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EXHIBIT 10.4
SECURITIES PURCHASE AGREEMENT
AMONG
STRATFORD CAPITAL PARTNERS, L.P.,
STRATFORD EQUITY PARTNERS, L.P.
AND
CLEAR HOLDINGS, INC.
NOVEMBER 1, 1999
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ARTICLE I
TERMS DEFINED..................................................................................................1
SECTION 1.1 Definitions.....................................................................................1
SECTION 1.2 Accounting Terms and Determinations............................................................13
SECTION 1.3 Gender and Number..............................................................................13
SECTION 1.4 References to Agreement........................................................................13
ARTICLE II
PURCHASE AND SALE OF SECURITIES...............................................................................14
SECTION 2.1 Purchase and Sale..............................................................................14
SECTION 2.2 Closing........................................................................................14
SECTION 2.3 Delivery.......................................................................................14
SECTION 2.4 Payment........................................................................................14
ARTICLE III
CERTAIN TERMS APPLICABLE TO WARRANTS..........................................................................15
SECTION 3.1 Exercise of Warrants...........................................................................15
SECTION 3.2 Adjustment of Number of Warrant Shares Purchasable.............................................15
SECTION 3.3 Notices to Warrant Holders.....................................................................18
SECTION 3.4 Put Rights.....................................................................................19
SECTION 3.5 Reservation and Issuance of Warrant Shares.....................................................20
ARTICLE IV
TRANSFER OF SECURITIES........................................................................................20
SECTION 4.1 Restrictions on Transfer.......................................................................20
SECTION 4.2 Registration, Transfer and Exchange of Warrants................................................21
SECTION 4.3 Mutilated or Missing Warrant Certificates......................................................21
ARTICLE V
CONDITIONS....................................................................................................22
SECTION 5.1 Conditions Precedent to Closing................................................................22
(a) Closing Deliveries ............................................................................22
(b) Acquisitions...................................................................................23
(c) Wachovia Senior Credit Agreement...............................................................23
(d) ACS Note Purchase Agreement....................................................................23
(e) Legal Matters..................................................................................23
(f) Absence of Default ............................................................................23
(g) Representations and Warranties.................................................................23
(h) No Material Adverse Change.....................................................................23
(i) Payment of Expenses ...........................................................................23
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES................................................................................24
SECTION 6.1 Corporate Existence and Power..................................................................24
SECTION 6.2 Corporate and Governmental Authorization; Contravention........................................24
SECTION 6.3 Binding Effect.................................................................................24
SECTION 6.4 Capitalization.................................................................................24
SECTION 6.5 Issuance of Securities.........................................................................25
SECTION 6.6 Financial Information..........................................................................25
SECTION 6.7 Material Agreements............................................................................26
SECTION 6.8 Ancillary Agreements...........................................................................26
SECTION 6.9 Investments....................................................................................26
SECTION 6.10. Outstanding Debt...............................................................................26
SECTION 6.11. Transactions with Affiliates...................................................................26
SECTION 6.12. Employment Matters.............................................................................26
SECTION 6.13. Operating Leases...............................................................................27
SECTION 6.14. Litigation.....................................................................................27
SECTION 6.15. ERISA..........................................................................................27
SECTION 6.16. Taxes and Filing of Tax Returns................................................................28
SECTION 6.17. Ownership of Properties; Liens.................................................................28
SECTION 6.18. Licenses, Permits, Etc.........................................................................28
SECTION 6.19. Proprietary Rights.............................................................................28
SECTION 6.20. Compliance with Law ...........................................................................28
SECTION 6.21. Environmental Matters..........................................................................29
SECTION 6.22. Burdensome Obligations.........................................................................29
SECTION 6.23. Fiscal Year....................................................................................29
SECTION 6.24. No Default.....................................................................................29
SECTION 6.25. Insurance......................................................................................29
SECTION 6.26. Government Regulation..........................................................................29
SECTION 6.27. Casualties.....................................................................................29
SECTION 6.28. Investment Company Act.........................................................................30
SECTION 6.29. Securities Laws................................................................................30
SECTION 6.30. Brokers and Finders............................................................................30
SECTION 6.31. Full Disclosure................................................................................30
SECTION 6.32. Small Business Concern.........................................................................30
SECTION 6.33. Year 2000......................................................................................30
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS...............................................................31
SECTION 7.1 Due Authorization; No Conflicts................................................................31
SECTION 7.2 Securities Representations.....................................................................31
(a) No Intended Distribution ......................................................................31
(b) Accredited Investor ...........................................................................31
(c) Investment Experience..........................................................................31
(d) Access to Books and Records; Opportunity to Ask Questions......................................31
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ARTICLE VIII
AFFIRMATIVE COVENANTS..........................................................................................32
SECTION 8.1. Information..................................................................................32
(a) Annual Statements .........................................................................32
(b) Monthly Statements .........................................................................32
(c) Financial Officer's Certificate..............................................................32
(d) Budget ......................................................................................33
(e) Accountant's Letters.........................................................................33
(f) Defaults ....................................................................................33
(g) Shareholder Information......................................................................33
(h) SEC Reports .................................................................................33
(i) Litigation ..................................................................................33
(j) Other Information ...........................................................................33
SECTION 8.2. Right of Inspection..........................................................................33
SECTION 8.3. Maintenance of Insurance.....................................................................34
SECTION 8.4. Payment of Taxes and Claims..................................................................34
SECTION 8.5. Compliance with Laws and Documents...........................................................34
SECTION 8.6. Operation of Properties and Equipment........................................................34
SECTION 8.7. Additional Documents.........................................................................34
SECTION 8.8. ERISA........................................................................................34
SECTION 8.9. Election as Director; Directors Meetings; Representation.....................................35
SECTION 8.10 Maintenance of Books and Records.............................................................35
SECTION 8.11 Environmental Matters........................................................................35
SECTION 8.12 Additional Subscription Rights...............................................................36
SECTION 8.13 Year 2000....................................................................................36
SECTION 8.14 Unlocking Right..............................................................................36
ARTICLE IX
NEGATIVE COVENANTS.............................................................................................37
SECTION 9.1. Distributions................................................................................37
SECTION 9.2. Business of the Company......................................................................37
SECTION 9.3. Liens........................................................................................37
SECTION 9.4. Incurrence of Debt and Guarantees............................................................37
SECTION 9.5. Modification of Capitalization Documents.....................................................37
SECTION 9.6. Consolidations, Mergers, Sales of Assets, and Maintenance....................................37
SECTION 9.7. Use of Proceeds..............................................................................38
SECTION 9.8. Investments..................................................................................38
SECTION 9.9. Transactions with Affiliates.................................................................38
SECTION 9.10. ERISA........................................................................................38
SECTION 9.11. Fiscal Year..................................................................................38
SECTION 9.12. Capital Expenditures.........................................................................38
SECTION 9.13. Lease Obligations............................................................................38
SECTION 9.14. Executive Compensation.......................................................................38
SECTION 9.15. Acquisitions.................................................................................38
SECTION 9.16. Equity Issuances.............................................................................38
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ARTICLE X
DEFAULTS......................................................................................................39
SECTION 10.1. Events of Default.............................................................................39
ARTICLE XII
MISCELLANEOUS.................................................................................................40
SECTION 11.1. Notices.......................................................................................40
SECTION 11.2. No Waivers....................................................................................40
SECTION 11.3. Expenses; Indemnification.....................................................................40
SECTION 11.4. Amendments and Waivers; Sale of Interest......................................................41
SECTION 11.5. Survival......................................................................................41
SECTION 11.6. Invalid Provisions............................................................................41
SECTION 11.7. Successors and Assigns........................................................................42
SECTION 11.8. GOVERNING LAW.................................................................................42
SECTION 11.9. Counterparts; Effectiveness...................................................................42
SECTION 11.10. No Third Party Beneficiaries..................................................................42
SECTION 11.11. FINAL AGREEMENT...............................................................................42
SECTION 11.12. SUBMISSION TO JURISDICTION; WAIVER OF SERVICE AND
VENUE.........................................................................................42
SECTION 11.13. WAIVER OF RIGHT TO TRIAL BY JURY..............................................................42
SECTION 11.14. Issue Price...................................................................................43
Exhibits
Exhibit A Form of Put Note
Exhibit B Form of Certificate of Designation
Exhibit C Form of Warrant Certificate
Schedules
Schedule 1.1(a) Permitted Debt
Schedule 1.1(b) Pro Forma Opening Balance Sheet
Schedule 6.1 Jurisdictions
Schedule 6.4 Capitalization
Schedule 6.6(c) Past Due Trade Payables
Schedule 6.6(d) Projections
Schedule 6.6(f) Exceptions to GAAP
Schedule 6.6(g) Projections
Schedule 6.7 Material Agreements
Schedule 6.10 Outstanding Debt
Schedule 6.11 Transactions with Affiliates
Schedule 6.12 Employment Matters
Schedule 6.13 Operating Leases
Schedule 6.14 Litigation
Schedule 6.15 ERISA
Schedule 6.17 Ownership of Properties
Schedule 6.25 Insurance
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Schedule 6.30 Brokers and Finders
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is entered into effective this 1st
day of November, 1999, by and among Stratford Capital Partners, L.P., a Texas
limited partnership and a federal licensee under the Small Business Investment
Act of 1958 ("Stratford Capital"), Stratford Equity Partners, L.P., a Texas
limited partnership and a federal licensee under the Small Business Investment
Act of 1958 ("Stratford Equity", and together with Stratford Capital, the
"Investors"), and Clear Holdings, Inc., a Georgia corporation (the "the
Company").
W I T N E S S E T H:
WHEREAS, the Company has authorized and desires to issue and sell to
the Investors hereunder (a) certain shares of the Company's Series D Senior
Redeemable Preferred Stock, no par value, and (b) certain Common Stock Purchase
Warrants;
WHEREAS, the Investors desire to purchase such Series D Senior
Redeemable Preferred Stock and Common Stock Purchase Warrants from the Company
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
TERMS DEFINED
SECTION 1.1. Definitions. The following terms, as used herein, have the
following meanings:
"Acceptance Notice" has the meaning given such term in Section 8.14
hereof.
"ACS" means American Capital Strategies, Ltd.
"ACS Note Purchase Agreement" means that certain Note and Equity
Purchase Agreement dated as of November 1, 1999, by and between the Company,
Clear Operating, certain of their Subsidiaries and ACS.
"ACS Subordinate Debt" means all Debt (including interest and fees
thereon) of Clear Operating outstanding under the ACS Note Purchase Agreement,
including all renewals and extensions thereof; provided, however, the
outstanding principal amount of ACS Subordinate Debt shall not at any time
exceed $19,250,000.
