of Directors thereafter, the
Initial Purchaser shall be entitled to such number of
Purchaser Designees to be appointed to each committee of the
Board of Directors (including the Nominating Committee) as
follows: (A) (i) if the Nominating Committee is composed
of three members, one Purchaser Designee shall be appointed
thereto or (ii) if the Nominating Committee is composed of
five members, two Purchaser Designees shall be appointed
thereto; and (B) such number (which number shall be at least
one and shall be rounded to the nearest whole number) of
Purchaser Designees shall be appointed to each other
committee of the Board of Directors equal to the product of
the total number of persons on such committee (including
Purchaser Designees) and a fraction the numerator of which
is the sum of (1) the number of shares of Common Stock the
shares of Series E Preferred Stock owned by the Initial
Purchaser are convertible into and (2) the number of
Conversion Shares owned by the Initial Purchaser and the
denominator of which is the total number of outstanding
securities of the Company entitled to vote generally in the
election of directors (assuming conversion of the outstand-
ing shares of Series E Preferred Stock). If the Initial
Purchaser holds Exchange Notes issued with respect to the
Series E Preferred Stock, the foregoing fraction shall be
calculated assuming conversion of such Exchange Notes. If
the Initial Purchaser Transfers shares of Series E Preferred
Stock, Conversion Shares or Exchange Notes issued with
respect to the Series E Preferred Stock and as a result no
longer holds all of the Original Investment, its right to
have Purchaser Designees appointed to the committees (other
than the Nominating Committee) of the Board of Directors
shall be reduced so that such number of Purchaser Designees
on each such committee equals the product of the total
number of persons on such committee (including Purchaser
Designees) and a fraction the numerator of which is the sum
of (a) the number of shares of Common Stock the shares of
Series E Preferred Stock owned by the Initial Purchaser are
convertible into and (b) the number of Conversion Shares
owned by the Initial Purchaser and the denominator of which
is the total number of outstanding securities of the Company
entitled to vote generally in the election of directors
(assuming conversion of the outstanding shares of Series E
Preferred Stock) rounded to the nearest whole number. If
the Initial Purchaser holds Exchange Notes issued with
47
respect to the Series E Preferred Stock, the foregoing
fraction shall be calculated assuming conversion of such
Exchange Notes. The number of Purchaser Designees that the
Initial Purchaser shall be entitled to have appointed to the
Nominating Committee shall be reduced only to the extent
such that such number does not exceed the number of
Purchaser Designees that the Initial Purchaser shall have
the right to nominate to the Board of Directors.
(C) In the event any Purchaser Designee
shall cease to serve as a director for any reason (other
than by reason of a reduction of the number of Purchaser
Designees entitled to be members of the Board of Directors)
the Company shall cause the vacancy resulting thereby to be
filled by another Purchaser Designee. If a Purchaser
Designee ceases to serve on a committee of the Board of
Directors (other than by reason of a reduction of the number
of Purchaser Designees entitled to be members of such com-
mittee), such Purchaser Designee shall be replaced by
another Purchaser Designee.
(D) So long as the Initial Purchaser
retains the right pursuant to this Section 6.17 to designate
one or more Purchaser Designees, the Board of Directors
shall be composed of no less than thirteen or more than
seventeen members (except if additional members are elected
in accordance with the Certificate of Amendment or pursuant
to the terms of the New Preferred Stock) and the size of the
Nominating Committee shall be either three or five members,
except, in either case, on account of vacancies caused by
the resignations of members.
(E) The Initial Purchaser shall appoint
the Initial Purchaser Representative to act on its behalf,
vis-a-vis the Company, concerning the designation of
nominees to the Company's Board of Directors and the Company
shall be entitled to conclusively rely upon any instructions
given to it by the Initial Purchaser Representative pursuant
to this Section 6.17.
6.18 Specified Corporate Action. The
--------------------------
Company will not consummate, or agree to consummate, any
transaction that would constitute a Specified Corporate
Action unless at the time of the consummation of such
transaction (A) the Company has sufficient funds legally
available to it (after giving effect to such transaction) to
redeem at the then applicable price all outstanding shares
of Series E Preferred Stock, Series F Preferred Stock and
48
Series G Preferred Stock pursuant to the Certificate of
Amendment, (B) such redemption shall not be prohibited by
any agreement to which the Company or any of its
Subsidiaries is a party, by applicable law or otherwise,
(C) the Board of Directors of the Company, including a
majority of the directors who are not officers or employees
of the Company, shall have adopted a resolution confirming
that such funds are available and that the holders of
Series E Preferred Stock, Series F Preferred Stock and
Series G Preferred Stock have the right to require such
redemption and (D) the Company has set aside sufficient
funds through the Mandatory Redemption Date to redeem the
shares of Series E Preferred Stock, Series F Preferred Stock
and Series G Preferred Stock held by such holders (except
that no funds need be set aside with respect to such Shares
held by any such holder who has thereto fore notified the
Company that it will not require redemption of such shares).
6.19 Regulatory Approvals. The Company
--------------------
shall take all steps necessary, and the Purchaser and its
Affiliates shall reasonably cooperate therein, such that no
approvals by any federal or state bank regulatory authority
will be required to be obtained by the Company, any
Subsidiary of the Company, the Purchaser or any Affiliate
thereof in order to consummate the transactions contemplated
by this Agreement, other than as may be provided in certain
agreed upon arrangements with such authorities, which shall
be reasonably satisfactory to the Purchaser and the Company
(the "Bank Regulatory Arrangements"). Notwithstanding
anything contained in this Section 6.19, the Purchaser shall
not be required to take any actions, or enter into any
arrangements that will subject the Purchaser or any of its
Affiliates to regulation or oversight by any federal or
state bank regulatory authority or impose any restrictions
upon the operations of the Purchaser or any of its
Affiliates (other than restrictions on any banking or non-
banking transactions between the Purchaser and its
Affiliates and California Central Bank Trust Corporation
(the "Bank") and restrictions on the Purchaser and its
Affiliates seeking to direct the management or policies of
the Bank).
6.20 Regulatory Documents. The Purchaser
--------------------
49
shall not include in any Forms A or similar information
statements filed by it with any insurance regulatory
authority in connection with seeking the approval of such
authority of the transactions contemplated by this Agreement
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading; provided,
--------
however, that the foregoing shall not apply to any informa-
-------
tion supplied by the Company or any of its representatives
or Affiliates to the Purchaser for inclusion in any such
statement and included by the Purchaser in any such
statement.
7. STANDSTILL.
7.1 Prohibited Activities. The Purchaser
---------------------
hereby agrees that during the Standstill Period (hereinafter
defined) it will not, nor will it permit any member of the
Purchaser Group to, directly or indirectly, unless in any
such case specifically requested in advance to do so by the
Board of Directors of the Company:
(A) acquire, offer to acquire, or
agree to acquire by purchase or by joining a part-
nership, limited partnership, syndicate or other
"group" (as such term is used in Section 13(d)(3)
of the Exchange Act, hereinafter referred to as
"13D Group"), any securities of the Company
entitled to vote generally in the election of
directors, or securities convertible into or
exercisable or exchangeable for such securities
(collectively, "Restricted Securities") or any
material portion of the assets or businesses of
the Company and its Subsidiaries; provided,
--------
however, that nothing contained herein shall
-------
prohibit any member of the Purchaser Group from
(x) consummating the transactions contemplated by
the CAM Agreement or (y) acquiring any Restricted
Securities (i) upon conversion of convertible
securities of the Company currently owned by the
Purchaser Group or acquired pursuant to this
Agreement or upon exercise of the Option, (ii) as
a result of a stock split, stock dividend or
similar recapitalization by the Company,
(iii) upon the execution of unsolicited buy orders
by any member of the Purchaser Group that is a
registered broker-dealer for the bona fide account
of accounts managed by it that are unaffiliated
50
and not acting in concert with any member of the
Purchaser Group, or (iv) pursuant to the exercise
of any warrant, option or other right to acquire
Restricted Securities ("Rights") that it receives
directly from the Company pursuant to a distri-
bution to stockholders or from acquiring such
Rights directly from the Company; provided
--------
further, that if during the Standstill Period, as
-------
a result of a business combination transaction
between the Company or an affiliate of the Company
and any other entity which is not an affiliate of
any member of the Purchaser Group (an "Other
Entity"), any one or more members of the Purchaser
Group shall acquire beneficial ownership (within
the meaning of Rule 13d-3 of the Exchange Act) of
Restricted Securities in such business combina-
tion, such members may continue to own bene-
ficially such Restricted Securities so acquired by
such members and such Restricted Securities shall
continue to be subject to the provisions of this
Section;
(B) participate in, or encourage,
the formation of any 13D Group which owns or seeks
to acquire beneficial ownership of, or otherwise
acts in respect of, Restricted Securities;
(C) make, or in any way
participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are
defined or used in Regulation 14A under the
Exchange Act) or become a "participant" in any
"election contest" (as such terms are defined or
used in Rule 14a-11 under the Exchange Act) with
respect to the Company, or initiate, propose or
otherwise solicit stockholders for the approval of
one or more stockholder proposals with respect to
the Company or induce or attempt to induce any
other person to initiate any stockholder proposal,
provided, however, that the limitation contained
in this paragraph (C) shall not apply to any
matter to be voted on by the Company's stock-
holders that is not initiated or proposed by any
member of the Purchaser Group or any Affiliate
thereof or the solicitation by any member of the
Purchaser Group of proxies for the election to the
Board of Directors of the Company of any Purchaser
Designee;
51
(D) except as permitted by the
Certificate of Amendment or this Agreement, call
or seek to have called any meeting of the stock-
holders of the Company; or
(E) otherwise act, directly or
indirectly, alone or in concert with others, to
seek to control the management, Board of
Directors, policies or affairs of the Company, or
solicit, propose, seek to effect or negotiate with
the Company or any other person with respect to
any form of business combination transaction with
the Company or any affiliate thereof (other than
an Other Entity with respect to which any member
of the Purchaser Group or any affiliate thereof
shall have filed a Schedule 13D with the SEC with
respect to any class of equity securities of such
Other Entity prior to the public announcement of
the Company's intent to consummate a business
transaction with such Other Entity) or any
restructuring, recapitalization or similar trans-
action with respect to the Company or any affi-
liate thereof (except as aforesaid), or solicit,
make or propose or encourage or negotiate with any
other person with respect to, or announce an
intent to make, any tender offer or exchange offer
for any Restricted Securities (other than an
exchange of shares of Series E Preferred Stock for
Conversion Shares or the exchange of Shares or
Option Shares for Exchange Notes as contemplated
by the Certificate of Amendment) or disclose an
intent, purpose, plan or proposal with respect to
the Company or any Restricted Securities inconsis-
tent with the provisions of this Section 7.1,
including an intent, purpose, plan or proposal
that is conditioned on or would require the
Company to waive the benefit of, or amend, any
provisions of this Section 7.1, or assist, parti-
cipate in, facilitate, encourage or solicit any
effort or attempt by any person to do or seek to
do any of the foregoing; provided, however, that
-------- -------
it is agreed that nothing herein shall affect the
right of any Purchaser Designee (i) to act as a
member of the Board of Directors of the Company or
any committee thereof and (ii) to take any action
necessary or advisable to carry out his obliga-
tions as a director of the Company.
52
Notwithstanding the foregoing, if any breach of Sec-
tion 7.1(A) caused by an acquisition of a non-material
amount of Restricted Securities shall have been cured within
30 days after the Purchaser becomes aware of such breach,
then no breach of this Section 7.1 shall be deemed to have
occurred.
7.2 Voting and Other Rights. Nothing in
-----------------------
this Section 7 shall preclude members of the Purchaser
Group, (A) from exercising the voting and other rights
granted to the Purchasers pursuant to this Agreement or any
of the Transaction Documents or (B) in the case of any
proposed merger, sale of assets or similar transaction that
under the Certificate of Amendment requires a vote of the
holders of Restricted Securities and has been approved or
recommended by the Board of Directors of the Company, or in
the case of a tender or exchange offer made without
encouragement by or the participation of the Purchaser or
any of its affiliates (if the Board of Directors of the
Company shall send to shareholders a statement that the
Board of Directors (i) recommends approval of such tender or
exchange offer, or (ii) is neutral with respect to such
tender or exchange offer) from making an offer to the Board
of Directors of the Company, in respect of such transaction,
upon terms more favorable to the Company or its stockholders
than those of the other transaction, as proposed.
7.3 Standstill Period. As used herein, the
-----------------
term "Standstill Period" shall mean the period from the date
that the Closing occurs until the earliest to occur of (each
a "Termination Event"):
(A) the date that is the fifth
anniversary of the Closing Date;
(B) the designation of any date as
the termination date of the Standstill Period by a
majority of the directors of the Company (exclud-
ing any Purchaser Designees and any directors
elected by the holders of Shares or Option Shares
pursuant to the Certificate of Amendment) at a
duly convened meeting thereof or by all of the
directors of the Company by written consent;
(C) the Company's breach of any of
its material obligations contained in the
Registration Rights Agreement;
53
(D) default in the payment of
principal or interest when due (whether at
maturity, upon acceleration or otherwise) after
the expiration of any grace periods applicable
thereto with respect to indebtedness of the
Company or any of its Subsidiaries for money
borrowed having an aggregate outstanding principal
amount of $25,000,000 or more;
(E) the date on which the full
amount of dividends payable on the Series E
Preferred Stock, the Series F Preferred Stock or
the Series G Preferred stock for any two quarterly
dividend periods shall not have been paid;
provided, however, that this paragraph (E) shall
-------- -------
not be a Termination Event with respect to any
provision of Section 7.1 except the provisions
contained therein prohibiting the Purchaser or its
Affiliates from making a tender offer for all the
outstanding shares of Common Stock or entering
into an agreement of merger or consolidation
(including soliciting, making, proposing or
negotiating with respect thereto, or announcing an
interest to make such a tender offer or to
consummate such a merger or consolidation);
(F) the date on which the full
amount of dividends payable on the Series E
Preferred Stock, the Series F Preferred Stock or
the Series G Preferred Stock for any six quarterly
dividend periods shall not have been paid;
(G) the Company or any of its
Subsidiaries shall commence a voluntary case
concerning itself under Title 11 of the United
States Code entitled "Bankruptcy" as now or
hereafter in effect, or any successor thereto (the
"Bankruptcy Code") that, in the case of a
Subsidiary of the Company, has had or would have a
Material Adverse Effect; or an involuntary case is
commenced against the Company or any of its
Subsidiaries and the petition not controverted
within 10 days, or is not dismissed within 60 days
after commencement of the case, which, in the case
of a Subsidiary of the Company, has had or would
have a Material Adverse Effect; or a custodian (as
defined in the Bankruptcy Code) is appointed for,
or takes charge of, all or any substantial part of
54
the property of the Company or any of its
Subsidiaries, which, in the case of a Subsidiary
of the Company, has had or would have a Material
Adverse Effect; or the Company or any of its
Subsidiaries commences any other proceeding under
any reorganization, arrangement, adjustment of
debt, relief of debtors, rehabilitation, dissolu-
tion, insolvency or liquidation or similar law of
any jurisdiction, whether now or hereafter in
effect, relating to the Company or such
Subsidiary, or there is commenced against the
Company or any of its Subsidiaries any such
proceeding which remains undismissed for a period
of 60 days, which, in the case of a Subsidiary of
the Company, has had or would have a Material
Adverse Effect; or the Company or any of its
Subsidiaries is adjudicated insolvent or bankrupt,
which, in the case of a Subsidiary of the Company,
has had or would have a Material Adverse Effect;
or any order of relief or other order approving
any such case or proceeding is entered, which, in
the case of a Subsidiary of the Company, has had
or would have a Material Adverse Effect; or the
Company or any of its Subsidiaries suffers any
appointment of any custodian or the like for it or
any substantial part of its property to continue
undischarged or unstayed for a period of 60 days,
which, in the case of a Subsidiary of the Company,
has had or would have a Material Adverse Effect;
or the Company or any of its Subsidiaries makes a
general assignment for the benefit of creditors,
which, in the case of a Subsidiary of the Company,
has had or would have a Material Adverse Effect;
or the Company shall fail to pay, or shall state
that it is unable to pay, or shall be unable to
pay, its debts, generally as they become due,
which, in the case of a Subsidiary of the Company,
has had or would have a Material Adverse Effect;
or the Company or any of its Subsidiaries shall
call a general meeting of its creditors with a
view to arranging a composition or adjustment of
its debts, which, in the case of a Subsidiary of
the Company, has had or would have a Material
Adverse Effect; or any corporate action is taken
by the Company or any of its Subsidiaries for the
purpose of effecting any of the foregoing, which,
in the case of a Subsidiary of the Company, has
had or would have a Material Adverse Effect;
55
(H) without encouragement by or
the participation of the Purchaser or any of its
Affiliates, the acquisition by any person or 13D
Group (other than members of the Purchaser Group
or Affiliates thereof) of, the commencement of a
tender offer by such person or 13D Group for, or
the public announcement of an intention to
acquire, Restricted Securities which, if added to
the Restricted Securities (if any) already owned
by such person or 13D Group, would represent
thirty percent (30%) or more of the total voting
power (including rights to acquire voting power)
of the Company's Restricted Securities, or the
receipt by such person or 13D Group of the
Company's agreement or consent to make such
acquisition; provided, however, that such a public
-------- -------
announcement or commencement of a tender offer
shall end the Standstill Period only if such
person or 13D Group shall have received the
Company's agreement or consent to make such
intended acquisition, and such a tender offer
shall terminate the Standstill Period only if and
when the Board of Directors of the Company shall
send to shareholders a statement that the Board of
Directors (i) recommends approval of such tender
offer or (ii) is neutral with respect to such
tender offer; or
(I) the failure of any of the
Purchaser Designees to be elected to the Board of
Directors of the Company or to be appointed to any
committee thereof in accordance with Section 6.17.
Notwithstanding the foregoing, if, in accordance with
Section 6.1, a transferee of the Purchaser is required to
agree to be bound by the provisions of this Section 7.1,
such agreement shall also provide that the events described
in paragraph (E), (F) or (I) shall not be a Termination
Event with respect to such transferee and its Affiliates.
8. INDEMNIFICATION.
8.1 Indemnification by the Company. In
------------------------------
addition to all other sums due hereunder or provided for in
this Agreement, the Company agrees to indemnify and hold
harmless the Initial Purchaser and its Affiliates and their
respective officers, directors, agents, employees,
subsidiaries, partners and controlling persons (each, an
56
"indemnified party") to the fullest extent permitted by law
from and against any and all losses, claims, damages,
expenses (including reasonable fees, disbursements and other
charges of counsel) or other liabilities ("Liabilities")
resulting from any breach of any covenant, agreement,
representation or warranty of the Company in this Agreement
or any legal, administrative or other actions brought by any
person or entity, proceedings or investigations (whether
formal or informal), or written threats thereof, based upon,
relating to or arising out of this Agreement, any
Transaction Document, the transactions contemplated hereby
or thereby, or any indemnified person's role therein or in
the transactions contemplated hereby or thereby; provided,
--------
however, that the Company shall not be liable under this
-------
Section 8.1: (i) for any amount paid in settlement of
claims without the Company's consent (which consent shall
not be unreasonably withheld) or (ii) to the extent that it
is finally judicially determined that such Liabilities
resulted primarily from a breach by the Purchaser of any
representation, warranty, covenant or agreement of the
Purchaser contained in this Agreement or the willful
misconduct of the Purchaser; provided further, that if and
-------- -------
to the extent that such indemnification is unenforceable for
any reason, the Company shall make the maximum contribution
to the payment and satisfaction of such indemnified
liability that shall be permissible under applicable laws.
In connection with the obligation of the Company to
indemnify for Liabilities as set forth above, the Company
further agrees to reimburse each indemnified party for all
such expenses (including reasonable fees, disbursements and
other charges of counsel) as they are incurred by such
indemnified party.
8.2 Notification. Each indemnified party
------------
under this Section 8 will, promptly after the receipt of
notice of the commencement of any action or other proceeding
against such indemnified party in respect of which indemnity
may be sought from the Company under this Section 8, notify
the Company in writing of the commencement thereof. The
omission of any indemnified party so to notify the Company
of any such action shall not relieve the Company from any
liability that it may have to such indemnified party
(A) other than pursuant to this Section 8 or (B) under this
Section 8 unless, and only to the extent that, such omission
results in the Company's forfeiture of substantive rights or
defenses. In case any such action or other proceeding shall
be brought against any indemnified party and it shall notify
the Company of the commencement thereof, the Company shall
57
be entitled to participate therein and, to the extent that
it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided,
--------
however, that any indemnified party may, at its own expense,
-------
retain separate counsel to participate in such defense.
Notwithstanding the foregoing, in any action or proceeding
in which both the Company and an indemnified party is, or is
reasonably likely to become, a party, such indemnified party
shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such
action or proceeding if, in the reasonable opinion of
counsel to such indemnified party, (i) there are or may be
legal defenses available to such indemnified party or to
other indemnified parties that are different from or
additional to those available to the Company or (ii) any
conflict or potential conflict exists between the Company
and such indemnified party that would make such separate
representation advisable; provided, however, that (1) any
-------- -------
such separate counsel employed by the indemnified party at
the Company's expense shall be reasonably satisfactory to
the Company, (2) the indemnified party will not, without the
prior written consent of the Company, settle, compromise or
consent to the entry of any judgment in such action or
proceeding unless such settlement, compromise or consent
includes an unconditional release of the Company from all
liability arising or that may arise out of such action or
proceeding relating to any matter subject to indemnification
hereunder and (3) in no event shall the Company be required
to pay fees and expenses under this Section 8 for more than
one firm of attorneys representing the indemnified parties
in any jurisdiction in any one legal action or group of
related legal actions. The Company agrees that the Company
will not, without the prior written consent of the
Purchaser, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action or pro-
ceeding relating to any matter subject to indemnification
hereunder unless such settlement, compromise or consent
includes an unconditional release of the Purchaser and each
other indemnified party from all liability arising or that
may arise out of such claim, action or proceeding. The
rights accorded to indemnified parties hereunder shall be in
addition to any rights that any indemnified party may have
at common law, by separate agreement or otherwise.
8.3 Registration Rights Agreement. Notwith-
-----------------------------
standing anything to the contrary in this Section 8, the
indemnification and contribution provisions of the
Registration Rights Agreement shall govern any claim made
58
with respect to registration statements filed pursuant
thereto or sales made thereunder.
9. TERMINATION.
9.1 Termination. This Agreement may be
-----------
terminated at any time prior to the Closing:
(A) by mutual written consent of the Company and
the Purchaser;
(B) by the Company or the Purchaser, if the
Closing shall not have occurred on or before February 28,
1995; provided, however, that the right to terminate this
-------- -------
Agreement under this clause (B) shall not be available to
any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure
of the closing to occur on or before such date;
(C) by the Company or the Purchaser, if any
judgment, injunction, order or decree enjoining the Pur-
chaser or the Company from consummating this Agreement is
entered and such judgment, injunction, order or decree shall
become final and nonappealable; provided, however, that the
-------- -------
party seeking to terminate this Agreement pursuant to this
clause (C) shall have used all reasonable efforts to remove
such judgment, injunction, order or decree;
(D) by the Company or the Purchaser if the
Company has entered into a definitive agreement with respect
to a Control Transaction;
(E) by the Purchaser if there has been a material
breach of any representation, warranty or material covenant
or agreement of the Company which is incurable, or which is
not cured on or prior to the Closing Date;
(F) by the Company if there has been a material
breach of any representation, warranty, or material covenant
or agreement of the Purchaser contained in this Agreement,
which breach is incurable or has not been cured on or prior
to the Closing Date;
9.2 Effect of Termination. If this Agreement is
---------------------
terminated pursuant to Section 9.1, this Agreement shall
become void and of no effect with no liability on the part
of any party hereto, except (A) to the extent such termina-
tion results from the breach by a party hereto of any of its
59
representations, warranties, covenants or agreements set
forth in this Agreement and (B) that the representation
contained in Section 4.18 and the covenants and agreements
contained in Sections 6.10, 6.12, 8, 13.1 and 13.2 shall
survive the termination hereof.
10. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS.
Notwithstanding any right of the Purchaser fully
to investigate the affairs of the Company and notwithstand-
ing any knowledge of facts determined or determinable by the
Purchaser pursuant to such investigation or right of inves-
tigation, the Purchaser has the right to rely fully upon the
representations, warranties, covenants and agreements of the
Company contained in this Agreement. All such representa-
tions, warranties, covenants and agreements shall survive
the execution and delivery of this Agreement and the Closing
hereunder, except that the representations and warranties
shall survive only for a period of two years from the
Closing.
11. PERFORMANCE; WAIVER.
The provisions of this Agreement (including this
Section 11) may be modified or amended, and waivers and
consents to the performance and observance of the terms
hereof may be given by written instrument executed and
delivered by the Company and (A) prior to the Closing, by
the Purchaser and (B) after the Closing by the holder or
holders of the Shares representing 66-2/3% of the aggregate
outstanding Shares, including Conversion Shares (if Exchange
Notes issued with respect to the Shares are outstanding such
percentage shall be calculated on the basis of the aggregate
principal amount of such Exchange Notes). The failure at
any time to require performance of any provision hereof
shall in no way affect the full right to require such
performance at any time thereafter (unless performance
thereof has been waived in accordance with the terms hereof
for all purposes and at all times by the parties to whom the
benefit of such performance is to be rendered). The waiver
by any party to this Agreement of a breach of any provision
hereof shall not be taken or held to be a waiver of any
succeeding breach of such provision of any other provision
or as a waiver of the provision itself.
60
12. SUCCESSORS AND ASSIGNS.
All covenants and agreements contained in this
Agreement by or on behalf of the parties hereto shall bind,
and inure the benefit of, the respective successors and
assigns of the parties hereto; provided, however, that the
-------- -------
rights and obligations of either party hereto may not be
assigned without the prior written consent of the other
parties except that (A) prior to the Closing, the Purchaser
may assign all or any portion of its right to purchase the
Shares (and the corresponding obligations) to one or more
Affiliates of Insurance Partners, L.P. or Insurance Partners
(Bermuda), L.P., in which event the Purchaser will be
relieved of its obligations hereunder to the extent so
assumed by such Affiliate or Affiliates and such Affiliate
or Affiliates will be considered to be included within each
of the term "Purchaser" and "Initial Purchaser" for all
purposes of this Agreement and (B) assignments of all or a
portion of the Purchaser's rights and obligations hereunder
may be made by the Purchaser in connection with transfers
permitted under clause (1) or (2) of Section 6.1, in which
event the assigning Purchaser shall be relieved of its
obligations to the extent so assigned by the transferee.
Each such assignment shall be made by such assignee and
assignor, as the case may be, and the Company executing an
Assignment Agreement pursuant to which the assignee shall
expressly agree to become a party to this Agreement and to
be bound by the terms of this Agreement.
13. MISCELLANEOUS.
13.1 Notices. All notices or other
-------
communications given or made hereunder shall be validly
given or made if in writing and delivered by facsimile
transmission or in person at, mailed by registered or
certified mail, return receipt requested, postage prepaid,
or sent by a reputable overnight courier to, the following
addresses (and shall be deemed effective at the time of
receipt thereof).
If to the Company:
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Telecopy: (212) 440-3857
Attention: Chief Executive Officer
61
with a copies to:
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Telecopy: (212) 440-3857
Attention: General Counsel
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
Attention: Edward A. Perell
If to the Purchaser:
TCC-PS Limited Partnership
c/o Insurance Partners Advisors, L.P.
One Chase Manhattan Plaza
44th Floor
New York, New York 10005
Telecopy: (212) 898-8720
Attention: Daniel L. Doctoroff
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Marilyn Sobel, Esq.
or to such other address as the party to whom notice is to
be given may have previously furnished notice in writing to
the other in the manner set forth above.
13.2 Expenses. Whether or not the Shares
--------
are sold to the Purchaser or this Agreement is terminated,
the Company agrees to pay all Transaction Expenses (whether
or not incurred prior to the date hereof); provided,
--------
however, that (A) if this Agreement is terminated pursuant
-------
to Section 9.1(D), then the provisions of Section 6.10 (and
not this Section 13.2) shall apply and (B) the Company shall
have no obligation to pay any Transaction Expenses if (i)
the Purchaser fails to close the transactions contemplated
hereby upon satisfaction of its closing conditions set forth
in Section 3.1 hereof or (ii) the Company terminates this
Agreement pursuant to Section 9.1(F). Notwithstanding the
foregoing, the Company will not be required to pay any
62
Transaction Expenses with respect to any advisor of the
Purchaser or its Affiliates engaged thereby after the date
hereof unless the Company has consented to such engagement
(which consent shall not be unreasonably withheld). Whether
or not the Shares are sold to the Purchaser or this
Agreement is terminated, the Company shall pay all of the
fees and expenses of its advisors, attorneys, accountants,
and investment bankers incurred in connection with the
transactions contemplated hereby.
13.3 Governing Law. THIS AGREEMENT SHALL BE
-------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
PERFORMED ENTIRELY WITHIN SUCH STATE. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE AND
FEDERAL COURTS IN THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
13.4 Severability. If any term, provision,
------------
covenant or restriction of this Agreement is held by a court
of competent jurisdiction to be invalid, void or unenforce-
able, each of the Company and the Purchaser directs that
such court interpret and apply the remainder of this
Agreement in the manner that it determines most closely
effectuates their intent in entering into this Agreement,
and in doing so particularly take into account the relative
importance of the term, provision, covenant or restriction
being held invalid, void or unenforceable.
13.5 Headings; Interpretation. The index
------------------------
and section headings herein are for convenience only and
shall not affect the construction hereof. References to
sections means sections of this Agreement unless the context
otherwise requires. References to herein or hereof mean
this Agreement.
13.6 Entire Agreement. This Agreement
----------------
embodies the entire agreement between the parties relating
to the subject matter hereof and any and all prior oral or
written agreements, representations or warranties, con-
tracts, understandings, correspondence, conversations, and
memoranda, whether written or oral, between the Company and
the Purchaser, or between or among any agents, representa-
tives, parents, Subsidiaries, Affiliates, predecessors in
interest or successors in interest, with respect to the
subject matter hereof.
63
13.7 Counterparts. This Agreement may be
------------
executed in counterparts, each of which shall be deemed to
be an original and both of which together shall be deemed to
be one and the same instrument.
13.8 Letter Agreement. Upon consummation of
----------------
the purchase of the Shares as contemplated hereby, the
Letter Agreement dated June 30, 1994 between Insurance
Partners Advisors, L.P. and the Company shall automatically
terminate and be of no further force and effect.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement.
THE CONTINENTAL CORPORATION
By:/s/ John P. Mascotte
-----------------------------------
Name: John P. Mascotte
Title: Chairman
TCC-PS LIMITED PARTNERSHIP
By: TCC-PS GENPAR, INC., its
General Partner
By: /s/ Daniel L. Doctoroff
-----------------------------------
Name: Daniel L. Doctoroff
Title: President
64
Schedule 1
----------
Material Subsidiaries
---------------------
With respect to the definition of "Material
Subsidiary" in Section 1 of the Stock Purchase Agreement,
between The Continental Corporation (the "Company") and TCC-
PS Limited Partnership, dated as of October 13, 1994, the
following Subsidiaries of the Company shall be included:
Boston Old Colony Insurance Company
The Buckeye Union Insurance Company
Casualty Insurance Company
Commercial Insurance Company of Newark, N.J.
The Continental Insurance Company
The Continental Insurance Company of New Jersey
the Continental Insurance Company of Puerto Rico
Continental Reinsurance Corporation
Continental Reinsurance Corporation International Limited
East River Insurance Company, Ltd.
East River Insurance Company (Bermuda) Ltd.
The Fidelity and Casualty Company of New York
Firemen's Insurance Company of Newark, New Jersey
Hong Kong Fire Insurance Company Limited
The Glens Falls Insurance Company
Kansas City Fire and Marine Insurance Company
The Mayflower Insurance Company, Ltd.
National-Ben Franklin Insurance Company of Illinois
Niagara Fire Insurance Company
Pacific Insurance Company
Workers' Compensation and Indemnity Company of California
EXHIBIT A
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
OF THE CONTINENTAL CORPORATION
UNDER SECTION 805 OF THE BUSINESS
CORPORATION LAW
---------------------------------
The undersigned, being the President and the Secretary, respectively,
of The Continental Corporation, hereby certify and set forth:
1. The name of the corporation is THE CONTINENTAL CORPORATION (the
"Corporation").
2. The certificate of incorporation of the Corporation was filed by
the Department of State on the 15th day of May, 1968.
3. The certificate of incorporation of the Corporation is hereby
amended, pursuant to section 502 of the Business Corporation Law, by the
addition of a provision stating the number, designation, relative rights,
preferences and limitations of the shares of (i) a series of Cumulative
Convertible Preferred Stock, Series E (the "Series E Preferred Stock"), (ii) a
series of Cumulative Preferred Stock, Series F (the "Series F Preferred Stock")
and (iii) a series of Cumulative Preferred Stock, Series G (the "Series G
Preferred Stock"). Each of the Series E Preferred Stock, the Series F Preferred
Stock and the Series G Preferred Stock was established by a resolution adopted
by a majority vote of the board of directors of The Continental Corporation at a
meeting of the board duly called and held on ________________. The text of that
resolution is set forth below:
RESOLVED that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of Article 5 of
the Certificate of Incorporation, three series of the class of authorized
Preferred Stock, par value $4.00 per share, of the Corporation are hereby
created and that the number of shares and the designations, relative rights
preferences and limitations of
the shares of each such series, and the qualifications, limitations and restric-
tions thereof are as follows:
Article 1 Series E Preferred Stock.
------------------------
Section 1 Designation and Number.
----------------------
(a) The shares of such series shall be designated as "Cumulative
Convertible Preferred Stock, Series E" (the "Series E Preferred Stock"). The
number of shares initially constituting the Series E Preferred Stock shall be
________,1/ which number may be decreased (but not increased) by the Board of
-
Directors without a vote of stockholders; provided, however, that such number
-------- -------
may not be decreased below the number of then outstanding shares of Series E
Preferred Stock.
