-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, cmszjTQSRImUMDLsl4WXIVjrzidtGHQ2yk2wXVwTBmFi7hEqZVy4EpkZFML7laU5 QKrk5Udj1X5A1SgQlaEB8w== 0000950123-94-000809.txt : 19940426 0000950123-94-000809.hdr.sgml : 19940426 ACCESSION NUMBER: 0000950123-94-000809 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19940425 GROUP MEMBERS: CORPORATE ADVISORS, L.P. GROUP MEMBERS: CORPORATE OFFSHORE PARTNERS, L.P. GROUP MEMBERS: CORPORATE PARTNERS L P GROUP MEMBERS: LFCP CORP. GROUP MEMBERS: STATE BOARD OF ADMINISTRATION OF FLORIDA SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TYCO TOYS INC CENTRAL INDEX KEY: 0000786130 STANDARD INDUSTRIAL CLASSIFICATION: 3944 IRS NUMBER: 133319358 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-38915 FILM NUMBER: 94524158 BUSINESS ADDRESS: STREET 1: 6000 MIDLANTIC DR CITY: MT LAUREL STATE: NJ ZIP: 08054-1516 BUSINESS PHONE: 6092347400 MAIL ADDRESS: STREET 1: 6000 MIDLANTIC DRIVE CITY: MOUNT LAUREL STATE: NJ ZIP: 08054-1516 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CORPORATE PARTNERS L P CENTRAL INDEX KEY: 0000908117 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: ONE ROCKEFELLER PLAZA STREET 2: SUITE 1010 CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2126324844 SC 13D 1 SCHEDULE 13D 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 TYCO TOYS, INC. (NAME OF ISSUER) Common Stock (TITLE OF CLASS OF SECURITIES) 90212810 (CUSIP NUMBER) With a copy to: Jonathan Kagan Timothy G. Massad, Esq. Corporate Advisors, L.P. Cravath, Swaine & Moore One Rockefeller Plaza 825 Eighth Avenue New York, New York 10020 New York, N.Y. 10019 212-632-6253 212-474-1154 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS) April 15, 1994 (DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this Schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. Check the following box if a fee is being paid with the statement [x]. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7.) NOTE: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 CUSIP NO. 90212810 13D PAGE 2 OF 216 PAGES ----------------------- ------- -------- 1 NAME OF REPORTING PERSON S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Corporate Partners, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [x] 3 SEC USE ONLY 4 SOURCE OF FUNDS* 00 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED -0- BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER -0- 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER -0- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,252,290 shares of Common Stock, assuming conversion of all shares of convertible preferred stock beneficially owned by Corporate Partners, L.P. 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.87%, assuming conversion of all shares of convertible preferred stock beneficially owned by Corporate Partners, L.P. 14 TYPE OF REPORTING PERSON* PN *SEE INSTRUCTIONS BEFORE FILLING OUT!
3 CUSIP NO. 90212810 13D PAGE 3 OF 216 PAGES ----------------------- ------- ------- 1 NAME OF REPORTING PERSON S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Corporate Offshore Partners, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [x] 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED -0- BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER -0- 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER -0- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 303,240 shares of Common Stock assuming conversion of all shares of convertible preferred stock beneficially owned by Corporate Offshore Partners, L.P. (See Item 5). 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.86%, assuming coversion of all shares of convertible preferred stock beneficially owned by Corporate Offshore Partners, L.P. 14 TYPE OF REPORTING PERSON* PN *SEE INSTRUCTIONS BEFORE FILLING OUT!
4 CUSIP NO. 90212810 13D PAGE 4 OF 216 PAGES ----------------------- ------- ------- 1 NAME OF REPORTING PERSON S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON State Board of Administration of Florida 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [x] 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Florida NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED -0- BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER -0- 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER -0- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 444,465 shares of Common Stock assuming conversion of all shares of convertible preferred stock owned by the State Board of Administration of Florida. 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.26% assuming conversion of all shares of convertible preferred stock owned by the State Board of Administration of Florida (See Item 5). 14 TYPE OF REPORTING PERSON* OO *SEE INSTRUCTIONS BEFORE FILLING OUT!
5 CUSIP NO. 90212810 13D PAGE 5 OF 216 PAGES ----------------------- ------- ------- 1 NAME OF REPORTING PERSON S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Corporate Advisors, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [x] 3 SEC USE ONLY 4 SOURCE OF FUNDS* Not applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED -0- BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 4,999,995 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 4,999,995 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,999,995 shares of Common Stock assuming conversion of all shares of convertible preferred stock beneficially owned by Corporate Partners, L.P., Corporate Offshore Partners, L.P. and the State Board of Administration of Florida. 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.53% assuming conversion of all shares of convertible preferred stock beneficially owned by Corporate Partners, L.P., Corporate Offshore Partners, L.P. and the State Board of Administration of Florida. 14 TYPE OF REPORTING PERSON* PN *SEE INSTRUCTIONS BEFORE FILLING OUT!
6 CUSIP NO. 90212810 13D PAGE 6 OF 216 PAGES ----------------------- ------- ------- 1 NAME OF REPORTING PERSON S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON LFCP Corp. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [x] 3 SEC USE ONLY 4 SOURCE OF FUNDS* Not applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED -0- BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 4,999,995 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 4,999,995 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,999,995 shares of Common Stock assuming conversion of all shares of convertible preferred stock beneficially owned by Corporate Partners, L.P., Corporate Offshore Partners, L.P. and the State Board of Administration of Florida. 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.53% assuming conversion of all shares of convertible preferred stock beneficially owned by Corporate Partners, L.P., Corporate Offshore Partners, L.P. and the State Board of Administration of Florida. 14 TYPE OF REPORTING PERSON* CO *SEE INSTRUCTIONS BEFORE FILLING OUT!
7 7 Item 1. Security and issuer. The security to which this joint statement relates is the common stock, par value $.01 per share (the "Common Stock"), of Tyco Toys, Inc., a Delaware corporation (the "Company"), whose principal executive offices are located at 6000 Midlantic Drive, Mt. Laurel, NJ 08054. Although no person identified in Item 2 (except as otherwise indicated in this Schedule 13D) has acquired any shares of Common Stock, such persons are deemed to be the beneficial owners of the shares of Common Stock reported in Item 5 by virtue of their acquisition of beneficial ownership of shares of the Company's Series B Voting Convertible Exchangeable Preferred Stock, par value $.10 (the "Preferred Stock"), which is convertible into shares of the Common Stock. Item 2. Identity and Background. This Statement is filed on behalf of (i) Corporate Partners, L.P., a Delaware limited partnership ("Corporate Partners"), (ii) Corporate Offshore Partners, L.P., a Bermuda limited partnership ("Corporate Offshore "Partners"; Corporate Partners and Corporate Offshore Partners being referred to collectively as the "Partnerships"), (iii) the State Board of Administration of Florida, a body corporate organized under the Constitution of the State of Florida (the "State Board"; the Partnerships and the State Board being referred to collectively as the "Purchasers"), (iv) Corporate Advisors, L.P. ("Corporate Advisors"), a Delaware limited partnership which serves as general partner of the Partnerships and as the investment manager over account assets held in a certain custody account for the State Board (which account assets include the shares of Preferred Stock owned by the State Board) and (v) LFCP Corp., a Delaware corporation which serves as the general partner of Corporate Advisors all the shares of capital stock of which are owned by Lazard Freres & Co., a New York limited partnership ("Lazard"). The Purchasers, Corporate Advisors and LFCP Corp. are collectively referred to as the "Reporting Persons". The agreement with respect to the joint filing of this Schedule 13D is attached hereto as Exhibit 1. This Statement is filed on behalf of the State Board because the State Board is a record owner of shares of Preferred Stock (see Item 5). However, under the Stock Purchase Agreement dated as of April 15, 1994 between the Purchasers, Corporate Advisors and the Company which is attached hereto as Exhibit 2 and incorporated herein by reference (the "Purchase Agreement") and an Investment Management Agreement dated as of June 17, 1988 between Corporate Advisors and the State Board, the State Board 8 8 has appointed Corporate Advisors as the exclusive investment manager over certain account assets which include the shares of Preferred Stock purchased by the State Board pursuant to the Purchase Agreement and has granted Corporate Advisors an irrevocable proxy dated April 15, 1994, which is attached hereto as Exhibit 3 and incorporated herein by reference, to vote all shares of Preferred Stock purchased by the State Board pursuant to the Purchase Agreement (the "Irrevocable Proxy") (see Item 4). Accordingly, the filing of this Statement on Schedule 13D on behalf of the State Board should not be deemed a representation that the State Board has an obligation to file in respect of the shares of Preferred Stock owned of record by the State Board or any other securities of the Company which the State Board purchases in the ordinary course of its investment activities. The Partnerships were formed for the purpose of providing a vehicle for institutional and other sophisticated investors to participate in the acquisition of substantial equity interests in companies with significant potential for long-term growth in value. The State Board is an agency of the State of Florida created pursuant to a provision of the Constitution of the State of Florida to perform certain duties specified in such Constitution and by statute, including the responsibility of investing certain funds of the Florida retirement system. LFCP Corp. was formed for the purpose of serving as the general partner of Corporate Advisors, which in turn was formed for the purpose of serving as the general partner of the Partnerships and as investment manager on behalf of the State Board pursuant to the Investment Management Agreement with respect to account assets held in a certain custody account for the State Board. Lazard is a private investment banking partnership of international stature, with extensive experience in principal investments, money management, mergers and acquisitions and corporate finance. The address of the principal offices of Corporate Partners, LFCP Corp., Corporate Advisors and Lazard is One Rockefeller Plaza, New York, New York 10020. The address of the principal offices of Corporate Offshore Partners is 30 Cedar Avenue, Hamilton 5-24, Bermuda. The address of the principal offices of the State Board is Park 20 West, 1230 Blountstown Highway, Tallahassee, Florida 32304. 9 9 The name, residence or business address, citizenship, present principal occupation or employment, and the name and address of any corporation or other organization in which such employment is conducted of (i) each of the executive officers and directors of LFCP Corp., (ii) each person ultimately in control of LFCP Corp. and (iii) each person controlling the State Board are set forth in Appendix A attached hereto and incorporated herein by reference. During the last five years, neither any Reporting Person nor, to the Reporting Persons' knowledge, any person identified in Appendix A has (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. On April 15, 1994, the Purchasers purchased an aggregate of 47,619 shares of Preferred Stock (the "Initial Shares") pursuant to the Purchase Agreement. Of such total, Corporate Partners purchased 40,498 Initial Shares, Corporate Offshore Partners purchased 2,888 Initial Shares and the State Board purchased 4,233 Initial Shares. The Initial Shares were purchased by the Purchasers at a purchase price of $1,050.00 per share, for an aggregate purchase price of $49,999,950.00 (the "Purchase Price"). The funds used by the Purchasers to pay for their respective portions of the Purchase Price were obtained by each Partnership from capital contributions made by their respective partners pursuant to preexisting capital commitments and by the State Board from contributions from the State of Florida for the Florida retirement system. The Certificate of Designation (the "Certificate of Designation") for the Preferred Stock, which is attached hereto as Exhibit 4 and incorporated herein by reference, provides that dividends on the Preferred Stock, which are to be paid at the rate of 6% per annum of the liquidation preference, may be paid in additional shares of Preferred Stock through the dividend period ending April 15, 1996. Any shares so issued are referred to herein as "Additional Shares". The Initial Shares, together 10 10 with Additional Shares so issued, are collectively referred to as the "Shares". Each Share of Preferred Stock is convertible into shares of Common Stock at a conversion price of $10.00 per share, subject to antidilution adjustments, or 105 shares of Common Stock currently. Item 4. Purpose of Transaction. The Purchasers have acquired the Shares for investment purposes. The Purchase Agreement contains certain restrictions on the Purchasers' ability to dispose of the Shares and any shares of Common Stock and Notes (as hereinafter defined) which may be issued upon the conversion of or in exchange for the Preferred Stock, and imposes other restrictions on the Purchasers' ability to engage in certain conduct in respect of the Company. Notwithstanding the foregoing, in respect of the State Board, all such restrictions relate only to securities of the Company acquired or held by the State Board to the extent the Partnerships or any of their affiliates have sole or shared voting or dispositive power. In this regard, the State Board has granted to Corporate Advisors the Irrevocable Proxy with respect to the Initial Shares purchased by the State Board under the Purchase Agreement, Additional Shares issued as dividends thereon, and shares of Common Stock and Notes which may be issued to the State Board upon conversion of or in exchange for the Shares. None of the Reporting Persons has any intention to acquire control over the Company; however, if any of the Reporting Persons believes that further investment in the Company is attractive, whether because of the market price of the Company's securities or otherwise, it may acquire additional shares of Common Stock or other securities of the Company to the extent and in a manner consistent with the Purchase Agreement. Similarly, subject to the terms of the Purchase Agreement and depending upon market and other factors, the Reporting Persons may determine to dispose of the Shares. Under the terms of the Purchase Agreement, and subject to certain limited exceptions set forth therein, the Purchasers have agreed that until the date when the Purchasers and certain of their affiliates do not own any Shares or any shares of Common Stock or Notes issued upon conversion of or in exchange for Shares, the Partnerships and Corporate Advisors, acting on behalf of the State Board, shall not, except by virtue of their representation on the Company's Board of Directors pursuant to the Purchase Agreement and the Certificate of Designation: (i) make, or in any way participate, directly or indirectly, in 11 11 any "solicitation" of "proxies" to vote (as such terms are used in the proxy rules of the SEC), initiate, propose or otherwise solicit stockholders of the Company for the approval of one or more stockholder proposals, or induce or attempt to induce any other person to initiate any stockholder proposal, or advise or influence, or seek to advise or influence, any person with respect to the voting of any voting securities of the Company; (ii) deposit any voting securities in the Company in a voting trust or, except for the Irrevocable Proxy, subject any voting securities of the Company to any agreement or arrangement with respect to the voting of any such voting securities or other agreement having similar effect; or (iii) form a partnership, syndicate or other group for the purpose of acquiring, holding, voting or disposing of voting securities with any person that is not a Purchaser or Corporate Advisors. Voting Rights. Each Share of Preferred Stock entitles the holder thereof to vote on all matters voted on by holders of Common Stock, voting together as a single class with other shares entitled to vote, at all meetings of the stockholders of the Company. With respect to any such vote, each Share of Preferred Stock entitles the holder thereof to cast the number of votes equal to the number of votes which could be cast in such vote by a holder of the number of shares of Common Stock into which such Share of Preferred Stock is convertible on the record date for such vote. Notwithstanding the foregoing, until such time as the waiting period (including any extensions) applicable to the acquisition of the Preferred Stock by the Purchasers under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have expired or terminated, the holders of shares of Preferred Stock shall not have the right to vote for the election of directors of the Company. Election of Directors. The Purchase Agreement provides that the Purchasers shall be entitled to designate two persons to be elected to the Company's Board of Directors and the Company shall use its best efforts to have such persons elected as directors of the Company. Notwithstanding the foregoing, the number of directors which may be so designated shall be reduced (i) to one upon a transfer of Shares as a result of which the Purchasers and their affiliates beneficially own Shares or shares of Common Stock that, in the aggregate, represent less than 5% of the total voting power of the voting securities of the Company and (ii) to zero upon a transfer of Shares as a result of which the Purchasers and their affiliates beneficially own Shares or shares of Common Stock 12 12 that, in the aggregate, represent less than 1% of the total voting power of the voting securities of the Company. The Purchasers have designated Mr. Jonathan Kagan and Mr. David Golub for election as directors of the Company. If at any time (i) the Company breaches in any material respect any of its obligations under the Purchase Agreement or the Registration Rights Agreement referred to below (which breach, in certain cases, shall have continued for a certain specified period), (ii) any quarterly dividend payable on the Preferred Stock is not paid when due, or (iii) the Company fails to satisfy its obligation to redeem shares of Preferred Stock then required to be redeemed, then, (x) the dividend rate payable on the Preferred Stock shall be increased to 7% per year of the liquidation preference, (y) the number of directors constituting the Board of Directors shall be increased by two and the holders of shares of Preferred Stock shall have the right, voting as a separate class, to elect the directors of the Company to fill such newly created directorships and (z) certain dividends on, and purchases and redemptions of, shares of capital stock ranking junior to or on parity with the Preferred Stock and certain other transactions shall be prohibited. Such remedies shall continue until such time as (A) all such breaches are no longer continuing, (B) all dividends accumulated on the Preferred Stock shall have been paid in full and (C) any redemption obligation with respect to the Preferred Stock which has become due has been satisfied or all necessary funds have been set aside for such redemption, as the else may be. Redemption. The Preferred Stock is subject to optional and mandatory redemption as follows: Except for redemption by exchange for Notes as hereinafter described, the Company may not redeem the Preferred Stock prior to April 15, 1997. The Company, at its option, may at any time on and after April 15, 1997, and prior to April 15, 1998, redeem the Preferred Stock in whole or in part, at a cash price per Share equal to 105.25% of the liquidation preference, if the daily closing price per share of the Common Stock for any 20 consecutive trading day period commencing on or after April 15, 1997, and ending prior to April 15, 1998, is greater than or equal to 175% of the then current Conversion Price (as defined below). 13 13 The Company, at its option, may at any time on and after April 15, 1998, and prior to April 15, 1999, redeem the Preferred Stock in whole or in part, at a cash price per Share equal to 104.50% of the liquidation preference, if the daily closing price per share of the Common Stock for any 20 consecutive trading day period commencing on or after April 15, 1998, and ending prior to April 15, 1999, is greater than or equal to 150% of the then current Conversion Price. The Company, at its option, may at any time on and after April 15, 1999, redeem the Preferred Stock in whole or in part at a cash price per share equal to a percentage of the liquidation preference (which shall be 103.75% for the twelve month period commencing April 15, 1999 and which shall decline ratably to 100.75% for the twelve month period commencing April 15, 2003. On April 15, 2004, the Company shall redeem all outstanding Shares of Preferred Stock at a price equal to the liquidation preference per share, which price may be paid in cash or in shares of Common Stock. If the redemption price is paid in shares of Common Stock, each share of Common Stock shall be valued at the product of (1) .95 and (2) the average of the daily closing prices per share of the Common Stock for the 20 consecutive trading days immediately preceding the redemption date. Upon any such redemption, the Company shall pay in cash all accrued and unpaid dividends on the Preferred Stock. Change of Control. In the event that any Change of Control (as defined in the Certificate of Designation) occurs while any shares of Preferred Stock are outstanding, each holder of Preferred Stock shall have the right to give notice that it is exercising a change of control election with respect to all or any number of such holder's Shares of Preferred Stock. Upon any such election, the Company shall either, at its option, (x) redeem each such holder's Shares at the applicable redemption price or (y) adjust the Conversion Price. The Company may choose the option of adjusting the Conversion Price only if redeeming the Shares (or the obligation to redeem the Shares) would constitute a breach of the Company's obligations under the covenant pertaining to restricted payments in the Indenture dated as of August 15, 1992 between the Company, certain of its subsidiaries and Bankers Trust, as trustee, as supplemented as of June 8, 1993, or if the failure to be able to exercise such option would cause the Shares not to be deemed Qualified Capital Stock as defined in such 14 14 indenture. If such holders' Shares are to be redeemed, the redemption price per share shall equal (A) a percentage of the liquidation preference per share equal to 106.0% for the twelve month period commencing April 15, 1994 and declining ratably to 100.6% for the twelve month period commencing April 15, 2003), plus (B) an amount equal to all accrued and unpaid dividends to the date of purchase of such holder's Shares by the Company. If the Conversion Price is to be adjusted, it shall be decreased (but not increased) so as to equal the product of .70 and the lowest average market price of the Common Stock over any consecutive ten trading day period during a specified period before and after the Change of Control. Redemption by Exchange for Notes. The Shares of Preferred Stock are redeemable at the option of the Company, in whole but not in part, on any date, by exchanging such shares for 6% Senior Subordinated Convertible Notes Due 2004 (the "Notes") of the Company. Holders of the outstanding shares of Preferred Stock will be entitled to receive a principal amount of the Notes equal to the liquidation preference of each share of Preferred Stock held by them at the time of exchange. Conversion. Each Share of Preferred Stock is convertible at any time at the option of the holder thereof into that number of fully paid and nonassessable shares of Common Stock (calculated as to each conversion to the nearest 1/100 of a share) obtained by dividing $1,050.00 by the Conversion Price in effect at such time. The "Conversion Price" shall mean and be $10.00, subject to adjustment in the event of certain stock dividends, subdivisions and combinations of Common Stock, certain distributions made on the outstanding Common Stock, certain issuances of Common Stock (or securities convertible into Common Stock) for a fair market value per share less than the market price and certain repurchases of Common Stock at a premium to market. If the Company is a party to a Transaction (as defined in the Certificate of Designation), including a merger or consolidation, sale of substantially all its assets or reclassification, in which the Company is not the Surviving Person (as defined in the Certificate of Designation), then, subject to certain limitations set forth in the Certificate of Designation, at the option of the holder (i) the Change of Control provisions shall apply to such holder's shares or (ii) if the consideration to be received by stockholders of the Company does not consist entirely of cash, 15 15 each Share shall be convertible into (x) shares of a series of preferred stock of the Surviving Person having terms similar to the Preferred Stock or (y) the kind and amount of shares of stock and other securities and property receivable (including cash) upon the consummation of such Transaction by a holder of that number of shares of Common Stock into which one Share was convertible immediately prior to such Transaction. Exchange of Preferred Stock for Common Stock. Each Share of Preferred Stock shall, at the option of the holder, be exchangeable at certain time between April 15, 1999 and April 29, 2003 into that number of shares of Common Stock (calculated as to each exchange to the nearest 1/100 of a share) obtained by dividing $1,050.00 by the Exchange Price (as defined below) applicable to such exchange. The "Exchange Price" per share of Common Stock with respect to any exchange is the average of the daily closing prices per share for the 20 consecutive trading days ending on the trading day immediately preceding the date of such exchange; provided, however, that the Exchange Price shall not be less than $5.00 per share (the "Minimum Exchange Price"); and provided further, however, the Minimum Exchange Price shall be adjusted in the same manner as the Conversion Price upon the occurrence of any of the events which would cause the adjustment of the Conversion Price. Upon any such exchange, the Company may, at its option, in lieu of issuing shares of Common Stock to such holder, redeem all but not less than all of the shares of Preferred Stock to be exchanged at a cash redemption price per share of Preferred Stock equal to the liquidation preference. Registration Rights. Under the Registration Rights Agreement dated April 15, 1994 between the Purchasers and the Company (the "Registration Rights Agreement"), the Purchasers have the right to demand the registration of shares of Preferred Stock or Common Stock or Notes issued upon conversion or exchange thereof under the Securities Act up to three times, two of which may be made at the Company's expense. The Purchasers also have unlimited "piggy-back" registration rights. The foregoing description of certain provisions of the Purchase Agreement, the Irrevocable Proxy, the Certificate of Designation and the Registration Rights Agreement is not intended to be complete and is qualified in its entirety by reference to the detailed provisions of such agreements and the Certificate of 16 16 Designation, copies of which are filed as Exhibits 2 through 5, respectively, and are incorporated herein by reference. Each capitalized term used in the foregoing description has the meaning as defined in the Purchase Agreement or the Certificate of Designation, unless otherwise indicated in the foregoing description. Other than as described above, neither any Reporting Person nor, to the best knowledge of each Reporting Person, any person identified in Appendix A, has any present plans or proposals which relate to or would result in: (a) the acquisition by any person of additional securities of the Company, or the disposition of securities of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Company or of any of its subsidiaries; (d) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) any material change in the present capitalization or dividend policy of the Company; (f) any other material change in the Company's business or corporate structure; (g) changes in the Company's charter, by-laws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; (h) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (j) any action similar to any of those enumerated above. Item 5. Interest in Securities of the Issuer. (a) through (c). As set forth above, on April 15, 1994, (i) Corporate Partners purchased from the Company 40,498 shares of Preferred Stock, (ii) Corporate Offshore Partners purchased from the Company 2,888 shares of Preferred Stock, and (iii) the State Board purchased from the Company 4,233 shares of Preferred Stock. Thus, as to each Purchaser, giving effect to the conversion of all Shares owned by such Purchaser (but not to the conversion of Shares beneficially owned by any other Purchaser) and using the current Conversion Price of $10.00 per share of Common Stock, (i) Corporate Partners beneficially owns 4,252,290 shares of Common Stock representing 10.87% of the outstanding 17 17 shares of Common Stock, (ii) Corporate Offshore Partners beneficially owns 303,240 shares of Common Stock representing 0.86% of the outstanding shares of Common Stock, and (iii) the State Board beneficially owns 444,465 shares of Common Stock representing 1.26% of the outstanding shares of Common Stock. By virtue of Corporate Advisors' relationship with the Partnerships and the State Board and LFCP Corp.'s relationship with Corporate Advisors, Corporate Advisors and LFCP Corp. each may be deemed to beneficially own 4,999,995 shares of Common Stock representing approximately 12.53% of the outstanding shares of Common Stock (assuming the conversion of all Shares owned by the Purchasers). Neither the Partnerships nor the State Board has any power to vote or dispose or to direct the disposition of the Shares indicated above as owned by it. Corporate Advisors as general partner of the Partnerships and as investment manager over the Shares owned by the State Board, which are held in a custody account, and LFCP Corp., as general partner of Corporate Advisors, may be deemed to have shared power to vote or to direct the vote, and to dispose or to direct the disposition, of the Shares. The percentages calculated in this Item 5 are based upon 34,876,940 shares of Common Stock outstanding as of April 15, 1994 as represented by the Company in the Purchase Agreement. Except as set forth above, no Reporting Person nor, to the best knowledge of each Reporting Person, any person identified in Appendix A, beneficially owns any Shares of Preferred Stock or Common Stock or has effected any transaction in shares of Common Stock during the preceding 60 days. (d) To the best knowledge of the Reporting Persons, no person other than the Reporting Persons has the right to receive or the power to direct the receipt of dividends from, or the proceeds from, the sale of the Shares or shares of Common Stock or Notes which may be issued upon conversion or exchange of such Shares. (e) Not applicable. 18 18 Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. The Company has entered into the Registration Rights Agreement, which is attached hereto as Exhibit 5 and incorporated herein by reference, with the Purchasers, giving the Purchasers rights to require the Company to register for sale to the public the Shares and the Common Stock or Notes which may be issued upon the conversion or exchange of the Shares. Except as described elsewhere in this Statement and as set forth in the Purchase Agreement, the Irrevocable Proxy, the Certificate of Designation and the Registration Rights Agreement, copies of which are attached as Exhibits 2 through 5 respectively, and incorporated herein by reference, to the best knowledge of the Reporting Persons, there exists no contract, arrangement, understanding or relationship (legal or otherwise) among the persons named in Item 2 and between such persons and any other person with respect to any securities of the Company, including but not limited to transfer or voting of any of the Shares, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, divisions of profits or loss, or giving or withholding of proxies. Item 7. Material to be Filed as Exhibits. Exhibit 1 - Agreement with Respect to Joint Filing on Schedule 13D. Exhibit 2 - Stock Purchase Agreement, dated as of April 15, among the Purchasers, Corporate Advisors and the Company. Exhibit 3 - Irrevocable Proxy, dated as of April 15, 1994, from the State Board to Corporate Advisors. Exhibit 4 - Certificate of Designation for the Preferred Stock. Exhibit 5 - Registration Rights Agreement, dated as of April 15, 1994, among the Purchasers and the Company. 19 19 Exhibit 6 - Power of Attorney from the State Board to Corporate Advisors. 20 20 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. Dated: April 15, 1994. CORPORATE PARTNERS, L.P. by: Corporate Advisors, L.P. General Partner by: LFCP Corp. General Partner by:/s/ Jonathan Kagan --------------------- Name: Jonathan Kagan Title: President CORPORATE OFFSHORE PARTNERS, L.P. by: Corporate Advisors, L.P. Attorney-In-Fact by: LFCP Corp. General Partner by: /s/ Jonathan Kagan --------------------- Name: Jonathan Kagan Title: President STATE BOARD OF ADMINISTRATION OF FLORIDA by: Corporate Advisors, L.P. Attorney-In-Fact by: LFCP Corp. General Partner by:/s/ Jonathan Kagan --------------------- Name: Jonathan Kagan Title: President 21 21 CORPORATE ADVISORS, L.P. by: LFCP Corp. General Partner by:/s/ Jonathan Kagan -------------------- Name: Jonathan Kagan Title: President LFCP CORP. by:/s/ Jonathan Kagan -------------------- Name: Jonathan Kagan Title: President 22 22 Appendix A 1. Set forth below are the name and position of each of the directors and executive officers of LFCP Corp. and each person controlling Lazard Freres & Co. The principal occupations of Messrs. Pollack and Kagan, respectively, are Senior Managing Director and Managing Director of Corporate Advisors, L.P. as well as, in both cases, general partner of Lazard Freres & Co. Except as otherwise indicated, the principal occupation of each person controlling Lazard Freres & Co. is general partner of Lazard Freres & Co., the business address of each such person is One Rockefeller Plaza, New York, New York 10020 and each person is a citizen of the United States. Lazard Groupment d'Interest Economique, a partnership organized under French law whose principal business is investments (including its investment in Lazard Freres & Co.), and Lazard Partners Limited Partnership, a Delaware limited partnership whose principal business is serving as a holding company, also serve as general partners of Lazard Freres & Co. Directors and Executive Officers of LFCP Corp.