"ACS Subordinate Debt Documents" means the ACS Note Purchase Agreement
and all promissory notes, security agreements, mortgages, deeds of trust,
assignments, guarantees and other documents, instruments and agreements executed
and delivered pursuant to the ACS Note Purchase Agreement evidencing, securing,
guaranteeing or otherwise pertaining to the ACS Subordinate Debt and other
obligations arising under the ACS Note Purchase Agreement, as the foregoing may
be amended, renewed, extended, supplemented, increased or otherwise modified
from time to time to the extent permitted hereunder.
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"Affiliate" means, as to any Person, any Subsidiary of such Person, or
any other Person which, directly or indirectly, controls, is controlled by, or
is under common control with, such Person and, with respect to the Company, any
executive officer of any Subsidiary or any Person who holds ten percent (10%) or
more of the voting stock of any member of the Company. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or partnership interests, or
by contract or otherwise. Neither Investor shall be an Affiliate of the Company
for purposes of this Agreement or the other Transaction Documents.
"Agreement" means this Securities Purchase Agreement.
"Authorized Officer" means, as to any Person, its Chairman, its Chief
Executive Officer, its President, its Chief Operating Officer, its Financial
Officer and any Vice President elected by the board of directors.
"Ancillary Agreements" means (a) the MTG Acquisition Documents, (b) the
TWR Acquisition Documents, (c) the ACS Subordinate Debt Documents and (d) the
Wachovia Senior Debt Documents.
"Appraised Value" means the Fair Market Value of the Common Stock
determined in accordance with the following procedures. For a period of thirty
(30) days after the delivery of a Put Notice (the "Negotiation Period"), each
party to this Agreement agrees to negotiate in good faith to reach agreement
upon the Fair Market Value of the Common Stock. In the event that the parties
are unable to agree upon the Appraised Value of the Common Stock by the end of
the Negotiation Period, then the Appraised Value of such Common Stock will be
determined for purposes of this Agreement by any of (x) Houlihan, Lokey, Xxxxxx
& Xxxxx, (y) Xxxx & Xxxxxx or (z) Willamette Management Associates, or any
successor to such firms, as the Company shall elect (the "Appraiser") to
determine the fair market value of such Common Stock on a Control Basis. Such
Appraiser shall be directed to determine Fair Market Value of such securities or
property as soon as practicable, but in no event later than thirty (30) days
from the date of its selection. The determination by an Appraiser of the Fair
Market Value will be conclusive and binding on all parties to this Agreement.
The costs of the Appraiser will be borne by the Company. In no event will the
Appraised Value of the Common Stock be less than the per share consideration
received or receivable with respect to the Common Stock in connection with a
pending transaction involving a sale, merger, recapitalization, reorganization,
consolidation, or share exchange, dissolution of the Company, sale or transfer
of all or a majority of its assets or revenue or income generating capacity, or
similar transaction. The prevailing market prices for the Common Stock will not
be dispositive of the Appraised Value thereof.
"Appraiser" has the meaning given such term in the definition of
Appraised Value.
"Business Day" means any day except a Saturday, Sunday or other day on
which national banks in Dallas, Texas are authorized by law to close.
"Capital Expenditure" means any expenditure by a Person for an asset
which will be used in a year or years subsequent to the year in which the
expenditure is made and which asset is properly classified in relevant financial
statements of such Person as equipment, real property or improvements, fixed
assets, or a similar type of capitalized asset in accordance with GAAP.
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"Capital Lease" means, for any Person as of any date, any lease of
property, real or personal, which would be capitalized on a balance sheet of the
lessee prepared as of such date in accordance with GAAP.
"Change of Control" means the occurrence of any of the following:
(a) any transaction or series of related transactions
resulting in the sale or issuance of securities or any rights to
acquire securities of the Company representing in the aggregate more
than 50% of the issued and outstanding equity securities on a fully
diluted basis, or any transaction or series of related transactions
resulting in the sale, transfer, assignment or other conveyance or
disposition of any securities or any rights to securities of the
Company by any holder or holders thereof representing in the aggregate
more than 50% of the issued and outstanding Common Stock on a Fully
Diluted Basis and the receipt of any consideration in connection
therewith;
(b) a merger, consolidation, reorganization, recapitalization
or share exchange in which the shareholders of the Company immediately
prior to such transaction receive, in exchange for securities of the
Company owned by them, cash, property or securities of the resulting or
surviving entity and as a result thereof the shareholders prior to such
transaction holding less than fifty percent (50%) of the voting
securities, calculated on a Fully Diluted Basis, of the resulting
Persons entitled to vote in the election of directors, managers or
similar functions;
(c) a sale, transfer or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries, on
a consolidated basis;
(d) any sale or issuance or series of sales or issuances of
Common Stock or any other voting security (or security convertible
into, exchangeable for, or exercisable for any other voting security)
of the Company within a 12-month period that results in a transfer of
more than 50% of the issued and outstanding Common Stock or a transfer
of more than 50% of the voting power of the Company;
(e) a Qualified Public Offering; and
(f) any member of Key Management shall cease to be employed by
the Company in the official capacity in which they serve as of the
Closing Date or shall cease to devote substantially all their time to
the business of the Company, unless a suitable replacement for such
departed member of Key Management is identified and elected by the
board of directors of the Company within the applicable Replacement
Time.
"Charter Documents" means, with respect to any Person, its certificate
of incorporation, articles of incorporation, bylaws, partnership agreement,
regulations, operating agreement and all other comparable charter documents.
"Clear Operating" means Clear Communications Group, Inc., a Georgia
corporation.
"Closing" has the meaning given such term in Section 2.2 hereof.
"Closing Date" means November 1, 1999.
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"Closing Price" means (a) if the primary market for the security in
question is a national securities exchange registered under the Exchange Act,
the National Association of Securities Dealers Automated Quotation
System--National Market System, or other market or quotation system in which
last sale transactions are reported on a contemporaneous basis, the last
reported sales price, regular way, of such security for such day, or, if there
has not been a sale on such trading day, the highest closing or last bid
quotation therefor on such trading day (excluding, in any case, any price that
is not the result of bona fide arm's length trading); or (b) if the primary
market for such security is not an exchange or quotation system in which last
sale transactions are contemporaneously reported, the highest closing or last
bona fide bid quotation by disinterested Persons in the over-the-counter market
on such trading day as reported by the National Association of Securities
Dealers through its Automated Quotation System or its successor or such other
generally accepted source of publicly reported bid quotations.
"Closing Transactions" means the transactions which will occur on the
Closing Date pursuant to (a) the Ancillary Agreements and (b) the Transaction
Documents.
"COBRA" has the meaning given such term in Section 6.15 hereof.
"Commission" means the Securities and Exchange Commission or any entity
succeeding to any or all of its functions under the Securities Act or the
Exchange Act.
"Common Stock" means the Company's common stock, par value $.0001 per
share.
"Company" has the meaning given such term in the preamble hereto.
"Consolidated Subsidiary" or "Consolidated Subsidiaries" means, for any
Person, any Subsidiary or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
as of such date in accordance with GAAP.
"Control Basis" means the valuation of the Common Stock by determining
on an aggregate basis the fair market value of all Common Stock on the basis of
the Common Stock being sold in the aggregate to a third party buyer in an arm's
length transaction with conveyance of control, without discount for minority
interests, illiquidity or restrictions on transfer, and then dividing such
amount by the number of all securities of such type on a Fully Diluted Basis.
"Debt" means, for any Person, without duplication, (a) all obligations
of such Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (c) all indebtedness
of such Person on which interest charges are customarily paid or accrued, (d)
all Guarantees by such Person, (e) the unfunded or unreimbursed portion of all
letters of credit issued for the account of such Person, (f) the present value
(discounted at the implicit rate, if known, or eight percent (8%) per annum
otherwise) of all obligations in respect of Capital Leases of such Person, (g)
any obligation of such Person representing the deferred purchase price of
property or services purchased by such Person other than trade payables incurred
in the ordinary course of business and which are not more than one hundred and
twenty (120) days past invoice date unless being contested in good faith and
adequate reserves have been set up by the Company or its Subsidiaries, and (h)
all liability of such Person as a general partner or joint venturer for
obligations of the nature described in (a) through (g) preceding.
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"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Distribution" by any Person means (a) with respect to any stock issued
by such Person or any partnership, joint venture or limited liability company
interest of such Person, the retirement, redemption, purchase, or other
acquisition for value of any such stock, partnership, joint venture or limited
liability company interest, (b) the declaration or payment of any dividend or
other distribution on or with respect to any stock, partnership, joint venture
or limited liability company interest of any Person, (c) any other payment by
such Person with respect to such stock, partnership, joint venture or limited
liability company interest of such Person, or (d) any payment, loan or advance
of any type to any officer, director, shareholder, partner or member of such
Person or any of its Affiliates; provided, that, Distributions shall not
include, in the case of the Company or any of its Subsidiaries, (i) payment of
compensation to officers and employees in the ordinary course of business which
is not in violation of Section 9.14 hereof, and (ii) reimbursement of, and
advances for, reasonable travel, entertainment and similar expenses incurred in
the ordinary course of business.
"Environmental Complaint" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, proceeding,
judgment, letter or other communication from any federal, state, municipal or
other Governmental Authority or any other party involving a Hazardous Discharge,
Environmental Contamination or any violation of any order, permit or
Environmental Law and Laws.
"Environmental Contamination" means the presence of any Hazardous
Substances, which presence results from a Hazardous Discharge.
"Environmental Law and Laws" means any law, common law, ordinance,
regulation or policy of any Governmental Authority, as well as any order,
decree, permit, judgment or injunction issued, promulgated, approved, or entered
thereunder, relating to the environment, health and safety, Hazardous Substances
(including, without limitation, the use, handling, transportation, production,
disposal, discharge or storage thereof), industrial hygiene, the environmental
conditions on, under, or about any real property owned, leased or operated at
any time by the Company or any of its Subsidiaries or any real property owned,
leased or operated by any other party, including, without limitation, soil,
groundwater, and indoor and ambient air conditions or the reporting or
remediation of Environmental Contamination. Environmental Law and Laws include,
without limitation, the Clean Air Act, as amended, the Federal Water Pollution
Control Act, as amended, the Rivers and Harbors Act of 1899, as amended, the
Safe Drinking Water Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), as amended, the Superfund Amendments
and Reauthorization Act of 1986 ("XXXX"), as amended, the Resource Conservation
and Recovery Act of 1976 ("RCRA"), as amended, the Hazardous and Solid Waste
Amendments Act of 1984, as amended, the Toxic Substances Control Act, as
amended, the Occupational Safety and Health Act ("OSHA"), as amended, the
Hazardous Materials Transportation Act, as amended, and any other federal, state
and local law whose purpose is to conserve or protect health, the environment,
wildlife or natural resources.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation promulgated thereunder.