(b) The Series E Preferred Stock shall, with respect to dividend
rights and rights on liquidation, dissolution or winding up, rank pari passu
---- -----
with the Corporation's $2.50 Cumulative Convertible Preferred Stock, Series A
(the "Series A Preferred Stock"), $2.50 Cumulative Preferred Stock, Series B
(the "Series B Preferred Stock"), Cumulative Preferred Stock, Series F (the
"Series F Preferred Stock"), Cumulative Preferred Stock, Series G (the "Series G
Preferred Stock") and the New Preferred Stock (if any) (the Series A Preferred
Stock, Series B Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock and New Preferred Stock (if any) are collectively defined for the purposes
of this Article 1 as the "Other Preferred Stock") and prior to all other classes
and series of capital stock of the Corporation now or hereafter authorized
including, without limitation, the Common Stock, par value $1.00 per share, of
the Corporation (the "Common Stock").
(c) Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Article 4 below.
--------------------
1/ Such number so that on the date of issue the shares of
-
Series E Preferred Stock shall be convertible into
19.9% of the outstanding Common Stock determined in
accordance with New York Stock Exchange Rules.
2
Section 2 Dividends and Distributions.
---------------------------
(a) The holders of shares of Series E Preferred Stock, in preference
to the holders of shares of Common Stock and of any shares of other capital
stock of the Corporation other than the Other Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors, out of the
assets of the Corporation at the time legally available therefor, cumulative
cash dividends at an annual rate on the Liquidation Preference thereof equal to
9.75% (subject to increase pursuant to Section 2(b)), calculated on the basis of
a 360-day year consisting of twelve 30-day months, accruing and payable in equal
quarterly payments, in immediately available funds, on the Business Day
immediately preceding the last day of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date") commencing on the Business Day immediately preceding [December
31, 1994];2/ provided, however, that with respect to such first Quarterly
- -------- -------
Dividend Payment Date, the holders of shares of Series E Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors, out
of the assets of the Corporation at the time legally available therefor, a
cumulative cash dividend in respect of each share of Series E Preferred Stock in
the amount of (i) 9.75% (or the then effective annual rate) of the Liquidation
Preference multiplied by (ii) a fraction equal to (A) the number of days from
(and including) the Issue Date to (but excluding) such Quarterly Dividend Pay-
ment Date divided by (B) 360. No interest shall be payable in respect of any
dividend payment on the Series E Preferred Stock that may be in arrears.
(b) If (i) within 45 days of the Issue Date, the Corporation has not
delivered to each holder of shares of Series E Preferred Stock a Private
Placement Memorandum or a Registration Statement on Form S-3 (if the Corporation
is then eligible to use Form S-3) with respect to the private placement or
public offering of the New Preferred Stock or the New Senior Notes, (ii) the
Corporation shall have delivered to the holder a draft of a Registration
Statement on Form S-3 (if the Corporation is then eligible to use Form S-3)
pursuant to clause (i), and such Registration Statement shall not have been
filed with the Securities and Exchange
- --------------------
2/ Assumes closing on or prior to December 31, 1994; otherwise date(s) will be
- -
appropriately adjusted.
3
Commission within 30 days after the Issue Date, (iii) a private placement or
public offering of the New Preferred Stock or the New Senior Notes, pursuant to
which the Corporation shall receive at least $100,000,000 in gross proceeds is
not consummated within 210 days after the Issue Date or (iv) the annual dividend
rate on the New Preferred Stock or the annual interest rate on the New Senior
Notes, as applicable, exceeds 13%, then the annual rate of the cumulative cash
dividends shall be increased to a rate of 11.75%, effective (w) in the case of
clause (i), the date that is forty-five days after the Issue Date, (x) in the
case of clause (ii), the date that is 30 days after the Issue Date, (y) in the
case of clause (iii), the date that is 210 days after the Issue Date and (z) in
the case of clause (iv), the date of the issuance of the New Preferred Stock or
the New Senior Notes, as applicable. If on any date (A) all of the Purchaser
Designees shall not have been elected to the Corporation's Board of Directors or
any such Purchaser Designees shall not have been appointed to the committees of
the Corporation's Board of Directors, in accordance with the provisions of
Section 6.17 of the Securities Purchase Agreement, (B) the Corporation shall
have failed to declare, or shall have failed to pay, the full amount of
dividends payable on the Series E Preferred Stock for six quarterly dividend
periods, (C) the Corporation shall have failed to satisfy its obligation to
convert shares of Series E Preferred Stock pursuant to Section 10 or (D) a
breach of any of the Material Provisions of the Securities Purchase Agreement or
any of the Corporation's material obligations under the Registration Rights
Agreement shall have occurred then, effective as of the date of such failure or
breach, the annual rate of the cumulative cash dividends shall be increased to a
rate of 11.75% and shall remain at such rate until such time as (1) the
Purchaser Designees shall have been elected to the Corporation's Board of
Directors and appointed to the committees of the Corporation's Board of
Directors in accordance with the provisions of Section 6.17 of the Securities
Purchase Agreement, (2) all dividends accrued to date on the Series E Preferred
Stock shall have been declared and paid in full, (3) any conversion obligation
provided in Section 10 that has become due shall have been fully satisfied or
(4) there shall exist no breach of any of the Material Provisions of the
Securities Purchase Agreement or any of the Corporation's material obligations
under the Registration Rights Agreement, as the case may be, at which time the
annual rate of the cumulative cash dividends shall be reduced to a rate of
9.75%, subject to being increased to a rate of 11.75% in the
4
event of each and every subsequent event of the character indicated above.
(c) Dividends payable pursuant to Section 2(a) shall begin to accrue
and be cumulative from the Issue Date, and shall accrue on a daily basis, in
each case whether or not declared. Dividends paid on the shares of Series E
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares of Series E Preferred Stock at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series E Preferred Stock entitled to receive payment of
a dividend declared thereon, which record date shall be no more than 60 days or
less than 10 days prior to the date fixed for the payment thereof. Accumulated
but unpaid dividends for any past quarterly dividend periods may be declared and
paid at any time, without reference to any regular Quarterly Dividend Payment
Date, to holders of record on such date, not more than 60 nor less than 10 days
preceding the payment date thereof, as may be fixed by the Board of Directors.
(d) The holders of shares of Series E Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided
herein.
Section 3 Voting Rights.
-------------
In addition to any voting rights provided by law, the holders of
shares of Series E Preferred Stock shall have the following voting rights:
(a) Except as otherwise required by applicable law so long as the
Series E Preferred Stock is outstanding, each share of Series E Preferred Stock
shall entitle the holder thereof to vote, in person or by proxy, at a special or
annual meeting of stockholders, on all matters voted on by holders of Common
Stock voting together as a single class with other shares entitled to vote
thereon. With respect to any such vote, each share of Series E Preferred Stock
shall entitle the holder thereof to cast that number of votes per share as is
equal to the number of votes that such holder would be entitled to cast had such
holder converted his shares of Series E Preferred Stock into Common Stock on the
record date for determining the stockholders of the Corporation eligible to vote
on any such matters.
5
(b) Unless the consent or approval of a greater number of shares
shall then be required by law, the affirmative vote of the holders of at least
66-2/3% of the outstanding shares of Series E Preferred Stock, voting separately
as a single class, in person or by proxy, at a special or annual meeting of
stockholders called for the purpose, shall be necessary to (i) authorize, adopt
or approve an amendment to the Certificate of Incorporation that would increase
or decrease the par value of the shares of Series E Preferred Stock, or alter or
change the powers, preferences or special rights of the shares of Series E
Preferred Stock, (ii) amend, alter or repeal the Certificate of Incorporation so
as to affect the shares of Series E Preferred Stock adversely or (iii) effect
the voluntary liquidation, dissolution, winding up, recapitalization or
reorganization of the Corporation, or the consolidation or merger of the
Corporation with or into any other Person, or the sale or other distribution to
another Person of all or substantially all of the assets of the Corporation;
provided, however, that no separate vote of the holders of Series E Preferred
- -------- -------
Stock shall be required to effect any of the transactions described in clause
(iii) above unless such transaction would either require a class vote pursuant
to clause (i) or (ii) above or would require a vote by any shareholders of the
Corporation; provided further, that no separate vote of the holders of the
-------- -------
Series E Preferred Stock as a class shall be required in the case of a
recapitalization, reorganization, consolidation or merger of, or sale by, the
Corporation if (A)(a) such recapitalization, reorganization, consolidation,
merger or sale constitutes a Specified Corporate Action, (b) the Corporation has
sufficient funds legally available to it (after giving effect to such
transaction) to redeem, at the then applicable price hereunder and pursuant to
the terms hereof, all the outstanding shares of Series E Preferred Stock,
(c) such redemption shall not be prohibited by any agreement to which the
Corporation or any of its Subsidiaries is a party, by applicable law or
otherwise, (d) the Board of Directors of the Corporation, including a majority
of the directors who are not officers or employees of the Corporation, shall
have adopted a resolution confirming that such funds are available and that the
holders of Series E Preferred Stock have the right to require such redemption
and (e) the Corporation shall have set aside sufficient funds to redeem through
the Mandatory Redemption Date the shares of Series E Preferred Stock held by
such holders (except that no funds need be set aside with respect to such shares
held by any such holder who has theretofore notified
6
the Corporation (whether pursuant to Section 6(c) or otherwise) that it will not
require redemption of such shares) or (B) (1) the Corporation shall be the
resulting or surviving corporation, (2) the resulting or surviving corporation
will have after such recapitalization, reorganization, consolidation or merger
no Senior Stock or Parity Stock either authorized or outstanding (except such
Parity Stock of the Corporation as may have been authorized or outstanding
immediately preceding such consolidation or merger) or such stock of the
resulting or surviving corporation (having the same powers, preferences and
special rights of any such Parity Stock) as may be issued in exchange therefor),
(3) each holder of shares of Series E Preferred Stock immediately preceding such
recapitalization, reorganization, consolidation or merger will receive in
exchange therefor the same number of shares of stock, with the same preferences,
rights and powers, of the resulting or surviving corporation, (4) after such
recapitalization, reorganization, consolidation or merger the resulting or
surviving corporation shall not be in breach of any of the terms hereof, any of
the Material Provisions of the Securities Purchase Agreement or any of its
material obligations under the Registration Rights Agreement and (5) all or
substantially all the holders of the outstanding shares of capital stock of the
Corporation immediately prior to such consolidation or merger are entitled to
receive shares representing 50% or more of the then outstanding shares of
capital stock of the resulting or surviving corporation entitled to vote
generally in the election of directors.
(c) If on any date (i) the Corporation shall have failed to declare,
or shall have failed to pay, the full amount of dividends payable on the
Series E Preferred Stock, Series F Preferred Stock or Series G Preferred Stock
for six quarterly dividend periods or (ii) a breach of any of the Material
Provisions of the Securities Purchase Agreement or any of the Corporation's
material obligations under the Registration Rights Agreement shall have
occurred, then the number of directors constituting the Board of Directors
shall, without further action, be increased by two and the holders of shares of
Series E Preferred Stock shall have, in addition to the other voting rights set
forth herein with respect to the Series E Preferred Stock, the exclusive right,
together with the holders of Series F Preferred Stock and Series G Preferred
Stock, voting separately as a single class together with the holders of Series F
Preferred Stock and Series G Preferred Stock, to elect two directors of the
Corporation to fill such newly created directorship, by
7
written consent as provided herein, or at a special meeting of such holders
called as provided herein. Any such additional directors shall continue as
directors (subject to reelection or removal as provided in Section 3(d)(ii)) and
the holders of Series E Preferred Stock shall have such additional voting rights
until such time as (A) dividends then payable on the Series E Preferred Stock,
Series F Preferred Stock and Series G Preferred Stock shall have been declared
and paid in full or (B) there shall exist no breach of any of the Material
Provisions of the Securities Purchase Agreement or any of the Corporation's
material obligations under the Registration Rights Agreement, as the case may
be, at which time such additional directors shall cease to be directors, the
number of directors constituting the Board of Directors shall be reduced by two
and such additional voting rights of the holders of Series E Preferred Stock,
Series F Preferred Stock and Series G Preferred Stock shall terminate, subject
to revesting in the event of each and every subsequent event of the character
indicated above.
(d) (i) The foregoing right of holders of shares of Series E
Preferred Stock to take any action as provided in Section 3(c) may be exercised
at any annual meeting of stockholders or at a special meeting of holders of
shares of Series E Preferred Stock, Series F Preferred Stock and Series G
Preferred Stock, held for such purpose as hereinafter provided or at any
adjournment thereof, or by the written consent, delivered to the Secretary of
the Corporation, of the holders of the minimum number of shares required to take
such action.
So long as such right to vote continues (and unless such right has
been exercised by written consent of the minimum number of shares required to
take such action), the President of the Corporation may call, and upon the
written request of holders of record of at least 5% of the aggregate outstanding
shares of Series E Preferred Stock, Series F Preferred Stock and Series G
preferred Stock, addressed to the Secretary of the Corporation at the principal
office of the Corporation, shall call, a special meeting of the holders of
shares entitled to vote as provided herein. Such meeting shall be held within
30 days after delivery of such request to the Secretary, at the place and upon
the notice provided by law and in the by-laws of the Corporation for the holding
of meetings of stockholders.
8
(ii) At each meeting of stockholders at which the holders of
shares of Series E Preferred Stock shall have the right, voting separately as a
single class together with the holders of Series F Preferred Stock and Series G
Preferred Stock, to elect two directors of the Corporation as provided in Sec-
tion 3(c) or to take any action, the presence in person or by proxy of the
holders of record of one-third of the total aggregate number of shares of
Series E Preferred Stock, Series F Preferred Stock and Series G Preferred Stock,
in each case then outstanding and entitled to vote on the matter shall be
necessary and sufficient to constitute a quorum. At any such meeting or at any
adjournment thereof:
(A) the absence of a quorum of the holders of shares of Series E
Preferred Stock, Series F Preferred Stock and Series G Preferred Stock,
shall not prevent the election of directors other than those to be elected
by the holders of shares of Series E Preferred Stock, Series F Preferred
Stock and Series G Preferred Stock, and the absence of a quorum of the
holders of shares of any other class or series of capital stock shall not
prevent the election of directors to be elected by the holders of shares of
Series E Preferred Stock, Series F Preferred Stock and Series G Preferred
Stock, or the taking of any action as provided in Section 3(c); and
(B) in the absence of a quorum of the holders of shares of
Series E Preferred Stock, Series F Preferred Stock and Series G Preferred
Stock, a majority of the holders of such shares present in person or by
proxy shall have the power to adjourn the meeting as to the actions to be
taken by the holders of shares of Series E Preferred Stock, Series F
Preferred Stock and Series G Preferred Stock, from time to time and place
to place without notice other than announcement at the meeting until a
quorum shall be present.
For taking of any action as provided in Section 3(b) or Section 3(c)
by the holders of shares of Series E Preferred Stock, each such holder shall
have one vote for each share of such stock standing in his name on the transfer
books of the Corporation as of any record date fixed for such purpose or, if no
such date be fixed, at the close of business on the Business Day next preceding
the day on which notice is given, or if notice is waived, at the close of
business on the Business Day next preceding the day
9
on which the meeting is held; provided, however, that shares of Series E
-------- -------
Preferred Stock, Series F Preferred Stock or Series G Preferred Stock held by
the Corporation or any Subsidiary of the Corporation shall not be deemed to be
outstanding for purposes of taking any action as provided in this Section 3.
Each director elected by the holders of shares of Series E Preferred
Stock, Series F Preferred Stock and Series G Preferred Stock, as provided in
Section 3(c) shall, unless his term shall expire earlier in accordance with the
provisions thereof, hold office until the annual meeting of stockholders next
succeeding his election or until his successor, if any, is elected and
qualified.
If any director so elected by the holders of Series E Preferred Stock,
Series F Preferred Stock and Series G Preferred Stock shall cease to serve as a
director before his term shall expire (except by reason of the termination of
the voting rights accorded to the holders of Series E Preferred Stock, Series F
Preferred Stock and Series G Preferred Stock, in accordance with Section 3(c)),
the holders of the Series E Preferred Stock, Series F Preferred Stock and
Series G Preferred Stock then outstanding and entitled to vote for such director
may, by written consent as provided herein, or at a special meeting of such
holders called as provided herein, elect a successor to hold office for the
unexpired term of the director whose place shall be vacant.
Any director elected by the holders of shares of Series E Preferred
Stock, Series F Preferred Stock and Series G Preferred Stock, voting together as
a separate class, may be removed from office with or without cause by the vote
or written consent of the holders of at least a majority of the aggregate
outstanding shares of Series E Preferred Stock, Series F Preferred Stock and
Series G Preferred Stock at the time of removal. A special meeting of the
holders of shares of Series E Preferred Stock and Series F Preferred Stock and
Series G Preferred Stock, may be called in accordance with the procedures set
forth in Section 3(d)(i).
Section 4 Certain Restrictions.
--------------------
(a) So long as any shares of Series E Preferred Stock remain
outstanding, the Corporation shall not declare or make any Restricted Payment.
10
(b) Whenever quarterly dividends payable on shares of Series E
Preferred Stock as provided in Section 2(a) are not paid in full, at such time
and thereafter until all unpaid dividends payable, whether or not declared, on
the outstanding shares of Series E Preferred Stock shall have been paid in full
or declared and set apart for payment, or whenever the Corporation shall not
have converted shares of Series E Preferred Stock at a time required by Section
10, at such time and thereafter until all conversion obligations provided in
Section 10 that have come due shall have been satisfied or all necessary funds
have been set apart for payment, or whenever the Corporation shall not have paid
the Optional Redemption Price, the Mandatory Redemption Price or the Maturity
Redemption Price when due, at such time and thereafter until all such amounts
have been paid in full or set apart for payment, the Corporation shall not:
(A) declare or pay dividends, or make any other distributions, on any shares of
Junior Stock, or (B) declare or pay dividends, or make any other distributions,
on any shares of Parity Stock, except dividends or distributions paid ratably on
the Series E Preferred Stock and all Parity Stock on which dividends are payable
and in arrears, in proportion to the total amounts to which the holders of all
shares of the Series E Preferred Stock and Parity Stock are then entitled.
(c) Whenever dividends payable on shares of Series E Preferred Stock
as provided in Section 2 are not paid in full, at such time and thereafter until
all unpaid dividends payable, whether or not declared, on the outstanding shares
of Series E Preferred Stock shall have been paid in full or declared and set
apart for payment, or whenever the Corporation shall not have converted shares
of Series E Preferred Stock at a time required by Section 10, at such time and
thereafter until all conversion obligations provided in Section 10 that have
come due shall have been satisfied or all necessary funds have been set apart
for payment, or whenever the Corporation shall not have paid the Optional
Redemption Price, the Mandatory Redemption Price or the Maturity Redemption
Price when due, at such time and thereafter until all such amounts have been
paid in full or set apart for payment, the Corporation shall not redeem,
purchase or otherwise acquire for consideration any shares of Junior Stock or
Parity Stock; provided, however, that (A) the Corporation may accept shares of
-------- -------
Parity Stock or Junior Stock for conversion into Junior Stock and (B) the
Corporation may at any time redeem, purchase or otherwise acquire shares of
Parity Stock pursuant to any mandatory
11
redemption, put, sinking fund or other similar obligation contained in such
Parity Stock, pro rata with the Series E Preferred Stock in proportion to the
total amount then required to be applied by the Corporation to redeem,
repurchase, or otherwise acquire shares of Series E Preferred Stock and shares
of such Parity Stock.
(d) The Corporation shall not permit any Subsidiary of the
Corporation, or cause any other Person, to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation unless the
Corporation could, pursuant to Section 4(c), purchase such shares at such time
and in such manner.
Section 5 Optional Redemption.
-------------------
(a) (i) The Corporation shall not have any right to redeem any
shares of Series E Preferred Stock prior to __________, 20013/. Thereafter,
-
so long as shares of Common Stock shall have traded on the New York Stock
Exchange (or another national securities exchange or on Nasdaq) on each trading
day during a 30-consecutive trading day period (each of which trading days shall
be after _________, 20013/ and no more than 5 Business Days prior to the date
-
notice is given of an Optional Redemption (as defined below)) and had a Closing
Price on at least 20 of such trading days in excess of 150% of the Conversion
Price in effect on such trading day, subject to the restrictions contained in
Section 4, the Corporation shall have the right, at its sole option and
election, to redeem (the "Optional Redemption") all or a portion of the shares
of Series E Preferred Stock, on not more than 45 nor less than 30 days' notice
of the date of redemption (any such date an "Optional Redemption Date") at a
price per share (the "Optional Redemption Price") equal to (A) the following
prices per share (stated as a percentage of the Liquidation Preference of such
share) plus (B) an amount per share equal to all accrued and unpaid dividends
thereon, whether or not declared or payable, to the applicable Optional
Redemption Date, in immediately available funds:
- --------------------
3/ Assumes closing on or prior to December 31, 1994; otherwise date(s) will be
- -
appropriately adjusted.
12
Optional Redemption Price
If Redeemed as a Percentage of
During the Period3/: Liquidation Preference
------------------ ----------------------
__________, 2001 to 102.775%
__________, 2002
__________, 2002 to 101.850%
__________, 2003
__________, 2003 to 100.925%
__________, 2004
__________, 2004 and 100%
thereafter
(ii) If the Corporation shall determine to redeem less than all
the shares of Series E Preferred Stock then outstanding pursuant to
paragraph (i), the shares to be redeemed shall be selected pro rata (as nearly
as may be) so that the number of shares redeemed from each holder shall be the
same proportion of all the shares to be redeemed that the total number of shares
of Series E Preferred Stock then held by such holder bears to the total number
of shares of Series E Preferred Stock then outstanding.
(iii) Notwithstanding the foregoing, any shares of Series E
Preferred Stock redeemed pursuant to this Section 5(a) at a time when the
Corporation would be required to redeem the shares of Series E Preferred Stock
pursuant to Section 6 shall be redeemed at a price equal to the price to be paid
pursuant to Section 6.
(b) Notice of any Optional Redemption shall specify the Optional
Redemption Date, the Optional Redemption Price, the place or places of payment,
that payment will be made upon presentation and surrender of the shares of
Series E Preferred Stock, that on and after the date of such Optional Redemption
dividends will cease to accrue on such shares, the then effective Conversion
Price and that the right of holders to convert shares of Series E Preferred
Stock shall terminate at the close of business on the Business Day immediately
preceding the Optional Redemption Date (unless the Corporation defaults in the
payment of the Optional Redemption Price) and be given by publication in a
newspaper of general circulation in the Borough of
13
Manhattan, The City of New York (if such publication shall be required by
applicable law, rule, regulation or securities exchange requirement), not less
than 30, nor more than 45, days prior to the Optional Redemption Date; and, in
any case, a similar notice shall be mailed at least 30, but not more than 45,
days prior to the Optional Redemption Date to each holder of shares of Series E
Preferred Stock, at such holder's address as it appears on the transfer books of
the Corporation. In order to facilitate the redemption of shares of Series E
Preferred Stock, the Board of Directors may fix a record date for the
determination of shares of Series E Preferred Stock to be redeemed, or may cause
the transfer books of the Corporation for the Series E Preferred Stock to be
closed, not more than 60 days or less than 45 days prior to the Optional
Redemption Date.
(c) On the date of any Optional Redemption that is specified in a
notice given pursuant to Section 5(b), the Corporation shall, and at any time
after such notice shall have been mailed and before the Optional Redemption Date
the Corporation may, deposit for the benefit of the holders of shares of
Series E Preferred Stock the funds necessary for such redemption with a bank or
trust company in the Borough of Manhattan, The City of New York, having a
capital and surplus of at least $100,000,000. Any moneys so deposited by the
Corporation and unclaimed at the end of two years from the Optional Redemption
Date shall revert to the general funds of the Corporation. After such
reversion, any such bank or trust company shall, upon demand, pay over to the
Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series E Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Optional Redemption Price. In the event that
moneys are deposited pursuant to this Section 5(c) in respect of shares of
Series E Preferred Stock that are converted in accordance with the provisions of
Section 10, such moneys shall, upon such conversion, revert to the general funds
of the Corporation and, upon demand, such bank or trust company shall pay over
to the Corporation such moneys and shall be relieved of all responsibilities to
the holders of such converted shares in respect thereof. Any interest accrued
on funds deposited pursuant to this Section 5(c) shall be paid from time to time
to the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid, upon the
deposit of funds pursuant to Sec-
14
tion 5(c) in respect of shares of Series E Preferred Stock to be redeemed
pursuant to Section 5(a), notwithstanding that any certificates for such shares
shall not have been surrendered for cancellation, from and after the Optional
Redemption Date (i) the shares represented thereby shall no longer be deemed
outstanding, (ii) the rights to receive dividends thereon shall cease to accrue,
and (iii) all rights of the holders of shares of Series E Preferred Stock to be
redeemed shall cease and terminate, excepting only the right to receive the
Optional Redemption Price therefor and the right to convert such shares into
shares of Common Stock until the close of business on the Business Day
immediately preceding the Optional Redemption Date (and to receive accrued and
unpaid dividends thereon), in accordance with Section 10; provided, however,
-------- -------
that if the Corporation shall default in the payment of the Optional Redemption
Price the shares of Series E Preferred Stock shall thereafter be deemed to be
outstanding and the holders thereof shall have all of the rights of a holder of
Series E Preferred Stock until such time as such default shall no longer be
continuing or shall have been waived by holders of at least 66-2/3% of the then
outstanding shares of Series E Preferred Stock.
(e) Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of
shares of Series E Preferred Stock receives such notice, and failure to give
such notice by mail, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Series E Preferred Stock. On or after the
Optional Redemption Date, each holder of the shares called for redemption,
subject to their right to convert shares of Series E Preferred Stock as provided
in section 10, shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the Optional Redemption Price. If less than all
the shares evidenced by any such surrendered certificate are redeemed, a new
certificate shall be issued evidencing the unredeemed shares.
Section 6 Mandatory Redemption at the Option of the Holder.
------------------------------------------------
(a) If one or more events constituting a Specified Corporate Action
shall occur, each holder of shares of the Series E Preferred Stock shall have
the right, on the date specified in Section 6(b) (the "Mandatory
15
Redemption Date"), to require the Corporation to redeem (a "Mandatory
Redemption") all or any part of the shares of Series E Preferred Stock then held
by such holder as such holder may elect at a price per share (the "Mandatory
Redemption Price") equal to (A) the following prices per share (stated as a
percentage of the Liquidation Preference of such share) plus (B) an amount per
share equal to all accrued and unpaid dividends thereon, whether or not declared
or payable, to the applicable Mandatory Redemption Date, in immediately
available funds:
If the Mandatory Mandatory Redemption Price
Redemption Date as a Percentage of
Occurs During the Liquidation Preference
----------------- --------------------------
Period4/:
-------
__________, 1994 to 110.4%
__________, 1995
__________, 1995 to 116.8%
__________, 1995
__________, 1995 to 126.7%
__________, 1996
__________, 1996 and there- 138.0%
after
(b) The date fixed for each Mandatory Redemption shall be fixed by
the Corporation and shall be no less than 60 days or more than 90 days following
the occurrence of the Specified Corporate Action giving rise thereto (or, in the
case of a Specified Corporate Action described in clause (iii) of the definition
of "Specified Corporate Action," no less than 60 days or more than 90 days
following the date on which the Corporation obtains actual knowledge of such
Specified Corporate Action). The Corporation shall, within 5 days of the
occurrence of a Specified Corporate Action (or, in the case of a Specified
Corporate Action described in clause (iii) of the definition of "Specified
Corporate Action," within 5 days of the date on which the Corporation obtains
actual knowledge of such Specified Corporate Action), give notice thereof by
publication in a newspaper of general circulation in the Borough of Manhattan,
The City
- --------------------
4/ Assumes closing on or prior to December 31, 1994; otherwise dates will be
- -
appropriately adjusted.
16
of New York (if such publication shall be required by applicable law, rule,
regulation or securities exchange requirement), and, in any case, a similar
notice shall be mailed to each holder of shares of the Series E Preferred Stock,
at such holder's address as it appears on the transfer books of the Corporation.
Each such notice shall specify the Specified Corporate Action that has occurred
and the date of such occurrence, the place or places of payment, the then
effective Mandatory Redemption Price and Conversion Price and the date the right
of such holder to require a Mandatory Redemption shall terminate.
(c) If the notice sent by the Corporation pursuant to Section 6(b)
shall contain (i) a form inquiring as to whether a holder of shares of Series E
Preferred Stock intends to surrender the certificate(s) representing such shares
for redemption pursuant to this Section 6 and (ii) a stamped self-addressed
envelope for return of such form to the Corporation or its designee, within ten
Business Days of such notice, each holder shall return such inquiry form to the
Corporation and shall indicate in such form the proportion of such holder's
shares of Series E Preferred Stock that will be surrendered for redemption
pursuant to this Section 6. If such notice shall indicate that if a holder does
not respond prior to ten Business Days after the date of such notice that such
holder will be deemed to have notified the Corporation that it will not require
the redemption of the shares of Series E Preferred Stock held by such holder for
purposes of Section 3(b) and such holder does not respond to the Corporation's
inquiry prior to ten Business Days after the date of such notice, such holder
will be deemed to have notified the Corporation that it will not require the
redemption of the shares of Series E Preferred Stock held by such holder for
purposes of Section 3(b). Nothing contained in this Section 6(c) shall affect
the right of a holder of Series E Preferred Stock to require the Corporation to
redeem such shares pursuant to Section 6(a).
(d) On the date fixed for any Mandatory Redemption, each holder of
shares of Series E Preferred Stock who elects to have shares of Series E
Preferred Stock held by it redeemed shall surrender the certificate representing
such shares to the Corporation at the place designated in such notice together
with an election to have such redemption made and shall thereupon be entitled to
receive payment therefor provided in this Section 6. If less than all the
shares represented by any such surrendered certificate are
17
redeemed, a new certificate shall be issued representing the unredeemed shares.
From and after the date of such redemption (i) the rights to receive dividends
thereon shall cease to accrue and (ii) all rights of the holders of shares of
Series E Preferred Stock so redeemed shall cease and terminate, excepting only
the right to receive the Mandatory Redemption Price therefor; provided, however,
-------- -------
that if the Corporation shall default in the payment of the Mandatory Redemption
Price the shares of Series E Preferred Stock that were to be redeemed shall
thereafter be deemed to be outstanding and the holders thereof shall have all of
the rights of a holder of Series E Preferred Stock until such time as such
default shall no longer be continuing or shall have been waived by holders of at
least 66-2/3% of the then outstanding shares of Series E Preferred Stock.
Section 7 Redemption Upon Maturity.
------------------------
(a) On __________, 20095/ (the "Maturity Date"), the Corporation
-
shall redeem (the "Maturity Redemption") the remaining outstanding shares of the
Series E Preferred Stock at a price per share (the "Maturity Redemption Price")
equal to (A) 100% of the Liquidation Preference per share plus (B) an amount
equal to accrued and unpaid dividends thereon, whether or not declared or
payable, to the Maturity Date, in immediately available funds.
(b) Notice of the Maturity Redemption shall be given by publication
in a newspaper of general circulation in the Borough of Manhattan, The City of
New York (if such publication shall be required by applicable law, rule,
regulation or securities exchange requirement), not less than 30, nor more than
60, days prior to the Maturity Date and, in any case, a similar notice shall be
mailed at least 30, but not more than 60, days prior to the Maturity Date to
each holder of shares of Series E Preferred Stock, at such holder's address as
it appears on the transfer books of the Corporation.
(c) On the Maturity Date, the Corporation shall, and at any time
after such notice shall have been mailed and before the Maturity Date the
Corporation may, deposit for the benefit of the holders of shares of Series E
Preferred Stock the funds necessary for such redemption with a bank or
- --------------------
5/ Assumes closing on or prior to December 31, 1994; otherwise dates will be
- -
appropriately adjusted.
18
trust company in the Borough of Manhattan, The City of New York, having a
capital and surplus of at least $100,000,000. Any moneys so deposited by the
Corporation and unclaimed at the end of two years from the date designated for
such redemption shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series E Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Maturity Redemption Price. In the event that
moneys are deposited pursuant to this Section 7(c) in respect of shares of
Series E Preferred Stock that are converted in accordance with the provisions of
Section 10, such moneys shall, upon such conversion, revert to the general funds
of the Corporation and, upon demand, such bank or trust company shall pay over
to the Corporation such moneys and shall be relieved of all responsibilities to
the holders of such converted shares in respect thereof. Any interest accrued
and unpaid on funds deposited pursuant to this Section 5(c) shall be paid from
time to time to the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid, upon the
deposit of funds pursuant to Section 7(c) in respect of shares of Series E
Preferred Stock to be redeemed pursuant to Section 7(a), notwithstanding that
any certificates for such shares shall not have been surrendered for
cancellation, from and after the Maturity Date, (i) the rights to receive
dividends thereon shall cease to accrue and (ii) all rights of the holders of
shares of Series E Preferred Stock shall cease and terminate, excepting only the
right to receive the Maturity Redemption Price therefor; provided, however, that
-------- -------
if the Corporation shall default in the payment of the Maturity Redemption
Price, the shares of Series E Preferred Stock that were to be redeemed shall
thereafter be deemed to be outstanding and the holders thereof shall have all of
the rights of a holder of Series E Preferred Stock until such time as such
default shall no longer be continuing.
Section 8 Acquired Shares.
---------------
Any shares of Series E Preferred Stock converted, exchanged, redeemed,
purchased or otherwise acquired by the Corporation or any of its Subsidiaries in
any manner whatsoever shall be retired and cancelled promptly after the
19
acquisition thereof. All such shares of Series E Preferred Stock shall upon
their cancellation become authorized but unissued shares of preferred stock, par
value $4.00 per share, of the Corporation and, upon the filing of an appropriate
certificate with the Department of State of the State of New York, may be
reissued as part of another series of preferred stock, par value $4.00 per
share, of the Corporation subject to the conditions or restrictions on issuance
set forth herein, but in any event may not be reissued as shares of Series E
Preferred Stock or Parity Stock unless all of the shares of Series E Preferred
Stock issued on the Issue Date shall have already been redeemed, converted or
exchanged.
