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EXHIBIT 1.2
FORWARD PURCHASE AGREEMENT*
THIS AGREEMENT is made as of this [ ] day of March, 1998 among
[Selling Shareholder], a limited liability company organized under the laws of
the State of Delaware ("Seller" and, together with the Other Sellers (as defined
below), "Sellers"), each of the Corporate Seller Control Persons (as defined
below), each a limited liability company organized under the laws of the State
of Delaware, the Xxxx Xxxxxx Family Trust, originally established on September
3, 1987, as amended and restated on December 31, 1996, and further amended on
September 17, 1997 and as further amended on March 22, 1998 (collectively the
"Xxxx Xxxxxx Family Trust"), Xxxx Xxxxxx (each of Seller, the Corporate Seller
Control Persons, the Xxxx Xxxxxx Family Trust and Xxxx Xxxxxx, a "Xxxx Xxxxxx
Entity", and collectively, the "Xxxx Xxxxxx Entities") and DECS Trust III, a
business trust organized under the laws of the State of Delaware under and by
virtue of an amended and restated declaration of trust, dated as of March [ ],
1998 (the "Declaration of Trust") (such trust and the trustees thereof acting in
their capacity as such being referred to herein as "Purchaser").
WHEREAS, Seller owns shares of Class B Common Stock, $.01 par
value (the "Common Stock"), of Herbalife International, Inc., a Nevada
corporation (including its successors, the "Company");
WHEREAS, Purchaser has filed with the Securities and Exchange
Commission a registration statement contemplating the offering of up to
5,750,000 DECS (the "DECS"), the terms of which contemplate delivery by
Purchaser to the holders thereof of a number of shares of Common Stock (or, if
some or all of the Sellers exercise their cash settlement option, cash in lieu
of part or all thereof), on [ ] [ ], 2001 (the "Exchange Date");
WHEREAS, in exchange for certain consideration to be paid by
Purchaser hereunder and under other similar agreements, Purchaser and Seller
desire to provide for the future acquisition, sale and delivery of the aggregate
number of shares of Common Stock contemplated to be delivered by Purchaser in
respect of the DECS on the Exchange Date, at a price to be established under
this Agreement and such other agreements;
WHEREAS, Seller has agreed, pursuant to the Collateral Agreement
(the "Collateral Agreement") dated as of March [ ], 1998, among Purchaser,
Seller, each of the Corporate Seller Control Persons, the Xxxx Xxxxxx Family
Trust, Xxxx Xxxxxx and The Bank of New York, as collateral agent (the
"Collateral Agent"), to grant Purchaser a security interest in the shares of
Common Stock specified therein and in certain other circumstances certain other
collateral to secure the obligations of Seller hereunder;
WHEREAS, Purchaser has agreed, pursuant to an underwriting
agreement, dated March [ ], 1998 (the "Underwriting Agreement"), among
Purchaser, Seller, the other persons and entities named as "Sellers" therein
(collectively, the "Other Sellers"), each of the Corporate
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* This is a form of Forward Purchase Agreement. A substantially identical
agreement will be entered into by each Seller.
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Seller Control Persons, the Xxxx Xxxxxx Family Trust, Xxxx Xxxxxx, the Company
and Xxxxx Xxxxxx Inc. and Prudential Securities Incorporated (each an
"Underwriter", and collectively, the "Underwriters"), to issue and sell to the
Underwriters an aggregate of [ ] DECS (the "Initial DECS") and, at the
Underwriters' option, up to [ ] additional DECS (the "Additional DECS") to cover
over-allotments, if any;
WHEREAS, MH Holdings I and MH Holdings II (each a "Corporate
Seller Control Person", and collectively, the "Corporate Seller Control
Persons") hold 99% and 1%, respectively, of the limited liability company
interests of each of the Sellers;
WHEREAS, the Xxxx Xxxxxx Family Trust holds 99% of the limited
liability company interests of each of the Corporate Seller Control Persons;
WHEREAS, the Xxxx Xxxxxx Family Trust is solely controlled by
Xxxx Xxxxxx;
NOW, THEREFORE, in consideration of their mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby mutually
covenant and agree as follows:
DEFINITIONS
As used herein, the following words and phrases shall have the
following meanings:
"Acceleration Date" has the meaning provided in Article VII.
"Acceleration Value" has the meaning provided in Article VII.
"Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"Additional DECS" has the meaning provided in the recitals of
this Agreement.
"Additional Purchase Price" has the meaning provided in Section
1.2(b).
"Additional Share Base Amount" means a number equal to the number
of Additional DECS that the Underwriters elect to Purchase under the
Underwriting Agreement.
"Additional Shares" has the meaning provided in Section 1.1(b).
"Additional STRIPS" means the U.S. Treasury obligations purchased
by Purchaser for settlement on the Option Closing Date.
"Adjustment Event" has the meaning provided in Section 6.2.
"Administrator" means The Bank of New York, administrator for
Purchaser under the Administration Agreement dated as of March [ ], 1998, or any
successor thereto.
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"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person or is a partner in, or a trustee, settlor, beneficiary, member,
manager, director or officer of, such Person and, with respect to any Person
that is a natural person, further includes such Person's immediate family
members, including his father, mother, spouse and children, the spouses of his
children, his siblings and their spouses and children. For purposes of this
definition, "control" (including the terms "controlled by" or "under common
control with") means, as to any Person, the possession, direct or indirect, of
the power to vote ten percent or more of the limited liability company interests
of such Person (or of the securities having ordinary voting power for the
election of directors of such Person), or the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities or by contract or otherwise.
"Associate" when used to indicate a relationship with any Person
means (i) a limited liability company, corporation or organization of which such
Person is an officer, director, member, manager or partner or is, directly or
indirectly, the beneficial owner of ten percent or more of any class of equity
securities or limited liability company interests, as the case may be, (ii) any
trust or other estate in which such Person serves as trustee or in a similar
capacity, and (iii) any relative or spouse of such Person or any relative of
such spouse.
"Bankruptcy Code" has the meaning provided in Section 10.7.
"Business Day" means any day that is not a Saturday, a Sunday or
a day on which the NYSE or banking institutions or trust companies in The City
of New York are authorized or obligated by law or executive order to close.
"Calculation Period" means any period of Trading Days for which
an average security price must be determined pursuant to this Agreement.
"Cash Delivery Option" has the meaning provided in Section
1.3(d).
"Closing Price" means, for any security on any date of
determination, (i) the closing sale price (or, if no closing price is reported,
the last reported sale price) of such security (regular way) on the NYSE on such
date, (ii) if such security is not listed for trading on the NYSE on any such
date, as listed in the composite transactions for the principal United States
national securities exchange on which such security is so listed, (iii) if such
security is not so listed on a United States national securities exchange, as
reported by The Nasdaq Stock Market, (iv) if such security is not so reported,
as reported in the composite transactions for the principal United States
regional securities exchange on which such security is so listed, (v) if such
security is not so listed on a United States regional security exchange, the
last quoted bid price for such security in the over-the-counter market as
reported by the National Quotation Bureau or similar organization or (vi) if
such security is not so quoted, the average of the mid-point of the last bid and
ask prices for such security from at least three nationally recognized
investment banking firms selected by the Administrator for such purpose. The
Closing Price as determined pursuant to the foregoing shall be subject to
adjustment in certain circumstances as provided in Section 6.1(c).
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"Collateral" has the meaning provided in the Collateral
Agreement.
"Collateral Agent" has the meaning provided in the recitals of
this Agreement.
"Collateral Agreement" has the meaning provided in the recitals
of this Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning provided in the recitals of this
Agreement.
"Company" has the meaning provided in the recitals of this
Agreement.
"Contract Shares" has the meaning provided in Section 1.1.
"Corporate Seller Control Person" and "Corporate Seller Control
Persons" have the meaning provided in the recitals of this Agreement.
"Custodian" means The Bank of New York, custodian for Purchaser
under the Custodian Agreement dated as of March [ ], 1998, or any successor
thereto.
"Declaration of Trust" has the meaning provided in the
introductory paragraph of this Agreement.
"DECS" has the meaning provided in the recitals of this
Agreement.
"Dilution Adjustment" means any fraction or number by which the
Exchange Rate shall be multiplied pursuant to Section 6.1(a) or (b) or by which
Closing Prices may be divided pursuant to Section 6.1(c).
