SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated as of July 8, 1999, by and
between ThermoView Industries, Inc., a Delaware corporation ("Company"), and
GE Capital Equity Investments, Inc., a Delaware corporation ("GE Capital" or
"Purchaser").
W I T N E S S E T H :
WHEREAS, Company has agreed to issue and sell to Purchaser, and
Purchaser has agreed to purchase from Company, upon the terms and conditions
hereinafter provided, a senior subordinated promissory note in the principal
amount of $10,000,000 (the "Note"); and
WHEREAS, Company has agreed to issue to Purchaser, upon the
terms and conditions hereinafter provided, a warrant to purchase 1,666,028
shares of Common Stock (as defined herein) of Company (the "Warrant" and
together with the Note, the "Securities");
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, it is agreed as follows:
1. DEFINITIONS
"Affiliate" shall mean, with respect to any Person, (i) each
Person that, directly or indirectly, owns or controls, whether beneficially,
or as a trustee, guardian or other fiduciary, 5% or more of the Stock having
ordinary voting power in the election of directors of such Person, (ii) each
Person that controls, is controlled by or is under common control with such
Person or any Affiliate of such Person, (iii) each of such Person's officers,
directors, joint venturers and partners, (iv) any trust or beneficiary of a
trust of which such Person is the sole trustee or (v) any lineal descendants,
ancestors, spouse or former spouses (as part of a marital dissolution) of
such Person (or any trust for the benefit of such Person). For the purpose
of this definition, "control" of a Person shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities,
by contract or otherwise.
"Agreement" shall mean this Securities Purchase Agreement
including all amendments, modifications and supplements hereto and any
appendices, exhibits and schedules hereto or thereto, and shall refer to the
Agreement as the same may be in effect at the time such reference becomes
operative.
"Balance Sheet" shall have the meaning set forth in Section
4.7(a) hereof.
"Xxxxx Xxxxxxx Warrants" shall have the meaning ascribed to
such term in Section 5.2(i).
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Capital Expenditures" shall mean all payments for any fixed
assets, or improvements or for replacements, substitutions or additions
thereto, that have a useful life of more than one year and which are required
to be capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any
lease of any property (whether real, personal or mixed) by such Person as
lessee that, in accordance with GAAP, either would be required to be
classified and accounted for as a capital lease on a balance sheet of such
Person or otherwise be disclosed as a capital lease in a note to such balance
sheet, other than, in the case of Company or a Subsidiary of Company, any
such lease under which Company or such Subsidiary is the lessor.
"Capital Lease Obligation" shall mean, with respect to any
Capital Lease, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in
respect of such Capital Lease or otherwise be disclosed in a note to such
balance sheet.
"Cash Equivalents" shall mean (i) marketable direct obligations
issued or unconditionally guaranteed by the United States of America or any
agency thereof maturing within one year from the date of acquisition thereof;
(ii) commercial paper maturing no more than one year from the date of
creation thereof and at the time of their acquisition having the highest
rating obtainable from either Standard & Poor's Corporation or Xxxxx'x
Investors Service, Inc.; (iii) certificates of deposit, maturing not more
than one year from the date of creation thereof, issued by commercial banks
incorporated under the laws of the United States of America, each having
combined capital, surplus and undivided profits of not less than $200,000,000
and having a rating of "A" or better by a nationally recognized rating
agency; and (iv) money-market funds investing solely in the types of items
referred to above.
"Change of Control" shall mean any of the following: (a) any
person or group of persons (within the meaning of the Exchange Act) (other
than GE Capital and its Affiliates) shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the SEC under the Exchange
Act) of 50% or more of the issued and outstanding shares of Common Stock of
Company; (b) Company shall be a party to a merger or consolidation in which
Company is not the survivor or in which Company's stockholders immediately
prior thereto own less than a majority of the outstanding voting stock of the
survivor; or (c) Company shall have sold, leased or otherwise transferred all
or substantially all of its assets.
"Charges" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental (including, without
limitation, PBGC) taxes at the time due
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and payable, levies, assessments, charges, liens, claims or encumbrances upon
or relating to (i) Company's or any of its Subsidiaries' employees, payroll,
income or gross receipts, (ii) Company's or any of its Subsidiaries'
ownership or use of any of its assets, or (iii) any other aspect of Company's
or any of the Subsidiaries' business.
"Closing" shall have the meaning set forth in Section 2.2(a)
hereof.
"Closing Date" shall have the meaning set forth in Section
2.2(a) hereof.
"COBRA" shall have the meaning set forth in Section 4.19(m)
hereof.
"Common Stock" shall mean the common stock, $.001 par value per
share, of Company.
"Default" shall mean any event which, with the passage of time
or notice or both, would, unless cured or waived, become an Event of Default.
"Earn-Outs" shall have the meaning set forth in Section
5.1(h)(i).
"EBITDA" shall have the meaning set forth in Section 5.1(h)(i).
"Environmental Laws" shall mean all federal, state and local
laws, statutes, ordinances and regulations, now or hereafter in effect, and
in each case as amended or supplemented from time to time, and any judicial
or administrative interpretation thereof, including, without limitation, any
applicable judicial or administrative order, consent decree or judgment,
relative to the applicable Real Estate, relating to the regulation and
protection of human health, safety, the environment and natural resources
(including, without limitation, ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation). Environmental Laws include but are not limited to the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (42 U.S.C. Section 9601 ET SEQ.) ("CERCLA"); the Hazardous
Material Transportation Act, as amended (49 U.S.C. Section 1801 ET SEQ.);
the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C.
Section 136 ET SEQ.); the Resource Conservation and Recovery Act, as amended
(42 U.S.C. Section 6901 ET SEQ.) ("RCRA"); the Toxic Substance Control Act,
as amended (15 U.S.C. Section 2601 ET SEQ.); the Clean Air Act, as amended
(42 U.S.C. Section 740 ET SEQ.); the Federal Water Pollution Control Act, as
amended (33 U.S.C. Section 1251 ET SEQ.); the Occupational Safety and Health
Act, as amended (29 U.S.C. Section 651 ET SEQ.) ("OSHA"); and the Safe
Drinking Water Act, as amended (42 U.S.C. Section 300f ET SEQ.), and any and
all regulations promulgated thereunder, and all analogous state and local
counterparts or equivalents and any transfer of ownership notification or
approval statutes.
"Environmental Liabilities and Costs" shall mean all
liabilities, obligations, responsibilities, remedial actions, losses,
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including, without limitation, all fees, disbursements and expenses
of counsel, experts and consultants and
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costs of investigation and feasibility studies), fines, penalties, sanctions
and interest incurred as a result of any claim, suit, action or demand by any
person or entity, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute or common law
(including, without limitation, any thereof arising under any Environmental
Law, permit, order or agreement with any Governmental Authority) and which
relate to any health or safety condition regulated under any Environmental
Law or in connection with any other environmental matter or Spill or the
presence of a hazardous substance or threatened Spill of any Hazardous
Substance.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974 (or any successor legislation thereto), as amended from time to time
and any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to Company, any
trade or business (whether or not incorporated) under common control with
Company and which, together with Company, are treated as a single employer
within the meaning of Sections 414(b), (c), (m) or (o) of the IRC, excluding
Purchaser and each other person which would not be an ERISA Affiliate if
Purchaser did not own any issued and outstanding shares of Stock of Company.
"Event of Default" shall have the meaning set forth in Section
7.1 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and all rules and regulations promulgated thereunder.
"Financials" shall mean the financial statements referred to in
Section 4.7(a) hereof.
"Fiscal Year" shall mean the twelve month period ending
December 31, and any change in such fiscal year for which Company provides
notice to Purchaser.
"Fixed Charges" shall mean, with respect to Company for any
period, the aggregate of all consolidated interest expenses paid or accrued,
plus scheduled payments of principal with respect to Indebtedness, in all
cases during such period by Company and its Subsidiaries.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time, except that for
purposes of the financial covenants contained in Section 5.1(h) hereof, GAAP
shall be as in effect on the date of the most recent Financials and shall be
applied in a manner consistent therewith.
"GE Capital" shall have the meaning set forth in the first
paragraph of this Agreement.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, and any agency, department
or other entity
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exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any Indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation, or (d) to
indemnify the owner of such primary obligation against loss in respect
thereof.
"Guaranty" shall mean the Guaranty, dated as of the date
hereof, of each of the Subsidiaries of Company, substantially in the form of
Exhibit F hereto.
"Hazardous Substance" shall have the meaning set forth in
Section 4.10(a) hereof.
"Holder" shall have the meaning assigned to such term in
Section 8.1 hereof.
"Indebtedness" of any Person shall mean (i) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property
or services (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured, but not including obligations to trade
creditors incurred in the ordinary course of business), (ii) all obligations
evidenced by notes, bonds, debentures or similar instruments, (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreements with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement
in the event of default are limited to repossession or sale of such
property), (iv) all Capital Lease Obligations, (v) all Guaranteed
Indebtedness, (vi) all Indebtedness referred to in clause (i), (ii), (iii),
(iv) or (v) above secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien
upon or in property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or
become liable for the payment of such Indebtedness, (vii) all liabilities
under Title IV of ERISA and (viii) any cash "earn-outs" then owing (whether
or not then due and payable) and calculable to be paid by Company or any of
its Subsidiaries.
"Interest Payment Date" shall have the meaning assigned to such
term in Section 2.6(a) hereof.
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"IRC" shall mean the Internal Revenue Code of 1986, as amended,
and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
thereto.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing,
and the filing of, or agreement to give, any financing statement perfecting a
security interest as to assets owned by the relevant Person under the Uniform
Commercial Code or comparable law of any jurisdiction).
"Loan Documents" shall mean this Agreement, the Note, the
Security Agreement, the Pledge Agreement, the Guaranty and all other
agreements, instruments, documents and certificates, including, without
limitation, pledges, powers of attorney, consents, assignments, contracts,
notices, and all other written matter whether heretofore, now or hereafter
executed by or on behalf of Company, and delivered to Purchaser, in its
capacity as a purchaser of the Note hereunder, in connection with this
Agreement or the transactions contemplated hereby.
"Material Adverse Effect" shall mean material adverse effect on
(i) the business, assets, operations, prospects or financial or other
condition of Company and its Subsidiaries, if any, taken as a whole or (ii)
Company's ability to pay the Obligations in accordance with the terms hereof.
"Material Contracts" means (i) all of Company's and its
Subsidiaries' contracts, agreements, leases or other instruments to which
Company or any of its Subsidiaries is a party or by which Company, its
Subsidiaries or its properties are bound, which involve payments by or to
Company or its Subsidiaries of more than $100,000, (ii) all of Company's and
its Subsidiaries' loan agreements, bank lines of credit agreements,
indentures, mortgages, deeds of trust, pledge and security agreements,
factoring agreements, conditional sales contracts, letters of credit or other
debt instruments, (iii) all material operating or capital leases for
equipment to which Company or any of its Subsidiaries is a party, (iv) all
non-competition and similar agreements to which Company is a party, (v) all
contracts for the employment of any officer or employee, (vi) all consulting
agreements, (vii) any guarantees by the Company or any of its Subsidiaries,
(viii) all distributor and sales agency agreements and (ix) all other
material contracts not made in the ordinary course of business.
"Maturity Date" shall have the meaning set forth in Section
2.1(a) hereof.
"Maximum Lawful Rate" shall have the meaning set forth in
Section 2.6(e) hereof.
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"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA, and to which Company, any of its
Subsidiaries or any ERISA Affiliate is making, is obligated to make, has made
or been obligated to make, contributions on behalf of participants who are or
were employed by any of them.
"Net Worth" shall mean, with respect to any Person as of any
date of determination, the book value of the assets of such Person, MINUS (a)
reserves applicable thereto, and MINUS (b) all of such Person's liabilities
on a consolidated basis (including accrued and deferred income taxes), all as
determined in accordance with GAAP.
"Note" shall mean the senior subordinated promissory note of
Company in the principal amount of $10,000,000 to be issued to Purchaser
hereunder, substantially in the form of Exhibit A hereto.
"Obligations" shall mean all amounts owing by Company to
Purchaser and any of its assignees pursuant hereto or the Note, including,
without limitation, all principal, interest, fees, expenses, attorneys' fees
and any other sum chargeable to Company under any of the Loan Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"Pension Plan" shall have the meaning set forth in Section
4.19(a) hereof.
"Permitted Acquisition" shall mean any acquisition by Company
or any of its Subsidiaries of any Person or all or substantially all of the
assets of any Person which is approved by Purchaser or where:
(i) the purchase price (including liabilities assumed)
for such acquisition shall not exceed an amount equal to the EBITDA of
such Person for the 12 month period ending on the last completed month
for which financial statements are available prior to the date of such
acquisition MULTIPLIED BY 5,
(ii) such Person shall be, or the assets acquired from
such Person shall be used in, conducting business solely in the existing
lines of business of Company and its Subsidiaries,
(iii) at or prior to the closing of such acquisition,
Purchaser will be granted a perfected lien, which lien shall be junior to
any liens securing Senior Debt, in all assets acquired pursuant thereto
and, if applicable, in the assets and capital stock of any Person
acquired pursuant thereto, and Company (or the Subsidiary of Company
making such acquisition) and, if applicable, such acquired Person, shall
have executed such documents and taken such actions as may be required in
connection therewith (including, without limitation, in the case of such
acquired Person, executing and becoming a party to the Security Agreement
and the Pledge Agreement), and
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(iv) at or prior to the closing of such acquisition, any
Person that shall become a Subsidiary of Company pursuant to such
acquisition shall have executed and become a party to the Guaranty.
For the purposes of this definition of Permitted Acquisition,
"EBITDA" shall mean, with respect to any Person, the consolidated (and combined,
if applicable) sum of all earnings before interest, taxes, depreciation and
amortization LESS any extraordinary gain, PLUS expenses, calculated and
estimated by such Person and its Subsidiaries in a manner and amount acceptable
to Purchaser in each case, incurred by such Person and its Subsidiaries, if and
to the extent applicable, that reasonably are expected no longer to be incurred
because of operating efficiencies realized as a result of and following each
such entity becoming a Subsidiary of Company.
"Permitted Indebtedness" shall mean, with respect to Company,
(i) taxes or assessments or other governmental charges or levies, either not
yet due and payable or to the extent that nonpayment thereof is permitted by
the terms of this Agreement; (ii) obligations under workmen's compensation,
unemployment insurance, social security or public liability laws or similar
legislation; (iii) bids, tenders, contracts (other than contracts for the
payment of money) or leases to which Company or any of its Subsidiaries is a
party as lessee made in the ordinary course of business; (iv) public or
statutory obligations of Company or any of its Subsidiaries; (v) all deferred
taxes; and (vi) all unfunded pension fund and other employee benefit plan
obligations and liabilities but only to the extent permitted to remain
unfunded under applicable law.