Name Position - ---- -------- Lester Pollack Director, Chairman of the Board, Treasurer Jonathan Kagan Director, President, Secretary
23
2 Persons Controlling Lazard Freres & Co. ----------------------------------------- Business Address and Principal Citizenship (if other Occupation (if other than as than as indicated Name indicated above) above) --------------------- ------------------------------- ------- Michel A. David-Weill France Marcus A.P. Agius Managing Director United Kingdom Lazard Brothers & Co., Ltd. 21 Moorfields London EC2P-2HT England Robert F. Agostinelli William R. Araskog F. Harlan Batrus David C. Batten Patrick J. Callahan Lazard Freres & Co. 200 West Madison Suite 2200 Chicago, IL 60606 Nancy C. Cooper Michael J. Del Giudice John V. Doyle Charles R. Dreifus Norman Eig Peter R. Ezersky Kim S. Fennebresque Dod A. Fraser Albert H. Garner James S. Gold Jeffrey A. Golman Lazard Freres & Co. 200 West Madison Suite 2200 Chicago, IL 60606 Steven J. Golub William P. Gottschalk Lazard Freres & Co. 200 West Madison Suite 2200 Chicago, IL 60606 Herbert W. Gullquist Thomas R. Haack Eduardo Haim J. Ira Harris Lazard Freres & Co. 200 West Madison Suite 2200 Chicago, IL 60606 Melvin L. Heineman Kenneth M. Jacobs Jonathan H. Kagan
24 3
Persons Controlling Lazard Freres & Co. --------------------------------------- Business Address and Principal Citizenship (if Occupation (if other than as other than as Name indicated above) indicated above) - --------------------- ------------------------------- ---------------- James L. Kemper Marilyn E. LaMarche Sandra A. Lamb M. Steven Langman William R. Loomis, Jr. J. Robert Lovejoy Lustig, Mathew J. Philippe Magistretti 6th Floor 135 Switzerland Fleet Street London EC4A 2ED Damon Mezzacappa Christina A. Mohr Robert P. Morgenthau Steven J. Niemczyk Jonathan O'Herron Steven W. Oliver Lazard Freres K.K AIU Building 13th Floor 1-3, Marunouchi 1-Chome Chiyoda-ku Tokyo 100 Japan James A. Paduano Vincent S. Perez, Jr. Philippines Louis Perlmutter Richard Poirier, Jr. Robert E. Poll, Jr. Lester Pollack Michael J. Price Steven L. Rattner John R. Reese John R. Reinsberg Luis E. Rinaldini United Kingdom Bruno Roger Lazard Freres et Cie France 121, Boulevard Haussmann 75382 Paris Felix G. Rohatyn Gerald Rosenfeld Jeremy W. Sillem Peter L. Smith Arthur P. Solomon Michael B. Solomon Edouard Stern France David J. Supino John S. Tamagni David L. Tashjian
25 4 Persons Controlling Lazard Freres & Co. --------------------------------------- Business Address and Principal Citizenship (if Occupation (if other than as other than as Name indicated above) indicated above) - ----------------------------- ------------------------------- ----------------- Ali E. Wambold Chief Executive Officer Lazard Freres & Co., Ltd. 21 Moorfields London EC20-2HT England Kendrick R. Wilson III Philip P. Young Alexander E. Zagoreos
26 2. Set forth below is the name, position and principal occupation of each person controlling the State Board of Administration of Florida. The business address of such person is Park 20 West, 1230 Bloutstown Highway, Tallahassee, Florida 32304, and such person is a citizen of the United States. Name Position - ---- -------- Ash Williams Jr. Executive Director 27 EXHIBIT INDEX EXHIBIT DESCRIPTION ------- ----------- Exhibit 1 - Agreement with Respect to Joint Filing on Schedule 13D. Exhibit 2 - Stock Purchase Agreement, dated as of April 15, among the Purchasers, Corporate Advisors and the Company. Exhibit 3 - Irrevocable Proxy, dated as of April 15, 1994, from the State Board to Corporate Advisors. Exhibit 4 - Certificate of Designation for the Preferred Stock. Exhibit 5 - Registration Rights Agreement, dated as of April 15, 1994, among the Purchasers and the Company. Exhibit 6 - Power of Attorney from the State Board to Corporate Advisors. EX-99.1 2 AGREEMENT WITH RESPECT TO JOINT FILING 1 EXHIBIT 1 - Agreement with Respect to Joint Filing on Schedule 13D 2 AGREEMENT WITH RESPECT TO THE JOINT FILING OF 13D The undersigned hereby agree, in accordance with the provisions of Rule 13d-(f)(1) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to the joint filing of a statement on Schedule 13D pursuant to the Exchange Act pertaining to our ownership of securities of Tyco Toys, Inc., a Delaware corporation. We further agree in accordance with subparagraph (ii) of said Rule, that each person on whose behalf such statement is filed is responsible for its timely filing and for the timely filing of any amendment thereto and for the completeness and accuracy of the information concerning each such person contained therein. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of April 15, 1994. CORPORATE PARTNERS, L.P. by: Corporate Advisors, L.P. General Partner by: LFCP Corp. General Partner by: /s/ Jonathan Kagan ----------------------- Name: Jonathan Kagan Title: President CORPORATE OFFSHORE PARTNERS, L.P. by: Corporate Advisors, L.P. General Partner by: LFCP Corp. General Partner by: /s/ Jonathan Kagan ----------------------- Name: Jonathan Kagan Title: President 3 STATE BOARD OF ADMINISTRATION OF FLORIDA by: Corporate Advisors, L.P. Attorney-In-Fact by: LFCP Corp. General Partner by: /s/ Jonathan Kagan ------------------------ Name: Jonathan Kagan Title: President CORPORATE ADVISORS, L.P. by: LFCP Corp. General Partner by: /s/ Jonathan Kagan ----------------------- Name: Jonathan Kagan Title: President LFCP CORP. by: /s/ Jonathan Kagan ----------------------- Name: Jonathan Kagan Title: President EX-99.2 3 STOCK PURCHASE AGREEMENT 1 EXHIBIT 2 - Stock Purchase Agreement, dated as of April 15, among the Purchasers, Corporate Advisors and the Company 2 CONFORMED COPY STOCK PURCHASE AGREEMENT THIS AGREEMENT is made as of the 15th day of April, 1994, among TYCO TOYS, INC., a Delaware corporation (the "Company"), CORPORATE PARTNERS, L.P., a Delaware limited partnership ("Corporate Partners"), CORPORATE OFFSHORE PARTNERS, L.P., a Bermuda limited partnership ("Offshore Partners", and collectively with Corporate Partners, the "Partnerships"), THE STATE BOARD OF ADMINISTRATION OF FLORIDA, a body corporate organized under the constitution of the State of Florida (the "State Board", and collectively with the Partnerships, the "Purchasers", which term includes any successor to the Purchasers) and CORPORATE ADVISORS, L.P. ("Corporate Advisors"). WHEREAS, the Company desires to raise additional capital by issuing and selling shares of a new series of its present class of Preferred Stock (as hereinafter defined); and WHEREAS, the Purchasers desire to purchase such shares of the Company's Preferred Stock. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, each intending to be legally bound, do hereby agree as follows: 1. Authorization of Issuance of Shares. The Company has authorized the issuance and sale of up to 47,619 shares (which number may be increased by the Board of Directors without a vote of stockholders if and to the extent that Additional Shares are issued) of its present class of Preferred Stock, such shares to be constituted as a new series of Preferred Stock, and being designated as the "Series B Voting Convertible Exchangeable Preferred Stock" (herein referred to as the "Convertible Exchangeable Preferred Stock"). The relative powers, preferences and rights and qualifications, limitations and restrictions of the Convertible Exchangeable Preferred Stock shall be set forth in the Certificate of Designation. 3 2 2. Sale and Purchase of Shares. Subject to the terms and conditions herein set forth, and contemporaneously with the execution of this Agreement, and in reliance on the representations, warranties and agreements of the Company (in the case of the Purchasers) or the Purchasers (in the case of the Company), (i) the Company is issuing and selling to Corporate Partners and Corporate Partners is purchasing from the Company 40,498 shares of Convertible Exchangeable Preferred Stock, (ii) the Company is issuing and selling to Corporate Offshore Partners and Corporate Offshore Partners is purchasing from the Company 2,888 shares of Convertible Exchangeable Preferred Stock and (iii) the Company is selling to the State Board and the State Board is purchasing from the Company 4,233 shares of Convertible Exchangeable Preferred Stock, in each case at a price of $1,050 per share. The shares of Convertible Exchangeable Preferred Stock being purchased pursuant hereto are referred to herein as the "Initial Shares". In accordance with the Certificate of Designation, the Company may, at its option, pay dividends on the Convertible Exchangeable Preferred Stock in additional shares of Convertible Exchangeable Preferred Stock through the dividend period ending April 15, 1996. Any shares so issued are referred to herein as "Additional Shares". The Initial Shares, together with any Additional Shares that the Company elects to issue, are collectively referred to as the "Shares". 3. The Closing. At or prior to the Closing, the parties shall have delivered or shall deliver all documents, instruments and writings required to be delivered by them at or prior to the Closing pursuant to this Agreement (including but not limited to those documents set forth in Section 8 hereof). At the Closing, the Company is delivering to each of the Purchasers a separate single certificate in definitive form representing the Shares being purchased by such Purchaser, registered in each such Purchaser's name (or in the name of its respective nominee), against payment of the purchase price therefor of $42,522,900 (in the case of Corporate Partners), $3,032,400 (in the case of Offshore Partners) and $4,444,650 (in the case of the State Board), by wire transfer of immediately available funds to the account of the Company at Midlantic Bank in Mount Laurel, New Jersey. Prior to the Closing the Restated Certificate of the Company shall be amended and supplemented by the Certificate of Designation, filed with the Secretary of 4 3 State of the State of Delaware in accordance with the General Corporation Law of such state. 4. Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchasers and Corporate Advisors as follows: (a) Organization, Standing and Power of the Company and its Subsidiaries; Holdings of the Company. The Company is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware; and each of the subsidiaries of the Company named in Schedule 4(a) attached hereto (such subsidiaries being herein called the "Material Subsidiaries") and each of the Company's other subsidiaries (each such Material Subsidiary and each such other subsidiary being herein collectively called the "Subsidiaries") is a corporation duly incorporated and validly existing in good standing under the laws of its jurisdiction of incorporation. Each of the Company and each of the Material Subsidiaries has the power and authority to own its properties and to conduct its business as now being conducted and is duly qualified to do business as a foreign corporation in good standing in those jurisdictions, other than the state of its incorporation or organization, in which the nature of the businesses conducted or property owned by it makes such qualification necessary and where the failure so to qualify would have a Material Adverse Effect. Except as set forth in Schedule 4(a), the Company owns, directly or indirectly, all of the issued and outstanding shares of capital stock of each of the Subsidiaries free and clear of any liens, encumbrances, equities and claims. Except as set forth in Schedule 4(a), there are no options, warrants or other rights outstanding for the purchase of, nor any securities convertible into, capital stock of any class of any Subsidiary, whether issued, unissued or held in the treasury. All Subsidiaries that are not Material Subsidiaries, taken in the aggregate, would not constitute a "significant subsidiary", as such term is defined in Rule 1-02 of Regulation S-X under the Securities Act of 1933, as amended (the "Securities Act"). Except for the investments in the Persons set forth on Schedule 4(a) (the "Minority Investments"), the Company and its Subsidiaries do not own any interest in any 5 4 Person other than the Subsidiaries. The class of security, number of shares, percentage of such class and percentage of the Total Voting Power of such Person owned by the Company and its Subsidiaries with respect to each Minority Investment is listed on Schedule 4(a) hereto. (b) Authority; No Conflict. The Company has the requisite corporate power and authority to enter into this Agreement and the Registration Rights Agreement and to carry out its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Company (including the issuance of the Shares, the issuance of shares of Common Stock upon the conversion or exchange of the Shares and the issuance of the Notes in exchange for the Shares) have been duly and validly authorized by all requisite corporate proceedings on the part of the Company and do not require the approval or consent of any stockholders of the Company. Each of this Agreement and the Registration Rights Agreement has been duly executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally or by the availability of equitable remedies and except as rights of indemnity or contribution may be limited by federal or state securities or other laws or the public policy underlying such laws. The execution and delivery of this Agreement and the Registration Rights Agreement, and the consummation of the transactions contemplated hereby and thereby (including the issuance of the Shares, the issuance of shares of Common Stock upon the conversion or exchange of the Shares and the issuance of the Notes in exchange for the Shares and the compliance by the Company with the terms of such securities), do not and will not result in or constitute: (i) a default under, or breach or violation of, the Restated Certificate or the By-laws, (ii) a default under, or breach or violation of, any material mortgage, deed of trust, indenture, note, bond, license, lease or other material agreement, instrument or obligation to which the Company or any Subsidiary is a party or by which any of their properties or assets are bound, (iii) an event which (with the giving of notice or the lapse of time or both) would permit any Person to terminate, accelerate the performance required by, or accelerate the maturity of any indebtedness or obligation of the Company or any Subsidiary under, any material agreement or commitment to which the Company or any Subsidiary is a party or by which the Company 6 5 or any Subsidiary is bound or by which any of their properties or assets are bound, (iv) the creation or imposition of any material lien, charge or encumbrance on any property of the Company or any Subsidiary or on the Shares, under any agreement or commitment to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound or by which any of their properties or assets are bound, (v) a material violation of any statute, rule, regulation, order, judgment or decree of any court, public body or authority or any other restriction of any kind or character by which the Company or any Subsidiary or any of their properties or assets may be bound or (vi) an event which would require any consent under any material agreement to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound or by which any of their properties or assets are bound, except as set forth on Schedule 4(b) with respect to the payment of cash dividends on, or redemption of, the Shares. (c) Capitalization. The authorized capital structure of the Company consists of (i) 50,000,000 shares of Common Stock, of which as of the Closing Date, 34,876,940 shares (excluding shares held in treasury) are outstanding, and (ii) 1,000,000 shares of Preferred Stock, par value $.10 per share, of which as of the Closing Date, no shares are outstanding. All of the outstanding shares of Common Stock and Preferred Stock have been duly and validly issued, and are fully paid and nonassessable and have not been issued in violation of or subject to any preemptive rights provided for by law or by the Restated Certificate or the By-laws. Except as set forth in Schedule 4(c), there are no outstanding preemptive, conversion or other rights, options, warrants or agreements granted or issued by or binding upon the Company for the purchase or acquisition of any shares of its capital stock or any other securities convertible into, exchangeable for or evidencing the right to subscribe for any shares of capital stock. Since December 31, 1993, the Company has not changed the amount of its authorized capital stock or purchased any shares of its capital stock, or subdivided or otherwise changed any shares of any class of its capital stock, whether by way of reclassification, recapitalization, stock split or otherwise, or issued or reissued, or agreed to issue or reissue, any of its capital stock, except as expressly provided in this Agreement, except as set forth on Schedule 4(c) or except for issuances of Common Stock pursuant to employee plans, and the Company has not since such date declared or paid any dividend in 7 6 cash or stock or made any other distribution of assets to its shareholders. (d) Status of Shares. The Shares have been duly authorized by all necessary corporate action on the part of the Company (no consent or approval of stockholders being required by law, the Restated Certificate, the By-laws or the rules of any stock exchange on which the Common Stock is traded). The Initial Shares have been, and upon their issuance any Additional Shares will be, validly issued and outstanding, fully paid and nonassessable and free and clear of any liens, and the issuance of such Shares is not and will not be subject to preemptive or similar rights of any other stockholder of the Company. The shares of Common Stock issuable upon conversion or exchange of the Shares or the Notes have been duly authorized by all necessary corporate action on the part of the Company (no consent or approval of stockholders being required by law, the Restated Certificate, the By-laws or the rules of any stock exchange on which the Common Stock is traded), and such shares of Common Stock have been validly reserved for issuance, and upon issuance upon such conversion or exchange will be validly issued and outstanding, fully paid and nonassessable, and free and clear of any liens and preemptive or similar rights. The Notes issuable upon exchange of the Shares have been duly authorized by all necessary corporate action on the part of the Company, and when issued and exchanged for Shares in accordance with the Certificate of Designation, will constitute valid and binding obligations of the Company, enforceable in accordance with their terms, except to the extent that the enforceability of remedies may be limited by applicable bankruptcy, insolvency, reorganization moratorium or other similar laws from time to time in effect affecting the enforcement of creditors' rights generally. The maximum number of Additional Shares issuable in respect of the payment of dividends as of the date hereof is 7,090 and such shares have been validly reserved for issuance. (e) Financial Statements. The Company has furnished to the Purchasers copies of the Financial Statements. The Financial Statements, including in each case the related notes, fairly present the financial position of the Company and its Subsidiaries as of the respective dates of said balance sheets and the results of the operations of the Company and its Subsidiaries for the respective periods covered by said statements of income and retained earnings and changes in financial position, and 8 7 have been prepared in accordance with generally accepted accounting principles consistently applied by the Company throughout the periods involved, except for accounting changes described in the related notes. (f) Inventory; Receivables. (i) The inventory of the Company and the Subsidiaries is in good and marketable condition, and is salable in the ordinary course of business, except for obsolete or unusable inventory the value of which does not exceed $2,000,000 in the aggregate at cost, and the reserves in respect thereof are adequate and were calculated in a manner consistent with past practice and in accordance with generally accepted accounting principles consistently applied and are disclosed in the Financial Statements. (ii) Substantially all accounts receivable of the Company and the Subsidiaries have arisen from bona fide transactions in the ordinary course of business consistent with past practice. All accounts receivable of the Company and the Subsidiaries reflected in the December 31, 1993 Balance Sheet are good and collectible at the aggregate recorded amounts thereof, net of any applicable reserve for returns, or allowances for doubtful accounts reflected thereon, which reserves are adequate and were calculated in a manner consistent with past practice and in accordance with generally accepted accounting principles consistently applied and are disclosed in the Financial Statements. (g) Liabilities. Except (i) as disclosed on Schedule 4(g) hereto, (ii) as disclosed in the Financial Statements, (iii) for liabilities or obligations that were incurred after December 31, 1993, in the ordinary course of business and consistent with past practices (none of which is a liability for breach of warranty, tort, infringement claim or lawsuit in excess of $100,000 individually or $500,000 in the aggregate for all such liabilities) and (iv) liabilities the maximum amount of which do not exceed $100,000 individually or $1,000,000 in the aggregate, the Company and its Subsidiaries do not have any liabilities or obligations (whether absolute, accrued, contingent or otherwise and whether due or to become due and whether or not the amount thereof is readily ascertainable) that were not either fully reflected or disclosed in the December 31, 1993, Balance Sheet and, in the reasonable judgment of the Company, the reserves referred to in the Financial Statements are appropriate and reasonable. 9 8 (h) Actions Pending. There is no action, suit, investigation or proceeding pending or, to the knowledge of the Company, threatened, against the Company or any of its Subsidiaries or any of their respective properties or assets by or before any court, arbitrator or governmental body, department, commission, board, bureau, agency or instrumentality, that questions the validity or enforceability of this Agreement, the Registration Rights Agreement, the Certificate of Designation or the Shares or any action taken or to be taken pursuant hereto or thereto. Except as disclosed in Schedule 4(h), there is no litigation or governmental proceeding or investigation pending or, to the knowledge of the Company, threatened against the Company or any of the Subsidiaries which, if adversely determined, would be reasonably likely to result in a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in default in any material respect with respect to any material judgment, order, writ, injunction, decree or award. (i) Compliance with Law. Except as disclosed in Schedule 4(i), the business of the Company and each Subsidiary has been and is presently being conducted in compliance with applicable U.S. and foreign federal, state, and local governmental laws, rules, regulations and ordinances, in all material respects. Except as disclosed in Schedule 4(i), the Company and each Subsidiary has all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it that are material to the business of the Company and its Subsidiaries, taken as a whole, and each of the Company and its Subsidiaries is in compliance with all material terms thereof. (j) No Consents. Except (i) as set forth in Schedule 4(j) and (ii) for any filings, notices, applications and other information as may be required to be made or supplied pursuant to the HSR Act, no consent, authorization or approval of or filing with any person or any U.S. or foreign federal, state or local governmental department, commission, board, agency or instrumentality is required to be obtained or made by the Company for the valid execution and performance by the Company of this Agreement or the Registration Rights Agreement or the valid authorization, issuance and sale of the Shares or the valid authorization, issuance and delivery of the shares of Common Stock issuable upon conversion or exchange of the Shares or the Notes issuable in exchange for the Shares. 10 9 (k) SEC Filings. The Company has furnished to the Purchasers its (i) Annual Report on Form 10-K for the fiscal year ended December 31, 1993, (ii) Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 26, 1994, and (iii) all other reports or registration statements (other than on Form S-8) filed by the Company or any of the Subsidiaries with the Securities and Exchange Commission (the "SEC") since January 1, 1991, each as filed with the SEC (collectively, the "SEC Reports"). As of their respective dates, such reports and statements complied in all material respects with the applicable requirements of the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations thereunder, and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (l) Environmental Matters. (i) Except as set forth in Schedule 4(l), (x) each of the Company and the Subsidiaries is in compliance with all Environmental Laws and all permits required thereunder for the operation of the Company and the Subsidiaries except as would not reasonably be expected to result in any Material Adverse Effect; (y) to the knowledge of the Company, neither the Company nor any Subsidiary has received any communication (written or oral) from a governmental authority with respect to such compliance or the failure thereof; and (z) the Company and the Subsidiaries are in compliance in all material respects with the New Jersey Environmental/Cleanup Responsibility Act, as amended by the Industrial Site Recovery Act, and any orders or decrees issued thereunder. (ii) Except as set forth in Schedule 4(l) and except as would not result in any Material Adverse Effect, (x) there is no civil, criminal or administrative action, claim, demand, investigation or notice relating to a violation of an Environmental Law (an "Environmental Claim") pending or, to the knowledge of the Company, threatened and (y) there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release or threatened release, emission, discharge or disposal of any chemical, pollutant, contaminant, waste, toxic substance, asbestos or asbestos containing material, petroleum or petroleum product, that could reasonably be expected to form the basis of any Environmental Claim, in either case (1) against the Company 11 10 or any Subsidiary, (2) to the knowledge of the Company, against any Person whose liability for any Environmental Claim the Company or any Subsidiary has or may have retained or assumed either contractually or by operation of law, or (3) involving any real or personal property which the Company or any Subsidiary owns, leases, operates or manages, or formerly owned, leased, operated or managed. "Environmental Laws" shall mean any applicable foreign, federal, state, provincial or local law, rule, regulation, directive, decree, order or agreement concerning releases of chemicals, substances, materials, wastes, contaminants or pollutants into any part of the natural environment, or protection of natural resources, the environment and public and employee health and safety including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendment, and Reauthorization Act, 42 U.S.C. Section 9601 et seq. the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (33 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 7401 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.), and the Occupational Health and Safety Act 29 U.S.C. Section 651 et seq., as such laws have been and may be amended or supplemented through the Closing Date, and the regulations promulgated pursuant thereto. (m) Disclosure of Facts. No representation, warranty or statement made by the Company in (i) this Agreement (including, without limitation, the representations and warranties made by the Company herein and in the schedules and exhibits hereto which are incorporated by reference herein and which constitute and integral part of this Agreement) or (ii) any other written materials furnished on or prior to the Closing Date, by the Company to the Purchasers or any of their representatives, attorneys and accountants pursuant to this Agreement, contains any untrue statement of a material fact, or omits to state a material fact required to be stated herein or therein or necessary to make the statements contained herein or therein, in light of the circumstances under which they were or will be made, not misleading. Except as heretofore disclosed to the Purchasers in writing, there is no fact which has had or, so far as the Company can reasonably foresee, will have a Material Adverse Effect, or will 12 11 materially and adversely affect the ability of the Company to perform its obligations under this Agreement, the Certificate of Designation or any Note, except those relating to general economic conditions or the toy industry in general. (n) No Violations; Restrictive Agreements. Except as disclosed in Schedule 4(n), neither the Company nor any Subsidiary is in violation of or default under any term of its certificate of incorporation or By-laws. Except as set forth in Schedule 4(n), neither the Company nor any Subsidiary (i) is a party to any contract or agreement that limits in any material respect the amount of, or otherwise imposes material restrictions on the incurring of indebtedness or the paying of dividends by the Company, (ii) is a party to any contract or agreement, or subject to any charter or other corporate restriction, that has a Material Adverse Effect or (iii) has any net worth maintenance, "keep-well", capital contribution or other similar financial obligations or commitments with respect to any Subsidiaries or any other Person in which it holds an interest. (o) Offering of Securities. Neither the Company nor any agent acting on its behalf has offered or will offer the Shares or any part thereof or any similar securities for issue or sale to, or has solicited or will solicit any offer to acquire any of the same from, anyone other than the Purchasers so as to require the registration of the Shares in connection with the issuance thereof pursuant to this Agreement under the provisions of Section 5 of the Securities Act. (p) Use of Proceeds. The proceeds from the sale of the Initial Shares will be used by the Company and its Subsidiaries to repay indebtedness under the Bank Credit Agreement. (q) Taxes. Except as set forth in Schedule 4(q), the Company and its Subsidiaries have timely filed or caused to be filed all Tax Returns that are required to be filed by or with respect to them, their operations and assets, and all such Tax Returns were complete and correct in all material respects. The Company and its Subsidiaries have paid or caused to be paid all Taxes as shown on said returns and on all assessments received by them to the extent that such Taxes have become due, except Taxes disclosed on Schedule 4(q) that are being contested in good faith by 13 12 appropriate proceedings and with respect to which adequate reserves have been set aside. The federal income Tax Returns of the Company and its Subsidiaries have been examined and reported on by the Internal Revenue Service (or closed by applicable statutes) and all Tax liabilities including additional assessments have been satisfied for all fiscal years prior to and including the fiscal year ended August 31, 1986. The Company and its Subsidiaries have paid or caused to be paid, or have established reserves which, in the reasonable judgment of the Company, are adequate, in all material respects, for all Tax liabilities applicable to the Company and its Subsidiaries for all fiscal years which have not been examined and reported on by the taxing authorities (or closed by applicable statutes). The term "Taxes" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, all net income, gross income, gross receipts, premium, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, estimated severance, stamp, occupation, property or other taxes, fees, custom duties, assessments or charges of any kind whatsoever, together with any interest and any penalties (including penalties for failure to file in accordance with applicable information reporting requirements), and additions to tax by any authority (domestic or foreign). The term "Tax Return" shall mean any report, return, form, declaration or other document or information required to be supplied to any authority in connection with the reporting or collection of Taxes. (r) Registration under the Exchange Act. The Company has not registered the Convertible Exchangeable Preferred Stock as a class pursuant to Section 12 of the Exchange Act. When issued, the Convertible Exchangeable Preferred Stock will not be registered as such a class and as of the date of such issuance such registration will not be required. (s) ERISA. Neither the Company nor any Subsidiary (nor any entity under common control with the Company or any Subsidiary as described in Section 414(b) or (c) of the Code) presently maintains, participates in or contributes to any employee pension benefit plan (as defined in Section 3(2) of ERISA) that is subject to Title IV of ERISA, or has any actual (or any possible contingent) liability under Title IV of ERISA for any such employee pension benefit plan which it previously maintained, participated in or contributed to. 14 13 (t) Absence of Specified Changes. Except as disclosed in Schedule 4(t), since December 31, 1993, there has not been with respect to the Company or its Subsidiaries, taken as a whole, any: (1) material adverse change in its business, financial condition or results of operations; (2) liability, contract, agreement, license, commitment or other transaction entered into or assumed by or on behalf of the Company or any of the Subsidiaries except in the ordinary course of business; (3) material change in accounting principles, methods or practices; (4) any purchase, sale, transfer, assignment, conveyance or pledge of the assets or properties of the Company or any of the Subsidiaries, except in the ordinary course of business consistent with past practice; (5) any waiver or modification by the Company or any Subsidiary of any right or rights of substantial value, or any payment, direct or indirect, in satisfaction of any liability, in each case, having a Material Adverse Effect; (6) any loan, advance or capital expenditure by the Company or any of the Subsidiaries, except for loans, advances and capital expenditures made in the ordinary course of business; (7) declaration, setting aside, or payment of a dividend or other distribution in respect of its capital stock, or any direct or indirect redemption, purchase or other acquisition of any shares of its capital stock; (8) amendment to its certificate of incorporation or By-laws; (9) issuance of capital stock or change in the authorized capitalization of the Company (except as contemplated by this Agreement), or any event which would have required an adjustment to the Conversion Price (as defined in the Certificate of Designation) or the number of shares of Common Stock issuable upon 15 14 conversion of a Share if the Shares had been issued and the Certificate of Designation had been in effect as of December 31, 1993; or (10) agreement or understanding to take any of the actions described above in this paragraph 4(t). (u) Intellectual Property. (i) Schedule 4(u) sets forth a true and complete list and summary description of all patents, registered or common law trademarks, trade names, service marks, licenses and copyrights and applications for any of the foregoing (collectively, "Intellectual Property") owned by or licensed to the Company or its Subsidiaries, which constitutes all the Intellectual Property necessary for use in the United States and in such other jurisdictions as is necessary for the conduct of the business of the Company and its Subsidiaries as presently conducted, other than those for products which the Company and its Subsidiaries are not currently marketing and do not reasonably expect to market in the near future. Except as disclosed on Schedule 4(u), the Company owns, or has the right to use for the term set forth in Schedule 4(u), without payment to or interference from any other party, all Intellectual Property listed on Schedule 4(u) and has not authorized any person in any jurisdiction to use any such Intellectual Property. All Intellectual Property listed on Schedule 4(u) which may be so registered or filed has been duly registered and filed in or issued by the appropriate governmental agency in the jurisdictions indicated, all necessary affidavits of continuing use have been filed, and all necessary maintenance fees have been paid to continue all such rights in effect. Except as set forth in Schedule 4(u), the Company has no notice or knowledge of any objection or claim being asserted by any person with respect to the ownership, validity, enforceability or use of any Intellectual Property listed on Schedule 4(u) or challenging or questioning the validity or effectiveness) of any such license, and has not received any such notice within the last five years. (ii) Schedule 4(u) also sets forth each agreement, whether oral or in writing, pursuant to which the Company is obligated to pay any Person, in