"ERISA Affiliate" means the Company or any of its Subsidiaries and any
other corporation or trade or business under common control with the Company or
any of its Subsidiaries or treated as a single
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employer with the Company or any of its Subsidiaries as determined under
sections 414(b), (c), (m) or (o) of the IRC.
"Event of Default" has the meaning set forth in Section 10.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor federal statute.
"Exempt Shares" means (a) the Warrant Shares, (b) options to purchase
up to 630,000 shares of Common Stock and the Common Stock issued upon exercise
thereof pursuant to the Company's Stock Option Plan and certain employment
agreements, (c) securities of the Company issuable upon exercise of any options,
warrants or other rights to acquire securities or upon conversion of any
convertible securities, in each case which are outstanding as of the Closing
Date and set forth on Schedule 6.4 hereto, (d) securities issued pursuant to
payment in kind of Distributions to holders of the Preferred Stock and Junior
Preferred Stock and (e) additional warrants issued to ACS pursuant to the ACS
Note Purchase Agreement in connection with the purchase of the Tranche B Notes
(as defined in the ACS Note Purchase Agreement) and the issuance of Common Stock
upon the exercise of such warrants.
"Exhibit" refers to an exhibit attached to this Agreement and
incorporated herein by reference, unless specifically provided otherwise.
"Financial Officer" means, as to any Person, its Chief Financial
Officer, or if no Person serves in such capacity, the highest ranking executive
officer of such Person with responsibility for accounting, financial reporting,
financial compliance and similar functions.
"Fully Diluted Basis" means, with reference to outstanding Common
Stock, the shares of Common Stock that would be outstanding assuming that all
outstanding options, warrants and other rights to acquire Common Stock had been
exercised (regardless of whether such rights are then exercisable) and all
securities convertible into Common Stock had then been converted (regardless of
whether such securities are then convertible) and had been issued. Any reference
in this Agreement or any of the other Transaction Documents to "holder(s) of
outstanding Common Stock on a Fully Diluted Basis" or words of similar import
shall be deemed to include holder(s) of outstanding options, warrants or similar
rights to acquire Common Stock or securities convertible into Common Stock.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their successors which are
applicable in the circumstances as of the date in question; and the requirement
that such principles be applied on a consistent basis means that the accounting
principles observed in a current period are comparable in all material respects
to those applied in a preceding period.
"Governmental Authority" means any government, any state or other
political subdivision thereof, or any Person exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guaranty" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt or other obligation
of any other Person and, without limiting the
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generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions, by "comfort letter" or other similar undertaking of
support of otherwise), or (b) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part); provided, that, the term "Guaranty" shall not include endorsements for
collection or deposit in the ordinary course of business. For purposes of this
Agreement, the amount of any Guaranty shall be the maximum amount that the
guarantor could be legally required to pay under such Guaranty.
"Hazardous Discharge" means any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping of a Hazardous Substance at, from, onto, under or within
any real property owned, leased or operated at any time by the Company or any of
its Subsidiaries or any real property owned, leased or operated by any other
Person.
"Hazardous Substance" means any pollutant, toxic substance, hazardous
waste, compound, element or chemical that is defined as hazardous, toxic,
noxious, dangerous or infectious pursuant to any Environmental Law and Laws or
which is otherwise regulated by any Environmental Law and Laws.
"Holder" with respect to any security of a Person shall mean the record
or beneficial owner of such security.
"Investment" in any Person means any investment, whether by means of
securities purchase (whether by direct purchase from such Person or from an
existing holder of securities of such Person), loan, advance, extension of
credit, capital contribution or otherwise, in or to such Person, the Guaranty of
any Debt or other obligation of such Person, or the subordination of any claim
against such Person to other Debt or other obligation of such Person; provided,
that, "Investments" shall not include advances made to employees of such Person
for reasonable travel, entertainment and similar expenses incurred in the
ordinary course of business.
"Investors" has the meaning given such term in the preamble hereto.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any regulation promulgated thereunder.
"Junior Preferred Stock" means the Company's Class A Convertible
Preferred Stock and the Company's Series C Convertible Preferred Stock.
"Key Management" means, as of the Closing Date, Xxxxxxx Xxxxxxxx Sr.
and Xxxxxxx Xxxxx and any substitutions, additions or deletions approved by the
Investors.
"Laws" means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of any state, commonwealth, nation,
territory, possession, county, township, parish, municipality, or Governmental
Authority.
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"Lien" means with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
including, without limitation, the rights of a lessor under a Capital Lease to
the asset which is the subject of such Capital Lease. For the purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title retention agreement
relating to such asset.
"Majority Warrant Holder" means a Warrant Holder or Warrant Holders who
hold more than fifty percent (50%) of the outstanding Warrant Shares (for
purposes of this definition, all Warrants will be deemed to have been
exercised); provided, that in the event all Warrant Holders are not required to
participate in the exercise of the right in question and less then all Warrant
Holders elect to participate in the exercise of the right in question, "Majority
Warrant Holder" shall mean a Warrant Holder or Warrant Holders participating in
the exercise of such right who holds more than fifty percent (50%) of all
Warrant Shares held by all Warrant Holders participating in the exercise of such
right.
"Mandatory Redemption Event" means any event which, pursuant to the
terms of this Agreement and the Series D Stock Designation, permits the Holders
of the Preferred Shares to redeem the Preferred Shares.
"Material Adverse Effect" means, with respect to a Person, a material
adverse effect on the business, financial condition, operations, assets or
prospects of such Person or any of its Subsidiaries, and shall also mean, with
respect to the Company or any of its Subsidiaries, a material adverse effect on
such Person's ability to pay and perform its obligations under the Transaction
Documents.
"Material Agreement" means any written or oral agreement, contract,
commitment, or understanding to which a Person is a party, by which such Person
is directly or indirectly bound, or to which any assets of such Person may be
subject (a) pursuant to which such Person acquires any material portion of the
raw materials, supplies or services used or consumed by such Person in the
operation of its business (unless such raw materials, supplies or services are
readily available to such Person from other sources on comparable terms) which
are not incurred in the ordinary course of business, (b) pursuant to which such
Person derives any material part of its revenues, or (c) pursuant to which the
Company is required to make annual expenditures in excess of $100,000, and
without limiting the foregoing, Material Agreement shall include each of the
Ancillary Agreements.
"Material Event of Default" means an Event of Default under (a)
Sections 10.1(a), (b), (g) or (h), (b) Section 10.1(c) if such Event of Default
arose as a result of a violation of Section 8.9 or (c) Section 10.1(d) if such
Event of Default arose as a result of a violation of Section 8.1 or Section 8.8.
"MTG" means XxXxxxxx Telecommunications Group, Inc., an Arizona
corporation.
"MTG Acquisition" means the purchase by Clear Operating and the sale by
MTG to Clear Program Management, Inc. of substantially all of the assets of MTG
pursuant to the MTG Asset Purchase Agreement.
"MTG Acquisition Documents" means the MTG Asset Purchase Agreement, and
all other documents, instruments and agreements now or hereafter executed by or
among the Company, Clear Program Management, Inc., any of their Subsidiaries or
MTG pertaining to the MTG Acquisition.
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"MTG Asset Purchase Agreement" means that certain Asset Purchase
Agreement dated as of November 1, 1999, by and between Clear Program Management,
Inc. and MTG, pursuant to which Clear Program Management, Inc. will purchase
from MTG and MTG will sell to Clear Program Management, Inc.
substantially all of the assets of MTG.
"Offer" has the meaning given such term in Section 8.14 hereof.
"Offer Notice" has the meaning given such term in Section 8.14 hereof.
"Operating Lease" means any lease, sublease, license or similar
arrangement (other than a Capital Lease), pursuant to which a Person leases,
subleases or otherwise is granted the right to occupy, take possession of, or
use property whether real, personal or mixed.
"Pension Plan" means any employee benefit plan within the meaning of
section 3(3) of ERISA maintained by the Company, any Subsidiary of the Company
or any ERISA Affiliate that is or was previously covered by Title IV of ERISA or
subject to the minimum funding standards under section 412 of the IRC, including
a "multiemployer plan" as such term is defined in section 3(37) of ERISA.
"Permitted Acquisition" means "Approved Acquisition" as defined in the
ACS Agreement in effect on the date hereof.
"Permitted Debt" means (a) the Wachovia Senior Debt, (b) the ACS
Subordinate Debt, (c) intercompany Debt among or between the Company and its
Subsidiaries to the extent permitted by the Wachovia Senior Credit Agreement,
(d) Debt not to exceed $1,250,000 in the aggregate at any time outstanding
secured by purchased money Liens or incurred with respect to Capital Leases, (e)
Debt issued to sellers in connection with Permitted Acquisitions, (f) Debt
issued on the Closing Date in connection with the TWR Acquisition and MTG
Acquisition, (g) Debt outstanding on the Closing Date and set forth on Schedule
1.1(a) hereto and (h) performance and payment bonds posted in the ordinary
course of business and which have been properly reported to the Preferred
Shareholders in accordance with Section 8.1(b).
"Permitted Encumbrances" means with respect to any asset:
(a) Liens securing the Obligations;
(b) Liens securing Permitted Debt;
(c) zoning restrictions, easements, licenses, covenants
and other restrictions affecting the use of real property, or other minor
irregularities in title to properties, whether real or personal, which do not
secure the payment of Debt or other liability or obligation and do not
materially impair the use of such property for the purposes for which the same
is held by the owner thereof;
(d) mechanics', materialmen's, warehousemen's,
journeymen's, landlord's, vendor's and carrier's Liens and other similar Liens
arising by operation of law or statute in the ordinary course of business and
are not delinquent or, if delinquent, is being contested in good faith and
adequate reserves have been set up by the Company or its Subsidiaries; and
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(e) Liens for Taxes or assessments not yet due or not yet
delinquent, or, if delinquent, that are being contested in good faith in the
normal course of business by appropriate action, as permitted by Section 8.4
hereof.
"Permitted Investments" means (a) readily marketable direct obligations
of the United States of America, (b) fully insured time deposits and
certificates of deposit with maturities of one (1) year or less of any
commercial bank operating in the United States having capital and surplus in
excess of $50,000,000.00, (c) commercial paper of a domestic issuer if at the
time of purchase such paper is rated in one of the two highest ratings
categories of Standard and Poor's Corporation or Xxxxx'x Investors Service, and
(d) Permitted Acquisitions.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof and shall also
mean the Company.
"Plan" means an employee benefit plan within the meaning of Section
3(3) of ERISA, under which the Company or any Subsidiary of the Company has any
current or future obligation or liability and under which any present or former
employee of the Company or any Subsidiary of the Company, or such present or
former employee's dependents or beneficiaries, has any current or future right
to benefits.
"Preferred Shareholder" means any Holder of Preferred Shares.