"Event of Default" has the meaning provided in Article VII.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Date" has the meaning provided in the recitals of this
Agreement.
"Exchange Price" means the average Closing Price per share of
Common Stock on the 20 Trading Days immediately prior to (but not including) the
Exchange Date; provided, however, that if there are not 20 Trading Days for the
Common Stock occurring later than the 60th calendar day immediately prior to,
but not including, the Exchange Date, Exchange Price shall mean the market value
per share of the Common Stock as of the Exchange Date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Administrator. The Exchange Price as determined pursuant to the
foregoing shall be subject to adjustment in certain circumstances as provided in
Section 6.1(c).
"Exchange Rate" has the meaning provided in Section 1.1(c).
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"Firm Payment Date" has the meaning provided in Section 1.3(a).
"Firm Purchase Price" has the meaning provided in Section 1.2(a).
"Firm Share Base Amount" has the meaning provided in Section
1.1(a).
"Firm Shares" has the meaning provided in Section 1.1(a).
"Forward Purchase Contract Characterization" has the meaning
provided in Section 5.2(a).
"Independent Dealers" has the meaning provided in Article VII.
"Initial DECS" has the meaning provided in the recitals of this
Agreement.
"Initial Price" has the meaning provided in Section 1.1(c).
"Xxxx Xxxxxx Entity" and "Xxxx Xxxxxx Entities" mean each of the
Sellers, the Corporate Seller Control Persons, the Xxxx Xxxxxx Family Trust,
Xxxx Xxxxxx and any successor entity pursuant to Section 5.6(b) hereof.
"Xxxx Xxxxxx Family Trust" has the meaning provided in the
introductory paragraph of this Agreement.
"Market Price" means, as of any date of determination, the
average Closing Price per share of Common Stock on the 20 Trading Days
immediately prior to (but not including) the date of determination; provided,
however, that if there are not 20 Trading Days for the Common Stock occurring
later than the 60th calendar day immediately prior to, but not including, such
date, the Market Price shall mean the market value per share of Common Stock as
of such date as determined by a nationally recognized investment banking firm
retained for such purpose by the Administrator.
"NYSE" means the New York Stock Exchange Inc.
"Officer" shall mean the manager, trustee, president, any vice
president, the chief financial officer, the treasurer or the secretary of a
Person.
"Officer's Certificate" means a certificate signed by an Officer
of a Person.
"Opinion of Counsel" means a written opinion from legal counsel
who is acceptable to the Trust.
"Option Closing Date" means the settlement dates for the
Additional DECS under Section 5 of the Underwriting Agreement.
"Ordinary Cash Dividend" means, with respect to any consecutive
365-day period, any dividend with respect to Common Stock paid in cash to the
extent that the amount of
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such dividend, together with the aggregate amount of all other dividends on the
Common Stock paid in cash during such 365-day period, does not exceed on a per
share basis 10% of the average of the Closing Prices of the Common Stock over
such 365-day period; provided that, for purposes of the foregoing definition,
the amount of cash dividends paid on a per share basis shall be appropriately
adjusted to reflect the occurrence during such period of any event described in
Article VI.
"Person" means an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated association,
limited liability company, joint venture or other entity, or a government or any
political subdivision or agency thereof.
"Purchaser" has the meaning provided in the introductory
paragraph of this Agreement.
"Reimbursement Agreement" means the reimbursement agreement,
dated as of March _____, 1998 among Xxxxx Xxxxxx Inc., the Sellers and certain
other Persons named therein.
"Reported Securities" has the meaning provided in Section 6.2.
"Seller" and "Sellers" have the meaning provided in the
introductory paragraph of this Agreement.
"Threshold Appreciation Price" has the meaning provided in
Section 1.1(c).
"Trading Day" means, with respect to any security the Closing
Price of which is being determined, a day on which such security (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of such security.
"Transaction Value" has the meaning provided in Section 6.2.
"Underwriter" and "Underwriters" have the meaning provided in the
recitals of this Agreement.
"Underwriting Agreement" has the meaning provided in the recitals
of this Agreement.
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ARTICLE I
SALE AND PURCHASE
1.1 Sale and Purchase.
(a) Firm Shares. Upon the terms and subject to the conditions of
this Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to
purchase and acquire from Seller, the number of shares of Common Stock (the
"Firm Shares") equal to the product of ____________ (the "Firm Share Base
Amount") and the Exchange Rate.
(b) Additional Shares. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to sell to Purchaser, and Purchaser
agrees to purchase and acquire from Seller, a number of additional shares of
Common Stock (the "Additional Shares") equal to the product of the Additional
Share Base Amount and the Exchange Rate. In addition to the other conditions set
forth herein, such purchase and sale shall be conditioned on the Underwriters'
purchase of the Additional Share Base Amount of Additional DECS pursuant to the
Underwriting Agreement on the Option Closing Date. Promptly after receipt by
Purchaser of notice that the Underwriters are exercising their option to
purchase Additional DECS, Purchaser will provide Seller with written notice of
such exercise by the Underwriters, stating the related Additional Share Base
Amount and the date on which Purchaser shall deliver the purchase price for the
Additional Shares, which shall be the Option Closing Date for the Additional
DECS. The Firm Shares and the Additional Shares (if any) are collectively
referred to herein as the "Contract Shares."
(c) Exchange Rate. The "Exchange Rate" shall be determined in
accordance with the following formula, subject to adjustment as a result of
certain events as provided in Article VI: (i) if the Exchange Price is greater
than $[ ] (the "Threshold Appreciation Price"), [ ], (ii) if the Exchange Price
is less than or equal to the Threshold Appreciation Price but greater than [$ ]
(the "Initial Price"), a fraction (rounded upward or downward to the nearest
1/10,000th or, if there is not a nearest 1/10,000th, to the next higher
1/10,000th) equal to the Initial Price divided by the Exchange Price and (iii)
if the Exchange Price is less than or equal to the Initial Price, 1.
1.2 Purchase Price.
(a) Firm Purchase Price. The purchase price for the Firm Shares
(the "Firm Purchase Price") shall be $[Y x Firm Share Base Amount] in cash.
(b) Additional Purchase Price. The purchase price for the
Additional Shares (the "Additional Purchase Price") shall be an amount equal to
(i) the difference between (1) the aggregate proceeds to Purchaser from the sale
of the Additional DECS and (2) the aggregate cost to Purchaser, as notified by
Purchaser to Seller on the Option Closing Date for the Additional DECS, of the
Additional STRIPS, multiplied by (ii) a fraction, the numerator of which is the
Firm Share Base Amount and the denominator of which is the number of Initial
DECS purchased by the Underwriters under the Underwriting Agreement.
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1.3 Payment for and Delivery of Contract Shares.
(a) Firm Payment Date. Upon the terms and subject to the
conditions of this Agreement, Purchaser shall deliver to Seller the Firm
Purchase Price on March [ ], 1998 (the "Firm Payment Date") at the offices of
Cleary, Gottlieb, Xxxxx & Xxxxxxxx, Xxx Xxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
or at such other place as shall be agreed upon by Purchaser and Seller, paid by
wire transfer of Federal (immediately available same-day) funds to an account
designated by Seller, against delivery by Seller to the Collateral Agent of the
number of shares of Common Stock and/or cash, securities and other property
necessary to comply with Seller's obligations under the Collateral Agreement.
(b) Option Closing Date. Upon the terms and subject to the
conditions of this Agreement, Purchaser shall deliver to Seller the Additional
Purchase Price on the Option Closing Date at the offices of Cleary, Gottlieb,
Xxxxx & Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as shall be
agreed upon by Purchaser and Seller, paid by wire transfer of Federal
(immediately available same-day) funds to an account designated by Seller,
against delivery by Seller to the Collateral Agent of the additional number of
shares of Common Stock and/or cash, securities and other property necessary to
comply with Seller's obligations under the Collateral Agreement.
(c) Delivery of Contract Shares.
(i) Seller agrees to deliver the Contract Shares to Purchaser on
the Exchange Date. Seller shall be deemed to have instructed the
Collateral Agent to deliver to the Custodian, for the account of
Purchaser, shares of Common Stock then held by the Collateral Agent as
collateral under the Collateral Agreement, in an amount equal to the
number of Contract Shares, rounded down to the nearest whole number.