consideration of a license of or other agreement with respect to Intellectual Property or in consideration of any other rights with respect to the development or marketing of any product or products, an amount which is in excess, or can reasonably be expected to be in excess, for fiscal year 1994, of either (i) $1 million 16 15 per annum or (ii) 10% of the sales of such product or product for such period (whether or not such amount is expressly calculated in such agreement as a percentage of such sales). The Purchasers have been supplied with true and correct copies of each such written agreement (and a description of any oral agreement) as in effect on the date hereof. (v) Projections. The Company has heretofore provided the Purchasers with certain projected financial information, as identified on Schedule 4(v), which, in the judgment of the Company's management, was prepared on a reasonable basis in light of the circumstances existing at the time of its preparation; provided, however, that no representation or warranty is made as to the occurrence of any particular assumptions on which such projections were based or as to any particular items or figures contained in such projections. (w) Unlawful Payments and Contributions. Neither the Company nor its Subsidiaries or any of their respective directors, officers or, to the Company's knowledge, any of their other employees or agents has (a) used any Company funds for any unlawful contribution, endorsement, gift, entertainment or other unlawful expense relating to political activity; (b) made any direct or indirect unlawful payment to any government official or employee from Company funds; (c) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended in connection with the Company's and its Subsidiaries' business; or (d) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any Person (whether or not a government official) with respect to matters pertaining to the Company. (x) Contracts and Commitments. (i) Except as expressly contemplated by this Agreement or as set forth on Schedule 4(x), neither the Company nor any Subsidiary is a party to any written or oral: (A) pension, profit sharing, stock option, employee stock purchase or other plan or arrangement providing for deferred or other compensation to employees or any other employee benefit plan or arrangement, or any contract with any labor union, or any severance agreements; 17 16 (B) contract for the employment of any officer, individual employee or other Person on a full-time, part-time, consulting or other basis providing annual compensation in excess of $250,000 or contract relating to loans to officers, directors or affiliates; (C) contract under which the Company or Subsidiary has advanced or loaned any other Person amounts in the aggregate exceeding $100,000; (D) agreement or indenture relating to the borrowing of money or the mortgaging, pledging or otherwise placing a lien on any material asset or material group of assets of the Company and its Subsidiaries; (E) guarantee of any obligation of any other Person in excess of $100,000 (other than by the Company of a wholly-owned Subsidiary's debts or a guarantee by a Subsidiary of the Company's debts or another Subsidiary's debts); (F) lease or agreement under which the Company or any Subsidiary is lessee of or holds or operates any property, real or personal, owned by any other party, except for any lease of real or personal property under which the aggregate annual rental payments do not exceed $50,000; (G) lease or agreement under which the Company or any Subsidiary is lessor of or permits any third party to hold or operate any property, real or personal, owned or controlled by the Company or any Subsidiary; (H) contract or group of related contracts with the same party or group of affiliated parties the performance of which involves a consideration in excess of $250,000, other than purchase orders and sale orders made in the ordinary course of business; (I) assignment, royalty, license, indemnification or agreement with respect to any Intellectual Property or any other intangible property (including, without limitation, know-how, trade secret or confidential information), other than agreements with respect to trade secrets or confidential information made in the ordinary course of business; 18 17 (J) other than in the ordinary course of business, warranty agreement with respect to its services rendered or its products sold or leased; (K) agreement under which it has granted any Person any registration rights (including piggyback rights); (L) contract or agreement with any officer, director, employee or affiliate, or any affiliate of any officer, director or employee; (M) contract or agreement prohibiting it from freely engaging in any business or competing anywhere in the world; (N) supply or customer contract involving consideration in excess of $200,000 annually; or (O) any agreement pursuant to which the Company or any Subsidiary has received or is entitled to receive payments from any Person in excess of $1,000,000 in consideration of the purchase or sale of, or other transaction concerning, any goods or services or any interests therein where such purchase or sale or other transaction has not yet been consummated or performed; or (P) any other agreement which is material to its operations and business prospects or involves a consideration in excess of $300,000 annually, other than those agreements which are not required to be disclosed due to ordinary course of business exceptions above. (ii) All of the contracts, agreements and instruments set forth on Schedule 4(x) are valid, binding and enforceable in accordance with their respective terms. Except as set forth on Schedule 4(x), to the best of the Company's knowledge, the Company and each Subsidiary have performed all material obligations required to be performed by them and are not in default under or in breach of nor in receipt of any claim of default or breach in each case in any material respect under any contract, agreement or instrument to which the Company or any Subsidiary is subject; no event has occurred which with the passage of time or the giving of notice or both would result in a default, breach or event of noncompliance in each case in 19 18 any material respect under any contract, agreement or instrument to which the Company or any Subsidiary is subject; neither the Company nor any Subsidiary has any present expectation or intention of not fully performing all such obligations; neither the Company nor any Subsidiary has knowledge of any material breach by the other parties. (iii) The Purchasers have been supplied with a true and correct copy of each of the written contracts and an accurate description of the oral contracts listed on Schedule 4(x) (or, in the case of those referred to in Section 4(x)(I), accurate abstracts thereof), together with all amendments, waivers or other changes thereto. (y) Assets. Except as set forth on Schedule 4(y), the Company and each Subsidiary have good and marketable title to, or a valid leasehold interest in, the material properties and assets shown on the December 31, 1993, Balance Sheet or acquired thereafter, free and clear of all liens, security interests, charges and encumbrances, except as disclosed on the December 31, 1993 Balance Sheet (including the notes thereto) and liens for current property taxes not yet due and payable. Except as described on Schedule 4(y), the Company's and each Subsidiary's material buildings, equipment and other tangible assets are in good operating condition in all material respects and are fit for use in the ordinary course of business. The Company and each Subsidiary own, or have a valid leasehold interest in, all material assets necessary for the conduct of their respective business as presently conducted and as presently proposed to be conducted. (z) Labor Matters. (i) Except as set forth on Schedule 4(z), neither the Company nor any Subsidiary is party to any labor or collective bargaining agreement and there are no labor or collective bargaining agreements which pertain to employees of the Company or any Subsidiary. (ii) No employees of the Company or any Subsidiary are represented by any labor organization. Except as set forth in Schedule 4(z), no labor organization or group of employees of the Company or any Subsidiary has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the knowledge of the Company, threatened to be brought or filed, with the National Labor Relations Board or any other labor relations tribunal or authority. To the 20 19 knowledge of the Company, there are no organizing activities involving the Company or any Subsidiary pending with, or threatened by, any labor organization. (iii) There are no material strikes, work stoppages, slowdowns, lockouts, arbitrations or grievances or other material labor disputes pending or, to the knowledge of the Company, threatened against or involving the Company or any Subsidiary. Except as would not reasonably be expected to result in any Material Adverse Effect, there are no unfair labor practice charges, grievances or complaints pending or, to the knowledge of the Company, threatened by or on behalf of any employees or group of employees of the Company or any Subsidiary. (aa) Insurance. Each insurance policy maintained by the Company and its Subsidiaries with respect to its properties, assets and businesses is in full force and effect as of the Closing Date. Neither the Company nor any Subsidiary is in default in any material respect with respect to its obligations under any insurance policy maintained by it. The insurance coverage of the Company and its Subsidiaries is customary for corporations of similar size engaged in similar lines of business. (bb) Related Party Transactions. Except as set forth on Schedule 4(bb) hereto, no Affiliate of the Company and/or any person who beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) five percent or more of the outstanding Common Stock of the Company has borrowed any monies from or has outstanding any indebtedness or other similar obligations to the Company or any Subsidiary which exceed $5,000 principal amount in any one case or $50,000 principal amount in the aggregate. Except as set forth on Schedule 4(bb) hereto, no Affiliate of the Company and/or any person who beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) five percent or more of the outstanding Common Stock of the Company (i) owns any direct or indirect interest of any kind in, or is a director, officer, employee, partner or Associate (as such term is defined in Rule 12b-2 under the Exchange Act) of, or consultant or lender to, or borrower from, or has the right to participate in the management, operations or profits of, any person or entity which is (a) a competitor, supplier, customer, distributor, lessor, tenant, creditor or debtor of the Company or any Subsidiary, (b) engaged in a business related to the business of the Company or (c) participating in any 21 20 transaction to which the Company or any Subsidiary is a party or (ii) is otherwise a party to any contract, arrangement or understanding with the Company or any Subsidiary. Each of the contracts, arrangements or understandings set forth on Schedule 4(bb) hereto to which the Company or any Subsidiary is a party provides for terms and conditions that are no less favorable to the Company then could be obtained from a non-Affiliate third-party in an arms-length transaction. 5. Representations and Warranties of the Purchasers. The Purchasers hereby represent and warrant to the Company as follows: (a) Organization and Standing of the Purchasers. Corporate Partners and Offshore Partners are partnerships duly organized, validly existing and in good standing under the laws of the State of Delaware and the country of Bermuda, respectively. The State Board is a body corporate duly organized and validly existing under the constitution of the State of Florida. Each of the Purchasers has been in existence for more than three years. (b) Authority and Authorization of the Purchasers. Each of the Purchasers has the requisite power and authority to enter into this Agreement and the Registration Rights Agreement and to carry out its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the Registration Rights Agreement by each of the Purchasers has been duly and validly authorized and no other proceedings on their part are necessary to authorize this Agreement or the Registration Rights Agreements or the transactions contemplated hereby or thereby. Each of this Agreement and the Registration Rights Agreement is a valid and binding agreement of each of the Purchasers, enforceable against each of the Purchasers in accordance with its terms except as may be limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally and except as may be limited by the availability of equitable remedies and except as rights of indemnity or contribution may be limited by federal or state securities or other laws or the public policy underlying such laws. The execution and delivery of this Agreement does not and the Registration Rights Agreement and consummation of the transactions contemplated hereby and thereby, will not, result in or constitute (i) a default, breach or violation of the partnership or corporate governing documents, as the case 22 21 may be, of any of the Purchasers, or (ii) subject to the receipt of the consents or approvals required as set forth on Schedule 5(c), a violation of any statute, rule, regulation, order, judgment or decree of any court, public body or authority, which violation would have a material adverse effect on any of the Purchasers. (c) No Consents. No consent, authorization or approval of, or filing with, any person or any U.S. or foreign federal, state or local governmental department, commission, board, agency or instrumentality is required to be made or obtained by any of the Purchasers in connection with their execution and performance of this Agreement, the Registration Rights Agreement or the purchase of the Shares, except as may be required under the HSR Act, and except for such consents, authorizations, approvals or filings, the absence of which would not prevent, impair, hinder or delay the consummation of the transactions contemplated by this Agreement or the Registration Rights Agreement. (d) Experience of Purchasers; Acquisition for Investment. Each of the Purchasers is an accredited investor as defined in Regulation D under the Securities Act and is an "institutional buyer" as that term is used in Section 359(e)-1(a) of the New York General Business Law. Each Purchaser has been given, at a reasonable time prior to the Closing, an opportunity to ask questions and receive answers concerning the terms and conditions of the investment in the Shares. None of the Purchasers is engaged in the business of manufacturing or marketing toys. Each of the Purchasers represents that it is acquiring the Shares solely for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof, and that it has no present intention or plan to effect any distribution of the Shares or the shares of Common Stock or the Notes issuable upon conversion or exchange of the Shares; provided, however, that the disposition of each Purchaser's property shall at all times be and remain within such Purchaser's control and subject to the provisions of this Agreement and the Registration Rights Agreement. The Shares, the shares of Common Stock and the Notes may bear a legend to the following effect: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be sold or transferred except in compliance with that Act. The securities 23 22 represented by this certificate are subject to the provisions of a Stock Purchase Agreement, dated April 15, 1994, among Tyco Toys, Inc., a Delaware corporation, Corporate Partners, L.P., a Delaware limited partnership, Corporate Offshore Partners, L.P., a Bermuda limited partnership, The State Board of Administration of Florida, a body corporate organized under the constitution of the State of Florida, and Corporate Advisors, L.P., copies of which are on file at the principal executive offices of Tyco Toys, Inc." (e) Authority of Corporate Advisors to Act for State Board. The State Board represents that Corporate Advisors has full power and authority, pursuant to the provisions of an Investment Management Agreement, dated as of June 17, 1988 (the "Management Agreement"), to act on behalf of the State Board in connection with the transactions contemplated by this Agreement and the Registration Rights Agreement, and that the Company can rely on any action taken by Corporate Advisors in connection therewith as if such action were taken by the State Board. (f) Principal Place of Business. Corporate Partners represents that its principal place of business is in New York. Offshore Partners represents that its principal place of business is in Bermuda. The State Board represents that its principal place of business is in Florida. (g) ERISA. The Purchasers are not making their investments in the Shares with the assets of any employee benefit plan that is subject to Section 406 of ERISA or Section 4975 of the Code. 6. Covenants of the Company. The Company hereby covenants to the Purchasers and Corporate Advisors as follows: (a) Financial Statements. The Company covenants to deliver to the Purchasers in duplicate: (i) as soon as available and in any event within 45 days after the end of each quarterly period (other than the last quarterly period) in each fiscal year, a consolidated statement of income and a consolidated statement of cash flows of the Company and its Subsidiaries for the period from the beginning of the current fiscal year to the end of such quarterly 24 23 period, and a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarterly period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and certified by an authorized financial officer of the Company, subject to changes resulting from year-end adjustments; provided, however, that delivery pursuant to clause (iii) below of a copy of the Quarterly Report on Form 10-Q of the Company for such quarterly period filed with the SEC shall be deemed to satisfy the requirements of this clause (i); (ii) as soon as available and in any event within 90 days after the end of each fiscal year, a consolidated statement of income and a consolidated statement of cash flows of the Company and its Subsidiaries for such year, and a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, setting forth in each case in comparative form corresponding consolidated figures from the preceding annual audit, all in reasonable detail and together with an opinion directed to the Company of independent accountants of recognized standing selected by the Company; provided, however, that delivery pursuant to clause (iii) below of a copy of the Annual Report on Form 10-K of the Company for such fiscal year filed with the SEC shall be deemed to satisfy the requirements of this clause (ii); (iii) promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as it shall send to its public shareholders and copies of all registration statements (without exhibits), other than on Form S- 8 or any similar successor form, and all reports which it files with the SEC; (iv) together with each delivery of financial statements required by clauses (i) and (ii) above, an officer's certificate demonstrating (with computations in reasonable detail) whether the Company was in compliance, as of the end of the period covered by such financial statements, with the provisions of Section 6(j) and (k) hereof (the "Financial Provisions"); and (v) promptly after the chief executive officer, principal financial officer or principal accounting 25 24 officer of the Company obtains knowledge of any failure to comply with any Financial Provision, an officer's certificate specifying the nature and period of existence thereof and what action the Company proposes to take with respect thereto. The Purchasers are hereby authorized to deliver a copy of any financial statement delivered to the Purchasers pursuant to this Section 6(a) to any regulatory body having jurisdiction over the Purchasers if such delivery is required by any law or regulation applicable to the Purchasers. (b) Inspection of Property; Access to Information. The Company covenants that it will permit each of the Purchasers (and the Purchasers Affiliates), for so long as they own any Shares (or shares of Common Stock issued upon conversion or in exchange thereof), and any holder of more than 15% of the Shares then outstanding (or shares of Common Stock issued upon conversion or in exchange of such number of Shares), and any Person acting in a representative capacity on behalf of any of the foregoing Persons and who is designated in writing by such Person, to (i) upon reasonable notice to the Company and at such Person's expense, visit any of the properties and inspect any of the corporate books and financial records of the Company and its Subsidiaries during normal business hours, provided that such visitations do not unreasonably disrupt the business of the Company or its Subsidiaries and (ii) reasonably request and be furnished with such data, books and records as will enable the Purchasers to confirm the Company's compliance with its obligations set forth in Sections 6(d), 6(f), 6(j) and 6(k) hereof. The Purchasers and such other holders shall, and shall cause any Person designated by them pursuant to the first sentence of this Section 6(b) to, keep confidential all information furnished to, or made available to, them pursuant to this Section 6(b), nor shall any of them use, or permit any such Person to use, any such information for any purpose other than to evaluate their investment in the Shares (or shares of Common Stock into which Shares have been converted); except that the Purchasers and such other holders shall have no obligation to keep confidential information which is or becomes generally available to the public other than as a result of a disclosure by the Purchasers or any such other holders or their representatives. 26 25 (c) Financial Records. The Company will, and will cause each of its Subsidiaries to, maintain in all material respects its financial records (including, but not limited to, its journals and ledgers) in accordance with generally accepted accounting principles and in accordance with any prescribed system of accounts applicable to the Company or any such Subsidiary, as the case may be. (d) Status of Shares. The Company covenants and agrees that in connection with any report to stockholders or any governmental authority and for all tax purposes, it will treat the Shares as equity, except as otherwise required by any change in applicable law or regulation or generally accepted accounting principles after the date hereof. (e) Election of Directors. (i) The Partnerships and Corporate Advisors, acting on behalf of the State Board, shall be entitled, with respect to each election of directors, to designate two persons to be elected to the Company's Board of Directors and the Company shall use its best efforts to have such persons elected as directors of the Company the first meeting of the Company's Board of Directors after the date hereof (it being understood that one of such directors shall be in the class of directors whose terms expire in 1996 and one of such directors shall be in the class of directors whose terms expire in 1997) and at each annual meeting (or special meeting, if applicable) of stockholders held thereafter (or, at each such meeting at which directors of the applicable class are to be elected). Such efforts by the Company shall include, without limitation, including the nominees of the Partnerships and Corporate Advisors in management's slate for election and nomination, solicitation of proxies on their behalf and voting any Voting Securities held by the Company or its Subsidiaries entitled to vote for such nominees. Prior to making the designation of any person to serve as a director of the Company, the Partnerships and Corporate Advisors shall consult with the Company. In the event that any person so designated and elected to the Company's Board of Directors shall cease to serve as a director for any reason, the vacancy resulting therefrom shall be filled by such Board with a substitute nominee designated by the Partnerships and Corporate Advisors. No person so designated to serve as a director of the Company shall, if the Company objects thereto, be a director, officer, or controlling person of any Person that is a direct competitor of the Company in the toy industry, and there shall not have occurred with respect to such person any of the legal 27 26 proceedings set forth under Item 401(f)(2), (3), (4), (5) or (6) of Regulation S-K under the Securities Act. (ii) The rights granted to the Purchasers in this Section 6(e) (x) shall be in addition to any rights the holders of the Shares may have pursuant to Section 5 of the Certificate of Designation at any time when the Shares are outstanding and (y) shall not be effective until the applicable waiting period under the HSR Act (as herein defined), including any extensions thereof, shall have expired or terminated. (iii) Notwithstanding the foregoing, the number of persons the Partnerships and Corporate Advisors, L.P., acting on behalf of the State Board, shall be entitled to designate for election to the Company's Board of Directors pursuant to Section 6(e) shall be reduced as follows in the event and upon the transfer by the Purchasers of any Shares to any Person other than a Purchaser Affiliate, if as a result of such transfer: (i) the Purchasers and the Purchaser Affiliates do not beneficially own Shares or shares of Common Stock that, in the aggregate, represent at least 5% of the Total Voting Power of the Company, in which case the Partnerships and Corporate Advisors, acting on behalf of the State Board, shall be entitled to designate one director; or (ii) the Purchasers and the Purchaser Affiliates do not beneficially own Shares or shares of Common Stock that, in the aggregate, represent at least 1% of the Total Voting Power of the Company, in which case the Partnerships and Corporate Advisors, acting on behalf of the State Board, shall not be entitled to designate any directors; it being understood that any such determination shall be made only as of the date and after giving effect to any such transfer. (f) Transactions with Shareholders and Affiliates. The Company will not, and will not permit any Subsidiary to, directly or indirectly, make loans, advances or payments to, or sell, transfer or lease any assets or property to, any Person who beneficially owns in the aggregate 5% or more of the Voting Securities of the Company or any Affiliate or Associate (as such terms are defined in 28 27 the rules and regulations under the Exchange Act) of such owner (a "Prohibited Transaction"), other than a Prohibited Transaction to which the Company or any of its Subsidiaries is contractually bound on the Closing Date and which is disclosed in Schedule 4(bb), unless the Board of Directors of the Company has determined such transaction is in the ordinary course of business and that the terms thereof are no less favorable to the Company or such Subsidiary than would be obtainable from an unaffiliated party (and in connection therewith any director interested in such transaction shall recuse himself from the discussion and vote on such transaction); provided, however, that a change in the terms of any existing Prohibited Transaction shall require a similar Board determination. (g) Exchange of Stock Certificates. Upon surrender of any certificate representing Shares for exchange at the office of the Company, the Company at its expense will cause to be issued in exchange therefor new certificates in such denomination or denominations as may be requested for the same aggregate number of Shares represented by the certificate so surrendered and registered as such holder may request. (h) Lost Certificates Evidencing Shares. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any certificate evidencing any of the Shares, and (in case of loss, theft or destruction) of indemnity reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such certificate, if mutilated, the Company will make and deliver in lieu of such certificate a new certificate of like tenor and for the number of shares evidenced by such certificate which remain outstanding. A Purchaser's agreement of indemnity shall constitute indemnity satisfactory to the Company for the purposes of this Section 6(h). (i) HSR Act. The Company shall make any and all filings which it is required to make under the HSR Act for the sale of the Shares, such filing to be made within ten business days of the Closing Date, and the Company agrees to furnish the Purchasers with such necessary information and reasonable assistance as the Purchasers may request in connection with their preparation of necessary filings or submissions to the FTC or the Antitrust Division, including, without limitation, any filings necessary under the 29 28 provisions of the HSR Act. The Company shall, at its own expense, utilize its best efforts to respond promptly to any Request for Additional Information, or other formal or informal request for information, witnesses or documents which may be made by any governmental body pertaining to the sale of the Shares, and shall keep the Purchasers fully apprised of its actions with respect thereto. (j) Restrictions on Indebtedness. Without the consent of the holders of a majority of the Shares, the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, incur, issue, assume or guarantee or otherwise become, directly or indirectly, liable with respect to (collectively, "incur") any additional Indebtedness, or permit any Subsidiary to, directly or indirectly, issue any Disqualified Capital Stock, other than (i) Indebtedness under the Bank Credit Agreement in an aggregate principal amount outstanding at any one time not to exceed $325,000,000, (ii) the 10-1/8% Notes and guarantees thereof in an aggregate principal amount not to exceed $126,500,000, (iii) the First Chicago Notes in an aggregate principal amount not to exceed $13,500,000 and additional notes issued in payment of interest thereon at a rate not in excess of 8% per annum, (iv) Permitted Refinancings of Indebtedness in clauses (ii) and (iii), (v) the Notes and (vi) other Indebtedness in an aggregate principal amount outstanding at any one time not to exceed $80,000,000, unless, after giving pro forma effect to the incurrence of such Indebtedness or issuance of such Disqualified Capital Stock and the application of the proceeds thereof, the Consolidated Fixed Charge Coverage Ratio, determined as of the date of such incurrence or issuance, would be greater than the applicable ratio set forth below: 1.75 to 1.0 for the period beginning on the date of this Agreement through August 15, 1994; 2.00 to 1.0 for the period beginning on August 16, 1994 through August 15, 1995; 2.25 to 1.0 for the period beginning on August 16, 1995 through August 15, 1996; and 2.50 to 1.0 for the period beginning August 16, 1996 and thereafter. A calculation of the Consolidated Fixed Charge Coverage Ratio as required by the paragraph above shall be made, in each case, for the period of four full consecutive fiscal quarters next preceding the date on which such Indebtedness is proposed to be incurred or such Disqualified Capital Stock is proposed to be issued. In addition, for purposes of the pro forma calculations required to be made above, the amount of Indebtedness to be incurred (plus all 30 29 other Indebtedness previously incurred during such four fiscal quarters) and the amount of Disqualified Capital Stock to be issued (plus all other Disqualified Capital Stock previously issued during such four fiscal quarters) will be presumed to have been outstanding during the latest four full fiscal quarters (beginning on the first day of the earliest of such four full fiscal quarters) and, if such Indebtedness or Disqualified Capital Stock is being used to finance an acquisition of another business or entity, the Consolidated Fixed Charge Coverage Ratio will be adjusted to give effect to such acquisition on a pro forma basis as if such acquisition had occurred on the first day of the earliest of such four full fiscal quarters. (k) Limitations on Restricted Payments. Without the consent of the holders of a majority of the Shares, the Company shall not, and shall not permit any Subsidiary (provided that these restrictions shall not apply to a Subsidiary if and to the extent such application would result in a breach by the Company of Section 4.10 of the Indenture if the same is then in effect) to, directly or indirectly, (i) declare or pay any dividends on or make any distributions in respect of the Capital Stock of the Company or of any Subsidiary that is not a wholly owned Subsidiary of the Company (other than dividends or distributions payable solely in shares of Qualified Capital Stock and other than pro rata dividends and distributions paid to minority stockholders of the Subsidiaries noted on Schedule 6(k) provided the percentage interests of such minorities do not exceed the amounts specified on such Schedule), or (ii) purchase, redeem or otherwise acquire or retire for value (other than through the issuance solely of Qualified Capital Stock of the Company) any (x) Capital Stock of the Company or any Subsidiary, or (y) warrants, rights or options to acquire any such Capital Stock of the Company or any Subsidiary (other than a redemption of rights for a nominal consideration per right under the Company's existing preferred stock rights plan or an acquisition of minority interests referred to on Schedule 6(k)), or (iii) make any investment in any Person other than the Company or a wholly owned Subsidiary or a Subsidiary referred to on Schedule 6(k) (any such transaction not excluded from (i), (ii) and (iii) above being hereinafter collectively referred to as a "Restricted Payment"); if at the time of such Restricted Payment, or after giving effect thereto, (x) a Restriction Event (as defined in Section 5 of the Certificate of Designation) shall have occurred and be continuing, (y) the Company would not be able to incur $1.00 31 30 of additional Indebtedness in accordance with Section 6(j), or (z) the aggregate amount expended for all Restricted Payments subsequent to March 31, 1994, shall exceed the sum of (a) 50% of the aggregate cumulative Consolidated Net Income (minus 100% of any cumulative net loss) for periods commencing with the fiscal quarter ending March 31, 1994, and through the full fiscal quarter ended immediately prior to the fiscal quarter in which the Restricted Payment is to be paid; and (b) 100% of the aggregate Net Proceeds received by the Company from any person other than a Subsidiary from (I) the issuance and sale subsequent to the date of this Agreement of Qualified Capital Stock of the Company (other than the sale of the Shares) and (II) the exchange, exercise, conversion or surrender after the date of this Agreement of any securities of the Company (issued after the date of this Agreement) for or into Qualified Capital Stock (excluding (A) any Qualified Capital Stock paid as a dividend on any Capital Stock or as interest on any Indebtedness and (B) the issuance of Qualified Capital Stock upon the conversion of or in exchange for any Qualified Capital Stock but including (C) the issuance of Common Stock upon the conversion of or in exchange for any Shares); provided, however, that so long as no Restricted Event shall have occurred and be continuing such provisions shall not prevent (1) the payment of any dividend within 60 days after the date of its declaration if the dividend would have been permitted on the date of its declaration, and (2) the acquisition of any shares of Capital Stock of the Company by any exchange for, or solely out of the proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock, although any such payments expended shall be counted for purposes of computing amounts expended in (ii) above. (l) Additional Shares. The Company covenants that for so long as it may issue Additional Shares pursuant to Section 2 hereof, the full number of Additional Shares which it could issue shall remain validly reserved for issuance. (m) Contractual Management Rights. So long as (i) the Purchasers own securities representing 1% or more of the Total Voting Power, and (ii) Corporate Partners is required to have contractual "management rights" under ERISA and Department of Labor Regulation Sec. 2510.3-101(d) (or successor provision) with respect to all or a portion of its investments in order that its assets are not considered "plan assets" under ERISA, then at the written request of 32 31 Corporate Partners the Company shall use its best efforts to provide Corporate Partners with rights that comply with such requirements, it being understood that (x) the Company shall have the sole discretion to determine which rights complying with such requirements it will so provide, and (y) all the rights of Corporate Partners under this Agreement and the Certificate of Designation shall be considered in determining if Corporate Partners has and is permitted to exercise sufficient contractual management rights. 