"Preferred Shares" means the shares of Preferred Stock to be issued and
sold by the Company to the Investors pursuant to Section 2.1 hereof.
"Preferred Stock" means the Company's Series D Senior Redeemable
Preferred Stock, no par value per share having the rights and preferences set
forth in the Series D Stock Designation.
"Pro Forma Opening Balance Sheet" means a consolidated and
consolidating balance sheet of the Company which shall consist of the Company's
actual consolidated and consolidating balance sheet as of September 30, 1999
referenced in Section 6.6(e) hereof, adjusted to give effect to the Closing
Transactions and is attached hereto as Schedule 1.1(b).
"Projections" means the projections of the Company's future financial
condition and results of operation attached hereto as Schedule 6.6 and
incorporated herein by reference for all purposes.
"Purchase Price" has the meaning given such term in Section 2.1.
"Put" means the right of any Holder to require the Company to
repurchase the Preferred Shares, Warrants and Warrant Shares pursuant to Section
3.4 hereof.
"Put Closing Date" has the meaning given such term in Section 3.4
hereof.
"Put Exercise Date" means (a) with respect to the Warrants and Warrant
Shares, the earliest of (i) November 1, 2005, (ii) the date of any Material
Event of Default or (iii) the date on which all of the Preferred Shares have
been redeemed, and (b) with respect to the Preferred Shares, the date of any
Mandatory Redemption Event.
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"Put Note" means a promissory note substantially in the form of Exhibit
A attached hereto.
"Put Notice" has the meaning given such term in Section 3.4 hereof.
"Put Price" means (a) with respect to the Common Stock, (i) if the
Common Stock is regularly traded in the organized securities markets, the
average of the Closing Price for the security in question for the thirty (30)
trading days immediately preceding the date of determination; and (ii) if the
Common Stock is not regularly traded in the securities markets, the fair market
value on a Control Basis as of the date of the Put Notice (unless some other
date of valuation is provided herein) as determined in good faith by the board
of directors of the Company; provided, however, that, at the election of the
Holders exercising the Put, either before or after the determination of Put
Price by the board of directors (a "Valuation Event Election") the Put Price of
such Common Stock shall be determined pursuant to the procedures set forth in
the definition of Appraised Value and (b) with respect to the Preferred Shares,
the Liquidation Value (as defined in the Series D Stock Designation) of such
Preferred Shares.
"Qualified Public Offering" means the consummation of an underwritten
public offering of Common Stock by the Company to the general public in which
the aggregate net cash proceeds received by the Company at the public offering
price is at least $30,000,000 and which results in a market capitalization of
the Company of at least $80,000,000.
"Redemption Date" means the date on which the Preferred Shares have
been redeemed in full.
"Registration Rights Agreement" means a Registration Rights Agreement
of even date herewith to be entered into by and among the Company, the Investors
and ACS.
"Rentals" means amounts payable by a lessee under an Operating Lease.
"Replacement Time" means 75 days until such time as the Company shall
have hired a Vice President of Operations or Chief Operating Officer and a
Controller; then such Replacement Time shall be 120 days.
"Sale" means any transaction described in clauses (a) through (c) of
the definition of Change of Control.
"Schedule" means a "schedule" attached to this Agreement and
incorporated herein by reference, unless specifically indicated otherwise.
"Section" refers to a "section" or "subsection" of this Agreement
unless specifically indicated otherwise.
"Securities" means the Preferred Shares and the Warrants to be issued
to the Investors hereunder.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute.
"Series D Stock Designation" means the Certificate of Designation of
Series D Senior Redeemable Preferred Stock of the Company in the form of Exhibit
B attached hereto.
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"Shareholders Agreement" means a Second Amended and Restated Voting and
Co-Sale Agreement of even date herewith to be entered into by and among the
Company, the Investors, DFW Capital Partners, L.P., ACS, Xxxxxxx X. Xxxxxxxx,
Xx., Clear Investors, LLC and certain other shareholders of the Company.
"Stratford Capital" has the meaning given such term in the preamble
hereto.
"Stratford Equity" has the meaning given such term in the preamble
hereto.
"Subsidiary" means, for any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions (including that of a general partner) are at the time directly or
indirectly owned, collectively, by such Person and any Subsidiaries of such
Person. The term Subsidiary shall include Subsidiaries of Subsidiaries (and so
on).
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, interest equalization
taxes, capital transaction taxes, foreign exchange taxes or other charges of any
nature whatsoever, from time to time or at any time imposed by law or any
federal, state or local governmental agency. "Tax" means any one of the
foregoing.
"Transaction Documents" means this Agreement, the Warrant Certificate,
the Registration Rights Agreement, the Shareholders Agreement, the Series D
Stock Designation and all other agreements, certificates, documents or
instruments now or at any time hereafter delivered in connection with this
Agreement, as the foregoing may be renewed, extended, modified, amended or
restated from time to time.
"Triggering Holder" means (a) with respect to any exercise of the Put
with respect to Warrants and Warrant Shares, the Majority Warrant Holder and (b)
with respect to any exercise of the Put with respect to Preferred Shares, the
Holders of a majority of the outstanding Preferred Shares.
"TWR" means TWR Telecom, Inc., a Texas corporation.
"TWR Acquisition" means the purchase by Clear Operating and the sale by
Xxxxxx Xxxxxxx to Clear Operating of all of the outstanding capital stock of TWR
pursuant to the TWR Stock Purchase Agreement.
"TWR Acquisition Documents" means the TWR Stock Purchase Agreement, and
all other documents, instruments and agreements now or hereafter executed by or
among the Company, Clear Operating, any of their Subsidiaries, Xxxxxx Xxxxxxx or
TWR pertaining to the TWR Acquisition.
"TWR Stock Purchase Agreement" means that certain Stock Purchase
Agreement dated as of August 20, 1999, as amended, by and between Clear
Operating and Xxxxxx Xxxxxxx, pursuant to which Clear Operating will purchase
from Xxxxxx Xxxxxxx and Xxxxxx Xxxxxxx will sell to Clear Operating
substantially all of the outstanding capital stock of TWR.
"Unlocking Price" means the sum of the following to the extent owned by
any Holder who delivers an Acceptance Notice: (a) with respect to the Preferred
Shares, the Liquidation Value (as defined in the Series D Stock Designation) of
such Preferred Shares and (b) with respect to the Warrants and Warrant Shares,
the per share consideration which would be received or is receivable with
respect to the Common
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Stock in connection with the Offer times the number of Warrants and Warrant
Shares owned by such Holder less the Warrant Exercise Price applicable to such
Warrants.
"Wachovia" means Wachovia Bank, N.A.
"Wachovia Senior Credit Agreement" means that certain Credit Agreement
dated as of November 1, 1999, by and among the Company, Clear Operating, their
respective Subsidiaries, Wachovia, as Agent and Lender, and the other banks
party thereto.
"Wachovia Senior Debt" means all Debt of Clear Operating outstanding
under the Wachovia Senior Credit Agreement, including all renewals and
extensions thereof; provided, however, the outstanding principal amount of the
Wachovia Senior Debt shall not at any time exceed the Wachovia Senior Debt Limit
in effect at such time.
"Wachovia Senior Debt Documents" means the Wachovia Senior Credit
Agreement and all promissory notes, security agreements, mortgages, deeds of
trust, assignments, guarantees and other documents, instruments and agreements
executed and delivered pursuant to the Wachovia Senior Credit Agreement
evidencing, securing, guaranteeing or otherwise pertaining to the Wachovia
Senior Debt and other obligations arising under the Wachovia Senior Credit
Agreement, as the foregoing may be amended, renewed, extended, supplemented,
increased or otherwise modified from time to time to the extent permitted
hereunder.
"Wachovia Senior Debt Limit" means $27,000,000; provided, however, if
another lender becomes a party to the Wachovia Senior Credit Agreement as a
lender thereunder, within thirty (30) days of the Closing Date, the maximum
amount of the senior debt shall increase by the amount of the additional
principal lent or committed to by such new lender, but is in no event to exceed
$37,000,000 and shall not include an increase of the term debt portion thereof.
"Warrant Certificate" means the Warrant Certificates to be issued by
the Company evidencing Warrants issued to the Investors hereunder which shall be
in the form of Exhibit C attached hereto.
"Warrant Exercise Price" means $0.01 per share (subject to adjustment
as provided in Section 3.2).
"Warrant Expiration Date" means November 1, 2009.
"Warrant Holder" means any Person (i) in whose name any Warrant is
registered on the Warrant Register, or (ii) in whose name any Warrant Shares are
registered on the books and records of the Company.
"Warrant Register" means a register maintained by the Company setting
forth the name and address of each Warrant Holder, the number of Warrants held
by such Warrant Holder and the certificate number of each Warrant Certificate
held by such Warrant Holder.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
"Warrants" means 1,491,755 Common Stock Purchase Warrants to be issued
by the Company to the Investors, pursuant to Section 2.1 of this Agreement, each
of which shall entitle the holder thereof to
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purchase one (1) share of Common Stock at the Warrant Exercise Price (subject to
adjustment as provided in Section 4.2).
SECTION 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP as
in effect from time to time, applied on a basis consistent with the most recent
annual audited, consolidated financial statements of the Company delivered to
the Investors prior to the date hereof.
SECTION 1.3. Gender and Number. Words of any gender used in this
Agreement shall be held and construed to include any other gender and words in
the singular number shall be held to include the plural, and vice versa, unless
the context requires otherwise.
SECTION 1.4. References to Agreement. Use of the words "herein",
"hereof", "hereinabove", and the like are and shall be construed as references
to this Agreement.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.1. Purchase and Sale. Subject to the satisfaction of the
terms and conditions set forth herein and in reliance upon the representations
and warranties of the parties set forth herein and in the other Transaction
Documents (a) Stratford Capital agrees to purchase from the Company and the
Company agrees to issue and sell to Stratford Capital 39,000 shares of Preferred
Stock and 775,713 Warrants for the aggregate purchase price for $3,900,000 (the
"Stratford Capital Purchase Price"), and (b) Stratford Equity agrees to purchase
from the Company and the Company agrees to issue and sell to Stratford Equity
36,000 shares of Preferred Stock and 716,042 Warrants for the aggregate purchase
price for $3,600,000 (the "Stratford Equity Purchase Price" and together with
the Stratford Equity Purchase Price, the "Purchase Price").
SECTION 2.2. Closing. Closing of the purchase and sale of the
Securities (the "Closing") shall take place at the offices of Xxxxx, Xxxxxxxx &
Xxxxxxx, LLP, 0000 Xxxxxxxxx Xxxxxx, XX, Xxxxxxx, Xxxxxxx 00000- 3952 at 10:00
a.m. on the Closing Date, or at such other time, date and place as may be agreed
upon in writing by the Company and the Investors.