Instead of any fractional shares of Common Stock that would otherwise be
deliverable (prior to rounding) to Purchaser at the Exchange Date,
Seller agrees to make a cash payment in respect of such fractional
shares of Common Stock in an amount equal to the value thereof at the
Exchange Price. Notwithstanding the foregoing, if an Adjustment Event
shall have occurred prior to the Exchange Date then, in lieu of the
foregoing, Seller shall be deemed to have instructed: (A) in the case of
any cash required to be delivered on the Exchange Date as provided in
Section 6.2, the Collateral Agent to wire transfer Federal (immediately
available) funds to an account designated by Purchaser; and (B) in the
case of any Reported Securities required to be delivered by Seller in
lieu of cash as provided in Section 6.2, the Collateral Agent to deliver
to the Custodian, for the account of Purchaser, a specified number of
Reported Securities then held as collateral under the Collateral
Agreement, as provided in Section 6(g) of the Collateral Agreement.
(ii) In the event that by the Exchange Date any substitute
collateral has not been replaced by shares of Common Stock (and/or,
after an Adjustment Event, cash or Reported Securities) sufficient to
meet Seller's obligations hereunder, delivery shall be effected by
delivery by the Collateral Agent to the Custodian, for the account of
Purchaser, of the market value of the shares of Common Stock required to
be delivered
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hereunder, in the form of any shares of Common Stock then pledged by
Seller plus cash generated from the liquidation of U.S. Government
obligations then pledged by Seller (and/or, after an Adjustment Event,
the market value of the alternative consideration required to be
delivered hereunder, in the form of any Reported Securities then
pledged, plus any cash then pledged, plus cash generated from the
liquidation of U.S. Government obligations then pledged). In such event,
Seller shall be deemed to have instructed the Collateral Agent to
liquidate and turn into cash the U.S. Government obligations then
pledged by Seller to the extent necessary to satisfy Seller's
obligations hereunder.
(iii) Certificates representing Common Stock (or Reported
Securities) in registered form that are part of the Contract Shares
shall be registered in Purchaser's name or in the name of a depositary
or a nominee of a depositary as requested by Purchaser, unless such
Common Stock (and/or Reported Securities) is represented by one or more
global certificates registered in the name of a depositary or a nominee
of a depositary or are book entry securities, in which event Purchaser's
interest in such securities shall be noted in a manner satisfactory to
Purchaser and its counsel.
(iv) Seller's right to deliver (or cause to be delivered) to
Purchaser hereunder Common Stock and Reported Securities shall be
conditioned upon such Common Stock and Reported Securities to be so
delivered being transferable by Purchaser, following receipt from
Seller, without any restrictions not generally applicable to all holders
of such Common Stock or Reported Securities, as the case may be. If the
condition set forth in the preceding sentence shall not be satisfied
with respect to any Common Stock or Reported Securities to be delivered
by Seller, then, notwithstanding the provisions hereof, Seller shall
exercise the Cash Delivery Option.
(d) Cash Delivery Option. At its option, Seller may deliver to
Purchaser on the Exchange Date, in lieu of the Contract Shares, an amount in
cash equal to, subject to adjustment as provided in Section 6.2, the Exchange
Price of the Contract Shares (the "Cash Delivery Option"), paid by wire transfer
to an account designated by Purchaser, in Federal (immediately available) funds.
Seller may elect the Cash Delivery Option in respect of all, but not less than
all, Contract Shares and may do so by notice to Purchaser, the Collateral Agent
and the Custodian not less than 25 Business Days prior to the Exchange Date. If
Seller elects the Cash Delivery Option and so notifies Purchaser, Purchaser
shall promptly notify The Depository Trust Company and publish a notice in a
daily newspaper of national circulation stating whether the holders of DECS will
receive shares of Common Stock, cash or a combination thereof and, if a
combination of Common Stock and cash, the relative proportion of each.
(e) Seller represents, and Purchaser acknowledges, that it is
Seller's current intention to deliver Contract Shares to the Purchaser on the
Exchange Date and not to exercise the Cash Delivery Option; however, Seller
intends to consider all relevant economic, market and business factors in
ultimately determining whether to deliver Contract Shares on the Exchange Date
or to exercise the Cash Delivery Option.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EACH OF SELLER, THE
CORPORATE SELLER CONTROL PERSONS, THE XXXX XXXXXX
FAMILY TRUST AND XXXX XXXXXX
(a) Each of Seller, the Corporate Seller Control Persons, the
Xxxx Xxxxxx Family Trust and Xxxx Xxxxxx, severally and jointly, represents and
warrants to Purchaser that each representation and warranty made by such Person
in Section 3 of the Underwriting Agreement is true and correct on the date
hereof.
(b) Each of the Xxxx Xxxxxx Entities, severally and jointly,
further represents and warrants to Purchaser that:
(i) Each Xxxx Xxxxxx Entity holds itself out as a separate and
distinct entity, under such Xxxx Xxxxxx Entity's own name, and such Xxxx
Xxxxxx Entity acts solely under its own individual, limited liability
company or trust name, as the case may be, and through its authorized
officers and agents.
(ii) Each Xxxx Xxxxxx Entity separately identifies its funds and
other assets. Each Xxxx Xxxxxx Entity maintains its financial statements
and accounting records separate from those of any Affiliate or any other
Person. Such Xxxx Xxxxxx Entity maintains its own separate books of
account. All of such Xxxx Xxxxxx Entity's assets are held by or on
behalf of such Xxxx Xxxxxx Entity and, when held on behalf of such Xxxx
Xxxxxx Entity by another entity, are kept identifiable (in accordance
with customary usages) as assets owned by such Xxxx Xxxxxx Entity.
(iii) Each Xxxx Xxxxxx Entity (other than Xxxx Xxxxxx) observes
all customary formalities regarding its existence as a limited liability
company or trust, as the case may be.
(iv) Seller does not, directly or indirectly, engage in any
business in any jurisdiction and has not incurred or undertaken to incur
any obligations (including debt) other than (a) entering into this
Agreement, the Collateral Agreement, the Underwriting Agreement and the
Reimbursement Agreement or any other agreement(s) or instrument(s)
entered into in connection with the foregoing (collectively, the "DECS
Documents") and performing its obligations hereunder and thereunder and
(b) in connection with a Permitted Obligation as defined in Section 5.7,
does not own any material property or assets other than the Common Stock
subject to this Agreement and the Collateral Agreement and does not have
any subsidiaries.
(v) Seller has not guaranteed the debts or obligations of any of
its Affiliates, nor has it loaned money or otherwise provided financial
assistance to any of its Affiliates, nor has it pledged, granted a
security interest in or lien upon its assets for the benefit of any of
its Affiliates, nor held itself out to be responsible for the debts or
obligations of any of its Affiliates or the decisions or actions
respecting the daily business and affairs of
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any of its Affiliates other than (i) entering into the DECS Documents
and as necessary to comply with the terms and obligations imposed by the
DECS Documents, or (ii) in connection with a Permitted Obligation as
defined in Section 5.7.
(vi) Seller has not permitted any of its Affiliates to guarantee
or undertake to guarantee the debts or obligations of Seller, nor has it
permitted any of its Affiliates to loan money or otherwise provide
financial assistance to Seller, nor has it permitted any of its
Affiliates to pledge, grant a security interest in or lien upon such
Affiliate's assets for the benefit of Seller, nor has it permitted any
Affiliate to hold itself out to be responsible for the debts or
obligations of Seller or the decisions or actions respecting the daily
business and affairs of Seller other than (i) entering into the DECS
Documents and as necessary to comply with the terms and obligations
imposed by the DECS Documents, or (ii) in connection with a Permitted
Obligation as defined in Section 5.7.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that:
(a) each representation and warranty made by Purchaser in Section
1 of the Underwriting Agreement is true and correct on the date hereof; and
(b) it acknowledges that the Common Stock delivered pursuant to
this Agreement and the Collateral Agreement may contain one or more of the type
of legends referred to in Section 3(e) of the Collateral Agreement (which legend
(i) will not be applicable to the delivery of any such Common Stock to the Trust
pursuant to this Agreement and the Collateral Agreement or to the delivery of
any such Common Stock by the Trust to the holders of DECS pursuant to the DECS
and (ii) will be removed at the request of the Collateral Agent to the transfer
agent for the Common Stock prior to any such delivery to holders of DECS).