Section 9 Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) If the Corporation shall commence a voluntary case under the
United States bankruptcy laws or any applicable bankruptcy, insolvency or
similar law of any other country, or consent to the entry of an order for relief
in an involuntary case under any such law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due (any such event, a
"Voluntary Liquidation Event"), or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, no distribution
shall be made (i) to the holders of shares of Junior Stock unless, prior
thereto, the holders of shares of Series E Preferred Stock, subject to Section
10, shall have received (A) if a Voluntary Liquidation Event shall have
occurred, the Optional Redemption Price with respect to each share and (B) if a
Voluntary Liquidation Event shall not have occurred, the Liquidation Preference,
plus all accrued and unpaid dividends, whether or not declared or currently
payable, to the date of
20
distribution, with respect to each share, or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on the Series E Preferred Stock
and all Parity Stock in proportion to the total amounts to which the holders of
all shares of the Series E Preferred Stock (which amounts are set forth in
clauses (A) and (B) above) and Parity Stock are entitled upon such liquidation,
dissolution or winding up.
(b) Neither the consolidation or merger of the Corporation with or
into any other Person nor the sale or transfer of all or any part of the
Corporation's assets for cash, securities or other property shall be deemed to
be a liquidation, dissolution or winding up of the Corporation for purposes of
this Section 9.
Section 10 Conversion.
----------
(a) Any holder of Series E Preferred Stock shall have the right, at
its option, at any time and from time to time prior to the Maturity Date (but
subject to the provisions of Section 10(b)) to convert, subject to the terms and
provisions of this Section 10, each share of Series E Preferred Stock into such
number of fully paid and non-assessable shares of Common Stock (calculated as to
each conversion to the nearest 1/100th of a share of Common Stock) for each full
share of Series E Preferred Stock as is equal, subject to Section 10(g), to the
quotient of (i) the Liquidation Preference divided by (ii) the Conversion Price
(as defined below) then in effect, except that with respect to any share that
shall be called for redemption, such right shall terminate at the close of
business on the date of redemption for such share, unless in any such case the
Corporation shall default in performance or payment due upon redemption thereof.
The Conversion Price shall be $15.00. The Conversion Price shall be subject to
adjustment as set forth in Section 10(d). Such conversion right shall be
exercised by the surrender of the shares of Series E Preferred Stock to be
converted to the Corporation at any time during usual business hours at its
principal place of business to be maintained by it, accompanied by written
notice that the holder elects to convert such shares and specifying the name or
names (with addresses) in which a certificate or certificates for shares of
Common Stock are to be issued and (if so required by the Corporation) by a
written instrument or instruments of transfer in form reasonably satisfactory to
the Corporation duly executed by
21
the holder or its duly authorized legal representative and transfer tax stamps
or funds therefor, if required pursuant to Section 10(k). All shares of
Series E Preferred Stock surrendered for conversion shall be delivered to the
Corporation for cancellation and cancelled by it and no shares shall be issued
in lieu thereof.
(b) As promptly as practicable after the surrender, as herein
provided, of any shares of Series E Preferred Stock for conversion pursuant to
Section 10(a), the Corporation shall deliver to or upon the written order of the
holder of the shares so surrendered a certificate or certificates representing
the number of fully paid and non-assessable shares of Common Stock into which
such shares may be or have been converted in accordance with the provisions of
this Section 10. Subject to the following provisions of this paragraph and of
Section 10(d), such conversion shall be deemed to have been made immediately
prior to the close of business on the date that such shares shall have been
surrendered in satisfactory form for conversion, and the Person or Persons
entitled to receive the Common Stock deliverable upon conversion of such shares
shall be treated for all purposes as having become the record holder or holders
of such Common Stock at such appropriate time, and such conversion shall be at
the Conversion Price in effect at such time; provided, however, that no
-------- -------
surrender shall be effective to constitute the Person or Persons entitled to
receive the Common Stock deliverable upon such conversion as the record holder
or holders of such Common Stock while the share transfer books of the
Corporation shall be closed (but not for any period in excess of five days), but
such surrender shall be effective to constitute the Person or Persons entitled
to receive such Common Stock as the record holder or holders thereof for all
purposes immediately prior to the close of business on the next succeeding day
on which such share transfer books are open, and such conversion shall be deemed
to have been made at, and shall be made at the Conversion Price in effect at,
such time on such next succeeding day. In case of any Optional Redemption or
Maturity Redemption of any shares of Series E Preferred Stock, the right of
conversion shall cease and terminate, as to the shares to be redeemed, at the
close of business on (A) the Business Day immediately preceding the Optional
Redemption Date, in the case of an Optional Redemption or (B) on the Business
Day immediately preceding the Maturity Date, in the case of a Maturity
Redemption, unless the Corporation shall default in the payment of the
applicable redemption price for the shares to be redeemed.
22
If the last day for the exercise of the conversion right shall not be
a Business Day, then such conversion right may be exercised on the next
preceding Business Day.
(c) To the extent permitted by law, when shares of Series E Preferred
Stock are converted, all dividends accrued and unpaid (whether or not declared
or currently payable) on the Series E Preferred Stock so converted to the date
of conversion shall be immediately due and payable and must accompany the shares
of Common Stock issued upon such conversion; provided, however, that if shares
-------- -------
being converted are held by a Person other than the original holder or any of
its Affiliates and such shares are not "restricted securities" (as defined in
Rule 144 under the Securities Act of 1933, as amended), then no such accrued and
unpaid dividends shall be payable when such shares are converted.
(d) The Conversion Price shall be subject to adjustment as follows:
(i) In case the Corporation shall at any time or from time to
time (A) pay a dividend or make a distribution on the outstanding shares of
Common Stock in Common Stock (other than pursuant to a dividend reinvestment
plan approved by the Corporation's Board of Directors), (B) subdivide the
outstanding shares of Common Stock into a larger number of shares, (C) combine
the outstanding shares of Common Stock into a smaller number of shares or
(D) issue any shares of its capital stock in a reclassification of the Common
Stock, then, and in each such case, the Conversion Price in effect immediately
prior to such event shall be adjusted (and any other appropriate actions shall
be taken by the Corporation) so that the holder of any share of Series E
Preferred Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock or other securities of the
Corporation that such holder would have owned or would have been entitled to
receive upon or by reason of any of the events described above, had such share
of Series E Preferred Stock been converted immediately prior to the occurrence
of such event. An adjustment made pursuant to this Section 10(d)(i) shall
become effective retroactively (A) in the case of any such dividend or
distribution, to the opening of business on the day immediately following the
close of business on the record date for the determination of holders of Common
Stock entitled to receive such dividend or distribution or (B) in the case of
any such subdivision, combination or
23
reclassification, to the close of business on the day upon which such corporate
action becomes effective.
(ii) In case the Corporation shall at any time or from time to
time issue or sell shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock, or any options, warrants or other
rights to acquire shares of Common Stock (other than (x) options granted to any
employee or director of the Corporation pursuant to a stock option plan approved
by the shareholders of the Corporation or (y) rights issued pursuant to a
shareholder rights plan, "poison pill" or similar arrangement that complies with
Section 10(k))) for a consideration per share less than the Conversion Price
then in effect at the record date or issuance date, as the case may be (the
"Date") referred to in the following sentence (treating the price per share of
any security convertible or exchangeable or exercisable into Common Stock as
equal to (A) the sum of the price for such security convertible, exchangeable or
exercisable into Common Stock plus any additional consideration payable (without
regard to any anti-dilution adjustments) upon the conversion, exchange or
exercise of such security into Common Stock divided by (B) the number of shares
of Common Stock initially underlying such convertible, exchangeable or
exercisable security), other than issuances or sales for which an adjustment is
made pursuant to another paragraph of this Section 10(d), then, and in each such
case, the Conversion Price then in effect shall be adjusted by dividing the
Conversion Price in effect on the day immediately prior to the Date by a
fraction (x) the numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to the Date plus the number of
additional shares of Common Stock issued or to be issued (or the maximum number
into which such convertible or exchangeable securities initially may convert or
exchange or for which such options, warrants or other rights initially may be
exercised) and (y) the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to the Date plus the number
of shares of Common Stock that the aggregate consideration (if any of such
aggregate consideration is other than cash, as valued by the Board of Directors
including a majority of the Directors who are not officers or employees of the
Corporation or any of its Subsidiaries, which determination shall be conclusive
and described in a resolution of the Board of Directors) for the total number of
such additional shares of Common Stock so issued (or into which such
24
convertible or exchangeable securities may convert or exchange or for which such
options, warrants or other rights may be exercised plus the aggregate amount of
any additional consideration initially payable upon conversion, exchange or
exercise of such security) would purchase at the Conversion Price. Such
adjustment shall be made whenever such shares, securities, options, warrants or
other rights are issued, and shall become effective retroactively to a date
immediately following the close of business (i) in the case of issuance to
stockholders of the Corporation, as such, on the record date for the
determination of stockholders entitled to receive such shares, securities,
options, warrants or other rights and (ii) in all other cases, on the date
("issuance date") of such issuance; provided, however, that the determination as
-------- -------
to whether an adjustment is required to be made pursuant to this Section
10(d)(ii) shall only be made upon the issuance of such shares or such
convertible or exchangeable securities, options, warrants or other rights, and
not upon the issuance of the security into which such convertible or
exchangeable security converts or exchanges, or the security underlying such
option, warrants or other right; provided, further, that if any convertible or
-------- -------
exchangeable securities, options, warrants or other rights (or any portions
thereof) that shall have given rise to an adjustment pursuant to this Section
10(d)(ii) shall have expired or terminated without the exercise thereof and/or
if by reason of the terms of such convertible or exchangeable securities,
options, warrants or other rights there shall have been an increase or
increases, with the passage of time or otherwise, in the price payable upon the
exercise or conversion thereof, then the Conversion Price hereunder shall be
readjusted (but to no greater extent than originally adjusted) on the basis of
(x) eliminating from the computation any additional shares of Common Stock cor-
responding to such convertible or exchangeable securities, options, warrants or
other rights as shall have expired or terminated, (y) treating the additional
shares of Common Stock, if any, actually issued or issuable pursuant to the
previous exercise of such convertible or exchangeable securities, options,
warrants or other rights as having been issued for the consideration actually
received and receivable therefor and (z) treating any of such convertible or
exchangeable securities, options, warrants or other rights that remain
outstanding as being subject to exercise or conversion on the basis of such
exercise or conversion price as shall be in effect at the time.
25
(iii) In case the Corporation shall at any time or from time to
time distribute to all holders of shares of its Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the resulting or surviving corporation and the Common Stock is
not changed or exchanged or a redemption of any rights or other securities
issued pursuant to a shareholder rights plan, "poison pill" or similar
arrangement) cash, evidences of indebtedness of the Corporation or another
issuer, securities of the Corporation or another issuer or other assets
(excluding (A) Permitted Dividends described in clause (B) of the definition
thereof and (B) securities for which adjustment is made under Section 10(d)(i)
or Section 10(d)(ii)), then, and in each such case, the Conversion Price then in
effect shall be adjusted by dividing the Conversion Price in effect immediately
prior to the date of such distribution by a fraction (x) the numerator of which
shall be the Current Market Price of the Common Stock on the record date
referred to below and (y) the denominator of which shall be such Current Market
Price of the Common Stock less the then Fair Market Value (as determined by the
Board of Directors of the Corporation, which determination shall be conclusive)
of the portion of the cash, evidences of indebtedness, securities or other
assets so distributed or of such subscription rights or warrants applicable to
one share of Common Stock (but such denominator not to be less than one);
provided, however, that no adjustment shall be made with respect to any
- -------- -------
distribution of rights to purchase securities of the Corporation if the holder
of shares of Series E Preferred Stock would otherwise be entitled to receive
such rights upon conversion at any time of shares of Series E Preferred Stock
into Common Stock unless such rights are subsequently redeemed by the
Corporation, in which case such redemption shall be treated for purposes of this
Section 10(d)(iii) as a dividend on the Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become effective
retroactively to a date immediately following the close of business on the
record date for the determination of stockholders entitled to receive such
distribution.
(iv) In the case the Corporation at any time or from time to
time shall take any action affecting its Common Stock, other than an action
described in any of Section 10(d)(i) through Section 10(d)(iii), inclusive, or
Section 10(h), then, the Conversion Price shall be adjusted in such manner and
at such time as the Board of Directors of the Corporation (other than Purchaser
Designees or directors
26
elected pursuant to Section 3(c)) in good faith determines to be equitable in
the circumstances (such determination to be evidenced in a resolution, a
certified copy of which shall be mailed to the holders of the Series E Preferred
Stock).
(v) The Corporation may make such reductions in the Conversion
Price, in addition to those required by subparagraphs (i), (ii), (iii) and (iv)
of this Section 10(d), as the Board of Directors considers to be advisable in
order to avoid or to diminish any income tax to holders of Common Stock or
rights to purchase Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such for income
tax purposes.
(vi) Notwithstanding anything herein to the contrary, no
adjustment under this Section 10(d) need be made to the Conversion Price unless
such adjustment would require an increase or decrease of at least 1% of the Con-
version Price then in effect. Any lesser adjustment shall be carried forward
and shall be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least 1% of such
Conversion Price. Any adjustment to the Conversion Price carried forward and
not theretofore made shall be made immediately prior to the conversion of any
shares of Series E Preferred Stock pursuant hereto; provided, however, that any
-------- -------
such adjustment shall in any event be made no later than three years after the
occurrence of the event giving rise to such adjustment.
(e) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Conversion Price, then, and
in each such case, the Corporation promptly shall deliver to each registered
holder of Series E Preferred Stock at least 10 Business Days prior to effecting
any of the foregoing transactions a certificate, signed by the President or a
Vice President and by the Treasurer or an
27
28
Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated and specifying
the increased or decreased Conversion Price then in effect following such
adjustment.
(g) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any shares of Series E Preferred Stock.
If more than one share of Series E Preferred Stock shall be surrendered for
conversion at one time by the same holder, the number of full shares of Common
Stock issuable upon conversion thereof shall be computed on the basis of the
aggregate Liquidation Preference of the shares of Series E Preferred Stock so
surrendered. If the conversion of any share or shares of Series E Preferred
Stock results in a fraction, an amount equal to such fraction multiplied by the
Current Market Price of the Common Stock on the Business Day preceding the day
of conversion shall be paid to such holder in cash by the Corporation on the
date of issuance of the certificates representing the shares issued by the
Corporation upon such conversion.
(h) In case of any capital reorganization or reclassification or
other change of outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value), or
in case of any consolidation or merger of the Corporation with or into another
Person (other than a consolidation or merger in which the Corporation is the
resulting or surviving Person and which does not result in any reclassification
or change of outstanding Common Stock), or in case of any sale or other
disposition to another Person of all or substantially all of the assets of the
Corporation (any of the foregoing, a "Transaction"), the Corporation, or such
successor or purchasing Person, as the case may be, shall execute and deliver to
each holder of Series E Preferred Stock at least 10 Business Days prior to
effecting any of the foregoing Transactions a certificate that the holder of
each share of Series E Preferred Stock then outstanding shall have the right
thereafter to convert such share of Series E Preferred Stock into the kind and
amount of shares of stock or other securities (of the Corporation or another
issuer) or property or cash receivable upon such Transaction by a holder of the
number of shares of Common Stock into which such share of Series E Preferred
Stock could have been converted immediately prior to such Transaction. Such
28
certificate shall provide for adjustments that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 10. If, in
the case of any such Transaction, the stock, other securities, cash or property
receivable thereupon by a holder of Common Stock includes shares of stock or
other securities of a Person other than the successor or purchasing Person and
other than the Corporation, which controls or is controlled by the successor or
purchasing Person or which, in connection with such Transaction, issues stock,
securities, other property or cash to holders of Common Stock, then such
certificate also shall be executed by such Person, and such Person shall, in
such certificate, specifically acknowledge the obligations of such successor or
purchasing Person and acknowledge its obligations to issue such stock,
securities, other property or cash to the holders of Series E Preferred Stock
upon conversion of the shares of Series E Preferred Stock as provided above.
The provisions of this Section 10(h) and any equivalent thereof in any such
certificate similarly shall apply to successive Transactions. The provisions of
this Section 10(h) and any equivalent thereof in any such certificate are and
shall be in addition to, and not in lieu of, the requirements with respect to a
Mandatory Redemption.
(i) In case at any time or from time to time:
(A) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock (other than a Permitted Dividend);
(B) the Corporation shall authorize the granting to the holders
of its Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or of any other rights or warrants;
(C) there shall be any reclassification of the Common Stock
(other than a subdivision or combination of the outstanding Common Stock, or a
change in par value, or from par value to no par value, or from no par value to
par value), or any consolidation or merger to which the Corporation is a party
and for which approval of any shareholders of the Corporation is required, or
any sale or other disposition of all or substantially all of the assets of the
Corporation; or
(D) the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
29
then the Corporation shall mail to each holder of shares of Series E Preferred
Stock at such holder's address as it appears on the transfer books of the
Corporation, as promptly as possible but in any event at least ten days prior to
the applicable date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution or
rights or warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution
or rights are to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, conveyance, dissolution, liquidation or winding up
is expected to become effective; provided that in the case of any event to which
--------
Section 10(h) applies, the Corporation shall give at least 10 days' prior
written notice as aforesaid. Such notice also shall specify the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for shares of stock or other securities or property
or cash deliverable upon such reclassification, consolidation, merger, sale,
conveyance, dissolution, liquidation or winding up.
(j) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Series E Preferred Stock, such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Series E
Preferred Stock, and shall take all action required to increase the authorized
number of shares of Common Stock if at any time there shall be insufficient
authorized but unissued shares of Common Stock to permit such reservation or to
permit the conversion of all outstanding shares of Series E Preferred Stock.
(k) The Corporation shall not adopt a shareholders right plan,
"poison pill" or similar arrangement unless such plan or arrangement shall
provide that (i) each holder of a share of Series E Preferred Stock shall be
entitled to receive thereunder, upon conversion of a share of Series E Preferred
Stock (in accordance with the terms hereof) prior to the earlier to occur of
either the date of redemption of the rights issued under such plan or the date
of expiration of the rights issued under such plan, rights for each share of
Common Stock issued upon conversion of such share of Series E Preferred Stock in
an amount equal to the amount of rights issued with respect to each outstanding
share of Common Stock pursuant to such plan and
30
(ii) if such rights are redeemed prior to the conversion of any share of
Series E Preferred Stock into Common Stock, then upon conversion of such share
of Series E Preferred Stock the holder thereof shall receive an amount in cash
equal to the amount in cash that such holder would have received had he
converted such share of Series E Preferred Stock prior to such redemption
(unless prior to such conversion the Conversion Price applicable to such share
of Series E Preferred Stock shall have been adjusted pursuant to
Section 10(d)(iii) as a result of such redemption).
(l) The issuance or delivery of certificates for Common Stock upon
the conversion of shares of Series E Preferred Stock shall be made without
charge to the converting holder of shares of Series E Preferred Stock for such
certificates or for any tax in respect of the issuance or delivery of such
certificates or the securities represented thereby, and such certificates shall
be issued or delivered in the respective names of, or in such names as may be
directed by, the holders of the shares of Series E Preferred Stock converted;
provided, however, that the Corporation shall not be required to pay any tax
- -------- -------
that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate in a name other than that of the holder of the
shares of Series E Preferred Stock converted, and the Corporation shall not be
required to issue or deliver such certificate unless or until the Person or
Persons requesting the issuance or delivery thereof shall have paid to the
Corporation the amount of such tax or shall have established to the reasonable
satisfaction of the Corporation that such tax has been paid.
Section 11 Exchange.
--------
(a) Subject to the provisions of this Section 11, the Corporation
shall have the right, with the consent of the holders of all of the outstanding
shares of Series E Preferred Stock (which consent may be withheld for any reason
whatsoever), at any time but on only one occasion, to exchange all (but not less
than all) of the shares of Series E Preferred Stock for Convertible Subordinated
Notes of the Corporation ("Convertible Notes"), at a price per share equal to
the Liquidation Preference per share, with the Convertible Notes valued for such
purpose at their face value. Simultaneously with such exchange the Corporation
shall pay to each holder of Series E Preferred Stock an amount per share in cash
equal to all accrued and unpaid dividends thereon, whether or not declared or
currently
31
payable, to the date fixed for exchange thereof. The Convertible Notes shall
have an annual interest rate equal to the annual dividend rate on Series E
Preferred Stock and shall contain other terms substantially similar to the
Series E Preferred Stock, including the date of maturity thereof and the right
to convert such notes into shares of Common Stock.
(b) Notice of an exchange of shares of Series E Preferred Stock
pursuant to Section 11(a) shall be given by publication in a newspaper of
general circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), not less than 30, nor more than 60, days prior to the
date fixed for exchange; and, in any case, a similar notice shall be mailed at
least 30, but not more than 60, days prior to the date fixed for exchange to
each holder at such holder's address as it appears on the transfer books of the
Corporation. In order to facilitate the exchange of shares of Series E
Preferred Stock hereunder the Board of Directors may fix a record date for the
determination of shares of Series E Preferred Stock to be exchanged, or may
cause the transfer books of the Corporation for the Series E Preferred Stock to
be closed, not more than 60 days or less than 30 days prior to the date fixed
for exchange.
(c) On the date of any exchange being made pursuant to Section 11(a)
that is specified in a notice given pursuant to Section 11(b) and is not deemed
terminated pursuant to Section 11(b), the Corporation shall, and at any time
after the date that is 10 days prior to the date of exchange the Corporation
may, deposit for the benefit of the holders of shares of Series E Preferred
Stock to be exchanged (i) the Convertible Notes necessary for such exchange and
(ii) an amount in cash equal to all dividends payable with respect thereto upon
such exchange with a bank or trust company in the Borough of Manhattan, The City
of New York, having a capital and surplus of at least $100,000,000. Any
Convertible Notes so deposited by the Corporation and unclaimed at the end of
two years from the date designated for such exchange shall revert to the Corpo-
ration. After such reversion, any such bank or trust company shall, upon
demand, return to the Corporation such unclaimed Convertible Notes and thereupon
such bank or trust company shall be relieved of all responsibility in respect
thereof and any holder of shares of Series E Preferred Stock to be exchanged
shall look only to the Corporation for the
32
delivery of the Convertible Notes. In the event that Convertible Notes and
moneys are deposited pursuant to this Section 11(c) in respect of shares of
Series E Preferred Stock that are converted in accordance with the provisions of
Section 10, such Convertible Notes and moneys shall, upon such conversion,
revert to the Corporation and, upon demand, such bank or trust company shall
return to the Corporation such Convertible Notes and moneys and shall be
relieved of all responsibilities to the holders of such converted shares in
respect thereof. Any interest accrued on Convertible Notes deposited pursuant
to this Section 11(c) shall accrue for the accounts of, and be payable to, the
holders of shares of Series E Preferred Stock to be exchanged therefor.
(d) Notice of exchange having been given as aforesaid and not having
been deemed terminated as aforesaid, upon the deposit of Convertible Notes
pursuant to clause (i) of Section 11(c) and the deposit of the cash referred to
in clause (ii) of Section 11(c) in respect of shares of Series E Preferred Stock
to be exchanged pursuant to Section 11(a), notwithstanding that any certificates
for such shares shall not have been surrendered for cancellation, from and after
the date of exchange designated in the notice of exchange (i) the shares
represented thereby shall no longer be deemed outstanding, (ii) the rights to
receive dividends thereon (except as provided in paragraph (b) above) shall
cease to accrue, and (iii) all rights of the holders of shares of Series E
Preferred Stock to be exchanged shall cease and terminate, excepting only the
right to receive the Convertible Notes therefor, the right to receive the
dividends described in paragraph (b) above and the right to convert such shares
into shares of Common Stock until the close of business on the Business Day
preceding the date of exchange, in accordance with Section 10; provided,
--------
however, that if the Corporation shall default in the execution and delivery of
- -------
the Convertible Notes, the shares of Series E Preferred Stock that were to be
exchanged shall thereafter be deemed to be outstanding and the holders thereof
shall have all of the rights of a holder of Series E Preferred Stock until such
time as such default shall no longer be continuing or shall have been waived by
holders of at least 66-2/3% of the then outstanding shares of Series E Preferred
Stock.
Article 2 Series F Preferred Stock.
------------------------
Section 1 Designation and Number.
----------------------
33
(a) The shares of such series shall be designated as "Cumulative
Preferred Stock, Series F" (the "Series F Preferred Stock"). The number of
shares initially constituting the Series F Preferred Stock shall be
________,6/ which number may be decreased (but not increased) by the Board of
-
Directors without a vote of stockholders; provided, however, that such number
-------- -------
may not be decreased below the number of then outstanding shares of Series F
Preferred Stock.
(b) The Series F Preferred Stock shall, with respect to dividend
rights and rights on liquidation, dissolution or winding up, rank pari passu
---- -----
with the Corporation's $2.50 Cumulative Convertible Preferred Stock, Series A
(the "Series A Preferred Stock"), $2.50 Cumulative Preferred Stock, Series B
(the "Series B Preferred Stock"), Cumulative Convertible Preferred Stock,
Series E (the "Series E Preferred Stock"), Cumulative Preferred Stock, Series G
(the "Series G Preferred Stock") and the New Preferred Stock (if any) (the
Series A Preferred Stock, Series B Preferred Stock, Series E Preferred Stock,
Series G Preferred Stock and New Preferred Stock (if any) are collectively
defined for the purposes of this Article 2 as the "Other Preferred Stock") and
prior to all other classes and series of capital stock of the Corporation now or
hereafter authorized including, without limitation, the Common Stock, par value
$1.00 per share, of the Corporation (the "Common Stock").
(c) Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Article 4 below.
Section 2 Dividends and Distributions.
---------------------------
(a) The holders of shares of Series F Preferred Stock, in preference
to the holders of shares of Common Stock and of any shares of other capital
stock of the Corporation other than the Other Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors, out of the
assets of the Corporation at the time legally available therefor, cumulative
cash dividends at an annual rate on the Liquidation Preference thereof
- --------------------
6/ Such number having an aggregate Liquidation Value equal to $200,000,000
- -
less the aggregate Liquidation Value of the Series E Preferred Stock.
34
equal to 9.75% (subject to increase pursuant to Section 2(b)), calculated on the
basis of a 360-day year consisting of twelve 30-day months, accruing and payable
in equal quarterly payments, in immediately available funds, on the Business Day
immediately preceding the last day of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date") commencing on the Business Day immediately preceding [December
31, 1994]7/; provided, however, that with respect to such first Quarterly
- -------- -------
Dividend Payment Date, the holders of shares of Series F Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors, out
of the assets of the Corporation at the time legally available therefor, a
cumulative cash dividend in respect of each share of Series F Preferred Stock in
the amount of (i) 9.75% (or the then effective annual rate) of the Liquidation
Preference multiplied by (ii) a fraction equal to (A) the number of days from
(and including) the Issue Date to (but excluding) such Quarterly Dividend Pay-
ment Date divided by (B) 360. No interest shall be payable in respect of any
dividend payment on the Series F Preferred Stock that may be in arrears.
(b) If (i) within 45 days of the Issue Date, the Corporation has not
delivered to each holder of shares of Series F Preferred Stock a Private
Placement Memorandum or a Registration Statement on Form S-3 (if the Corporation
is then eligible to use Form S-3) with respect to the private placement or
public offering of the New Preferred Stock or the New Senior Notes, (ii) the
Corporation shall have delivered to the holder a draft of a Registration
Statement on Form S-3 (if the Corporation is then eligible to use Form S-3)
pursuant to clause (i), and such Registration Statement shall not have been
filed with the Securities and Exchange Commission within 30 days after the Issue
Date, (iii) a private placement or public offering of the New Preferred Stock or
the New Senior Notes, pursuant to which the Corporation shall receive at least
$100,000,000 in gross proceeds is not consummated within 210 days after the
Issue Date or (iv) the annual dividend rate on the New Preferred Stock or the
annual interest rate on the New Senior Notes, as applicable, exceeds 13%, then
the annual rate of the cumulative cash dividends shall be increased to a rate of
11.75%, effective (w) in the case of clause (i), the date
- --------------------
7/ Assumes closing on or prior to December 31, 1994; otherwise date(s) will be
- -
appropriately adjusted.
35
that is forty-five days after the Issue Date, (x) in the case of clause (ii),
the date that is 30 days after the Issue Date, (y) in the case of clause (iii),
the date that is 210 days after the Issue Date and (z) in the case of clause
(iv), the date of the issuance of the New Preferred Stock or the New Senior
Notes, as applicable. If on any date (A) all of the Purchaser Designees shall
not have been elected to the Corporation's Board of Directors or any such
Purchaser Designees shall not have been appointed to the committees of the
Corporation's Board of Directors, in accordance with the provisions of
Section 6.17 of the Securities Purchase Agreement, (B) the Corporation shall
have failed to declare, or shall have failed to pay, the full amount of
dividends payable on the Series F Preferred Stock for six quarterly dividend
periods, (C) the Corporation shall have failed to satisfy its obligation to
convert shares of Series E Preferred Stock pursuant to Article 1, Section 10 or
(D) a breach of any of the Material Provisions of the Securities Purchase
Agreement or any of the Corporation's material obligations under the
Registration Rights Agreement shall have occurred then, effective as of the date
of such failure or breach, the annual rate of the cumulative cash dividends
shall be increased to a rate of 11.75% and shall remain at such rate until such
time as (1) the Purchaser Designees shall have been elected to the Corporation's
Board of Directors and appointed to the committees of the Corporation's Board of
Directors in accordance with the provisions of Section 6.17 of the Securities
Purchase Agreement, (2) all dividends accrued to date on the Series F Preferred
Stock shall have been declared and paid in full, (3) any conversion obligation
provided in Article 1, Section 10 that has become due shall have been fully
satisfied or (4) there shall exist no breach of any of the Material Provisions
of the Securities Purchase Agreement or any of the Corporation's material
obligations under the Registration Rights Agreement, as the case may be, at
which time the annual rate of the cumulative cash dividends shall be reduced to
a rate of 9.75%, subject to being increased to a rate of 11.75% in the event of
each and every subsequent event of the character indicated above.
(c) Dividends payable pursuant to Section 2(a) shall begin to accrue
and be cumulative from the Issue Date, and shall accrue on a daily basis, in
each case whether or not declared. Dividends paid on the shares of Series F
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis
36
among all such shares of Series F Preferred Stock at the time outstanding. The
Board of Directors may fix a record date for the determination of holders of
shares of Series F Preferred Stock entitled to receive payment of a dividend
declared thereon, which record date shall be no more than 60 days or less than
10 days prior to the date fixed for the payment thereof. Accumulated but unpaid
dividends for any past quarterly dividend periods may be declared and paid at
any time, without reference to any regular Quarterly Dividend Payment Date, to
holders of record on such date, not more than 60 nor less than 10 days preceding
the payment date thereof, as may be fixed by the Board of Directors.
(d) The holders of shares of Series F Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided
herein.
Section 3 Voting Rights.
-------------
In addition to any voting rights provided by law, the holders of
shares of Series F Preferred Stock shall have the following voting rights:
(a) Unless the consent or approval of a greater number of shares
shall then be required by law, the affirmative vote of the holders of at least
66-2/3% of the outstanding shares of Series F Preferred Stock, voting separately
as a single class, in person or by proxy, at a special or annual meeting of
stockholders called for the purpose, shall be necessary to (i) authorize, adopt
or approve an amendment to the Certificate of Incorporation that would increase
or decrease the par value of the shares of Series F Preferred Stock, or alter or
change the powers, preferences or special rights of the shares of Series F
Preferred Stock, (ii) amend, alter or repeal the Certificate of Incorporation so
as to affect the shares of Series F Preferred Stock adversely or (iii) effect
the voluntary liquidation, dissolution, winding up, recapitalization or
reorganization of the Corporation, or the consolidation or merger of the
Corporation with or into any other Person, or the sale or other distribution to
another Person of all or substantially all of the assets of the Corporation;
provided, however, that no separate vote of the holders of Series F Preferred
- -------- -------
Stock shall be required to effect any of the transactions described in clause
(iii) above unless such transaction would either require a class vote pursuant
to clause (i) or (ii) above or would require a vote by any
37
shareholders of the Corporation; provided further, that no separate vote of the
-------- -------
holders of the Series F Preferred Stock as a class shall be required in the case
of a recapitalization, reorganization, consolidation or merger of, or sale by,
the Corporation if (A)(a) such recapitalization, reorganization, consolidation,
merger or sale constitutes a Specified Corporate Action, (b) the Corporation has
sufficient funds legally available to it (after giving effect to such
transaction) to redeem, at the then applicable price hereunder and pursuant to
the terms hereof, all the outstanding shares of Series F Preferred Stock,
(c) such redemption shall not be prohibited by any agreement to which the
Corporation or any of its Subsidiaries is a party, by applicable law or
otherwise, (d) the Board of Directors of the Corporation, including a majority
of the directors who are not officers or employees of the Corporation, shall
have adopted a resolution confirming that such funds are available and that the
holders of Series F Preferred Stock have the right to require such redemption
and (e) the Corporation shall have set aside sufficient funds through the
Specified Corporation Action Redemption Date to redeem the shares of Series F
Preferred Stock held by such holders (except that no funds need be set aside
with respect to such shares held by any such holder who has theretofore notified
the Corporation (whether pursuant to Section 6(a)(iii) or otherwise) that it
will not require redemption of such shares) or (B) (1) the Corporation shall be
the resulting or surviving corporation, (2) the resulting or surviving
corporation will have after such recapitalization, reorganization, consolidation
or merger no Senior Stock or Parity Stock either authorized or outstanding
(except such Parity Stock of the Corporation as may have been authorized or
outstanding immediately preceding such consolidation or merger) or such stock of
the resulting or surviving corporation (having the same powers, preferences and
special rights of any such Parity Stock) as may be issued in exchange therefor),
(3) each holder of shares of Series F Preferred Stock immediately preceding such
recapitalization, reorganization, consolidation or merger will receive in
exchange therefor the same number of shares of stock, with the same preferences,
rights and powers, of the resulting or surviving corporation, (4) after such
recapitalization, reorganization, consolidation or merger the resulting or
surviving corporation shall not be in breach of any of the terms hereof, any of
the Material Provisions of the Securities Purchase Agreement or any of its
material obligations under the Registration Rights Agreement and (5) all or
substantially all the holders of
38
the outstanding shares of capital stock of the Corporation immediately prior to
such consolidation or merger are entitled to receive shares representing 50% or
more of the then outstanding shares of capital stock of the resulting or
surviving corporation entitled to vote generally in the election of directors.