7. Covenants of the Purchasers. Each of the Purchasers covenants with the Company as follows: (a) Prohibited Actions. From the Closing Date and until the date when the Purchasers and the Purchaser Affiliates do not own any Shares or any shares of Common Stock or Notes issued on conversion of or in exchange for Shares, the Partnerships and Corporate Advisors, acting on behalf of the State Board, shall not, except by virtue of their representation on the Company's Board of Directors pursuant to Section 6(e) hereof and the Certificate of Designation: (i) make, or in any way participate, directly or indirectly, in any "solicitation" of "proxies" to vote (as such terms are used in the proxy rules of the SEC), initiate, propose or otherwise solicit stockholders of the Company for the approval of one or more stockholder proposals, or induce or attempt to induce any other person to initiate any stockholder proposal, or advise or influence, or seek to advise or influence, any person with respect to the voting of any Voting Securities of the Company; (ii) deposit any Voting Securities in a voting trust or, except for the irrevocable proxy to be delivered by the State Board to Corporate Advisors pursuant to Section 7(c), subject any Voting Securities to any agreement or arrangement with respect to the voting of any Voting Securities or other agreement having similar effect; or (iii) form a partnership, syndicate or other group (as defined in Rule 13d-3 under the Exchange Act) for the purpose of acquiring, holding, voting or disposing of Voting Securities with any person that is not a Purchaser or Corporate Advisors. In addition to and not in limitation of any other remedies at law or in equity available to the Purchasers for a breach of Section 4 of the Certificate of Designation, the restrictions contained in this Section 7(a) shall not apply to any Partnership or Corporate Advisors, acting on behalf of the State Board, as to whom there has been a redemption default pursuant to Section 4 of the Certificate of Designation which default is continuing after 33 32 30 days notice thereof from such Partnership or Corporate Advisors to the Company. The Company may not assign any of its rights under this Section 7(a) and the obligations of the Partnerships and Corporate Advisors, acting on behalf of the State Board, under this Section 7(a) shall not be binding upon any subsequent holders of the Shares other than Purchaser Affiliates. For purposes of this Section 7(a), "Purchaser Affiliate" shall be deemed not to include Lazard Freres & Co. provided it is not acting on behalf of a Purchaser. (b) HSR Act. The Purchasers shall make any and all filings which they are required to make under the HSR Act with respect to the purchase of the Shares, such filing to be made within ten business days of the Closing Date and the Purchasers agree to furnish the Company with such necessary information and reasonable assistance as it may request in connection with its preparation of necessary filings or submissions to the FTC or the Antitrust Division, including, without limitation, any filings necessary under the provisions of the HSR Act. The Purchasers agree to utilize their best efforts to respond promptly to any request for additional information, or other formal or informal request for information, witnesses or documents which may be made by any governmental body pertaining to the sale of the Shares, and shall keep the Company fully apprised of their actions with respect thereto. (c) Irrevocable Proxy. The State Board covenants that as soon as practicable after the date of this Agreement, it will grant to Corporate Advisors an irrevocable proxy with respect to the Shares purchased by the State Board hereunder, shares of Common Stock issued to the State Board upon conversion of the Shares and all other shares of equity capital of the Company having voting rights obtained by the State Board pursuant to ownership of the Shares. (d) Exempt Voting Securities. Notwithstanding anything to the contrary contained in this Agreement, (i) the restrictions and obligations contained in Section 7 shall not apply to any Voting Securities acquired or held by the State Board with respect to which none of Corporate Advisors, the Partnerships, nor any of the Purchaser Affiliates has sole or shared voting or dispositive power with respect thereto pursuant to the Management Agreement, which Voting Securities shall also include Shares acquired by the State Board pursuant to this Agreement (or shares of 34 33 Common Stock into which such Shares have been converted) if such Shares (or the shares of Common Stock into which such Shares have been converted) are released from the custody account maintained by Corporate Advisors on behalf of the State Board pursuant to the Management Agreement, and (ii) the State Board shall not be bound by the obligations or prohibitions set forth in subparagraphs (a) through (c) of this Section 7; provided, however, that the foregoing shall not be deemed to be a limitation of any of the obligations imposed by this Agreement upon Corporate Advisors, acting on behalf of the State Board. If at any time the irrevocable proxy described in Section 7(c) shall cease to be in full force and effect and the Shares (or shares of Common Stock issued upon conversion or exchange of Shares) are released from the custody account maintained by Corporate Advisors on behalf of the State Board pursuant to the Management Agreement, the State Board shall not be entitled to any rights or interests under this Agreement (other than rights or interests accruing as of, or with respect to matters occurring prior to, such time), unless it agrees to be bound by the provisions of this Section 7. The foregoing shall not be construed to limit the rights of the State Board under Section 10 hereof with respect to matters arising prior to such time. (e) Notice Prior to Sale. Each of the Partnerships and Corporate Advisors, acting on behalf of the State Board, shall give the Company three days' prior notice of its intent to sell any Shares prior to entering into a written agreement for such sale. 8. Other Documents to be Delivered at Closing. (a) The Purchasers shall deliver to the Company a certificate attesting that the representations and warranties of the Purchasers are true and correct in all material respects as of the Closing Date, signed by a duly authorized officer or agent of the Purchasers. (b) The Purchasers shall deliver to the Company a certificate attesting that the Purchasers have performed, satisfied and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed, satisfied or complied with on or prior to the Closing Date, signed by a duly authorized officer or agent of the Purchasers. 35 34 (c) The Company shall have received from the Purchasers, and the Purchasers shall have received from the Company, fully executed counterparts of the Registration Rights Agreement substantially in the form of Exhibit B attached hereto. (d) The Company shall deliver to the Purchasers a certificate attesting that the representations and warranties of the Company are true and correct in all material respects as of the Closing Date, signed by a duly authorized officer of the Company. (e) The Company shall deliver to the Purchasers a certificate attesting that the Company has performed, satisfied and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed, satisfied or complied with on or prior to the Closing Date, signed by a duly authorized officer of the Company to such effect. (f) There shall be delivered to each of the Purchasers a signed opinion of R. Michael Kennedy, Jr., Esq., General Counsel of the Company, dated as of the date of the Closing, in a form satisfactory to the Purchasers and their legal counsel. (g) The Company shall deliver to the Purchasers (i) a long form certificate of good standing as to the Company certified by the Secretary of State of the State of Delaware (the "Secretary of State"), dated within 30 days of the Closing Date, and (ii) telephonic confirmation by the Secretary of State of such good standing as to the Company. The Company shall deliver to the Purchasers copies of the Restated Certificate and the Certificate of Designation certified by the Secretary of State and the By-laws certified by the Secretary of the Company. (h) The Company shall deliver to the Purchasers a certificate, dated the Closing Date and in form and substance satisfactory to the Purchasers, of the President or the Chief Executive Officer of the Company as to (i) the incumbency of those officers of the Company who shall be executing and delivering this Agreement and the Registration Rights Agreement, which shall be certified by the Secretary of the Company, and (ii) the adoption of appropriate corporate resolutions authorizing the execution and delivery of each of this Agreement and the Registration Rights 36 35 Agreement and consummation of the transactions contemplated hereby and thereby. 9. Definitions. "Additional Shares" shall have the meaning set forth in Section 2. "Affiliate" shall have the meaning set forth in Reel 12b-2 under the Exchange Act (as in effect on the date of this Agreement). "Antitrust Division" shall mean the Antitrust Division of the U.S. Department of Justice. "Bank Credit Agreement" shall mean the Amended and Restated Credit Agreement dated as of October 2, 1992, among the Company and certain of its Subsidiaries, the Lenders party thereto, Nationsbank of North Carolina, N.A., as agent for such Lenders, and The Bank of Nova Scotia, as co-agent, as the same was amended by amendment agreements dated as of March 18, 1993 and February 10, 1994, and by the waivers and modifications listed on Schedule 9(a), and all renewals, extensions, amendments and modifications thereof and any refunding or refinancing of the Indebtedness thereunder so long as the same is in the form of Indebtedness under a credit facility with banks or other financial institutions. "By-laws" shall mean the By-laws of the Company, as amended to the Closing Date. "Capital Stock" shall mean with respect to any person any and all shares, interests, participations or other equivalents (however designated) of corporate stock, including each class of common stock and preferred stock of such person. "Certificate of Designation" shall mean the Certificate of Designation setting forth the relative powers, preferences and rights and qualifications, limitations and restrictions of the Convertible Exchangeable Preferred Stock. "Closing" shall mean the closing of the sale of the Initial Shares to the Purchasers. "Common Stock" shall mean the Common Stock of the Company, par value $.01 per share. 37 36 "Consolidated EBITDA" shall mean, for any period, the Consolidated Net Income for such period plus (in each case to the extent such Consolidated Net Income was reduced thereby) (i) all liabilities paid or accrued during such period by the Company or any of its consolidated Subsidiaries for taxes based on income or earnings after taking into account all items of credit, loss or deductions available during such period, (ii) depreciation and amortization expense of the Company or any of its consolidated Subsidiaries during such period, (iii) Fixed Charges and (iv) to the extent not included in clauses (i) through (iii) above, any other non-cash expense reducing Consolidated Net Income, in each case determined on a consolidated basis in accordance with generally accepted accounting principles. "Consolidated Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of (i) Consolidated EBITDA for such period to (ii) Fixed Charges for such period. "Consolidated Net Income" for any period shall mean the Net Income (or loss) of the Company and its Subsidiaries for such period, on a consolidated basis, determined in accordance with generally accepted accounting principles, provided, however, that (a) the Net Income of any Subsidiary (of which less than 80% of the Capital Stock of such Subsidiary having ordinary voting power for the election of directors or other governing body of such Subsidiary is owned by the Company or any of its Subsidiaries) shall be included only to the extent of the amount of dividends or distributions paid to the Company or its Subsidiaries in such period; (b) the Net Income of any Subsidiary that is subject to any restriction or limitation on the payment of dividends or the payment of other distributions (including loans or advances) to the Company or any other Subsidiary (or the ability of the Company or such other Subsidiary to receive or retain such amount) shall be excluded to the extent of such restriction or limitation; and (c) there shall be excluded (i) the Net Income (or loss) of any person acquired in a pooling of interests transaction for any period prior to the date of such acquisition, (ii) any net gain (but not loss) on the sale or other disposition of capital assets by the Company or any of its Subsidiaries other than in the ordinary course of business and (iii) any net gain (but not loss) from the issuance, sale or disposition of any Capital Stock of the Company or any of its Subsidiaries. 38 37 "December 31, 1993 Balance Sheet" shall mean the balance sheet of the Company and its Subsidiaries as of such date, including the notes thereto, included in the Financial Statement. "Disqualified Capital Stock" shall mean any Capital Stock of the Company or its Subsidiaries that, by its terms or by the terms of any security into which it is convertible or exchangeable, is, or upon the happening of an event would be, required to be repurchased, including at the option of the holder, in whole or in part, or has, or upon the happening of any event would have, a redemption or similar payment due, on or prior to April 15, 2004. "ERISA" shall mean the Employee Retirement Income Security Act of 1974. "Financial Statements" shall mean the consolidated balance sheets of the Company and its Subsidiaries for the years ended December 31, 1992 and 1993, and the consolidated statements of income and retained earnings and changes in financial position for the three years ended December 31, 1993, and the notes thereto, all as reported on by Deloitte & Touche, independent accountants. "First Chicago Notes" shall mean the 7% Convertible Subordinated Notes issued by the Company, which rank junior in right of payment to the 10-1/8% Notes. "Fixed Charges" shall mean, for any period, the aggregate amount of (i) consolidated interest in respect of all Indebtedness of the Company and any of its consolidated Subsidiaries (including, without limitation, all commissions, discounts or related amortization and other fees and charges owed by the Company and its consolidated Subsidiaries with respect to letters of credit and bankers' acceptance financing and the net costs associated with interest swap obligations of the Company and its consolidated Subsidiaries, amortization of debt expense and original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with the effective interest method), and (ii) dividend requirements of the Company, any of its consolidated Subsidiaries and any person in which the Company has at least a 50% equity ownership, paid, accrued or scheduled to be paid during such period attributable to any preferred stock (excluding in all such cases items that would be or are eliminated in consolidation). For purposes 39 38 of this definition, (a) with respect to capitalized lease obligations, all but the principal component of rentals relating to such capitalized lease obligations, and with respect to operating leases relating to assets other than real estate, one-third of the aggregate amount of rent expense relating to such operating lease paid, accrued, or scheduled to be paid or accrued by the Company and its consolidated Subsidiaries shall be deemed to be Fixed Charges, and (b) Fixed Charges attributable to any Indebtedness represented by the guarantee by the Company or any of its consolidated Subsidiaries of an obligation of a person other than the Company or any of its consolidated Subsidiaries shall be deemed to be the Fixed Charges attributable to the items guaranteed. For purposes of clause (ii) above, dividend requirements attributable to any preferred stock shall be an amount equal to the aggregate dollar amount of dividend requirements on such preferred stock dividend by the difference between 1 and the applicable Federal, state, local and foreign income tax rates of the Company and its consolidated Subsidiaries (expressed as a decimal number between 1 and 0), on a consolidated basis. "FTC" shall mean the Federal Trade Commission. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976. "Indebtedness" shall mean, for any entity, (a) its liabilities for borrowed money or the deferred purchase price of property or services, (b) capitalized lease obligations of such entity, and (c) all liabilities of any other entity for borrowed money or for the deferred purchase price of property or services (other than trade accounts payable, and any such purchase price payable for goods or services acquired, in either case in the ordinary course of business) (i) which is or are secured by any mortgage, deed of trust, pledge, lien, security interest or other charge or encumbrance upon or in property owned by such entity, whether or not such entity has assumed or become liable for the payment of such liability, or (ii) for which such entity has assumed or otherwise become directly or contingently liable for the payment of such liability. "Indenture" shall mean the Indenture dated as of August 15, 1992, among the Company certain subsidiaries of the Company and Bankers Trust, as in effect on the date 40 39 hereof, without giving effect to any amendment or modification subsequent to the date hereof. "Initial Shares" shall have the meaning set forth in Section 2. "Material Adverse Effect" shall mean a material adverse effect on the business condition (financial or otherwise), prospects or results of operation of the Company and the Subsidiaries, taken as a whole. "Net Income" of any Person shall mean the net income (or loss) of such person, determined in accordance with generally accepted accounting principles; excluding, however, from the determination of Net Income any gain (but not loss) realized upon the sale or other disposition (including, without limitation, dispositions pursuant to leaseback transactions) of any real property or equipment of such person, which is not sold or otherwise disposed of in the ordinary course of business, or of any Capital Stock of the Company or a Subsidiary owned by such person. "Net Proceeds" shall have the meaning set forth in the Indenture. "Notes" shall mean the Company's Convertible Subordinated Notes in the form attached hereto as Exhibit C. "Permitted Refinancing" shall mean, with respect to any Indebtedness, Indebtedness incurred in exchange for or the proceeds of which are used to refinance or pay at or prior to maturity such Indebtedness so long as (i) the principal amount of the Indebtedness so incurred does not exceed the principal amount outstanding of the Indebtedness so exchanged, refinanced or paid plus accrued and unpaid interest and prepayment premium, if any, (ii) the Indebtedness so incurred (A) does not mature prior to the stated maturity of the Indebtedness so exchanged, refinanced or paid and (B) has an average life equal to or greater than the remaining average life of the Indebtedness so exchanged, refinanced or paid, (iii) if the Indebtedness so exchanged, refinanced or paid is subordinated to the Notes, the Indebtedness so incurred is subordinated to at least the same extent, (iv) if the Indebtedness so exchanged, refinanced or paid ranks pari passu with the Notes, the Indebtedness so incurred ranks pari passu with or is subordinated to the Notes (assuming for purposes of clauses (iii) and (iv) that the Notes were then outstanding). 41 40 "Person" shall mean any individual, partnership, joint venture, corporation, trust, organization, government or department or agency of a government. "Preferred Stock" shall mean the Company's present class of Preferred Stock, par value $.10 per share designated in Article V of the Restated Certificate of Incorporation. "Purchaser Affiliate" shall mean any Affiliate of a Purchaser except as set forth under Section 7(a), and shall include any successor to (but not any assignee of) a Purchaser or Purchaser Affiliate, it being understood that any limited partner of either Partnership shall not be an Affiliate of such Partnership solely by virtue of its status as such a limited partner. "Qualified Capital Stock" shall mean any Capital Stock of the Company that is not Disqualified Capital Stock. "Registration Rights Agreement" shall mean the Registration Rights Agreement with respect to the Shares substantially in the form of Exhibit B attached hereto. "Restated Certificate" shall mean the Restated Certificate of Incorporation of the Company, as amended by the Closing Date. "Shares" shall have the meaning set forth in Section 2. "subsidiary" of any Person shall mean any other Person a majority of the voting stock of which is owned by such first Person. "10 1/8% Notes" shall mean the Company's 10 1/8% Senior Subordinated Notes due August 15, 2002 issued under the Indenture. "Total Voting Power" of any Person at any time shall mean the total combined voting power in the general election of directors of all the outstanding shares of all classes of capital stock of such Person which are then entitled to vote generally in the election of directors. "Voting Securities" shall mean Common Stock and any other securities of the Company entitled to vote generally for the election of directors or any securities 42 41 (including without limitation, rights and options) convertible into or exchangeable for or exercisable for any of the foregoing, including without limitation, the Shares; 10. Indemnification. (a) Company Indemnification. The Company agrees to indemnify and hold harmless each Purchaser, Corporate Advisors, each person who controls any Purchaser or Corporate Advisors within the meaning of Section 15 of the Securities Act and/or Section 20 of the Exchange Act, each member of any advisory or similar committee or Board of each of the Purchasers and Corporate Advisors and each of the respective partners, officers, directors, employees, agents, Affiliates and Associates of any Purchaser and Corporate Advisors in their respective capacities as such (the "Purchaser Indemnitees"), to the fullest extent lawful, from and against (i) any and all actions, suits, claims, proceedings, costs, losses, damages, judgments, amounts paid in settlement in accordance with Section 10(c) and reasonable expenses (including, without limitation, reasonable attorneys' fees and disbursements)(hereinafter collectively referred to as a "Loss" or "Losses") suffered or incurred by any Purchaser Indemnitee to the extent relating to or arising out of any inaccuracy in or breach, violation or nonobservance of the representations, warranties, covenants or agreements made by the Company herein (other than the covenants in Sections 6(j) and 6(k)) or in the Registration Rights Agreement and (ii) any and all Losses relating to or arising out of any action or failure to act undertaken by a Purchaser Indemnitee at the specific request of or with the consent of the Company or its Chairman or otherwise relating to or arising out of the transactions contemplated hereby or by the Registration Rights Agreement, provided that any Loss referred to in this clause (ii) shall (x) have been incurred or suffered by a Purchaser Indemnitee in connection with a threatened or actual investigation, action, suit, claim or proceeding involving the Purchaser Indemnitee as defendant, co-defendant, deponent, witness or in any capacity whatsoever other than as a plaintiff initiating an action, suit, claim or proceeding against any person or entity and (y) not have resulted from the bad faith, wilful misconduct or gross negligence of such Purchaser Indemnitee, as determined by a court of competent jurisdiction in a final, non-appealable order. The parties hereto agree that to the extent a Purchaser Indemnitee shall have suffered a Loss for which indemnification is available pursuant to this Section 43 42 10, it shall be entitled to indemnification for the full amount thereof whether the investment by the Purchasers in the Shares or, in the case of conversion or redemption, the Common Stock or Notes shall have yielded an actual economic loss or profit. (b) Purchaser Indemnification. The Purchasers agree to indemnify and hold harmless the Company, the directors, officers, employees and agents of the Company, and each person who controls the Company within the meaning of Section 15 of the Securities Act and/or Section 20 of the Exchange Act from and against any and all Losses suffered or incurred by the Company as a result of any inaccuracy in or breach, violation or nonobservance of the representations, warranties or covenants made by the Purchasers herein. (c) Expenses, Reimbursement. Any Person (an "Indemnifying Person") who is obligated to indemnify another Person (an "Indemnified Person") pursuant hereto promptly shall reimburse any such Indemnified Person for all Losses constituting reasonable out-of-pocket expenses (including reasonable attorneys' fees and disbursements) as they are incurred in connection with investigating, preparing to defend or defending any such action, suit, claim or proceeding (including any inquiry or investigation) for which indemnity is available under Sections 10(a) or 10(b), whether or not such Indemnified Person is a party thereto. To the extent that any Indemnifying Person shall indemnify or reimburse any Indemnified Person for Losses or expenses pursuant to Sections 10(a), 10(b) or this Section 10(c) and it is subsequently judicially determined that such Indemnified Person is not entitled to such indemnity or reimbursement of expenses hereunder, such Indemnified Person shall promptly refund to any Indemnifying Person the amounts so received by it. In the event that any Indemnified Person shall appeal a judgment contemplated by the preceding sentence that is adverse to such Indemnified Person and thereafter it shall be judicially determined that such Indemnified Person was entitled to indemnity hereunder, such Indemnifying Person shall reimburse the Indemnified Person for all Losses incurred by such Indemnified Person, including without limitation amounts earlier refunded to such Indemnifying Person by such Indemnified Person and the costs associated with pursuing and prosecuting the appeal. (d) Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in Sections 10(a) and 10(b) is 44 43 due in accordance with its terms but is for any reason held by a court to be unavailable from any Indemnifying Person on grounds of public policy or otherwise, then such Indemnifying Person shall, to the fullest extent permitted by law, contribute to the aggregate Losses of such Indemnified Person in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Purchasers on the other in connection with the conduct which resulted in the Loss. The parties agree that it would not be just or equitable if contribution were determined by pro rata allocation or by any other method of allocation which does not take account of relative fault and other equitable considerations. The parties further agree that if and to the extent that pro rata contribution were nevertheless considered by a court, all Purchaser Indemnitees collectively on the one hand, and the Company and each other Person indemnified pursuant to Section 10(b) collectively on the other hand, shall each be deemed to be one person. No Purchaser Indemnitee shall in any event have liability to the Company arising out of any inaccuracy in or breach of the representations, warranties, covenants or agreements made by the Company herein; other conduct by the Company or its employees or agents; or any action or failure to act undertaken by a Purchaser Indemnitee at the request of or with the consent of the Company. (e) Indemnification Procedure. An Indemnified Person shall give written notice to the Indemnifying Person of any claim with respect to which it seeks indemnification within five days after the discovery by such parties of any matters giving rise to a claim for indemnification pursuant to Sections 10(a) or 10(b), as the case may be; provided that the failure of any Indemnified Person to give notice as provided herein shall not relieve any Indemnifying Person of its obligations under this Section 10 except to the extent that such Indemnifying Person is actually prejudiced by such failure to give notice. In case any such action, proceeding or claim is brought against any Indemnified Person, the Indemnifying Persons shall be entitled to participate in and, unless in the reasonable good faith judgment of the Indemnified Persons a conflict of interest between them and the Indemnifying Persons may exist in respect of such action, proceeding or claim, to assume the defense thereof, with counsel reasonably satisfactory to the Indemnified Persons, and after notice from the Indemnifying Persons to the Indemnified Persons of their election so to assume the defense thereof, the Indemnifying Persons shall not be liable to such Indemnified Persons for any legal or other 45 44 expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. In any event, unless and until the Indemnifying Persons elect in writing to assume and do so assume the defense of any such claim, proceeding or action, the Indemnified Persons' costs and expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding shall be losses subject to indemnification hereunder. If the Indemnifying Persons elect to defend any such action or claim, then the Indemnified Persons shall be entitled to participate in such defense with counsel of their choice at their sole cost and expense. The Indemnifying Persons shall not be liable for any settlement of any action, claim or proceeding effected without its written consent, provided, however, that the Indemnifying Persons shall not unreasonably withhold, delay or condition their consent. Anything in this Section 10 to the contrary notwithstanding, the Indemnifying Persons shall not, without the Indemnified Persons' prior written consent (which consent shall not be unreasonably withheld), settle or compromise any claim or consent to entry of any judgment in respect thereof which imposes any future obligation on the Indemnified Persons or which does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the Indemnified Persons, a release from all liability in respect of such claim. (f) Survival. The obligations of the Company and the Purchasers under this Section 10 shall survive the transfer of any Shares or shares of Common Stock or Notes or the Closing or termination of this Agreement and the transactions contemplated hereby and shall inure to the benefit of any transferees or assignees of the Purchasers or the Company to the extent provided by Section 11(d) of this Agreement. The agreements contained in this Section 10 shall be in addition to any other rights of any party hereto against any other party with respect to the matters referred to in Sections 10(a), 10(b) and 10(c) or others. 11. Miscellaneous. (a) Home Office Payment. The Company agrees that, as long as the Purchasers shall hold any Shares, any dividend and other payments to be made on, or in connection with the redemption of, such Shares will be made at the place and in the manner indicated on Schedule 11(a) hereto or such other place or manner as the Purchasers may designate in writing, without any requirement for the presentation or surrender of the certificates for such Shares. 46 45 (b) Expenses. Except for Allen & Company Incorporated, who have provided certain brokerage and financial advisory services to the Company with respect to the issuance and sale of the Shares, the Company on the one hand and the Purchasers on the other each represents to the other that it has not used a broker in connection with the transactions contemplated by this Agreement. The Company agrees to pay, and hold the Purchasers harmless against liability for the payment of, all out-of-pocket expenses arising in connection with the preparation, negotiation and execution of this Agreement, the Registration Rights Agreement and the Closing of the purchase and sale of the Shares, including, without limitation, the fees and expenses of the Purchasers' special counsel and all local counsel retained in connection with such agreements and the Closing. The Company shall be responsible for any and all fees and expenses owing to Allen & Company Incorporated. (c) Survival of Representations and Warranties. The representations and warranties set forth in this Agreement shall survive the execution and delivery of this Agreement. (d) Assignment and Binding Effect. (i) This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties pursuant to this paragraph. The Company shall not assign all or any part of this Agreement without the prior written consent of the Purchasers. After the closing hereunder, any Purchaser may assign its rights under this Agreement to any Person who acquires Shares (or securities issued upon the conversion or exchange thereof) and who signs and delivers to the Company an agreement assuming the rights and obligations hereunder and under the Registration Rights Agreement of the assigning Purchaser; provided that a Purchaser may not assign its rights under Sections 6(e) and 6(m) to any assignee, and the Company shall not be obligated to any assignee with respect to such Sections, other than a Purchaser Affiliate. (ii) Notwithstanding any assignment pursuant hereto, it is understood and agreed that (x) at any time when there are no Shares outstanding, the covenants set forth in Sections 6(d), 6(g), 6(h), 6(j), 6(k) and 6(1) shall cease to have any effect and (y) at any time when there are no Shares outstanding and none of the Purchasers or the Purchaser Affiliates owns any Voting Securities issued upon conversion or exchange of Shares, all the 47 46 covenants set forth in Section 6 shall cease to have any effect. (e) Independent Investment Banking Firm. So long as the Purchasers or any Purchaser Affiliates hold any Shares, any independent investment banking firm or appraisal firm used pursuant to Section 3 of the Certificate of Designation shall be mutually acceptable to the Company, on the one hand, and the Purchasers or such Purchaser Affiliates on the other hand. (f) Headings. Subject headings are included for convenience only and shall not affect the interpretation of any provisions of this Agreement. (g) Notices. Any notice, demand, request, waiver, or other communication under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if personally served or transmitted via telecopy, (ii) on the next business day after delivery to an overnight carrier or (iii) on the third day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered, return receipt requested, postage prepaid and addressed as follows: (i) To the Company: Tyco Toys, Inc. 6000 Midlantic Drive Mt. Laurel, NJ 08054 Attention: Harry J. Pearce With a copy to: R. Michael Kennedy, Esq. Tyco Toys, Inc. 6000 Midlantic Drive Mt. Laurel, NJ 08054 (ii)(a) To Corporate Partners: Corporate Partners, L.P. One Rockefeller Center New York, New York 10020 Attention: Mr. Jonathan Kagan (ii)(b) To Offshore Partners: Corporate Offshore Partners, L.P. One Rockefeller Center New York, New York 10020 Attention: Mr. Jonathan Kagan 48 47 (iii)(a) To the State Board: State Board of Administration of Florida c/o Corporate Advisors, L.P. One Rockefeller Center New York, New York 10020 Attention: Mr. Jonathan Kagan - in each case with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, NY 10019 Attention: Timothy G. Massad (h) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. (i) Entire Agreement. This Agreement, including the Exhibits and Schedules hereto, sets forth the entire understanding and agreement of the parties hereto relating to the purchase and sale of the Shares and supersedes any and all other understandings, negotiations or agreements between the parties hereto relating to the sale and purchase of the Shares, including the letter agreement dated February 14, 1994 between Corporate Advisors L.P. and Allen & Company on behalf of the Company. (j) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute a single agreement. (k) Severability. In the event that any one or more of the immaterial provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable, the same shall not affect any other provision of this Agreement, but this Agreement shall be construed in a manner which, as nearly as possible, reflects the original intent of the parties. (l) Words in Singular and Plural Form. Words used in the singular form in this Agreement shall be deemed to import the plural, and vice versa, as the sense may require. 