SECTION 2.3. Delivery. At the Closing, the Company shall deliver to the
Investors, against payment therefor, certificates evidencing the Preferred
Shares and the Warrant Certificates evidencing the Warrants purchased by the
Investors, in each case duly issued and in form sufficient to vest title thereto
fully, free and clear of all Liens, claims and encumbrances.
SECTION 2.4. Payment. At the Closing, (a) Stratford Capital and
Stratford Equity shall pay to the Company by wire transfer of immediately
available funds in accordance with the instructions set forth in the Closing
Statement, the Stratford Capital Purchase Price and Stratford Equity Purchase
Price, respectively, and (b) the Company shall pay to Stratford Capital and
Stratford Equity, by wire transfer of immediately available funds in accordance
with the instructions set forth in the Closing Statement, closing fees equal to
$97,500 and $90,000, respectively.
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ARTICLE III
CERTAIN TERMS APPLICABLE TO WARRANTS
SECTION 3.1. Exercise of Warrants. (a) The Warrants may be exercised in
whole or in part at any time until the Warrant Expiration Date at which time the
Warrants shall expire and shall thereafter no longer be exercisable. The
Warrants shall be exercised by presentation of the Warrant Certificate
evidencing the Warrants to be exercised, with the form of election to purchase
on the reverse thereof duly completed and signed, to the Company at the offices
of the Company as set forth on the signature page of this Agreement, together
with payment of the aggregate Warrant Exercise Price for the number of Warrant
Shares in respect of which such Warrants are being exercised in lawful money of
the United States of America; provided, that, to the extent the Warrant Holder
exercising such Warrants is also the holder of Preferred Shares, such Warrant
Holder may elect, by written notice to the Company delivered with such
presentation, to elect to pay the applicable Warrant Exercise Price by
offsetting accrued dividends on the Preferred Shares by an amount equal to the
aggregate Warrant Exercise Price payable in connection with such exercise of
Warrants. Upon such presentation, the Company shall issue and cause to be
delivered to or upon the written order of the registered Holder of such Warrants
and in such name or names as such registered Holder may designate, a certificate
or certificates for the aggregate number of Warrant Shares issued upon such
exercise of such Warrants. Any Person so designated to be named therein shall be
deemed to have become holder of record of such Warrant Shares as of the date of
exercise of such Warrants; provided, that, no Warrant Holder will be permitted
to designate that such Warrant Shares be issued to any Person other than such
Warrant Holder unless each condition to transfer contained in Article V hereof
which would be applicable to a transfer of Warrants or Warrant Shares has been
satisfied.
(b) If less than all of the Warrants evidenced by a Warrant
Certificate are exercised at any time, a new Warrant Certificate or Certificates
shall be issued for the remaining number of Warrants evidenced by such Warrant
Certificate. All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled.
(c) the Company shall not be required to issue fractional
shares of Common Stock upon exercise of any Warrants issued by it, but shall pay
for any such fraction of a share an amount in cash equal to the value of such
fractional share determined by the Company's board of directors in good faith.
(d) the Company will pay all Taxes attributable to the initial
issuance of Warrant Shares upon the exercise of the Warrants issued by it;
provided, that, each Warrant Holder shall use its reasonable efforts to avoid
any such Tax on the issuance of Warrant Shares; and provided, further that, the
Company shall not be required to pay any income Tax or any other Tax which may
be payable in respect of the exercise and the sale of the Warrants and Warrant
Shares by any Warrant Holder or any transfer involved in the issue of any
Warrant Certificate or any certificate for Warrant Shares in a name other than
that of the registered holder of a Warrant Certificate surrendered upon the
exercise of such a Warrant, and the Company shall not be required to issue or
deliver such certificates unless or until the Person or Persons requesting the
issuance thereof shall have paid to the Company the amount of such Tax or shall
have established to the satisfaction of the Company that such Tax has been paid.
SECTION 3.2. Adjustment of Number of Warrant Shares Purchasable. The
number of Warrant Shares purchasable upon the exercise of each Warrant is
subject to adjustment from time to time upon the occurrence of any of the events
enumerated in this Section 3.2.
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(a) In the event that the Company shall at any time after the
date of this Agreement (i) declare a dividend on the Common Stock in shares of
its capital stock (whether shares of such Common Stock or of capital stock of
any other class of the Company), (ii) split or subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, the number of Warrant Shares purchasable upon an exercise of each
Warrant after the time of the record date for such dividend or of the effective
date of such split, subdivision or combination shall be adjusted to equal the
number of shares of Common Stock which a Holder having the same number of shares
of Common Stock as the number of Warrant Shares into which each Warrant is
exercisable immediately prior to such record date or effective date, as the case
may be, would own or be entitled to receive after such record date or effective
date.
(b) In the event that the Company shall at any time after the
date of this Warrant Agreement (other than Exempt Shares) (i) issue any shares
of Common Stock without consideration or at a price per share less than the
Stipulated Equity Value, or (ii) issue options, rights or warrants to subscribe
for or purchase such Common Stock (or securities convertible into such Common
Stock) without consideration or at a price per share (or having a conversion
price per share, if a security convertible into such Common Stock) less than the
Stipulated Equity Value immediately prior to such issuance, the number of
Warrant Shares purchasable upon an exercise of each Warrant after the date of
such issuance shall be adjusted to equal the product obtained by multiplying the
number of Warrant Shares into which each Warrant is exercisable immediately
prior to the date of such issuance by a fraction, the numerator shall be the
number of shares of Common Stock outstanding on a Fully Diluted Basis
immediately after such issuance, and the denominator of which shall be the
number of shares of Common Stock outstanding on a Fully Diluted Basis
immediately prior to such issuance plus the number of shares of such Common
Stock which the aggregate offering price of the total number of shares of such
Common Stock so to be issued or to be offered for subscription or purchase (or
the aggregate initial conversion price of the convertible securities so to be
offered) would purchase at the Stipulated Equity Value immediately prior to such
issuance. In case such subscription price may be paid in a consideration part or
all of which shall be in a form other than cash, the value of such consideration
shall be as determined in good faith by the board of directors of the Company.
Shares of such Common Stock owned by or held for the account of the Company or
any Subsidiary thereof shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever the date
of such issuance is fixed (which date of issuance shall be the record date for
such issuance if a record date therefor is fixed); and, in the event that such
shares or options, rights or warrants are not so issued, the number of Warrant
Shares into which each Warrant is exercisable shall again be adjusted to be such
number of Warrant Shares into which each Warrant is exercisable if the date of
such issuance had not been fixed.
(c) In case the Company shall make a distribution to all
holders of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the surviving corporation but
excluding any Distribution permitted by Section 9.1 hereof) of evidences of its
indebtedness or assets, the number of Warrant Shares into which each Warrant is
exercisable after such date of distribution shall be adjusted to equal the
product obtained by multiplying the number of Warrant Shares purchasable upon an
exercise of each Warrant immediately prior to such date by a fraction, the
numerator of which shall be the Stipulated Equity Value immediately prior to
such distribution, and the denominator of which shall be the Stipulated Equity
Value immediately prior to such distribution less the fair market value as
determined in good faith by the board of directors of the Company of the portion
of the assets or evidences of indebtedness so to be distributed applicable to
one share of Common Stock. Such adjustment shall be made successively whenever a
date for such distribution is fixed (which date of
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distribution shall be the record date for such issuance if a record date
therefor is fixed); and, if such distribution is not so made, the number of
Warrant Shares into which each Warrant is exercisable shall again be adjusted to
be such number of Warrant Shares which would then be in effect if the date of
such distribution had not been fixed.
(d) No adjustment in the number of Warrant Shares purchasable
upon an exercise of each Warrant shall be required unless such adjustment would
require an increase or decrease of at least one-tenth of one percent (.1%) in
such number of Warrant Shares; provided that any adjustments which by reason of
this Section 3.2(d) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 3.2 shall be made to the nearest hundredth of one percent.
(e) The Warrant Exercise Price in effect immediately prior to
any adjustment of the number of Warrant Shares into which each Warrant is
exercisable shall be simultaneously adjusted (but not below the par value of the
Common Stock) by multiplying the Warrant Exercise Price immediately prior to
such adjustment by a fraction, the numerator of which shall be the number of
Warrant Shares into which each Warrant is exercisable immediately prior to such
adjustment, and the denominator of which shall be the number of Warrant Shares
into which each Warrant is exercisable immediately after such adjustment.
(f) In the event of any capital reorganization of the Company,
or of any reclassification of any Common Stock for which any Warrant is
exercisable (other than a subdivision or combination of outstanding shares of
such Common Stock), or in case of the consolidation of the Company with or the
merger of the Company with or into any other corporation or of the sale of the
properties and assets of the Company as, or substantially as, an entirety to any
other Person, each Warrant shall after such capital reorganization,
reclassification of such Common Stock, consolidation, merger or sale be
exercisable, upon the terms and conditions specified in this Agreement, for the
number of shares of stock or other securities or assets to which a holder of the
number of Warrant Shares purchasable (at the time of such capital
reorganization, reclassification of such Common Stock, consolidation, merger or
sale) upon exercise of such Warrant would have been entitled upon such capital
reorganization, reclassification of such Common Stock, consolidation, merger or
sale; and in any such case, if necessary, the provisions set forth in this
Section 3 with respect to the rights thereafter of such Warrant shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities or assets thereafter deliverable on
the exercise of such Warrants. The Company shall not effect any such
consolidation, merger or sale, unless prior to or simultaneously with the
consummation thereof, the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets or the appropriate corporation or entity shall assume, by written
instrument, the obligation to deliver to each Warrant Holder the shares of
stock, securities or assets to which, in accordance with the foregoing
provisions, such Warrant Holder may be entitled pursuant to this Section 3.2(f).
(g) If any question shall at any time arise with respect to
the adjusted number of Warrant Shares, such question shall be determined by the
independent firm of certified public accountants of recognized national standing
selected by the Majority Warrant Holders.
(h) Notwithstanding anything in this Section 3.2 to the
contrary, the Company shall not be permitted to take any action described in
this Section 3.2 (such as, but not by way of limitation, any dividend,
consolidation merger or reorganization) if such action is prohibited under any
other provision of this Agreement, including, without limitation, any provision
of Article IX hereof.