"Permitted Liens" shall mean the following: (i) Liens for
taxes or assessments or other governmental charges or levies, either not yet
due and payable or to the extent that nonpayment thereof is permitted by the
terms of this Agreement; (ii) pledges or deposits securing obligations under
workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation; (iii) pledges or deposits securing
bids, tenders, contracts (other than contracts for the payment of money) or
leases to which Company or any of its Subsidiaries is a party as lessee made
in the ordinary course of business; (iv) Liens arising solely by virtue of
any statutory or common law provision relating to bankers' liens, rights of
set-off or similar rights and remedies as to deposit accounts or other funds
maintained with a creditor depository institution; (v) workers, mechanics,
suppliers, carriers, warehousemen's or other similar liens arising in the
ordinary course of business and securing indebtedness, not yet due and
payable; (vi) deposits securing or in lieu of surety, appeal or customs bonds
in proceedings to which Company or any of its Subsidiaries is a party; (vii)
Liens arising in the ordinary course of business in connection with
obligations that are not overdue or which are being contested in good faith
and by appropriate proceedings, including, but not limited to, Liens under
bid, performance and other surety bonds, appeal bonds, landlord Liens arising
under leases of real property, Liens on advance or progress payments received
from customers under contracts for the sale, lease or license of goods,
software or services and upon the products being sold or licensed, in each
case securing performance of the underlying contract or the repayment of such
advances in the event final acceptance of performance under such contracts
does not occur, and Liens upon
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funds collected temporarily from others pending payment or remittance on
their behalf; and (viii) zoning restrictions, easements, licenses, or other
restrictions on the use of real property or other minor irregularities in
title (including leasehold title) thereto, so long as the same do not
materially impair the use, value, or marketability of such real property,
leases or leasehold estates.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit
corporation, entity or government (whether federal, state, county, city,
municipal or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
"Plan" shall have the meaning set forth in Section 4.19(a)
hereof.
"Pledge Agreement" shall mean the Pledge Agreement, dated as of
the date hereof, between Company and Purchaser, substantially in the form of
Exhibit E hereto.
"PNC Bank" shall mean PNC Bank, National Association, in any
capacity under the PNC Loan Agreement.
"PNC Loan Agreement" shall mean that certain Loan Agreement,
dated August 31, 1998, among PNC Bank, Company and each of its then-existing
Subsidiaries, as amended by that certain Joinder to Loan Documents and
Amendment to Loan Documents (Xxxxxx Construction Inc.) dated as of January 1,
1999, as further amended by that certain Joinder to Loan Documents and
Amendment to Loan Documents (Precision Window Mfg., Inc.) dated as of January
5, 1999, as further amended by that certain Joinder to Loan Documents and
Amendment to Loan Documents (Thermo-Shield) dated as of July 8, 1999, as the
same may be amended, supplemented or modified from time to time.
"PNC Senior Debt" shall mean all loans, advances, debts,
liabilities, obligations, covenants and duties owing by Company or any of its
Subsidiaries to PNC Bank of any kind or nature, present or future, whether or
not evidenced by any note, guaranty or other instrument, arising under the
PNC Loan Agreement or any agreement, instrument or document related thereto,
whether or not for the payment of money, whether arising by reason of an
extension of credit, opening of a letter of credit, loan or guarantee or in
any other manner, whether arising out of overdrafts on deposit or other
accounts or electronic funds transfers (whether through automatic clearing
houses or otherwise) or out of PNC Bank's non-receipt of or inability to
collect funds or otherwise not being made whole in connection with depository
transfer check or other similar arrangements, whether direct or indirect
(including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, and any amendments, extensions, renewals or increases up to an
aggregate amount not to exceed $15,000,000, or such greater amount as is
permitted to be incurred hereunder and all costs and expenses of PNC Bank
incurred in the
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documentation, negotiation, modification, enforcement, collection or
otherwise in connection with any of the foregoing, including but not limited
to reasonable attorneys' fees and expenses.
"Purchaser" shall have the meaning set forth in the first
paragraph of this Agreement.
"Qualified IPO" shall mean a sale of Common Stock pursuant to
an initial public offering of Common Stock on Form S-1 (or any equivalent
general registration form) under the Securities Act (i) at a price of not
less than $6.00 per share of Common Stock, (ii) in which the aggregate
proceeds to Company shall be not less than $15,000,000 and (iii) following
which the Common Stock will be listed on The New York Stock Exchange or The
Nasdaq National Market.
"Required Holders" shall mean Persons who hold at least a
majority of the outstanding principal amount of the Note.
"Restricted Payment" shall mean (i) the declaration of any
dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of Company's
Stock or (ii) any payment on account of the purchase, redemption or other
retirement of Company's Stock or any other payment or distribution made in
respect of any Stock of Company, either directly or indirectly.
"Retiree Welfare Plan" shall refer to any Welfare Plan
providing for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant's termination of
employment, other than continuation coverage provided pursuant to Section
4980B of the IRC and at the sole expense of the participant or the
beneficiary of the participant.
"SEC" shall mean the U.S. Securities and Exchange Commission,
or any successor thereto.
"Securities" shall mean, collectively, the Note and the Warrant.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.
"Security Agreement" shall mean the Security Agreement, dated
the date hereof, among Company, each of the Subsidiaries of Company and
Purchaser, substantially in the form of Exhibit D hereto.
"Senior Debt" shall mean any Indebtedness, other than the PNC
Senior Debt, of Company and its Subsidiaries for money borrowed from any bank
or financial institution other than PNC Bank generally engaged in the
business of lending money, PROVIDED that the incurrence of such Indebtedness
does not result in the occurrence of a Default or Event of Default hereunder.
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"Series C Convertible Preferred Stock" shall mean the Series C
Convertible Preferred Stock, $.001 par value per share, of the Company issued
pursuant to the Certificate of Designation of Series C Convertible Preferred
Stock of the Company filed with the Delaware Secretary of State on April 23,
1999.
"Spill" shall have the meaning set forth in Section 4.10(a)
hereof.
"Stock" shall mean all shares, options, warrants, general or
limited partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity
whether voting or nonvoting, including, without limitation, common stock,
preferred stock, or any other "equity security" (as such term is defined in
Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under
the Exchange Act).
"Subordination Agreement" shall mean that certain Subordination
and Intercreditor Agreement, dated as of the date hereof, by and among
Company and its Subsidiaries, PNC Bank and the Purchaser.
"Subordinated Debt" shall have the meaning set forth in Section
8.1 hereof.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person and/or one or more
Subsidiaries of such Person, and (b) any partnership or other entity in which
such Person and/or one or more Subsidiaries of such Person shall have an
interest (whether in the form of voting or participation in profits or
capital contribution) of more than 50%.
"Taxes" shall have the meaning set forth in Section 2.11(a)
hereof.
"Transaction Documents" shall mean this Agreement, the
Securities, the Security Agreement, the Pledge Agreement and the Guaranty.
"Warrant" shall mean the warrant to purchase initially
1,666,028 shares of Common Stock to be issued to Purchaser hereunder,
substantially in the form of Exhibit B hereto.
"Welfare Plan" shall mean any welfare plan, as defined in
Section 3(1) of ERISA, which is maintained or contributed to by Company, any
of its Subsidiaries or any ERISA Affiliate.
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"Withdrawal Liability" means, at any time, the aggregate amount
of the liabilities, if any, pursuant to Section 4201 of ERISA, and any
increase in contributions pursuant to Section 4243 of ERISA with respect to
all Multiemployer Plans.
"Year 2000 Compliant" shall have the meaning set forth in
Section 4.24(a) hereof.
References to this "Agreement" shall mean this Securities
Purchase Agreement, including all amendments, modifications and supplements
and any exhibits or schedules to any of the foregoing, and shall refer to the
Agreement as the same may be in effect at the time such reference becomes
operative.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such
term in accordance with GAAP, and all financial computations hereunder shall
be computed, unless otherwise specifically provided herein, in accordance
with GAAP consistently applied. That certain terms or computations are
explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole, including the Exhibits and Schedules hereto, as the same may from time
to time be amended, modified or supplemented, and not to any particular
section, subsection or clause contained in this Agreement. Wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, the
feminine and the neuter.
2. PURCHASE OF NOTE AND WARRANT
2.1 PURCHASE OF NOTE AND WARRANT.
(a) Subject to the terms and conditions set forth in this
Agreement, Purchaser agrees to purchase from Company, and Company agrees to
issue and sell to Purchaser, on the Closing Date, the Note for an aggregate
purchase price of $10,000,000, containing the terms set forth herein and in
Exhibit A hereto. The principal amount of the Note shall be $10,000,000, and
the maturity date thereof shall be July 8, 2002 (the "Maturity Date").
(b) Subject to the terms and conditions set forth in this
Agreement, Company agrees to issue to Purchaser, on the Closing Date, the
Warrant, containing the terms set forth hereto in Exhibit B hereto.
2.2 CLOSING; FEES.
(a) The closing of the purchase and sale of the Note and the
issuance of the Warrant (the "Closing") shall take place within five Business
Days after the satisfaction or waiver of the conditions set forth in Section
6 hereof or such date and time
12
as shall be mutually agreed to by the parties hereto (the "Closing Date") at
the offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx, or such other place as shall be mutually agreed to by the parties
hereto.
(b) On the Closing Date, Company will deliver to Purchaser
(i) the Note payable to Purchaser against delivery by Purchaser of the
purchase price therefor by wire transfer of funds to the account of Company
and (ii) the Warrant.
(c) On the Closing Date, Company will pay to Purchaser an
underwriting fee of $200,000 (less any amounts previously paid to Purchaser
in respect of such fee).
2.3 OPTIONAL REDEMPTION. The Note may be redeemed at
Company's option, at any time on or after the date hereof as a whole or from
time to time in part, upon not less than 30 days' written notice to Purchaser
at the following redemption prices (expressed as percentages of principal
amount) if redeemed during the 12-month period beginning July 8 of the years
indicated:
Redemption
Year Price
----
1999.................................... 103%
2000.................................... 102%
2001.................................... 101%
together in the case of any such redemption with accrued and unpaid interest
on the amount being redeemed through the date of redemption.
2.4 MANDATORY REDEMPTION.
(a) On the Maturity Date, Company shall redeem the entire
remaining principal balance of the Note at 100% of the redemption price,
together with accrued and unpaid interest thereon through the date of
redemption.
(b) Upon the occurrence of a Change of Control, Purchaser
may, by written notice to Company within sixty (60) days of the occurrence
thereof, require Company to redeem all or a portion of the Note at the
following redemption prices (expressed as percentages of principal amount) if
redeemed during the 12-month period beginning July 8 of the years indicated:
13
Redemption
Year Price
----
1999................................... 103%
2000................................... 102%
2001................................... 101%
together in the case of any such redemption with accrued and unpaid interest
on the amount being redeemed through the date of redemption. Company shall
give Purchaser written notice of the occurrence of a Change of Control within
ten (10) days after the occurrence thereof.
2.5 USE OF PROCEEDS. Company shall use the proceeds from
the sale of the Note hereunder for (i) the repayment of the amounts set forth
on Schedule 2.5, (ii) Permitted Acquisitions and (iii) investments in Cash
Equivalents.
2.6 INTEREST ON NOTE.
(a) Company shall pay interest to Purchaser, quarterly in
arrears on the last day of each March, June, September and December,
commencing on June 30, 1999 (each, an "Interest Payment Date"), at a rate
equal to 12% per annum, based on a year of 360 days for the actual number of
days elapsed, and based on the amounts outstanding from time to time under
the Note; PROVIDED, HOWEVER, that if Company shall not have consummated a
Qualified IPO on or prior to July 8, 2000, such rate shall be increased to
15% per annum effective as of such date.
(b) If any payment on the Note becomes due and payable on a
day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
(c) So long as any Event of Default shall be continuing, the
interest rate applicable to the Note shall be increased by 2% per annum above
the rate otherwise applicable.
(d) If and so long as Company pays or is required to pay
damages pursuant to Section 2(d) of the Registration Rights Agreement, dated
as of April 23, 1999, among Company, Xxxxx Xxxxxxx Strategic Growth Fund,
Ltd. and Xxxxx Xxxxxxx Strategic Growth Fund, L.P., Company shall pay to
Purchaser additional interest on the Note in an amount per month equal to 2%
of the outstanding principal amount of the Note payable on the last day of
each month.
(e) Notwithstanding anything to the contrary set forth in
this Section 2.6, if at any time until payment in full of the Note, the
interest rate payable thereon exceeds the highest rate of interest
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto (the "Maximum Lawful Rate"), then
in such event and so long as the Maximum Lawful Rate would be so
14
exceeded, the rate of interest payable on the Note shall be equal to the
Maximum Lawful Rate; PROVIDED, HOWEVER, that if at any time thereafter the
interest rate payable thereon is less than the Maximum Lawful Rate, Company
shall continue to pay interest thereunder at the Maximum Lawful Rate until
such time as the total interest received by Purchaser is equal to the total
interest which it would have received had the interest rate on the Note been
(but for the operation of this paragraph) the interest rate payable since the
Closing Date. Thereafter, the interest rate payable shall be the stated
interest rate unless and until such rate again exceeds the Maximum Lawful
Rate, in which event this paragraph shall again apply. In no event shall the
total interest received by Purchaser pursuant to the terms hereof exceed the
amount which it could lawfully have received had the interest due hereunder
been calculated for the full term hereof at the Maximum Lawful Rate. In the
event the Maximum Lawful Rate is calculated pursuant to this paragraph, such
interest shall be calculated at a daily rate equal to the Maximum Lawful Rate
divided by the number of days in the year in which such calculation is made.
In the event that a court of competent jurisdiction, notwithstanding the
provisions of this Section 2.6(e), shall make a final determination that
Purchaser has received interest hereunder or under any of the Loan Documents
in excess of the Maximum Lawful Rate, Purchaser shall, to the extent
permitted by applicable law, promptly apply such excess first to any interest
due and not yet paid under the Note, then to the outstanding principal of the
Note, then to other unpaid Obligations and thereafter shall refund any excess
to Company or as a court of competent jurisdiction may otherwise order.
2.7 RECEIPT OF PAYMENTS. Company shall make each payment
under the Note not later than 2:00 P.M. (New York City time) on the day when
due in lawful money of the United States of America in immediately available
funds to Purchaser's depository bank in the United States as designated by
Purchaser from time to time for deposit in Purchaser's depositary account.
For purposes only of computing interest under the Note, all payments shall be
applied by Purchaser to the Note on the day payment has been credited by
Purchaser's depository bank to Purchaser's account in immediately available
funds.