ARTICLE IV
CONDITIONS TO PURCHASER'S OBLIGATIONS
(a) The obligation of Purchaser to deliver the Firm Purchase
Price on the Firm Payment Date is subject to the satisfaction of the following
conditions:
(i) the purchase by the Underwriters of the Initial DECS pursuant
to the Underwriting Agreement shall have been consummated as
contemplated under the Underwriting Agreement;
(ii) the representations and warranties of each Xxxx Xxxxxx
Entity contained in Article II hereof shall be true and correct as of
the Firm Payment Date;
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(iii) the Collateral Agreement shall have been executed by each
Xxxx Xxxxxx Entity and the delivery of the Collateral thereunder shall
have been made; and
(iv) the Reimbursement Agreement shall have been executed by each
Xxxx Xxxxxx Entity and each Other Seller.
(b) The obligation of Purchaser to deliver the Additional
Purchase Price on the Option Closing Date is subject to the satisfaction of the
following conditions:
(i) the purchase by the Underwriter of the Additional DECS
pursuant to the Underwriting Agreement shall have been consummated as
contemplated under the Underwriting Agreement;
(ii) the representations and warranties of each of the Xxxx
Xxxxxx Entities contained in Article II hereof shall be true and correct
as of the Option Closing Date; and
(iii) the delivery of any additional Collateral under the
Collateral Agreement shall have been made.
ARTICLE V
COVENANTS
5.1 Taxes. Seller shall pay any and all documentary, stamp,
transfer or similar taxes and charges that may be payable in respect of the
entry into this Agreement and the transfer and delivery of the Contract Shares,
cash or Reported Securities pursuant hereto.
5.2 Forward Purchase Contract. Each of Purchaser and Seller
hereby agrees that
(a) it will treat this Agreement in its entirety as a forward
purchase contract for the delivery of the Contract Shares on the Exchange Date
(including as a result of acceleration or otherwise) (the "Forward Purchase
Contract Characterization"), under the terms of which contract (i) at the time
of issuance of the DECS Purchaser deposits irrevocably with Seller a fixed
amount of cash equal to the Firm Purchase Price (plus, if the Underwriters
exercise their option to purchase Additional DECS, the Additional Purchase
Price) to assure the fulfillment of Purchaser's purchase obligation described in
clause (ii) below, which deposit will unconditionally and irrevocably be applied
at the Exchange Date to satisfy such obligation and (ii) at the Exchange Date
such cash deposit unconditionally and irrevocably will be applied by Seller in
full satisfaction of Purchaser's obligation under the forward purchase contract,
and Seller will deliver to Purchaser the number of Contract Shares that
Purchaser is entitled to receive at that time pursuant to the terms of this
Agreement (subject to Seller's right to deliver cash and/or other property as
provided in this Agreement in lieu of the Contract Shares);
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(b) it will treat, consistent with the above characterization,
amounts paid to Seller in respect of this Agreement as allocable in their
entirety to the amount of the cash deposit attributable to such Agreement;
(c) it will not treat this Agreement, any portion of this
Agreement or any obligation hereunder as giving rise to any interest income or
other inclusions of ordinary income (in the case of Purchaser) or as giving rise
to any interest expense or other deductions of ordinary expense (in the case of
Seller);
(d) it will not treat the delivery of any portion of the Contract
Shares, cash or Reported Securities to be delivered pursuant to this Agreement
as the payment of interest or ordinary income; and
(e) it will not take any action (including filing any tax return
or form or taking any position in any tax proceeding) that is inconsistent with
the obligations contained in clauses (a) through (d), unless such action or
position is required by an applicable taxing authority or unless such action or
position is required by a change in statutory law or regulation or by a judicial
or other authoritative interpretation of the law enacted, promulgated or
published after the date of this Agreement.
5.3 Limitations on Trading During Certain Days. Each Xxxx Xxxxxx
Entity hereby agrees that he or it will not, and will cause each of his or its
Affiliates that is under his or its control not to, buy or sell shares of Common
Stock, Class A Common Stock (the "Class A Stock") par value $.01, of the Company
or Reported Securities for his or its own account during the 60 days prior to
the Exchange Date, except that the Company may repurchase the aforementioned
securities pursuant to an ongoing share repurchase program conducted in
compliance with the conditions specified in Section 5(b) of Rule 10b-18 of the
Exchange Act.
5.4 Notices. Each Xxxx Xxxxxx Entity will cause to be delivered
to Purchaser:
(a) Immediately upon the occurrence of any Event of Default
hereunder or under the Collateral Agreement, or upon such Xxxx Xxxxxx Entity's
obtaining knowledge that any of the conditions or events described in paragraph
(a) or (b) of Article VII shall have occurred with respect to the Company,
notice of such occurrence; and
(b) In case at any time prior to the Exchange Date such Xxxx
Xxxxxx Entity receives notice, or otherwise obtains knowledge, that any event
requiring that an adjustment be effected pursuant to Article VI hereof shall
have occurred or be pending, then such Xxxx Xxxxxx Entity shall promptly cause
to be delivered to Purchaser a notice identifying such event and stating, if
known to such Xxxx Xxxxxx Entity, the date on which such event is to occur and,
if applicable, the record date relating to such event. Such Xxxx Xxxxxx Entity
shall cause further notices to be delivered to Purchaser if such Xxxx Xxxxxx
Entity shall subsequently receive notice, or shall otherwise obtain knowledge,
of any further or revised information regarding the terms or timing of such
event or any record date relating thereto.
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5.5. Affirmative Covenants. During the term of this Agreement,
each of the Xxxx Xxxxxx Entities, jointly and severally, covenants and agrees
that he or it will:
(a) Comply in all material respects with all applicable laws,
rules, regulations and orders to the extent noncompliance would have a material
adverse effect on the ability of any Xxxx Xxxxxx Entity to perform his or its
obligations hereunder or under the Collateral Agreement, such compliance to
include, without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon such Xxxx Xxxxxx Entity or
upon such Xxxx Xxxxxx Entity's property, including, in the case of the Seller,
the collateral pledged under the Collateral Agreement, except to the extent
contested in good faith.
(b) Furnish to Purchaser as soon as possible and in any event
within twenty calendar days after such Xxxx Xxxxxx Entity shall become aware of
the occurrence of any failure by any Xxxx Xxxxxx Entity to comply with or
perform any agreement or obligation contained in this Agreement or the
Collateral Agreement, a statement of such Xxxx Xxxxxx Entity describing such
failure and setting forth details of such failure and the action which such Xxxx
Xxxxxx Entity has taken and proposes to take with respect thereto.
5.6 Additional Affirmative Covenants of each of the Xxxx Xxxxxx
Entities. During the term of this Agreement, each of the Xxxx Xxxxxx Entities,
jointly and severally, further covenants and agrees that:
(a) Each of the Xxxx Xxxxxx Entities (other than Xxxx Xxxxxx)
will continue in good standing under the laws of the state of its formation and
will continue to be wholly controlled, directly or indirectly, by Xxxx Xxxxxx,
so long as Xxxx Xxxxxx has legal capacity.
(b) Each Xxxx Xxxxxx Entity (other than Xxxx Xxxxxx) shall not
consolidate with or merge with or into, or transfer all or substantially of its
assets to, any other Person unless:
(i) either (x) such Xxxx Xxxxxx Entity shall be the resulting or
surviving entity or (y) such other Person is an entity organized and existing
under the laws of the United States, a State thereof or the District of
Columbia, such other Person expressly assumes by supplemental agreement executed
and delivered to the Trust, in form satisfactory to counsel to the Trust, all
the obligations of such Xxxx Xxxxxx Entity under the Underwriting Agreement,
Collateral Agreement, the Reimbursement Agreement, and this Agreement (in which
case all such obligations of such Xxxx Xxxxxx Entity shall terminate); and
(ii) such Xxxx Xxxxxx Entity shall deliver to the Trust prior to
the proposed transaction an Officer's Certificate and an Opinion of Counsel,
each of which shall state that such consolidation, merger or transfer and such
supplemental agreement comply with this Section 5.6(b) and that all conditions
precedent herein provided for relating to such transaction have been complied
with.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of a Xxxx Xxxxxx Entity in accordance with this
Section 5.6(b), the successor entity formed by such consolidation or into which
such Xxxx Xxxxxx Entity is merged or to which such
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transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of such Xxxx Xxxxxx Entity under this Agreement with the
same effect as if such successor entity had been named as such Xxxx Xxxxxx
Entity herein, and the predecessor entity, shall be relieved of any further
obligation under this Agreement.