(b) If on any date (i) the Corporation shall have failed to declare,
or shall have failed to pay, the full amount of dividends payable on the
Series F Preferred Stock, Series E Preferred Stock or Series G Preferred Stock
for six quarterly dividend periods or (ii) a breach of any of the Material
Provisions of the Securities Purchase Agreement or any of the Corporation's
material obligations under the Registration Rights Agreement shall have
occurred, then the number of directors constituting the Board of Directors
shall, without further action, be increased by two and the holders of shares of
Series F Preferred Stock shall have, in addition to the other voting rights set
forth herein with respect to the Series F Preferred Stock, the exclusive right,
together with the holders of Series E Preferred Stock and Series G Preferred
Stock, voting separately as a single class together with the holders of Series E
Preferred Stock and Series G Preferred Stock, to elect two directors of the
Corporation to fill such newly created directorship, by written consent as
provided herein, or at a special meeting of such holders called as provided
herein. Any such additional directors shall continue as directors (subject to
reelection or removal as provided in Section 3(c)(ii)) and the holders of
Series F Preferred Stock shall have such additional voting rights until such
time as (A) dividends then payable on the Series F Preferred Stock, Series E
Preferred Stock and Series G Preferred Stock shall have been declared and paid
in full or (B) there shall exist no breach of any of the Material Provisions of
the Securities Purchase Agreement or any of the Corporation's material
obligations under the Registration Rights Agreement, as the case may be, at
which time such additional directors shall cease to be directors, the number of
directors constituting the Board of Directors shall be reduced by two and such
additional voting rights of the holders of Series F Preferred Stock, Series E
Preferred Stock and Series G Preferred Stock shall terminate, subject to
revesting in the event of each and every subsequent event of the character
indicated above.
(c) (i) The foregoing right of holders of shares of Series F
Preferred Stock to take any action as provided in Section 3(b) may be exercised
at any annual meeting of
39
stockholders or at a special meeting of holders of shares of Series F Preferred
Stock, Series E Preferred Stock and Series G Preferred Stock, held for such
purpose as hereinafter provided or at any adjournment thereof, or by the written
consent, delivered to the Secretary of the Corporation, of the holders of the
minimum number of shares required to take such action.
So long as such right to vote continues (and unless such right has
been exercised by written consent of the minimum number of shares required to
take such action), the President of the Corporation may call, and upon the
written request of holders of record of at least 5% of the aggregate outstanding
shares of Series F Preferred Stock, Series E Preferred Stock and Series G
Preferred Stock, addressed to the Secretary of the Corporation at the principal
office of the Corporation, shall call, a special meeting of the holders of
shares entitled to vote as provided herein. Such meeting shall be held within
30 days after delivery of such request to the Secretary, at the place and upon
the notice provided by law and in the by-laws of the Corporation for the holding
of meetings of stockholders.
(ii) At each meeting of stockholders at which the holders of
shares of Series F Preferred Stock shall have the right, voting separately as a
single class together with the holders of Series E Preferred Stock and Series G
Preferred Stock, to elect two directors of the Corporation as provided in Sec-
tion 3(b) or to take any action, the presence in person or by proxy of the
holders of record of one-third of the total aggregate number of shares of
Series F Preferred Stock, Series E Preferred Stock and Series G Preferred Stock,
in each case then outstanding and entitled to vote on the matter shall be
necessary and sufficient to constitute a quorum. At any such meeting or at any
adjournment thereof:
(A) the absence of a quorum of the holders of shares of Series F
Preferred Stock, Series E Preferred Stock and Series G Preferred Stock,
shall not prevent the election of directors other than those to be elected
by the holders of shares of Series F Preferred Stock, Series E Preferred
Stock and Series G Preferred Stock, and the absence of a quorum of the
holders of shares of any other class or series of capital stock shall not
prevent the election of directors to be elected by the holders of shares of
40
Series F Preferred Stock, Series E Preferred Stock and Series G Preferred
Stock, or the taking of any action as provided in Section 3(b); and
(B) in the absence of a quorum of the holders of shares of
Series F Preferred Stock, Series E Preferred Stock and Series G Preferred
Stock, a majority of the holders of such shares present in person or by
proxy shall have the power to adjourn the meeting as to the actions to be
taken by the holders of shares of Series F Preferred Stock, Series E
Preferred Stock and Series G Preferred Stock, from time to time and place
to place without notice other than announcement at the meeting until a
quorum shall be present.
For taking of any action as provided in Section 3(a) or Section 3(b)
by the holders of shares of Series F Preferred Stock, each such holder shall
have one vote for each share of such stock standing in his name on the transfer
books of the Corporation as of any record date fixed for such purpose or, if no
such date be fixed, at the close of business on the Business Day next preceding
the day on which notice is given, or if notice is waived, at the close of
business on the Business Day next preceding the day on which the meeting is
held; provided, however, that shares of Series F Preferred Stock, Series E
-------- -------
Preferred Stock or Series G Preferred Stock held by the Corporation or any
Subsidiary of the Corporation shall not be deemed to be outstanding for purposes
of taking any action as provided in this Section 3.
Each director elected by the holders of shares of Series F Preferred
Stock, Series E Preferred Stock and Series G Preferred Stock, as provided in
Section 3(b) shall, unless his term shall expire earlier in accordance with the
provisions thereof, hold office until the annual meeting of stockholders next
succeeding his election or until his successor, if any, is elected and
qualified.
If any director so elected by the holders of Series F Preferred Stock,
Series E Preferred Stock and Series G Preferred Stock shall cease to serve as a
director before his term shall expire (except by reason of the termination of
the voting rights accorded to the holders of Series F Preferred Stock, Series E
Preferred Stock and Series G Preferred Stock, in accordance with Section 3(b)),
the holders of the Series F Preferred Stock, Series E Preferred Stock and
Series G Preferred Stock then
41
outstanding and entitled to vote for such director may, by written consent as
provided herein, or at a special meeting of such holders called as provided
herein, elect a successor to hold office for the unexpired term of the director
whose place shall be vacant.
Any director elected by the holders of shares of Series F Preferred
Stock, Series E Preferred Stock and Series G Preferred Stock, voting together as
a separate class, may be removed from office with or without cause by the vote
or written consent of the holders of at least a majority of the aggregate
outstanding shares of Series F Preferred Stock, Series E Preferred Stock and
Series G Preferred Stock at the time of removal. A special meeting of the
holders of shares of Series F Preferred Stock, Series E Preferred Stock and
Series G Preferred Stock, may be called in accordance with the procedures set
forth in Section 3(c)(i).
Section 4 Certain Restrictions.
--------------------
(a) So long as any shares of Series F Preferred Stock remain
outstanding, the Corporation shall not declare or make any Restricted Payment.
(b) Whenever quarterly dividends payable on shares of Series F
Preferred Stock as provided in Section 2(a) are not paid in full, at such time
and thereafter until all unpaid dividends payable, whether or not declared, on
the outstanding shares of Series F Preferred Stock shall have been paid in full
or declared and set apart for payment at such time and thereafter until all
necessary funds have been set apart for payment, or whenever the Corporation
shall not have paid the Optional Redemption Price, the Specified Corporate
Action Redemption Price, the Conversion Redemption Price or the Maturity
Redemption Price when due, at such time and thereafter until all such amounts
have been paid in full or set apart for payment, the Corporation shall not:
(A) declare or pay dividends, or make any other distributions, on any shares of
Junior Stock, or (B) declare or pay dividends, or make any other distributions,
on any shares of Parity Stock, except dividends or distributions paid ratably on
the Series F Preferred Stock and all Parity Stock on which dividends are payable
and in arrears, in proportion to the total amounts to which the holders of all
shares of the Series F Preferred Stock and Parity Stock are then entitled.
42
(c) Whenever dividends payable on shares of Series F Preferred Stock
as provided in Section 2 are not paid in full, at such time and thereafter until
all unpaid dividends payable, whether or not declared, on the outstanding shares
of Series F Preferred Stock shall have been paid in full or declared and set
apart for payment, at such time and thereafter until all necessary funds have
been set apart for payment, or whenever the Corporation shall not have paid the
Optional Redemption Price, the Specified Corporate Action Redemption Price, the
Conversion Redemption Price or the Maturity Redemption Price when due, at such
time and thereafter until all such amounts have been paid in full or set apart
for payment, the Corporation shall not redeem, purchase or otherwise acquire for
consideration any shares of Junior Stock or Parity Stock; provided, however,
-------- -------
that (A) the Corporation may accept shares of any Parity Stock or Junior Stock
for conversion into Junior Stock and (B) the Corporation may at any time redeem,
purchase or otherwise acquire shares of any Parity Stock pursuant to any manda-
tory redemption, put, sinking fund or other similar obligation contained in such
Parity Stock, pro rata with the Series F Preferred Stock in proportion to the
total amount then required to be applied by the Corporation to redeem,
repurchase, or otherwise acquire shares of Series F Preferred Stock and shares
of such Parity Stock.
(d) The Corporation shall not permit any Subsidiary of the
Corporation, or cause any other Person, to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation unless the
Corporation could, pursuant to Section 4(c), purchase such shares at such time
and in such manner.
Section 5 Optional Redemption.
-------------------
(a) (i) The Corporation shall not have any right to redeem any
shares of Series F Preferred Stock prior to __________, 20018/. Thereafter,
-
(A) if any shares of Series E Preferred Stock remain outstanding, the
Corporation will simultaneously elect to redeem (in accordance with the terms of
Article 1, Section 5) the same percentage of the outstanding shares of Series F
Preferred Stock as the percentage of shares of Series E Preferred Stock (or
aggregate principal amount of Convertible Notes) the
- --------------------
8/ Assumes closing on or prior to December 31, 1994; otherwise date will be
- -
appropriately adjusted.
43
Corporation is electing to redeem under Article 1, Section 5 or (B) if no shares
of the Series E Preferred Stock remain outstanding, so long as shares of Common
Stock shall have traded on the New York Stock Exchange (or another national
securities exchange or on Nasdaq) on each trading day during a 30-consecutive
trading day period (each of which trading days shall be after _________, 20018/
-
and no more than 5 Business Days prior to the date notice is given of an
Optional Redemption (as defined below)) and had a Closing Price on at least 20
of such trading days in excess of 150% of the Conversion Amount in effect on
such trading day as determined pursuant to Section 11, subject to the
restrictions contained in Section 4, the Corporation shall have the right, at
its sole option and election, to redeem (the "Optional Redemption") (I) in the
case of clause (A), such percentage of the shares of Series F Preferred Stock
specified in such clause and (II) in the case of clause (B), all or a portion of
the shares of Series F Preferred Stock, on not more than 45 nor less than 30
days' notice of the date of redemption (any such date an "Optional Redemption
Date") at a price per share (the "Optional Redemption Price") equal to the sum
of (A) the following prices per share (stated as a percentage of the Liquidation
Preference of such share), (B) an amount per share equal to all accrued and
unpaid dividends thereon, whether or not declared or payable, to the applicable
Optional Redemption Date and (C) the Additional Amount (as defined in Section
11), in immediately available funds:
44
Optional Redemption Price
If Redeemed as a Percentage of
During the Period9/: Liquidation Preference
------------------ ----------------------
__________, 2001 to 102.775%
__________, 2002
__________, 2002 to 101.850%
__________, 2003
__________, 2003 to 100.925%
__________, 2004
__________, 2004 and 100%
thereafter
(ii) If the Corporation shall have the right to, or shall
determine to, redeem less than all the shares of Series F Preferred Stock then
outstanding pursuant to paragraph (i), the shares to be redeemed shall be
selected pro rata (as nearly as may be) so that the number of shares redeemed
from each holder shall be the same proportion of all the shares to be redeemed
that the total number of shares of Series F Preferred Stock then held by such
holder bears to the total number of shares of Series F Preferred Stock then
outstanding.
(iii) Notwithstanding the foregoing, any shares of Series F
Preferred Stock redeemed pursuant to this Section 5(a) at a time when the
Corporation would be required to redeem the shares of Series F Preferred Stock
pursuant to Section 6 shall be redeemed at a price equal to the price to be paid
pursuant to Section 6.
(b) Notice of any Optional Redemption shall specify the Optional
Redemption Date fixed for redemption, the Optional Redemption Price, the place
or places of payment, that payment will be made upon presentation and surrender
of the shares of Series F Preferred Stock and that on and after the date of such
Optional Redemption dividends will cease to accrue on such shares and be given
by publication in a newspaper of general circulation in the
- --------------------
9/ Assumes closing on or prior to December 31, 1994; otherwise dates will be
- -
appropriately adjusted.
45
Borough of Manhattan, The City of New York (if such publication shall be
required by applicable law, rule, regulation or securities exchange
requirement), not less than 30, nor more than 45, days prior to the Optional
Redemption Date; and, in any case, a similar notice shall be mailed at least 30,
but not more than 45, days prior to the Optional Redemption Date to each holder
of shares of Series F Preferred Stock, at such holder's address as it appears on
the transfer books of the Corporation. In order to facilitate the redemption of
shares of Series F Preferred Stock, the Board of Directors may fix a record date
for the determination of shares of Series F Preferred Stock to be redeemed, or
may cause the transfer books of the Corporation for the Series F Preferred Stock
to be closed, not more than 60 days or less than 45 days prior to the Optional
Redemption Date.
(c) On the date of any Optional Redemption that is specified in a
notice given pursuant to Section 5(b), the Corporation shall, and at any time
after such notice shall have been mailed and before the Optional Redemption Date
the Corporation may, deposit for the benefit of the holders of shares of
Series F Preferred Stock the funds necessary for such redemption with a bank or
trust company in the Borough of Manhattan, The City of New York, having a
capital and surplus of at least $100,000,000. Any moneys so deposited by the
Corporation and unclaimed at the end of two years from the Optional Redemption
Date shall revert to the general funds of the Corporation. After such
reversion, any such bank or trust company shall, upon demand, pay over to the
Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series F Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Optional Redemption Price. Any interest
accrued on funds deposited pursuant to this Section 5(c) shall be paid from time
to time to the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid, upon the
deposit of funds pursuant to Section 5(c) in respect of shares of Series F
Preferred Stock to be redeemed pursuant to Section 5(a), notwithstanding that
any certificates for such shares shall not have been surrendered for
cancellation, from and after the Optional Redemption Date (i) the shares
represented thereby shall no longer be deemed outstanding, (ii) the rights to
receive dividends thereon shall cease to accrue, and (iii) all
46
rights of the holders of shares of Series F Preferred Stock to be redeemed shall
cease and terminate, excepting only the right to receive the Optional Redemption
Price therefor; provided, however, that (A) if the Corporation shall default in
-------- -------
the payment of the Optional Redemption Price or (B) if the Corporation is
obligated under Section 5(a)(i)(A) to simultaneously redeem shares of Series E
Preferred Stock (or Convertible Notes) and the Corporation has failed to
simultaneously redeemed such shares (or notes), the shares of Series F Preferred
Stock shall thereafter be deemed to be outstanding and the holders thereof shall
have all of the rights of a holder of Series F Preferred Stock until such time
as such default or failure shall no longer be continuing or shall have been
waived by holders of at least 66-2/3% of the then outstanding shares of Series F
Preferred Stock.
(e) Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of
shares of Series F Preferred Stock receives such notice, and failure to give
such notice by mail, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Series F Preferred Stock. On or after the
Optional Redemption Date fixed for redemption as stated in such notice, each
holder of the shares called for redemption shall surrender the certificate
evidencing such shares to the Corporation at the place designated in such notice
and shall thereupon be entitled to receive payment of the Optional Redemption
Price. If less than all the shares evidenced by any such surrendered
certificate are redeemed, a new certificate shall be issued evidencing the
unredeemed shares.
Section 6 Mandatory Redemption at the Option of the
-----------------------------------------
Holder.
------
(a) (i) If one or more events constituting a Specified Corporate
Action shall occur, each holder of shares of the Series F Preferred Stock shall
have the right, at such holder's option on the date specified in Section
6(a)(ii) (the "Specified Corporate Action Redemption Date"), to require the
Corporation to redeem (a "Specified Corporate Action Redemption") all or any
part of the shares of Series F Preferred Stock then held by such holder as such
holder may elect at a price per share equal to the greater of (I) the sum of (A)
the following prices per share (stated
47
as a percentage of the Liquidation Preference of such share) and (B) an amount
per share equal to all accrued and unpaid dividends thereon, whether or not
declared or payable, to the applicable Specified Corporate Action Redemption
Date
If the Specified Specified Corporate
Corporate Action Action Redemption Price
Redemption Date as a Percentage of
Occurs During the Liquidation Preference
----------------- --------------------------
Period10/:
--------
__________, 1994 to 110.4%
__________, 1995
__________, 1995 to 116.8%
__________, 1995
__________, 1995 to 126.7%
__________, 1996
__________, 1996 and there- 138.0%
after
and (II) the sum of (x) 100% of the Liquidation Preference of such share, (y) an
amount per share equal to all accrued and unpaid dividends thereon whether or
not declared or payable to the Specified Corporate Action Redemption Date and
(z) the Additional Amount, in either case in immediately available funds (the
"Specified Corporate Action Redemption Price").
(ii) The date fixed for each Specified Corporate Action Redemption
shall be fixed by the Corporation and shall be no less than 60 days or more than
90 days following the occurrence of the Specified Corporate Action giving rise
thereto (or, in the case of a Specified corporate Action as described in clause
(iii) of the definition of "Specified Corporate Action," no less than 60 days or
more than 90 days following the date on which the Corporation obtains actual
knowledge of such Specified Corporate Action). The Corporation shall, within 5
days of the occurrence of a Specified Corporate Action (or, in the case of a
Specified Corporate Action described in clause (iii) of the definition of
"Specified Corporate Action," within 5 days of the date
- --------------------
10/ Assumes closing on or prior to December 31, 1994; otherwise dates will be
- --
appropriately adjusted.
48
on which the Corporation obtains actual knowledge of such Specified Corporate
Action), give notice thereof by publication in a newspaper of general
circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), and, in any case, a similar notice shall be mailed to
each holder of shares of the Series F Preferred Stock, at such holder's address
as it appears on the transfer books of the Corporation. Each such notice shall
specify the Specified Corporate Action that has occurred and the date of such
occurrence, the place or places of payment, the then effective Specified
Corporate Action Redemption Price and the date the right of such holder to
require a Specified Corporate Action Redemption shall terminate.
(iii) If the notice sent by the Corporation pursuant to Section
6(a)(ii) shall contain (i) a form inquiring as to whether a holder of shares of
Series F Preferred Stock intends to surrender the certificate(s) representing
such shares for redemption pursuant to this Section 6(a) and (ii) a stamped
self-addressed envelope for return of such form to the Corporation or its
designee, within ten Business Days of such notice, each holder shall return such
inquiry form to the Corporation and shall indicate in such form the proportion
of such holder's shares of Series F Preferred Stock that will be surrendered for
redemption pursuant to this Section 6(a). If such notice shall indicate that if
a holder does not respond prior to ten Business Days after the date of such
notice that such holder will be deemed to have notified the Corporation that it
will not require the redemption of the shares of Series F Preferred Stock held
by such holder for purposes of Section 3(b) and such holder does not respond to
the Corporation's inquiry prior to ten Business Days after the date of such
notice, such holder will be deemed to have notified the Corporation that it will
not require the redemption of the shares of Series F Preferred Stock held by
such holder for purposes of Section 3(b). Nothing contained in this
Section 6(a)(iii) shall affect the right of a holder of Series F Preferred Stock
to require the Corporation to redeem such shares pursuant to Section 6(a)(i).
(b) (i) If at any time shares of Series E Preferred Stock are
converted into Common Stock pursuant to Article 1, Section 10 (the date of any
such conversion being the "Conversion Date"), then each holder of shares of the
Series F Preferred Stock shall have the right, at such
49
holder's option exercisable on the date specified in Section 6(b)(ii) (the
"Conversion Redemption Date"), to require the Corporation to redeem (a
"Conversion Redemption") such holder's Pro Rata Portion (as hereinafter defined)
of shares of Series F Preferred Stock then held by such holder at a price per
share (the "Conversion Redemption Price") equal to the sum of (A) 100% of the
Liquidation Preference of such shares, (B) an amount per share equal to all
accrued and unpaid dividends thereon, whether or not declared or payable, to the
applicable Conversion Redemption Date and (C) the Additional Amount, in
immediately available funds. "Pro Rata Portion" with respect to any holder of
Series F Preferred Stock shall mean, on any Conversion Redemption Date, the
number of shares of Series F Preferred Stock equal to the product of (x) a
fraction the numerator of which is the number of shares of Series E Preferred
Stock (or aggregate principal amount of Convertible Notes) converted to Common
Stock on the relevant Conversion Date and the denominator of which is the total
number of shares of Series E Preferred Stock (or aggregate principal amount of
Convertible Notes) outstanding immediately prior to such Conversion Date and (y)
the total number of shares of Series F Preferred Stock held by such holder as of
such Conversion Date.
(ii) The date fixed for each Conversion Redemption shall be fixed by
the Corporation and shall be no less than 60 days or more than 90 days following
the occurrence of the Conversion Date giving rise thereto. The Corporation
shall, within 5 days of the occurrence of a Conversion Date, give notice thereof
by publication in a newspaper of general circulation in the Borough of
Manhattan, the City of New York (if such publication shall be required by
applicable law, rule, regulation or securities exchange requirement), and, in
any case, a similar notice shall be mailed to each holder of shares of the
Series F Preferred Stock, at such holder's address as it appears on the transfer
books of the Corporation. Each such notice shall state that a Conversion Date
has occurred and the date of such occurrence, the place or places of payment,
the number of shares of Series E Preferred Stock (or the aggregate principal
amount of Convertible Notes) converted in such Conversion Date, the number of
shares of Series E Preferred Stock (or aggregate principal amount of Convertible
Notes) outstanding immediately prior to the Conversion Date, the total number of
shares of Series F Preferred Stock the Corporation would be required to redeem
form each holder electing to have redeemed all the shares of
50
Series F Preferred Stock that it is entitled to have redeemed, the then
effective Conversion Redemption Price and the date the right of such holder to
require a Conversion Redemption shall terminate.
(c) On the date fixed for any Specified Corporate Action Redemption
or on the Conversion Redemption Date, each holder of shares of Series F
Preferred Stock who elects to have shares of Series F Preferred Stock held by it
redeemed shall surrender the certificate representing such shares to the
Corporation (i) at the place designated in such notice in the case of a
Specified Corporate Action Redemption or (ii) at the Corporation's principal
place of business to be maintained by it, in the case of a Conversion
Redemption, together with an election to have such redemption made and shall
thereupon be entitled to receive payment therefor provided in this Section 6.
If less than all the shares represented by any such surrendered certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares.
From and after the date of such redemption (i) the rights to receive dividends
thereon shall cease to accrue and (ii) all rights of the holders of shares of
Series F Preferred Stock so redeemed shall cease and terminate, excepting only
the right to receive the Specified Corporate Action Redemption Price or
Conversion Redemption Price therefor, as applicable; provided, however, that if
-------- -------
the Corporation shall default in the payment of the applicable redemption price
the shares of Series F Preferred Stock that were to be redeemed shall thereafter
be deemed to be outstanding and the holders thereof shall have all of the rights
of a holder of Series F Preferred Stock until such time as such default shall no
longer be continuing or shall have been waived by holders of at least 66-2/3% of
the then outstanding shares of Series F Preferred Stock.
Section 7 Redemption Upon Maturity.
------------------------
(a) On __________, 200911/ (the "Maturity Date"), the Corporation
--
shall redeem (the "Maturity Redemption") the remaining outstanding shares of the
Series F Preferred Stock at a price per share (the "Maturity Redemption Price")
equal to the sum of (A) 100% of the Liquidation Preference per share, (B) an
amount equal to accrued and unpaid dividends
- --------------------
11/ Assumes closing on or prior to December 31, 1994; otherwise date will be
- --
appropriately adjusted.
51
thereon, whether or not declared or payable, to the Maturity Date and (C) the
Additional Amount, determined as of the date immediately prior to the Maturity
Date, in immediately available funds.
(b) Notice of the Maturity Redemption shall be given by publication
in a newspaper of general circulation in the Borough of Manhattan, The City of
New York (if such publication shall be required by applicable law, rule,
regulation or securities exchange requirement), not less than 30, nor more than
60, days prior to the Maturity Date and, in any case, a similar notice shall be
mailed at least 30, but not more than 60, days prior to the Maturity Date to
each holder of shares of Series F Preferred Stock, at such holder's address as
it appears on the transfer books of the Corporation.
(c) On the Maturity Date, the Corporation shall, and at any time
after such notice shall have been mailed and before the Maturity Date the
Corporation may, deposit for the benefit of the holders of shares of Series F
Preferred Stock the funds necessary for such redemption with a bank or trust
company in the Borough of Manhattan, The City of New York, having a capital and
surplus of at least $100,000,000. Any moneys so deposited by the Corporation
and unclaimed at the end of two years from the date designated for such
redemption shall revert to the general funds of the Corporation. After such
reversion, any such bank or trust company shall, upon demand, pay over to the
Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series F Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Maturity Redemption Price. Any interest
accrued and unpaid on funds deposited pursuant to this Section 5(c) shall be
paid from time to time to the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid, upon the
deposit of funds pursuant to Section 7(c) in respect of shares of Series F
Preferred Stock to be redeemed pursuant to Section 7(a), notwithstanding that
any certificates for such shares shall not have been surrendered for
cancellation, from and after the Maturity Date, (i) the rights to receive
dividends thereon shall cease to accrue and (ii) all rights of the holders of
shares of Series F Preferred Stock shall cease and terminate, excepting only the
right to receive the Maturity Redemption Price therefor; provided, however, that
-------- -------
if the Corporation
52
shall default in the payment of the Maturity Redemption Price, the shares of
Series F Preferred Stock that were to be redeemed shall thereafter be deemed to
be outstanding and the holders thereof shall have all of the rights of a holder
of Series F Preferred Stock until such time as such default shall no longer be
continuing.
Section 8 Acquired Shares.
---------------
Any shares of Series F Preferred Stock exchanged, redeemed, purchased
or otherwise acquired by the Corporation or any of its Subsidiaries in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares of Series F Preferred Stock shall upon their
cancellation become authorized but unissued shares of preferred stock, par value
$4.00 per share, of the Corporation and, upon the filing of an appropriate
certificate with the Department of State of the State of New York, may be
reissued as part of another series of preferred stock, par value $4.00 per
share, of the Corporation subject to the conditions or restrictions on issuance
set forth herein, but in any event may not be reissued as shares of Series F
Preferred Stock or Parity Stock unless all of the shares of Series F Preferred
Stock issued on the Issue Date shall have already been redeemed or exchanged.
Section 9 Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) If the Corporation shall commence a voluntary case under the
United States bankruptcy laws or any applicable bankruptcy, insolvency or
similar law of any other country, or consent to the entry of an order for relief
in an involuntary case under any such law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due (any such event, a
"Voluntary Liquidation Event"), or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of
53
any such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, no distribution
shall be made (i) to the holders of shares of Junior Stock unless, prior
thereto, the holders of shares of Series F Preferred Stock shall have received
(A) if a Voluntary Liquidation Event shall have occurred, the Optional Redemp-
tion Price with respect to each share and (B) if a Voluntary Liquidation Event
shall not have occurred, the Liquidation Preference and all accrued and unpaid
dividends, whether or not declared or currently payable, to the date of
distribution, with respect to each share, or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on the Series F Preferred Stock
and all Parity Stock in proportion to the total amounts to which the holders of
all shares of the Series F Preferred Stock (which amounts are set forth in
clauses (A) and (B) above) and Parity Stock are entitled upon such liquidation,
dissolution or winding up.
(b) Neither the consolidation or merger of the Corporation with or
into any other Person nor the sale or transfer of all or any part of the
Corporation's assets for cash, securities or other property shall be deemed to
be a liquidation, dissolution or winding up of the Corporation for purposes of
this Section 9.
Section 10 Exchange.
--------
(a) Subject to the provisions of this Section 10, the Corporation
shall have the right, with the consent of the holders of all of the outstanding
shares of Series F Preferred Stock (which consent may be withheld for any reason
whatsoever), at any time but on only one occasion, to exchange all (but not less
than all) of the shares of Series F Preferred Stock for Subordinated Notes of
the Corporation ("Subordinated Notes"), at a price per share equal to the
Liquidation Preference per share, with the Subordinated Notes valued for such
purpose at their face value. Simultaneously with such exchange the Corporation
shall pay to each holder of Series F Preferred Stock an amount per share in cash
equal to all accrued and unpaid dividends thereon, whether or not declared or
currently payable, to the date fixed for exchange thereof. The Subordinated
Notes shall have an annual interest rate equal to the annual dividend rate on
Series F Preferred Stock and shall contain other terms substantially similar to
the Series F Preferred Stock, including the date of maturity thereof.
54
(b) Notice of an exchange of shares of Series F Preferred Stock
pursuant to Section 10(a) shall be given by publication in a newspaper of
general circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), not less than 30, nor more than 60, days prior to the
date fixed for exchange; and, in any case, a similar notice shall be mailed at
least 30, but not more than 60, days prior to the date fixed for exchange to
each holder at such holder's address as it appears on the transfer books of the
Corporation. In order to facilitate the exchange of shares of Series F
Preferred Stock hereunder the Board of Directors may fix a record date for the
determination of shares of Series F Preferred Stock to be exchanged, or may
cause the transfer books of the Corporation for the Series F Preferred Stock to
be closed, not more than 60 days or less than 30 days prior to the date fixed
for exchange.
(c) On the date of any exchange being made pursuant to Section 10(a)
that is specified in a notice given pursuant to Section 10(b) and is not deemed
terminated pursuant to Section 10(b), the Corporation shall, and at any time
after the date that is 10 days prior to the date of exchange the Corporation
may, deposit for the benefit of the holders of shares of Series F Preferred
Stock to be exchanged (i) the Subordinated Notes necessary for such exchange and
(ii) an amount in cash equal to all dividends payable with respect thereto upon
such exchange with a bank or trust company in the Borough of Manhattan, The City
of New York, having a capital and surplus of at least $100,000,000. Any
Subordinated Notes so deposited by the Corporation and unclaimed at the end of
two years from the date designated for such exchange shall revert to the Corpo-
ration. After such reversion, any such bank or trust company shall, upon
demand, return to the Corporation such unclaimed Subordinated Notes and
thereupon such bank or trust company shall be relieved of all responsibility in
respect thereof and any holder of shares of Series F Preferred Stock to be
exchanged shall look only to the Corporation for the delivery of the
Subordinated Notes. Any interest accrued on Subordinated Notes deposited
pursuant to this Section 10(c) shall accrue for the accounts of, and be payable
to, the holders of shares of Series F Preferred Stock to be exchanged therefor.
(d) Notice of exchange having been given as aforesaid and not having
been deemed terminated as afore-
55
said, upon the deposit of Subordinated Notes pursuant to clause (i) of Section
10(c) and the deposit of the cash referred to in clause (ii) of Section 10(c) in
respect of shares of Series F Preferred Stock to be exchanged pursuant to
Section 10(a), notwithstanding that any certificates for such shares shall not
have been surrendered for cancellation, from and after the date of exchange
designated in the notice of exchange (i) the shares represented thereby shall no
longer be deemed outstanding, (ii) the rights to receive dividends thereon
(except as provided in paragraph (b) above) shall cease to accrue, and (iii) all
rights of the holders of shares of Series F Preferred Stock to be exchanged
shall cease and terminate, excepting only the right to receive the Subordinated
Notes therefor and the right to receive the dividends described in paragraph (b)
above; provided, however, that if the Corporation shall default in the execution
-------- -------
and delivery of the Convertible Notes, the shares of Series F Preferred Stock
that were to be exchanged shall thereafter be deemed to be outstanding and the
holders thereof shall have all of the rights of a holder of Series F Preferred
Stock until such time as such default shall no longer be continuing or shall
have been waived by holders of at least 66-2/3% of the then outstanding shares
of Series F Preferred Stock.
Section 11 Additional Amount.
-----------------
(a) For the purposes of this Article 2, "Additional Amount" shall
mean an amount per share equal to the product of (i) the excess of the sum of
(1) the Market Price of a share of Common Stock and (2) if the Corporation shall
have issued a right or rights with respect to its outstanding shares of Common
Stock pursuant to a shareholder rights plan, "poison pill" or similar
arrangement, during the period commencing on the "distribution date" of such
right or rights (i.e., the date on which such right or rights commence to trade
----
separately from the Common Stock) and ending on the "triggering date" of such
right or rights (i.e., the date on which such right or rights commence to be
----
exercisable), the Market Price of such right or rights over the Conversion
Amount, in effect as hereinafter determined and (ii) (x) the Liquidation
Preference divided by (y) such Conversion Amount, in all cases calculated as of
the applicable determination date. The Additional Amount shall in no event be
less than zero. The Conversion Amount shall be $15.00, subject to adjustment as
set forth in Section 11(b). For the purpose of calculating the Additional
Amount in connection with an Optional Redemption,
56
Specified Corporate Action Redemption or Conversion Redemption, the Market Price
of the Common Stock and, if applicable, rights shall be the average of the
Market Price of such securities on the five trading days immediately preceding
and the five trading days immediately following the date of notice of such
redemption.
(b) The Conversion Amount shall be subject to adjustment as follows:
(i) In case the Corporation shall at any time or from time to
time (A) pay a dividend or make a distribution on the outstanding shares of
Common Stock in Common Stock (other than pursuant to a dividend reinvestment
plan approved by the Corporation's Board of Directors), (B) subdivide the
outstanding shares of Common Stock into a larger number of shares, (C) combine
the outstanding shares of Common Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Common Stock,
then, and in each such case, the Conversion Amount in effect immediately prior
to such event shall be adjusted so that if the holder of any share of Series F
Preferred Stock were entitled to convert such share into such number of shares
of Common Stock as equals the Liquidation Preference divided by the Conversion
Amount and such holder thereafter surrendered such share for conversion, such
holder would be entitled to receive the number of shares of Common Stock or
other securities of the Corporation that such holder would have owned or would
have been entitled to receive upon or by reason of any of the events described
above had such share of Series F Preferred Stock been converted immediately
prior to the occurrence of such event. An adjustment made pursuant to this
Section 11(b)(i) shall become effective retroactively (A) in the case of any
such dividend or distribution, to the opening of business on the day immediately
following the close of business on the record date for the determination of
holders of Common Stock entitled to receive such dividend or distribution or (B)
in the case of any such subdivision, combination or reclassification, to the
close of business on the day upon which such corporate action becomes effective.