49 48 (m) Amendment and Modification. This Agreement may be amended or modified only by written agreement executed by the Company and the holders of the Shares (or of the securities issued upon the conversion or exchange of the Shares) representing a majority of the voting rights of the Shares (or other securities) outstanding, it being understood that the Shares (or any other securities other than Common Stock) shall be deemed to have been converted into Common Stock for such purpose. (n) Waiver. Any agreement on the part of a party hereto to any waiver of any provision hereof shall be valid against such party only if set forth in an instrument in writing signed by such party but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not be deemed to be construed as a further or continuing waiver of any such obligation, covenant agreement or condition or of the breach of any other provision, term, covenant, representation or warranty of this Agreement and shall not operate as a waiver of, or estoppel with respect to, any subsequent or future failure. (o) Sections, Exhibits, Schedules. References to a section are, unless otherwise specified, to one of the sections of this Agreement and references to an "Exhibit" or "Schedule" are, unless otherwise specified, to one of the exhibits or schedules attached to this Agreement. References to this Agreement include, unless otherwise specified, the exhibits or Schedules attached hereto. (p) Specific Enforcement. Purchasers, on the one hand, and the Company, on the other, acknowledge and agree that irreparable damage would occur in the event that any of the covenants contained in Sections 6(e), (i), (j) or (k) of this Agreement were not performed in accordance with their specific terms or were otherwise breached, and that money damages are an inadequate remedy for breach thereof because of the difficulty of ascertaining and quantifying the amount of damage that will be suffered by the parties hereto in the event that such covenants are not performed in accordance with their terms or are otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of the covenants referred to in the immediately preceding sentence and to enforce specifically the terms and provisions hereof in any court of the United States or any state thereof having jurisdiction, this being in addition to any other 50 49 rights and remedies to which they may be entitled at law or equity. (q) Corporate Advisors to Act for the State Board. So long as the Management Agreement remains in effect without amendment of the provisions granting Corporate Advisors the authority to act on behalf of the State Board in connection with the transactions contemplated by this Agreement and the Registration Rights Agreement, any and all actions that are required or permitted to be taken by the State Board pursuant to this Agreement or the Registration Rights Agreement may be taken by Corporate Advisors on behalf of the State Board and any and all notices required to be given by the Company to the State Board pursuant to this Agreement or the Registration Rights Agreement may be given to Corporate Advisors in lieu of giving such notice to the State Board; provided, however, that the provisions of this sentence shall not relieve the State Board of any of its obligations pursuant to this Agreement or the Registration Rights Agreement. The Company shall be entitled to assume that, and to act in reliance on the assumption that, the Management Agreement remains in effect without amendment of any such provisions unless and until it receives written notice from the State Board to the contrary. (r) Confidentiality. The Purchasers and Corporate Advisors agree that they shall not disclose any non-public information concerning the Company which they receive from the Company to any partner or equity owner of any Purchaser or any affiliate thereof that in any such case is directly or indirectly engaged in the toy business, except such information which is required to be disclosed by applicable law or in connection with any legal proceeding or pursuant to their fiduciary obligation. The foregoing shall not apply to information that shall be or hereinafter become publicly available other than as a result of a disclosure by the Purchasers or Corporate Advisors. (s) Submission to Jurisdiction. (i) The Company hereby irrevocably submits, for itself and its property, to the jurisdiction of the Supreme Court of the State of New York, County of New York, and the United States District Court for the Southern District of New York over any suit, action or other proceeding arising out of, or relating to, this Agreement or the transactions contemplated hereunder, and the Company hereby irrevocably waives and agrees not to assert, by way of motion, as a defense, or otherwise, in any 51 50 such suit, action or proceeding, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper or that this Agreement may not be enforced in or by such courts. The Company agrees, to the fullest extent it may effectively do so under applicable law, that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (ii) The Company irrevocably appoints Prentice Hall, having offices at the date hereof at 15 Columbus Circle, New York, N.Y. 10023, as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any suit, action or proceeding of the nature referred to in subparagraph (ii) above in any court referred to therein, and consents to process being served in any such suit, action or proceeding by mailing a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to Prentice Hall at the aforementioned address or to the Company at its address set forth or referred to in Section 11(g). The Company agrees that such service (x) shall be deemed in every respect effective service of process upon the Company in any such suit, action or proceeding and (y) shall, to the fullest extent it may effectively do so under applicable law, be taken and held to be valid personal service upon and personal delivery to the Company. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth above. TYCO TOYS, INC., by: /s/ Harry J. Pearce ------------------------ Name: Harry J. Pearce Title: Vice Chairman and Chief Financial Officer 52 51 CORPORATE PARTNERS, L.P., by: Corporate Advisors, L.P. General Partner by: LFCP Corp. General Partner by: /s/ Jonathan Kagan -------------------- Name: Jonathan Kagan Title: President CORPORATE OFFSHORE PARTNERS, L.P., by: Corporate Advisors, L.P. General Partner by: LFCP Corp. General Partner by: /s/ Jonathan Kagan --------------------- Name: Jonathan Kagan Title: President THE STATE BOARD OF ADMINISTRATION OF FLORIDA, by: Corporate Advisors, L.P. Attorney-in-Fact by: LFCP Corp. General Partner by: /s/ Jonathan Kagan --------------------- Name: Jonathan Kagan Title: President CORPORATE ADVISORS, L.P., by: LFCP Corp. General Partner by: /s/ Jonathan Kagan --------------------- Name: Jonathan Kagan Title: President EX-99.3 4 IRREVOCABLE PROXY 1 EXHIBIT 3 - Irrevocable Proxy, dated as of April 15, 1994, from the State Board to Corporate Advisors 2 CONFORMED COPY IRREVOCABLE PROXY Reference is made to the Stock Purchase Agreement, dated as of April 15, 1994 (the "Purchase Agreement"), by and among Corporate Partners, L.P., a Delaware limited partnership ("Corporate Partners"), Corporate Offshore Partners, L.P., a Bermuda limited partnership ("Corporate Offshore Partners"), the State Board of Administration of Florida, a body corporate organized under the constitution of the State of Florida ("Florida"; the Partnerships and Florida being referred to collectively as the "Purchasers"), Corporate Advisors, L.P., a Delaware limited partnership, and Tyco Toys, Inc., a Delaware corporation (the "Company"). All capitalized terms used herein have the respective meanings set forth in the Purchase Agreement. The undersigned hereby irrevocably appoints Corporate Advisors, L.P. as attorney and proxy of the undersigned, to attend any and all meetings, and adjournments thereof, of the shareholders of the Company, called for any purpose, to vote, and to express consent to any corporate action with respect to, the shares of Series B Convertible Exchangeable Preferred Stock, par value $.10 (the "Convertible Exchangeable Preferred Stock"), issued by the Company pursuant to the Purchase Agreement; any and all securities issued by the Company to the undersigned upon conversion or exchange of the shares of Convertible Exchangeable Preferred Stock issued to the undersigned pursuant to the Certificate of Designation; any and all securities issued by the Company to the undersigned as a dividend on any securities for which this irrevocable proxy has then been granted; and any and all securities issued by the Company to the undersigned on conversion of or exchange for any securities for which this irrevocable proxy has then been granted (collectively, the "Securities"), of the Company owned of record by the undersigned, at any such meeting or adjournment thereof at which such Securities are entitled to vote, and to represent and otherwise to act for the undersigned in the same manner and with the same effect as if such action were taken by the undersigned. The undersigned hereby revokes any previous proxies with respect to the Securities which are the subject of this irrevocable proxy. This proxy is irrevocable, coupled with an interest and has been granted pursuant to the Investment Management Agreement, dated as of June 17, 1988, between the undersigned and Crossroads Advisors, L.P., 3 2 a Delaware limited partnership, now named Corporate Advisors, L.P., which limited partnership is the general partner of the Partnerships. Notwithstanding anything to the contrary in the foregoing, this proxy shall not be applicable to (and shall be deemed revoked as to) Securities otherwise covered by this proxy which are sold by the undersigned (other than Securities sold subsequent to any record date for any meeting of shareholders of the Company as to which the undersigned retains voting rights). This proxy shall expire on April 15, 2004. The undersigned authorizes the attorney and proxy appointed herein to substitute any other person to act hereunder, to revoke any such substitution and to file this proxy or any substitution or revocation with the Secretary of the Company. Dated: April 15, 1994 STATE BOARD OF ADMINISTRATION OF FLORIDA By: /s/ William O. Bell -------------------------- for Ash Williams, Jr. Executive Director Approved as to legality: /s/ Horce Schow II ----------------------------- Horace Schow II General Counsel Fl Bar ID#0251471 EX-99.4 5 CERTIFICATE OF DESIGNATION 1 EXHIBIT 4 - Certificate of Designation for the Preferred Stock 2 CONFORMED COPY Tyco Toys, Inc. CERTIFICATE OF DESIGNATION OF SERIES B VOTING CONVERTIBLE EXCHANGEABLE PREFERRED STOCK SETTING FORTH THE POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF SUCH SERIES OF PREFERRED STOCK Tyco Toys, Inc. (hereinafter referred to as the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, as amended (the "Delaware Code"), does HEREBY CERTIFY: That, pursuant to authority conferred by Article V of the Restated Certificate of Incorporation of the Corporation, the Board of Directors of the Corporation has adopted a resolution providing for the issuance of a series of Preferred Stock consisting initially of 47,619 shares, plus any additional shares if and to the extent additional shares are to be issued in respect of accrued dividends, designated "Series B Convertible Exchangeable Preferred Stock", which resolution is as follows: RESOLVED, that pursuant to the authority vested in the Board of Directors (the "Board") of Tyco Toys, Inc., a Delaware corporation (the "Corporation"), by Article V of the Restated Certificate of Incorporation of the Corporation (the "Restated Certificate"), the Board does hereby create, provide for and approve a series of Preferred Stock, par value $.10 per share 3 2 (herein called "Preferred Stock"), of the Corporation to be designated "Series B Voting Convertible Exchangeable Preferred Stock" (such series being herein called the "Convertible Exchangeable Preferred Stock"), consisting of 47,619 shares (plus any additional shares if and to the extent that additional shares are to be issued in respect of accrued dividends) of the presently authorized but unissued shares of Preferred Stock, and that in connection therewith, and pursuant to the authority granted to the Board under Section 1 of Article VI of the Restated Certificate, the maximum number of directors of the Corporation shall be and hereby is increased to seventeen (17), and to the extent that the designations, powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions, of the Convertible Exchangeable Preferred Stock are not stated and expressed in the Restated Certificate, does hereby fix and herein state and express such designations, powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions thereof as follows (all terms used herein which are defined in the Restated Certificate shall have the meaning provided in said Restated Certificate): Section 1. Dividends. (a) The holders of shares of Convertible Exchangeable Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation out of funds legally available therefor, cumulative dividends on the shares of Convertible Exchangeable Preferred Stock at the rate of 6% of the liquidation preference per share per year (subject to increase during the continuance of a Restriction Event as provided in Section 5 hereof), 4 3 payable quarterly on the 15th day of each of January, April, July and October, respectively (each, a "Quarterly Dividend Payment Date"), commencing July 15, 1994 (except that if any such date is a Saturday, Sunday or legal holiday, then such dividend shall be payable on the next day that is not a Saturday, Sunday or legal holiday), in each year with respect to the quarterly dividend period (or portion thereof) ending on such Quarterly Dividend Payment Date. Such dividends shall be payable, (i) at the option of the Corporation, on any Quarterly Dividend Payment Date until and including the Quarterly Dividend Payment Date on April 15, 1996, in cash or in additional shares of Convertible Exchangeable Preferred Stock and (ii) thereafter, in cash. Dividends payable in additional shares of Convertible Exchangeable Preferred Stock shall be paid at the rate of one share of Convertible Exchangeable Preferred Stock (or fraction thereof) for each $1,050.00 of dividends not paid in cash (and except that the Corporation may pay cash in lieu of any fractional shares). The amount of dividends payable per share of Convertible Exchangeable Preferred Stock for each quarterly dividend period shall be computed by dividing the annual amount by 5 4 four. The amount of dividends payable for the initial dividend period and any period shorter than a full quarterly dividend period shall be computed on a pro-rata basis, based on the number of days elapsed. (b) On each Quarterly Dividend Payment Date all dividends which shall have accrued on each share of Convertible Exchangeable Preferred Stock outstanding on such date shall accumulate and shall be deemed to have become due. Additional dividends shall be paid to reflect amounts equivalent to interest on accrued but unpaid dividends at the rate of 6.00% per annum (subject to increase during the continuance of a Restriction Event as provided in Section 5 hereof) from the Quarterly Dividend Payment Date with respect to which such dividend was not paid until the date such dividend is paid (whether in cash or, if permitted in accordance with Section 1(a), in additional shares of Convertible Exchangeable Preferred Stock). (c) No dividends or other distributions, other than dividends payable solely in shares of Common Stock or other capital stock of the Corporation ranking junior as to dividends and as to any distribution of assets other than by way of dividends to the Convertible Exchangeable Preferred Stock, shall be 6 5 paid, or declared and set apart for payment by the Corporation, and no purchase, redemption or other acquisition shall be made by the Corporation or any of its subsidiaries of, any shares of Common Stock or other capital stock of the Corporation ranking junior as to dividends or as to any distribution of assets other than by way of dividends to the Convertible Exchangeable Preferred Stock (the "Junior Stock") unless and until all accrued and unpaid dividends on the Convertible Exchangeable Preferred Stock, including the full dividend for the then current dividend period, shall have been paid or declared and set apart for payment. No full dividends shall be paid or declared and set apart for payment on any class or series of the Corporation's capital stock ranking, as to dividends, on a parity with the Convertible Exchangeable Preferred Stock (the "Parity Dividend Stock") for any period unless full cumulative dividends have been, or contemporaneously are, paid or declared and set apart for payment on the Convertible Exchangeable Preferred Stock for all dividend payment periods terminating on or prior to the date of payment of such full dividends. No full dividends shall be paid or declared and set apart for payment on the Convertible Exchangeable 7 6 Preferred Stock for any period unless full cumulative dividends have been, or contemporaneously are, paid or declared and set apart for payment on the Parity Dividend Stock for all dividend periods terminating on or prior to the date of payment of such full dividends. When dividends are not paid in full upon the Convertible Exchangeable Preferred Stock and the Parity Dividend Stock, all dividends paid or declared and set aside for payment upon shares of Convertible Exchangeable Preferred Stock and the Parity Dividend Stock shall be paid or declared and set aside for payment pro rata so that the amount of dividends paid or declared and set aside for payment per share on the Convertible Exchangeable Preferred Stock and the Parity Dividend Stock shall in all cases bear to each other the same ratio that accrued and unpaid dividends per share on the shares of Convertible Exchangeable Preferred Stock and the Parity Dividend Stock bear to each other. (d) The Corporation covenants that it will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of Preferred Stock or its issued shares of Preferred Stock held in its 8 7 treasury, or both, for the purpose of paying accrued dividends in the form of additional shares of Convertible Exchangeable Preferred Stock, the full number of shares of Convertible Exchangeable Preferred Stock issuable if all dividends from such time through and including the Quarterly Dividend Payment Date on April 15, 1996, were paid in additional shares at the rate that would apply if a Restriction Event had occurred and was continuing, which number as of the date hereof is 7,090. Section 2. Voting Rights. In addition to any voting rights provided by law and the rights set forth in Section 5, the holders of shares of Convertible Exchangeable Preferred Stock shall have the following voting rights: (a) So long as the Convertible Exchangeable Preferred Stock is outstanding, each share of Convertible Exchangeable Preferred Stock shall entitle the holder thereof to vote on all matters voted on by holders of the capital stock of the Corporation into which such share of Convertible Exchangeable Preferred Stock is convertible, voting together as a single class with the other shares entitled to vote, at all meetings 9 8 of the stockholders of the Corporation. With respect to any such vote, each share of Convertible Exchangeable Preferred Stock shall entitle the holder thereof to cast the number of votes equal to the number of votes which could be cast in such vote by a holder of the number of shares of capital stock of the Corporation into which such share of Convertible Exchangeable Preferred Stock is convertible on the record date for such vote. (b) So long as any shares of Convertible Exchangeable Preferred Stock are outstanding, subject to the provisions of Section 275(c) of the Delaware Code, the Corporation shall not, without consent of the holders of at least a majority of the number of shares of Convertible Exchangeable Preferred Stock at the time outstanding, given in person or by proxy, either in writing or by vote at a special meeting called for the purpose, enter into any plan of complete liquidation or dissolution or otherwise effect the voluntary liquidation, dissolution or winding up of the Corporation unless, as a result of such liquidation, dissolution or winding-up, the liquidation preference on the Convertible Exchangeable Preferred Stock is satisfied in full pursuant to Section 6 herein. 10 9 (c) Notwithstanding anything to the contrary in this Section 2, until such time as the waiting period (including any extensions) applicable to the acquisition of the Convertible Exchangeable Preferred Stock by the initial holders thereof under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have expired or terminated, the holders of shares of Convertible Exchangeable Preferred Stock shall not have the right to vote for the election of directors of the Company. (d) Except as otherwise required by applicable law, the consent of a majority of the number of shares of Convertible Exchangeable Preferred Stock at the time outstanding, given in person or by proxy, either in writing or by vote, at a special or annual meeting, shall be necessary to amend or waive any provision of this Certificate of Designation. Section 3. Conversion. At the option of the holder thereof and upon surrender thereof for conversion to the Corporation at the office of the Transfer Agent of the Corporation's Common Stock in the Borough of Manhattan, the City of New York, each share of Convertible Exchangeable 11 10 Preferred Stock shall be convertible at any time (or if such share is called or surrendered for redemption, then in respect of such share to and including, but not after, the close of business on the redemption date, unless the Corporation shall default in the payment of the redemption price, in which case such right shall not terminate at such time and date) into that number of fully paid and nonassessable shares of Common Stock (calculated as to each conversion to the nearest 1/100 of a share) obtained by dividing $1,050.00 by the Conversion Price (as defined below) in effect at such time. The "Conversion Price" shall mean and be $10.00, subject to adjustment from time to time by the Corporation as follows: (a) In case the Corporation shall, at any time or from time to time while any of the shares of Convertible Exchangeable Preferred Stock are outstanding, (i) pay a dividend or make a distribution on its Common Stock in shares of its Common Stock, (ii) subdivide 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 of its shares of Common Stock any shares of its capital 12 11 stock (each such transaction being called a "Stock Transaction"), then and in each such case, the Conversion Price in effect immediately prior thereto shall be adjusted so that the holder of a share of Convertible Exchangeable Preferred Stock surrendered for conversion after the record date fixing stockholders to be affected by such Stock Transaction shall be entitled to receive upon conversion the number of such shares of Common Stock or other capital stock of the Corporation that he would have owned or been entitled to receive after the happening of such event had such share of Convertible Exchangeable Preferred Stock been converted immediately prior to such record date (or, if no record date, the effective date). Such adjustment shall be made whenever any of such events shall happen, but shall also be effective retroactively as to shares of Convertible Exchangeable Preferred Stock converted between such record date and the date of the happening of any such event. (b)(i) In case the Corporation shall, at any time or from time to time while any of the shares of Convertible Exchangeable Preferred Stock are outstanding, issue, sell or exchange shares of Common Stock (other than (x) pursuant to any right or warrant 13 12 to purchase or acquire shares of Common Stock (including as such a right or warrant any security convertible into or exchangeable for shares of Common Stock), (y) pursuant to any employee or director incentive or benefit plan or arrangement, including any employment, severance or consulting agreement but excluding any employee stock ownership plan within the meaning of Section 4975(e)(7) of the Internal Revenue Code of 1986, as amended (an "ESOP"), whether presently existing or to be established in the future, of the Corporation or any subsidiary of the Corporation heretofore or hereafter adopted, and (z) as provided in paragraph (a) of this Section 3) for a consideration having a Fair Market Value (as defined below) on the date of such issuance, sale or exchange that is less than the Market Price (as defined below) of such shares on the date of such issuance, sale or exchange, then and in each case, the Conversion Price shall be adjusted by multiplying such Conversion Price by a fraction (which shall not be greater than 1), the numerator of which shall be the sum of (x) the Current Market Price per share of Common Stock as of the trading day immediately preceding the date of the public announcement of the actual terms (including the 14 13 pricing terms) of such issuance, sale or exchange (or if there is no such public announcement prior to the effective date of such issuance, sale or exchange, such effective date) multiplied by the number of shares of Common Stock outstanding immediately prior to such issuance, sale or exchange plus (y) the aggregate Fair Market Value of the consideration received by the Corporation in respect of such issuance, sale or exchange of shares of Common Stock, and the denominator of which shall be the product of (x) the Current Market Price per share of Common Stock referred to in the immediately preceding clause (x) multiplied by (y) the sum of the number of shares of Common Stock outstanding on such day plus the number of shares of Common Stock so issued, sold or exchanged by the Corporation. For purposes of the preceding sentence, the aggregate consideration receivable by the Corporation in connection with the issuance, sale or exchange of shares of Common Stock shall be deemed to be equal to the sum of the aggregate offering price (before deduction of reasonable underwriting discounts or commissions and expenses) of all such shares. (ii) In the event the Corporation shall, at any time or from time to time while any shares of 15 14 Convertible Exchangeable Preferred Stock are outstanding, issue, sell or exchange any right or warrant to purchase or acquire shares of Common Stock (including as such a right or warrant any security convertible into or exchangeable for shares of Common Stock) (other than (x) any issuance, sale or exchange to holders of shares of Common Stock as a dividend or distribution (including by way of a reclassification of shares or a recapitalization of the Corporation), and (y) pursuant to any employee or director incentive or benefit plan or arrangement (excluding any ESOP), of the Corporation or any subsidiary of the Corporation heretofore or hereafter adopted), for a consideration having a Fair Market Value on the date of such issuance, sale or exchange less than the Fair Market Value of such rights or warrants on the date of such issuance, sale or exchange, then and in each case, the Conversion Price shall be adjusted by multiplying such Conversion Price by a fraction (which shall not be greater than 1), the numerator of which shall be the sum of (a) the Current Market Price per share of Common Stock as of the trading date immediately preceding the date of the public announcement of the actual terms (including the price terms) of such issuance, sale or 16 15 exchange (or if there is no such public announcement prior to the effective date of such issuance, sale or exchange, such effective date) multiplied by the number of shares of Common Stock outstanding immediately prior to such issuance, sale or exchange plus (b) the aggregate Fair Market Value of the consideration received by the Corporation in respect of such issuance, sale or exchange of such right or warrant, and the denominator of which shall be the sum of (i) the Current Market Price per share of Common Stock referred to in the preceding clause (a) multiplied by the number of shares of Common Stock outstanding immediately prior to such issuance, sale or exchange plus (ii) the aggregate Fair Market Value of such rights or warrants at the time of such issuance. For the purposes of the preceding sentence, the aggregate consideration receivable by the Corporation in connection with the issuance, sale or exchange of any such right or warrant shall be deemed to be equal to the sum of the aggregate offering price (before deduction of reasonable underwriting discounts or commissions and expenses) of all such rights or warrants. 17 16 (c) In the event the Corporation or any of its subsidiaries shall, at any time or from time to time while any shares of Convertible Exchangeable Preferred Stock are outstanding, repurchase or redeem any of the Corporation's outstanding capital stock at a premium over the average Market Price per share on the trading day immediately preceding such repurchase or redemption (a "Repurchase"), then and in the case of each Repurchase the Conversion Price in effect immediately prior thereto shall be adjusted by multiplying such Conversion Price by a fraction, the numerator of which is (i) the product of (x) the number of shares of Common Stock outstanding immediately before such repurchase or redemption multiplied by (y) the average Market Price per share of Common Stock on the five trading days immediately following the consummation of such Repurchase minus (ii) the aggregate purchase price of the Repurchase and the denominator of which shall be the product of (x) the number of shares of Common Stock outstanding immediately before such Repurchase minus the number of shares of Common Stock repurchased or redeemed by the Corporation multiplied by (y) the average Market Price per share of Common Stock on such five trading days 18 17 referred to in the preceding clause (i)(y); provided, however, that the conversion price shall not be so adjusted with respect to (i) any Repurchase of the Convertible Exchangeable Preferred Stock pursuant to Section 6 or 7 hereof. (d) In the event the Corporation shall at any time or from time to time while any shares of Convertible Exchangeable Preferred Stock are outstanding, declare and pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Corporation or any of its subsidiaries by way of dividend or distribution or evidences of indebtedness of the Corporation or any other person) on its Common Stock, other than (A) regular quarterly dividends payable in cash (it being understood that the failure to pay a regular quarterly dividend for one or more quarters shall not affect the treatment of any other dividend as a regular quarterly dividend), (B) shares of Common Stock for which an adjustment is made under paragraph (a) of this Section 3 or (C) any other dividend or distribution on the Corporation's Common Stock if in conjunction with such other dividend or 19 18 distribution the Corporation declares and makes (or pays) a dividend or distribution on each share of Convertible Exchangeable Preferred Stock which is the same as the dividend or distribution that would have been made or paid with respect to such share of Convertible Exchangeable Preferred Stock had such share been converted into shares of Common Stock immediately prior to the record date for any such dividend or distribution on the Corporation's Common Stock, then, and in each such case, an appropriate adjustment to the Conversion Price shall be made by multiplying the Conversion Price in effect immediately prior to the record date fixed for the determination of stockholders entitled to receive such dividend or distribution by a fraction, the numerator of which shall be the Current Market Price per share of the Common Stock as of the fifth business day preceding such record date less the Fair Market Value per share of Common Stock of such dividend or distribution (as determined in good faith by the Board of Directors of the Corporation, a certified resolution with respect to which shall be mailed to each holder of shares of Convertible Exchangeable Preferred Stock) and the denominator of which shall be the Current Market Price per share of 20 19 Common Stock as of the fifth business day preceding such record date; provided, however, that in the event of a distribution of shares of capital stock of a subsidiary of the Corporation (a "Spin-Off") made to holders of shares of Common Stock, the numerator of such fraction shall be the Current Market Price per share of Common Stock as of the 30th trading day after the effective date of such Spin-Off and the denominator of which shall be the sum of the Current Market Price per share of Common Stock as of such 30th trading day and the Current Market Price of the number of shares (or the fraction of a share) of capital stock of the subsidiary which is distributed in such Spin-Off in respect of one share of Common Stock as of such 30th trading day. Notwithstanding the foregoing, no adjustment shall be made with respect to any distribution of rights or warrants to purchase securities of the Corporation if the holder of shares of Convertible Exchangeable Preferred Stock would otherwise be entitled to receive such rights upon conversion at any time of shares of Convertible Exchangeable Preferred Stock into Common Stock unless such rights are subsequently redeemed by the Corporation, in which case such redemption shall be 21 20 treated for purposes of this Section as a dividend on Common Stock. An adjustment made pursuant to this paragraph (d) shall be made upon the opening of business on the next business day following the date on which any such dividend or distribution is made and shall be effective retroactively immediately after the close of business on the record date fixed for the determination of stockholders entitled to receive such dividend or distribution; provided, however, if the proviso to the second preceding sentence applies, then such adjustment shall be made and be effective as of such 30th trading day after the effective date of such Spin-Off. (e) For the purposes of any computation under paragraphs (a) through (d) of this Section 3, the following definitions shall apply: (i) "Closing Price" of publicly traded shares of Common Stock or any other class of capital stock or other security of the Corporation or any other issuer for a day shall mean the last reported sales price, regular way, or, in case no sale takes place on such day, the average of the reported closing bid and asked prices, regular way, in either case as reported on the New York 22 21 Stock Exchange--Composite Transactions Tape or, if such security is not listed or admitted to trading on the New York Stock Exchange, on the principal national securities exchange on which such security is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on the NASDAQ National Market System or, if such security is not quoted on such National Market System, the average of the closing bid and asked prices on each such day in the over-the counter market as reported by NASDAQ or, if bid and asked prices for such security on each such day shall not have been reported through NASDAQ, the average of the bid and asked prices of such day as furnished by any New York Stock Exchange member firm regularly making a market in such security selected for such purpose by the Board of Directors of the Corporation or a committee thereof. If the Common Stock or other class of capital stock or security in question is not publicly held, or so listed, or publicly traded, "Closing Price" shall mean the Fair Market Value thereof. 23 22 (ii) "Current Market Price" per share of Common Stock as of any date shall be deemed to be the average of the daily Closing Prices per share for the 10 consecutive trading days ending on and including the day in question. (iii) "Fair Market Value" of any consideration other than cash or of any securities shall mean the amount which a willing buyer would pay to a willing seller in an arm's length transaction as determined by an independent investment banking or appraisal firm experienced in the valuation of such securities or property selected in good faith by the Board of Directors of the Corporation or a committee thereof. (iv) "Market Price" per share at any date shall be the Closing Price on the specified date; provided, that, in the case of the issuance, sale or exchange of shares of Common Stock pursuant to paragraph (b) of this Section 3 that are not registered under the Securities Act of 1933 Market Price shall be reduced by an amount, if any (as determined by an independent investment banking or appraisal firm experienced in the valuation of such securities or property selected in good 24 23 faith by the Board of Directors of the Corporation or a committee thereof), to compensate for the fact that such shares are not so registered, and in making such determination any registration rights granted by the Company shall be taken into account. (f) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this paragraph (f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 3 shall be made to the nearest one-hundredth of a share. (g) No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion of any share of Convertible Exchangeable Preferred Stock. If the conversion thereof results in a fraction, an amount equal to such fraction multiplied by the Current Market Price per share of Common Stock (as defined above) as of the conversion date shall be paid to such holder in cash by the Corporation. 