(c) Each of the Xxxx Xxxxxx Entities (other than Xxxx Xxxxxx)
will comply in all respects with the requirements and limitations of its powers,
as the case may be, as set forth in its organizational documents.
(d) Each Xxxx Xxxxxx Entity will at all times hold itself out,
and each of its Affiliates will at all times hold such Xxxx Xxxxxx Entity out as
a separate and distinct entity, under such Xxxx Xxxxxx Entity's own name and
such Xxxx Xxxxxx Entity will act solely under its own individual, limited
liability company or trust name, as the case may be, and through its authorized
officers and agents.
(e) Each Xxxx Xxxxxx Entity will separately identify funds and
other assets of such Xxxx Xxxxxx Entity. Such Xxxx Xxxxxx Entity will maintain
separate accounting records separate from those of any Affiliate or any other
Person. Such Xxxx Xxxxxx Entity will maintain its own separate bank accounts.
All of such Xxxx Xxxxxx Entity's assets will at all times be held by or on
behalf of such Xxxx Xxxxxx Entity and, when held on behalf of such Xxxx Xxxxxx
Entity by another entity, will at all times be kept identifiable (in accordance
with customary usages) as assets owned by such Xxxx Xxxxxx Entity.
(f) Each Xxxx Xxxxxx Entity (other than Xxxx Xxxxxx) will observe
all customary formalities regarding the existence of such Xxxx Xxxxxx Entity as
a limited liability company or trust, as the case may be.
5.7 Negative Covenants of Seller. During the term of this
Agreement, Seller will not, and each of the Corporate Seller Control Persons,
the Xxxx Xxxxxx Family Trust and Xxxx Xxxxxx, jointly and severally, covenants
and agrees to cause Seller not to:
(a) Directly or indirectly, incur any obligations (including
debt) other than (i) pursuant to or as necessary to comply with the terms and
obligations imposed by this Agreement, the Collateral Agreement, the
Underwriting Agreement, the Reimbursement Agreement or any other agreement(s) or
instrument(s) entered into in connection with the foregoing (collectively, the
"DECS Documents"), (ii) the note outstanding as of the date hereof issued by
Seller to MH Holdings I, including accrued interest thereon and any replacement,
refunding, refinancing, extension or other successor obligation thereto, (iii)
organizational and administrative expenses of Seller (including, without
limitation, annual state franchise taxes), and (iv) any obligations between or
among Seller and any of the other Xxxx Xxxxxx Entities, including, without
limitation, distribution of available cash and advances provided that each such
action is accurately reflected in the books and records of Seller (collectively,
the matters in clauses (ii) - (iv) are referred to as "Permitted Obligations").
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(b) Acquire or own any property or assets nor engage in any
business other than (i) entering into the DECS Documents and as necessary to
comply with the terms and obligations imposed by the DECS Documents, or (ii) as
the beneficiary of a Permitted Obligation of any other Seller.
(c) Guarantee the debts or obligations of any of its Affiliates,
nor loan money or otherwise provided financial assistance to any of its
Affiliates, nor will it pledge, grant a security interest in or lien upon its
assets for the benefit of any of its Affiliates, nor will it hold itself out to
be responsible for the debts or obligations of any of its Affiliates or the
decisions or actions respecting the affairs of any of its Affiliates, other than
(i) entering into the DECS Documents and as necessary to comply with the terms
and obligations imposed by the DECS Documents, or (ii) in connection with a
Permitted Obligation.
(d) Permit any of its Affiliates to guarantee the debts or
obligations of Seller, nor will it permit any of its Affiliates to loan money or
otherwise provide financial assistance to Seller, nor will it permit any of its
Affiliates to pledge, grant a security interest in or lien upon such Affiliate's
assets for the benefit of Seller, nor will it permit any Affiliate to hold
itself out to be responsible for the debts or obligations of Seller or the
decisions or actions respecting the affairs of Seller, other than (i) entering
into the DECS Documents and as necessary to comply with the terms and
obligations imposed by the DECS Documents, or (ii) in connection with a
Permitted Obligation.
5.8 Covenants of each of the Xxxx Xxxxxx Entities (other than
Seller). During the term of this Agreement, each of the Xxxx Xxxxxx Entities
(other than Seller) covenants and agrees that each of them:
(a) Will cause, in its or his capacity as an Affiliate of any
other Xxxx Xxxxxx Entity, such other Xxxx Xxxxxx Entity to comply with its
obligations under this Agreement and the Collateral Agreement.
(b) Will not, and will cause each of its or his Affiliates that
is under its or his control not to, buy or sell Common Stock, Class A Stock or
Reported Securities for its or his own account during the 60 days prior to the
Exchange Date, except that the Company may repurchase the aforementioned
securities pursuant to an ongoing share repurchase program conducted in
compliance with the conditions specified in Section 5(b) of Rule 10b-18 of the
Exchange Act .
5.9 Further Assurances. From time to time on and after the date
hereof through the Exchange Date (or, if later, the date on which this Agreement
has been fully performed), each of the parties hereto shall use its or his
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper and advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement in accordance with the terms and conditions hereof, including (i)
using reasonable best efforts to remove any legal impediment to the consummation
of such transactions and (ii) the execution and delivery of all such deeds,
agreements, assignments and further instruments of
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transfer and conveyance necessary, proper or advisable to consummate and make
effective the transactions contemplated by the Agreement in accordance with the
terms and conditions hereof.
ARTICLE VI
ADJUSTMENT OF EXCHANGE RATE, EXCHANGE PRICE AND CLOSING PRICE
6.1 Dilution Adjustments. The Exchange Rate, Exchange Price and
Closing Price shall be subject to adjustment successively from time to time as
follows:
(a) Stock Dividends, Splits, Reclassifications, Etc. If the
Company shall, after the date hereof,
(i) pay a stock dividend or make a distribution, in either case,
with respect to Common Stock in shares of such stock;
(ii) subdivide or split its outstanding shares of Common Stock
into a greater number of shares;
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares; or
(iv) issue by reclassification (other than a reclassification
pursuant to clause (b), (c), (d) or (e) of the definition of Adjustment
Event) of its shares of Common Stock any other equity securities of the
Company;
then, in each such case, the Exchange Rate shall be multiplied by a Dilution
Adjustment equal to the number of shares of common stock (or the fraction
thereof) that a holder who held one share of Common Stock immediately prior to
such event would be entitled solely by reason of such event to hold immediately
after such event. In the case of the reclassification of any shares of Common
Stock into any other equity securities of the Company other than the Common
Stock, such other equity securities shall be deemed shares of Common Stock for
all purposes hereunder. The Exchange Price and Closing Price shall also be
adjusted in the manner described in paragraph (c).
(b) Right or Warrant Issuances. If the Company shall, after the
date hereof, issue, or declare a record date in respect of an issuance of,
rights or warrants (other than rights to purchase Common Stock pursuant to a
plan for the reinvestment of dividends or interest) to all holders of Common
Stock entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Market Price of the Common Stock on the Business
Day next following the record date for the determination of holders of Common
Stock entitled to receive such rights or warrants, then, in each such case, the
Exchange Rate shall be multiplied by the following Dilution Adjustment: a
fraction, of which the numerator shall be (A) the number of shares of Common
Stock outstanding on the record date for the issuance of such rights or warrants
plus (B) the number of additional shares of Common Stock offered for
subscription or
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purchase pursuant to such rights or warrants, and of which the denominator shall
be (x) the number of shares of Common Stock outstanding on the record date for
the issuance of such rights or warrants plus (y) the number specified in clause
(B) above multiplied by the quotient of the exercise price of such rights or
warrants divided by the Market Price of the Common Stock on the Business Day
next following the record date for the determination of holders of Common Stock
entitled to receive such rights or warrants. To the extent that such rights or
warrants expire prior to the Exchange Date and shares of Common Stock are
delivered with respect to less than all of such rights or warrants prior to such
expiration, the Exchange Rate shall be readjusted to the Exchange Rate which
would then be in effect had such adjustments for the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock actually delivered pursuant to such rights or warrants. The
Exchange Price and Closing Price shall also be adjusted in the manner described
in paragraph (c).