(ii) In case the Corporation shall at any time or from time to
time issue or sell shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock, or any options, warrants or other
rights to acquire shares of Common Stock (other than options granted to any
employee or director of the Corporation
57
pursuant to a stock option plan approved by the shareholders of the
Corporation)) for a consideration per share less than the Conversion Amount then
in effect at the record date or issuance date, as the case may be (the "Date")
referred to in the following sentence, including, without limitation, upon
exercise of rights issued pursuant to a shareholder rights plan, "poison pill"
or similar arrangement (treating the price per share of any security convertible
or exchangeable or exercisable into Common Stock as equal to (A) the sum of the
price for such security convertible, exchangeable or exercisable into Common
Stock plus any additional consideration payable (without regard to any anti-
dilution adjustments) upon the conversion, exchange or exercise of such security
into Common Stock divided by (B) the number of shares of Common Stock initially
underlying such convertible, exchangeable or exercisable security), other than
issuances or sales for which an adjustment is made pursuant to another paragraph
of this Section 11(b), then, and in each such case, the Conversion Amount then
in effect shall be adjusted by dividing the Conversion Amount in effect on the
day immediately prior to the Date by a fraction (x) the numerator of which shall
be the sum of the number of shares of Common Stock outstanding immediately prior
to the Date plus the number of additional shares of Common Stock issued or to be
issued (or the maximum number into which such convertible or exchangeable
securities initially may convert or exchange or for which such options, warrants
or other rights initially may be exercised) and (y) the denominator of which
shall be the sum of the number of shares of Common Stock outstanding immediately
prior to the Date plus the number of shares of Common Stock that the aggregate
consideration (if any of such aggregate consideration is other than cash, as
valued by the Board of Directors including a majority of the Directors who are
not officers or employees of the Corporation or any of its Subsidiaries, which
determination shall be conclusive and described in a resolution of the Board of
Directors) for the total number of such additional shares of Common Stock so
issued (or into which such convertible or exchangeable securities may convert or
exchange or for which such options, warrants or other rights may be exercised
plus the aggregate amount of any additional consideration initially payable upon
conversion, exchange or exercise of such security) would purchase at the
Conversion Amount. Such adjustment shall be made whenever such shares,
securities, options, warrants or other rights are issued, and shall become
effective retroactively to a date immediately following the close of business
(i) in the case of issuance to stockholders of the Corporation, as such, on the
58
record date for the determination of stockholders entitled to receive such
shares, securities, options, warrants or other rights and (ii) in all other
cases, on the date ("issuance date") of such issuance; provided, however, that
-------- -------
the determination as to whether an adjustment is required to be made pursuant to
this Section 11(b)(ii) shall only be made upon the issuance of such shares or
such convertible or exchangeable securities, options, warrants or other rights,
and not upon the issuance of the security into which such convertible or
exchangeable security converts or exchanges, or the security underlying such
option, warrants or other right; provided, further, that if any convertible or
-------- -------
exchangeable securities, options, warrants or other rights (or any portions
thereof) that shall have given rise to an adjustment pursuant to this Section
11(b)(ii) shall have expired or terminated without the exercise thereof and/or
if by reason of the terms of such convertible or exchangeable securities,
options, warrants or other rights there shall have been an increase or
increases, with the passage of time or otherwise, in the price payable upon the
exercise or conversion thereof, then the Conversion Amount hereunder shall be
readjusted (but to no greater extent than originally adjusted) on the basis of
(x) eliminating from the computation any additional shares of Common Stock cor-
responding to such convertible or exchangeable securities, options, warrants or
other rights as shall have expired or terminated, (y) treating the additional
shares of Common Stock, if any, actually issued or issuable pursuant to the
previous exercise of such convertible or exchangeable securities, options,
warrants or other rights as having been issued for the consideration actually
received and receivable therefor and (z) treating any of such convertible or
exchangeable securities, options, warrants or other rights that remain
outstanding as being subject to exercise or conversion on the basis of such
exercise or conversion price as shall be in effect at the time.
(iii) In case the Corporation shall at any time or from time to
time distribute to all holders of shares of its Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the resulting or surviving corporation and the Common Stock is
not changed or exchanged or a redemption of any rights or other securities
issued pursuant to a shareholder rights plan, "poison pill" or similar
arrangement) cash, evidences of indebtedness of the Corporation or another
issuer, securities of the Corporation or another issuer or other assets
(excluding (A) Permitted
59
Dividends described in clause (B) of the definition thereof and (B) securities
for which adjustment is made under Section 11(b)(i) or Section 11(b)(ii)), then,
and in each such case, the Conversion Amount then in effect shall be adjusted by
dividing the Conversion Amount in effect immediately prior to the date of such
distribution by a fraction (x) the numerator of which shall be the Current
Market Price of the Common Stock on the record date referred to below and (y)
the denominator of which shall be such Current Market Price of the Common Stock
less the then Fair Market Value (as determined by the Board of Directors of the
Corporation, which determination shall be conclusive) of the portion of the
cash, evidences of indebtedness, securities or other assets so distributed or of
such subscription rights or warrants applicable to one share of Common Stock
(but such denominator not to be less than one). Such adjustment shall be made
whenever any such distribution is made and shall become effective retroactively
to a date immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iv) In the case the Corporation at any time or from time to
time shall take any action affecting its Common Stock, other than an action
described in any of Section 11(b)(i) through Section 11(b)(iii), inclusive,
then, the Conversion Amount shall be adjusted in such manner and at such time as
the Board of Directors of the Corporation (other than Purchaser Designees or
directors elected pursuant to Section 3(b)) in good faith determines to be
equitable in the circumstances (such determination to be evidenced in a
resolution, a certified copy of which shall be mailed to the holders of the
Series F Preferred Stock).
(v) The Corporation may make such reductions in the Conversion
Amount, in addition to those required by subparagraphs (i), (ii), (iii) or (iv)
of this Section 11(b), as the Board of Directors considers to be advisable in
order to avoid or to diminish any income tax to holders of Common Stock or
rights to purchase Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such for income
tax purposes.
(vi) Notwithstanding anything contained in this Section 11(b),
no adjustment to the Conversion Amount shall be made with respect to any rights
issued pursuant to
60
a shareholder rights plan, "poison pill" or similar arrangement unless the
"triggering date" (i.e. the date on which such rights commence to be
----
exercisable) shall have occurred or such rights shall have been redeemed, in
which event adjustments under clause (ii) and clause (iii), respectively, shall
be made.
(c) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Amount then in
effect shall be required by reason of the taking of such record.
(d) Upon any increase or decrease in the Conversion Amount, then, and
in each such case, the Corporation promptly shall deliver to each registered
holder of Series F Preferred Stock at least 10 Business Days prior to effecting
any of the foregoing transactions a certificate, signed by the President or a
Vice President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation, setting forth in reasonable detail
the event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Conversion Amount then in
effect following such adjustment.
Article 3 Series G Preferred Stock.
------------------------
Section 1 Designation and Number.
----------------------
(a) The shares of such series shall be designated as "Cumulative
Preferred Stock, Series G" (the "Series G Preferred Stock"). The number of
shares initially constituting the Series G Preferred Stock shall be 1,250,000,
which number may be decreased (but not increased) by the Board of Directors
without a vote of stockholders; provided, however, that such number may not be
-------- -------
decreased below the number of then outstanding shares of Series G Preferred
Stock.
(b) The Series G Preferred Stock shall, with respect to dividend
rights and rights on liquidation, dissolution or winding up, rank pari passu
---- -----
with the Corporation's $2.50 Cumulative Convertible Preferred Stock, Series A
(the "Series A Preferred Stock"), $2.50 Cumulative
61
Preferred Stock, Series B (the "Series B Preferred Stock"), Cumulative
Convertible Preferred Stock, Series E (the "Series E Preferred Stock") and
Cumulative Preferred Stock, Series F (the "Series F Preferred Stock") and the
New Preferred Stock (if any) (the Series A Preferred Stock, Series B Preferred
Stock, Series E Preferred Stock, Series F Preferred Stock and New Preferred
Stock (if any) are collectively defined for the purposes of this Article 2 as
the "Other Preferred Stock") and prior to all other classes and series of
capital stock of the Corporation now or hereafter authorized including, without
limitation, the Common Stock, par value $1.00 per share, of the Corporation (the
"Common Stock").
(c) Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Article 4 below.
Section 2 Dividends and Distributions.
---------------------------
(a) The holders of shares of Series G Preferred Stock, in preference
to the holders of shares of Common Stock and of any shares of other capital
stock of the Corporation other than the Other Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors, out of the
assets of the Corporation at the time legally available therefor, cumulative
cash dividends at an annual rate on the Liquidation Preference thereof equal to
9.75% (subject to increase pursuant to Section 2(b)), calculated on the basis of
a 360-day year consisting of twelve 30-day months, accruing and payable in equal
quarterly payments, in immediately available funds, on the Business Day
immediately preceding the last day of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date") commencing on the Business Day immediately preceding the date of
the issuance of such shares of Series G Preferred Stock; provided, however, that
-------- -------
with respect to such first Quarterly Dividend Payment Date with respect to any
shares of Series G Preferred Stock, the holders of shares of Series G Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors, out of the assets of the Corporation at the time legally available
therefor, a cumulative cash dividend in respect of each share of Series G
Preferred Stock in the amount of (i) 9.75% (or the then effective annual rate)
of the Liquidation Preference multiplied by (ii) a fraction equal to (A) the
number of days from (and including) the date of the issuance
62
of such shares of Series G Preferred Stock to (but excluding) such Quarterly
Dividend Payment Date divided by (B) 360. No interest shall be payable in
respect of any dividend payment on the Series G Preferred Stock that may be in
arrears.
(b) If (i) within 45 days of the Issue Date, the Corporation has not
delivered to each holder of shares of Series G Preferred Stock a Private
Placement Memorandum or a Registration Statement on Form S-3 (if the Corporation
is then eligible to use Form S-3) with respect to the private placement or
public offering of the New Preferred Stock or the New Senior Notes, (ii) the
Corporation shall have delivered to the holder a draft of a Registration
Statement on Form S-3 (if the Corporation is then eligible to use Form S-3)
pursuant to clause (i), and such Registration Statement shall not have been
filed with the Securities and Exchange Commission within 30 days after the Issue
Date, (iii) a private placement or public offering of the New Preferred Stock or
the New Senior Notes, pursuant to which the Corporation shall receive at least
$100,000,000 in gross proceeds is not consummated within 210 days after the
Issue Date or (iv) the annual dividend rate on the New Preferred Stock or the
annual interest rate on the New Senior Notes, as applicable, exceeds 13%, then
the annual rate of the cumulative cash dividends shall be increased to a rate of
11.75%, effective (w) in the case of clause (i), the date that is forty-five
days after the Issue Date, (x) in the case of clause (ii), the date that is 30
days after the Issue Date, (y) in the case of clause (iii), the date that is 210
days after the Issue Date and (z) in the case of clause (iv), the date of the
issuance of the New Preferred Stock or the New Senior Notes, as applicable. If
on any date (A) all of the Purchaser Designees shall not have been elected to
the Corporation's Board of Directors or any such Purchaser Designees shall not
have been appointed to the committees of the Corporation's Board of Directors,
in accordance with the provisions of Section 6.17 of the Securities Purchase
Agreement, (B) the Corporation shall have failed to declare, or shall have
failed to pay, the full amount of dividends payable on the Series G Preferred
Stock for six quarterly dividend periods, (C) the Corporation shall have failed
to satisfy its obligation to convert shares of Series E Preferred Stock pursuant
to Article 1, Section 10 or (D) a breach of any of the Material Provisions of
the Securities Purchase Agreement or any of the Corporation's material
obligations under the Registration Rights Agreement shall have occurred then,
effective as of
63
the date of such failure or breach, the annual rate of the cumulative cash
dividends shall be increased to a rate of 11.75% and shall remain at such rate
until such time as (1) the Purchaser Designees shall have been elected to the
Corporation's Board of Directors and appointed to the committees of the Corpora-
tion's Board of Directors in accordance with the provisions of Section 6.17 of
the Securities Purchase Agreement, (2) all dividends accrued to date on the
Series G Preferred Stock shall have been declared and paid in full, (3) any
conversion obligation provided in Article 1, Section 10 that has become due
shall have been fully satisfied or (4) there shall exist no breach of any of the
Material Provisions of the Securities Purchase Agreement or any of the
Corporation's material obligations under the Registration Rights Agreement, as
the case may be, at which time the annual rate of the cumulative cash dividends
shall be reduced to a rate of 9.75%, subject to being increased to a rate of
11.75% in the event of each and every subsequent event of the character
indicated above.
(c) Dividends payable on a share of Series G Preferred Stock pursuant
to Section 2(a) shall begin to accrue and be cumulative from the date of
issuance of such share of Series G Preferred Stock, and shall accrue on a daily
basis, in each case whether or not declared. Dividends paid on the shares of
Series G Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares of Series G Preferred Stock
at the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series G Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall be no
more than 60 days or less than 10 days prior to the date fixed for the payment
thereof. Accumulated but unpaid dividends for any past quarterly dividend
periods may be declared and paid at any time, without reference to any regular
Quarterly Dividend Payment Date, to holders of record on such date, not more
than 60 nor less than 10 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
(d) The holders of shares of Series G Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided
herein.
64
Section 3 Voting Rights.
-------------
In addition to any voting rights provided by law, the holders of
shares of Series G Preferred Stock shall have the following voting rights:
(a) Unless the consent or approval of a greater number of shares
shall then be required by law, the affirmative vote of the holders of at least
66-2/3% of the outstanding shares of Series G Preferred Stock, voting separately
as a single class, in person or by proxy, at a special or annual meeting of
stockholders called for the purpose, shall be necessary to (i) authorize, adopt
or approve an amendment to the Certificate of Incorporation that would increase
or decrease the par value of the shares of Series G Preferred Stock, or alter or
change the powers, preferences or special rights of the shares of Series G
Preferred Stock, (ii) amend, alter or repeal the Certificate of Incorporation so
as to affect the shares of Series G Preferred Stock adversely or (iii) effect
the voluntary liquidation, dissolution, winding up, recapitalization or
reorganization of the Corporation, or the consolidation or merger of the
Corporation with or into any other Person, or the sale or other distribution to
another Person of all or substantially all of the assets of the Corporation;
provided, however, that no separate vote of the holders of Series G Preferred
- -------- -------
Stock shall be required to effect any of the transactions described in clause
(iii) above unless such transaction would either require a class vote pursuant
to clause (i) or (ii) above or would require a vote by any shareholders of the
Corporation; provided further, that no separate vote of the holders of the
-------- -------
Series G Preferred Stock as a class shall be required in the case of a
recapitalization, reorganization, consolidation or merger of, or sale by, the
Corporation if (A)(a) such recapitalization, reorganization, consolidation,
merger or sale constitutes a Specified Corporate Action, (b) the Corporation has
sufficient funds legally available to it (after giving effect to such
transaction) to redeem, at the then applicable price hereunder and pursuant to
the terms hereof, all the outstanding shares of Series G Preferred Stock,
(c) such redemption shall not be prohibited by any agreement to which the
Corporation or any of its Subsidiaries is a party, by applicable law or
otherwise, (d) the Board of Directors of the Corporation, including a majority
of the directors who are not officers or employees of the Corporation, shall
have adopted a resolution confirming that such funds are available and that the
holders of Series G
65
Preferred Stock have the right to require such redemption and (e) the
Corporation shall have set aside sufficient funds through the Specified
Corporation Action Redemption Date to redeem the shares of Series G Preferred
Stock held by such holders (except that no funds need be set aside with respect
to such shares held by any such holder who has theretofore notified the
Corporation (whether pursuant to Section 6(a)(iii) or otherwise) that it will
not require redemption of such shares) or (B) (1) the Corporation shall be the
resulting or surviving corporation, (2) the resulting or surviving corporation
will have after such recapitalization, reorganization, consolidation or merger
no Senior Stock or Parity Stock either authorized or outstanding (except such
Parity Stock of the Corporation as may have been authorized or outstanding
immediately preceding such consolidation or merger) or such stock of the
resulting or surviving corporation (having the same powers, preferences and
special rights of any such Parity Stock) as may be issued in exchange therefor),
(3) each holder of shares of Series G Preferred Stock immediately preceding such
recapitalization, reorganization, consolidation or merger will receive in
exchange therefor the same number of shares of stock, with the same preferences,
rights and powers, of the resulting or surviving corporation, (4) after such
recapitalization, reorganization, consolidation or merger the resulting or
surviving corporation shall not be in breach of any of the terms hereof, any of
the Material Provisions of the Securities Purchase Agreement or any of its
material obligations under the Registration Rights Agreement and (5) all or
substantially all the holders of the outstanding shares of capital stock of the
Corporation immediately prior to such consolidation or merger are entitled to
receive shares representing 50% or more of the then outstanding shares of
capital stock of the resulting or surviving corporation entitled to vote
generally in the election of directors.
(b) If on any date (i) the Corporation shall have failed to declare,
or shall have failed to pay, the full amount of dividends payable on the
Series G Preferred Stock, Series E Preferred Stock or Series F Preferred Stock
for six quarterly dividend periods or (ii) a breach of any of the Material
Provisions of the Securities Purchase Agreement or any of the Corporation's
material obligations under the Registration Rights Agreement shall have
occurred, then the number of directors constituting the Board of Directors
shall, without further action, be increased by two and the holders of shares of
Series G Preferred Stock shall have, in
66
addition to the other voting rights set forth herein with respect to the
Series G Preferred Stock, the exclusive right, together with the holders of
Series E Preferred Stock and Series F Preferred Stock, voting separately as a
single class together with the holders of Series E Preferred Stock and Series G
Preferred Stock, to elect two directors of the Corporation to fill such newly
created directorship, by written consent as provided herein, or at a special
meeting of such holders called as provided herein. Any such additional
directors shall continue as directors (subject to reelection or removal as
provided in Section 3(c)(ii)) and the holders of Series G Preferred Stock shall
have such additional voting rights until such time as (A) dividends then payable
on the Series G Preferred Stock, Series E Preferred Stock and Series F Preferred
Stock shall have been declared and paid in full or (B) there shall exist no
breach of any of the Material Provisions of the Securities Purchase Agreement or
any of the Corporation's material obligations under the Registration Rights
Agreement, as the case may be, at which time such additional directors shall
cease to be directors, the number of directors constituting the Board of
Directors shall be reduced by two and such additional voting rights of the
holders of Series G Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock shall terminate, subject to revesting in the event of each and
every subsequent event of the character indicated above.
(c) (i) The foregoing right of holders of shares of Series G
Preferred Stock to take any action as provided in Section 3(b) may be exercised
at any annual meeting of stockholders or at a special meeting of holders of
shares of Series G Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock, held for such purpose as hereinafter provided or at any
adjournment thereof, or by the written consent, delivered to the Secretary of
the Corporation, of the holders of the minimum number of shares required to take
such action.
So long as such right to vote continues (and unless such right has
been exercised by written consent of the minimum number of shares required to
take such action), the President of the Corporation may call, and upon the
written request of holders of record of at least 5% of the aggregate outstanding
shares of Series G Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock, addressed to the Secretary of the Corporation at the principal
office of the Corporation, shall call, a special meeting of the holders of
shares entitled to vote as
67
provided herein. Such meeting shall be held within 30 days after delivery of
such request to the Secretary, at the place and upon the notice provided by law
and in the by-laws of the Corporation for the holding of meetings of
stockholders.
(ii) At each meeting of stockholders at which the holders of
shares of Series G Preferred Stock shall have the right, voting separately as a
single class together with the holders of Series E Preferred Stock and Series F
Preferred Stock, to elect two directors of the Corporation as provided in Sec-
tion 3(b) or to take any action, the presence in person or by proxy of the
holders of record of one-third of the total aggregate number of shares of
Series G Preferred Stock, Series E Preferred Stock and Series F Preferred Stock,
in each case then outstanding and entitled to vote on the matter shall be
necessary and sufficient to constitute a quorum. At any such meeting or at any
adjournment thereof:
(A) the absence of a quorum of the holders of shares of Series G
Preferred Stock, Series E Preferred Stock and Series F Preferred Stock,
shall not prevent the election of directors other than those to be elected
by the holders of shares of Series G Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock, and the absence of a quorum of the
holders of shares of any other class or series of capital stock shall not
prevent the election of directors to be elected by the holders of shares of
Series G Preferred Stock, Series E Preferred Stock and Series F Preferred
Stock, or the taking of any action as provided in Section 3(b); and
(B) in the absence of a quorum of the holders of shares of
Series G Preferred Stock, Series E Preferred Stock and Series F Preferred
Stock, a majority of the holders of such shares present in person or by
proxy shall have the power to adjourn the meeting as to the actions to be
taken by the holders of shares of Series G Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock, from time to time and place
to place without notice other than announcement at the meeting until a
quorum shall be present.
For taking of any action as provided in Section 3(a) or Section 3(b)
by the holders of shares of Series G Preferred Stock, each such holder shall
have one
68
vote for each share of such stock standing in his name on the transfer books of
the Corporation as of any record date fixed for such purpose or, if no such date
be fixed, at the close of business on the Business Day next preceding the day on
which notice is given, or if notice is waived, at the close of business on the
Business Day next preceding the day on which the meeting is held; provided,
--------
however, that shares of Series G Preferred Stock, Series E Preferred Stock or
- -------
Series F Preferred Stock held by the Corporation or any Subsidiary of the
Corporation shall not be deemed to be outstanding for purposes of taking any
action as provided in this Section 3.
Each director elected by the holders of shares of Series G Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock, as provided in
Section 3(b) shall, unless his term shall expire earlier in accordance with the
provisions thereof, hold office until the annual meeting of stockholders next
succeeding his election or until his successor, if any, is elected and
qualified.
If any director so elected by the holders of Series G Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock shall cease to serve as a
director before his term shall expire (except by reason of the termination of
the voting rights accorded to the holders of Series G Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock, in accordance with Section 3(b)),
the holders of the Series G Preferred Stock, Series E Preferred Stock and
Series F Preferred Stock then outstanding and entitled to vote for such director
may, by written consent as provided herein, or at a special meeting of such
holders called as provided herein, elect a successor to hold office for the
unexpired term of the director whose place shall be vacant.
Any director elected by the holders of shares of Series G Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock, voting together as
a separate class, may be removed from office with or without cause by the vote
or written consent of the holders of at least a majority of the aggregate
outstanding shares of Series G Preferred Stock, Series E Preferred Stock and
Series F Preferred Stock at the time of removal. A special meeting of the
holders of shares of Series G Preferred Stock, Series E Preferred Stock and
Series F Preferred Stock, may be called in accordance with the procedures set
forth in Section 3(c)(i).
69
Section 4 Certain Restrictions.
--------------------
(a) So long as any shares of Series G Preferred Stock remain
outstanding, the Corporation shall not declare or make any Restricted Payment.
(b) Whenever quarterly dividends payable on shares of Series G
Preferred Stock as provided in Section 2(a) are not paid in full, at such time
and thereafter until all unpaid dividends payable, whether or not declared, on
the outstanding shares of Series G Preferred Stock shall have been paid in full
or declared and set apart for payment at such time and thereafter until all
necessary funds have been set apart for payment, or whenever the Corporation
shall not have paid the Optional Redemption Price, the Specified Corporate
Action Redemption Price, the Conversion Redemption Price, the Holder's Election
Redemption Price or the Maturity Redemption Price when due, at such time and
thereafter from and until all such amounts have been paid in full or set apart
for payment, the Corporation shall not: (A) declare or pay dividends, or make
any other distributions, on any shares of Junior Stock, or (B) declare or pay
dividends, or make any other distributions, on any shares of Parity Stock,
except dividends or distributions paid ratably on the Series G Preferred Stock
and all Parity Stock on which dividends are payable and in arrears, in
proportion to the total amounts to which the holders of all shares of the
Series G Preferred Stock and Parity Stock are then entitled.
(c) Whenever dividends payable on shares of Series G Preferred Stock
as provided in Section 2 are not paid in full, at such time and thereafter until
all unpaid dividends payable, whether or not declared, on the outstanding shares
of Series G Preferred Stock shall have been paid in full or declared and set
apart for payment, at such time and thereafter until all necessary funds have
been set apart for payment, or whenever the Corporation shall not have paid the
Optional Redemption Price, the Specified Corporate Action Redemption Price, the
Conversion Redemption Price, the Holder's Election Redemption Price or the
Maturity Redemption Price when due, at such time and thereafter from and until
all such amounts have been paid in full or set apart for payment, the
Corporation shall not redeem, purchase or otherwise acquire for consideration
any shares of Junior Stock or Parity Stock; provided, however, that (A) the
-------- -------
Corporation may accept shares of any Parity Stock or Junior Stock for conversion
into Junior Stock and (B) the Corporation may at any time redeem, purchase or
otherwise
70
acquire shares of any Parity Stock pursuant to any mandatory redemption, put,
sinking fund or other similar obligation contained in such Parity Stock, pro
rata with the Series G Preferred Stock in proportion to the total amount then
required to be applied by the Corporation to redeem, repurchase, or otherwise
acquire shares of Series G Preferred Stock and shares of such Parity Stock.
(d) The Corporation shall not permit any Subsidiary of the
Corporation, or cause any other Person, to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation unless the
Corporation could, pursuant to Section 4(c), purchase such shares at such time
and in such manner.
Section 5 Optional Redemption.
-------------------
(a) (i) The Corporation shall not have any right to redeem any
shares of Series G Preferred Stock prior to __________, 200112/. Thereafter,
--
(A) if any shares of Series E Preferred Stock remain outstanding, the
Corporation will simultaneously elect to redeem (in accordance with the terms of
Article 1, Section 5) the same percentage of the outstanding shares of Series G
Preferred Stock as the percentage of shares of Series E Preferred Stock (or
aggregate principal amount of Convertible Notes) the Corporation is electing to
redeem under Article 1, Section 5 or (B) if no shares of the Series E Preferred
Stock remain outstanding, so long as shares of Common Stock shall have traded on
the New York Stock Exchange (or another national securities exchange or on
Nasdaq) on each trading day during a 30-consecutive trading day period (each of
which trading days shall be after _________, 200112/ and no more than 5 Business
--
Days prior to the date notice is given of an Optional Redemption (as defined
below)) and had a Closing Price on at least 20 of such trading days in excess of
150% of the Conversion Amount in effect on such trading day as determined
pursuant to Section 11, subject to the restrictions contained in Section 4, the
Corporation shall have the right, at its sole option and election, to redeem
(the "Optional Redemption") (I) in the case of clause (A), such percentage of
the shares of Series G Preferred Stock specified in such clause and (II) in the
case of clause (B), all or a portion of the shares of Series G Preferred Stock,
- --------------------
12/ Assumes closing on or prior to December 31, 1994; otherwise date will be
- --
appropriately adjusted.
71
on not more than 45 nor less than 30 days' notice of the date of redemption (any
such date an "Optional Redemption Date") at a price per share (the "Optional
Redemption Price") equal to the sum of (A) the following prices per share
(stated as a percentage of the Liquidation Preference of such share), (B) an
amount per share equal to all accrued and unpaid dividends thereon, whether or
not declared or payable, to the applicable Optional Redemption Date and (C) the
Additional Amount (as defined in Section 11), in immediately available funds:
Optional Redemption Price
If Redeemed as a Percentage of
During the Period13/: Liquidation Preference
------------------- ----------------------
__________, 2001 to 102.775%
__________, 2002
__________, 2002 to 101.850%
__________, 2003
__________, 2003 to 100.925%
__________, 2004
__________, 2004 and 100%
thereafter
(ii) If the Corporation shall have the right to, or shall
determine to, redeem less than all the shares of Series G Preferred Stock then
outstanding pursuant to paragraph (i), the shares to be redeemed shall be
selected pro rata (as nearly as may be) so that the number of shares redeemed
from each holder shall be the same proportion of all the shares to be redeemed
that the total number of shares of Series G Preferred Stock then held by such
holder bears to the total number of shares of Series G Preferred Stock then
outstanding.
(iii) Notwithstanding the foregoing, any shares of Series G
Preferred Stock redeemed pursuant to this Section 5(a) at a time when the
Corporation would be required to redeem the shares of Series G Preferred Stock
- --------------------
13/ Assumes closing on or prior to December 31, 1994; otherwise dates will be
- --
appropriately adjusted.
72
pursuant to Section 6 shall be redeemed at a price equal to the price to be paid
pursuant to Section 6.
(b) Notice of any Optional Redemption shall specify the Optional
Redemption Date fixed for redemption, the Optional Redemption Price, the place
or places of payment, that payment will be made upon presentation and surrender
of the shares of Series G Preferred Stock and that on and after the date of such
Optional Redemption dividends will cease to accrue on such shares and be given
by publication in a newspaper of general circulation in the Borough of
Manhattan, The City of New York (if such publication shall be required by
applicable law, rule, regulation or securities exchange requirement), not less
than 30, nor more than 45, days prior to the Optional Redemption Date; and, in
any case, a similar notice shall be mailed at least 30, but not more than 45,
days prior to the Optional Redemption Date to each holder of shares of Series G
Preferred Stock, at such holder's address as it appears on the transfer books of
the Corporation. In order to facilitate the redemption of shares of Series G
Preferred Stock, the Board of Directors may fix a record date for the
determination of shares of Series G Preferred Stock to be redeemed, or may cause
the transfer books of the Corporation for the Series G Preferred Stock to be
closed, not more than 60 days or less than 45 days prior to the Optional
Redemption Date.
(c) On the date of any Optional Redemption that is specified in a
notice given pursuant to Section 5(b), the Corporation shall, and at any time
after such notice shall have been mailed and before the Optional Redemption Date
the Corporation may, deposit for the benefit of the holders of shares of
Series G Preferred Stock the funds necessary for such redemption with a bank or
trust company in the Borough of Manhattan, The City of New York, having a
capital and surplus of at least $100,000,000. Any moneys so deposited by the
Corporation and unclaimed at the end of two years from the Optional Redemption
Date shall revert to the general funds of the Corporation. After such
reversion, any such bank or trust company shall, upon demand, pay over to the
Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series G Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Optional Redemption Price. Any interest
accrued on funds deposited pursuant to
73
this Section 5(c) shall be paid from time to time to the Corporation for its own
account.
(d) Notice of redemption having been given as aforesaid, upon the
deposit of funds pursuant to Section 5(c) in respect of shares of Series G
Preferred Stock to be redeemed pursuant to Section 5(a), notwithstanding that
any certificates for such shares shall not have been surrendered for
cancellation, from and after the Optional Redemption Date (i) the shares
represented thereby shall no longer be deemed outstanding, (ii) the rights to
receive dividends thereon shall cease to accrue, and (iii) all rights of the
holders of shares of Series G Preferred Stock to be redeemed shall cease and
terminate, excepting only the right to receive the Optional Redemption Price
therefor; provided, however, that (A) if the Corporation shall default in the
-------- -------
payment of the Optional Redemption Price or (B) if the Corporation is obligated
under Section 5(a)(i)(A) to simultaneously redeem shares of Series E Preferred
Stock (or Convertible Notes) and the Corporation has failed to simultaneously
redeemed such shares (or notes), the shares of Series G Preferred Stock shall
thereafter be deemed to be outstanding and the holders thereof shall have all of
the rights of a holder of Series G Preferred Stock until such time as such
default or failure shall no longer be continuing or shall have been waived by
holders of at least 66-2/3% of the then outstanding shares of Series G Preferred
Stock.
(e) Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of
shares of Series G Preferred Stock receives such notice, and failure to give
such notice by mail, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Series G Preferred Stock. On or after the
Optional Redemption Date fixed for redemption as stated in such notice, each
holder of the shares called for redemption shall surrender the certificate
evidencing such shares to the Corporation at the place designated in such notice
and shall thereupon be entitled to receive payment of the Optional Redemption
Price. If less than all the shares evidenced by any such surrendered
certificate are redeemed, a new certificate shall be issued evidencing the
unredeemed shares.
74
Section 6 Mandatory Redemption at the Option of the
-----------------------------------------
Holder.
------
(a) (i) If one or more events constituting a Specified Corporate
Action shall occur, each holder of shares of the Series G Preferred Stock shall
have the right, at such holder's option on the date specified in Section
6(a)(ii) (the "Specified Corporate Action Redemption Date"), to require the
Corporation to redeem (a "Specified Corporate Action Redemption") all or any
part of the shares of Series G Preferred Stock then held by such holder as such
holder may elect at a price per share equal to the greater of (I) the sum of (A)
the following prices per share (stated as a percentage of the Liquidation
Preference of such share) and (B) an amount per share equal to all accrued and
unpaid dividends thereon, whether or not declared or payable, to the applicable
Specified Corporate Action Redemption Date
If the Specified Specified Corporate
Corporate Action Action Redemption Price
Redemption Date as a Percentage of
Occurs During the Liquidation Preference
----------------- --------------------------
Period14/:
--------
__________, 1994 to 110.4%
__________, 1995
__________, 1995 to 116.8%
__________, 1995
__________, 1995 to 126.7%
__________, 1996
__________, 1996 and there- 138.0%
after
and (II) the sum of (x) 100% of the Liquidation Preference of such share, (y) an
amount per share equal to all accrued and unpaid dividends thereon, whether or
not declared or payable, to the Specified Corporate Action Redemption Date and
(z) the Additional Amount, in either case in immediately available funds (the
"Specified Corporate Action Redemption Price"); provided, however, that the
-------- -------
holder of any share of Series G Preferred Stock that was not outstanding for at
- --------------------
14/ Assumes closing on or prior to December 31, 1994; otherwise date will be
- --
appropriately adjusted.
75
least ten Business Days prior to the date of the notice of the Specified
Corporate Action shall only be entitled to receive upon such Specified Corporate
Action Redemption the amount specified in clause (II) above.