2.8 APPLICATION OF PAYMENTS. Company irrevocably waives the
right to direct the application of any and all payments at any time or times
hereafter received by Purchaser from or on behalf of Company pursuant to the
terms of this Agreement, and Company irrevocably agrees that Purchaser shall
have the continuing exclusive right to apply any and all such payments
against the then due and payable Obligations of Company and in repayment of
the Note as it may deem advisable. In the absence of a specific
determination by Purchaser with respect thereto, the same shall be applied in
the following order: (i) then due and payable fees and expenses; (ii) then
due and payable interest payments on the Note; and (iii) then due and payable
principal payments on the Note.
2.9 SHARING OF PAYMENTS. If any holder of the Note or a
portion thereof shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise) on account of the
Note held by it in excess of its ratable share of payments on account of the
Notes held by all holders thereof, such holder shall
15
forthwith purchase from each other holder such participations in the Note
held by it as shall be necessary to cause such purchasing holder to share the
excess payment ratably with each other holder; PROVIDED, HOWEVER, that if all
or any portion of such excess payment is thereafter recovered from such
purchasing holder, such purchase shall be rescinded and such holder shall
repay to the purchasing holder the purchase price to the extent of such
recovery together with an amount equal to such holder's ratable share
(according to the proportion of (i) the amount of such holder's required
repayment to (ii) the total amount so recovered from the purchasing holder)
of any interest or other amount paid or payable by the purchasing holder in
respect of the total amount so recovered. Company agrees that any holder so
purchasing a participation from another holder pursuant to this Section 2.9
may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such participation
as fully as if such holder were the direct creditor of Company in the amount
of such participation. Company further agrees to make all payments on the
Note to all holders thereof on a pro rata basis, based on the principal
amount of the Note held by each.
2.10 ACCESS. Purchaser and any of its officers, employees
and/or agents shall have the right, exercisable as frequently as it
determines to be appropriate, during normal business hours, to visit and
inspect the properties and facilities of Company and its Subsidiaries and to
inspect, audit and make extracts from all of Company's and its Subsidiaries'
records, files, corporate books and books of account and to discuss the
affairs, finances and accounts of Company and its Subsidiaries with the
principal officers of Company, all at such reasonable times, upon reasonable
notice and as often as Purchaser may reasonably request. Company shall
deliver any document or instrument reasonably necessary for Purchaser, as it
may request, to obtain records from any service bureau maintaining records
for Company or its Subsidiaries. Company shall instruct its and its
Subsidiaries' banking and other financial institutions to make available to
Purchaser such information and records as it may reasonably request.
2.11 TAXES.
(a) Any and all payments by Company hereunder or under the
Note shall be made, in accordance with this Section 2.11, free and clear of
and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding taxes imposed on or measured by the net income of
Purchaser, by the jurisdiction under the laws of which it is organized or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred
to as "Taxes"). If Company shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder or under the Note to Purchaser,
(i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.12) Purchaser receives an amount equal to
the sum it would have received had no such deductions been made, (ii) Company
shall make such deductions, and (iii) Company shall pay the full amount
deducted to the relevant taxing or other authority in accordance with
applicable law.
16
(b) In addition, Company agrees to pay any present or future
stamp or documentary taxes or any other sales, transfer, exercise, mortgage
recording or property taxes, charges or similar levies that arise from any
payment made hereunder or under the Note or from the execution, sale,
transfer, delivery or registration of, or otherwise with respect to, any of
the Transaction Documents (hereinafter referred to as "Other Taxes").
(c) Company shall indemnify Purchaser for the full amount of
Taxes or Other Taxes (including without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.11) paid
by Purchaser and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. This indemnification shall be made
within 30 days from the date Purchaser makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes,
Company shall furnish to Purchaser the original or a certified copy of a
receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement
of Company hereunder, the agreements and obligations of Company contained in
this Section 2.11 shall survive the payment in full of the Note.
2.12 ORIGINAL ISSUE DISCOUNT. Company and Purchaser hereby
acknowledge and agree that the Warrant is part of an investment unit within
the meaning of Section 1273(c)(2) of the IRC, which includes the Note being
purchased by Purchaser. Notwithstanding anything to the contrary contained
herein, Company and Purchaser hereby further acknowledge and agree that for
United States federal, state and local income tax purposes the "issue price"
of the Warrant and Note under Section 1273(b) of the IRC shall equal
$4,369,000 and $5,631,000, respectively. Company and Purchaser agree to use
the foregoing issue price for all income tax purposes with respect to this
transaction.
3. PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser makes the following representations and warranties to
Company, each and all of which shall survive the execution and delivery of
this Agreement and the Closing hereunder:
3.1 INVESTMENT INTENTION. Purchaser is acquiring the
Securities for its own account, for investment purposes and not with a view
to the distribution thereof. Purchaser will not, directly or indirectly,
offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of
the Securities (or solicit any offers to buy, purchase, or otherwise acquire
any of the Securities), except in compliance with the Securities Act.
3.2 ACCREDITED INVESTOR. Purchaser is an "accredited
investor" (as that term is defined in Rule 501 of Regulation D under the
Securities Act) and by reason of its
17
business and financial experience, it has such knowledge, sophistication and
experience in business and financial matters as to be capable of evaluating
the merits and risks of the prospective investment, is able to bear the
economic risk of such investment and is able to afford a complete loss of
such investment.
3.3 CORPORATE EXISTENCE. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware.
3.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
The execution, delivery and performance by Purchaser of this Agreement and
the other Transaction Documents to be executed by it: (i) are within
Purchaser's corporate power; (ii) have been duly authorized by all necessary
corporate action; (iii) are not in contravention of any provision of
Purchaser's certificate of incorporation or by-laws; and (iv) will not
violate any law or regulation, or any order or decree of any court or
governmental instrumentality binding on Purchaser. This Agreement and the
other Transaction Documents to which Purchaser is a party have each been duly
executed and delivered by Purchaser and constitute the legal, valid and
binding obligations of Purchaser, enforceable against it in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability,
to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
4. COMPANY'S REPRESENTATIONS AND WARRANTIES
Company makes the following representations and warranties to
Purchaser, each and all of which shall survive the execution and delivery of
this Agreement and the Closing hereunder:
4.1 AUTHORIZED AND OUTSTANDING SHARES OF CAPITAL STOCK.
After giving effect to the Closing, the authorized capital stock of Company
consists of 100,000,000 shares of Common Stock, $.001 par value per share, of
which 14,459,726 shares are issued and outstanding, and 50,000,000 shares of
preferred stock, $.001 par value per share, of which 3,386,000 shares are
issued and outstanding. All of such issued and outstanding shares are
validly issued, fully paid and non-assessable. Except as set forth on
Schedule 4.1, (i) there is no existing option, warrant, call, commitment or
other agreement to which Company is a party requiring, and there are no
convertible securities of Company outstanding which upon conversion would
require, the issuance of any additional shares of Stock of Company or other
securities convertible into shares of equity securities of Company, other
than the Warrant, and (ii) there are no agreements to which Company is a
party with respect to the voting or transfer of the Stock of Company, other
than the pledge agreement securing the PNC Senior Debt. Except as set forth
on Schedule 4.1, there are no stockholders' preemptive rights or rights of
first refusal or other similar rights with respect to the issuance of Stock
by Company. True and correct
18
copies of the certificate of incorporation and by-laws of Company have been
delivered to Purchaser.
4.2 AUTHORIZATION AND ISSUANCE OF SECURITIES. The issuance
of the Securities has been duly authorized by all necessary corporate action
on the part of Company and, upon delivery to Purchaser of the Securities
against payment in accordance with the terms hereof, the Securities will have
been validly issued, free and clear of all pledges, liens, encumbrances and
preemptive rights. The issuance of shares of Common Stock upon exercise of
the Warrant has been duly authorized by all necessary corporate action on the
part of Company and, when issued upon exercise of the Warrant, such Common
Stock will have been validly issued and fully paid and non-assessable.
Company has duly reserved 1,666,028 shares of Common Stock for issuance
pursuant to the terms of the Warrant.
4.3 SECURITIES LAWS. In reliance on the investment
representations contained in Sections 3.1 and 3.2, the offer, issuance, sale
and delivery of the Securities, as provided in this Agreement, are exempt
from the registration requirements of the Securities Act and all applicable
state securities laws, and are otherwise in compliance with such laws.
Neither Company nor any Person acting on its behalf has taken or will take
any action (including, without limitation, any offering of any securities of
Company under circumstances which would require the integration of such
offering with the offering of the Securities under the Securities Act and the
rules and regulations of the SEC thereunder) which might subject the
offering, issuance or sale of the Securities, to the registration
requirements of Section 5 of the Securities Act.
4.4 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Company and
each of its Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware in the
case of Company and as set forth on Schedule 4.5 in the case of its
Subsidiaries; (ii) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification (except
for jurisdictions in which such failure to so qualify or to be in good
standing would not have a Material Adverse Effect); (iii) has the requisite
corporate power and authority and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it
operates under lease, and to conduct its business as now being conducted;
(iv) has, or has applied for, all material licenses, permits, consents or
approvals from or by, and has made all material filings with, and has given
all material notices to, all Governmental Authorities having jurisdiction, to
the extent required for such ownership, operation and conduct; (v) is in
compliance with its certificate or articles of incorporation and by-laws; and
(vi) is in compliance with all applicable provisions of law, except for such
non-compliance which would not have a Material Adverse Effect.
4.5 SUBSIDIARIES. There currently exist no Subsidiaries of
Company other than as set forth on Schedule 4.5 hereto, which sets forth such
Subsidiaries, together with their respective jurisdictions of organization,
and the authorized and outstanding capital Stock of each such Subsidiary, by
class and number and percentage of each class
19
owned by Company or a Subsidiary of Company or any other Person. There are
no options, warrants, rights to purchase or similar rights covering capital
Stock for any such Subsidiary.
4.6 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
The execution, delivery and performance by Company and each of its
Subsidiaries of each Transaction Document to which it is a party and each
other instrument and document to be delivered by Company or such Subsidiary,
the issuance and sale of the Note and the consummation of the other
transactions contemplated by any of the foregoing: (i) are within Company's
and each Subsidiary's corporate power and authority; (ii) have been duly
authorized by all necessary or proper corporate action; (iii) are not in
contravention of any provision of the certificate or articles of
incorporation or by-laws of Company or any of its Subsidiaries; (iv) will not
violate any law or regulation, or any order or decree of any court or
governmental instrumentality; (v) will not conflict with or result in the
breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which Company or any of its Subsidiaries is
a party or by which Company, any of its Subsidiaries or any of their property
is bound; (vi) will not result in the creation or imposition of any Lien upon
any of the property of Company or any of its Subsidiaries other than the
Liens created pursuant to the Pledge Agreement and the Security Agreement;
and (vii) do not require the consent or approval of, or any filing with, any
Governmental Authority or any other Person (except (A) for those filings
required by the registration rights provisions of the Warrant and (B) to the
extent previously obtained or made). At or prior to the Closing Date, each
of this Agreement and the other Transaction Documents shall have been duly
executed and delivered by Company and each shall then constitute a legal,
valid and binding obligation of Company, enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
4.7 FINANCIAL STATEMENTS.
(a) The audited consolidated balance sheet of Company and
its Subsidiaries as at December 31, 1998 (the "Balance Sheet"), and the
related consolidated statements of income and cash flows for the year then
ended, with the opinion thereon of Ernst & Young LLP, and the unaudited
consolidated balance sheet of Company and its Subsidiaries as at March 31,
1999 and the related unaudited consolidated statements of income, and cash
flows for the three months then ended, copies of which have previously been
delivered to Purchaser, have been, except as noted therein, prepared in
conformity with GAAP consistently applied throughout the periods involved and
present fairly in all material respects the consolidated financial position
of Company and its Subsidiaries as at the dates thereof, and the consolidated
results of operations and cash flows for the periods then ended, subject, in
the case of the interim financial statements, to normal year-end audit
adjustments.
20
(b) Except as set forth on Schedule 4.7 and other than
regularly scheduled dividends on its outstanding preferred stock, neither
Company nor any of its Subsidiaries has any material obligations, contingent
or otherwise, including, without limitation, liabilities for Charges,
long-term leases or unusual forward or long-term commitments which are not
reflected in the Balance Sheet, other than those incurred since December 31,
1998, in the ordinary course of business.
(c) Except as set forth on Schedule 4.7 and other than
regularly scheduled dividends on its outstanding preferred stock, no
dividends or other distributions have been declared, paid or made upon any
shares of capital Stock of Company, nor have any shares of capital Stock of
Company been redeemed, retired, purchased or otherwise acquired for value by
Company since December 31, 1998.
4.8 OWNERSHIP OF PROPERTY.
(a) Except as set forth on Schedule 4.8(a), neither Company
nor any of its Subsidiaries owns any real estate. Each of Company and its
Subsidiaries has good and marketable and insurable fee simple title to its
owned real property, free and clear of all Liens. Each of Company and its
Subsidiaries has valid and marketable leasehold interests in the leases
described in Schedule 4.8(b) hereto, and, except as set forth on Schedule
4.8(b), good and marketable title to, or valid leasehold interests in, all of
its other properties and assets free and clear of all Liens, except Permitted
Liens and Liens permitted pursuant to Section 5.2(f) hereof.
(b) All real property leased by Company and its Subsidiaries
is set forth on Schedule 4.8(b). Each of such leases is valid and
enforceable in accordance with its terms (subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)) and is in full
force and effect. Company has delivered to Purchaser or has provided
Purchaser access to true and complete copies of each of such leases set forth
on Schedule 4.8(b) and all documents affecting the rights or obligations of
Company or any of its Subsidiaries, including, without limitation, any
non-disturbance and recognition agreements, subordination agreements,
attornment agreements and agreements regarding the term or rental of any of
the leases. Except as set forth on Schedule 4.8(b), none of Company, any of
its Subsidiaries nor, to its knowledge, any other party to any such lease is
in default of its obligations thereunder or has delivered or received any
notice of default under any such lease, nor has any event occurred which,
with the giving of notice, the passage of time or both, would constitute a
default under any such lease.
(c) Except as disclosed on Schedule 4.8(c), neither Company
nor any of its Subsidiaries is obligated under or a party to, any option,
right of first refusal or any other contractual right to purchase, acquire,
sell, assign or dispose of any real property owned or leased by Company or
such Subsidiary.
21
4.9 MATERIAL CONTRACTS; INDEBTEDNESS. Schedule 4.9 contains
a true, correct and complete list and description of all Material Contracts.
Each Material Contract is a valid and binding agreement of Company or its
Subsidiaries (as the case may be) enforceable against Company or such
Subsidiary in accordance with its terms (subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)), and neither
Company nor any of its Subsidiaries has any knowledge that any Material
Contract is not a valid and binding agreement against the other parties
thereto. Company and each of its Subsidiaries has fulfilled all obligations
required pursuant to the Material Contract to have been performed by Company
or such Subsidiary on its part. Except as set forth in Schedule 4.9, neither
Company nor any of its Subsidiaries is in default or breach, nor to Company's
or such Subsidiary's knowledge is any third party in default or breach, under
or with respect to any Material Contract. Except as set forth on Schedule
4.9, neither Company nor any of its Subsidiaries has any Indebtedness except
(i) Permitted Indebtedness and (ii) PNC Senior Debt.