25 24 (h) In the event of any capital reorganization (other than a capital reorganization covered by paragraph (d) of this Section 3) or reclassification of outstanding shares of Common Stock (other than a reclassification covered by paragraph (a) of this Section 3), or in case of any merger, consolidation or other corporate combination of the Corporation with or into another corporation, or in case of any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety (each of the foregoing being referred to as a "Transaction"), each share of Convertible Exchangeable Preferred Stock shall continue to remain outstanding if the Corporation is the Surviving Person (as defined below) of such Transaction, and shall be subject to all the provisions of the Certificate of Designation of Series B Convertible Exchangeable Preferred Stock which embodies this resolution, as in effect prior to such Transaction (including, without limitation, the provisions of Section 4 hereof if such Transaction also constitutes a Change of Control (as hereinafter defined)), or if the Corporation is not the Surviving Person in such Transaction, then each holder of shares of Convertible 26 25 Exchangeable Preferred Stock may elect (which election shall be made within twenty days of the Transaction) to either (1) have Section 4 hereof be applicable to such holder's shares of Convertible Exchangeable Preferred Stock or (2) if the consideration to be received by stockholders of the Corporation in the Transaction does not consist entirely of cash, have each share of Convertible Exchangeable Preferred Stock be exchanged for a new series of senior preferred stock of the Surviving Person, or in the case of a Surviving Person other than a corporation, comparable securities of such Surviving Person, in either case having economic terms as nearly equivalent as possible to, and with the same voting and other rights as, the Convertible Exchangeable Preferred Stock (including the right to convert into Survivor Common Stock); provided, however that, at the option of the holder of any shares of Convertible Exchangeable Preferred Stock (which election shall be made within such twenty days), each share of Convertible Exchangeable Preferred Stock then outstanding or deemed to be outstanding, as the case may be, shall entitle the holder thereof to receive, upon presentation of the certificate therefor to the Surviving Person subsequent to the consummation of such 27 26 Transaction the kind and amount of shares of stock and other securities and property receivable (including cash) upon the consummation of such Transaction by a holder of that number of shares of Common Stock into which one share of Convertible Exchangeable Preferred Stock was convertible immediately prior to such Transaction; provided, further, that if in connection with the Transaction a tender or exchange offer shall have been made and there shall have been acquired pursuant thereto more than 50% of the outstanding shares of Common Stock, and if the holder of shares of Convertible Exchangeable Preferred Stock so designates in the notice given to the Corporation which specifies such holder's selection of this alternative, such holder of such shares shall be entitled to receive upon conversion thereof, the amount of securities or other property to which such holder would actually have been entitled as a holder of shares of Common Stock if such holder had converted such shares of Convertible Exchangeable Preferred Stock prior to the expiration of such tender or exchange offer and accepted such offer and had sold therein the percentage of all the shares of Common Stock issuable upon conversion of its shares of Convertible Exchangeable Preferred Stock equal to 28 27 the percentage of shares of the then outstanding Common Stock so purchased in the tender or exchange offer, with the remaining portion of its shares of Convertible Exchangeable Preferred Stock thereafter being convertible into the amount of securities or other property to which such holder would actually have been entitled upon the consummation of the Transaction as a holder of shares of Common Sock if such holder had converted such shares of Convertible Exchangeable Preferred Stock immediately prior to such Transaction (subject to adjustments from and after the consummation of the Transaction as nearly equivalent as possible to the adjustments provided for in this Section 3). In any such case, if necessary, appropriate adjustment (as determined by the Board of Directors in good faith) shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the holders of shares of Convertible Exchangeable Preferred Stock to the end that the provisions set forth herein for the protection of the conversion rights of the Convertible Exchangeable Preferred Stock shall thereafter be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities and property 29 28 deliverable upon conversion of the shares of Convertible Exchangeable Preferred Stock remaining outstanding (with such adjustments in the conversion price and number of shares issuable upon conversion and such other adjustments in the provisions hereof as the Board of Directors in good faith shall determine to be appropriate). In case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Section 3 shall be deemed to apply, so far as appropriate and as nearly as may be, to such other securities or property. Notwithstanding anything contained herein to the contrary, the Corporation will not effect any Transaction unless, prior to the consummation thereof, (i) proper provision is made to ensure that the holders of shares of Convertible Exchangeable Preferred Stock will be entitled to receive the benefits afforded by this paragraph (h) of Section 3, and (ii) if, following the Transaction, one or more entities other than the Corporation shall be required to deliver securities or other property upon the conversion of the Convertible Exchangeable Preferred Stock, such entity or entities shall assume, by written instrument delivered to each 30 29 holder of shares of Convertible Exchangeable Preferred Stock, if such shares are held by 10 or fewer holders or group of affiliated holders, or to each Transfer Agent for the shares of Convertible Exchangeable Preferred Stock, if such shares are held by a greater number of holders, the obligation to deliver to such holder the amounts in cash to which, in accordance with the foregoing provisions, such holder is entitled. For purposes of this paragraph (h) of Section 3, the following terms shall have the meanings as described to them below: (i) "Surviving Person" shall mean the continuing or surviving Person of a merger, consolidation or other corporate combination, the Person receiving a transfer of all or a substantial part of the properties and assets of the Corporation, or the Person consolidating with or merging into the Corporation in a merger, consolidation or other corporate combination in which the Corporation is the continuing or surviving Person, but in connection with which the Convertible Exchangeable Preferred Stock or Common Stock of the Corporation is exchanged, converted or reclassified into the securities of any other Person or cash or any other property. 31 30 (ii) "Survivor Common Stock" with respect to any Person shall mean shares of such Person of any class or series which has no preference or priority in the payment of dividends or in the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person and which is not subject to redemption by such Person provided, however; that if (x) the shares of such class or series are not (or upon consummation of such Transaction will not be) listed on the New York Stock Exchange or the American Stock Exchange or quoted by the NASDAQ National Market System or any successor thereto or comparable system, and (y) the Surviving Person is a direct or indirect subsidiary of a Qualified Person, the Survivor Common Stock shall be the common stock (or equivalent equity securities referred to in the definition of "Qualified Person") of such Qualified Person. (iii) "Qualified Person" shall mean any Person that, immediately after giving effect to the applicable Transaction, is a solvent corporation or other entity organized under the laws of any state of the United States of America having its common stock or, in the case of an entity other than a corporation, 32 31 equivalent equity securities, listed on the New York Stock Exchange or the American Stock Exchange or quoted by the NASDAQ National Market System or any successor thereto or comparable system. (iv) "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. (v) "Current Market Price" shall have the meaning set forth in paragraph (e) of this Section 3. (i) In case at any time or from time to time, the Corporation shall pay any dividend or make any other distribution to the holders of its Common Stock of, or shall offer for subscription pro rata to the holders of its Common Stock, any additional shares of stock of any class or any other right, or there shall be any capital reorganization or reclassification of the Common Stock of the Corporation or merger, consolidation or other corporate combination of the Corporation with or into another corporation, or any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety, or there shall be a voluntary or involuntary dissolution, liquidation or winding up the Corporation, then, in any one or more of 33 32 said cases the Corporation shall give written notice at the same time as, or as soon as practicable after, such event is first communicated (including by announcement of a record date in accordance with the rules of any stock exchange on which the Common Stock is listed or admitted to trading) to holders of Common Stock, but in any event at least 10 days prior to the record date for such event specified below (the time of mailing of such notice shall be deemed to be the time of delivery thereof) to the registered holders of the Convertible Exchangeable Preferred Stock at the addresses of each as shown on the books of the Corporation maintained by the Transfer Agent thereof of the date on which (x) the books of the Corporation shall close or a record shall be taken for such stock dividend, distribution or subscription rights or (y) such reorganization, reclassification, merger, consolidation, corporate combination, sale or conveyance, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of the Common Stock of record shall participate in said dividend, distribution, subscription rights or shall be entitled to exchange their Common Stock for securities or other property 34 33 deliverable upon such reorganization, reclassification, merger, consolidation, corporate combination, sale or conveyance or participate in such dissolution, liquidation or winding up, as the case may be, as well as the conversion price and the number of shares into which each share of Convertible Exchangeable Preferred Stock may be converted at such time. Failure to give such notice shall not invalidate any action so taken. (j) The Corporation covenants that it will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of Common Stock or its issued shares of Common Stock held in its treasury, or both, for the purpose of effecting conversions of shares of Convertible Exchangeable Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding shares of Convertible Exchangeable Preferred Stock not theretofore converted. For purposes of this Section 3(j), the number of shares of Common Stock which shall be deliverable upon the conversion of all outstanding shares of Convertible Exchangeable Preferred Stock shall be computed as if at the time of computation all outstanding shares of 35 34 Convertible Exchangeable Preferred Stock were held by a single holder. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value (if any) of the shares of Common Stock deliverable upon conversion of the shares of Convertible Exchangeable Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Conversion Price. (k) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock upon conversions of shares of Convertible Exchangeable Preferred Stock pursuant hereto. (l) Upon any adjustment of the Conversion Price, then, and in each such case, the Corporation shall promptly deliver to the transfer agent of the Convertible Exchangeable Preferred Stock and the Common Stock, a certificate signed by the President or a Vice President and by the Treasurer or an Assistant 36 35 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 Conversion Price then in effect following such adjustment. The Corporation shall also promptly after the making of such adjustment give written notice to the registered holders of the Convertible Exchangeable Preferred Stock at the address of each holder as shown on the books of the Corporation maintained by the transfer agent thereof, which notice shall state the Conversion Price then in effect, as adjusted, and shall set forth in reasonable detail the method of calculation of the same and a brief statement of the facts requiring such adjustment. Where appropriate, such notice to holders of the Convertible Exchangeable Preferred Stock may be given in advance and included as part of the notice required under the provisions of Section 3(i). Section 4. Change of Control. (a)(i) In the event that any Change of Control (as hereinafter defined) shall occur at any time and from time to time while any shares of Convertible Preferred Stock are outstanding, each holder of Convertible Exchangeable 37 36 Preferred Stock shall have the right to give notice that it is exercising a Change of Control election (a "Change of Control Election"), with respect to all or any number of such holder's shares of Convertible Exchangeable Preferred Stock, during the period (the "Exercise Period") beginning on the 30th day and ending on the 180th day after the date of such Change of Control. Upon any such election, the Corporation shall either, at its option, (x) redeem each such holder's shares for which such an election is made, out of funds lawfully available therefor, at the redemption price set forth below or (y) adjust the conversion price as provided herein; provided, however, that the Corporation shall choose the same option for all holders giving a Change of Control Election and the Corporation shall be entitled to choose the option set forth in the preceding clause (y) only if the circumstances set forth in the first sentence of Section 4(a)(ii) are then satisfied. If such holders' shares are to be redeemed, the redemption price shall be a per share price equal to the sum of (A) the applicable redemption price per share (expressed as a percentage of the liquidation preference) set forth below, plus (B) an amount equal to all accrued and unpaid dividends to the date of purchase of such holder's shares by the Corporation together with any additional dividends pursuant to Section 1(b). 38 37
Redemption Period Redemption ----------------- ---------- Price ----- April 15, 1994, through April 14, 1995 106.00% April 15, 1995, through April 14, 1996 105.40% April 15, 1996, through April 14, 1997 104.80% April 15, 1997, through April 14, 1998 104.20% April 15, 1998, through April 14, 1999 103.60% April 15, 1999, through April 14, 2000 103.00% April 15, 2000, through April 14, 2001 102.40% April 15, 2001, through April 14, 2002 101.80% April 15, 2002, through April 14, 2003 101.20% April 15, 2003, through April 14, 2004 100.60%
(a)(ii) In the event that any Change of Control shall occur at any time when any shares of Convertible Exchangeable Preferred Stock are outstanding, the circumstances under which the Corporation may elect the option set forth in Section 4(a)(i)(y) are that the redemption (or the obligation of the Corporation to effect such redemption) of all or any such shares pursuant to Section 4(a)(i)(x) would constitute a breach of the Company's obligations under Section 4.09 of the Indenture dated as of August 15, 1992, between the Company, certain of its subsidiaries and Bankers Trust, as Trustee, as supplemented by a Supplemental Indenture dated October 17, 39 38 1992, and a Second Supplemental Indenture dated June 8, 1993 (but without giving effect to any other amendment thereto), and compliance therewith has not been waived or the failure of the Corporation to be able to exercise such option would cause the Shares not to be deemed to be Qualified Capital Stock as defined therein. If the Company elects to adjust the Conversion Price as set forth in Section (4)(a)(i)(y), then the Conversion Price in effect immediately prior to the effective date of the Change of Control (the "Change of Control Date") shall be decreased (but not increased) so as to equal the product of (1) .70 and (2) the lowest Current Market Price as of any date during the period (the "Initial Measurement Period") beginning on the date (which shall not be earlier than six months prior to the Change of Control Date) on which the first public announcement is made that a transaction constituting a Change of Control has occurred or of the intention of any person to effect such a transaction (the "Announcement Date") and ending on the date which is ten days after the Change of Control Date. The Corporation shall make such election on or prior to the end of the Initial Measurement Period, and such adjustment shall become effective immediately after the end of the Initial Measurement Period; provided, that further adjustments shall be made successively for six months after the Change of 40 39 Control Date in the event and at the time of any decrease in the Current Market Price as of any date after the end of the Initial Measurement Period and through the end of the six months following the Change of Control Date; provided, however, that no such successive adjustment shall be made with respect to the Conversion Price of any Convertible Exchangeable Preferred Stock that have been converted or redeemed prior to the event giving rise to such adjustment. (b) As used herein, "Change of Control" shall mean: (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) (the "Acquiring Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under such Act) of 50% or more of the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors, but excluding, for this purpose, any such action by (x) the Corporation or any of its subsidiaries, (y) any Purchaser (as defined in Section 5) or (z) any corporation or other entity with respect to which, following such acquisition, more than 50% of the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election 41 40 of directors (or if another entity, more than 50% of the equivalent controlling interests) is then beneficially owned, directly or indirectly, by individuals and entities who were the beneficial owners of voting securities of the Corporation immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors; or (ii) consummation of a reorganization, merger or consolidation involving the Corporation, in each case, with respect to which the individuals and entities who were the respective beneficial owners of at least 80% of the voting securities of the Corporation immediately prior to such reorganization, merger or consolidation do not or will not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such reorganization, merger or consolidation; or 42 41 (iii) the sale or other disposition of all or substantially all the assets of the Corporation in one transaction or series of related transactions; or (iv) individuals who would constitute a majority of the members of the Board of Directors elected at any meeting of stockholders or by written consent (without regard to any members of the Board of Directors elected pursuant to the terms of any series of Preferred Stock) shall be elected to the Board of Directors and the election or the nomination for election by the Corporation's stockholders of such directors was not approved by a vote of at least a majority of the directors in office immediately prior to such election or nomination. (c) On or before the fourteenth day after a Change of Control, the Corporation shall mail to all holders of record of the Convertible Exchangeable Preferred Stock at their respective addresses as the same shall appear on the books of the Corporation as of such date, a notice disclosing (i) the Change of Control, (ii) if applicable, the redemption price per share of the Convertible Exchangeable Preferred Stock applicable hereunder and (iii) if applicable, its election to adjust the Conversion Price in lieu of redeeming the Convertible Exchangeable Preferred Stock and the initial adjustment thereto and the 43 42 procedure which the holder must follow to exercise the redemption right provided above. The Corporation shall cause a copy of such notice to be published in a newspaper of general circulation in the Borough of Manhattan, New York. To exercise such redemption right, if applicable, a holder of the Convertible Exchangeable Preferred Stock must deliver during the Exercise Period written notice to the Corporation (or an agent designated by the Corporation for such purpose) of the holder's exercise of such redemption right, and, to be valid, any such notice of exercise must be accompanied by each certificate evidencing shares of the Convertible Exchangeable Preferred Stock with respect to which the redemption right is being exercised, duly endorsed for transfer. On or prior to the fifth business day after receipt of such written notice, the Corporation shall accept for payment all shares of Convertible Exchangeable Preferred Stock properly surrendered to the Corporation (or an agent designated by the Corporation for such purpose) during the Exercise Period for redemption in connection with the valid exercise of such redemption right and shall cause payment to be made in cash for such shares of Convertible Exchangeable Preferred Stock. (d) In the event of any Change of Control, proper provision shall be made to ensure that the holders of shares 44 43 of Convertible Exchangeable Preferred Stock will be entitled to receive the benefits afforded by this Section 4; provided, however, that in the event of any Change of Control effected with the Corporation's consent, such provision to ensure the benefits of this Section 4 shall be made prior to such Change of Control. If, following the Change of Control, one or more entities other than the Corporation shall be required to deliver securities or other property upon the conversion of the Convertible Exchangeable Preferred Stock, such entity or entities shall assume, by written instrument delivered to each holder of shares of Convertible Exchangeable Preferred Stock, if such shares are held by 10 or fewer holders or group of affiliated holders, or to each Transfer Agent for the shares of Convertible Exchangeable Preferred Stock, if such shares are held by a greater number of holders, the obligation to deliver to such holder the amounts in cash to which, in accordance with the foregoing provisions, such holder is entitled. Section 5. Certain Restrictions. (a) In case of the happening of any of the following events ("Restriction Events"): (i) the Corporation breaches in any material respect (x) any of its obligations under Section 6(j) or 6(k) of the Stock Purchase Agreement dated as of April 15, 1994, among the Corporation 45 44 and Corporate Partners, L.P., Corporate Offshore Partners, L.P. the State Board of Administration of Florida (such three entities collectively, the "Purchasers") and Corporate Advisors, L.P. (the "Stock Purchase Agreement"), (y) any of its obligations under Section 6(d), 6(e), 6(f), 6(i), 6(l) or 6(m) of the Stock Purchase Agreement and such breach shall have continued for ten days after notice thereof by any holder or (z) any of its other obligations under the Stock Purchase Agreement or any of its obligations under the Registration Rights Agreement and such breach shall have continued for twenty days after notice thereof by any holder; (ii) any quarterly dividend (or additional dividends thereon, if any) payable on the Convertible Exchangeable Preferred Stock as provided in this Certificate is not paid when due; or (iii) the Corporation shall not have redeemed any shares of the Convertible Exchangeable Preferred Stock when required pursuant to this Certificate, then, until such breach is cured or until such dividends are paid or until such redemption occurs: (x) the dividend rate payable pursuant to Section 1(a) hereof shall be 7% per year of the liquidation preference of each share of Convertible Exchangeable Preferred Stock per year and the equivalent interest rate payable as additional dividends pursuant to Section 1(b) shall be increased to 7.00% per annum; (y) the 46 45 number of members of the Board of Directors of the Corporation shall be increased by two, effective as of the time of election of such directors as hereinafter provided, and the holders of the outstanding Convertible Exchangeable Preferred Stock shall have the exclusive right, voting separately and as a class, to elect two additional directors of the Corporation, and the remaining directors of the Corporation shall be elected by the other class or classes of stock entitled to vote therefor (including the Convertible Exchangeable Preferred Stock in accordance with paragraphs (a) and (b) of Section 2), also voting separately as a class, at each meeting of the stockholders held for the purpose of electing directors, provided, that, if at such time there are fewer than 2,381 shares of Convertible Exchangeable Preferred Stock then outstanding this clause (y) shall not be applicable; and (z) the Corporation shall not: (1) declare or pay dividends on, or make any other distributions of cash, properties or securities of the Corporation on or with respect to any shares of capital stock ranking junior (either as to dividends or as to any distribution of assets other than by way of dividends) to the Convertible Exchangeable Preferred Stock; 47 46 (2) redeem or purchase or otherwise acquire for consideration (or make any sinking fund, purchase fund or other similar payments in respect of) any shares of capital stock ranking (either as to dividends or as to any distribution of assets other than by way of dividends) junior to, or on parity with, the Convertible Exchangeable Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of capital stock ranking on parity with the Convertible Exchangeable Preferred Stock in exchange for shares of any capital stock ranking junior to the Convertible Exchangeable Preferred Stock, or permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of capital stock of the Corporation unless the Corporation could, pursuant to this Section 5, purchase such shares at such time and in such manner; (3) make or permit to remain outstanding after such time when pursuant to its terms such loan or advance would be due any loan or advance (including any guarantee of a loan or advance by a third party) by the Corporation or a subsidiary to any person who beneficially owns any capital stock ranking junior 48 47 (either as to dividends or as to any distribution of assets other than by way of dividends) to the Convertible Exchangeable Preferred Stock, or any affiliate or associate of such Person; or (4) without the consent of the holders of at least a majority of the number of shares of the Convertible Exchangeable Preferred Stock at the time outstanding, given in person or by proxy, either in writing or by vote at a special meeting called for the purpose, redeem or purchase or otherwise acquire for consideration or offer to redeem, purchase or acquire for consideration any shares of Convertible Exchangeable Preferred Stock except as provided in Section 4 and Section 7; provided, that if at such time there are fewer than 2,381 shares of Convertible Exchangeable Preferred Stock outstanding, this clause (z) shall be applicable only in the case of a Restriction Event described above in clause (ii) or (iii) of this sentence. (b) The foregoing right of the holders of the Convertible Exchangeable Preferred Stock with respect to the election of two directors may be exercised initially by written consent or at any special meeting of holders of the Convertible Exchangeable Preferred Stock called as 49 48 hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at each such annual meeting until such right terminates as provided herein. If the right to elect directors shall have accrued to the holders of the Convertible Exchangeable Preferred Stock more than 90 days preceding the date established for the next annual meeting of stockholders, the President of the Corporation shall, within 20 days after the delivery to the Corporation at its principal office of a written request for a special meeting signed by the holders of at least ten percent (10%) of the Convertible Exchangeable Preferred Stock then outstanding, call a special meeting of the holders of the Convertible Exchangeable Preferred Stock to be held within 60 days after the delivery of such request for the purpose of electing such additional directors. At any such meeting, the presence in person or by proxy of the holders of shares representing more than 50% in voting power of the then outstanding shares of Convertible Exchangeable Preferred Stock shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. At such time as all arrears in dividends on the Convertible Exchangeable Preferred Stock shall have been paid and dividends thereon for the current 50 49 dividend period shall have been paid or declared and set apart for payment, the mandatory redemption obligation (if then due) shall have been satisfied in full or all necessary funds for the satisfaction of such redemption obligation have been set apart for payment, all breaches of the Stock Purchase Agreement shall have been cured and no other Restriction Events shall be continuing, the right of the Convertible Exchangeable Preferred Stock to vote for directors as provided in this Section 5 (but not any voting rights set forth in Section 2) shall terminate and the term of office of any director(s) then in office who were elected by the Convertible Exchangeable Preferred Stock pursuant to this Section 5 shall terminate. In case any vacancy shall occur among the directors elected by the holders of shares of Convertible Exchangeable Preferred Stock, such vacancy may be filled for the unexpired portion of the term by vote of the remaining director theretofore elected by such holders (if there is a remaining director), or such director's successor in office. If any such vacancy is not so filled within 20 days after the creation thereof or if both directors so elected by the holders of Convertible Exchangeable Preferred Stock shall cease to serve as directors before their terms 51 50 shall expire, the holders of the Convertible Exchangeable Preferred Stock then outstanding and entitled to vote for such directors may, by written consent or at a special meeting of such holders called as provided herein, elect successors to hold office for the unexpired terms of the directors whose places shall be vacant. Section 6. Liquidation Preference. In the event of a liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of Convertible Exchangeable Preferred Stock shall be entitled to receive out of the assets of the Corporation, whether such assets are stated capital or surplus of any nature, an amount equal to the dividends accrued and unpaid thereon to the date of final distribution to such holders, whether or not declared, together with any additional dividends pursuant to Section 1(b), and a sum equal to $1,050.00 per share, and no more. Such payments shall be made before any payment shall be made or any assets distributed to the holders of Common Stock or any other class or series of the Corporation's capital stock ranking junior as to liquidation rights to the 52 51 Convertible Exchangeable Preferred Stock (the "Junior Liquidation Stock"). The entire assets of the Corporation available for distribution shall be distributed ratably among the holders of the Convertible Exchange Preferred Stock and any other class or series of the Corporation's capital stock now existing or which may hereafter be created having parity as to liquidation rights with the Convertible Exchangeable Preferred Stock in proportion to the respective preferential amounts to which each is entitled (but only to an extent of such preferential amounts). Neither a consolidation, merger or other business combination of the Corporation's assets for cash, securities or other property shall be considered a liquidation, dissolution or winding up of the Corporation for purposes of this Section 6 (unless in connection therewith the liquidation of the Corporation is specifically approved). Section 7. Optional and Mandatory Redemption. (a) Except as provided in Section 9, the Corporation may not redeem the Convertible Exchangeable Preferred Stock prior to April 15, 1997. (b) The Corporation, at its option, may at any time on and after April 15, 1997, and prior to April 15, 53 52 1998, redeem the Convertible Exchangeable Preferred Stock in whole or in part, at a cash redemption price per share equal to 105.25% of the liquidation preference, (provided that the Corporation simultaneously declares and pays all dividends on the Convertible Exchangeable Preferred Stock accrued and unpaid thereon pro rata to the date fixed for redemption, together with any additional dividends pursuant to Section 1(b)) if the daily Closing Price (as defined in Section 3(c)) per share of the Common Stock for any 20 consecutive trading day period that ends at any time during the period commencing on or after April 15, 1997, and ending prior to April 15, 1998, is greater than or equal to 175% of the then current Conversion Price. (c) The Corporation, at its option, may at any time on and after April 15, 1998, and prior to April 15, 1999, redeem the Convertible Exchangeable Preferred Stock in whole or in part, at a cash redemption price per share equal to 104.50% of the liquidation preference, provided that the Corporation simultaneously declares and pays in cash all dividends on the Convertible Exchangeable Preferred Stock accrued and unpaid thereon, pro rata to the date fixed for redemption, together with any additional dividends pursuant to Section 1(b), if the daily Closing Price per share of the Common Stock for any 20 consecutive trading day period that 54 53 ends at any time during the period commencing on or after April 15, 1998, and ending prior to April 15, 1999, is greater than or equal to 150% of the then current Conversion Price. (d) The Corporation, at its option, may at any time on and after April 15, 1999, redeem the Convertible Exchangeable Preferred Stock in whole or in part at the applicable cash redemption prices per share (expressed as a percentage of the liquidation preference) set forth below:
Redemption Period Redemption Price ----------------- ---------------- April 15, 1999, through April 14, 2000 103.75% April 15, 2000, through April 14, 2001 103.00% April 15, 2001, through April 14, 2002 102.25% April 15, 2002, through April 14, 2003 101.50% April 15, 2003, through April 14, 2004 100.75%