(ii) The date fixed for each Specified Corporate Action Redemption
shall be fixed by the Corporation and shall be no less than 60 days or more than
90 days following the occurrence of the Specified Corporate Action giving rise
thereto (or, in the case of a Specified corporate Action as described in clause
(iii) of the definition of "Specified Corporate Action," no less than 60 days or
more than 90 days following the date on which the Corporation obtains actual
knowledge of such Specified Corporate Action). The Corporation shall, within 5
days of the occurrence of a Specified Corporate Action (or, in the case of a
Specified Corporate Action described in clause (iii) of the definition of
"Specified Corporate Action," within 5 days of the date on which the Corporation
obtains actual knowledge of such Specified Corporate Action), give notice
thereof by publication in a newspaper of general circulation in the Borough of
Manhattan, The City of New York (if such publication shall be required by
applicable law, rule, regulation or securities exchange requirement), and, in
any case, a similar notice shall be mailed to each holder of shares of the
Series G Preferred Stock, at such holder's address as it appears on the transfer
books of the Corporation. Each such notice shall specify the Specified
Corporate Action that has occurred and the date of such occurrence, the place or
places of payment, the then effective Specified Corporate Action Redemption
Price and the date the right of such holder to require a Specified Corporate
Action Redemption shall terminate.
(iii) If the notice sent by the Corporation pursuant to Section
6(a)(ii) shall contain (i) a form inquiring as to whether a holder of shares of
Series G Preferred Stock intends to surrender the certificate(s) representing
such shares for redemption pursuant to this Section 6(a) and (ii) a stamped
self-addressed envelope for return of such form to the Corporation or its
designee, within ten Business Days of such notice, each holder shall return such
inquiry form to the Corporation and shall indicate in such form the proportion
of such holder's shares of Series G Preferred Stock that will be surrendered for
redemption pursuant to this Section 6. If such notice shall indicate that if a
holder does not respond prior to
76
ten Business Days after the date of such notice that such holder will be deemed
to have notified the Corporation that it will not require the redemption of the
shares of Series G Preferred Stock held by such holder for purposes of Section
3(b) and such holder does not respond to the Corporation's inquiry prior to
ten Business Days after the date of such notice, such holder will be deemed to
have notified the Corporation that it will not require the redemption of the
shares of Series G Preferred Stock held by such holder for purposes of Sec-
tion 3(b). Nothing contained in this Section 6(a)(iii) shall affect the right
of a holder of Series G Preferred Stock to require the Corporation to redeem
such shares pursuant to Section 6(a)(i).
(b) At any time after , 1995,15/ the holder of any shares
--------- --
of Series G Preferred Stock shall have the right, at such holder's option
exercisable at any time upon 30 days notice to the Corporation, to require the
Corporation to redeem (a "Holder's Election Redemption") all or any part of the
shares of Series G Preferred Stock then held by such holder at a price per share
(the "Holder's Election Redemption Price") equal to the sum of (A) 100% of the
Liquidation Preference of such share, (B) an amount per share equal to all
accrued and unpaid dividends thereon, whether or not declared or payable, to the
date specified for such Holder's Election Redemption and (C) the Additional
Amount, in immediately available funds. Notwithstanding the foregoing, if the
redemption of any portion of such shares would (i) cause any two of Standard's &
Poor's ("S&P"), Moody's Investor Services ("Moody's") and A.M. Best & Co. ("A.M.
Best") to downgrade the rating of (a) the Corporation's securities, in the case
of S&P or Moody's or (b) the pooled rating of the Subsidiaries of the
Corporation engaged in the insurance business, in the case of A.M. Best or (ii)
in the reasonable judgment of the Board of Directors of the Corporation have a
material adverse effect on the financial condition of the Corporation, then the
Corporation may elect to deliver with respect to such shares in lieu of cash
senior nonconvertible notes of the Corporation ("Notes") (x) having a final
maturity date no later than December 31, 2006, and (y) having such other terms
and conditions as shall result in a determination that such Notes have a fair
market value as of the date of their proposed issuance at least equal to the sum
of (1) the Holder's Election Redemption Price with respect to such
- --------------------
15/ First anniversary of Closing Date.
- --
77
shares and (2) customary underwriting discounts and commissions payable with
respect to the sale of securities of a type comparable to the Notes; provided,
--------
however, that if the issuance of senior nonconvertible notes would cause the
- -------
event described in clause (i) above or in the reasonable judgment of the Board
of Directors of the Corporation have a material adverse effect on the financial
condition of the Corporation, then the Corporation may elect to issue
subordinated nonconvertible notes (in which case the term "Notes" shall mean
such subordinated nonconvertible notes) or shares of nonconvertible preferred
stock ("Redemption Preferred Stock") in each case having the terms and
conditions described in clauses (x) and (y) in lieu of senior nonconvertible
notes. The Corporation shall use its best efforts to cause the Notes or the
Redemption Preferred Stock to be registered for immediate resale pursuant to an
effective registration statement under the Securities Act prior to the issuance
thereof. If such registration statement is not effective within 60 days of the
date of such issuance then the annual interest rate of the Notes or the annual
dividend rate of the Redemption Preferred Stock, as applicable, shall be
increased by 0.5% per annum until such securities are sold pursuant to an
effective registration statement under the Securities Act. For purposes of this
Section 6(b), "fair market value" shall mean the fair market value of the Notes
or Redemption Preferred Stock, as the case may be, as determined by an
investment banking firm of national standing selected by the Corporation and
reasonably acceptable to the holders of a majority of the shares of Series G
Preferred Stock electing to effect such Holder's Election Redemption. In the
case that the Corporation shall be entitled to deliver either subordinated
nonconvertible notes or Redemption Preferred Stock, it shall be the election of
the Corporation whether to deliver such Notes or Redemption Preferred Stock,
except that, if, the sale of the security to be delivered by the Corporation to
effect a Holder's Election Redemption would give rise to an additional liability
on the part of such holder upon the sale thereof and it shall so notify the
Corporation in writing, the Corporation shall deliver to such holder the other
type of security specified in such notice.
(c) On the date fixed for any Specified Corporate Action Redemption
or Holder's Election Redemption, each holder of shares of Series G Preferred
Stock who elects to have shares of Series G Preferred Stock held by it redeemed
shall surrender the certificate representing such shares to
78
the Corporation (i) at the place designated in such notice in the case of a
Specified Corporate Action Redemption or (ii) at the Corporation's principal
place of business to be maintained by it, in the case of a Holder's Election
Redemption, together with an election to have such redemption made and shall
thereupon be entitled to receive payment therefor provided in this Section 6.
If less than all the shares represented by any such surrendered certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares.
From and after the date of such redemption (i) the rights to receive dividends
thereon shall cease to accrue and (ii) all rights of the holders of shares of
Series G Preferred Stock so redeemed shall cease and terminate, excepting only
the right to receive the Specified Corporate Action Redemption Price or Holder's
Election Redemption Price therefor, as applicable; provided, however, that if
-------- -------
the Corporation shall default in the payment of the applicable redemption price
or, in the case of a Holder's Election Redemption, elect to postpone payment
thereof in accordance with Section 6(b), the shares of Series G Preferred Stock
that were to be redeemed shall thereafter be deemed to be outstanding and the
holders thereof shall have all of the rights of a holder of Series G Preferred
Stock until such time as such default shall no longer be continuing or shall
have been waived by holders of at least 66-2/3% of the then outstanding shares
of Series G Preferred Stock or, in the case of a Holder's Election Redemption,
so postponed, the date on which the Holder's Election Redemption Price is paid.
Section 7 Redemption Upon Maturity.
------------------------
(a) On __________, 200916/ (the "Maturity Date"), the Corporation
--
shall redeem (the "Maturity Redemption") the remaining outstanding shares of the
Series G Preferred Stock at a price per share (the "Maturity Redemption Price")
equal to the sum of (A) 100% of the Liquidation Preference per share, (B) an
amount equal to accrued and unpaid dividends thereon, whether or not declared or
payable, to the Maturity Date and (C) the Additional Amount, determined as of
the date immediately prior to the Maturity Date, in immediately available funds.
- --------------------
16/ Assumes closing on or prior to December 31, 1994; otherwise date will be
- --
appropriately adjusted.
79
(b) Notice of the Maturity Redemption shall be given by publication
in a newspaper of general circulation in the Borough of Manhattan, The City of
New York (if such publication shall be required by applicable law, rule,
regulation or securities exchange requirement), not less than 30, nor more than
60, days prior to the Maturity Date and, in any case, a similar notice shall be
mailed at least 30, but not more than 60, days prior to the Maturity Date to
each holder of shares of Series G Preferred Stock, at such holder's address as
it appears on the transfer books of the Corporation.
(c) On the Maturity Date, the Corporation shall, and at any time
after such notice shall have been mailed and before the Maturity Date the
Corporation may, deposit for the benefit of the holders of shares of Series G
Preferred Stock the funds necessary for such redemption with a bank or trust
company in the Borough of Manhattan, The City of New York, having a capital and
surplus of at least $100,000,000. Any moneys so deposited by the Corporation
and unclaimed at the end of two years from the date designated for such
redemption shall revert to the general funds of the Corporation. After such
reversion, any such bank or trust company shall, upon demand, pay over to the
Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series G Preferred Stock to be redeemed shall look only to the
Corporation for the payment of the Maturity Redemption Price. Any interest
accrued and unpaid on funds deposited pursuant to this Section 5(c) shall be
paid from time to time to the Corporation for its own account.
(d) Notice of redemption having been given as aforesaid, upon the
deposit of funds pursuant to Section 7(c) in respect of shares of Series G
Preferred Stock to be redeemed pursuant to Section 7(a), notwithstanding that
any certificates for such shares shall not have been surrendered for
cancellation, from and after the Maturity Date, (i) the rights to receive
dividends thereon shall cease to accrue and (ii) all rights of the holders of
shares of Series G Preferred Stock shall cease and terminate, excepting only the
right to receive the Maturity Redemption Price therefor; provided, however, that
-------- -------
if the Corporation shall default in the payment of the Maturity Redemption
Price, the shares of Series G Preferred Stock that were to be redeemed shall
thereafter be deemed to be outstanding and the holders thereof shall have all of
the rights of a holder
80
of Series G Preferred Stock until such time as such default shall no longer be
continuing.
Section 8 Acquired Shares.
---------------
Any shares of Series G Preferred Stock exchanged, redeemed, purchased
or otherwise acquired by the Corporation or any of its Subsidiaries in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares of Series G Preferred Stock shall upon their
cancellation become authorized but unissued shares of preferred stock, par value
$4.00 per share, of the Corporation and, upon the filing of an appropriate
certificate with the Department of State of the State of New York, may be
reissued as part of another series of preferred stock, par value $4.00 per
share, of the Corporation subject to the conditions or restrictions on issuance
set forth herein, but in any event may not be reissued as shares of Series G
Preferred Stock or Parity Stock unless all of the issued and outstanding shares
of Series G Preferred Stock shall have already been redeemed or exchanged.
Section 9 Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) If the Corporation shall commence a voluntary case under the
United States bankruptcy laws or any applicable bankruptcy, insolvency or
similar law of any other country, or consent to the entry of an order for relief
in an involuntary case under any such law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due (any such event, a
"Voluntary Liquidation Event"), or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, no distribution
shall be made (i) to the holders of shares of Junior Stock unless, prior
thereto,
81
the holders of shares of Series G Preferred Stock shall have received (A) if a
Voluntary Liquidation Event shall have occurred, the Optional Redemption Price
with respect to each share and (B) if a Voluntary Liquidation Event shall not
have occurred, the Liquidation Preference and all accrued and unpaid dividends,
whether or not declared or currently payable, to the date of distribution, with
respect to each share, or (ii) to the holders of shares of Parity Stock, except
distributions made ratably on the Series G Preferred Stock and all Parity Stock
in proportion to the total amounts to which the holders of all shares of the
Series G Preferred Stock (which amounts are set forth in clauses (A) and (B)
above) and Parity Stock are entitled upon such liquidation, dissolution or
winding up.
(b) Neither the consolidation or merger of the Corporation with or
into any other Person nor the sale or transfer of all or any part of the
Corporation's assets for cash, securities or other property shall be deemed to
be a liquidation, dissolution or winding up of the Corporation for purposes of
this Section 9.
Section 10 Exchange.
--------
(a) Subject to the provisions of this Section 10, the Corporation
shall have the right, with the consent of the holders of all of the outstanding
shares of Series G Preferred Stock (which consent may be withheld for any reason
whatsoever), at any time but on only one occasion, to exchange all (but not less
than all) of the shares of Series G Preferred Stock for Subordinated Notes of
the Corporation ("Subordinated Notes"), at a price per share equal to the
Liquidation Preference per share, with the Subordinated Notes valued for such
purpose at their face value. Simultaneously with such exchange the Corporation
shall pay to each holder of Series G Preferred Stock an amount per share in cash
equal to all accrued and unpaid dividends thereon, whether or not declared or
currently payable, to the date fixed for exchange thereof. The Subordinated
Notes shall have an annual interest rate equal to the annual dividend rate on
Series G Preferred Stock and shall contain other terms substantially similar to
the Series G Preferred Stock, including the date of maturity thereof.
(b) Notice of an exchange of shares of Series G Preferred Stock
pursuant to Section 10(a) shall be given by publication in a newspaper of
general circulation in the
82
Borough of Manhattan, The City of New York (if such publication shall be
required by applicable law, rule, regulation or securities exchange
requirement), not less than 30, nor more than 60, days prior to the date fixed
for exchange; and, in any case, a similar notice shall be mailed at least 30,
but not more than 60, days prior to the date fixed for exchange to each holder
at such holder's address as it appears on the transfer books of the Corporation.
In order to facilitate the exchange of shares of Series G Preferred Stock
hereunder the Board of Directors may fix a record date for the determination of
shares of Series G Preferred Stock to be exchanged, or may cause the transfer
books of the Corporation for the Series G Preferred Stock to be closed, not more
than 60 days or less than 30 days prior to the date fixed for exchange.
(c) On the date of any exchange being made pursuant to Section 10(a)
that is specified in a notice given pursuant to Section 10(b) and is not deemed
terminated pursuant to Section 10(b), the Corporation shall, and at any time
after the date that is 10 days prior to the date of exchange the Corporation
may, deposit for the benefit of the holders of shares of Series G Preferred
Stock to be exchanged (i) the Subordinated Notes necessary for such exchange and
(ii) an amount in cash equal to all dividends payable with respect thereto upon
such exchange with a bank or trust company in the Borough of Manhattan, The City
of New York, having a capital and surplus of at least $100,000,000. Any
Subordinated Notes so deposited by the Corporation and unclaimed at the end of
two years from the date designated for such exchange shall revert to the Corpo-
ration. After such reversion, any such bank or trust company shall, upon
demand, return to the Corporation such unclaimed Subordinated Notes and
thereupon such bank or trust company shall be relieved of all responsibility in
respect thereof and any holder of shares of Series G Preferred Stock to be
exchanged shall look only to the Corporation for the delivery of the
Subordinated Notes. Any interest accrued on Subordinated Notes deposited
pursuant to this Section 10(c) shall accrue for the accounts of, and be payable
to, the holders of shares of Series G Preferred Stock to be exchanged therefor.
(d) Notice of exchange having been given as aforesaid and not having
been deemed terminated as aforesaid, upon the deposit of Subordinated Notes
pursuant to clause (i) of Section 10(c) and the deposit of the cash referred to
in clause (ii) of Section 10(c) in respect of
83
shares of Series G Preferred Stock to be exchanged pursuant to Section 10(a),
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, from and after the date of exchange designated in
the notice of exchange (i) the shares represented thereby shall no longer be
deemed outstanding, (ii) the rights to receive dividends thereon (except as
provided in paragraph (b) above) shall cease to accrue, and (iii) all rights of
the holders of shares of Series G Preferred Stock to be exchanged shall cease
and terminate, excepting only the right to receive the Subordinated Notes
therefor and the right to receive the dividends described in paragraph (b)
above; provided, however, that if the Corporation shall default in the execution
-------- -------
and delivery of the Convertible Notes, the shares of Series G Preferred Stock
that were to be exchanged shall thereafter be deemed to be outstanding and the
holders thereof shall have all of the rights of a holder of Series G Preferred
Stock until such time as such default shall no longer be continuing or shall
have been waived by holders of at least 66-2/3% of the then outstanding shares
of Series G Preferred Stock.
Section 11 Additional Amount.
-----------------
(a) For the purposes of this Article 3, "Additional Amount" shall
mean an amount per share equal to the product of (i) the excess of the sum of
(1) the Market Price of a share of Common Stock and (2) if the Corporation shall
have issued a right or rights with respect to its outstanding shares of Common
Stock pursuant to a shareholder rights plan, "poison pill" or similar
arrangement, during the period commencing on the "distribution date" of such
right or rights (i.e., the date on which such right or rights commence to trade
----
separately from the Common Stock) and ending on the "triggering date" of such
right or rights (i.e., the date on which such right or rights commence to be
----
exercisable), the Market Price of such right or rights over the Conversion
Amount, in effect as hereinafter determined and (ii) (x) the Liquidation
Preference divided by (y) such Conversion Amount, in all cases calculated as of
the applicable determination date. The Additional Amount shall in no event be
less than zero. The Conversion Amount shall be $17.00, subject to adjustment as
set forth in Section 11(b). For the purpose of calculating the Additional
Amount in connection with an Optional Redemption, Specified Corporate Action
Redemption or Holder's Election Redemption, the Market Price of the Common Stock
and, if applicable, rights shall be the average of the Market Price
84
of such securities on the five trading days immediately preceding and the five
trading days immediately following the date of notice of such redemption.
(b) The Conversion Amount shall be subject to adjustment as follows:
(i) In case the Corporation shall at any time or from time to
time (A) pay a dividend or make a distribution on the outstanding shares of
Common Stock in Common Stock (other than pursuant to a dividend reinvestment
plan approved by the Corporation's Board of Directors), (B) subdivide the
outstanding shares of Common Stock into a larger number of shares, (C) combine
the outstanding shares of Common Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Common Stock,
then, and in each such case, the Conversion Amount in effect immediately prior
to such event shall be adjusted so that if the holder of any share of Series G
Preferred Stock were entitled to convert such share into such number of shares
of Common Stock as equals the Liquidation Preference divided by the Conversion
Amount and such holder thereafter surrendered such share for conversion, such
holder would be entitled to receive the number of shares of Common Stock or
other securities of the Corporation that such holder would have owned or would
have been entitled to receive upon or by reason of any of the events described
above had such share of Series G Preferred Stock been converted immediately
prior to the occurrence of such event. An adjustment made pursuant to this
Section 11(b)(i) shall become effective retroactively (A) in the case of any
such dividend or distribution, to the opening of business on the day immediately
following the close of business on the record date for the determination of
holders of Common Stock entitled to receive such dividend or distribution or (B)
in the case of any such subdivision, combination or reclassification, to the
close of business on the day upon which such corporate action becomes effective.
(ii) In case the Corporation shall at any time or from time to
time issue or sell shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock, or any options, warrants or other
rights to acquire shares of Common Stock (other than options granted to any
employee or director of the Corporation pursuant to a stock option plan approved
by the shareholders of the Corporation)) for a consideration per share less than
the Conversion Amount then in effect at the record date or
85
issuance date, as the case may be (the "Date") referred to in the following
sentence, including, without limitation, upon exercise of rights issued pursuant
to a shareholder rights plan, "poison pill" or similar arrangement (treating the
price per share of any security convertible or exchangeable or exercisable into
Common Stock as equal to (A) the sum of the price for such security convertible,
exchangeable or exercisable into Common Stock plus any additional consideration
payable (without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security into Common Stock divided by (B) the
number of shares of Common Stock initially underlying such convertible,
exchangeable or exercisable security), other than issuances or sales for which
an adjustment is made pursuant to another paragraph of this Section 11(b), then,
and in each such case, the Conversion Amount then in effect shall be adjusted by
dividing the Conversion Amount in effect on the day immediately prior to the
Date by a fraction (x) the numerator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to the Date plus the number
of additional shares of Common Stock issued or to be issued (or the maximum
number into which such convertible or exchangeable securities initially may
convert or exchange or for which such options, warrants or other rights initi-
ally may be exercised) and (y) the denominator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to the Date plus
the number of shares of Common Stock that the aggregate consideration (if any of
such aggregate consideration is other than cash, as valued by the Board of
Directors including a majority of the Directors who are not officers or
employees of the Corporation or any of its Subsidiaries, which determination
shall be conclusive and described in a resolution of the Board of Directors) for
the total number of such additional shares of Common Stock so issued (or into
which such convertible or exchangeable securities may convert or exchange or for
which such options, warrants or other rights may be exercised plus the aggregate
amount of any additional consideration initially payable upon conversion,
exchange or exercise of such security) would purchase at the Conversion Amount.
Such adjustment shall be made whenever such shares, securities, options,
warrants or other rights are issued, and shall become effective retroactively to
a date immediately following the close of business (i) in the case of issuance
to stockholders of the Corporation, as such, on the record date for the
determination of stockholders entitled to receive such shares, securities,
options, warrants or other rights and
86
(ii) in all other cases, on the date ("issuance date") of such issuance;
provided, however, that the determination as to whether an adjustment is
- -------- -------
required to be made pursuant to this Section 11(b)(ii) shall only be made upon
the issuance of such shares or such convertible or exchangeable securities,
options, warrants or other rights, and not upon the issuance of the security
into which such convertible or exchangeable security converts or exchanges, or
the security underlying such option, warrants or other right; provided, further,
-------- -------
that if any convertible or exchangeable securities, options, warrants or other
rights (or any portions thereof) that shall have given rise to an adjustment
pursuant to this Section 11(b)(ii) shall have expired or terminated without the
exercise thereof and/or if by reason of the terms of such convertible or
exchangeable securities, options, warrants or other rights there shall have been
an increase or increases, with the passage of time or otherwise, in the price
payable upon the exercise or conversion thereof, then the Conversion Amount
hereunder shall be readjusted (but to no greater extent than originally
adjusted) on the basis of (x) eliminating from the computation any additional
shares of Common Stock corresponding to such convertible or exchangeable
securities, options, warrants or other rights as shall have expired or termi-
nated, (y) treating the additional shares of Common Stock, if any, actually
issued or issuable pursuant to the previous exercise of such convertible or
exchangeable securities, options, warrants or other rights as having been issued
for the consideration actually received and receivable therefor and (z) treating
any of such convertible or exchangeable securities, options, warrants or other
rights that remain outstanding as being subject to exercise or conversion on the
basis of such exercise or conversion price as shall be in effect at the time.
(iii) In case the Corporation shall at any time or from time to
time distribute to all holders of shares of its Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the resulting or surviving corporation and the Common Stock is
not changed or exchanged a redemption of any rights pursuant to a shareholder
rights plan, "poison pill" or similar arrangement) cash, evidences of
indebtedness of the Corporation or another issuer, securities of the Corporation
or another issuer or other assets (excluding (A) Permitted Dividends described
in clause (B) of the definition thereof and (B) securities for which adjustment
is made under Section 11(b)(i) or Section
87
11(b)(ii)), then, and in each such case, the Conversion Amount then in effect
shall be adjusted by dividing the Conversion Amount in effect immediately prior
to the date of such distribution by a fraction (x) the numerator of which shall
be the Current Market Price of the Common Stock on the record date referred to
below and (y) the denominator of which shall be such Current Market Price of the
Common Stock less the then Fair Market Value (as determined by the Board of
Directors of the Corporation, which determination shall be conclusive) of the
portion of the cash, evidences of indebtedness, securities or other assets so
distributed or of such subscription rights or warrants applicable to one share
of Common Stock (but such denominator not to be less than one). Such adjustment
shall be made whenever any such distribution is made and shall become effective
retroactively to a date immediately following the close of business on the
record date for the determination of stockholders entitled to receive such
distribution.
(iv) In the case the Corporation at any time or from time to
time shall take any action affecting its Common Stock, other than an action
described in any of Section 11(b)(i) through Section 11(b)(iii), inclusive,
then, the Conversion Amount shall be adjusted in such manner and at such time as
the Board of Directors of the Corporation (other than Purchaser Designees or
directors elected pursuant to Section 3(b)) in good faith determines to be
equitable in the circumstances (such determination to be evidenced in a
resolution, a certified copy of which shall be mailed to the holders of the
Series G Preferred Stock).
(v) The Corporation may make such reductions in the Conversion
Amount, in addition to those required by subparagraphs (i), (ii), (iii) or (iv)
of this Section 11(b), as the Board of Directors considers to be advisable in
order to avoid or to diminish any income tax to holders of Common Stock or
rights to purchase Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such for income
tax purposes.
(vi) Notwithstanding anything contained in this Section 11(b),
no adjustment to the Conversion Amount shall be made with respect to any rights
issued pursuant to a shareholder rights plan, "poison pill" or similar
arrangement unless the "triggering date" (i.e. the date on which such rights
----
commence to be exercisable) shall have
88
occurred or such rights shall have been redeemed, in which event adjustments
under clause (ii) and clause (iii), respectively, shall be made.
(c) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Amount then in
effect shall be required by reason of the taking of such record.
(d) Upon any increase or decrease in the Conversion Amount, then, and
in each such case, the Corporation promptly shall deliver to each registered
holder of Series G Preferred Stock at least 10 Business Days prior to effecting
any of the foregoing transactions a certificate, signed by the President or a
Vice President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation, setting forth in reasonable detail
the event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Conversion Amount then in
effect following such adjustment.
Article 4 Definitions.
-----------
For the purposes of this Certificate of Amendment of Certificate of
Incorporation, the following terms shall have the meanings indicated:
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Closing Price" on any day shall mean the closing sale price of the
Common Stock regular way on such day or, in case no such sale takes place on
such day, the average of the reported closing bid and asked prices of the Common
Stock regular way, in each case on the New York Stock Exchange or, if the Common
Stock is not listed or admitted to trading on such exchange, on the principal
national
89
securities exchange on which it is then traded or, if the Common Stock is not
listed or admitted to trading on such an exchange, on Nasdaq.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) the average daily Market Price of the
Common Stock for those days during the period of 30 days, ending on such date,
on which the national securities exchanges were open for trading, and (b) if the
Common Stock is not then listed or admitted to trading on any national
securities exchange or quoted in the over-counter market, the Market Price on
such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
thereunder.
"Fair Market Value" shall mean the amount that a willing buyer would
pay a willing seller in an arm's-length transaction.
"Issue Date" shall mean , 199417/.
------------ --
"Junior Stock" shall mean any capital stock of the Corporation ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
(a) for the purposes of Article 1, to the Series E Preferred Stock, (b) for the
purposes of Article 2, to the Series F Preferred Stock or (c) for the purposes
of Article 3, to the Series G Preferred Stock.
"Liquidation Preference" with respect to a share of Series E Preferred
Stock, a share of Series F Preferred Stock or a share of Series G Preferred
Stock shall mean $100.
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) the closing price per share of the Common Stock on such
date published in The Wall Street Journal or, if no such closing price on such
date is published in The Wall Street Journal, the average of the closing bid and
asked prices on such date, as officially reported on the principal national
securities exchange on
- --------------------
17/ Assumes closing on or prior to December 31, 1994; otherwise date will be
- --
appropriately adjusted.
90
which the Common Stock is then listed or admitted to trading; or (b) if the
Common Stock is not then listed or admitted to trading on any national
securities exchange but is designated as a national market system security by
the NASD, the last trading price of the Common Stock on such date; or (c) if
there shall have been no trading on such date or if the Common Stock is not so
designated, the average of the reported closing bid and asked prices of the
Common Stock, on such date as shown by Nasdaq and reported by any member firm of
the New York Stock Exchange selected by the Corporation; or (d) if none of (a),
(b) or (c) is applicable, a market price per share determined at the
Corporation's expense by an appraiser chosen by the holders of a majority of the
shares of Series E Preferred Stock or, if such calculations shall also be
utilized in connection with the Series F Preferred Stock or Series G Preferred
Stock, the holders of a majority of the aggregate shares of Series E Preferred
Stock and, as applicable, Series F Preferred Stock and Series G Preferred Stock
or, if no such appraiser is so chosen more than twenty Business Days after
notice of the necessity of such calculation shall have been delivered by the
Corporation to the holders of Series E Preferred Stock or, if such calculation
shall also be utilized in connection with the Series F Preferred Stock or
Series G Preferred Stock, the holders of Series E Preferred Stock and, as
applicable, Series F Preferred Stock and Series G Preferred Stock, then by an
appraiser chosen by the Corporation.
"Material Provision of the Securities Purchase Agreement" shall mean
any of the provisions contained in any of Sections 6.6, 6.13, 6.14, 6.16, 6.17
or 6.18 of the Securities Purchase Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq" shall mean the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System.
"New Preferred Stock" means nonconvertible, non-exchangeable shares of
Preferred Stock to be issued by the Corporation within 210 days of the Issue
Date that have an aggregate liquidation preference not exceeding $100,000,000.
"New Senior Notes" means senior notes to be issued by the Corporation
within 210 days of the Issue Date that
91
have an aggregate principal amount not exceeding $100,000,000.
"Parity Stock" shall mean with respect to the Series E Preferred
Stock, Series F Preferred Stock or Series G Preferred Stock, as the case may be,
any capital stock of the Corporation, including the Series E Preferred Stock (in
the case of the Series F Preferred Stock or Series G Preferred Stock), the
Series F Preferred Stock (in the case of the Series E Preferred Stock and
Series G Preferred Stock), and Series G Preferred Stock (in the case of the
Series E Preferred Stock and Series F Preferred Stock), the Other Preferred
Stock and the New Preferred Stock (if any), ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series G
Preferred Stock or the Series E Preferred Stock, as the case may be.
"Permitted Dividend" shall mean (A) a dividend on the Common Stock
payable solely in shares of Junior Stock or (B) a dividend on the Common Stock
payable solely in cash that has been declared by the Board of Directors
subsequent to the third anniversary of the Issue Date; provided, however, that
-------- -------
if at the time of the declaration of such dividend the (i) Series E Preferred
Stock, Series F Preferred Stock, Series G Preferred Stock or Parity Stock is not
rated at least BBB- by Standard & Poor's and at least Baa-3 by Moody's Investor
Services or (ii) the Corporation has received written notice from either such
rating agency that (x) the rating issued thereby with respect to any such
capital stock is likely to be downgraded by such rating agency or (y) such
rating agency has placed the Corporation on credit watch with negative
implications of a downgrade of the rating issued with respect to any such
capital stock by Standard & Poor's to below BBB- or by Moody's Investor Services
to below Baa-3 (the time during which such minimum ratings are not in effect or
such time after the Corporation has received such written notice until such time
as the Corporation has received written notice from such rating agency that it
no longer intends to downgrade such rating or that the Corporation has been
removed from such credit watch shall be referred to as the "Dividend Maximum
Period"), then the aggregate per share amount of cash dividends on the Common
Stock that may thereafter be declared or paid in such fiscal year and each
fiscal year thereafter during the Dividend Maximum Period (including cash
dividends declared or paid prior to the commencement of the Dividend Maximum
Period) shall not exceed an amount equal to 25% of the
92
average of consolidated net operating income of the Corporation and its
Subsidiaries (excluding capital gains or loss either realized or unrealized) per
share of Common Stock (as determined in accordance with generally accepted
accounting principles) for the two immediately preceding fiscal years (the
"Dividend Maximum Amount") provided further, that (x) if in any fiscal year in
-------- -------
which there is a Dividend Maximum Period cash dividends in excess of the
Dividend Maximum Amount (the "Excess Amount") shall have been paid prior to the
commencement of the Dividend Maximum Period, such dividends shall nevertheless
be considered Permitted Dividends so long as (I) no other cash dividends shall
have been declared or paid during the portion of such fiscal year that was a
Dividend Maximum Period and (II) in the next succeeding fiscal year, if a
Dividend Maximum Period exists the aggregate per share amount of cash dividends
on the Common Stock shall not exceed the excess of the Dividend Maximum Amount
for such year over the Excess Amount.
----
"Person" shall mean any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind, and shall include any successor (by merger or otherwise) of
such entity.
"Preferred Stock" shall mean preferred stock, par value $4.00 per
share, of the Corporation.
"Purchaser Designee" shall have the meaning specified in the
Securities Purchase Agreement.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated as of the Issue Date, between the Corporation and [the original
holders of the Series E and Series F Preferred Stock and the option to purchase
the shares of Series G Preferred Stock], as the same may be amended from time to
time.
"Restricted Payment" shall mean any dividend payment (other than a
Permitted Dividend) or other distribution of assets, properties, cash, rights,
obligations or securities by the Corporation on account of any shares of Common
Stock or any other class of Junior Stock or the purchase, redemption or other
acquisition for value by the Corporation or any Subsidiary of the Corporation of
any shares of Common Stock or any other class of Junior Stock or
93
any warrants, rights or options to acquire such shares, now or hereafter
outstanding.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement, dated as of October __, 1994, between the Corporation and TCC-PS
Limited Partnership as the same may be amended from time to time.
"Senior Stock" shall mean any capital stock of the Corporation
ranking senior (either as to dividends or upon liquidation, dissolution or
winding up) (a) for the purposes of Article 1, to the Series E Preferred Stock,
(b) for the purposes of Article 2, to the Series F Preferred Stock and (c) for
the purposes of Article 3, to the Series G Preferred Stock.