4.10 ENVIRONMENTAL PROTECTION.
(a) Except as set forth on Schedule 4.10, all real property
owned, leased or otherwise operated by Company and its Subsidiaries (each, a
"Facility") is free of contamination from any substance, waste or material
(i) currently identified to be toxic or hazardous pursuant to, or which may
result in liability under, any Environmental Law or (ii) within the
definition of a substance which is toxic or hazardous under any Environmental
Law, including, without limitation, any asbestos, pcb, radioactive substance,
methane, volatile hydrocarbons, industrial solvents, oil or petroleum or
chemical liquids or solids, liquid or gaseous products, or any other material
or substance which has in the past or could at any time in the future cause
or constitute a health, safety, or environmental hazard to any Person or
property or result in any Environmental Liabilities and Costs ("Hazardous
Substance") of more than $100,000 or which, in either case, could have a
Material Adverse Effect. Except as set forth on Schedule 4.10, neither
Company nor any of its Subsidiaries has caused or suffered to occur any
release, spill, migration, leakage, discharge, spillage, uncontrolled loss,
seepage, or filtration of Hazard Substances at or from the Facility (a
"Spill") which could result in Environmental Liabilities and Costs in excess
of $100,000.
(b) Company and each Subsidiary has generated, treated,
stored and disposed of any Hazardous Substances in full compliance with
applicable Environmental Laws, except for such non-compliances which would
not have a Material Adverse Effect.
(c) Company and each Subsidiary has obtained, or has applied
for, and is in full compliance with and in good standing under all permits
required under Environmental Laws (except for such failures which would not
have a Material Adverse
22
Effect) and neither Company nor any of its Subsidiaries has any knowledge of
any proceedings to substantially modify or to revoke any such permit.
(d) Except as set forth on Schedule 4.10, there are no
investigations, proceedings or litigation pending or, to Company's or its
Subsidiaries' knowledge, threatened affecting or against Company, any of its
Subsidiaries or the Facilities relating to Environmental Laws or Hazardous
Substances.
(e) Since December 31, 1998, except for communications in
connection with the matters listed on Schedule 4.10, neither Company nor any
of its Subsidiaries has received any communication or notice (including,
without limitation, requests for information) indicating the potential of
Environmental Liabilities and Costs against Company or its Subsidiaries.
4.11 LABOR MATTERS.
(a) There are no strikes or other labor disputes against
Company or any of its Subsidiaries pending or, to Company's or its
Subsidiaries' knowledge, threatened. Hours worked by and payment made to
employees of Company and its Subsidiaries have not been in violation of the
Fair Labor Standards Act or any other applicable law dealing with such
matters. All payments due from Company and each of its Subsidiaries on
account of employee health and welfare insurance have been paid or accrued as
a liability on the books of Company or such Subsidiary. There is no
organizing activity involving Company or any of its Subsidiaries pending or,
to Company's or its Subsidiaries' knowledge, threatened by any labor union or
group of employees. There are no representation proceedings pending or, to
Company's or its Subsidiaries' knowledge, threatened with the National Labor
Relations Board, and no labor organization or group of employees of Company
or its Subsidiaries has made a pending demand for recognition. There are no
complaints or charges against Company or any of its Subsidiaries pending or,
to Company's or its Subsidiaries' knowledge, threatened to be filed with any
federal, state, local or foreign court, governmental agency or arbitrator
based on, arising out of, in connection with, or otherwise relating to the
employment or termination of employment by Company or any of its Subsidiaries
of any individual.
(b) Except as set forth on Schedule 4.11, neither Company
nor any of its Subsidiaries is, or during the five years preceding the date
hereof was, a party to any labor or collective bargaining agreement and there
are no labor or collective bargaining agreements which pertain to employees
of Company or its Subsidiaries.
4.12 OTHER VENTURES. Except as set forth on Schedule 4.12,
neither Company nor any of its Subsidiaries is engaged in any joint venture
or partnership with any other Person.
4.13 TAXES. Except as set forth on Schedule 4.13, all
federal, state, local and foreign tax returns, reports and statements
required to be filed by Company and
23
its Subsidiaries have been timely filed with the appropriate Governmental
Authority and all such returns, reports and statements are true, correct and
complete in all material respects. All Charges and other impositions due and
payable for the periods covered by such returns, reports and statements have
been paid prior to the date on which any fine, penalty, interest or late
charge may be added thereto for nonpayment thereof, or any such fine,
penalty, interest, late charge or loss has been paid. Proper and accurate
amounts have been withheld by Company and its Subsidiaries from its employees
for all periods in full and complete compliance with the tax, social security
and unemployment withholding provisions of applicable federal, state, local
and foreign law and such withholdings have been timely paid to the respective
governmental agencies. Neither Company nor any of its Subsidiaries has
executed or filed with the IRS or any other Governmental Authority any
agreement or other document extending, or having the effect of extending, the
period for assessment or collection of any Charges. No tax audits or other
administrative or judicial proceedings are pending or threatened with regard
to any Charges for which Company or any Subsidiary may be liable and no
assessment of Charges is proposed against the Company or any Subsidiary.
Neither Company nor any of its Subsidiaries has filed a consent pursuant to
IRC Section 341(f) or agreed to have IRC Section 341(f)(2) apply to any
dispositions of subsection (f) assets (as such term is defined in IRC Section
341(f)(4)). None of the property owned by Company or any of its Subsidiaries
is property which such company is required to treat as being owned by any
other Person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended, and in effect immediately prior to the
enactment of the Tax Reform Act of 1986 or is "tax-exempt use property"
within the meaning of IRC Section 168(h). Neither Company nor any of its
Subsidiaries has agreed or has been requested to make any adjustment under
IRC Section 481(a) by reason of a change in accounting method or otherwise.
Neither Company nor any of its Subsidiaries has any obligation under any
written tax sharing agreement.
4.14 NO LITIGATION. Except as disclosed on Schedule 4.14, no
action, claim or proceeding is now pending or, to the knowledge of Company or
its Subsidiaries, threatened against Company or any of its Subsidiaries, at
law, in equity or otherwise, before any court, board, commission, agency or
instrumentality of any federal, state, or local government or of any agency
or subdivision thereof, or before any arbitrator or panel of arbitrators,
except those which would not reasonably be likely to result in a Material
Adverse Effect.
4.15 BROKERS. Except as set forth on Schedule 4.15, no
broker or finder acting on behalf of Company or any of its Subsidiaries
brought about the consummation of the transactions contemplated pursuant to
this Agreement and neither Company nor any of its Subsidiaries has any
obligation to any Person in respect of any finder's or brokerage fees (or any
similar obligation) in connection with the transactions contemplated by this
Agreement. Company is solely responsible for the payment of all such
finder's or brokerage fees.
24
4.16 EMPLOYMENT AND LABOR AGREEMENTS. Except as set forth on
Schedule 4.16, there are no employment, consulting or management agreements
covering management of Company or any of its Subsidiaries.
4.17 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Company
and each of its Subsidiaries owns all licenses, patents, patent applications,
copyrights, service marks, trademarks and registrations and applications for
registration thereof, and trade names necessary to continue to conduct its
business as heretofore conducted by it and now being conducted by it, each of
which is listed, together with Patent and Trademark Office or Copyright
Office application or registration numbers, where applicable, on Schedule
4.17 hereto. To Company's knowledge, Company and each of its Subsidiaries
conducts its businesses without infringement or claim of infringement of any
license, patent, copyright, service xxxx, trademark, trade name, trade secret
or other intellectual property right of others, except as set forth on
Schedule 4.17 hereto. To Company's knowledge, there is no infringement by
others of any license, patent, copyright, service xxxx, trademark, trade
name, trade secret or other intellectual property right of Company or any of
its Subsidiaries, except as set forth on Schedule 4.17 hereto.
4.18 NO MATERIAL ADVERSE EFFECT. Except as set forth on
Schedule 4.18 or as otherwise disclosed in the March 31, 1999 financial
statements of Company and its Subsidiaries, no event has occurred since
December 31, 1998 which has had or could be reasonably expected to have a
Material Adverse Effect.
4.19 ERISA.
(a) Schedule 4.19 sets forth: (i) all "employee benefit
plans", as defined in Section 3(3) of ERISA, and any other employee benefit
arrangements or payroll practices, including, without limitation, severance
pay, sick leave, vacation pay, salary continuation for disability, consulting
or other compensation agreements, retirement, deferred compensation, bonus,
stock purchase, hospitalization, medical insurance, life insurance and
scholarship programs (the "Plans") maintained by Company and any of its
Subsidiaries or to which Company or any its Subsidiaries contributed or is
obligated to contribute thereunder, and (ii) all "employee pension plans", as
defined in Section 3(2) of ERISA (the "Pension Plans"), maintained by
Company, any of its Subsidiaries or any of its ERISA Affiliates to which
Company, any of its Subsidiaries or any of its ERISA Affiliates contributed
or is obligated to contribute thereunder.
(b) Purchaser will not have (i) any obligation to make any
contribution to any Multiemployer Plan or (ii) any withdrawal liability from
any such Multiemployer Plan under Section 4201 of ERISA which it would not
have had if it had not purchased the Note from Company at the Closing in
accordance with the terms of this Agreement.
(c) The Pension Plans intended to be qualified under Section
401 of the IRC are so qualified and the trusts maintained pursuant thereto
are exempt from federal income taxation under Section 501 of the IRC, and
nothing has occurred with respect to the operation of the Pension Plans which
could cause the loss of such
25
qualification or exemption or the imposition of any liability, penalty, or
tax under ERISA or the IRC.
(d) All contributions required by law or pursuant to the
terms of the Plans (without regard to any waivers granted under Section 412
of the IRC) to any funds or trusts established thereunder or in connection
therewith have been made by the due date thereof (including any valid
extension) and no accumulated funding deficiencies exist in any of the
Pension Plans.
(e) There is no "amount of unfunded benefit liabilities" as
defined in Section 4001(a)(18) of ERISA in any of the respective Pension
Plans. Each of the respective Pension Plans are fully funded in accordance
with the actuarial assumptions used by the PBGC to determine the level of
funding required in the event of the termination of the Pension Plan and all
benefit liabilities do not exceed the assets of such Pension Plans.
(f) There has been no "reportable event" as that term is
defined in Section 4043 of ERISA and the regulations thereunder with respect
to the Pension Plans which would require the giving of notice, or any event
requiring disclosure under Sections 4041(c)(3)(C), 4063(a) or 4068(f) of
ERISA.
(g) There is no material violation of ERISA with respect to
the filing of applicable reports, documents, and notices regarding the Plans
with the Secretary of Labor and the Secretary of the Treasury or the
furnishing of such documents to the participants or beneficiaries of the
Plans.
(h) True, correct and complete copies of the following
documents, with respect to each of the Plans, have been made available or
delivered to Purchaser by Company: (A) any plans and related trust documents,
and amendments thereto, (B) the most recent Forms 5500 (including any
schedules thereto) and the most recent actuarial valuation report, if any,
(C) the last IRS determination letter, (D) summary plan descriptions, (E)
written communications to employees relating to the Plans and (F) written
descriptions of all non-written agreements relating to the Plans.
(i) There are no pending actions, claims or lawsuits which
have been asserted or instituted against the Plans, the assets of any of the
trusts under such Plans or the Plan sponsor or the Plan administrator, or
against any fiduciary of the Plans with respect to the operation of such
Plans (other than routine benefit claims), other than those which would not
reasonably be likely to have a Material Adverse Effect, nor does Company or
any of its Subsidiaries have knowledge of facts which could form the basis
for any such claim or lawsuit.
(j) All amendments and actions required to bring the Plans
into conformity in all material respects with all of the applicable
provisions of ERISA and other applicable laws have been made or taken except
to the extent that such amendments or actions are not required by law to be
made or taken until a date after the Closing Date.
26
(k) The Plans have been maintained, in all material
respects, in accordance with their terms and with all provisions of ERISA
(including rules and regulations thereunder) and other applicable Federal and
state law, and neither Company nor any of its Subsidiaries or "party in
interest" or "disqualified person" with respect to the Plans has engaged in a
"prohibited transaction" within the meaning of Section 4975 of the IRC or
Section 406 of ERISA.
(l) None of Company, any of its Subsidiaries or any ERISA
Affiliate has terminated any Pension Plan, or incurred any outstanding
liability under Section 4062 of ERISA to the PBGC, or to a trustee appointed
under Section 4042 of ERISA.
(m) None of Company, any of its Subsidiaries or any ERISA
Affiliate maintains retired life and retired health insurance plans which are
Welfare Plans and which provide for continuing benefits or coverage for any
participant or any beneficiary of a participant except as may be required
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA") and at the expense of the participant or the participant's
beneficiary. Company, all of its Subsidiaries and all ERISA Affiliates which
maintains a Welfare Plan has complied with the notice and continuation
requirements of COBRA and the regulations thereunder.
(n) None of Company, any of its Subsidiaries or any ERISA
Affiliate has contributed or been obligated to contribute to a Multiemployer
Plan as of the Closing.
(o) None of Company, any of its Subsidiaries or any ERISA
Affiliate has withdrawn in a complete or partial withdrawal from any
Multiemployer Plan prior to the Closing Date, nor has any of them incurred
any liability due to the termination or reorganization of a Multiemployer
Plan.
(p) None of Company, any of its Subsidiaries, any ERISA
Affiliate or any organization to which Company is a successor or parent
corporation, within the meaning of Section 4069(b) of ERISA, has engaged in
any transaction, within the meaning of Section 4069 of ERISA.
4.20 ORDINARY COURSE OF BUSINESS. Except as set forth on
Schedule 4.7 or in response to the events described therein, since December
31, 1998, Company and each of its Subsidiaries has conducted its operations
only in the ordinary course of business consistent with past practice.
4.21 INSURANCE. Schedule 4.21 hereto contains a complete and
correct list of all policies of insurance of any kind or nature covering
Company and its Subsidiaries, including, without limitation, policies of
life, fire, theft, employee fidelity and other casualty and liability
insurance, indicating the type of coverage, name of insured, the insurer, the
premium, the expiration date of each policy and the amount of coverage, and,
except as would not reasonably be likely to result in a Material Adverse
Effect, such policies are in full force and effect. Complete and correct
copies of each
27
such policy have been furnished or made available to Purchaser. Such
policies are in amounts customary for the industry in which Company or such
Subsidiary operates.