provided that the Corporation simultaneously declares and pays in cash all dividends on the Convertible Exchangeable Preferred Stock accrued and unpaid thereon, pro rata to the date fixed for redemption together with any additional dividends pursuant to Section 1(b). (e) On April 15, 2004, the Corporation shall redeem all outstanding shares of Convertible Exchangeable 55 54 Preferred Stock at a redemption price equal to the liquidation preference per share, provided that the Corporation simultaneously declares and pays all accrued and unpaid dividends to and including the date of redemption, together with any additional dividends pursuant to Section 1(b). The redemption price shall be paid, at the Corporation's option, in cash or in shares of Common Stock. If the redemption price is paid in shares of Common Stock, each share of Common Stock shall be valued at the product of (1) .95 and (2) the average of the daily Closing Prices per share of the Common Stock for the 20 consecutive trading days immediately preceding the redemption date. (f) Not more than 30 nor less than 15 days prior to the redemption date, notice by first class mail, postage prepaid, shall be given to each holder of record of the Convertible Exchangeable Preferred Stock to be redeemed, at such holder's address as it shall appear upon the stock transfer books of the Corporation. Each such notice of redemption shall be irrevocable and shall specify the date fixed for redemption, the Redemption Price (or the method by which such price will be determined), whether such redemption price shall be paid in cash or in shares of Common Stock, the identification of the shares to be redeemed (if fewer than all the outstanding shares are to be 56 55 redeemed), the place or places of payment, that payment will be made upon presentation and surrender of the certificate(s) evidencing the shares of Convertible Exchangeable Preferred Stock to be redeemed, that on and after the redemption date, dividends will cease to accrue on such shares, the then effective Conversion Price pursuant to Section 3 and that the right of holders to convert shares called for redemption shall terminate at the close of business on the redemption date (unless the Corporation defaults in the payment of the Redemption Price). (g) Any notice that is mailed as herein provided shall be conclusively presumed to have been duly given, whether or not the holder of the Convertible Exchangeable 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 Convertible Exchangeable Preferred Stock. On or after the 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 Redemption Price in the manner set forth in the notice. 57 56 If fewer than all the shares represented by any such surrendered certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. If, on the date fixed for redemption, funds (or shares of Common Stock) necessary for the redemption shall be available therefor and shall have been irrevocably deposited or set aside, then, notwithstanding that the certificates evidencing any shares so called for redemption shall not have been surrendered the dividends with respect to the shares so called shall cease to accrue after the date fixed for redemption, the shares shall no longer be deemed outstanding, the holders thereof shall cease to be stockholders, and all rights whatsoever with respect to the shares so called for redemption (except the right of the holders to receive the Redemption Price without interest upon surrender of their certificates therefor) shall terminate. (h) In the event that any shares of Convertible Exchangeable Preferred Stock shall be converted into Common Stock pursuant to Section 3, then (i) the Corporation shall not have the right to redeem such shares and (ii) any funds which shall have been deposited for the payment of the Redemption Price for such shares shall be returned to the Corporation immediately after such conversion (subject to 58 57 declared dividends payable to holders of shares of Convertible Exchangeable Preferred Stock on the record date for such dividends being so payable, to the extent set forth in Section 3 hereof, regardless of whether such shares are converted subsequent to such record date and prior to the related dividend payment date). (i) If fewer than all the shares outstanding are to be redeemed, the Corporation shall select the shares to be redeemed pro rata. Section 8. Rank. All shares of Convertible Exchangeable Preferred Stock shall rank, both as to payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, prior to or pari passu with all classes and series of the Corporation's Preferred Stock, par value $.10 per share, and prior to all of the Corporation's now or hereafter issued Common Stock. The term "Common Stock" shall mean the Common Stock, $.01 par value per share, of the Corporation as the same exists at the date hereof or as such stock may be constituted from time to time, except that for the purpose of Section 3, the term "Common Stock" shall 59 58 also mean and include stock of the Corporation of any class, whether now or hereafter authorized, which shall have the right to participate in the distribution of either dividends or assets of the Corporation upon liquidation, dissolution or winding up, without limit as to the amount or percentage. Section 9. Redemption by Exchange for Notes. (a) The shares of Convertible Exchangeable Preferred Stock are redeemable at the option of the Corporation, in whole but not in part, on any date, by exchanging such shares for the 6% Convertible Subordinated Notes due 2004 (the "Notes") of the Corporation, which shall be in substantially the form filed as an exhibit to the Stock Purchase Agreement dated April 15, 1994, among the Corporation and Corporate Partners, L.P., Corporate Offshore Partners, L.P., and the State Board of Administration of Florida, completed as set forth therein and with such changes as may be required by law. Holders of the outstanding shares of Convertible Exchangeable Preferred Stock will be entitled to receive a principal amount of the Notes equal to the liquidation preference of each share of Convertible Exchangeable Preferred Stock held by them at the time of exchange, and the Corporation shall simultaneously 60 59 declare and pay in cash all dividends on the Convertible Exchangeable Preferred Stock accrued and unpaid to the date of such exchange. (b) Notwithstanding the foregoing, no such redemption by exchange of shares of Convertible Exchangeable Preferred Stock for Notes shall be made unless (a)(i) the Corporation shall not be in arrears with respect to the payment of any dividends (including cumulative dividends, if applicable) on Convertible Exchangeable Preferred Stock or on any shares of preferred stock of the Corporation ranking, as to dividends, prior to or on a parity with the Convertible Exchangeable Preferred Stock, and (ii) such exchange shall on such date not be prohibited by applicable law, and (b) on or prior to the date on which such exchange is to be made (i) the Notes shall have been executed and delivered by the Corporation and (ii) the holders of Convertible Exchangeable Preferred Stock shall have received an opinion of counsel to the Corporation dated such date, substantially to the following effect: (1) the Corporation has duly authorized the exercise of its right to redeem the Convertible Exchangeable Preferred Stock in exchange for the Notes and has exercised such option; (2) the Corporation has full corporate power and authority to issue and deliver 61 60 the Notes; (3) the Notes constitute legal, valid and binding obligations of the Corporation enforceable against the Corporation in accordance with their terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general equitable principles); (4) no consent, approval, authorization or order of any court or governmental agency or body is required to be obtained by the Corporation in connection with the issuance of the Notes and the exchange of the Shares for the Notes, except such approvals (specified in such opinion) as have been obtained; and (5) the issuance of the Notes and the performance by the Corporation of its obligations thereunder and the exchange of the Shares for the Notes will not be in conflict with or constitute a breach of or a default (with the passage of time or otherwise) under (w) the Restated Certificate of Incorporation or Bylaws of the Corporation in effect at the date of such opinion, (x) the certificate of incorporation or bylaws of any subsidiary of the Corporation, which conflict, breach or default is material to the Corporation and its subsidiaries taken as a whole, in effect at the 62 61 date of such opinion, (y) any agreement or instrument, known to such counsel, to which the Corporation or any of its subsidiaries is a party or by which it or any of its subsidiaries is bound or (z) any statute, law or regulation known to such counsel and in effect at the date of such opinion to which the Corporation or any of its subsidiaries or any of their respective properties may be subject or any judgment, decree or order, known to such counsel, of any court or governmental agency or authority then in effect and applicable to the Corporation or any of its subsidiaries (which conflict, breach or default is, in the case of clauses (y) or (z), individually or in the aggregate, material to the Corporation and its subsidiaries taken as a whole). Upon such exchange, the rights of the holders of the Convertible Exchangeable Preferred Stock as stockholders of the Corporation shall cease (except the right to receive on the date of exchange an amount in cash equal to the amount of accrued and unpaid dividends on the Convertible Exchangeable Preferred Stock to the date of exchange, together with any additional dividends pursuant to Section 1(b), and the Notes), and the person or persons entitled to receive the Notes issuable upon such redemption 63 62 and exchange shall be treated for all purposes as the registered holder or holders of such Notes. (d) The Corporation will mail to each holder of record of Convertible Exchangeable Preferred Stock, at such holder's last address as it shall appear upon the stock transfer books of the Corporation, written notice of its intention to redeem the shares of Convertible Exchangeable Preferred Stock by exchanging such Shares for the Notes not less than 15 nor more than 30 days prior to the exchange date. Such notice shall be irrevocable and shall state: (i) the exchange date; (ii) the place or places where certificates for such shares are to be surrendered for exchange for Notes; and (iii) that dividends on the shares to be exchanged will cease to accrue on such exchange date. Upon surrender in accordance with said notice of the certificates for any shares to be exchanged (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), the Corporation will cause the Notes to be authenticated and issued in exchange for such shares of Convertible Exchangeable Preferred Stock and to be mailed to the holder of the shares of Convertible Exchangeable Preferred Stock at such holder's address of record or such other address as the holder shall specify upon such surrender of such certificates. 64 63 (e) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect to the issue or delivery of Notes upon exchange of shares of Convertible Exchangeable Preferred Stock. Section 10. Exchange of Convertible Exchangeable Preferred Stock for Common Stock. (a) Subject to and upon compliance with the provisions of this Section 10, each share of Convertible Exchangeable Preferred Stock shall, at the option of the holder thereof, be exchangeable (but only if notice of such exchange is given by such holder during an Exchange Period (as defined below)) into that number of fully paid and nonassessable shares of Common Stock (calculated as to each exchange to the nearest 1/100 of a share) obtained by dividing $1,050.00 by the Exchange Price (as defined below) applicable to such exchange, provided that the Corporation simultaneously declares and pays all dividends accrued and unpaid on the Convertible Exchangeable Preferred Stock. In order to exercise the exchange privilege, the holder of one or more shares of Convertible Exchangeable Preferred Stock to be exchanged shall deliver an Exchange Notice to the Corporation stating its intent to effect such exchange, which Exchange Notice must be received by the Corporation during an Exchange Period and must specify an Exchange Date 65 64 not more than 30 nor less than 10 business days after the date such notice is delivered, upon which Exchange Date such holder shall surrender such shares to the office maintained for such purpose by the Corporation. (b) For purposes of this Section 10; (i) "Exchange Date" shall mean the date (which shall not be a Saturday, Sunday or legal holiday) specified in an Exchange Notice delivered to the Corporation upon which the conversion shall be effected, which date shall not be less than 10 and not more than 30 business days after the date such Exchange Notice is delivered to the Corporation. (ii) "Exchange Notice" shall mean a written notice delivered by a holder of Convertible Exchangeable Preferred Stock to the Corporation during an Exchange Period stating that such holder has elected to exchange the number of shares specified therein for shares of Common Stock and specifying the Exchange Date for such exchange. Such notice shall also state the name or names, together with the address or addresses, in which the certificates for shares of Common Stock which shall be issuable in such conversion shall be issued. 66 65 (iii) "Exchange Period" shall mean April 15 through April 29, 1999 April 15 through April 29, 2000 April 15 through April 29, 2001 April 15 through April 29, 2002 April 15 through April 29, 2003 (iv) "Exchange Price" per share of Common Stock with respect to any exchange shall be deemed to be the average of the daily Closing Prices per share for the 20 consecutive trading days ending on the trading day immediately preceding the Exchange Date; provided, however, that the Exchange Price shall not be less than $5.00 per share (the "Minimum Exchange Price"); provided further, however, that if any of the events described in Section 3 hereof shall occur, then and in each such case, the Minimum Exchange Price in effect immediately prior thereto shall be appropriately adjusted in the same manner as the Conversion Price would be adjusted with respect to such event. Such adjustment shall be made whenever any of such events shall happen, but shall also be effective retroactively as to shares of Convertible Exchangeable Preferred Stock exchanged between such record date and the date of the happening of any such event. (c) Each exchange shall be deemed to have been effected immediately prior to the close of business on the 67 66 Exchange Date, and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such exchange shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date, and such exchange shall be at the Exchange Price in effect at such time on such date, unless the stock transfer books of the Corporation shall be closed on that date, in which event such person or persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Exchange Price in effect on the Exchange Date. (d) No fractional shares or scrip representing fractions of shares of Common Stock shall be issued upon exchange of Preferred Stock. If more than one share of Convertible Exchangeable Preferred Stock shall be surrendered for exchange 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 of $1,050.00 for each such share so surrendered. Instead of any fractional interest in a share of Common Stock which would otherwise be delivered upon the exchange of any shares of Convertible Exchangeable Preferred Stock, 68 67 the Corporation shall pay to the holder of such shares an amount in cash (computed to the nearest cent) equal to the Exchange Price multiplied by the fractional interest (expressed as a percentage) that otherwise would have been deliverable upon conversion of such share. (e) If a holder of shares of Convertible Exchangeable Preferred Stock shall have delivered an Exchange Notice with respect to some or all of such holder's shares, the Corporation may, at its option, in lieu of issuing shares of Common Stock to such holder on the applicable Exchange Rate, redeem all but not less than all of the shares of Convertible Exchangeable Preferred Stock to be exchanged at a cash redemption price per share of Convertible Exchangeable Preferred Stock equal to the liquidation preference, provided that the Corporation simultaneously declares and pays in cash all dividends on the Convertible Exchangeable Preferred Stock accrued and unpaid thereon. (f) If the Corporation elects to redeem shares of Convertible Exchangeable Preferred Stock with respect to which an Exchange Notice shall have been herein delivered, the Corporation shall give notice to such holder by first class mail, postage prepaid, not less than 5 business days prior to the Exchange Date, at such holder's address as it 69 68 shall appear upon the stock transfer books of the Corporation. Each such notice of redemption shall specify the date fixed for redemption (which shall be the Exchange Date), the redemption price, the place or places or payment, that payment will be made upon presentation and surrender of the certificate(s) evidencing the shares of Convertible Exchangeable Preferred Stock to be redeemed and that on and after the redemption date, dividends will cease to accrue on such shares. (g) Any notice that is mailed as herein provided shall be conclusively presumed to have been duly given, whether or not the holder of the Convertible Exchangeable 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 Convertible Exchangeable Preferred Stock. On or after the 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 redemption price. If fewer than all the shares represented by any such surrendered certificate are 70 69 redeemed, a new certificate shall be issued representing the unredeemed shares. If, on the date fixed for redemption, funds necessary for the redemption shall be available therefor and shall have been irrevocably deposited or set aside, then, notwithstanding that the certificates evidencing any shares so called for redemption shall not have been surrendered, the dividends with respect to the shares so called shall cease to accrue after the date fixed for redemption, the shares shall no longer be deemed outstanding, the holders thereof shall cease to be stockholders, and all rights whatsoever with respect to the shares so called for redemption (except the right of the holders to receive the redemption price without interest upon surrender of their certificates therefor) shall terminate. Section 11. Notice. All notices hereunder shall be in writing. IN WITNESS WHEREOF, Tyco Toys, Inc. has caused this Certificate to be signed and acknowledged by its Vice 71 70 Chairman and its corporate seal to be hereunto affixed and attested by the Secretary, this the 15th day of April, 1994. TYCO TOYS, INC. By /s/ Harry J. Pearce ----------------------- Name: Harry J. Pearce Title: Vice Chairman Attest: /s/ R. Michael Kennedy, Jr. --------------------------- Name: R. Michael Kennedy, Jr. Title: Secretary EX-99.5 6 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 5 - Registration Rights Agreement, dated as of April 15, 1994, among the Purchasers and the Company 2 CONFORMED COPY REGISTRATION RIGHTS AGREEMENT dated as of April 15, 1994 by and among TYCO TOYS, INC., a Delaware corporation (the "Company"), CORPORATE PARTNERS, L.P., a Delaware limited partnership ("Corporate Partners"), CORPORATE OFFSHORE PARTNERS, L.P., a Bermuda limited partnership ("Offshore Partners", and collectively with Corporate Partners, the "Partnerships"), and THE STATE BOARD OF ADMINISTRATION OF FLORIDA, a body corporate organized under the constitution of the State of Florida (the "State Board", and collectively with the Partnerships, the "Purchasers"). This Agreement is made pursuant to the Stock Purchase Agreement (the "Purchase Agreement"), dated as of April 15, 1994, by and among the Company and the Purchasers, whereby the Company has agreed, among other things, to issue 47,619 shares (which number may be increased if and to the extent additional shares are issued in respect of accrued dividends) of its Series B Voting Convertible Exchangeable Preferred Stock, par value $0.10 per share (the "Preferred Stock") to the Purchasers. The Preferred Stock is convertible into shares of the Company's common stock, par 3 2 value $.10 per share (the "Common Stock") at $10.50 per share, as such price may be adjusted pursuant to the Purchase Agreement. The Preferred Stock is also exchangeable in certain circumstances into Common Stock, and is exchangeable in certain circumstances into the Company's 6% Convertible Subordinated Notes Due 2004 (the "Notes"), which shall be in substantially the form filed as an exhibit to the Purchase Agreement. In order to induce the Purchasers to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. This Agreement shall become effective upon the issuance of the initial shares of Preferred Stock to the Purchasers pursuant to the Purchase Agreement. In consideration of the foregoing and the respective covenants and agreements herein contained, the parties hereto, intending to be legally bound hereby, agree as follows: 4 3 SECTION 1. Definitions. Capitalized terms used and not defined herein have the meanings assigned to such terms in the Purchase Agreement. As used herein, unless the context otherwise requires, the following terms have the following respective meanings: "Blue Sky Filing" is defined in Section 2.07 of this Agreement. "Commission" means the Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act. "Common Stock" is defined in the introduction to this Agreement. "Company" is defined in the introduction to this Agreement. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor 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 therein shall include a reference to the comparable section, if any, of any such successor Federal statute. "Preferred Stock" is defined in the introduction to this Agreement. 5 4 "Person" means a corporation, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency. "Purchase Agreement" is defined in the introduction to this Agreement. "Purchasers" is defined in the introduction to this Agreement. "Registrable Securities" means any (i) shares of Preferred Stock, (ii) Notes, (iii) shares of Common Stock issued upon the conversion or exchange of the Preferred Stock or the Notes and (iv) securities issued or issuable with respect to any shares of Preferred Stock, the Notes or Common Stock by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. 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 to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, (c) they 6 5 shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and in the opinion of counsel reasonably satisfactory to the Company subsequent public distribution of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force, or (d) they shall have ceased to be outstanding. "Registration Expenses" is defined in Section 2.09(a) of this Agreement. "Securities Act" means the Securities Act of 1933, as amended, or any successor 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 therein shall include a reference to the comparable section, if any, of any such similar Federal statute. SECTION 2. Registration under Securities Act. SECTION 2.01. Demand Registration. (a) Request. At any time after the date hereof, upon the written request of the Partnerships and Corporate Advisors, L.P., a Delaware limited partnership acting on behalf of the State Board ("Corporate Advisors"), that the Company effect the registration under the Securities Act of all or part 7 6 (subject to Section 2.01(f)) of the Purchasers' Registrable Securities and specifying the types of Registrable Securities to be registered and the intended method of disposition thereof, the Company will give prompt written notice of such request to all registered holders of Registrable Securities, and thereupon the Company will use its best efforts to effect the registration under the Securities Act of: (i) the Registrable Securities which the Company has been requested to register by the Purchasers, and (ii) all other Registrable Securities which the Company has been requested to register by written request of the holders thereof given to the Company within 30 days after the giving of the aforesaid written notice by the Company (specifying the intended method of disposition of such Registrable Securities), all to the extent requisite to permit the intended disposition of the Registrable Securities to be so registered. (b) Registration of Other Securities. Whenever the Company shall effect a registration pursuant to this Section 2.01 in connection with an underwritten offering by one or more holders of Registrable Securities, no securities other than Registrable Securities shall be included among 8 7 the securities covered by such registration unless (i) the managing underwriter of such offering shall have advised the Purchasers in writing that the inclusion of such other securities would not adversely affect such offering or (ii) the Purchasers shall have consented in writing to the inclusion of such other securities. (c) Registration Statement Form. Registrations under this Section 2.01 shall be on such appropriate registration form of the Commission (i) as shall be selected by the Company and (ii) as shall permit the disposition of such Registrable Securities in accordance with the intended method or methods of disposition specified in their request for such registration; provided, however, that if at the time of such registration the Company satisfies the eligibility requirements for use of a registration statement on Form S-3 under the Securities Act, the Purchasers may request a registration on Form S-3 for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration") and the Company shall use all reasonable efforts to cause the registration to be made on such form. The Company agrees to include in any such registration statement all information which, in the opinion of counsel to the Purchasers or counsel to the Company, is required to be included. 9 8 (d) Effective Registration Statement. A registration requested pursuant to this Section 2.01 shall not be deemed to have been effected and will not be considered one of the three demand registrations which may be requested pursuant to this Agreement (i) if the registration statement with respect thereto does not become effective, (ii) if after it has become effective, it does not remain effective for a period of at least 180 days or, in the case of a Shelf Registration, one year (or in each case such shorter period during which all the Registrable Securities registered thereunder are sold or disposed of) or such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason and has not thereafter become effective, or (iii) if the conditions to closing specified in the underwriting agreement entered into in connection with such registration are not satisfied or waived other than by reason of the failure or refusal of a holder of Registrable Securities to satisfy or perform a condition to such closing or a default by an underwriter. If a demand is made pursuant to Section 2.01 and the Company files a registration statement and causes (or is in the process of causing) such registration statement to become effective and the holders requesting registration decide not 10 9 to proceed with such registration for reasons other than a breach by the Company of its obligations hereunder or the Company's inability or failure to obtain the effectiveness of such registration statement, such request shall nevertheless count as one demand under Section 2.01. (e) Priority in Demand Registrations. If a demand registration pursuant to this Section 2.01 involves an underwritten offering, and the managing underwriter shall advise the Company in writing (with a copy sent to each holder of the Registrable Securities requesting registration) that the number of securities requested to be included in such registration exceeds the number which can be sold in such offering within a price range acceptable to the Purchasers or such other person entitled to make a demand registration pursuant to Section 8 hereof, such registration will include only that number of Registrable Securities which the Company is so advised can be sold in such offering, drawn pro rata from the holders of the Registrable Securities requesting such registration on the basis of the percentage of Registrable Securities held by the holders of Registrable Securities which have requested that such securities be included. In connection with any such registration, no securities other than Registrable Securities shall be covered by such registration. 11 10 (f) Limitations on Registration; Expenses. The Company will not be required to effect, in the aggregate, more than three demand registrations pursuant to this Section 2.01 (or any other provision of this Agreement), of which, subject to Section 1.02(b), the Company shall pay all Registration Expenses in connection with two of the three demand registrations, and the selling holders of Registrable Securities shall pay the Registration Expenses incurred in connection with the remaining demand registration except as set forth in Section 2.09(b). The Purchasers shall specify in the notice pursuant to Section 2.1(a) whether any demand registration shall be at the Company's expense. The Company shall not be required to effectuate any registration pursuant to this Section 2.01 within less than six months after the end of the effectiveness period of any other registration pursuant to Section 2.01. Notwithstanding the foregoing, no demand may be made in respect of a number (or principal amount) of Registrable Securities by all holders demanding registration which is less than the lesser of (x) 25% of the total Registrable Securities originally issued (or the equivalent thereof in the case of securities issued upon the exchange or conversion thereof) or (y) the number (or principal amount) of Registrable Securities having a 12 11 market value (as reasonably estimated in good faith by the holders requesting registration) of at least $20,000,000. SECTION 2.02. Incidental Registration. (a) Right to Include the Registrable Securities. If the Company at any time proposes to register any of its securities under the Securities Act by registration on Forms S-1, S-2 or S-3 or any successor or similar form(s), whether or not for sale for its own account, it will each such time give prompt written notice to the Purchasers and all other holders of Registrable Securities of its intention to do so and of such holders' rights under this Section 2.02. Upon the written request of any such holder, or by Corporate Advisors acting on behalf of the State Board as a holder (specifying the Registrable Securities intended to be disposed of by such holder and the intended method of disposition thereof), made within 30 days after the receipt of any such notice (10 days if the Company gives telephonic notice to all 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 to be disposed of by such holder), the Company will, subject to the next sentence, use its best efforts to 13 12 effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the holders thereof, to the extent requisite to permit the disposition of such Registrable Securities to be so registered. If the Company thereafter determines 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 holder of Registrable Securities and, thereupon, (i) in the case of a determination not to register, shall be relieved of the obligation to register such 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 (if any) of the Purchasers or an assignee to request that such registration be effected as a registration under Section 2.01, and (ii) in the case of a determination to delay registration, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registration of such other securities. All obligations of the Company with respect to any registration described in this Section 2.02(a) shall be subject to the rights of the Company set forth in the immediately preceding sentence. No registration effected under this Section 2.02 shall relieve 14 13 the Company of its obligation to effect any registration upon request under Section 2.01. The Company will pay all Registration Expenses in connection with registration of Registrable Securities requested pursuant to this Section 2.02. If such offering is to be underwritten, the holders seeking to sell such Registrable Securities agree to join in such underwritten offering. (b) Priority in Incidental Registrations. In a registration pursuant to this Section 2.02 involving an underwritten offering of the securities so being registered, whether or not for sale for the account of the Company by or through one or more underwriters of recognized standing, if the managing underwriter of such underwritten offering shall inform the Company and the holders of Registrable Securities requesting registration in such offering by letter of its belief that the number or type of securities to be included in such registration would materially adversely affect its ability to effect such offering, then the Company will be required to include in such registration only that number and type of Registrable Securities which it is so advised can be sold in such offering, drawn pro rata from the holders of Registrable Securities requesting such registration on the basis of the percentage of Registrable Securities held by the holders of Registrable Securities 15 14 which have requested that such securities be included (it being understood that this provision shall not limit the number of securities that the Company or any holder of securities exercising a demand registration right shall be entitled to register for sale for their own respective accounts). SECTION 2.03. Registration Procedures. In connection with the Company's obligations pursuant to Sections 2.01 and 2.02 hereof, the Company will use its best efforts to effect such registrations to permit the sale of Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company will as expeditiously as possible: (a) prepare (as soon as possible and in any event within 45 days after the end of the period within which requests for registration may be given to the Company), and file with the Commission (but not earlier than 90 days after the end of the Company's fiscal year or 45 days after the end of the last fiscal quarter), a registration statement or registration statements on the appropriate form under the Securities Act, which form shall be available for the sale of the Registrable Securities by the holders thereof in accordance with the intended method or methods of distribution thereof, 16 15 and use its best efforts to cause such registration statement to become effective and to remain continuously effective for a period of 180 days following the date on which such registration statement is declared effective (or, in the case of a Shelf Registration, for a period of one year following such date); provided that the Company shall have no obligation to maintain the effectiveness of such registration statement after the sale of all Registrable Securities registered thereunder or for a period longer than that specified in this paragraph (a); (b) prepare and file with the Commission such amendments and post-effective amendments to a registration statement as may be necessary to keep such registration statement effective for the applicable period; cause the related prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during the applicable period in accordance with the intended methods of disposition by the sellers thereof 17 16 set forth in such registration statement or supplement to such prospectus; (c) notify the selling holders of Registrable Securities, and the managing underwriters, if any, promptly, and (if requested by any such Person) confirm such advice in writing, (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to a registration statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission for amendments or supplements to a registration statement or related prospectus or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of a registration statement or the initiation of any proceedings for that purpose, (iv) if at any time the representations and warranties of the Company made as contemplated by paragraph (1) below cease to be true and correct in any material respect, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (vi) of the happening of 18 17 any event which requires the making of any changes in a registration statement or related prospectus so that such documents 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 and (vii) if the Company reasonably determines that a post-effective amendment to a registration statement would be appropriate; (d) use its best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any Registrable Securities for sale in any jurisdiction and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment. (e) if requested by the managing underwriters or any holder of Registrable Securities being sold in connection with an underwritten offering, immediately incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriters and such holder agree should be included 19 18 therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being sold to such underwriters, the purchase price being paid therefor by such underwriters and with respect to any other terms of the underwritten (or best efforts underwritten) offering of the Registrable Securities to be sold in such offering; make all required filings of such prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and supplement or make amendments to any registration statement if requested by any holder of Registrable Securities covered by such registration statement or any underwriter of such Registrable Securities; (f) furnish to each selling holder of Registrable Securities and each managing underwriter, without charge, at least one signed copy of the registration statement or statements and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); 20 19 (g) deliver to each holder of Registrable Securities and the underwriters, if any, without charge, as many copies of the prospectus or prospectuses (including each preliminary Prospectus) and any amendment or supplement thereto as such Persons may reasonably request; the Company consents to the use of such prospectus or any amendment or supplement thereto by each of the selling holders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto; (h) prior to any public offering of Registrable Securities, use its best efforts to register or qualify or cooperate with the selling holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as any selling holder or underwriter reasonably requests in writing; keep each such registration or qualification effective during the period such registration statement is required to be kept effective and do any and all other acts or things 21 20 necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the applicable registration statement; provided that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject; (i) cooperate with the selling holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends unless required by applicable law; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of Registrable Securities to the underwriters; (j) use its best efforts to cause the Registrable Securities covered by the applicable registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or 22 21 the underwriters, if any, to consummate the disposition of such Registrable Securities; (k) upon the occurrence of any event contemplated by paragraph (c)(vi) above, prepare a supplement or post-effective amendment to the applicable registration statement or related prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such prospectus will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (l) enter into such agreements (including an underwriting agreement) and take all such other actions in connection therewith in order to expedite or facilitate the disposition of such Registrable Securities and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, (i) make