"Specified Corporate Action" shall mean such time as: (i) the
Corporation shall consent or agree to the acquisition of, or the commencement of
a tender offer for, or the Board of Directors of the Corporation shall make a
statement that the Board of Directors recommends, or is neutral with respect to,
a tender offer for, "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) by any "Person" or "group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) other than TCC-PS Limited Partnership and its Affiliates, of securities
of the Corporation entitled to vote generally in the election of directors, or
securities convertible into, exchangeable for or exercisable into such
securities (collectively, "Designated Securities"), representing, when added to
the Designated Securities already owned by any such Person or group, thirty
percent (30%) or more of such Designated Securities; (ii) the Board of Directors
of the Corporation shall take any action under Section 912 of the Business
Corporation Law of the State of New York to exempt from the provisions of
Section 912 of the Business Corporation Law of the State of New York any
transaction between the Corporation and any of its Subsidiaries, on the one
hand, and any Person or group (other than TCC-PS Limited Partnership and its
Affiliates or any transferee thereof), or any Affiliates of any such Person or
group, on the other hand, who (A) acquire, own or hold beneficial ownership of
Designated Securities representing thirty percent (30%) or more of such
Designated Securities or (B) acquire, own or hold beneficial ownership of
Designated Securities representing ten percent (10%) or more of such Designated
Securities unless such other Person or group, or any Affiliate of such Person or
94
group, enters into a standstill agreement with the Corporation limiting the
acquisition of Designated Securities by such other Person or group, or any
Affiliates of such Person or group, to less than thirty percent (30%) of the
Designated Securities and such standstill agreement remains in full force and
effect; (iii) any Person or group (other than TCC-PS Limited Partnership and its
Affiliates or any transferee thereof) shall acquire, or shall have the then
contractual right to acquire through conversion, exercise of warrants or
otherwise, more than thirty percent (30%) of the Designated Securities; (iv) the
Corporation shall agree to merge or consolidate with or into any Person, (other
than TCC-PS Limited Partnership and its Affiliates or any transferee thereof) or
shall agree to sell all or substantially all its assets to any such Person other
than (a) a merger or consolidation of one Subsidiary of the Corporation into
another or the Corporation, or (b) a merger or consolidation immediately
subsequent to which all or substantially all the holders of the outstanding
shares of capital stock immediately prior to such consolidation or merger are
entitled to receive shares representing 50% or more of the then outstanding
shares of capital stock of the resulting or surviving corporation entitled to
vote generally in the election of directors; or (v) a majority of the Board of
Directors of the Corporation shall consist of Persons other than Continuing
Directors. The term "Continuing Director" shall mean any member of the Board of
Directors on the Issue Date and any directors elected pursuant to
Sections 3.1.18 and 6.17 of the Securities Purchase Agreement and any other
member of the Board of Directors who shall be recommended or elected to succeed
a Continuing Director by a majority of Continuing Directors who are then members
of the Board of Directors.
"Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
95
Article 5 Preemptive Rights.
-----------------
None of the holders of Series E Preferred Stock, the holders of
Series F Preferred Stock or the holders of Series G Preferred Stock shall be
entitled to any preemptive or subscription rights in respect of any securities
of the Corporation.
IN WITNESS WHEREOF, we have signed this certificate on this ____ day
of _______, 1994.
--------------------------------------------------
Name:
Title: President
--------------------------------------------------
Name:
Title: Secretary
i
EXHIBIT B
THIS OPTION AND SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, OR (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION THEREUNDER. ANY SALE PURSUANT TO CLAUSE
(ii) OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER OF THIS OPTION TO THE
EFFECT THAT SUCH SALE IS NOT IN VIOLATION OF THE ACT.
STOCK OPTION
------------
1. Grant of Option. Pursuant to the Securities Purchase
---------------
Agreement, dated as of October ___, 1994 (the "Securities Purchase
Agreement"), between The Continental Corporation, a New York corporation (the
"Corporation"), and TCC-PS Limited Partnership, a Delaware limited
partnership (the "Optionee"), the Corporation hereby grants to the Optionee,
for the period beginning on [the Closing Date] and ending at midnight (New
York Time) on [seventh anniversary of the Closing Date] (the "Expiration
Date"), the exclusive and irrevocable right and option (this "Option") to
purchase from the Corporation for cash in an amount equal to
$125,000,000.00 (the "Exercise Price") a total of 1,250,000 shares (the
"Shares") of Cumulative Preferred Stock, Series G (the "Series G Preferred
Stock"), par value $4.00 per share, of the Corporation, as such Series G
Preferred Stock is designated in the Certificate of Incorporation of the
Corporation. Accordingly, the exercise price per Share shall be $100.00 (the
"Exercise Price Per Share").
2. Defined Terms. Capitalized terms used but not defined herein
-------------
shall have the meanings specified in the Securities Purchase Agreement.
3. Exercise of Option. This Option may be exercised in whole or
------------------
in part by the Optionee from time to time between [the Closing Date] and the
Expiration Date. Upon any partial exercise of this Option, the remainder of
this Option shall remain in effect and may be exercised at any time or times
thereafter until the Expiration Date. If the Optionee wishes to exercise
this Option, the Optionee shall send a written notice to the Corporation
specifying its intention to exercise this Option and setting forth a date
(not less than 5 business days and not more than 10 business days from the
date of such notice), time and place for the closing of such purchase. The
place specified in
2
3
such notice shall be the offices of the Corporation unless otherwise agreed
to by the Optionee and the Corporation. The date on which the notice is sent
to the Corporation by a means provided for in Section 8.3 hereof shall be
deemed to be the exercise date with respect to such purchase and is referred
to herein as the "Exercise Date." The Option may be exercised only with
respect to full shares of Series G Preferred Stock. No fractional shares of
Series G Preferred Stock shall be issued.
4. Payment and Delivery of Certificates.
------------------------------------
4.1 Delivery of Funds and the Acknowledgement. Upon any
-----------------------------------------
exercise of all or any part of this Option, the Optionee shall on the
Exercise Date (i) deliver to the Corporation an Election to Exercise in the
form of Exhibit A hereto and (ii) make payment to the Corporation of the
aggregate Exercise Price Per Share for the Shares being purchased by delivery
of a certified or bank check or by wire transfer of immediately available
funds to a bank designated by the Corporation.
4.2 Delivery of the Shares. Upon payment (or deemed payment
----------------------
in accordance with Section 4.1) of the Exercise Price Per Share for the
Shares being purchased, the
3
Corporation shall deliver to the Optionee certificates representing the
number of Shares being purchased by the Optionee from the Corporation,
registered in the name of the Optionee. The issuance of any Shares upon the
exercise of this Option and the delivery of certificates representing such
Shares shall be made without charge to the Holder for any tax or other charge
in respect of such issuance.
4.3 Put Option. At any time that the Optionee would be
----------
entitled to cause the redemption of any Shares pursuant to Article 3, Section
6 of the Certificate of Amendment if it were the holder of such Shares, in
lieu of exercising all or any part of this Option, the Optionee may, at any
time (except with respect to a Holder's Election Redemption only after the
[first anniversary of the Closing Date]) instead require the Corporation to
repurchase this Option (or any portion thereof) for cash at a price equal to
the Value (as hereinafter defined for purposes of this Section 4.3) of this
Option. For purposes of this Section 4.3, the Value of this Option (or such
portion) shall equal the product of (i) the number of Shares for which this
Option (or such portion) is exercisable, multiplied by (ii) the excess, if
any, of (A) the applicable redemption price
4
per Share at such time pursuant to Article 3, Section 6 of the Certificate of
Amendment (which will be, in each case hereunder, the sum of (x) 100% of the
Liquidation Preference of such share and (y) the Additional Amount), over (B)
the Exercise Price Per Share. Notwithstanding the foregoing, if the
applicable redemption price is the Holder's Election Redemption Price and the
redemption of any portion of this Option would (i) cause any two of
Standard's & Poor's ("S&P"), Moody's Investor Services ("Moody's") and A.M.
Best & Co. ("A.M. Best") to downgrade the rating of (a) the Corporation's
securities, in the case of S&P or Moody's or (b) the pooled rating of the
Subsidiaries of the Corporation engaged in the insurance business, in the
case of A.M. Best or (ii) in the reasonable judgment of the Board of
Directors of the Corporation have a material adverse effect on the financial
condition of the Corporation, then the Corporation may elect to deliver with
respect to such portion of this Option in lieu of cash senior nonconvertible
notes of the Corporation ("Notes") (x) having a final maturity date no later
than December 31, 2006, and (y) having such other terms and conditions as
shall result in a determination that such Notes have a fair market value as
of the date of their
5
proposed issuance at least equal to the sum of (1) the Value of this Option
(or such portion) and (2) customary underwriting discounts and commissions
payable with respect to the sale of securities of a type comparable to the
Notes; provided, however, that if the issuance of senior nonconvertible notes
-------- -------
would cause the event described in clause (i) above or in the reasonable
judgment of the Board of Directors of the Corporation have a material adverse
effect on the financial condition of the Corporation, then the Corporation
may elect to issue, in lieu of senior nonconvertible notes, subordinated
nonconvertible notes (in which case the term "Notes" shall mean such
subordinated nonconvertible notes) or shares of nonconvertible preferred
stock ("Redemption Preferred Stock"), in each case having the terms and
conditions described in clauses (x) and (y) above. The Corporation shall use
its best efforts to cause the Notes or the Redemption Preferred Stock to be
registered for immediate resale pursuant to an effective registration under
the Act prior to the issuance thereof. If such registration statement is not
effective within 60 days of the date of such issuance then the annual
interest rate of the Notes or the annual dividend rate of the Redemption
6
Preferred Stock, as applicable, shall be increased by 0.5% per annum until
such securities are sold pursuant to an effective registration statement
under the Act. For purposes of this Section 4.3 "fair market value" shall
mean the fair market value of the Notes or Redemption Preferred Stock, as the
case may be, as determined by an investment banking firm of national standing
selected by the Corporation and reasonably acceptable to the Optionees
electing to effect such Holder's Election Redemption. In the case that the
Corporation shall be entitled to deliver either subordinated nonconvertible
notes or Redemption Preferred Stock, it shall be the election of the
Corporation whether to deliver such Notes or Redemption Preferred Stock,
except that, if the sale of the security to be delivered by the Corporation
pursuant to the terms hereof would give rise to an additional liability on
the part of the Optionee and it shall so notify the Corporation in writing,
the Corporation shall deliver the type of security specified in such notice.
5. Transfer.
--------
5.1 Restrictions on Transferability. The Optionee will not
-------------------------------
effect any sale, assignment, transfer,
7
disposition by gift or distribution in liquidation or otherwise ("Transfer")
(including any Transfer upon foreclosure of a pledge or other security
interest), pledge, mortgage, hypothecation or grant of a security interest of
or in this Option or any of the Shares or any Subordinated Notes issued upon
exchange for the Shares (the "Exchange Notes") that under applicable law
requires prior regulatory approval until such regulatory approval has been
obtained. The Optionee will not Transfer, pledge, mortgage, hypothecate or
grant a security interest in this Option, any of the Shares or Exchange Notes
(unless, with respect to such Shares or Exchange Notes, such Shares or
Exchange Notes were previously issued pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Act")) except
pursuant to (A) an effective registration statement under the Act or (B) an
applicable exemption from registration under the Act. In connection with any
Transfer by the Optionee pursuant to clause (B) of the immediately preceding
sentence, the Optionee shall furnish to the Corporation an opinion of counsel
reasonably satisfactory to the Corporation to the effect that the proposed
transfer or conveyance would not be in violation of the Act. The
8
Optionee may not, during the period (the "Restricted Period") ending upon the
earliest to occur of (i) the first anniversary of the date hereof, (ii) a
Change of Control, (iii) a breach by the Corporation of any of its
obligations under any of Sections 6.6, 6.13, 6.14, 6.16, 6.17 or 6.18 of the
Securities Purchase Agreement or any of its material obligations under the
Registration Rights Agreement, and (iv) the date on which the full amount of
dividends payable on the Series E Preferred Stock, Series F Preferred Stock
or the Series G Preferred Stock for any two quarterly dividend periods shall
not have been paid, the Optionee will not Transfer any portion of the Option,
the Shares or the Exchange Notes except (1) to an Affiliate of the Purchaser
or a partner of Insurance Partners, L.P. or Insurance Partners Offshore
(Bermuda), L.P., in each case who agrees to be bound by the restrictions of
this Section 5.1 (and, in the case of a transferee who is an Initial
Purchaser, agrees to be bound by the restrictions of Section 6.4 of the
Securities Purchase Agreement), (2) to a person or entity who agrees to be
bound by the restrictions of this Section 5.1 and Section 6.4 of the
Securities Purchase Agreement, the Transfer to whom has been approved in
advance
9
by the Board of Directors of the Corporation, (3) to a person or entity who
after such Transfer will beneficially own (to the knowledge of the Optionee,
based solely on the representation and warranty of such person or entity, and
knowledge available from a review of publicly available filings made by such
person or entity with respect to the beneficial ownership of Common Stock
under Section 13 of the Exchange Act) less than 5% of the Common Stock on a
fully diluted basis, or (4) pursuant to a tender offer (a) commenced by the
Corporation or (b) commenced by any other person or entity with respect to
which the Board of Directors of the Corporation shall send to shareholders a
statement that the Board of Directors (x) recommends approval of such tender
offer, or (y) is neutral with respect to such tender offer. Other than as
set forth in the first sentence of this Section 5.1, nothing contained in
this Section 5.1 shall restrict or prohibit the Purchaser from pledging,
mortgaging, hypothecating or granting a security interest in, or granting
participation rights in, the Option, the Shares or the Exchange Notes;
provided, however, that if a pledgee, mortgagee or holder of such security
-------- -------
interest forecloses on the Option, the Shares or
10
the Exchange Notes during the Restricted Period, it may do so only if such
pledgee, mortgagee or holder of such security interest agrees to be bound by
the restrictions of this Section 5.1 and Section 6.4 of the Securities
Purchase Agreement.
5.2 Restrictive Legend. Until such time as (i) a
------------------
registration statement with respect to the sale of this Option shall have
become effective under the Act and the Option shall have been disposed of in
accordance with such registration statement, (ii) this Option shall have been
sold as permitted by Rule 144 under the Act and the purchaser thereof does
not receive "restricted securities" as defined in Rule 144 or (iii) this
Option shall have been otherwise transferred, a new Option not bearing a
legend restricting further transfer shall have been delivered by the
Corporation and subsequent public distribution of this Option shall not in
the opinion of counsel to the Optionee require registration under the Act,
this Option shall be subject to a stop-transfer order and shall bear the
legend set forth hereon. So long as the Shares or Exchange Notes are
Registrable Securities, the Shares or Exchange Notes shall be subject to a
stop-transfer order and shall bear the
11
following legend by which each holder thereof shall be bound:
"[THE SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SHARES OR
OTHER SECURITIES ISSUABLE UPON EXCHANGE HEREOF] [THIS NOTE] MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 OR (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION THEREOF. ANY SALE PURSUANT TO CLAUSE (ii)
OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES TO THE EFFECT
SUCH SALE IS NOT IN VIOLATION OF THE ACT."
5.3 Removal of Legends. After termination of the requirement
------------------
that all or part of such legend be placed upon this Option, a certificate
representing the Shares or an Exchange Note, the Corporation shall, upon
receipt by the Corporation of evidence reasonably satisfactory to it that
such requirement has terminated and upon the written request of the holder of
this Option, such Shares or such Exchange Note, issue a new Option,
certificate for such Shares or Exchange Note that does not bear such legend.
5.4 Transfer of Option. Subject to Section 5.1, this Option
-------------------
shall be transferable, in whole or in part, upon delivery thereof to the
Corporation accompanied by an Assignment substantially in the form of
Exhibit B hereto duly endorsed by the Optionee. Upon any
12
registration of transfer, the Corporation shall deliver a new Option to the
person entitled thereto. This Option may be exchanged, at the option of the
Optionee, for another Option, or other Options of different denominations, of
like tenor and representing in the aggregate the right to purchase a like
number of Shares upon surrender to the Corporation.
6. Reservation of Shares. The Corporation shall retain and
----------------------
reserve a sufficient number of shares of Series G Preferred Stock in order to
meet its obligation hereunder. The Corporation agrees not to issue, sell,
assign, pledge, hypothecate, transfer or otherwise dispose of any shares of
Series G Preferred Stock except in accordance with this Option.
7. Amendment of Certificate of Amendment. Prior to the issuance
-------------------------------------
of any Shares upon exercise of this Option, without the prior written consent
of the Optionee, the Corporation will not (i) alter or repeal the Certificate
of Incorporation so as to affect the holders of Series G Preferred Stock
adversely or (ii) authorize, adopt or approve an amendment to the Certificate
of Incorporation that would increase or decrease the par value of the
13
Series G Preferred Stock, or alter or change the powers, preference or
special rights of the Series G Preferred Stock. Notwithstanding the
foregoing, nothing in this Section 7 shall prohibit the Corporation from
effecting a recapitalization, reorganization, consolidation or merger of, or
sale by, the Corporation if (A)(a) such recapitalization, reorganization,
consolidation, merger or sale constitutes a Specified Corporate Action,
(b) the Corporation has sufficient funds legally available to it (after
giving effect to such transaction) to redeem, at the then applicable price
under Section 4.3 pursuant to the terms hereof, the Option, (c) such
redemption shall not be prohibited by any agreement to which the Corporation
or any of its Subsidiaries is a party, by applicable law or otherwise,
(d) the Board of Directors of the Corporation, including a majority of the
directors who are not officers or employees of the Corporation, shall have
adopted a resolution confirming that such funds are available and that the
Optionee (pursuant to Section 4.3) has the right to require such redemption
and (e) the Corporation shall have set aside sufficient funds to meet the
applicable redemption payments through the Specified Corporate Action
Redemption
14
Date (except that no funds need be set aside with respect to any portion of
the Option if the Optionee has notified the Corporation that it will not
require redemption of such portion under Section 4.3) or (B) (1) the
Corporation shall be the resulting or surviving corporation, (2) the
resulting or surviving corporation will have after such recapitalization,
reorganization, consolidation or merger no Senior Stock or Parity Stock (each
as defined in the Certificate of Amendment) either authorized or outstanding
(except such Parity Stock of the Corporation as may have been authorized or
outstanding immediately preceding such consolidation or merger) or such stock
of the resulting or surviving corporation (having the same powers,
preferences and special rights of any such Parity Stock) as may be issued in
exchange therefor), (3) the Optionee will receive in exchange for this Option
an option to purchase the same number of shares of stock, with the same
preferences, rights and powers, of the resulting or surviving corporation,
(4) after such recapitalization, reorganization, consolidation or merger the
resulting or surviving corporation shall not be in breach of any of the terms
hereof, any of the Material Provisions of the Securities Purchase Agreement
(as defined
15
in the Certificate of Amendment) or any of its material obligations under the
Registration Rights Agreement and (5) all or substantially all the holders of
the outstanding shares of capital stock of the Corporation immediately prior
to such consolidation or merger are entitled to receive shares representing
50% or more of the then outstanding shares of capital stock of the resulting
or surviving corporation entitled to vote generally in the election of
directors.
8. Miscellaneous.
-------------
8.1 Binding Effect and Assignment. This Option and all of
-----------------------------
the provisions hereof shall be binding upon and inure to the benefit of the
Optionee and the Corporation and their respective successors and assigns.
8.2 Amendments and Modifications. This Option may not be
----------------------------
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
8.3 Notices. All notices or other communications given or
-------
made hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in person at, mailed by registered or
16
certified mail, return receipt requested, postage prepaid, or sent by a
reputable overnight courier to, the following addresses (and shall be deemed
effective at the time of receipt thereof).
If to the Corporation:
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Telecopy: (212) 440-3857
Attention: Chief Executive Officer
with copies to:
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Telecopy: (212) 440-3857
Attention: General Counsel
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
Attention: Edward A. Perell, Esq.
If to the Optionee:
TCC-PS Limited Partnership
c/o Insurance Partners Advisors, L.P.
One Chase Manhattan Plaza
44th Floor
New York, New York 10005
Telecopy: (212) 898-8720
Attention: Daniel L. Doctoroff
17
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Marilyn Sobel, Esq.
or to such other address as the person or entity to whom notice is to be
given may have previously furnished notice in writing to the other in the
manner set forth above.
8.4 Lost Options. Upon receipt of evidence satisfactory to
-------------
the Corporation of the loss, theft, destruction or mutilation of this Option
and upon reimbursement of the Corporation's reasonable incidental expenses,
the Corporation shall execute and deliver to the Optionee a new Option of
like date, tenor and denomination.
8.5 No Rights of a Shareholder. The Optionee shall not have,
--------------------------
solely on account of such status, any rights of a shareholder of the
Corporation, either at law or in equity, or to any notice of meetings of
shareholders or of any other proceedings of the Corporation. No adjustment
shall be made for dividends or other rights for which the record date is
prior to the issuance of a certificate or certificates for Shares upon each
exercise of this Option.
18
8.6 Entire Agreement. This Option, together with the
----------------
Securities Purchase Agreement and the Certificate of Amendment, contains the
entire understanding of the Optionee and the Corporation in respect of the
subject matter hereof, and supersedes all prior negotiations and
understandings between the parties with respect to such subject matter.
Subsequent to exercise of this Option into Shares, all rights and preferences
of such Shares shall be as specified in the Certificate of Amendment.
8.7 Governing Law. The validity, construction, enforcement
-------------
and interpretation of this Option shall be governed by the laws of the State
of New York applicable to agreements made and to be performed entirely within
such State.
8.8 Captions. The captions, headings and arrangements used
--------
in this Option are for convenience only and do not in any way affect, limit,
amplify or modify the terms and provisions hereof.
19
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
duly executed on the ___ day of _____________, 1994.
THE CONTINENTAL CORPORATION
By:____________________________
Name:
Title:
Attest:
___________________________
Name:
Title:
20
Exhibit A
---------
FORM OF ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to purchase
______ shares of Cumulative Preferred Stock, Series G ("Series G Preferred
Stock"), par value $4.00 per share, of The Continental Corporation covered by
the within Option and tenders payment herewith in the amount of $_____ in
accordance with the terms thereof, and requests that certificates for such
securities be issued in the name of, and delivered to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of shares of Series G Preferred Stock shall not be all
the shares of Series G Preferred Stock covered by the within Option, that a
new Option for the balance of the shares of Series G Preferred Stock covered
by the within Option be registered in the name of, and delivered to, the
undersigned at the address stated below.
Dated: ___________________
Signature:__________________________
Witness: __________________
21
EXHIBIT B
---------
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, ___________________ hereby sells, assigns, and
transfers unto ______________________ an Option to purchase __________ shares
of Cumulative Preferred Stock, Series G, par value $4.00 per share, of The
Continental Corporation, together with all right, title and interest therein,
and does hereby irrevocable constitute and appoint _____________ attorney to
transfer such Option on the books of the Corporation, with full power of
substitution.
Dated: ___________________
Signature ________________________
Witness: ____________________
EXHIBIT C
=============================================================================
=
REGISTRATION RIGHTS AGREEMENT
between
THE CONTINENTAL CORPORATION
and
The Original Holders of
the Series E Preferred Stock,
the Series F Preferred Stock and the Option
_______________________________________
Dated: _______________
_______________________________________
=============================================================================
=
TABLE OF CONTENTS
Page
----
1. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Registration Under Securities Act, etc. . . . . . . . . . . . . . . 1
2.1 Shelf Registration . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Incidental Registration . . . . . . . . . . . . . . . . . . . . 3
2.3 Registration Procedures . . . . . . . . . . . . . . . . . . . . 4
2.4 Underwritten Offerings . . . . . . . . . . . . . . . . . . . . 8
2.5 Preparation; Reasonable Investigation . . . . . . . . . . . . . 10
2.6 Limitations, Conditions and Qualifications
to Obligations under Registration Covenants . . . . . . . . . . 11
2.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 12
3. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4. Rule 144 and Rule 144A . . . . . . . . . . . . . . . . . . . . . . . 19
5. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . 19
6. Nominees for Beneficial Owners . . . . . . . . . . . . . . . . . . . 19
7. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9. Calculation of Percentage Interests in Registrable Securities . . . 21
10. No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . 21
11. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12. Certain Distributions . . . . . . . . . . . . . . . . . . . . . . . 21
13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
16. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
17. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
i
REGISTRATION RIGHTS AGREEMENT, dated ____________, between THE
CONTINENTAL CORPORATION, a New York corporation (the "Company"), and the
original holders of the Series E Preferred Stock, the Series F Preferred
Stock and the Option (each as defined in Section 1) set forth on the
signature pages hereof (the "Purchaser").
1. Background. Pursuant to a Securities Purchase Agreement,
----------
dated as of October __, 1994, between the Company and the Purchaser (the
"Purchase Agreement"), the Purchaser has agreed to purchase from the Company,
and the Company has agreed to issue to the Purchaser, (i) ____ shares of the
Company's Cumulative Convertible Preferred Stock, Series E (the "Series E
Preferred Stock") and (ii) ______ shares of the Company's Cumulative
Preferred Stock, Series F (the "Series F Preferred Stock"), each of a par
value of $4.00 per share. Pursuant to an Option (the "Option") dated as of
the date hereof, the Company has granted to the Purchaser an option (the
"Option") to purchase up to 1,250,000 shares of Cumulative Preferred Stock,
Series G (the "Series G Preferred Stock" and, together with the Series E
Preferred Stock and the Series F Preferred Stock, the "Preferred Stock"), par
value $4.00 per share. The Series E Preferred Stock may be converted at the
election of the holders thereof into shares of the Company's Common Stock,
par value $1.00 per share. The Series E Preferred Stock may be exchanged for
Convertible Subordinated Notes ("Convertible Subordinated Notes") and the
Series F Preferred Stock and the Series G Preferred Stock may be exchanged
for Subordinated Notes ("Subordinated Notes"), in each case upon the election
of the Company with the consent of all the holders of the applicable series
of Preferred Stock. Capitalized terms used herein but not otherwise defined
shall have the meanings given them in Section 3.
2. Registration Under Securities Act, etc.
---------------------------------------
2.1 Shelf Registration.
------------------
(a) Filing and Effectiveness of Shelf Registration. If
----------------------------------------------
the Original Purchaser or the holders of
50% of the Registrable Securities shall so request, on or before [eleven
months after Closing Date], the Company shall file a "shelf" registration
statement with respect to the Registrable Securities (as defined below) and
pursuant to Rule 415 under the Securities Act (the "Shelf Registration");
provided, however, that if the Company has at the time of such request filed
-------- -------
the Shelf Registration pursuant to the penultimate sentence of this Section
2.1(a), the Company may instead amend such Shelf Registration to register
such Registrable Securities. The Shelf Registration shall be on Form S-3 (or
any successor form) if the Company is then eligible to use Form S-3 (or such
successor form). The Company shall use its best efforts to have the Shelf
Registration declared effective as soon as reasonably practicable after such
filing, and shall use its best efforts to keep the Shelf Registration
continuously effective, subject to Section 2.6(a), from the date such Shelf
Registration is declared effective until such time as all of the Registrable
Securities shall cease to be Registrable Securities. Notwithstanding the
foregoing, upon the request of any holder of Registrable Securities that has
acquired such Registrable Securities upon foreclosure upon a security
interest granted in such Registrable Securities by the Original Purchaser,
the Company shall promptly file the Shelf Registration with respect to such
Registrable Securities, whether or not such request shall be made prior to
[eleven months after Closing Date], and use its best efforts to have the
Shelf Registration declared effective as soon as reasonably practicable after
such filing; provided, however, that if such Registrable Securities are not
-------- -------
shares of Common Stock, such Shelf Registration shall only be required to
cover the shares of Common Stock (if any) issuable upon conversion of such
Registrable Securities. The filing of the Shelf Registration in accordance
with the immediately preceding sentence shall not relieve the Company of any
of its other obligations under this Section 2.1(a).
(b) Supplements and Amendments; Expenses. The Company
------------------------------------
shall supplement or amend, if necessary, the Shelf Registration, as required
by the registration form utilized by the Company or by the instructions
applicable to such registration form or by the Securities Act or as
reasonably required by the Original Purchaser or the holder or holders of (or
any underwriter for) a majority of the Registrable Securities and the Company
shall furnish to the holders of the Registrable Securities to which the Shelf
Registration relates copies of any such supplement or amendment prior to its
being used
2
and/or filed with the Commission. The Company shall pay all Registration
Expenses in connection with the Shelf Registration, whether or not it becomes
effective, and whether all, none or some of the Registrable Securities are
sold pursuant to the Shelf Registration. In no event shall the Shelf
Registration include securities other than Registrable Securities, unless the
Initial Purchaser consents to such inclusion.
(c) Underwriting Procedures. If the Original Purchaser
-----------------------
so elects or, in the event the Original Purchaser does not hold 50% of the
Registrable Securities, if the holders of a majority of the Registrable
Securities so elect, the offering of all or a portion of such Registrable
Securities pursuant to the Shelf Registration shall be in the form of an
underwritten offering and the managing underwriter or underwriters selected
for such offering shall be selected by the Original Purchaser or such
holders, as the case may be, and reasonably acceptable to the Company. The
Original Purchaser or such holders shall provide the Company with notice of
the identity of the managing underwriter or underwriters it or they have
selected a reasonable time prior to the commencement of any such underwritten
offering.
2.2 Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If at any
---------------------------------------
time subsequent to the [first anniversary of Closing Date] the Company at any
time proposes to register any of its Common Stock under the Securities Act by
registration on any form other than Form S-4 or S-8, whether or not for sale
for its own account, it will each such time give prompt written notice to all
registered holders of Registrable Securities of its intention to do so and of
such holders' rights under this Section 2.2. Upon the written request of any
such holder (a "Requesting Holder") made as promptly as practicable and in
any event within 20 days after the receipt of any such notice (10 days if the
Company states in such written notice or gives telephonic or telecopied
notice to all registered holders of Registrable Securities, with written
confirmation to follow promptly thereafter, stating that (i) such
registration will be on Form S-3 and (ii) such shorter period of time is
required because of a planned filing date) (which request shall specify the
Registrable Securities intended to be disposed of by such Requesting Holder
and the intended method of disposition), the Company will use its reasonable
best efforts
3
to effect the registration under the Securities Act of all Registrable
Securities that the Company has been so requested to register by the
Requesting Holders thereof to the extent required to permit the disposition
of such Registrable Securities in accordance with the intended methods
thereof described as aforesaid; provided, however, that prior to the
-------- -------
effective date of the registration statement filed in connection with such
registration, immediately upon notification to the Company from the managing
underwriter of the price at which such securities are to be sold, if such
price is below the price which any Requesting Holder shall have indicated to
be acceptable to such Requesting Holder, the Company shall so advise such
Requesting Holder of such price, and such Requesting Holder shall then have
the right to withdraw its request to have its Registrable Securities included
in such registration statement; provided further, that if, at any time after
-------- -------
giving written notice of its intention to register any securities and prior
to the effective date of the registration statement filed in connection with
such registration, the Company shall determine for any reason not to register
or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to each Requesting Holder
of Registrable Securities and (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from any obligation
of the Company to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights of any holder or holders of
Registrable Securities under Section 2.1, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering
any Registrable Securities, for the same period as the delay in registering
such other securities. No registration effected under this Section 2.2 shall
relieve the Company of its obligations under Section 2.1. Notwithstanding
the foregoing, if the Shelf Registration is effective at the time the Company
proposes to effect a registration subject to this Section 2.2(a), the Company
shall have no obligation to notify the holders of Registrable Securities or
effect the registration of any such securities under this Section 2.2(a)
unless the securities to be registered by the Company are to be disposed of
in an underwritten offering.
(b) Priority in Incidental Registrations. If the
------------------------------------
managing underwriter of any underwritten offering shall inform the Company by
letter that, in its opinion, the number or type of Registrable Securities
4
requested to be included in such registration would adversely affect such
offering, and the Company has so advised the Requesting Holders in writing,
then the Company will include in such registration, to the extent of the
number and type that the Company is so advised can be sold in (or during the
time of) such offering, first, all securities proposed by the Company to be
-----
sold for its own account, second, such Registrable Securities requested to be
------
included in such registration pursuant to this Agreement, pro rata among such
Requesting Holders on the basis of the estimated proceeds from the sale
thereof and, third, all other securities proposed to be registered.
-----
(c) Expenses. The Company will pay all Registration
--------
Expenses in connection with any registration effected pursuant to this
Section 2.2.
2.3 Registration Procedures. If and when-ever the Company is
-----------------------
required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 2.1 and 2.2, the Company will, as
expeditiously as possible:
(i) prepare and file with the Commission the requisite
registration statement to effect such registration and thereafter use
its best efforts to cause such registration statement to become
effective; provided, however, that the Company may discontinue any
-------- -------
registration of its securities that are not Registrable Securities (and,
under the circumstances specified in Section 2.2(a), its securities that
are Registrable Securities) at any time prior to the effective date of
the registration statement relating thereto;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities
covered by such registration statement until such time as all of such
Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement; provided, however, that in the
-------- -------
case of a registration statement filed pursuant to Sec-
5
tion 2.2(a), not later than 135 days after the effective date thereof;
(iii) furnish to each selling holder of Registrable
Securities covered by such registration statement, such number of
conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits,
appropriately redacted in the case of those exhibits filed on a
confidential basis), and so long as the Company is required to keep such
registration statement effective pursuant to subdivision (ii) such
number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities
Act, and such other documents, as such selling holder may reasonably
request;
(iv) use its best efforts (x) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such States of
the United States of America where an exemption is not available and as
the selling holder of Registrable Securities covered by such
registration statement shall reasonably request, (y) to keep such
registration or qualification in effect for so long as such registration
statement remains in effect and (z) to take any other action that may be
necessary or advisable to enable such selling holders to consummate the
disposition in such jurisdictions of the securities to be sold by such
selling holders, except that the Company shall not for any such purpose
be required to (a) qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not, but for the
requirements of this subdivision (iv), be obligated to be so qualified,
(b) become subject to taxation in any jurisdiction where it would not
then so subject or (c) take any action that would subject it to general
service of process in any such jurisdiction;
(v) use its reasonable best efforts to cause all
Registrable Securities covered by such registration statement to be
registered with or approved by such other federal or state governmental
agencies or authorities as may be necessary in the opinion of
6
counsel to the Company and counsel to the selling holder or selling
holders of Registrable Securities to enable the seller or sellers
thereof to consummate the disposition of such Registrable Securities;
(vi) furnish at the effective date of such registration
statement and the date of closing of the sale of the Registrable
Securities (whether or not such sale is underwritten), to each selling
holder of Registrable Securities, and each such selling holder's
underwriters, if any, a signed counterpart of:
(x) an opinion of counsel for the Company, dated
the effective date of such registration statement (or such date of
sale, as applicable), and
(y) a "comfort" letter signed by the independent
public accountants who have certified the Company's financial
statements included or incorporated by reference in such
registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of the accountants' comfort letter, with respect to events
subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' comfort
letters delivered to the underwriters in underwritten public offerings
of securities;
(vii) notify each selling holder of Registrable Securities
covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
upon discovery that, or upon the happening of any event known to the
Company as a result of which, the prospectus included in such registra-
tion statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, in
the light of the circumstances under which they were made, and, subject
to Section 2.6(a), promptly prepare and, at the request of any such
selling holder, furnish to it a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
7
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances under which they were made;
(viii) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and, if
required, make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with the
first full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 promulgated thereunder,
and promptly furnish to each such selling holder of Registrable
Securities a copy of any amendment or supplement to such registration
statement or prospectus;
(ix) provide and cause to be maintained a transfer agent
and registrar (which, in each case, may be the Company) for all
Registrable Securities covered by such registration statement from and
after a date not later than the effective date of such registration; and
(x) use its best efforts to list all Registrable
Securities covered by such registration statement on The New York Stock
Exchange.