4.22 ACCOUNTS RECEIVABLE. All accounts receivable of Company
and its Subsidiaries as shown on the Balance Sheet are collectible in the
ordinary course of business by Company or such Subsidiary, net of the
reserves for bad debts shown on the Balance Sheet, except as would not
reasonably be likely to result in a Material Adverse Effect.
4.23 MINUTE BOOKS. The minute books of Company, as
previously made available to Purchaser, accurately reflect all formal
corporate action of the stockholders and Board of Directors of Company.
4.24 YEAR 2000 COMPLIANCE.
(a) Each system comprised of software, hardware, databases
or embedded control systems (microprocessor controlled or controlled by any
robotic or other device) (collectively, a "System") that constitutes any
material part of, or is used in connection with the use, operation or
enjoyment of, any material tangible or intangible asset or real property of
Company or any of its Subsidiaries will not be materially adversely affected
by the advent of the year 2000, the advent of the twenty-first century or the
transition from the twentieth century through the year 2000 and into the
twenty-first century ("Year 2000 Compliant"). Company has no reason to
believe that it or any of its Subsidiaries may incur material expenses
arising from or relating to the failure of any of their Systems as a result
of the advent of the year 2000, the advent of the twenty-first century or the
transition from the twentieth century through the year 2000 and into the
twenty-first century. Each System of Company and its Subsidiaries is able to
accurately process date data, including, but not limited to, calculating,
comparing and sequencing from, into and between the twentieth century
(through year 1999), the year 2000 and the twenty-first century, including
leap year calculations.
(b) (i) All vendors of products or services to Company or
any of its Subsidiaries, and their respective products, services and
operations, are, to the knowledge of Company, Year 2000 Compliant. To the
knowledge of Company after a reasonably diligent investigation, each such
vendor will continue to furnish its products or services to Company or its
Subsidiaries, as applicable, without interruption or material delay, on and
after January 1, 2000.
(ii) Company and its Subsidiaries have entered into
appropriate agreements with each of its vendors certifying that all hardware,
software or firmware, and any other products and services furnished by such
vendor, including any and all enhancements, upgrades, customizations,
modifications, maintenance and the like, are Year 2000 Compliant, except as
would not reasonably be likely to result in a Material Adverse Effect. All
such vendor agreements include appropriate indemnification by the vendor in
favor of Company or its Subsidiaries, as applicable, and their successors if
that vendor or its products, services or operations fail to be Year 2000
Compliant or if the
28
products, services or operations fail to conform to or meet the terms of the
vendor warranties, representations, or other contractual terms.
4.25 FULL DISCLOSURE. No information contained in this
Agreement, any other Transaction Document, the Financial Statements or any
written statement furnished by or on behalf of Company pursuant to the terms
of this Agreement contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which made.
5. COVENANTS
5.1 AFFIRMATIVE AND FINANCIAL COVENANTS. Company covenants
and agrees that from and after the date hereof (except as otherwise provided
herein, or unless the Required Holders have given their prior written
consent) so long as the Note is outstanding:
(a) BOOKS AND RECORDS. Company shall, and shall cause its
Subsidiaries to, keep adequate records and books of account with respect to
their business activities, in which proper entries, reflecting all of their
financial transactions, are made in accordance with GAAP.
(b) FINANCIAL AND BUSINESS INFORMATION.
(i) MONTHLY INFORMATION. Commencing with the month
ending July 31, 1999, Company will deliver to Purchaser as soon as
practicable after the end of each month, but in any event within 30 days
thereafter: (A) an unaudited consolidated balance sheet of Company and its
Subsidiaries, if any, at the end of such month; (B) unaudited consolidated
statements of income, retained earnings and cash flows of Company and its
Subsidiaries, if any, for such month and for the portion of such year ending
with such month; (C) an acquisition pipeline report; and (D) an Earn-Out
forecast which shall detail all anticipated payments for all Earn-Outs..
(ii) QUARTERLY INFORMATION. Company will deliver to
Purchaser as soon as practicable after the end of each of the first three
quarterly fiscal periods in each Fiscal Year of Company, but in any event
within 45 days thereafter, (A) an unaudited consolidated balance sheet of
Company and its Subsidiaries, if any, as at the end of such quarter; (B)
unaudited consolidated statements of income, retained earnings and cash flows
of Company and its Subsidiaries, if any, for such quarter and (in the case of
the second and third quarters) for the portion of the Fiscal Year ending with
such quarter, setting forth in comparative form in each case the projected
consolidated figures for such period and the actual consolidated figures for
the comparable period of the prior Fiscal Year. Such statements shall be (1)
prepared in accordance with GAAP consistently applied, (2) in reasonable
detail, (3) certified by the principal financial or accounting officer of
Company and (4) accompanied by a statement in reasonable detail, certified by
the Chief Executive Officer or Chief Financial Officer of Company showing
29
the calculations used in determining compliance with each of the financial
covenants set forth in Sections 5.1(h) and 5.2(i); and (C) the pro forma
financial reports of Company and its Subsidiaries for such quarter.
(iii) ANNUAL INFORMATION. Company will deliver to
Purchaser as soon as practicable after the end of each Fiscal Year of
Company, but in any event within 90 days thereafter, (A) an audited
consolidated balance sheet of Company and its Subsidiaries, if any, as at the
end of such year, and (B) audited consolidated statements of income, retained
earnings and cash flows of Company and its Subsidiaries, if any, for such
year; setting forth in each case in comparative form the figures for the
previous year. Such statements shall be (1) prepared in accordance with GAAP
consistently applied, (2) in reasonable detail, (3) certified by Ernst &
Young LLP or such other firm of independent certified public accountants of
recognized national standing selected by Company and reasonably acceptable to
Purchaser and (4) accompanied by a statement in reasonable detail, certified
by the Chief Executive Officer or Chief Financial Officer of Company showing
the calculations used in determining compliance with each of the financial
covenants set forth in Sections 5.1(h) and 5.2(i).
(iv) FILINGS. Company will deliver to Purchaser,
promptly upon their becoming available, one copy of each report, notice or
proxy statement sent by Company to its stockholders generally, and of each
regular or periodic report (pursuant to the Exchange Act) and any
registration statement, prospectus or other writing (other than transmittal
letters) (including, without limitation, by electronic means) pursuant to the
Securities Act filed by Company with (i) the SEC or (ii) any securities
exchange on which shares of Common Stock of Company are listed.
(v) PROJECTIONS; BUDGET. Company will deliver to
Purchaser within 15 days prior to the beginning of each Fiscal Year:
(A) projected consolidated balance sheets of
Company and its Subsidiaries, if any, for such Fiscal Year, on a monthly
basis;
(B) projected consolidated cash flow
statements of Company and its Subsidiaries, if any, including summary details
of cash disbursements, for such Fiscal Year, on a monthly basis;
(C) projected consolidated income statements
of Company and its Subsidiaries, if any, for such Fiscal Year, on a monthly
basis; and
(D) an annual budget for Company and its
Subsidiaries for such Fiscal Year;
in each case, approved by the Board of Directors of Company, together with
appropriate supporting details.
(vi) CUSTOMER COMPLAINTS; OTHER INFORMATION. Company
will promptly notify Purchaser of any material customer complaints concerning
Company's
30
products and services. If requested by any Purchaser, Company will deliver
to such Purchaser such other information respecting Company's or any of its
Subsidiaries' business, financial condition or prospects as such Purchaser
may, from time to time, reasonably request.
(vii) INCURRENCE OF ADDITIONAL INDEBTEDNESS. Company
will promptly, but in no event later than the date of such incurrence, notify
Purchaser of its intention to incur additional Indebtedness other than (i)
Permitted Indebtedness and (ii) Indebtedness assumed, and purchase money
notes issued, in connection with a Permitted Acquisition.
(c) COMMUNICATION WITH ACCOUNTANTS. Company authorizes
Purchaser to communicate directly with its independent certified public
accountants and tax advisors and authorizes those accountants to disclose to
such Purchaser any and all financial statements and other supporting
financial documents and schedules including copies of any management letter
with respect to the business, financial condition and other affairs of
Company and any of its Subsidiaries. At or before the Closing Date, Company
shall deliver a letter addressed to such accountants and tax advisors
instructing them to comply with the provisions of this Section 5.1(c).
(d) TAX COMPLIANCE. Company shall pay all transfer, excise
or similar taxes (not including income or franchise taxes) in connection with
the issuance, sale, delivery or transfer by Company to Purchaser of the Note
and the Common Stock issuable upon conversion thereof, and shall indemnify
and save each Purchaser harmless without limitation as to time against any
and all liabilities with respect to such taxes. Company shall not be
responsible for any taxes in connection with the transfer of the Note or such
Common Stock by the holder thereof. The obligations of Company under this
Section 5.1(d) shall survive the payment, prepayment or redemption of the
Note and the termination of this Agreement until the expiration of the
applicable statutes of limitations.
(e) INSURANCE. Company shall and shall cause each
Subsidiary of Company to maintain insurance covering, without limitation,
fire, theft, burglary, public liability, property damage, product liability,
workers' compensation, directors' and officers' insurance, key-man life
insurance insuring the lives of Xxxxxx Xxxxxxxx and Xxxxxxx Xxxxxxxx, and
insurance on all property and assets material to the operation of the
business, all in amounts customary for the industry. Company shall, and
shall cause each of its Subsidiaries to, pay all insurance premiums payable
by them. Within one hundred twenty (120) days after the date hereof, Company
shall obtain and thereafter Company shall maintain a general liability policy
of at least $10,000,000 covering Company and its Subsidiaries. On or prior
to August 8, 1999, Company shall deliver to Purchaser, in each case in form
and substance satisfactory to Purchaser, evidence that the insurance policies
provided for in Section 4.21 are in full force and effect and endorsements to
all such policies naming Purchaser as additional insured.
31
(f) EMPLOYEE PLANS.
(i) With respect to other than a Multiemployer Plan,
for each Plan and Pension Plan intended to be qualified under Section 401(a)
of the IRC hereafter adopted or maintained by Company, any of its
Subsidiaries or any ERISA Affiliate, Company shall (A) seek, or cause its
Subsidiaries or ERISA Affiliates to seek, and receive determination letters
from the IRS to the effect that such Plan or Pension Plan is qualified within
the meaning of Section 401(a) of the IRC; and (B) from and after the adoption
of any such Plan or Pension Plan, cause such plan to be qualified within the
meaning of Section 401(a) of the IRC and to be administered in all material
respects in accordance with the requirements of ERISA and Section 401(a) of
the IRC.
(ii) With respect to each Welfare Plan hereafter
adopted or maintained by Company, any of its Subsidiaries or any ERISA
Affiliate, to the extent applicable, Company shall comply, or cause its
Subsidiaries or ERISA Affiliates to comply, with the notice and continuation
coverage requirements of Section 4980B of the IRC and the regulations
thereunder.
(iii) Company shall not, directly or indirectly, and
shall not permit its Subsidiaries or any ERISA Affiliate to directly or
indirectly by reason of an amendment or amendments to, or the adoption of,
one or more Pension Plans, permit the present value of all benefit
liabilities, as defined in Title IV of ERISA, (using the actuarial
assumptions utilized by the PBGC upon termination of a plan) to exceed the
fair market value of assets allocable to such benefits by more than $100,000,
or to increase to the extent security must be provided to any Pension Plan
under Section 401(a)(29) of the IRC. Neither Company nor any of its
Subsidiaries shall establish or become obligated to any new Retiree Welfare
Plan, which would result in the present value of future liabilities under any
such plans to exceed $100,000. Neither Company nor any of its Subsidiaries
or ERISA Affiliates shall establish or become obligated to any new unfunded
Pension Plan, which would result in the present value of future liabilities
under any such plans to exceed $100,000. Company shall not directly or
indirectly, and shall not permit its Subsidiaries or any ERISA Affiliate to
(a) satisfy any liability under any Pension Plan by purchasing annuities from
an insurance company or (b) invest the assets of any Pension Plan with an
insurance company, unless, in each case, such insurance company is rated AA
by Standard & Poor's Corporation and the equivalent by each other nationally
recognized rating agency at the time of the investment.
(iv) Company, any of its Subsidiaries and any ERISA
Affiliate shall not contribute or become obligated to contribute to any
Multiemployer Plan.
32
(g) COMPLIANCE WITH LAW. Company shall, and shall cause
each of its Subsidiaries to, comply with all laws, including Environmental
Laws, applicable to it, except where the failure to comply would not be
reasonably likely to result in a Material Adverse Effect.
(h) FINANCIAL COVENANTS.
(i) FUNDED DEBT TO MODIFIED EBITDA. The ratio,
calculated as of the end of each fiscal quarter of Company and its
Subsidiaries beginning September 30, 1999 (each a "Calculation Date"), of the
consolidated (and combined, if applicable) Funded Debt of Company and its
Subsidiaries as of each Calculation Date divided by the consolidated (and
combined, if applicable) Modified EBITDA for Company and its Subsidiaries for
the four (4) fiscal quarters of Company and its Subsidiaries immediately
preceding the applicable Calculation Date shall not be greater than 4.25 to
1.00.
For purposes of this financial covenant, the following terms shall
have the following meaning:
(A) "Base Earnings" shall mean the consolidated (and combined,
if applicable) sum of all earnings before interest, taxes,
depreciation and amortization LESS any extraordinary gain,
PLUS expenses, calculated and estimated by Company and its
Subsidiaries in a manner and amount acceptable to Purchaser
in each case, incurred by Company and its Subsidiaries, if
and to the extent applicable, that reasonably are expected
no longer to be incurred because of operating efficiencies
realized as a result of and following each such entity
having become a Subsidiary of Company ("Non-Recurring
Expenses"), and before giving effect to "corporate income"
(e.g., interest income and similar revenues generated by
cash on hand) of Company and its Subsidiaries and corporate
overhead incurred by Company and its subsidiaries during
the period of calculation.
(B) "EBITDA" shall mean the sum of (i) Base Earnings of Company
and its Subsidiaries PLUS (ii) an amount equal to all
non-cash charges to income incurred by Company and its
Subsidiaries on or before the date of this Agreement in
respect of stock options heretofore issued by Company and
its Subsidiaries ("Stock Option Charges"), not to exceed
(a) $6,120,000 for the Calculation Date occurring on
September 30, 1999, until (but not including) the
Calculation Date occurring on December 31, 1999, (b)
$620,000 for the Calculation Date occurring on December 31,
1999, until (but not including) the Calculation Date
occurring on March 31, 2000 and (c) $0.00 for all
Calculation Dates occurring on and after March 31, 2000.