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(i) As used in this Section 3.2, "Stipulated Equity Value"
initially means $3.02 per share; provided that (A) after giving effect to any
event described in Section 3.2(a) or (b) hereof, the Stipulated Equity Value
shall be adjusted to an amount equal to the quotient obtained by dividing (1)
the product of the number of outstanding shares of Common Stock of the Company
on a Fully Diluted Basis immediately prior to the occurrence of such event times
the Stipulated Equity Value immediately prior to the occurrence of such event,
by (2) the number of outstanding shares of Common Stock of the Company on a
Fully Diluted Basis immediately after giving effect to such event, and (B) after
giving effect to any event described in Section 3.2(c) hereof, the Stipulated
Equity Value shall be adjusted to an amount equal to the quotient obtained by
dividing (1) the remainder of (a) the product of the number of outstanding
shares of Common Stock of the Company on a Fully Diluted Basis times the
Stipulated Equity Value immediately prior to the occurrence of such event, minus
(b) the fair market value of the aggregate evidence of the Company's
indebtedness and assets distributed to the holders of Common Stock, by (2) the
number of outstanding shares of Common Stock of the Company on a Fully Diluted
Basis.
SECTION 3.3. Notices to Warrant Holders. Upon any adjustment of the
number of Warrant Shares issuable upon an exercise of the Warrants or any
adjustment of the Warrant Exercise Price pursuant to Section 3.2, the Company
shall promptly, but in any event within thirty (30) days thereafter, cause to be
given to each Warrant Holder, at its address appearing on the Warrant Register,
by first class mail, postage prepaid, a certificate signed by the Company's
Financial Officer setting forth the number of Warrant Shares issuable upon the
exercise of each Warrant as so adjusted and the Warrant Exercise Price as so
adjusted, and describing in reasonable detail the facts accounting for such
adjustment and the method of calculation used. Where appropriate, such
certificate may be given in advance and included as part of the notice required
to be mailed under the other provisions of this Section 3.3.
In the event:
(a) that the Company shall authorize the issuance to all
holders of its Common Stock of rights or warrants to subscribe for or purchase
capital stock of the Company or of any other subscription rights or warrants; or
(b) that the Company shall authorize the distribution to all
holders of its Common Stock of evidences of its indebtedness or assets; or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any capital reorganization or
reclassification or change of the Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination); or
(d) of the voluntary dissolution, liquidation or winding up of
the Company; or
(e) that the Company proposes to take any other action which
would require an adjustment of the Warrant Exercise Price of the Warrants issued
by it pursuant to Section 3.3;
then the Company shall cause to be given to each Warrant Holder at such Warrant
Holder's address appearing on the Warrant Register, at least ten (10) days prior
to the applicable date hereinafter specified, by first class mail, postage
prepaid, a written notice stating (i) the date as of which the holders of record
of
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Common Stock to be entitled to receive any such rights, warrants or distribution
are to be determined, or (ii) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that the holders of
record of Common Stock shall be entitled to exchange their shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up.
SECTION 3.4. Put Rights. (a) At any time on or after the applicable Put
Exercise Date, an appropriate Triggering Holder may, by written notice of such
intent to the Company (the "Put Notice"), require the Company to purchase all of
the Preferred Shares or the Warrants and Warrant Shares, as applicable, then
outstanding at the Put Price determined as of the date of the Put Notice. An
exercise of the Put by the Triggering Holder shall be binding upon all Preferred
Shareholders or all Warrant Holders, as applicable, all of whom shall be
obligated to sell all of their Preferred Shares or Warrants and Warrant Shares
to the Company at such time in accordance with and subject to this Section 3.4.
The Put Notice shall set forth a date (which shall be not less than sixty 60
days, nor more than ninety 90 days after the date of the Put Notice and which
shall be a Business Day) (the "Put Closing Date") for the purchase and sale of
the Preferred Shares or Warrants and Warrant Shares with respect to which the
Put is exercised (the "Put Securities"). Promptly upon the receipt by the
Company of a Put Notice, the Company shall deliver a notice to each other
Preferred Shareholder or Warrant Holder setting forth (1) that a Triggering
Holder has exercised the Put on behalf of all Preferred Shareholders or Warrant
Holders, as applicable, (2) the Put Closing Date and (3) to the extent
determined, the Put Price. If the Put Price has not been determined at such
time, the Company shall promptly notify all Preferred Shareholders or Warrant
Holders of the amount of the Put Price as soon as such Put Price is determined.
On the Put Closing Date, each Preferred Shareholder or Warrant Holder, as
applicable, shall deliver the certificates evidencing the Put Securities held by
such Person to the Company duly endorsed, free and clear of all Liens (other
than any arising under this Agreement or under applicable securities Laws), and
the Company shall pay to such Preferred Shareholder or Warrant Holder an amount
equal to the sum of (i) the Put Price with respect to the Preferred Shares and
(ii) the sum of (A) the Put Price with respect to the Common Stock multiplied by
the number of Warrant Shares included in such Put Securities, plus (B) (1) the
Put Price with respect to the Common Stock multiplied by the number of Warrant
Shares which would be purchased upon an exercise of all Warrants included in
such Put Securities, less (B) the aggregate Warrant Exercise Price which would
be required to be paid by such Holder to exercise all Warrants held by such
Holder ("Put Purchase Price"). The amount payable by the Company to any
Preferred Shareholder or Warrant Holder upon exercise of the Put shall be paid
by certified or cashier's check, by wire transfer or other immediately available
funds. In the event that the Company defaults on its obligation to purchase all
of the Put Securities upon exercise of the Put by any Triggering Holder because
the Company does not have cash available to honor such Put, or because the Put
is exercised as a result of a Material Event of Default or Mandatory Redemption
Event and restrictions contained in the Wachovia Senior Debt Documents which
have not been waived by Wachovia after the reasonable best efforts of the
Company to obtain such waiver, the Triggering Holder may elect on behalf of all
Preferred Shareholders or Warrant Holders, as applicable, in addition to any
other rights or remedies of such Triggering Holder, either to (x) rescind the
exercise of the Put, in which case the Put will remain in full force and effect,
(y) accept partial payment of the Put Purchase Price (pro rata among all
Preferred Shareholders or Warrant Holders, as applicable) in an amount equal to
the amount of cash which the Company has available for payment of the Put
Purchase Price on the Put Closing Date and either (I) rescind the exercise of
the Put with respect to the Put Securities which could not be purchased in cash,
in which case the Put will remain in full force and effect with respect to such
unpurchased Put Securities or (II) receive a Put Note in a principal amount
equal to the amount of the Put Purchase Price which could not be paid in cash on
the Put Closing Date or (z) to receive
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a Put Note in a principal amount equal to the applicable Put Purchase Price. In
the event the Put Notice is delivered prior to the Warrant Expiration Date, the
Put shall remain enforceable with respect to the applicable Put Securities
notwithstanding that the Warrant Expiration Date may occur prior to the Put
Closing Date. The failure of any Holder to deliver the certificates evidencing
Put Securities held by such Holder to the Company shall not limit or impair the
right of such Holder to receive the consideration to be paid to such Holder upon
exercise of the Put. However, the Company may withhold payment of such
consideration pending receipt from such Holder of such certificates or evidence
that such certificates have been mutilated, lost, stolen or destroyed as
contemplated by Section 4.3 hereof. Pending delivery of such certificate(s) (or
other evidence), the consideration to be paid to such Holder shall be held in
trust by the Company for such Holder and shall be set aside in a separate
account for the benefit of such Holder, segregated from the other assets of the
Company.
(b) If the Company is unable to purchase all Put Securities on
the applicable Put Closing Date due to state law restrictions, the Company shall
purchase all Put Securities which it is then permitted to purchase without
violating such state law restrictions (on a pro rata basis from each Holder
exercising the Put), and the Company shall purchase the remaining Put Securities
as soon thereafter as possible without violating such state law restrictions;
provided, that in the event the purchase of such remaining securities is
postponed for more than ninety (90) days following the original Put Closing
Date, the Holders exercising the Put shall have the right to have the Put Price
redetermined as of such date and may elect to have the Put Price be the higher
of the original Put Price or the Put Price determined at such later date.
SECTION 3.5. Reservation and Issuance of Warrant Shares. (a) the
Company will at all times have authorized, and reserve and keep available, free
from preemptive rights, for the purpose of enabling it to satisfy any obligation
to issue Warrant Shares upon the exercise of the Warrants, the number of shares
of Common Stock deliverable upon exercise of all outstanding Warrants.
(b) the Company covenants that all Warrant Shares issued by it
will, upon issuance in accordance with the terms of this Agreement, be fully
paid and nonassessable and free from all Taxes with respect to the issuance
thereof and free from all Liens other than Liens arising by, through or under
the Warrant Holder to whom such Warrant Shares were issued.
ARTICLE IV
TRANSFER OF SECURITIES
SECTION 4.1. Restrictions on Transfer. The Investors understand and
agree that the Securities and the Warrant Shares have not been registered under
the Securities Act or any state securities Laws, and that accordingly, they will
not be fully transferable except as permitted under various exemptions contained
in the Securities Act and applicable state securities Laws, or upon satisfaction
of the registration and prospectus delivery requirements of the Securities Act
and applicable state securities Laws. The Investors acknowledge that they must
bear the economic risk of their investment in the Securities and the Warrant
Shares for an indefinite period of time (subject, however, to the redemption
obligations applicable to the Preferred Shares, the Company's obligations with
respect to the Put and to register the Warrant Shares pursuant to the
Registration Rights Agreement) since they have not been registered under the
Securities Act and applicable state securities Laws and therefore cannot be sold
unless they are subsequently registered or an exemption from registration is
available. Absent an effective notification under Regulation A or a registration
statement under the Securities Act and applicable state securities Laws covering
the disposition
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of the Securities and Warrant Shares and, the Investors will not sell, transfer,
assign, pledge, hypothecate or otherwise dispose of any or all of the Securities
or the Warrant Shares absent a valid exemption from the registration and
prospectus delivery requirements of the Securities Act and the registration or
qualification requirements of any applicable state securities Laws.
SECTION 4.2. Registration, Transfer and Exchange of Warrants. (a) The
Company shall maintain at the offices of the Company as set forth on the
signature pages of this Agreement, the Warrant Register for registration of the
Warrants and Warrant Certificates and transfers thereof. On the Closing Date,
the Company shall register the outstanding Warrants and Warrant Certificates
issued to the Investors. The Company may deem and treat the registered Warrant
Holders as the absolute owners of the Warrants registered to such holders and
(notwithstanding any notation of ownership or other writing on the Warrant
Certificates made by any Person) for the purpose of any exercise thereof or any
distribution to the Warrant Holders, and for all other purposes.
(b) Upon satisfaction of each condition set forth in Section
4.1 hereof, the Company shall register the transfer of any outstanding Warrants
in the Warrant Register upon surrender of the Warrant Certificate(s) evidencing
such Warrants to the Company at the offices of the Company as set forth on the
signature pages of this Agreement, accompanied (if so required by it) by a
written instrument or instruments of transfer in form satisfactory to it, duly
executed by the registered Warrant Holder or by the duly appointed legal
representative thereof. Upon any such registration of transfer, new Warrant
Certificate(s) evidencing such transferred Warrants shall be issued to the
transferee(s) and the surrendered Warrant Certificate(s) shall be canceled. If
less than all the Warrants evidenced by a Warrant Certificate(s) surrendered for
transfer are to be transferred, a new Warrant Certificate(s) shall be issued to
the Warrant Holder surrendering such Warrant Certificate(s) evidencing such
remaining number of Warrants.