(c) Corresponding Adjustments to Exchange Price; Adjustment of
Closing Price in Certain Circumstances.
(i) If any adjustment is made to the Exchange Rate pursuant to
paragraph (a) or (b) of this Section 6.1, an adjustment shall also be
made to the Exchange Price as such term is used throughout the
definition of Exchange Rate. The required adjustment to the Exchange
Price shall be made at the Exchange Date by multiplying the Exchange
Price by the cumulative Dilution Adjustment.
(ii) If, during any Calculation Period used in calculating the
Exchange Price, the Market Price or the Transaction Value, there shall
occur any event requiring an adjustment to be effected pursuant to this
Section 6.1, then the Closing Price for each Trading Day in the
Calculation Period occurring prior to the day on which such adjustment
is effected shall be adjusted by being divided by the relevant Dilution
Adjustment.
(d) Timing of Dilution Adjustments. Each Dilution Adjustment
shall be effected:
(i) in the case of any dividend, distribution, or issuance of
rights or warrants, at the opening of business on the Business Day next
following the record date for determination of holders of Common Stock
entitled to receive such dividend, distribution or issuance or, if the
announcement of any such dividend, distribution or issuance is after
such record date, at the time such dividend, distribution or issuance
shall be announced by the Company; and
(ii) in the case of any subdivision, split, combination or
reclassification, on the effective date of such transaction.
(e) General; Failure of Dilution Event to Occur. All Dilution
Adjustments shall be rounded upward or downward to the nearest 1/10,000th (or if
there is not a nearest 1/10,000th to the next higher 1/10,000th). No adjustment
in the Exchange Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein;
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provided, however, that any adjustments which by reason of this sentence are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. If any announcement or declaration of a record date in
respect of a dividend, distribution or issuance requiring an adjustment pursuant
to this Section 6.1 shall subsequently be canceled by the Company, or such
dividend, distribution or issuance shall fail to receive requisite approvals or
shall fail to occur for any other reason, then, upon such cancellation, failure
of approval or failure to occur, the Exchange Rate shall be readjusted to the
Exchange Rate which would then have been in effect had adjustment for such event
not been made. If an Adjustment Event shall occur after the occurrence of one or
more events requiring an adjustment pursuant to this Section 6.1, the Dilution
Adjustments previously applied to the Exchange Rate in respect of such events
shall not be rescinded but shall be applied to the new Exchange Rate provided
for under Section 6.2.
6.2 Adjustment for Consolidation, Merger or Other Adjustment
Event. In the event of (a) any dividend or distribution by the Company to all
holders of Common Stock of evidences of its indebtedness or other assets
(excluding any dividends or distributions referred to in Section 6.1(a)(i), any
other equity securities issued pursuant to a reclassification referred to in
Section 6.1(a)(iv) and any Ordinary Cash Dividends) or any issuance by the
Company to all holders of Common Stock of rights or warrants to subscribe for or
purchase any of its securities (other than rights or warrants referred to in
Section 6.1(b)), (b) any consolidation or merger of the Company with or into
another entity (other than a merger or consolidation in which the Company is the
continuing corporation and in which the Common Stock outstanding immediately
prior to the merger or consolidation is not exchanged for cash, securities or
other property of the Company or another corporation), (c) any sale, transfer,
lease or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, (d) any statutory exchange of
securities of the Company with another corporation (other than in connection
with a merger or acquisition) or (e) any liquidation, dissolution or winding up
of the Company (any such event described in clause (a), (b), (c), (d) or (e), an
"Adjustment Event"), the Exchange Rate shall be adjusted so that on the Exchange
Date Seller shall deliver to Purchaser, in lieu of or (in the case of an
Adjustment Event described in clause (a) above) in addition to, the Contract
Shares, cash in an amount equal to the product of the number of Contract Shares
and the Transaction Value (as defined below). Following an Adjustment Event, the
Exchange Price, as such term is used throughout the definition of Exchange Rate,
shall be deemed to equal (A) if shares of Common Stock are outstanding at the
Exchange Date, the Exchange Price of the Common Stock, as adjusted pursuant to
Section 6.1(c), otherwise zero, plus (B) the Transaction Value.
Notwithstanding the foregoing, with respect to any Reported
Securities (as defined below) received by holders of Common Stock in an
Adjustment Event, Seller shall, in lieu of delivering cash in respect of such
Reported Securities as described above, deliver a number of such Reported
Securities with a value, as determined in accordance with clause (ii) of the
definition of Transaction Value, equal to all cash amounts that would otherwise
be deliverable in respect of Reported Securities received in such Adjustment
Event, unless Seller has made an election to exercise the Cash Delivery Option
or such Reported Securities have not yet been delivered to the holders entitled
thereto following such Adjustment Event or any record date with respect thereto.
If, following any Adjustment Event, any Reported Security ceases to
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qualify as a Reported Security, then (x) Seller shall not deliver such Reported
Security but instead shall deliver of an equivalent amount of cash and (y)
notwithstanding clause (ii) of the definition of Transaction Value, the
Transaction Value of such Reported Security shall mean the fair market value of
such Reported Security on the date such security ceases to qualify as a Reported
Security, as determined by a nationally recognized investment banking firm
retained for this purpose by the Administrator.
"Transaction Value" means (i) for any cash received in any
Adjustment Event, the amount of cash received per share of Common Stock, (ii)
for any Reported Securities received in any Adjustment Event, an amount equal to
(x) the average Closing Price per security of such Reported Securities on the 20
Trading Days immediately prior to (but not including) the Exchange Date
multiplied by (y) the number of such Reported Securities (as adjusted pursuant
to the definition thereof) received per share of Common Stock and (iii) for any
property received in any Adjustment Event other than cash or Reported
Securities, an amount equal to the fair market value of the property received
per share of Common Stock on the date such property is received, as determined
by a nationally recognized investment banking firm retained for this purpose by
the Administrator; provided, however, that in the case of clause (ii), (x) with
respect to securities that are Reported Securities by virtue of only clause (iv)
of the definition of Reported Securities, Transaction Value with respect to any
such Reported Security means the average of the mid-point of the last bid and
ask prices for such Reported Security as of the Exchange Date from each of at
least three nationally recognized investment banking firms retained for such
purpose by the Administrator multiplied by the number of such Reported
Securities (as adjusted pursuant to the definition thereof) received per share
of Common Stock and (y) with respect to all other Reported Securities, if there
are not 20 Trading Days for any particular Reported Security occurring after the
60th calendar day immediately prior to, but not including, the Exchange Date,
Transaction Value with respect to such Reported Security means the fair market
value per security of such Reported Security as of the Exchange Date as
determined by a nationally recognized investment banking firm retained for such
purpose by the Administrator multiplied by the number of such Reported
Securities (as adjusted pursuant to the definition thereof) received per share
of Common Stock. For purposes of calculating the Transaction Value, any cash,
Reported Securities or other property receivable in an Adjustment Event shall be
deemed to have been received immediately prior to the close of business on the
record date for such Adjustment Event or, if there is no record date for such
Adjustment Event, immediately prior to the close of business on the effective
date of such Adjustment Event.
"Reported Securities" means any securities received in an
Adjustment Event that (A) are (i) listed on a United States national securities
exchange, (ii) reported on a United States national securities system subject to
last sale reporting, (iii) traded in the over-the-counter market and reported on
the National Quotation Bureau or similar organization or (iv) for which bid and
ask prices are available from at least three nationally recognized investment
banking firms and (B) are either (x) perpetual equity securities or (y)
non-perpetual equity or debt securities with a stated maturity after the
Exchange Date. The number of shares of any Reported Securities included in the
calculation of Transaction Value pursuant to clause (ii) of the definition
thereof shall be subject to adjustment if any event that would, had it occurred
with respect to the Common Stock or the Company, have required an adjustment
pursuant to Section 6.1 or 6.2,
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shall occur with respect to such Reported Securities or the issuer thereof
subsequent to the date the Adjustment Event is consummated. Adjustment for such
subsequent events shall be as nearly equivalent as practicable to the
adjustments provided for in Section 6.1 or 6.2, as applicable.