33
(C) "Funded Debt" shall mean the consolidated (and combined, if
applicable) sum of borrowings pursuant to the PNC Loan
Agreement, plus current (i.e. less than or equal to one (1)
year) and non-current maturities of long term Indebtedness
of each of Company and its Subsidiaries (including but not
limited to any obligations of any of Company or its
Subsidiaries that are (i) determined based on the future
performance of any acquired entity ("Earn-Outs") and (ii)
which Earn-Outs are not paid in full within thirty (30)
days of the date when due and payable (including after any
applicable requirement for notice and an opportunity to
cure expressly provided in the applicable instrument or
document governing such obligation) to any other person or
entity).
(D) "Modified EBITDA" is defined as the EBITDA of the Company
and its Subsidiaries for which the Funded Debt to Modified
EBITDA financial covenant is being calculated, except
without giving effect to the EBITDA of any of Company or
its Subsidiaries (each an "Unaudited Subsidiary") for which
the Purchaser has not received both (x) audited financial
statements in form and detail acceptable to the Purchaser,
as well as (y) other due diligence information concerning
such of Company or its Subsidiaries as Purchaser may
request, in form and substance acceptable to the Purchaser
plus fifty percent (50%) of the EBITDA of each Unaudited
Subsidiary.
(ii) FIXED CHARGE COVERAGE RATIO. The ratio as of
each Calculation Date of the consolidated (and combined, if applicable)
Modified EBITDA LESS the amount of any Earn-Outs (as that term is defined
herein) not financed with the proceeds of loans or other borrowings from any
person or entity ("Unfinanced Earn-Outs"), cash taxes ("Cash Taxes") and
Capital Expenditures of Company and its Subsidiaries not financed with the
proceeds of loans or other borrowings from any person or entity ("Unfinanced
Capital Expenditures"), which Unfinanced Earn-Outs, Cash Taxes and Unfinanced
Capital Expenditures were incurred during the immediately preceding four (4)
fiscal quarters of Company and its Subsidiaries divided by the sum of
consolidated (and combined, if applicable) current maturities of Funded Debt
for Company and its Subsidiaries PLUS any and all dividends paid or accrued
by Company and its Subsidiaries PLUS all Fixed Charges paid or accrued by
Company and its Subsidiaries, shall not be less than 1.25 to 1.00 as of the
Calculation Date occurring on September 30, 1999, and thereafter until (but
not including) the Calculation Date occurring on December 31, 1999; 1.50 to
1.00 as of the Calculation Date occurring on December 31, 1999, and
thereafter until (but not including) the Calculation Date occurring on March
31, 2000; 1.75 to 1.00 as of the Calculation Date occurring on and after
March 31, 2000.
34
(iii) MINIMUM NET WORTH. Company and its Subsidiaries
will maintain during the times specified below a consolidated (and combined,
if applicable) minimum Net Worth as set forth below:
7/8/99 to 7/7/00 $41,000,000
7/8/00 to 7/7/01 $51,000,000
7/8/01 to 7/8/02 $61,000,000
(i) MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS.
Company shall, and shall cause each of its Subsidiaries to: (i) do or cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence, and its rights and franchises; (ii) at all times
maintain, preserve and protect all of its patents, trademarks and trade
names, and preserve all the remainder of its material assets, in use or
useful in the conduct of its business and keep the same in good repair,
working order and condition (taking into consideration ordinary wear and
tear) and from time to time make, or cause to be made, all needful and proper
repairs, renewals and replacements, betterments and improvements thereto
consistent with industry practices; and (iii) continue to conduct business
solely in its existing lines of business and businesses related thereto.
(j) ACCESS. Company shall permit representatives of
Purchaser to visit and inspect any of the properties of Company and its
Subsidiaries, to examine the corporate books and make copies or extracts
therefrom and to discuss the affairs, finances and accounts of Company and
its Subsidiaries with the principal officers of Company, all at such
reasonable times, upon reasonable notice and as often as such Purchaser may
reasonably request.
(k) ACCOUNTING SOFTWARE. On or prior to September 30, 1999,
Company shall complete the implementation of the Great Plains accounting
software for the Company and each of the Subsidiaries and businesses of
Company on the date hereof. Company shall implement such software for any
business or Subsidiary acquired after the date hereof by the later to occur
of (i) September 30, 1999 and (ii) 90 days after the date of such acquisition.
(l) AUDITORS. Company shall use Ernst & Young LLP or any of
the other "Big 5" accounting firms as the independent auditors for Company
and its Subsidiaries.
(m) CERTAIN LOANS. Company agrees that, on or prior to
August 8, 1999, it shall, and shall cause its Subsidiaries to (i) terminate
that certain Promissory Note (Secured) dated January 9, 1999 issued by
Thermo-Shield Company, Inc. and Weather-Guard, Incorporated a/k/a/
Thermo-Shield of America (Wisconsin), Inc. to American National Bank and
Trust Company of Chicago (the "ANB Note") and terminate all security
interests and the related liens granted in connection therewith and (ii) pay
off in full the Indebtedness represented thereby and Company agrees that
until such termination and pay off in full of the ANB Note, the EBITDA of
Thermo-Shield
35
Company, Inc. and Thermo-Shield of America (Wisconsin), Inc. shall not be
included in the calculations of "EBITDA" or "Modified EBITDA" for any
purposes under this Agreement.
5.2 NEGATIVE COVENANTS. Company covenants and agrees that
from and after the date hereof (except as otherwise provided herein, or
unless the Required Holders have given their prior written consent) so long
as the Note is outstanding:
(a) PERMITTED ACQUISITIONS OR INVESTMENTS. Company shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly
in any transaction or related series of transactions, acquire or invest in,
whether for cash, debt, Stock, or other property or assets or by guaranty of
any obligation, any assets or business of any Person other than (i)
acquisitions of assets in the ordinary course of business of Company, (ii)
acquisitions by Company or wholly-owned Subsidiaries of Company from Company
or any such wholly-owned Subsidiary or investments therein, (iii) Permitted
Acquisitions or (iv) investments in Cash Equivalents. Company shall not, and
shall not permit any of its Subsidiaries to, invest in any Person if, after
giving effect thereto, such Person would be an Affiliate, but not a
Subsidiary, of Company.
(b) SALES OF ASSETS; LIQUIDATION. Company shall not, and
shall not permit any Subsidiary of Company to, (i) sell, transfer, convey or
otherwise dispose of any assets or properties or (ii) liquidate, dissolve or
wind up Company, or any of its Subsidiaries, except for transfers to Company,
whether voluntary or involuntary; PROVIDED, HOWEVER, that the foregoing shall
not prohibit (A) the sale of inventory or Key Home Credit financing contracts
in the ordinary course of business, (B) the sale of surplus or obsolete
equipment and fixtures, (C) transfers resulting from any casualty or
condemnation of assets or properties or (D) other sales of assets or
properties the net proceeds of which, in the aggregate, do not exceed
$700,000.
(c) EMPLOYEE LOANS. Company shall not and shall not permit
any Subsidiary to make or accrue any loans or other advances of money to any
employee of Company or any Subsidiary (including advances to any employee in
respect of future commissions to be earned by such employee), other than in
the ordinary course of business in an aggregate amount outstanding not to
exceed one percent (1%) of Pro Forma Revenue as of the end of the last
completed fiscal quarter of Company (each a "Revenue Calculation Date")
commencing with the Revenue Calculation Date occurring on September 30, 1999,
and as calculated from the most recently available consolidated pro forma
financial statements of Company and its Subsidiaries. For purposes of this
Section 5.2(c), "Pro Forma Revenue", as of any Revenue Calculation Date,
shall mean the consolidated sales revenues of Company and its Subsidiaries
for the four fiscal quarters ending on such Revenue Calculation Date,
assuming that any acquisitions during such four quarter period were
consummated on the first day of the four fiscal quarter period ending on such
Revenue Calculation Date; PROVIDED that any advance to an employee shall not
be outstanding for more than ninety (90) days. The restrictions of this
Section 5.2(c) shall not apply until such time as such financial statements
for the fiscal quarter ending September 30, 1999 are available or, if
earlier, November 15, 1999.
36
(d) TRANSACTIONS WITH AFFILIATES. Except as set forth on
Schedule 5.2(d), Company shall not and shall not permit any Subsidiary of
Company to enter into or be a party to any transaction with any Affiliate of
Company or such Subsidiary, except (i) transactions expressly permitted
hereby, (ii) transactions in the ordinary course of and pursuant to the
reasonable requirements of Company's or such Subsidiary's business and upon
fair and reasonable terms that are fully disclosed to Purchaser and are no
less favorable to Company or such Subsidiary than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate of Company
or such Subsidiary, (iii) transactions between Company and its wholly-owned
Subsidiaries or between such Subsidiaries and (iv) payment of compensation to
employees and directors' fees.
(e) INDEBTEDNESS. Company shall not and shall not permit
any Subsidiary of Company to incur or suffer to exist any Indebtedness
except: (i) Indebtedness existing on the date hereof and listed on Schedule
4.9 and refinancings thereof which do not result in the occurrence of a
Default or Event of Default; (ii) Permitted Indebtedness; (iii) other
Indebtedness, provided that the incurrence of such Indebtedness, together
with the Indebtedness referred to in clause (i) above, shall not result in
the occurrence of a breach of Section 5.1(h)(i) or (ii), or any other Default
or Event of Default and at the time of borrowing thereunder no Default or
Event of Default shall have occurred and be continuing; or (iv) Indebtedness
owing by Company to any of its wholly-owned Subsidiaries or by any of
Company's wholly-owned Subsidiaries to any other wholly-owned Subsidiaries or
Company. For the purposes of measuring compliance of Company and its
Subsidiaries with Sections 5.1(h)(i) and (ii) for the purposes of this
Section 5.2(e), (a) such calculation shall be performed on a pro forma basis,
assuming that any additional Indebtedness was incurred on the first day of
the four fiscal quarter period ending on the most recent Calculation Date and
(b) if such calculation is being performed in connection with the incurrence
of Indebtedness other than pursuant to the PNC Loan Agreement, Indebtedness
will be deemed to include at least $15,000,000 of the PNC Senior Debt.
(f) LIENS. Company shall not, and shall not permit any
Subsidiary of Company to, incur or suffer to exist any Liens on any of its
assets, except (i) Liens existing on the date hereof and described on
Schedule 5.2(f), (ii) Permitted Liens, (iii) Liens securing PNC Senior Debt
or Senior Debt permitted hereunder and (iv) Liens granted pursuant to the
Security Agreement and the Pledge Agreement.
(g) RESTRICTED PAYMENTS. Company shall not and shall not
permit any Subsidiary of Company to make any Restricted Payments nor shall
Company permit any Subsidiary to make such payments with respect to Company's
Stock, other than regularly scheduled dividend payments on its presently
outstanding preferred stock (the cash amount of such dividend payments in
respect of Series C Convertible Preferred Stock not to exceed in the
aggregate 7% per annum of the stated liquidation value of such Stock),
PROVIDED that Company shall not make any such Restricted Payment if at the
time of such payment a Default or Event of Default shall have occurred and be
continuing or such payment would result in the occurrence of a Default or
Event of Default.
37
(h) MERGERS AND SUBSIDIARIES. Neither Company nor any
Subsidiaries of Company shall directly or indirectly, by operation of law or
otherwise, merge with, consolidate with, or otherwise combine with any
Person, nor shall Company create any Subsidiary, other than (i) the creation
of wholly-owned Subsidiaries, (ii) mergers of wholly-owned Subsidiaries of
Company into Company or any other of its wholly-owned Subsidiaries or (iii)
Subsidiaries created in connection with or acquired in connection with a
Permitted Acquisition.
(i) CAPITAL EXPENDITURES. Capital Expenditures by Company
and its Subsidiaries shall not exceed, exclusive of the purchase price of any
Permitted Acquisitions during such calendar year, (i) in calendar year 1999,
$1,000,000 and (ii) in any subsequent calendar year, an amount equal to
fifteen percent (15%) of EBITDA for the prior calendar year.
(j) CERTAIN AMENDMENTS. Company shall not amend the terms
of (i) the Series C Convertible Preferred Stock, (ii) any other series of
presently outstanding preferred stock or (iii) Warrant No. W-1, issued by
Company to Xxxxx Xxxxxxx Strategic Growth Fund, Ltd., and Warrant No. W-2,
issued by Company to Xxxxx Xxxxxxx Strategic Growth Fund, L.P, each as
amended (collectively, the "Xxxxx Xxxxxxx Warrants").
6. CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT. The obligation of Purchaser to
purchase the Securities pursuant to Section 2.1 hereof, is subject to the
condition that Purchaser shall have received, on the Closing Date, the
following, each dated the Closing Date unless otherwise indicated, in form
and substance satisfactory to Purchaser:
(a) Favorable opinions of Xxxxxx & Xxxxxxxx, counsel to
Company, substantially in the form attached hereto as Exhibit C, it being
understood that to the extent that such opinion of counsel to Company shall
rely upon any other opinion of counsel, each such other opinion shall be in
form and substance reasonably satisfactory to the Purchaser and shall provide
that Purchaser may rely thereon.
(b) Resolutions of the board of directors of Company and
each of its Subsidiaries, as applicable, certified by the Secretary or
Assistant Secretary of Company or the applicable Subsidiary of Company, as of
the Closing Date, to be duly adopted and in full force and effect on such
date, authorizing (i) the consummation of each of the transactions
contemplated by this Agreement and each other Transaction Document and (ii)
specific officers to execute and deliver this Agreement and each other
Transaction Document to which it is a party.
(c) Governmental certificates, dated the most recent
practicable date prior to the Closing Date, with telegram updates where
available, showing that Company and each of its Subsidiaries is organized and
in good standing in the State of its
38
incorporation and that Company is qualified as a foreign corporation and in
good standing in all other jurisdictions in which it is qualified to transact
business.
(d) A copy of the certificate of incorporation and all
amendments thereto of Company, certified as of a recent date by the Secretary
of State of the State of its incorporation, and copies of by-laws of Company,
certified by the Secretary or Assistant Secretary of such corporation as true
and correct as of the Closing Date.
(e) The letter from Company to its accountants referred to
in Section 5.1(c).
(f) Certificates of the Secretary or an Assistant Secretary
of Company and each of its Subsidiaries, dated the Closing Date, as to the
incumbency and signatures of the officers of Company or any of its
Subsidiaries executing this Agreement, the Securities and each other
Transaction Document to which it is a party and any other certificate or
other document to be delivered pursuant hereto or thereto, together with
evidence of the incumbency of such Secretary or Assistant Secretary.
(g) Certificate of the President of Company, dated the
Closing Date, stating that all of the representations and warranties of
Company contained herein or in the other Transaction Documents are true and
correct in all material respects on and as of the Closing Date as if made on
such date and that no material breach of any covenant contained in Article V
has occurred or would result from the Closing hereunder.
(h) Fully executed copies of each of the Note, the Warrant,
the Security Agreement, the Pledge Agreement and the Guaranty.
(i) The monthly financial information set forth in Section
5.1(b)(i) for Company and its Subsidiaries for the month ending April 30,
1999.