(c) Warrant Certificates may be exchanged at the option of the
Warrant Holder(s) thereof, when surrendered to the Company at the offices of the
Company as set forth on the signature pages of this Agreement, for another
Warrant Certificate or other Warrant Certificates of like tenor and representing
in the aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange shall be canceled.
(d) No charge shall be made for any such transfer or exchange
except for any Tax or other governmental charge imposed in connection therewith.
SECTION 4.3. Mutilated or Missing Warrant Certificates. If any Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company shall
issue, in exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution for the Warrant Certificate
lost, stolen or destroyed, a new Warrant Certificate of like tenor and
representing an equivalent number of Warrants, but only upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction of such Warrant
Certificate and, if requested, indemnity satisfactory to it. No service charge
shall be made for any such substitution, but all expenses and reasonable charges
associated with procuring such indemnity and all stamp, Tax and other
governmental duties that may be imposed in relation thereto shall be borne by
the holder of such Warrant Certificate.
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ARTICLE V
CONDITIONS
SECTION 5.1. Conditions Precedent to Closing. The obligations of the
Investors to purchase the Securities pursuant to Section 2.1 are subject to the
satisfaction of each of the conditions precedent set forth in this Section 5.1
on or before 10:00 a.m. (Dallas, Texas time) on the Closing Date. In the event
all of the conditions precedent set forth in this Section 5.1 are not satisfied
by such time, the Investors may, at their option, terminate this Agreement and
the other Transaction Documents and all obligations of the Investors hereunder
and thereunder.
(a) Closing Deliveries. The Company shall have delivered to the
Investors, in form and substance satisfactory to the Investors each of the
following:
(i) certificates issued to each of the Investors by
the Company evidencing the Preferred Shares to be purchased by such
Investors pursuant to Section 2.1;
(ii) Warrant Certificates issued to each of the
Investors by the Company evidencing the Warrants to be purchased by
such Investors pursuant to Section 2.1;
(iii) the Registration Rights Agreement duly
executed and delivered by the Company, the Investors and the other
parties thereto;
(iv) the Shareholders Agreement duly executed and
delivered by the Company, the Investors and the other parties thereto;
(v) each of the Ancillary Agreements, accompanied by
a certificate from an Authorized Officer stating that (A) except as
expressly disclosed therein, none of such Ancillary Agreements have
been amended or modified in any respect and no rights of any party
thereunder have been waived, (B) no other party to any of the Ancillary
Agreements is in default of its obligations thereunder, and (C) the
Ancillary Agreements are valid, binding and enforceable obligations of
each party thereto in accordance with the terms and are in full force
and effect;
(vi) a favorable opinion of Xxxxx, Xxxxxxxx &
Xxxxxxx, LLP, counsel to the Company, in form and substance
satisfactory to the Investors;
(vii) all resolutions, certificates and documents
the Investors may request relating to (A) the organization, existence,
good standing and foreign qualification of the Company and each of its
Subsidiaries, (B) the corporate authority for the execution, delivery
and enforceability of this Agreement, the other Transaction Documents,
the Ancillary Agreements and the consummation of the Closing
Transactions, (C) the stock ownership of the Company and each of its
Subsidiaries, and (D) such other matters relevant to the foregoing as
the Investors shall reasonably request, all of which shall be in form
and substance satisfactory to the Investors;
(viii) the Pro Forma Opening Balance Sheet in form
and substance satisfactory to each Investor;
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(ix) complete and accurate Assurance of Compliance
and Size Status Declaration Forms promulgated by the Small Business
Administration duly executed by the Company and the information
necessary to complete the Small Business Administration Portfolio
Financing Report (Form 1031);
(x) evidence satisfactory to each Investor that all
Closing Transactions have been consummated;
(xi) a certificate from an Authorized Officer of the
Company certifying that (A) neither a Default nor an Event of Default
has occurred, (B) each and every representation and warranty of the
Company in the Transaction Documents is true and correct in all
respects and (C) all conditions precedent to the consummation of the
Transactions contemplated herein have been satisfied in all respects;
and
(xii) such other documents, instruments and
agreements as each Investor shall reasonably request.
The documents, certificates and opinions referred to in this Section 5.1(a)
shall be delivered to the Investors no later than the Closing Date and shall,
except as expressly provided otherwise, be dated the Closing Date.
(b) Acquisitions. The TWR Acquisition and the MTG Acquisition shall
have been consummated on terms and conditions acceptable to the Investors.
(c) Wachovia Senior Credit Agreement. The transactions contemplated by
the Wachovia Senior Credit Agreement have been consummated on terms and
conditions acceptable to the Investors.
(d) ACS Note Purchase Agreement. The transactions contemplated by the
ACS Note Purchase Agreement have been consummated on terms and conditions
acceptable to the Investors.
(e) Legal Matters. All legal matters with respect to the Company and
its Subsidiaries, the Transaction Documents and the Closing Transactions shall
be acceptable to each Investor in its sole and absolute discretion.
(f) Absence of Default. No Default or Event of Default shall have
occurred which is continuing.
(g) Representations and Warranties. The representations and warranties
contained in this Agreement and in the other Transaction Documents shall be true
and correct in all respects.
(h) No Material Adverse Change. There shall not have occurred, in the
sole and absolute discretion of the Investors, any material adverse change in
(i) the business, operations, assets, financial condition or prospects of the
Company from that reflected in the financial statements referenced in Sections
6.6(a), (b) and (f) hereof, (ii) TWR and MTG or (iii) any other facts,
conditions or circumstances which could have a Material Adverse Effect on the
Company.
(i) Payment of Expenses. The Company shall have paid in full all
reasonable out of pocket fees, expenses and disbursements incurred by the
Investors in connection with their investigation, underwriting, negotiation and
closing of the transactions contemplated hereby, including, without limitation,
all reasonable
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fees and expenses of Xxxxxx & Xxxxxx L.L.P., counsel to the Investors, to the
extent incurred through the Closing Date, in connection with the preparation and
negotiation of the Transaction Documents and closing of the transactions
contemplated hereby. The Investors acknowledge that they have received a $30,000
deposit from the Company to cover a portion of such expenses.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Investors to purchase the Securities to be
purchased by it hereunder, the Company hereby represents and warrants to the
Investors that each of the following statements (a) is true and correct on the
date hereof, and (b) will be true and correct after giving effect to the Closing
Transactions.
SECTION 6.1. Corporate Existence and Power. Each of the Company and
each of its Subsidiaries (a) is a corporation, duly organized, validly existing
and in good standing under the Laws of its jurisdiction of incorporation set
forth on Schedule 6.1 attached hereto, (b) has all corporate power and authority
necessary to carry on its business as now conducted and as proposed to be
conducted, and (c) is duly qualified as a foreign corporation in each
jurisdiction set forth on Schedule 6.1 which constitutes all jurisdictions where
a failure to be so qualified could have a Material Adverse Effect on the Company
or such Subsidiary.
SECTION 6.2. Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance of this Agreement and the other
Transaction Documents by the Company are within its corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any Governmental Authority (other than filings with
any applicable securities regulatory authorities to perfect exemptions from the
registration or qualification requirements of applicable securities Laws and
which will be made immediately following the Closing Date), and, except for
matters which have been waived in writing by the appropriate Person, do not
contravene, or constitute a default under, any provision of applicable Law or of
the Charter Documents or of any material judgment, injunction, order, decree or
Material Agreement binding upon the Company or any of its Subsidiaries or its
respective assets, or result in the creation or imposition of any Lien on any
asset of the Company or any of its Subsidiaries.
SECTION 6.3. Binding Effect. This Agreement constitutes the valid and
binding agreement of the Company; each other Transaction Document when executed
and delivered in accordance with this Agreement, will constitute the valid and
binding obligation of the Company, in each case enforceable in accordance with
its terms except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar Laws affecting creditors rights generally, and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
SECTION 6.4. Capitalization. Schedule 6.4 attached hereto accurately
and completely sets forth for each of the Company and its Subsidiaries (a) its
jurisdiction of incorporation and current existence, (b) each jurisdiction in
which it is qualified to transact business as a foreign corporation, (c) its
authorized, issued and outstanding capital stock of every class, and (d) the
names of the record, and to the Company's knowledge, beneficial owner, of its
capital stock of every class, including the number and class of shares held by
each such stockholder. Except as set forth on Schedule 6.4 hereto and except for
the Warrants and preemptive rights expressly set forth in the Shareholders
Agreement and registration rights provided in
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Registration Rights Agreement, (x) there are not outstanding any options,
warrants or other rights to acquire capital stock of any class of the Company or
any of its Subsidiaries or securities convertible into capital stock of the
Company or any of its Subsidiaries of any class, (y) no Person has any
preemptive or similar rights with respect to any subsequent issue of stock by
the Company or any of its Subsidiaries, and (z) no Person has any right to
require the Company or any of its Subsidiaries to register any securities of the
Company or any of its Subsidiaries under the Securities Act.
SECTION 6.5. Issuance of Securities. The Securities, when issued upon
payment of the applicable Purchase Price in accordance with Section 2.1, will be
duly authorized, validly issued, fully paid and non-assessable and will be free
and clear of all Liens, claims and encumbrances including pre-emptive rights.
The Warrant Shares, when issued upon an exercise of the Warrants, will be duly
authorized, validly issued, fully paid and nonassessable and free and clear of
all Liens, claims and encumbrances, including, without limitation, all
preemptive rights.
SECTION 6.6. Financial Information. (a) The consolidated balance sheets
of the Company as of December 31, 1997 and 1998, and the related consolidated
statements of income and changes in financial position for the Company's fiscal
year then ended (or portion thereof with respect to 1997), reported on by KPMG
Peat Marwick LLP fairly present, in conformity with GAAP, the consolidated and
consolidating financial position of the Company as of such date and its
consolidated and consolidating results of operations and changes in financial
position for the fiscal year then ended (or portion thereof with respect to
1997).
(b) The consolidated balance sheet of the Company as of
September 30, 1999, and the related consolidated statement of income and cash
flow for the portion of the Company's fiscal year then ended fairly presents, in
conformity with GAAP, the consolidated and consolidating financial position of
the Company as of such date and its consolidated and consolidating results of
operations and changes in financial position for the portion of the Company's
fiscal year then ended.