ARTICLE VII
ACCELERATION
If one or more of the following events (each an "Event of
Default") shall occur:
(a) Any Xxxx Xxxxxx Entity (or any Other Seller) shall commence a
voluntary case or other proceeding seeking a liquidation, reorganization or
other relief with respect to himself or itself or his or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of him or it or any substantial part of his or its property, or
shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against him or it, or shall take any action to authorize any of the foregoing;
(b) an involuntary case or other proceeding shall be commenced
against any Xxxx Xxxxxx Entity (or any Other Seller) seeking liquidation,
reorganization or other relief with respect to him or it or his or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of him or it or any substantial part of his or its
property; or an order for relief shall be entered against any Xxxx Xxxxxx Entity
(or any Other Seller) under the federal bankruptcy laws as now or hereafter in
effect; or
(c) a Collateral Event of Default within the meaning of the
Collateral Agreement;
then an "Acceleration Date" shall occur, Seller's rights under
Section 1.3(d) shall terminate immediately and (i) in the case of clause
(c), Seller shall become obligated to the extent permitted by law to
deliver to Purchaser (and shall be deemed to instruct the Collateral
Agent to deliver to the Custodian, for the account of Purchaser, and to
liquidate and turn into cash the U.S. Government obligations then
pledged by Seller to the extent necessary to satisfy such obligation)
the Contract Shares, in the form of the shares of Common Stock then
pledged by Seller, or cash generated from the liquidation of U.S.
Government obligations then pledged by Seller, or a combination thereof
(or, after an Adjustment Event, the alternate consideration to be
delivered, in the form of Reported Securities then pledged, cash then
pledged, cash generated from the liquidation of U.S. Government
obligations then pledged, or a combination thereof); or
(ii) in the case of clauses (a) or (b), Seller shall become
obligated to the extent permitted by law to deliver to Purchaser (and
shall be deemed to instruct the Collateral Agent to deliver to the
Custodian, for the account of Purchaser, and to liquidate and turn
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into cash the U.S. Government obligations then pledged by Seller to the
extent necessary to satisfy such obligation) a number of shares of
Common Stock, in the form of the shares of Common Stock then pledged by
Seller, or cash generated from the liquidation of U.S. Government
obligations then pledged by Seller, or a combination thereof (or, after
an Adjustment Event, the alternate consideration to be delivered, in the
form of Reported Securities then pledged, cash then pledged, cash
generated from the liquidation of U.S. Government obligations then
pledged, or a combination thereof), with an aggregate value (based on
the Closing Price on the Acceleration Date) equal to the Acceleration
Value (as defined below).
"Acceleration Value" means an amount determined by the
Administrator on the basis of quotations from Independent Dealers (as defined
below). Each quotation will be for an amount that would be paid to the relevant
Independent Dealer in consideration of an agreement between Purchaser and such
Independent Dealer that would have the effect of preserving for Purchaser the
economic equivalent of the payments and deliveries that Purchaser would, but for
the occurrence of the Acceleration Date, have been entitled to receive after the
Acceleration Date hereunder (taking into account any adjustments to the Exchange
Rate that may have been effected on or prior to the Acceleration Date). On or as
soon as reasonably practicable following the Acceleration Date, the
Administrator will request each Independent Dealer to provide its quotation as
soon as reasonably practicable, but in any event within two Business Days. The
Administrator shall compute the Acceleration Value upon receipt of each
Independent Dealer's quotation, provided that if, at the close of business on
the fourth Business Day following the Acceleration Date, the Administrator shall
have received quotations from fewer than four of the Independent Dealers, the
Administrator shall compute the Acceleration Value using the quotations, if any,
it shall have received at or prior to such time. If four quotations are
provided, the Acceleration Value will be the arithmetic mean of the two
quotations remaining after disregarding the highest and lowest quotations. (For
this purpose, if more than one quotation has the same highest or lowest value,
then one of such quotations shall be disregarded.) If two or three quotations
are provided, the Acceleration Value will be the arithmetic mean of such
quotations. If one quotation is provided, the Acceleration Value will be equal
to such quotation. If no quotations are provided, the Acceleration Value will be
the aggregate value (based on the Closing Price on the Acceleration Date) of the
number of shares of Common Stock (or, after an Adjustment Event, Reported
Securities, cash or a combination thereof) that would be required to be
delivered hereunder on the Acceleration Date if the Exchange Date were redefined
to be the Acceleration Date.
"Independent Dealers" means four nationally recognized
independent investment banking firms selected in good faith by the
Administrator.
As promptly as reasonably practicable after receipt of the
quotations on which the Acceleration Value is based (or, as the case may be,
after failure to receive any such quotations within the time period prescribed
above), Purchaser shall deliver to Seller and the Collateral Agent a notice
specifying the number of shares of Common Stock (or, after an Adjustment Event,
the alternate consideration) required to be delivered by Seller. Purchaser and
Seller agree that the obligations contained in clauses (i) and (ii) above are a
reasonable pre-estimate of loss
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and not a penalty. Such amount is payable for the loss of bargain and Purchaser
will not be entitled to recover additional damage as a consequence of loss
resulting from an Event of Default.
ARTICLE VIII
8. Guaranty. (a) In order to induce the Purchaser to enter into
this Agreement and for other valuable consideration, each of Xxxx Xxxxxx, the
Xxxx Xxxxxx Family Trust and the Corporate Seller Control Persons, jointly and
severally, hereby irrevocably guarantees (as primary obligor and not merely as
surety) to the Purchaser, the trustees, directors, officers, employees and
agents of the Purchaser, and each person who controls the Purchaser within the
meaning of the Act or the Exchange Act or other Federal or state statutory law
or regulation, at common law or otherwise (each of such persons, a
"Beneficiary") (i) the accuracy of the representations and warranties of the
Seller contained in Article II hereof and (ii) the performance by the Seller of
the covenants and agreements contained in each of Article I, Article V and
Article VII hereof.
(b) The obligations of Xxxx Xxxxxx, the Xxxx Xxxxxx Family Trust
and each Corporate Seller Control Person under this Article VIII shall be
unconditional, irrespective of the validity or enforceability of any other
provision of this Agreement.
(c) The obligations of Xxxx Xxxxxx, the Xxxx Xxxxxx Family Trust
and each Corporate Seller Control Person under this Article VIII constitute
guarantees of performance and of payment, and not merely guarantees of
collection, and shall remain in full force and effect until all obligations of
and all amounts payable by the Seller in respect of the matters (the "Guaranteed
Matters") that are the subject of the obligations of Xxxx Xxxxxx, the Xxxx
Xxxxxx Family Trust and each Corporate Seller Control Person under this Article
VIII of this Agreement have been validly, finally and irrevocably performed or
paid in full, as the case may be, and shall not be affected in any way by the
absence of any action to obtain such performance or amounts, as the case may be,
from the Seller or by any variation, extension, waiver, compromise or release of
any or all of the obligations of the Seller hereunder or of any security from
time to time therefor. Each of Xxxx Xxxxxx, the Xxxx Xxxxxx Family Trust and the
Corporate Seller Control Persons hereby waives all requirements as to
promptness, diligence, presentment, demand for payment, protest and notice of
any kind with respect to his or its obligations under this Article VIII. Each of
Xxxx Xxxxxx, the Xxxx Xxxxxx Family Trust and the Corporate Seller Control
Persons hereby agrees, jointly and severally, that action may be taken directly
against such person under this Article VIII without any action being taken
against the Seller.
(d) The obligations of Xxxx Xxxxxx, the Xxxx Xxxxxx Family Trust
and each Corporate Seller Control Person under this Article VIII shall not be
affected by any change in applicable laws, rules or regulations or by any
present or future action of any governmental authority or court amending,
varying, reducing or otherwise affecting or purporting to amend, vary, reduce or
otherwise affect any of the obligations of the Seller under this Agreement or by
any other circumstance (other than by complete, irrevocable performance or
payment) that might
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otherwise constitute a legal or equitable discharge or defense of a surety or a
guarantor. If the Seller merges or consolidates with or into another entity,
loses its separate legal identity or ceases to exist, Xxxx Xxxxxx, the Xxxx
Xxxxxx Family Trust and the Corporate Seller Control Persons shall nonetheless
continue to be liable for the performance of all obligations or the payment of
all amounts, as the case may be, that would have been due or payable, as the
case may be, by the Seller in respect of the Guaranteed Matters.