The Company may require each selling holder of Registrable Securities as to
which any registration is being effected to furnish the Company such
information regarding such selling holder and the distribution of such
securities as the Company may from time to time reasonably request in
writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in subdivision (vii) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
8
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies, then
in such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
2.4 Underwritten Offerings.
----------------------
(a) Requested Underwritten Offerings. If requested by
--------------------------------
the underwriters for any underwritten offering by holders of Registrable
Securities pursuant to the Shelf Registration Statement, the Company will use
all reasonable efforts to enter into an underwriting agreement with such
underwriters for such offering, such agreement to be reasonably satisfactory
in substance and form to the Company, the Original Holder (or, if the
Original Holder does not hold 50% of the Registrable Securities to be
included in such underwritten offering, the holders of a majority of the
Registrable Securities to be included in such underwritten offering) and the
underwriters and to contain such representations and warranties by the
Company and such other terms as are customary in agreements of that type,
including, without limitation, indemnities to the effect and to the extent
provided in Section 2.7. The holders of the Registrable Securities proposed
to be sold by such underwriters will reasonably cooperate with the Company in
the negotiation of the underwriting agreement. Such holders of Registrable
Securities to be sold by such underwriters shall be parties to such
underwriting agreement and may, at their option, require that any or all of
the representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. No holder of
Registrable Securities shall be required to make any representations or
warranties to or agreements with the Company other than representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution or any other
representations required by applicable law.
9
(b) Incidental Underwritten Offerings. If the Company
---------------------------------
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any
Requesting Holder of Registrable Securities in the notice given to the
Company by such Requesting Holder under Section 2.2(a), use its reasonable
best efforts to arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such Requesting Holder among the
securities of the Company to be distributed by such underwriters, subject to
the provisions of Section 2.2(b). The holders of Registrable Securities to
be distributed by such underwriters shall be parties to the underwriting
agreement between the Company and such underwriters and may, at their option,
require that any or all of the representations and warranties by, and the
other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such holders of Registrable
Securities. Any such Requesting Holder of Registrable Securities shall not
be required to make any representations or warranties to or agreements with
the Company or the underwriters other than representations, warranties or
agreements regarding such Requesting Holder, such Requesting Holder's
Registrable Securities and such Requesting Holder's intended method of
distribution or any other representations required by applicable law. The
holders of Registrable Securities, if requested by the managing underwriter
or underwriters of such underwritten offering, shall not, except as part of
such underwritten offering, effect any public sale or distribution of
Registrable Securities of the same class as any securities included in such
underwritten offering (including a sale pursuant to Rule 144) during the
10-day period prior to, and during the 90-day period beginning on, the
closing date of such underwritten offering, to the extent timely notified in
writing by the Company or the managing underwriter or underwriters. No
holder of Registrable Securities may participate in any such underwritten
offering unless such holder (i) agrees to sell such holder's Registrable
Securities on the basis provided in the underwriting agreement and
(ii) completes and executes all questionnaires, powers of attorney, and other
documents reasonably required under the terms of the underwriting agreement.
10
(c) Underwriting Discounts and Commissions. The holders
--------------------------------------
of Registrable Securities sold in any offering pursuant to Section 2.4(a) or
Section 2.4(b) shall pay all underwriting discounts and commissions of the
underwriter or underwriters with respect to the Registrable Securities sold
thereby.
2.5 Preparation; Reasonable Investigation. In connection with
-------------------------------------
the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the holders
of Registrable Securities registered under such registration statement, their
underwriters, if any, and their respective counsel the opportunity to
participate in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each amendment
thereof or supplement thereto, and will give each of them such reasonable
access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary, in the opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act; provided, however, that each such holder, underwriter or
-------- -------
counsel shall receive such information only if such holder, underwriter or
counsel and their respective agents and representatives shall have expressly
agreed that any information that is designated in writing by the Company, in
good faith, as confidential at the time of delivery of such information,
shall be kept confidential by such holder, underwriters, counsel, agent or
representative and not be used for any purpose other than in connection with
the review by such holder, underwriter, counsel, agent or representative of
the registration statement except to the extent (i) disclosure of such
information is required by court or administrative order or applicable law,
(ii) disclosure of such information, in the opinion of counsel to such
holder, underwriter, counsel, agent or representative is necessary to avoid
or correct a misstatement or omission of a material fact in the registration
statement, prospectus or any supplement or post-effective amendment thereto,
(iii) disclosure of such information is in the opinion of counsel for any
such holder, underwriter, counsel, agent or representative necessary or
advisable in connection with any action, claim, suit or proceeding, directly
or indirectly, involving or potentially involving such holder, underwriter,
counsel, agent or representative and arising out of, or based upon, relating
to or involving this Agreement or any
11
of the transactions contemplated hereunder or (iv) such information becomes
generally available to the public other than as a result of a disclosure or
failure to safeguard by such holder, underwriter, counsel, agent or
representative. Each selling holder of such Registrable Securities further
agrees that it will, upon learning that disclosure of any such information is
sought pursuant to a court or administrative order, give prompt notice
thereof to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of the information deemed
confidential. The Company shall promptly notify the holders of Registrable
Securities and their counsel of any stop order issued or threatened by the
Commission and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
2.6 Limitations, Conditions and Qualifications to Obligations
---------------------------------------------------------
under Registration Covenants.
----------------------------
(a) Limitation on Requirement to File or Amend
------------------------------------------
Registration Statement. Anything in this Agreement to the contrary
----------------------
notwithstanding, it is understood and agreed that the Company shall not be
required to file a Registration Statement, amendment or post-effective amend-
ment thereto or prospectus supplement or to supplement or amend any
Registration Statement if the Company is then involved in discussions
concerning, or otherwise engaged in, an acquisition, disposition, financing
or other material transaction and the Company determines in good faith that
the making of such a filing, supplement or amendment at such time would
materially adversely effect or interfere with such transaction so long as the
Company shall, as soon as practicable thereafter (but in no event more than
90 days thereafter) make such filing, supplement or amendment. The Company
shall promptly give the holders of Registrable Securities written notice of
such postponement, containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay, provided,
--------
however, that nothing herein shall require the Company to disclose any terms
-------
of any such transaction or the identity of any party thereto. Upon receipt
by a holder of notice of an event of the kind described in this Section
2.6(a), such holder shall forthwith discontinue such holder's disposition of
Registrable Securities until such holder's receipt of notice from the Company
that such disposition may continue and of any supplemented or amended
prospectus indicated in such notice.
12
(b) Provision of Information by Holder. Each selling
----------------------------------
holder of Registrable Securities as to which any registration is being
effected agrees, as a condition to the registration obligations with respect
to such selling holder provided herein, to furnish promptly to the Company
such information regarding the selling holder and the distribution of such
Registrable Securities as the Company may, from time to time, reasonably
request in writing to comply with the Securities Act and other applicable
law. The Company may exclude from such registration the Registrable
Securities of any selling holder who unreasonably fails to furnish such
information within a reasonable time after receiving such request. If the
identity of a selling holder of Registrable Securities is to be disclosed in
a registration statement, such selling holder shall be permitted to include
all information regarding such selling holder as it shall reasonably request.
(c) Discontinuation of Offering. Each holder of
---------------------------
Registrable Securities agrees that, upon receipt of written notice from the
Company of (i) the issuance by the Commission of a stop order suspending the
effectiveness of a registration statement or of any order preventing or
suspending the use of any preliminary prospectus or the initiation of any
proceedings for that purpose or (ii) the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of a registration statement or any Registrable Securities
covered thereby for offer or sale in any jurisdiction or the initiation of
any proceeding for such purpose, such holder shall forthwith discontinue the
disposition of such Registrable Securities covered by such registration
statement or prospectus (but in the case of clause (ii), solely in the
applicable jurisdiction) until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by the Company, or until it
is advised in writing by the Company that the use of the applicable
prospectus may be resumed, and has received copies of any amendments or
supplements thereto, and, if so directed by the Company, such holder will
deliver to the Company all copies, other than permanent file copies, then in
such holder's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
13
2.7 Indemnification.
---------------
(a) Indemnification by the Company. The Company will,
------------------------------
and hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Section 2.1 or 2.2, each holder of any Regis-
trable Securities covered by such registration statement, and each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such holder or any
such underwriter within the meaning of Section 15 of the Securities Act, and
their respective directors, officers, partners, agents and affiliates,
against any losses, claims, damages or liabilities, joint or several, to
which such holder or underwriter or any such director, officer, partner,
agent, affiliate or controlling person may become subject under the
Securities Act or otherwise, including, without limitation, the fees and
expenses of legal counsel, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement filed by the Company
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances in
which they were made not misleading, and the Company will reimburse such
holder or underwriter and each such director, officer, partner, employee,
agent, affiliate and controlling Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided, however, that
-------- -------
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such holder,
underwriter, director, officer, partner, employee, agent, affiliate or
controlling Person, as the case may be, expressly for use in the preparation
thereof; provided further, that the Company shall not be liable in any such
-------- -------
14
case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue
statement of any material fact contained in any such registration statement,
preliminary prospectus, final prospectus or summary prospectus contained
therein or any omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading in a prospectus or pros-
pectus supplement, if (i) such untrue statement or omission is completely
corrected in an amendment or supplement to such prospectus or prospectus
supplement, the seller of the Registrable Securities has an obligation under
the Securities Act to deliver a prospectus or prospectus supplement in
connection with such sale of Registrable Securities and the seller of
Registrable Securities thereafter fails to deliver such prospectus or
prospectus supplement as so amended or supplemented prior to or concurrently
with the sale of Registrable Securities to the person asserting such loss,
claim, damage or liability after the Company has furnished such seller with a
sufficient number of copies of the same or (ii) if the seller received
written notice from the Company of the existence of such an untrue statement
or such an omission and the seller continued to dispose of Registrable
Securities prior to the time of the receipt of either (a) an amended or
supplemented prospectus or prospectus supplement that completely corrected
the untrue statement or the omission or (b) a notice from the Company that
the use of the existing prospectus or prospectus supplement may be resumed.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director,
officer, partner, employee, agent, affiliate or controlling person and shall
survive the transfer of such securities by such seller.
(b) Indemnification by the Sellers. As a condition to
------------------------------
including any Registrable Securities in any registration statement, the
Company shall have received an undertaking satisfactory to it from the
prospective seller of such Registrable Securities, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section
2.7(a)) the Company, and each director of the Company, each officer of the
Company and each other Person, if any, who participates as an underwriter in
the offering or sale of such securities and each other Person who controls
the Company or any such underwriter within the meaning of the Securities Act,
with respect to any statement
15
or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such seller expressly for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, that (A) the
-------- -------
indemnifying party shall not be liable in any such case to the extent that
any such statement or omission is completely corrected (x) in the final
prospectus, in the case of a preliminary prospectus, or (y) in an amendment
or supplement to a prospectus or prospectus supplement (provided, however,
-------- -------
that nothing in this clause (y) shall limit the indemnifying party's liabi-
lity with respect to sales made prior to the receipt by the Company from the
indemnifying party of written notice of such an untrue statement or such an
omission) and (B) the liability of such indemnifying party under this Section
2.7(b) shall be limited to the amount of proceeds received by such indem-
nifying party in the offering giving rise to such liability. Such indemnity
shall remain in full force and effect, regardless of any investigation made
by or on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of such securities by such holder.
(c) Notices of Claims, etc. Promptly after receipt by
-----------------------
an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in Section 2.7(a) or (b), such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement
of such action; provided, however, that the failure of any indemnified party
-------- -------
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding subdivisions of this Section 2.7, except
to the extent that the indemnifying party is materially prejudiced by such
failure to give notice. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it may wish, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; provided,
--------
however, that (i) if the indemnified party reasonably believes that it is
-------
advisable for it to be represented by
16
separate counsel because there exists or may exist a conflict of interest
between its interests and those of the indemnifying party with respect to
such claim, or there exist defenses available to such indemnified party that
may not be available to the indemnifying party, or (ii) if the indemnifying
party shall fail to assume responsibility for such defense, the indemnified
party may retain counsel satisfactory to it and, in the case of clause (i),
reasonably satisfactory to the indemnifying party, and the indemnifying party
shall pay all fees and expenses of such counsel; provided further, that the
-------- -------
indemnifying party shall not be deemed to have failed to assume
responsibility for such defense if the indemnifying party has not received
notice of such claim pursuant to this Section 2.7(c). In the event an
indemnifying party elects not to assume, or shall not be entitled to assume
because of a conflict of interest between its interests and those of the
indemnified party, the defense of a claim, such indemnifying party shall not
be obligated to pay the fees and expenses of more than one counsel or firm of
counsel in any jurisdiction in any one legal action or group of related legal
actions for all parties indemnified by such indemnifying party in respect of
such claim, unless in the reasonable judgment of any such indemnified party a
conflict of interest may exist between such indemnified party and any other
of such indemnified parties in respect of such claim. No indemnifying party
shall be liable for any settlement of any action or proceeding effected
without its written consent, which consent shall not be unreasonably withheld
or delayed. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation or that requires action
other than the payment of money by the indemnifying party.
(d) Contribution. If the indemnification provided for
------------
in this Section 2.7 shall for any reason be held by a court to be unavailable
to an indemnified party under Section 2.7(a) or (b) hereof in respect of any
loss, claim, damage or liability, or any action in respect thereof, then, in
lieu of the amount paid or payable under Section 2.7(a) or (b), the
indemnified party and the indemnifying party under Section 2.7(a) or (b)
shall contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in
17
connection with investigating the same), (i) in such proportion as is
appropriate to reflect the relative fault of the Company and the prospective
sellers of Registrable Securities covered by the registration statement that
resulted in such loss, claim, damage or liability, or action or proceeding in
respect thereof, with respect to the statements or omissions which resulted
in such loss, claim, damage or liability, or action or proceeding in respect
thereof, as well as any other relevant equitable considerations or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as shall be appropriate to reflect the relative
benefits received by the Company and such prospective sellers from the
offering of the securities covered by such registration statement; provided,
--------
however, that for purposes of this clause (ii), the relative benefits
-------
received by the prospective sellers shall be deemed not to exceed the amount
of proceeds received by such prospective sellers. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. Such prospective sellers'
obligations to contribute as provided in this Section 2.7(d) are several in
proportion to the relative value of their respective Registrable Securities
covered by such registration statement and not joint. In addition, no Person
shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such Person's consent,
which consent shall not be unreasonably withheld.
(e) Other Indemnification. Indemnification and
---------------------
contribution similar to that specified in the preceding subdivisions of this
Section 2.7 (with appropriate modifications) shall be given by the Company
and each holder of Registrable Securities with respect to any required regis-
tration or other qualification of securities under any federal or state law
or regulation of any governmental authority other than the Securities Act.
(f) Indemnification Payments. The indemnification and
------------------------
contribution required by this Section 2.7 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as
and when bills are received or expense, loss, damage or liability is
incurred.
18
3. Definitions. As used herein, unless the context otherwise
-----------
requires, the following terms have the following respective meanings:
"Commission" means the Securities and Exchange Commission or any
----------
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean and include the Common Stock, par value
------------
$1.00 per share, of the Company and each other class of capital stock of the
Company that does not have a preference over any other class of capital stock
of the Company as to dividends or upon liquidation, dissolution or winding up
of the Company and, in each case, shall include any other class of capital
stock of the Company into which such stock is reclassified or reconstituted.
"Conversion Shares" means the shares of Common Stock issued or
-----------------
issuable upon conversion of the Series E Preferred Stock or the Convertible
Subordinated Notes pursuant to the terms of the Certificate of Amendment (as
defined in the Purchase Agreement).
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include a reference to the comparable section, if any, of any
such similar Federal statute.
"Exchange Notes" means, collectively, the Convertible Subordinated
--------------
Notes and the Subordinated Notes.
"Original Purchaser" means the initial purchaser or purchasers of
------------------
the Series E Preferred Stock, the Series F Preferred Stock and the Option.
"Person" means any individual, firm, corporation, partnership,
------
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind.
"Registrable Securities" means (i) any Conversion Shares and any
----------------------
Related Registrable Securities (ii) any Exchange Notes and any Related
Registrable Securities and (iii) any shares of the Preferred Stock and any
Related
19
Registrable Securities. As to any particular Registrable Securities, once
issued, such securities shall cease to be Registrable Securities when (a) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they shall
have been sold as permitted by Rule 144 and the purchaser thereof does not
receive "restricted securities" as defined in Rule 144, (c) they shall have
been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not in the opinion of counsel to
the holders, require registration of them under the Securities Act or (d)
they shall have ceased to be outstanding. All references to percentages of
Registrable Securities shall be calculated pursuant to Section 9.
"Registration Expenses" means all expenses incident to the
---------------------
Company's performance of or compliance with Section 2, including, without
limitation, all registration and filing fees, all fees of the New York Stock
Exchange, Inc., other applicable national securities exchanges or the
National Association of Securities Dealers, Inc., all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating
and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of "comfort" letters required by or
incident to such performance and compliance, any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (excluding
any underwriting discounts or commissions with respect to the Registrable
Securities) and the reasonable fees and expenses of one special counsel
retained by the selling holders (selected by selling holders representing a
majority of the Registrable Securities covered by such registration);
provided, however, that in the event the Company shall determine, in
-------- -------
accordance with Section 2.2(a) or Section 2.6, not to register any securities
with respect to which it had given written notice of its intention to so
register to holders of Registrable Securities, all of the costs of the type
set forth in this definition and incurred by Requesting Holders in connection
with such registration on or prior to the date on which the Company notifies
the Requesting Holders of such determination shall be deemed Registration
Expenses.
20
"Related Registrable Securities" means with respect to Conversion
------------------------------
Shares, Exchange Notes, Preferred Stock or Common Stock, any securities of
the Company issued or issuable with respect to any Conversion Shares,
Exchange Notes, Preferred Stock or Common Stock by way of a dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise.
"Requesting Holder" is defined in Section 2.2.
-----------------
"Rule 144" means Rule 144 under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"Securities Act" means the Securities Act of 1933, as amended, or
--------------
any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933, as amended, shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
4. Rule 144 and Rule 144A. The Company shall take all actions
----------------------
reasonably necessary to enable holders of Registrable Securities to sell such
securities without registration under the Securities Act within the
limitation of the provisions of (a) Rule 144 under the Securities Act, as
such Rule may be amended from time to time, (b) Rule 144A under the
Securities Act, as such Rule may be amended from time to time, or (c) any
similar rules or regulations hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
5. Amendments and Waivers. This Agreement may be amended with
----------------------
the consent of the Company and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to such
amendment, action or omission to act, of the holder or holders of at least
50% of the Registrable Securities affected by such amendment, action or
omission to act. Each holder of any Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized
21
by this Section 5, whether or not such Registrable Securities shall have been
marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any
------------------------------
Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election in writing
delivered to the Company, be treated as the holder of such Registrable
Securities for purposes of any request or other action by any holder or
holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects,
the Company may require assurances reasonably satisfactory to it of such
owner's beneficial ownership of such Registrable Securities.
7. Notices. All notices, demands and other communications
-------
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested,
telecopier, courier service or personal delivery:
(a) if to the Purchaser, addressed to it in the manner
set forth in the Purchase Agreement, or at such other address as it shall
have furnished to the Company in writing in the manner set forth herein;
(b) if to any other holder of Registrable Securities, at
the address that such holder shall have furnished to the Company in writing
in the manner set forth herein, or, until any such other holder so furnishes
to the Company an address, then to and at the address of the last holder of
such Registrable Securities who has furnished an address to the Company; or
(c) if to the Company, addressed to it in the manner set
forth in the Purchase Agreement, or at such other address as the Company
shall have furnished to each holder of Registrable Securities at the time
outstanding in the manner set forth herein.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; when delivered
to a courier, if delivered by overnight courier service; two business days
22
after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
8. Assignment. This Agreement shall be binding upon and inure to
----------
the benefit of and be enforceable by the parties hereto and, with respect to
the Company, its respective successors and permitted assigns and, with
respect to the Purchaser, any holder of any Registrable Securities, subject
to the provisions respecting the minimum numbers of percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein. Except by operation of law, this
Agreement may not be assigned by the Company without the prior written
consent of the holders of 50% of the Registrable Securities at the time such
consent is requested.
9. Calculation of Percentage Interests inRegistrable Securities.
------------------------------------------------------------
For purposes of this Agreement, all references to a percentage of the
Registrable Securities shall be calculated as follows: such percentage of
each of the total number of Conversion Shares and shares of Preferred Stock
outstanding at the time such calculation is made and such percentage of the
outstanding principal amount of Exchange Notes outstanding at such time.
10. No Inconsistent Agreements. The Company will not hereafter
--------------------------
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement. Without limiting the generality of the foregoing, the Company
will not hereafter enter into any agreement with respect to its securities
that grants, or modify any existing agreement with respect to its securities
to grant, to the holder of its securities in connection with an incidental
registration of such securities equal or higher priority to the rights
granted to the Purchasers under this Section 2.2(b).
11. Remedies. Each holder of Registrable Securities, in addition
--------
to being entitled to exercise all rights granted by law, including recovery
of damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
23
12. Certain Distributions. The Company shall not at any time make
---------------------
a distribution on or with respect to the Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the resulting or surviving corporation and such Registrable
Securities are not changed or exchanged) of securities of another issuer if
holders of Registrable Securities are entitled to receive such securities in
such distribution as holders of Registrable Securities and any of the
securities so distributed are registered under the Securities Act, unless the
securities to be distributed to the holders of Registrable Securities are
also registered under the Securities Act.
13. 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 Purchaser shall be enforceable to the fullest extent permitted by law.
14. Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement (including the exhibits and schedules thereto), the Option and the
Preferred Stock, is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
and therein. This Agreement, the Purchase Agreement (including the exhibits
and schedules thereto) and the Preferred Stock supersede all prior agreements
and understandings between the parties with respect to such subject matter.
15. Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not limit or otherwise affect the meaning hereof.
16. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
24
17. Counterparts. This Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed shall be
deemed an original and both of which taken together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and delivered by their respective representatives hereunto
duly authorized as of the date first above written.
THE CONTINENTAL CORPORATION
By:______________________________
Name:
Title:
[Original Purchasers]
_________________________________
_________________________________
_________________________________
Exhibit D
Opinion of General Counsel
--------------------------
(i) The Company and each of its
Material Subsidiaries (i) has been duly
incorporated and is validly existing as a
corporation in good standing under the laws of the
jurisdiction in which it is chartered or
organized, with full corporate power and authority
to own its properties and conduct its business as
described in the Annual Report, and (ii) is duly
organized as a foreign corporation, licensed and
in good standing under the laws of each
jurisdiction where the conduct of its business or
its ownership, leasing or operation of property
requires such qualification (with such exceptions
as shall not individually or in the aggregate have
a Material Adverse Effect);
(ii) Exhibit 21 of the Annual Report
is a true, accurate and correct statement of all
the information required to be set forth therein
by the regulations of the SEC; all the outstanding
shares of stock of each Material Subsidiary have
been duly and validly authorized and issued and
are fully paid and nonassessable and all
outstanding shares (except for directors'
qualifying shares) of capital stock of the
Material Subsidiaries are owned by the Company
either directly or through wholly-owned
Subsidiaries of the Company free and clear of any
perfected security interest and, to the best of
Mr. Gleason's knowledge, any other Encumbrances
(other than such Encumbrances that may exist under
federal and state securities law or any
Encumbrances between or among the Company and/or
any Subsidiary of the Company), and there are no
rights granted to or in favor of any third party
(whether acting in an individual, fiduciary or
other capacity), other than the Company or any
Subsidiary of the Company, to acquire any such
capital stock, any additional capital stock or any
other securities of any Material Subsidiary,
except where the failure to so own the stock of a
Material Subsidiary would not have a Material
Adverse Effect;
(iii) Neither the Company nor any of
the Material Subsidiaries is in violation of any
term or provision of (A) its Certificate of
Incorporation or By-laws or (B) any judgment,
decree or order applicable to the Company or such
2
Material Subsidiary, or any applicable statute,
rule or regulation, except with respect to clause
(B) of this paragraph such violations that would
not individually or in the aggregate have a
Material Adverse Effect;
(iv) To Mr. Gleason's actual
knowledge, except as set forth in the SEC
Documents filed with the SEC before the date
hereof, no event of default exists, and no event
has occurred that with notice, lapse of time, or
both, would constitute an event of default or,
upon the consummation by the Company of the
transactions contemplated by the Agreement or any
of the Transaction Documents, will exist in the
due performance and observance of any term,
covenant or condition of any indenture, mortgage,
loan agreement, note or other agreement of
instrument for borrowed money, any guarantee of
any agreement for borrowed money, any guarantee of
any agreement or instrument to which the Company
or any of the Material Subsidiaries is a party or
by which it or any of them is bound or to which
any of the properties, assets or operations of the
Company or any of the Material Subsidiaries is
subject, except such events of default that would
not individually or in the aggregate have a
Material Adverse Effect;
(v) To Mr. Gleason's actual
knowledge, there is no pending or threatened
action or suit or proceeding before any court or
governmental authority or body or any arbitrator
involving the Company or any of its Subsidiaries
that could reasonably be expected to have a
Material Adverse Effect;
(vi) To Mr. Gleason's actual
knowledge, there is no pending or threatened
action, suit or proceeding before any court or
governmental agency or body or any arbitrator to
which the Company or any Subsidiary is or is
threatened to be made a party that questions the
validity of the Agreement or the Transaction
Documents or any action to be taken pursuant
thereto;
(vii) The Company's authorized equity
capitalization is as set forth in Section 4.2 of
the Agreement; the outstanding shares of capital
stock of the Company have been duly authorized,
are validly issued, fully paid and nonassessable
and have been issued in compliance with applicable
3
federal and state securities law; and the holders
of outstanding shares of stock of the Company are
not entitled pursuant to the Certificate of
Incorporation or the By-laws of the Company or any
agreement to preemptive or similar rights with
respect to the securities of the Company;
(viii) The Company has all requisite
corporate power and authority to execute and
deliver the Agreement and the Transaction
Documents and has taken all requisite action
required by applicable law, the Certificate of
Incorporation, its By-Laws or otherwise required
to be taken by it to authorize the execution,
delivery and performance by it of the Agreement
and the Transaction Documents, to carry out the
provisions and conditions of the Agreement and the
Transaction Documents and the transactions
contemplated in the Agreement and the Transaction
Documents, to issue and sell the Shares, the
Option, the Option Shares and the Conversion
Shares and to otherwise perform its obligations
contemplated in the Agreement and the Transaction
Documents;
(ix) The issuance and sale of the
Shares and the Option and the issuance of the
Option Shares and the Conversion Shares, the
execution, delivery and performance by the Company
of the Agreement and the Transaction Documents and
the consummation of any other transaction
contemplated in the Agreement and the Transaction
Documents will not (A) contravene the Certificate
of Incorporation or the By-laws of the Company or
the organizational documents of any of its
Material Subsidiaries, (B) conflict with, or
result in a breach or violation of any of the
terms and provisions of, or constitute a default
under, or result in the creation or imposition of
any Encumbrance upon any assets or properties of
it or any of its Subsidiaries, of any indenture,
mortgage, loan agreement, note or other agreement
or instrument for borrowed money, any guarantee of
any agreement or instrument for borrowed money or
any lease, permit, license or other agreement or
instrument to which the Company or any of its
Material Subsidiaries is a party or by which it or
any of them is bound or to which any of the
properties, assets or operations of it or any such
Subsidiary is subject or (C) any statute, rule,
regulation, order or decree of any court,
regulatory body, administrative agency,
governmental body or arbitrator having
4
jurisdiction over the Company or any of its
Material Subsidiaries, except with respect to
clause (B) or (C) of this paragraph such
conflicts, breaches, violations, defaults
creations or impositions that would not,
individually or in the aggregate, have a Material
Adverse Effect;
(x) All consents, approvals, authori-
zations, orders, registrations, and qualifications
of or with any court, government agency or body,
stock exchange on which the securities of the
Company are traded or other third party required
to be obtained or taken by the Company for or in
connection with the delivery of the Shares, the
Option, the Option Shares and the Conversion
Shares and for the consummation of the
transactions contemplated by the Agreement and the
Transaction Documents have been validly and
sufficiently obtained and are in full force and
effect;
(xi) Those provisions of any contract
or agreement that are described in the Annual
Report conform in all material respects to the
description thereof contained in the Annual
Report;
(xii) The Company is not an "investment
Company" within the meaning of the Investment
Company Act of 1940, as amended; and
(xiii) The Company has filed all
documents required to be filed by it with the SEC
under the Exchange Act since January 1, 1993; to
the best of Mr. Gleason's knowledge, all SEC
Documents complied as to form in all material
respects with the applicable requirement of the
Act or the Exchange Act, as applicable.
In rendering such opinion, Mr. Gleason may rely as
to matters of fact, to the extent Mr. Gleason deems proper,
on certificates of responsible officers of the Company and
public officials. For purposes of this opinion, the term
"Material Subsidiary" does not include any Subsidiary of the
Company organized under the laws of any jurisdiction outside
the United States.
Exhibit E
Opinion of Debevoise & Plimpton
-------------------------------
(i) To the actual knowledge of such
counsel, there is no pending or threatened action,
suit or proceeding before any court, or
governmental agency or body or any arbitrator to
which the Company is or is threatened to be made a
party that questions the validity of the Agreement
or the Transaction Documents or any action to be
taken pursuant thereto;
(ii) The certificates representing the
Shares are in valid and sufficient form; the
holders of outstanding shares of stock of the
Company are not entitled pursuant to the
Certificate of Incorporation or the Company's By-
laws to preemptive or other rights as shareholders
to subscribe for the Series E Preferred Stock, the
Series F Preferred Stock, the Series G Preferred
Stock or the Conversion Shares;
(iii) The Shares, the Option, the
Option Shares and the Certificate of Amendment
have been duly authorized and (a) the Shares, when
issued and delivered in accordance with the terms
of the Agreement and (b) the Option Shares when
issued and delivered in accordance with the terms
of the Option, will be validly issued, fully paid
and nonassessable;
(iv) Upon due execution, issuance and
delivery in accordance with the Agreement and the
Certificate of Amendment, the Shares of Series E
Preferred Stock will be convertible into the
Conversion Shares in accordance with the terms
specified therein; the Conversion Shares issuable
upon such conversion or exchange have been duly
authorized and validly reserved for issuance upon
conversion or exchange and, when so issued upon
conversion or exchange in accordance with the
terms of the Certificate of Amendment, will be
validly issued, fully paid, and nonassessable; the
holders of shares of Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock
or the Conversion Shares will not be subject to
personal liability for obligations of the Company
by reason of being such holders (with respect to
any liability under Section 630 of the Business
Corporation Law of the State of New York, on the
assumption that the Common Stock is then trading
on the New York Stock Exchange); all consents,
approvals, authorizations, orders, registrations
2
and qualifications of or with any New York any
federal court or governmental agency or body, if
any, or the New York Stock Exchange, Inc. and all
corporate approvals and authorizations required to
be obtained or taken by the Company for or in
connection with the authorization, issuance and
delivery of the Shares, the Option, the Option
Shares and the Conversion Shares and for the
consummation of the transactions contemplated in
the Agreement and the Transaction Documents have
been obtained or taken and are in full force and
effect;
(v) This Agreement and the
Transaction Documents have been duly authorized,
executed and delivered by the Company and,
assuming due authorization, execution and delivery
thereof by the other party thereto, are the valid
and binding obligations of the Company, subject to
applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject,
as to enforceability, to general principles of
equity (regardless of whether enforcement is
sought in a proceeding in equity or at law),
except insofar as (A) the indemnification and
contribution provisions contained in the
Registration Rights Agreement and (B) indemnifi-
cation pursuant to the Securities Purchase
Agreement for liabilities under the Act, the
Exchange Act or state securities laws may be
limited by applicable law;
(vi) The Certificate of Amendment has
been filed by the New York Department of State and
has become effective in accordance with the
Business Corporation Law of the State of New York;
(vii) The issuance of the Shares, the
Option, the Option Shares and the Conversion
Shares, the execution, delivery and performance by
the Company of the Agreement and the Transaction
Documents and the consummation of any other of the
transactions contemplated in the Agreement or the
Transaction Documents and the performance, as of
the Closing Date if performed on such date, by the
Company of the obligations under the Certificate
of Amendment will not conflict with, result in a
violation or breach of, or constitute a default
under (A) the Certificate of Incorporation or the
By-laws of the Company or (B) any United States
federal or New York statute, rule or regulation or
stock exchange rule or regulation applicable to
the Company or any of the Material Subsidiaries,
3
except with respect to clause (B) of this
paragraph, such conflicts, breaches, violations or
defaults that would not have a Material Adverse
Effect;
(viii) The Company is not an "investment
company" within the meaning of the Investment
Company Act of 1940, as amended;
(ix) No approvals by any federal or
state bank regulatory authority are required to be
obtained by the Company or any Subsidiary of the
Company or the Purchaser in order to consummate
the transactions contemplated by the Agreement;
and upon the consummation of the transactions
contemplated by the Agreement neither the
Purchaser nor any of its Affiliates shall, as a
result of the consummation of the transactions
contemplated by the Agreement, be subject to
regulation or oversight of any federal or state
bank regulatory authority (other than restrictions
on any banking or non-banking transactions between
the Purchaser and its Affiliates and the Bank and
restrictions on the Purchaser and its Affiliates
seeking to direct the management or policies of
the Bank); and
(x) In connection with the purchase
of the Shares and the Option and the delivery of
the certificates representing the Shares to be
delivered on such Closing Date by the Company to
the Purchaser pursuant to the Agreement, and
assuming the correctness of all representations
and warranties made by the Purchaser in
Section 5.3 and by the Company in Section 4.24 of
the Agreement, it is not necessary to register the
offer or sale of the Shares or the Option under
the Act or the General Business Law of the State
of New York.
In rendering such opinion, Debevoise & Plimpton
may rely as to matters of fact, to the extent Debevoise &
Plimpton deems proper, on certificates of responsible
officers of the Company and public officials.