such representations and warranties to the holders of such Registrable Securities with respect to the registration statement, prospectus and documents incorporated by reference, if any, in form, substance 23 22 and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested; (ii) obtain the opinions of counsel to the Company and updates thereof with respect to the registration statement and the prospectus in the form, scope and substance which are customarily made in underwritten offerings; (iii) in the case of an underwritten offering, enter into an underwriting agreement in form, scope and substance as is customary in underwritten offerings and obtain opinions of counsel to the Company and updates thereof addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such holders and underwriters; (iv) furnish to each seller of Registrable Securities a signed counterpart, addressed to such seller (and the underwriters, if any) of (x) an opinion of counsel for the Company, which may be the general counsel of the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), in form, scope and substance reasonably satisfactory to, and addressed to, the 24 23 managing underwriters, and (y) a "comfort" letter, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Company's financial statements in form, scope and substance reasonably satisfactory to, and addressed to, the managing underwriters, and included in such registration statement, in form, scope and substance satisfactory to the managing underwriters, and covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' 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' letters delivered to the underwriters in underwritten public offerings of securities and, in the case of the accountants' letter, such other financial matters, and, in the case of the legal opinion, such other legal matters, as such seller or such holder (or the underwriters, if any) may reasonably request; (v) if an underwriting agreement is entered into, the same shall 25 24 set forth in full the indemnification provisions and procedures of Section 2.07 hereof with respect to all parties to be indemnified pursuant to said section, with such other indemnification provisions as are customary and acceptable to the underwriters, the Purchasers and the Company; and (vi) the Company shall deliver such documents and certificates as may be requested by the holders of a majority of the Registrable Securities sold and the managing underwriters, if any, to evidence compliance with this clause (1) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The above shall be done at each closing under such underwriting or similar agreement or as and to the extent required thereunder; (m) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission and make generally available to its security holders earnings statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (n) permit any holder of Registrable Securities, which holder, in the judgment of its counsel, might be deemed to be a "control person" of the Company (within 26 25 the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), to participate in the preparation of such registration statement and include therein material, furnished to the Company in writing which, in the reasonable judgment of such holder and its counsel, is required to be included therein; (o) if any registration statement refers to any holder of Registrable Securities by name or otherwise as the holder of any securities of the Company, and if such holder reasonably believes it is or may be deemed to be a control person in relation to, or an Affiliate of, the Company, then such holder shall have the right to require (i) the insertion in such registration statement of language, in form and substance satisfactory to such holder, to the effect that the ownership by such holder of such securities is not to be construed as and is not intended to be a recommendation by such holder of the investment quality of, or the relative merits and risks attendant to the purchase of, the Company's securities covered thereby, and that such ownership does not imply that such holder will assist in meeting any future financial or operating requirements of the Company, or (ii) in the case where the reference to such holder by name or 27 26 otherwise is not required by the Securities Act or any similar federal or state statute then in effect, the deletion of the reference to such holder; (p) use its best efforts to cause all such Registrable Securities to be listed on each securities exchange, if any, on which Registrable Securities of the type then being registered are listed; and (q) provide and cause to be maintained a transfer agent and registrar (if applicable) for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. The Company may require each holder of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding such holder and the distribution of such Registrable Securities as the Company may from time to time reasonably request in writing in order to comply with the Securities Act. Each holder of Registrable Securities as to which any registration is being effected agrees to notify the Company, as promptly as practicable of any inaccuracy or change in information previously furnished by such holder to the Company or of the happening of any event in either case as a result of which any prospectus relating to such registration 28 27 contains an untrue statement of a material fact regarding such holder or the distribution of such Registrable Securities or omits to state any material fact regarding such holder or the distribution of such Registrable Securities or omits to state any material fact regarding such holder or the distribution of such Registrable Securities required to be stated therein or necessary to make the statement therein not misleading in light of the circumstances then existing, and to promptly furnish to the Company any additional information required to correct and update any previously furnished information or required such that such prospectus shall not contain, with respect to such holder or the distribution of such Registrable Securities, 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 light of the circumstances then existing. Each holder of Registrable Securities agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.03(c)(ii), (iii), (v), (vi) or (vii) hereof, such holder will forthwith discontinue disposition of such Registrable Securities covered by such registration statement or prospectus until such holder's receipt of the copies of the supplemented or 29 28 amended prospectus relating to such registration statement or prospectus, 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 additional or supplemental filings which are incorporated by reference in such Prospectus, and, if so directed by the Company, such holder 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 covering the Registrable Securities current at the time of receipt of such notice. SECTION 2.04. Underwritten Offerings. (a) Demand Underwritten Offerings. In any offering by holders of Registrable Securities pursuant to a registration requested under Section 2.01, sales shall be made through a nationally recognized investment banking firm (or syndicate managed by such a firm) selected by the holders of at least a majority in aggregate principal amount of the Registrable Securities to be included in such offering and approved by the Company (which approval shall not be unreasonably withheld) and the Company shall enter into an underwriting agreement which shall be reasonably satisfactory in form and substance to each holder and the underwriters and which shall contain representations, warranties and agreements 30 29 (including indemnification agreements to the effect and to the extent provided in Section 2.07) as are customarily included by an issuer in underwriting agreements with respect to primary distributions. The holders of Registrable Securities to be distributed 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. Any such 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 holder, such holder's Registrable Securities and such holder's intended method of distribution and any other representation required by law. (b) Incidental Underwritten Offerings. If the Company at any time proposes to register any of its securities under the Securities Act as contemplated by 31 30 Section 2.02 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by any holder of Registrable Securities as provided in Section 2.02 and subject to the provisions of Section 2.02(b), use its best efforts to arrange for such underwriters to include all the Registrable Securities to be offered and sold by such holder among the securities to be distributed by such underwriters. The holders of Registrable Securities to be distributed by such underwriters shall be parties to the underwriting agreement between the Company and such underwriters. Any such 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 holder, such holder's Registrable Securities and such holder's intended method of distribution and any other representation required by law. SECTION 2.05. 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 to be registered under such registration statement, their underwriters, and their respective counsel and accountants the opportunity to 32 31 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 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. SECTION 2.06. Limitations, Conditions and Qualifications to Obligations Under Registration Covenants. The obligations of the Company to use its reasonable efforts to cause the Registrable Securities to be registered under the Securities Act are subject to each of the following limitations, conditions and qualifications: (a) The Company shall not be obligated to file or keep effective any registration statement pursuant to Section 2.01 hereof at any time if the Company would be required to include financial statements audited as of any date other than the end of its fiscal year. (b) The Company shall be entitled to postpone for a reasonable period of time (but not exceeding 60 days and not more than once in any six-month period) the filing or 33 32 effectiveness of any registration statement otherwise required to be prepared and filed by it pursuant to Section 2.01 if the Company determines, in its reasonable judgment, that (i) the Company is in possession of material information that has not been disclosed to the public and the Company reasonably determines that it would be detrimental to the Company and its stockholders to disclose such information at such time in a registration statement or (ii) such registration and offering would interfere with any financing, acquisition, corporate reorganization or other material transaction involving the Company or any of its Affiliates (as defined in the rules and regulations adopted under the Exchange Act) and, in any such case, the Company promptly gives the requesting holders of Registrable Securities written notice of such determination, containing a general statement of the reasons for such postponement and an approximation of the anticipated delay. If the Company shall so postpone the filing of a registration statement, the requesting holders of Registrable Securities shall have the right to withdraw the request for registration by giving written notice to the Company within 30 days after receipt of the notice of postponement and, in the event of such withdrawal, such request shall not be counted for purposes of the requests for registration to which the Purchasers and 34 33 their assignees are entitled pursuant to Section 2.01 hereof. (c) No holder of Registrable Securities may participate in any underwritten offering hereunder unless such holder (i) agrees to sell such holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. SECTION 2.07. Indemnification. (a) Indemnification by the Company. In the event of any registration of any Registrable Securities under the Securities Act, the Company will, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, the holder of any Registrable Securities whose Registrable Securities are covered by such registration statement, its directors and officers, 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 seller or any such underwriter within the meaning of the Securities Act, against any and all losses, claims, damages, liabilities and expenses, joint or several, (or actions or proceedings, 35 34 whether commenced or threatened, in respect thereof) to which they or any of them may become subject under the Securities Act or any other statute or common law, including any amount paid in settlement of any litigation, commenced or threatened, and to reimburse them for any legal or other expenses incurred by them in connection with investigating any claims and defending any actions, insofar as any such losses, claims, damages, liabilities, expenses or actions arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement or prospectus relating to the sale of such securities or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under Blue Sky or other securities laws of jurisdictions in which the Registrable Securities are offered ("Blue Sky Filing"), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, if used prior to the effective date of such registration statement (unless such statement is corrected in the final prospectus and the Company has 36 35 previously furnished copies thereof to any holder of Registrable Securities seeking such indemnification and the underwriters), or contained in the final prospectus (as amended or supplemented if the Company shall have filed with the Commission any amendment thereof or supplement thereto) if used within the period during which the Company is required to keep the registration statement to which such prospectus relates current, or the omission or alleged omission to state therein (if so used) a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the indemnification agreement contained herein shall not (i) apply to such losses, claims, damages, liabilities, expenses or actions arising out of, or based upon, any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such statement or omission was made in reliance upon and in conformity with written information furnished to the Company by such seller or such underwriter specifically stating that it is for use in connection with preparation of the registration statement, any preliminary prospectus or final prospectus contained in the registration statement, any such amendment or supplement thereto or any Blue Sky Filing or (ii) inure to the benefit of any underwriter or 37 36 any person controlling such underwriter, to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such person if such statement or omission was corrected in such final prospectus. 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 or controlling person and shall survive the transfer of such securities by such seller. (b) Indemnification by the Sellers. The Company may require, as a condition to including any Registrable Securities in any registration statement filed pursuant to Section 2.01 or 2.02, that the Company shall have received an undertaking satisfactory to it from the prospective seller of such securities, to indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 2.07) the Company, each director of the Company, each officer of the Company and 38 37 each other person, if any, who controls the Company within the meaning of the Securities Act, with respect to any untrue statement or alleged untrue statement in, or omission or alleged omission from, such registration statement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, if such statement or omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller specifically stating that it is for use in such registration statement, preliminary prospectus, final prospectus, amendment or supplement. 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 seller. In no event shall any indemnity paid by any seller to the Company pursuant to this Section 2.07(b), or otherwise, exceed the proceeds received by such seller in such offering. In the case of an underwritten offering of Registrable Securities, each holder of registrable Securities shall agree to indemnify such underwriters, their officers and directors, if any, and each person, if any, who controls such underwriters within the meaning of Section 15 of the Securities Act and Section 20 39 38 of the Exchange Act, with respect to information furnished by them for use in the registration statement or prospectus to the extent customary in the circumstances for a selling stockholder in an underwritten public offering. (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 the preceding subdivisions of this Section 2.07, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter within five days of the commencement of such action; provided 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 2.07, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and, unless in such indemnified party's reasonable good faith judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it 40 39 may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. In the event that the indemnifying party advises an indemnified party that it will contest a claim for indemnification hereunder, or fails, within thirty (30) days of receipt of any indemnification notice to notify, in writing, such person of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the indemnified party may, at its option, defend, settle or otherwise compromise or pay such action or claim. In any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such claim, proceeding or action, the indemnified party's reasonable out-of-pocket costs and expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding shall be losses subject to indemnification hereunder. The indemnified party shall 41 40 cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the indemnified party which relates to such action or claim. The indemnifying party shall keep the indemnified party fully appraised at all times as to the status of the defense or any settlement negotiations with respect thereto. If the indemnifying party elects to defend any such action or claim, then the indemnified party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense. If the indemnifying party does not assume such defense, the indemnified party shall keep the indemnifying party appraised at all times as to the status of the defense; provided, however, that the failure to keep the indemnifying party so informed shall not affect the obligations of the indemnifying party hereunder. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its written consent; provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the indemnified party (which consent shall not be unreasonably withheld, delayed or conditioned), consent to 42 41 entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Contribution. (i) If the indemnification from the indemnifying party as provided in this Section 2.7 is unavailable or is otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party shall, to the fullest extent permitted by law, contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party shall be determined by reference to, among other things, whether any action in question, including any untrue (or alleged untrue) statement of a material fact or omission (or alleged omission) to state a material fact, has been made, or related to information 43 42 supplied by such indemnifying party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 2.7(c), any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.7 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. 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. If however, indemnification is available under this Section 2.7, the indemnifying parties shall indemnify each indemnified party to the fullest extent provided in Section 2.7(a) and (b) hereof without regard to the relative fault of said indemnifying party or indemnified 44 43 party or any other equitable consideration provided for in this Section 2.7(d). (e) Indemnification Payments. The indemnification and contribution required by this Section 2.07 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. (e) Other Rights, Liabilities. The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the indemnified party against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law. SECTION 2.08. Adjustments Affecting Registrable Securities. (a) During any period commencing on either (i) the date a request for a demand registration has been made pursuant to Section 2.01(a) hereof or (ii) the date on which any holder of Registrable Securities, or Corporate Advisors on behalf of the State Board as a holder, makes written request in accordance with the terms of Section 2.02(a) hereof to have its Registrable Shares registered, and in either event, terminating on the date which is the earlier 45 44 of (i) 180 days after the date on which the registration statement registering such Registrable Securities becomes effective and (ii) the date on which all Registrable Securities registered under such registration statement are sold, transferred or disposed of, the Company will not, without the consent of the Purchasers, effect, permit to occur or announce any future intent to effect or permit to occur, any combination or subdivision of shares which would materially adversely affect the ability of the holders of Registrable Securities to include Registrable Securities in any registration of securities contemplated by this Section 2 or the marketability of Registrable Securities under any such registration. (b) Prior to any registration of Preferred Shares, the Company will, if so requested by the Purchasers, use its best efforts, subject to all required stockholder approvals pursuant to the Restated Certificate, the Certificate of Designation and the General Corporation Law of the State of Delaware, to effect a stock-split or other division in respect of such Registrable Securities (other than the common stock of the Corporation) in such proportion as is desirable, in the opinion of the Purchasers, to enhance the marketability of such Registrable Securities; provided that the Corporation shall not be required to 46 45 obtain the approval of its holders of Common Stock to increase the authorized number of shares of Preferred Stock pursuant hereto as long as there are at least 550,000 authorized, unissued and unreserved shares of preferred stock available to effectuate such a split, or division. In the event of any such stock split, appropriate adjustments shall be made to the provisions of the Certificate of Designation, including without limitation of the voting rights, dividend, conversion and redemption provisions. SECTION 2.09. Registration Expenses. (a) Except as provided in Section 2.09(b), all expenses incident to the Company's performance of or compliance with this Agreement, including without limitation (i) any allocation of salaries and expenses of Company personnel or other general overhead expenses of the Company, or other expenses for the preparation of historical and pro forma financial statements or other data normally prepared by the Company in the ordinary course of business or customarily prepared by the issuer in a public offering; (ii) all registration, application, filing, listing, transfer and registrar fees; (iii) all National Association of Securities Dealers fees and fees and expenses of registration or qualification of Registrable Securities under state securities or blue sky laws; (iv) all word processing, duplicating and printing 47 46 expenses, messenger and delivery expenses; (v) the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of customary "cold comfort" letters required by or incident to such performance and compliance; and (vi) any fees and disbursements of underwriters and broker-dealers customarily paid by issuers or sellers of securities; (all such expenses being herein called "Registration Expenses") will be borne or caused to be borne by the Company whether or not any of the Registration Statements becomes effective provided, however, that in all cases in which the Company is required to pay Registration Expenses hereunder, Registration Expenses shall exclude, and the sellers of the Registrable Securities being registered shall pay, the fees and disbursements of their counsel, their accountants and their other advisors, and underwriting discounts and commissions and transfer taxes in respect of the Registrable Securities under state securities or blue sky laws. (b) In the case of any demand registration pursuant to Section 2.1 which is not at the Company's expense as provided in Section 2.01(f), the selling holders of Registrable Securities shall pay all Registration Expenses other than those in clause (i) of Section 2.09(a), the fees and expenses of counsel to the Company and any 48 47 other expenses referred to in clause (iv) of Section 2.09(a) which constitute overhead expenses of the Company, all of which expenses shall be paid by the Company. SECTION 2.10 Other Sales. (a) The Company hereby agrees not to effect, except pursuant to employee benefit plans, any public sale or distribution of any securities of the same class as (or otherwise similar to) the Registrable Securities, or any securities which, with notice, lapse of time and/or payment of monies, are exchangeable or exercisable for or convertible into any such securities, or to enter into any agreement to make, file a registration statement for, or announce any sale or distribution of, any such securities, during the 15-day period prior to, and during the 90-day period commencing on, the effective date of a registration statement filed with the Commission in connection with an underwritten offering effected pursuant to Section 2.1 of this Agreement without the prior written consent of the managing underwriters of such offering. (b) The Purchasers agree, during the 10-day period prior to, and during the 90-day period commencing on, the effective date of a registration statement filed with the Commission (other than on Form S-8) in connection with an underwritten offering of securities of the same class as 49 48 the then outstanding Registrable Securities (or any securities issuable upon conversion or exchange thereof), not to make any sales of Registrable Securities (or such other securities) pursuant to Rule 144, provided that they were given the opportunity to include in such registration statement all such Registrable Securities as they may have requested. SECTION 3. Rule 144. 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 exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission including, without limiting the generality of the foregoing, filing on a timely basis all reports required to be filed by the Exchange Act. 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. Notwithstanding anything herein to the contrary, no holder may exercise any right to require the registration of a number (or principal amount) of Registrable Securities which he is at such time able to sell pursuant to Rule 144 50 49 (without being limited by any volume restriction therein with respect to Registrable Securities desired to be sold immediately by such holder). SECTION 4. Entire Agreement; Amendments and Waivers. This Agreement, together with the Purchase Agreement and the agreements, schedules, exhibits and annexes referred to therein, represents the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes any and all prior oral and written agreements, arrangements and understandings among the parties hereto with respect to such subject matters. This Agreement may be amended, waived or modified only by a written instrument signed by the Company and the holder or holders of a majority of the shares of Registrable Securities. SECTION 5. Other Registration Rights. The Company hereby covenants and agrees not to hereafter enter into any agreement, arrangement or understanding with respect to its securities which is inconsistent or otherwise interferes with the rights granted to the holders of Registrable Securities under this Agreement. SECTION 6. Nominees for Beneficial Owners. In the event that any Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial 51 50 owner thereof may, at its election, be treated as the holder of such securities for purposes of any request or other action by any holder or holders of securities pursuant to this Agreement or any determination of any number or percentage of shares of securities held by any holder or holders of 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. SECTION 7. Notices. Any notice, demand, request, waiver, or other communication under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if personally served or transmitted via telecopy, (ii) on the next business day after delivery to an overnight carrier or (iii) on the third day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered, return receipt requested, postage prepaid and (a) if addressed to the Purchasers, addressed to such party in the manner set forth in the Purchase Agreement, or at such other address as such party shall have furnished to the Company in writing, or (b) if addressed to any other holder of Registrable Securities, at the address that such holder shall have 52 51 furnished to the Company in writing, 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 securities who has furnished an address to the Company, or (c) if addressed to the Company, at 6000 Midlantic Drive, Mount Laurel, New Jersey 08054 attention of the General Counsel or at such other address, or to the attention of such other officer, as the Company shall have furnished to each holder of Registrable Securities at the time outstanding. SECTION 8. Assignment. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors by merger, consolidation or amalgamation and permitted assigns. The Company may not assign any of its rights and obligations hereunder without the consent of the holders of all the Registrable Securities then outstanding. Any Purchaser may assign its rights hereunder without the consent of the Company to any Purchaser Affiliate (as defined in the Purchase Agreement) or successor or to any Person who purchases or otherwise duly receives title to 10% or more of the Registrable Securities then outstanding; provided that such assignee agrees in writing to be bound by the terms of this Agreement. This Agreement shall not inure to the 53 52 benefit of any person who is not a party hereto or a successor to or permitted assignee of a party hereto. SECTION 9. Descriptive Headings. The descriptive headings of the several sections and paragraphs of this Agreement are inserted for reference only and shall not limit or otherwise affect the meaning hereof. SECTION 10. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, APPLICABLE TO CONTRACTS TO BE MADE, EXECUTED, DELIVERED AND PERFORMED WHOLLY WITHIN SUCH STATE AND, IN ANY CASE, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE. SECTION 11. Severability. If at any time subsequent to the date hereof, any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon and shall not impair the enforceability of any other provision of this Agreement. SECTION 12. Equitable Remedies. The parties hereto agree that irreparable harm would occur in the event that any of the agreements and provisions of this Agreement were not performed fully by the parties hereto in accordance 54 53 with their specific terms or conditions or were otherwise breached, and that money damages are an inadequate remedy for breach of this Agreement because of the difficulty of ascertaining and quantifying the amount of damage that will be suffered by the parties hereto in the event that this Agreement is not performed in accordance with its terms or conditions or is otherwise breached. It is accordingly hereby agreed that the parties hereto shall be entitled to an injunction or injunctions to restrain, enjoin and prevent breaches of this Agreement by the other parties and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, such remedy being in addition to and not in lieu of, any other rights and remedies to which the other parties are entitled to at law or in equity SECTION 13. No Waiver. The failure of any party at any time or times to require performance of any provision hereof (within the time limitations contained herein) shall not affect the right at a later time to enforce the same. No waiver by any party of any condition, and no breach of any provision, term, covenant, representation or warranty contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be construed as a further or continuing waiver of any such 55 54 condition or of the breach of any other provision, term, covenant, representation or warranty of this Agreement. SECTION 14. Submission to Jurisdiction. (a) The Company hereby irrevocably submits, for itself and its property, to the jurisdiction of the Supreme Court of the State of New York, County of New York, and the United States District Court for the Southern District of New York over any suit, action or other proceeding arising out of, or relating to, this Agreement or the transactions contemplated hereunder, and the Company hereby irrevocably waives and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper or that this Agreement may not be enforced in or by such courts. The Company agrees, to the fullest extent it may effectively do so under applicable law, that a final judgment in any such action or proceeding shall be conclusive and may be enforced 56 55 in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) The Company irrevocably appoints Prentice Hall, having offices at the date hereof at 15 Columbus Circle, New York, N.Y. 10023, as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any suit, action or proceeding of the nature referred to in subparagraph (a) above in any court referred to therein, and consents to process being served in any such suit, action or proceeding by mailing a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to Prentice Hall at the aforementioned address or to the Company at its address set forth or referred to in Section 11(g). The Company agrees that such service (i) shall be deemed in every respect effective service of process upon the Company in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon and personal delivery to the Company. SECTION 15. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, but all such 57 56 counterparts shall together constitute one and the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the date first above written. TYCO TOYS, INC. by /s/ Harry J. Pearce ------------------------ Name:Harry J. Pearce Title: Vice Chairman and Chief Financial Officer CORPORATE PARTNERS, L.P., by Corporate Advisors, L.P. General Partner, by /s/ Jonathan Kagan --------------------- Name: Jonathan Kagan Title: President CORPORATE OFFSHORE PARTNERS, L.P., by Corporate Advisors, L.P. General Partner, by /s/ Jonathan Kagan --------------------- Name: Jonathan Kagan Title: President 58 57 THE STATE BOARD OF ADMINISTRATION OF FLORIDA, by Corporate Advisors, L.P. Attorney-in-Fact, by /s/ Jonathan Kagan --------------------- Name: Jonathan Kagan Title: President EX-99.6 7 POWER OF ATTORNEY 1 EXHIBIT 6 - Power of Attorney from the State Board to Corporate Advisors 2 Exhibit 6 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the State Board of Administration of Florida, a body corporate organized under the constitution of the State of Florida ("Florida"), hereby irrevocably constitutes and appoints Corporate Advisors, L.P., a Delaware limited partnership ("Corporate Advisors"), its true and lawful attorney-in-fact and agent, with full power and authority in its name, place and stead, in any and all capacities, and with full power of substitution, to execute, acknowledge, deliver, swear to, file and record at the appropriate public offices such agreements, documents and instruments as may be necessary or appropriate to carry out the provisions of the Investment Management Agreement, dated as of June 17, 1988, between Florida and Crossroads Advisors, L.P. (the "Agreement"), including, without limitation, contract providing for the purchase of, and governing the terms, disposition and voting of, securities in a manner consistent with the provisions of the Agreement, and schedules (including, without limitation, Schedules 13D filed with the Securities and Exchange Commission (the "Commission") in accordance with the Securities Exchange Act of 1934 and the rules of the Commission promulgated thereunder), registration statements, and any other documents filed in connection with the registration of securities. It is expressly intended that the foregoing power of attorney is irrevocable and coupled with an interest and shall survive and not be affected by the incapacity, disability, death or dissolution of any person hereby giving such power. IN WITNESS WHEREOF, the State Board of Administration of Florida has caused this power of attorney to be executed and 3 attested by its Executive Director and General counsel thereunto duly authorized as of this 17th day of June, 1988. STATE BOARD OF ADMINISTRATION OF FLORIDA /s/ Lan Janecek ------------------------- Lan Janecek, designee for: Cliff Hinkle Executive Director Approved as to legality: /s/ Horace Schow II ------------------------- Horace Schow II General Counsel FL BAR ID #0251471 2 -----END PRIVACY-ENHANCED MESSAGE-----