6.2 ADDITIONAL CONDITIONS. The obligation of Purchaser to
purchase the Securities pursuant to Section 2.1 is subject to the additional
conditions precedent that:
(a) Purchaser shall have received evidence that the
insurance policies provided for in Section 4.21 are in full force and effect,
certified by the insurer thereof.
(b) Company shall have paid all reasonable fees and expenses
of (i) GE Capital's outside counsel, Weil, Gotshal & Xxxxxx LLP, (ii) all
special local counsel retained in connection with this Agreement and the
transactions contemplated thereby and (iii) the fees and expenses referred to
in Section 10.2.
(c) Except as disclosed pursuant to Article IV, there shall
not have occurred any event or condition since December 31, 1998 which would
reasonably be likely to result in a Material Adverse Effect.
39
(d) All of the representations and warranties of Company
contained herein or in the other Transaction Documents shall be true and
correct in all material respects on and as of the Closing Date as if made on
such date and no material breach of any covenant contained in Article V shall
have occurred or would result from the Closing hereunder.
(e) The underwriting fee referred to in Section 2.2(c) shall
have been paid in full.
(f) Company shall have filed a Certificate of Amendment to
the Series C Convertible Preferred Stock Certificate of Designation amending
the dividend rate applicable to, and certain redemption rights of, the Series
C Convertible Preferred Stock in form and substance satisfactory to Purchaser.
(g) Company shall have obtained the consent of PNC Bank to
the terms and conditions of this Agreement and the transactions contemplated
hereby and the waiver by the holders of the Series C Convertible Preferred
Stock of certain registration rights, in each case in form and substance
satisfactory to Purchaser.
(h) The Xxxxx Xxxxxxx Warrants shall have been amended with
respect to the exercise of certain redemption rights contained therein, in
form and substance satisfactory to Purchaser.
(i) The Closing shall have occurred no later than July 8,
1999.
7. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
7.1 EVENTS OF DEFAULT. The occurrence of any one or more of
the following events (regardless of the reason therefor) shall constitute an
"Event of Default" hereunder and under the Note:
(a) Company shall fail to make any payment of principal of,
or interest on or any other amount owing in respect of, the Note, or any of
the other Obligations when due and payable or declared due and payable,
including pursuant to Section 2.4 hereof, which, other than principal or
interest, shall have remained unremedied for a period of ten (10) days.
(b) Company shall fail or neglect to perform, keep or
observe any of the provisions of Sections 5.1(h) or 5.2 hereof.
(c) Company shall fail or neglect to perform, keep or
observe any other provision of this Agreement or of any of the other Loan
Documents, and the same shall remain unremedied for a period of thirty (30)
days after Company shall receive written notice of any such failure from
Purchaser.
(d) A default shall occur under any other agreement,
document or instrument to which Company or any Subsidiary is a party or by
which Company or any
40
of its Subsidiaries or any of their property is bound, and such default (i)
involves the failure to make any payment (whether of principal, interest or
otherwise) due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) in respect of any Indebtedness of Company
or any of its Subsidiaries in an aggregate amount exceeding $500,000 or (ii)
causes (or permits any holder of such Indebtedness or a trustee to cause)
such Indebtedness or a portion thereof in an aggregate amount exceeding
$500,000, to become due prior to its stated maturity or prior to its
regularly scheduled dates of payment.
(e) Any representation or warranty herein or in any Loan
Document or in any written statement pursuant thereto or hereto, report,
financial statement or certificate made or delivered to Purchaser by Company
pursuant hereto or thereto shall be untrue or incorrect in any material
respect, as of the date when made.
(f) Any of the assets of Company or any of its Subsidiaries
shall be attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the possession of any receiver, trustee, custodian or
assignee for the benefit of creditors of Company or any of its Subsidiaries
and shall remain unstayed or undismissed for sixty (60) consecutive days; or
Company or any of its Subsidiaries shall have concealed, removed or permitted
to be concealed or removed, any part of its property, with intent to hinder,
delay or defraud its creditors or any of them or made or suffered a transfer
of any of its property or the incurring of an obligation which may be
fraudulent under any bankruptcy, fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced against
Company or any of its Subsidiaries in a court having competent jurisdiction
seeking a decree or order in respect of Company or any of its Subsidiaries
(i) under title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable federal, state or foreign bankruptcy or
other similar law, (ii) appointing a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of Company or any of
its Subsidiaries or of any substantial part of its or their properties, or
(iii) ordering the winding-up or liquidation of the affairs of Company or any
of its Subsidiaries and such case or proceeding shall remain undismissed or
unstayed for sixty (60) consecutive days or such court shall enter a decree
or order granting the relief sought in such case or proceeding.
(h) Company or any of its Subsidiaries shall (i) file a
petition seeking relief under title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of Company or any of
its Subsidiaries or of any substantial part of its properties, (iii) fail
generally to pay its debts as such debts become due, or (iv) take any
corporate action in furtherance of any such action.
41
(i) Final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of $500,000 in
the aggregate shall be rendered against Company or any of its Subsidiaries
and the same shall not be (i) fully covered by insurance, or (ii) vacated,
stayed, bonded, paid or discharged for a period of thirty (30) days.
(j) (i) With respect to any Plan, a prohibited transaction
within the meaning of Section 4975 of the IRC or Section 406 of ERISA occurs
which in the reasonable determination of Purchaser would reasonably be likely
to result in direct or indirect liability to Company or any of its
Subsidiaries, (ii) with respect to any Title IV Plan, the filing of a notice
to voluntarily terminate any such plan in a distress termination, (iii) with
respect to any Multiemployer Plan, Company, any of its Subsidiaries or any
ERISA Affiliate shall incur any Withdrawal Liability, (iv) with respect to
any Pension Plan subject to Section 412 of the Code or Section 302 of ERISA,
Company, any of its Subsidiaries or any ERISA Affiliate shall incur an
accumulated funding deficiency or request a funding waiver from the IRS, or
(v) with respect to any Title IV Plan or Multiemployer Plan which has an
ERISA Event not described in clauses (ii) - (iv) hereof, in the reasonable
determination of Purchaser there is a reasonable likelihood for termination
of any such plan by the PBGC; PROVIDED, HOWEVER, that the events listed in
clauses (i) - (v) hereof shall constitute Events of Default only if the
liability, deficiency or waiver request of Company, any of its Subsidiaries
or any ERISA Affiliate, whether or not assessed, exceeds $500,000 in any case
set forth in (i) - (v) above, or exceeds $500,000 in the aggregate for all
such cases.
7.2 REMEDIES. Subject to the terms and conditions contained
in the Subordination Agreement, if any Event of Default specified in Section
7.1 shall have occurred and be continuing, Purchaser may, without advance
notice, declare all Obligations to be forthwith due and payable, whereupon
all such Obligations shall become and be due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived by Borrower; PROVIDED, HOWEVER, that upon the occurrence of
an Event of Default specified in Section 7.1(f), (g) or (h) hereof, such
Obligations shall become due and payable without declaration, notice or
demand by Purchaser.
Subject to the terms and conditions contained in the
Subordination Agreement, Purchaser may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
or Event of Default as it shall deem advisable in its best interests,
including any action (or the failure to act) pursuant to the Loan Documents.
7.3 WAIVERS BY COMPANY. Except as otherwise provided for in
this Agreement and applicable law, Company waives (i) presentment, demand and
protest and notice of presentment, dishonor notice of intent to accelerate
and notice of acceleration, (ii) all rights to notice and a hearing prior to
Purchaser's taking possession or control of, or to Purchaser's replevy,
attachment or levy upon, the Collateral or any bond or security which might
be required by any court prior to allowing Purchaser to exercise any of its
42
remedies, and (iii) the benefit of all valuation, appraisal and exemption
laws. Company acknowledges that it has been advised by counsel of its choice
with respect to this Agreement, the other Loan Documents and the transactions
evidenced by this Agreement and the other Loan Documents.
7.4 RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, Purchaser is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time
owing by Purchaser to or for the credit or the account of Company against any
and all of the obligations of Company now or hereafter existing under this
Agreement and the Note held by Purchaser irrespective of whether or not
Purchaser shall have made any demand under this Agreement or the Note and
although such obligations may be unmatured. Purchaser agrees promptly to
notify Company after any such set-off and application made by Purchaser;
PROVIDED, HOWEVER, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of Purchaser under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which Purchaser may have.
8. SUBORDINATION
8.1 NOTE SUBORDINATED TO SENIOR DEBT. Company covenants and
agrees, and Purchaser and any other holder of the Note (Purchaser and such
holders being hereinafter referred to collectively as "Holder") by its
acceptance thereof likewise covenants and agrees, that all payments of the
principal of and interest on the Note and all other Obligations of Company
pursuant to this Agreement (collectively the "Subordinated Debt") shall be
subordinated in accordance with the provisions of this Section 8 to the prior
payment in full of all Senior Debt of Company and each Subsidiary of Company.
For purposes of this Section 8, the term "Senior Debt" shall mean the Senior
Debt of Company and each Subsidiary of Company and shall include principal of
and premium, if any, and interest (including interest accruing at the rate
provided for in the documents evidencing such Senior Debt after the
commencement of any proceedings of the type referred to in Section 8.2(a)
hereof, whether or not an allowed claim in such proceeding) on all loans and
other extensions of credit under, and all expenses, fees, reimbursements,
indemnities and other amounts owing pursuant to, the Senior Debt, to the
extent permitted to be incurred pursuant hereto.
8.2 PRIORITY AND PAYMENT OVER OF PROCEEDS IN CERTAIN EVENTS.
(a) SUBORDINATION ON DISSOLUTION, LIQUIDATION OR
REORGANIZATION OF COMPANY. Upon payment or distribution of assets or
securities of Company of any kind or character, whether in cash, property or
securities, upon any dissolution or winding up or total or partial
liquidation or reorganization of Company, whether voluntary or involuntary,
or in bankruptcy, insolvency, receivership or other proceedings or upon an
assignment for the benefit of creditors or any other marshalling of the
assets and liabilities of Company, all Senior Debt shall first be paid in
full in cash, or payment
43
provided for in cash or cash equivalents in a manner satisfactory to the
holders of Senior Debt, before any direct or indirect payments or
distributions, including, without limitation, by exercise of set-off, of any
cash, property or securities on account of principal of (or premium, if any)
or interest on the Note and to that end the holders of Senior Debt shall be
entitled to receive (pro rata on the basis of the respective amounts of
Senior Debt held by them) directly, for application to the payment thereof
(to the extent necessary to pay all Senior Debt in full after giving effect
to any substantially concurrent payment or distribution to or provision for
payment to the holders of such Senior Debt), any payment or distribution of
any kind or character, whether in cash, property or securities, in respect of
the Subordinated Debt, except that the holders of the Note may receive and
retain equity securities of Company or debt securities of Company (or any
Subsidiary of Company party to the Guaranty Agreement) that are subordinated
to Senior Debt (and any debt securities issued in exchange for Senior Debt)
to substantially the same extent as, or to a greater extent than, the Note
and the obligations of each Subsidiary under the Guaranty Agreement are
subordinated to the Senior Debt pursuant to this Section 8. The holders of
Senior Debt are hereby authorized to file an appropriate claim for and on
behalf of the Holders if they or any of them do not file, and there is not
otherwise filed on behalf of the Holders, a proper claim or proof of claim in
the form required in any such proceeding prior to 30 days before the
expiration of the time to file such claim or claims.
(b) SUBORDINATION ON DEFAULT IN SENIOR DEBT. No direct or
indirect payment by or on behalf of Company of principal of (premium, if
any), or interest on, the Subordinated Debt, whether pursuant to the terms of
the Note, upon acceleration or otherwise, shall be made if at the time of
such payment there exists (i) a default in the payment of all or any portion
of principal of (premium, if any), interest on, fees or other amounts owing
in connection with any Senior Debt or (ii) any default other than a default
described in clause (i) above under any document or instrument governing or
evidencing any Senior Debt, and, with respect to this clause (ii), each
Holder has received written notice of such default from a holder or
representative of the holders of Senior Debt, and, in either case, such
default shall not have been cured or waived in writing, PROVIDED, HOWEVER,
that if within the period specified in the next sentence with respect to a
default referred to in clause (ii) above, the holders of Senior Debt have not
declared the Senior Debt to be immediately due and payable (or have declared
such Senior Debt to be immediately due and payable and within such period
have rescinded such acceleration), then and in that event, payment of
principal of, and interest on, the Note shall be resumed. With respect to
any default under clause (ii) above, the period referred to in the preceding
sentence shall commence upon receipt by each Holder of a written notice or
notices (which shall specify all defaults existing under the Senior Debt on
the date of such notice and of which the holder thereof or representative
giving such notice had actual knowledge at such time) of the commencement of
such period from such holder or representative, and shall end at the
completion of the 179th day after the beginning of such period. Only one
such 179 day period may commence within any 360 consecutive days. Upon
termination of any such period, Company shall resume payments on account
44
of the principal of (premium, if any), and interest on, the Note, and on
account of all other Subordinated Debt, subject to the provisions of Sections
8.1 and 8.2 hereof.
(c) RIGHTS AND OBLIGATIONS OF HOLDERS.
(i) In the event that, notwithstanding the foregoing
provision prohibiting such payment or distribution, the Holders shall have
received any payment on account of the Subordinated Debt at a time when such
payment is prohibited by such provision before the Senior Debt is paid in
full, then and in such event, such payment or distribution shall be received
and held in trust by the Holders apart from their other assets and paid over
or delivered to the holders of the Senior Debt remaining unpaid to the extent
necessary to pay in full in cash the principal of (premium, if any), and
interest on, such Senior Debt in accordance with its terms and after giving
effect to any concurrent payment or distribution to the holders of such
Senior Debt.
(ii) Nothing contained in this Section 8 will limit
the right of the Holders of Subordinated Debt to take any action to
accelerate the maturity of the Subordinated Debt pursuant to Section 7.2
hereof, PROVIDED, HOWEVER, that all Senior Debt then due or thereafter
declared to be due shall first be paid in full before the Holders are
entitled to receive any payment from Company of principal of, or interest on,
the Note.
(iii) Upon any payment or distribution of assets or
securities referred to in this Section 8, the Holders shall be entitled to
rely upon any order or decree of a court of competent jurisdiction in which
such dissolution, winding up, liquidation or reorganization proceedings are
pending, and upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making any such payment or
distribution, delivered to the Holders for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of Senior
Debt and other Indebtedness of Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Section 8.
8.3 RIGHTS OF HOLDERS OF SENIOR DEBT NOT TO BE IMPAIRED. No
right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced
or impaired by any act or failure to act by any such holder, or by any
noncompliance by Company with the terms and provisions and covenants herein
regardless of any knowledge thereof such holder may have or otherwise be
charged with.