(e) The obligations of Xxxx Xxxxxx, the Xxxx Xxxxxx Family Trust
and the Corporate Seller Control Persons under this Article VIII shall remain in
full force and effect or shall be reinstated (as the case may be) if at any time
any obligation or payment of the Seller in respect of the Guaranteed Matters, in
whole or in part, is rescinded or must otherwise be returned by a Beneficiary
upon the insolvency, bankruptcy or reorganization of the Seller or otherwise,
all as though such performance or payment, as the case may be, had not been
made.
(f) If at any time when any obligation of, or any amount payable
by the Seller in respect of, the Guaranteed Matters is overdue and unperformed
or unpaid, as the case may be, Xxxx Xxxxxx, the Xxxx Xxxxxx Family Trust or any
Corporate Seller Control Person receives any amount as a result of any action
against the Seller or any of its property or assets or otherwise for or on
account of any payment made by Xxxx Xxxxxx, the Xxxx Xxxxxx Family Trust or any
Corporate Seller Control Person pursuant to this Article VIII, Xxxx Xxxxxx, the
Xxxx Xxxxxx Family Trust or such Corporate Seller Control Person, as the case
may be, shall forthwith pay such amount received by it to Xxxxx Xxxxxx Inc., on
behalf of the Beneficiaries, without demand, to be credited and applied toward
any such amount payable by the Seller.
(g) The guarantee agreements set forth in this Agreement shall be
in addition to any liability which the Seller, Xxxx Xxxxxx, the Xxxx Xxxxxx
Family Trust or the Corporate Seller Control Persons may otherwise have.
ARTICLE IX
MISCELLANEOUS
9.1 Adjustments; Selection of Independent Investment Banking
Firm. Purchaser shall be responsible for the effectuation and calculation of any
adjustment pursuant to Article VI hereof and shall furnish Seller notice of any
such adjustment and shall provide Seller reasonable opportunity to review the
calculations pertaining to any such adjustment. If, pursuant to the terms and
conditions hereof, the Administrator shall be required to retain a nationally
recognized independent investment banking firm for any purpose provided herein,
such nationally recognized independent investment banking firm shall be selected
and retained by the Administrator only after consultation with Seller; provided,
however, that Seller shall be deemed to have waived his right to consult if
Seller fails to consult within five Business Days of notice being sent by the
Administrator to Seller seeking consultation. Purchaser may delegate the
effectuation and calculation of any such adjustments to its Administrator.
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9.2 Notices. Notices to Purchaser shall be directed to it in care
of the Administrator for Purchaser, The Bank of New York, 000 Xxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Telephone: (000) 000-0000, Telecopier: (000) 000-0000;
notices to Seller, either Corporate Seller Control Person, the Xxxx Xxxxxx
Family Trust, or Xxxx Xxxxxx shall be directed to Xxxx Xxxxxx, Herbalife
International, Inc., 0000 Xxxxxxx Xxxx Xxxx, Xxxxxxx Xxxx, XX 00000-0000,
Telephone: (000) 000-0000, Telecopier: (000) 000-0000, with a copy to
Irell & Xxxxxxx LLP, 000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx
00000, Telephone: (000) 000-0000, Telecopier: (000) 000-0000, Attention: Xxxxxxx
X. Xxxx, Esq. Notwithstanding the foregoing, notices to a party shall be
directed to such other address for such party as shall be specified by such
party in a like notice given pursuant to this Section 9.2. All notices and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if either (i) personally delivered (including delivery by courier
service or by Federal Express or any other nationally recognized overnight
delivery service for next day delivery) to the offices specified in the
preceding sentence, in which case they shall be deemed received on the first
Business Day by which delivery shall have been made to said offices; or (ii)
sent by certified mail, return receipt requested, in accordance with the
preceding sentence, in which case they shall be deemed received when receipted
for unless acknowledgment is refused (in which case delivery shall be deemed to
have been received on the first Business Day on which such acknowledgment is
refused). Any notice, demand or other communication to be provided by or on
behalf of Purchaser pursuant to this Agreement shall be sent to the address of
Seller, the Corporate Seller Control Persons, the Xxxx Xxxxxx Family Trust or
Xxxx Xxxxxx provided in this Section 9.2 notwithstanding the death of Xxxx
Xxxxxx, the adjudication of Xxxx Xxxxxx as incompetent or the appointment of a
guardian with respect to the affairs of Xxxx Xxxxxx. Any failure by Seller, the
Corporate Seller Control Persons, the Xxxx Xxxxxx Family Trust or Xxxx Xxxxxx or
any guardian, conservator, executor, administrator or other similarly appointed
person to receive any such notice, demand or communication shall in no way
abrogate, invalidate or otherwise affect the validity or enforceability of the
notice, demand or communication or the matters set forth therein.
9.3 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
9.4 Entire Agreement. Except as expressly set forth herein, this
Agreement constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.
9.5 Amendments; Waivers. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser, Seller, each of the Corporate
Seller Control Persons, the Xxxx Xxxxxx Family Trust and Xxxx Xxxxxx or, in the
case of a waiver, by the party or parties against whom the waiver is to be
effective. No failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other
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right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
9.6 No Third Party Rights; Successors and Assigns. Except as
otherwise agreed in writing, this Agreement is not intended and shall not be
construed to create any rights in any person other than Seller and Purchaser and
their respective successors and assigns and no person shall assert any rights as
third party beneficiary hereunder. Whenever any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
permitted assigns of such party. This Agreement will be (A) binding on and
legally enforceable against the estate of Xxxx Xxxxxx should he become deceased
or the legal representative, attorney, or guardian of Xxxx Xxxxxx should he lack
legal capacity and (B) binding on and legally enforceable against the Xxxx
Xxxxxx Family Trust despite the death or legal incapacity of any settlor or
beneficiary of such trust.
9.7. Application of Bankruptcy Code. The parties hereto
acknowledge and agree that the Collateral Agent is a "financial institution"
within the meaning of Section 101(22) of Title 11 of the United States Code (the
"Bankruptcy Code") and is acting as agent and custodian for Purchaser in
connection with this Agreement and that Purchaser is a "customer" of the
Collateral Agent within the meaning of said Section 101(22). The parties hereto
further acknowledge and agree that this Agreement is a "securities contract", as
such term is defined in Section 741(7) of the Bankruptcy Code, entitled to the
protection of Section 555 of the Bankruptcy Code.
9.8 Governing Law; Jurisdiction; Severability; Waiver of Jury
Trial. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. For the purpose of any suit, action or proceeding
arising out of or relating to this Agreement, the parties hereto hereby
expressly and irrevocably consent and submit to the non-exclusive jurisdiction
of any United States Federal or New York State court sitting in the Borough of
Manhattan, City and State of New York, and expressly and irrevocably waive, to
the extent permitted under applicable law, any immunity from the jurisdiction
thereof and any claim or defense in such suit, action or proceeding based on a
claim of improper venue, forum non conveniens or any similar basis to which it
or he might otherwise be entitled. To the extent permitted by law, the
unenforceability or invalidity of any provision or provisions of this Agreement
shall not render any other provision or provisions herein contained
unenforceable or invalid. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES
HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH
PARTY HERETO ACKNOWLEDGES THAT IT OR HE HAS BEEN INFORMED BY THE OTHER PARTY
HERETO THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT UPON
WHICH SUCH OTHER PARTY HERETO HAS
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RELIED, IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT AND ANY
DOCUMENT RELATED THERETO. EACH PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER
PARTY HERETO TO THE WAIVER OF ITS OR HIS RIGHTS TO TRIAL BY JURY.
IN WITNESS WHEREOF, the parties have signed this Agreement as of
the date and year first above written.
PURCHASER: SELLER:
DECS TRUST III: [ ]
By: By:
----------------------------- --------------------------------
Name: Name:
Title: Title
MH HOLDINGS I: XXXX XXXXXX:
By: By:
----------------------------- --------------------------------
Name: Name:
Title: Title
MH HOLDINGS II: XXXX XXXXXX FAMILY TRUST:
By: By:
----------------------------- --------------------------------
Name: Name:
Title: Title
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