The provisions of this Section 8 are intended to be for the
benefit of, and shall be enforceable directly by, the holders of the Senior
Debt. Company and each Holder of the Note, by its acceptance thereof,
acknowledges that the holders of the Senior Debt are relying upon the
provisions of this Section 8 in extending such Senior Debt.
8.4 SUBROGATION. Upon the payment in full of all Senior
Debt, the Holders shall be subrogated to the extent of the payments or
distributions made to the
45
holders of, or otherwise applied to payment of, the Senior Debt pursuant to
the provisions of this Section 8 and to the rights of the holders of Senior
Debt to receive payments or distributions of assets of Company made on the
Senior Debt until the Note shall be paid in full; and for the purposes of
such subrogation, no payments or distributions to holders of Senior Debt of
any cash, property or securities to which Holders of the Note would be
entitled except for the provisions of this Section 8 and no payment over
pursuant to the provisions of this Section 8 to holders of Senior Debt by the
Holders, shall, as between Company, its creditors other than holders of
Senior Debt and the Holders, be deemed to be payment by Company to or on
account of Senior Debt, it being understood that the provisions of this
Section 8 are solely for the purpose of defining the relative rights of the
holders of Senior Debt, on the one hand, and the Holders, on the other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Section 8 shall
have been applied, pursuant to the provisions of this Section 8, to the
payment of Senior Debt, then and in such case, the Holders shall be entitled
to receive from the holders of Senior Debt at the time outstanding any
payments or distributions received by such holders of Senior Debt in excess
of the amount sufficient to pay all Senior Debt in full.
8.5 OBLIGATIONS OF COMPANY UNCONDITIONAL. Nothing contained
in this Section 8 or elsewhere in this Agreement or in the Note is intended
to or shall impair, as between Company and the Holders, the obligations of
Company, which are absolute and unconditional, to pay to the Holders the
principal of (premium, if any), and interest on, the Note as and when the
same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders and creditors
of Company other than the holders of the Senior Debt, nor shall anything
herein or therein prevent any Holder from exercising all remedies otherwise
permitted by applicable law upon the occurrence of a Default or Event of
Default under this Agreement, subject to the rights, if any, under this
Section 8 of the holders of Senior Debt in respect of cash, property or
securities of Company received upon the exercise of any such remedy.
The failure to make a payment on account of principal of, or
interest on, the Note by reason of any provision of this Section 8 shall not
be construed as preventing the occurrence of a Default or an Event of Default
hereunder.
8.6 NOTICE TO HOLDERS. Company shall give prompt written
notice to each Holder of any fact known to Company which would prohibit the
making of any payment on or in respect of the Note, but failure to give such
notice shall not affect the subordination of the Subordinated Debt to the
Senior Debt provided in this Section 8. Notwithstanding the provisions of
this Section 8 or any other provision of this Agreement or the Note, no
Holder shall be charged with knowledge of the existence of any facts which
would prohibit the making of any payment to or in respect of the Note, unless
and until the Holders shall have received written notice thereof from Company
or a representative of or holder of Senior Debt, and, prior to the receipt of
any such written notice, subject to the provisions of this Section 8 the
Holders shall be entitled in all respects to assume no such facts exist.
Nothing contained in this Section 8.6 shall limit
46
the right of the holders of Senior Debt to recover payments as contemplated
by 8.1 and 8.2.
8.7 RIGHT OF ANY HOLDER AS HOLDER OF SENIOR DEBT. Any
Holder in its individual capacity shall be entitled to all the rights set
forth in this Section 8 with respect to any Senior Debt which may at any time
be held by it, to the same extent as any other holder of Senior Debt, and
nothing in this Agreement shall deprive such Holder of any of its rights as
such holder.
8.8 REINSTATEMENT. The provisions of this Section 8 shall
continue to be effective or be reinstated, and the Senior Debt shall not be
deemed to be paid in full, as the case may be, if at any time any payment of
any of the Senior Debt is rescinded or must otherwise be returned by the
holder thereof upon the insolvency, bankruptcy or reorganization of the
Company or otherwise, all as though such payment had not been made.
8.9 CONFLICT WITH SUBORDINATION AGREEMENT. In the event of
any conflict between or among the provisions as contained in this Agreement
and the provisions contained in the Subordination Agreement, the provisions
of the Subordination Agreement shall be applicable to the terms of the
subordination of the Obligations to the PNC Senior Debt.
9. INDEMNIFICATION
Company agrees to indemnify and hold harmless Purchaser and its
Affiliates and their respective officers, directors and employees from and
against any losses, liabilities, obligations, damages, penalties, actions,
proceedings, judgments, suits, claims, costs, fees, expenses and
disbursements (including, without limitation, reasonable attorneys' fees and
disbursements, including those incurred by Purchaser on any appeal) of any
kind ("Losses") which may be imposed upon, incurred by or asserted against
Purchaser or such other indemnified Persons as a result of Purchaser having
entered into this Agreement or any of the other Loan Documents or relating to
or arising out of any untrue representation, breach of warranty or failure to
perform any covenants or agreement by Company contained herein or in any
certificate or document delivered pursuant hereto or arising out of any
Environmental Law applicable to Company or its Subsidiaries or otherwise
relating to or arising out of the transactions contemplated hereby; PROVIDED,
HOWEVER, that Company shall not be liable for such indemnification to such
indemnified Person to the extent that any such suit, action, proceeding,
claim, damage, loss, liability or expense results from such indemnified
Person's gross negligence or willful misconduct.
47
10. MISCELLANEOUS
10.1 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT; SALE OF
INTEREST.
(a) The Transaction Documents and the Loan Documents
constitute the complete agreement between the parties with respect to the
subject matter hereof and may not be modified, altered or amended except as
provided therein, or in the case of the Loan Documents by an agreement in
writing signed by Company and Purchaser in accordance with Section 10.1(d)
hereof. Company may not sell, assign or transfer any of the Loan Documents
or any portion thereof, including, without limitation, Company's rights,
title, interests, remedies, powers and duties hereunder or thereunder.
Company hereby consents to Purchaser's sale of participations, assignment,
transfer or other disposition, at any time or times, of any of the Loan
Documents or of any portion thereof or interest therein, including, without
limitation, Purchaser's rights, title, interests, remedies, powers or duties
thereunder, whether evidenced by a writing or not.
(b) In the event Purchaser assigns or otherwise transfers
all or any part of the Note, Company shall, upon the request of Purchaser
issue new Notes to effectuate such assignment or transfer.
(c) Purchaser may sell, assign, transfer or negotiate to one
or more other lenders, commercial banks, insurance companies, other financial
institutions or any other Person acceptable to Purchaser all or a portion of
its rights and obligations under the Note held by Purchaser and this
Agreement; PROVIDED, HOWEVER, that (i) such sale, assignment, transfer or
negotiation does not violate any applicable provision of applicable
securities laws and (ii) acceptance of such assignment by any assignee shall
constitute the agreement of such assignee to be bound by the terms of this
Agreement applicable to Purchaser. From and after the effective date of such
an assignment, (x) the assignees thereunder shall, in addition to the rights
and obligations hereunder held by it immediately prior to such effective
date, have the rights and obligations hereunder that have been assigned to it
pursuant to such assignment and (y) the assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it
pursuant to such assignment, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an assignment and
acceptance covering all or the remaining portion of an assignor's rights and
obligations under this Agreement, such assignor shall cease to be a party
hereto).
(d) No amendment or waiver of any provision of this
Agreement or the Note or any other Loan Document, nor consent to any
departure by Company therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Required Holders, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; PROVIDED, HOWEVER, that no amendment,
waiver or consent shall, unless in writing and signed by each holder of a
Note affected thereby do any of the following: (i) subject such holder to
any additional obligations, (ii) reduce the principal of, or interest on, the
Note or other amounts payable hereunder or release or discharge Company from
its obligations to make such payments,
48
(iii) postpone any date fixed for any payment of principal of, or interest
on, the Note or other amounts payable hereunder, (iv) change the aggregate
unpaid principal amount of the Note, or the number of holders thereof, which
shall be required for such holders or any of them to take any action
hereunder, or (v) amend this Section 10.1(d).
10.2 FEES AND EXPENSES. Company shall pay all reasonable
out-of-pocket expenses of Purchaser in connection with the preparation of the
Transaction Documents and the transactions contemplated thereby, including
all reasonable legal expenses. If, at any time or times, regardless of the
existence of an Event of Default (except with respect to paragraph (iii)
below, which shall be subject to an Event of Default having occurred and be
continuing), Purchaser shall employ counsel or other advisors for advice or
other representation or shall incur reasonable legal or other costs and
expenses in connection with:
(i) any amendment, modification or waiver, or consent
with respect to, any of the Loan Documents or advice in connection with the
administration of the loans made pursuant hereto or its rights hereunder or
thereunder;
(ii) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Purchaser, Company, any
Subsidiary of Company or any other Person) in any way relating to any of the
Loan Documents or any other agreements to be executed or delivered in
connection herewith; or
(iii) any attempt to enforce any rights of Purchaser
against Company, any Subsidiary of Company or any other Person, that may be
obligated to Purchaser by virtue of any of the Loan Documents;
then, and in any such event, the reasonable attorneys' and other parties'
fees arising from such services, including those of any appellate
proceedings, and all expenses, costs, charges and other fees incurred by such
counsel and others in any way or respect arising in connection with or
relating to any of the events or actions described in this Section shall be
payable, on demand, by Company to Purchaser and shall be additional
Obligations under this Agreement and the other Loan Documents. Without
limiting the generality of the foregoing, such expenses, costs, charges and
fees may include: paralegal fees, costs and expenses; accountants' and
investment bankers' fees, costs and expenses; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and
expenses; long distance telephone charges; air express charges; telegram
charges; and expenses for travel, lodging and food paid or incurred in
connection with the performance of such legal services.
10.3 NO WAIVER BY PURCHASER. Purchaser's failure, at any
time or times, to require strict performance by Company of any provision of
this Agreement and any of the other Loan Documents shall not waive, affect or
diminish any right of Purchaser thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by Purchaser of an Event of
Default by Company
49
under the Loan Documents shall not suspend, waive or affect any other Event
of Default by Company under this Agreement and any of the other Loan
Documents whether the same is prior or subsequent thereto and whether of the
same or of a different type. None of the undertakings, agreements,
warranties, covenants and representations of Company contained in this
Agreement or any of the other Loan Documents and no Event of Default by
Company under this Agreement and no defaults by Company under any of the
other Loan Documents shall be deemed to have been suspended or waived by
Purchaser, unless such suspension or waiver is by an instrument in writing
signed by an officer of Purchaser and the Required Holders and directed to
Company specifying such suspension or waiver.
10.4 REMEDIES. Purchaser's rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and
remedies which Purchaser may have under any other agreement, including
without limitation, the Loan Documents, the other Transaction Documents, by
operation of law or otherwise.
10.5 WAIVER OF JURY TRIAL. The parties hereto waive all
right to trial by jury in any action or proceeding to enforce or defend any
rights under the Transaction Documents.
10.6 SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
10.7 BINDING EFFECT; BENEFITS. This Agreement and the other
Transaction Documents shall be binding upon, and inure to the benefit of, the
successors of Company and Purchaser and the assigns, transferees and
endorsees of Purchaser.
10.8 CONFLICT OF TERMS. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of
the other Loan Documents, the provision contained in this Agreement shall
govern and control.
10.9 GOVERNING LAW. Except as otherwise expressly provided
in any of the Transaction Documents, in all respects, including all matters
of construction, validity and performance, this Agreement and the Obligations
arising hereunder shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York applicable to contracts
made and performed in such state, without regard to the principles thereof
regarding conflict of laws, and any applicable laws of the United States of
America. Purchaser and Company agree to submit to personal jurisdiction and
to waive any objection as to venue in the federal or New York State courts
located in the County of New York, State of New York. Service of process on
Purchaser or Company in any action arising out of or relating to any of the
Transaction Documents shall be effective if
50
mailed to such party at the address listed in Section 10.10 hereof. Nothing
herein shall preclude Purchaser or Company from bringing suit or taking other
legal action in any other jurisdiction.
10.10 NOTICES. Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon
any of the parties by another, or whenever any of the parties desires to give
or serve upon another any such communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person
with receipt acknowledged or by registered or certified mail, return receipt
requested, postage prepaid, or by telecopy and confirmed by telecopy
answerback addressed as follows:
If to Company:
ThermoView Industries, Inc.
0000 Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, Chief Executive Officer
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxxxx, Xx. (Xxxx)
Telecopy Number: (000) 000-0000
If to Purchaser:
GE Capital Equity Investments, Inc.
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: GE Equity Group-ThermoView
Telecopy Number: (000) 000-0000
with copies to:
General Electric Capital Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: GE Equity Group Legal Counsel
Telecopy Number: (000) 000-0000
51
and
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxx X. Xxxxxxx, Esq.
Telecopy Number: (000) 000-0000
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration or other communication hereunder
shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, telecopied and confirmed by
telecopy answerback, or three (3) Business Days after the same shall have
been deposited with the United States mail. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or
other communication to the Persons designated above to receive copies shall
in no way adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration or other communication.
10.11 SURVIVAL. The representations and warranties of Company
in this Agreement shall survive the execution, delivery and acceptance hereof
by the parties hereto and the closing of the transactions described herein or
related hereto.
10.12 SECTION AND OTHER HEADINGS. The section and other
headings contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
10.13 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
10.14 BOARD OF DIRECTORS; OBSERVER. For so long as Purchaser
or any of its Affiliates shall continue to hold all or any portion of the
Note or the Warrant, Company shall use its best efforts to cause a designee
of Purchaser to be elected to the Board of Directors of Company; PROVIDED,
HOWEVER, that if Purchaser shall elect not to designate a member of the Board
of Directors, then Purchaser may designate one individual (the "Observer") to
attend all meetings of the Board of Directors of Company (and any committees
thereof) in a non-voting observer capacity. The Observer shall be entitled
to receive all reports, presentations and materials as if the Observer were a
member of the Board. Company shall reimburse such member of the Board of
Directors and the Observer for any reasonable expenses incurred in connection
with meetings of the Board of Directors and committees thereof.
10.15 PUBLICITY. Neither Purchaser nor Company shall issue
any press release or make any public disclosure regarding the transactions
contemplated hereby unless such press release or public disclosure is
approved by the other party in advance.
52
Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with the SEC or other regulatory bodies, make such
statements with respect to the transactions contemplated hereby as each may
be advised by counsel is legally necessary or advisable, and may make such
disclosure as it is advised by its counsel is required by law, subject to
advance consultation with Purchaser.
IN WITNESS WHEREOF, Company and Purchaser have executed this
Agreement as of the day and year first above written.
COMPANY:
THERMOVIEW INDUSTRIES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
PURCHASER:
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
53