(c) Except as set forth on Schedule 6.6(c), neither the
Company nor any of its Subsidiaries has incurred, and there is not outstanding
with respect to the Company or any of its Subsidiaries, any Debt, material
liability or material obligation (whether accrued, absolute, contingent,
liquidated or otherwise) other than (i) obligations under Material Agreements
described in Schedule 6.7 attached hereto, (ii) trade payables incurred in the
ordinary course of business, none of which are more than one hundred twenty
(120) days past the invoice date, (iii) obligations under the Operating Leases
described on Schedule 6.13 attached hereto, (iv) the Obligations, and (v) other
liabilities set forth in the Pro Forma Opening Balance Sheet.
(d) Since September 30, 1999, there has been no material
adverse change in the business, financial position, results of operations or
prospects of the Company or any of its Subsidiaries.
(e) The Pro Forma Opening Balance Sheet fairly presents what
the consolidated financial position of the Company and its Subsidiaries will be
immediately after giving effect to the Closing Transactions.
(f) Except as set forth on Schedule 6.6(f), all financial
statements concerning TWR and MTG which have been delivered to the Investors as
of the date hereof fairly present in conformity with
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GAAP the financial position of the Person covered thereby as of dates thereof
and the results of operations of the Persons covered thereby for the periods
then ended.
(g) The Projections set forth a reasonable estimate as of the
date hereof of the Company's consolidated financial condition and results of
operations for the dates and periods covered thereby. The assumptions disclosed
in the Projections were reasonable when the Projections were prepared. The
Company believes such assumptions continue to be reasonable on the date hereof.
SECTION 6.7. Material Agreements. Schedule 6.7 attached hereto contains
a complete and accurate description of every Material Agreement to which the
Company or any of its Subsidiaries is a party (other than the Transaction
Documents) or by which the Company or any of its Subsidiaries or any of their
respective assets are bound (including all amendments and modifications
thereto). The Company has provided each Investor with a true and correct copy of
all such Material Agreements, including all amendments and modifications
thereof. No rights or obligations of any party to any of such Material
Agreements has been waived, and no party to any of such Material Agreements is
in default of its obligations thereunder. Each of such Material Agreements is a
valid, binding and enforceable obligation of the parties thereto in accordance
with its terms and is in full force and effect.
SECTION 6.8. Ancillary Agreements. The Company has provided each
Investor with a true and correct copy of all of the Ancillary Agreements
including all amendments and modifications thereto. No rights or obligations of
any party to any of such Ancillary Agreements have been waived, and no party to
any of such Ancillary Agreements is in default of its obligations thereunder.
Each of such Ancillary Agreements is a valid, binding and enforceable obligation
of the parties thereto in accordance with its terms and is in full force and
affect. Each representation and warranty of all parties to the Ancillary
Agreements are true and correct in all respects.
SECTION 6.9. Investments. Neither the Company nor any of its
Subsidiaries has any outstanding Investments other than Permitted Investments.
SECTION 6.10. Outstanding Debt. Schedule 6.10 attached hereto contains
a complete and accurate description of all Debt of the Company and each of its
Subsidiaries outstanding on the date hereof. Neither the Company nor any of its
Subsidiaries is in default in payment of any Debt with respect to which it is an
obligor or in default of any covenant, agreement, representation, warranty or
other term of any document, instrument or agreement evidencing, securing or
otherwise pertaining to any such Debt.
SECTION 6.11. Transactions with Affiliates. Schedule 6.11 attached
hereto contains a complete and accurate description of all contracts, agreements
and other arrangements (whether written, oral, express or implied) between the
Company or any of its Subsidiaries and any Affiliate of the Company and its
Subsidiaries in existence on the date hereof, including, without limitation, a
complete and accurate description of all Investments of any the Company or any
of its Subsidiaries in any Affiliate of the Company or any of its Subsidiaries.
SECTION 6.12. Employment Matters. Schedule 6.12 attached hereto
contains a complete and accurate list as of the date hereof of all employees of
the Company and each of its Subsidiaries who either (a) have been, or will be
paid cash compensation in the twelve month period ending December 31, 1998 of
$100,000 or more, or (b) are projected to earn in cash compensation $100,000 or
more in the twelve (12) month period ending December 31, 1999. Such schedule
also sets forth for the current fiscal year the annual
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salary (including projected bonuses and other cash compensation) of all such
employees and all benefits (other than health insurance benefits and other
similar benefits which are both customary in the industry in which the Company
or any of its Subsidiaries is engaged and provided to all full time employees of
the Company or any of its Subsidiaries generally) provided to such employees.
Schedule 6.12 also contains a complete and accurate description of all
employment contracts, consulting agreements, management agreements, non-compete
and similar agreements to which the Company or any of its Subsidiaries is a
party on the date hereof.
SECTION 6.13. Operating Leases. Schedule 6.13 attached hereto contains
a complete and accurate description of all Operating Leases to which the Company
or any of its Subsidiaries is a party as of the date hereof which require Rental
payments of $50,000 or more per year. The aggregate amount of all Rental
payments under all Operating Leases to which the Company and its Subsidiaries
are parties on the date hereof does not exceed $1,800,000 per year.
SECTION 6.14. Litigation. Except as set forth on Schedule 6.14, there
is no action, suit or proceeding pending against, or to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
before any court or arbitrator or any Governmental Authority.
SECTION 6.15. ERISA. Neither the Company nor any of its Subsidiaries
nor any ERISA Affiliate maintains or contributes to any Plan or any Pension Plan
other than those disclosed on Schedule 6.15 attached hereto. Each such Plan is
in compliance in all material respects with its terms and the applicable
provisions of ERISA and the IRC. Except as required by law, none of the Company
or any of its Subsidiaries nor any ERISA Affiliate has any commitment to create
any additional Plan. Neither the Company nor any of its Subsidiaries nor any
ERISA Affiliate has ever sponsored, adopted, maintained or been obligated to
contribute to, or had any liability under, any Pension Plan. 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 the Treasury or
the furnishing of such documents to the participants and beneficiaries of the
Plans, and, to the best of the Company's knowledge, with respect to each Plan
all other reports required under ERISA or the IRC to be filed with any
Governmental Authority have been duly filed and all such reports are true and
correct in all material respects as of the dates given. Each Plan that is
intended to be "qualified" within the meaning of section 401(a) of the IRC is,
and has been during the period from its adoption to date, so qualified, both as
to form and, to the best of the Company's knowledge, has been qualified
operation, and all necessary governmental approvals, including a favorable
determination as to the qualification under the IRC of each of such Plans and
each amendment thereto, have been timely obtained or application for a favorable
determination will be filed prior to the applicable filing deadlines. Except as
disclosed on Schedule 6.15 attached hereto, each trust created under any such
Plan intended to be qualified within the meaning of section 401(a) of the IRC
and each trust described in section 501(c)(9) of the IRC is exempt from federal
income taxation under section 501(a) of the IRC and has been so exempt during
the period from creation to date. The Company has no pending or, to the best of
the Company's knowledge, threatened claims, lawsuits or actions (other than
routine claims for benefits in the ordinary course) asserted or instituted
against, and the Company has no knowledge of any threatened litigation or claims
against, the assets of any Plan or its related trust or against any fiduciary of
a Plan with respect to the operation of such Plan. Neither the Company nor any
of its Subsidiaries has received notice of any pending investigations, inquires
or audits with respect to any Plan by any regulatory agency. Neither the Company
nor any of its Subsidiaries has engaged in any prohibited transactions, within
the meaning of section 406 of ERISA or section 4975 of the IRC, in connection
with any Plan. Neither the Company nor any of its Subsidiaries maintains or has
established any Plan which is a welfare benefit plan within the meaning of
section 3(1) of ERISA which
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provides for retiree medical liabilities or continuing benefits or coverage for
any participant or any beneficiary of any participant after such participant's
termination of employment except as may be required by the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA") and the regulations
thereunder, and at the expense of the participant or the beneficiary of the
participant. The Company and each of its Subsidiaries that maintains a Plan that
is a welfare benefit plan within the meaning of section 3(1) of ERISA has
complied with any applicable notice and continuation requirements of COBRA and
the regulations thereunder. To the best of the Company's knowledge, none of the
Company or any of its Subsidiaries maintains, has established, or has ever
participated in, a multiple employer welfare benefit arrangement within the
meaning of section 3(40)(A) of ERISA.
SECTION 6.16. Taxes and Filing of Tax Returns. The Company and each of
its Subsidiaries has filed all Tax returns required to have been filed by it and
has paid all Taxes shown to be due and payable on such returns, including
interest and penalties, and all other Taxes which are payable by the Company or
any of its Subsidiaries. The Company does not know of any proposed Tax
assessment against the Company or any of its Subsidiaries and all Tax
liabilities of the Company and each of its Subsidiaries are adequately provided
for and no Tax liability of the Company or any of its Subsidiaries has been
asserted by the Internal Revenue Service or any other Governmental Authority for
Taxes in excess of those already paid.
SECTION 6.17. Ownership of Properties; Liens. The Company and each of
its Subsidiaries has good and marketable fee simple or leasehold title to their
respective properties and assets, real and personal, including, without
limitation, all assets reflected in the Pro Forma Opening Balance Sheet and all
assets which are used by the Company and its Subsidiaries in the operation of
their respective businesses, and none of such properties or assets is subject to
any Lien of any kind, other than Permitted Encumbrances. Schedule 6.17 attached
hereto contains an accurate and complete description of all real property owned,
leased or otherwise utilized by the Company or any of its Subsidiaries,
including the name of the owner or lessee of such real property and a complete
description of leases related thereto.
SECTION 6.18. Licenses, Permits, Etc. The Company and each of its
Subsidiaries possess all franchises, certificates, licenses, permits, consents,
authorizations, exemptions and orders of Governmental Authorities as are
necessary to carry on their respective businesses as now being conducted and as
proposed to be conducted, except to the extent a failure to have such
franchises, certificates, licenses, permits, consents, authorizations,
exemptions and orders could not have a Material Adverse Effect.
SECTION 6.19. Proprietary Rights. The Company and each of its
Subsidiaries has ownership of, or valid licenses to use, all trademarks,
copyrights, patents and other proprietary rights used in their respective
businesses. To the best of the Company's knowledge, the operation of the
businesses of the Company and its Subsidiaries does not infringe any patent,
copyright, trademark or other proprietary rights of others, and, neither the
Company nor any of its Subsidiaries has received any notice from any third party
of any such alleged infringement by the Company or any of its Subsidiaries. The
Company and each of its Subsidiaries has taken reasonable steps to establish and
preserve its respective ownership of all patents, copyrights, trademarks, trade
secrets and other proprietary rights. The Company is not aware of any
infringement by others of its or any its Subsidiaries' patents, copyrights,
trademarks or other proprietary rights.
SECTION 6.20. Compliance with Laws. The business and operations of the
Company and each of its Subsidiaries have been and are being conducted in all
material respects in accordance with all applicable Laws.
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SECTION 6.21. Environmental Matters. Except with respect to matters
that individually or in the aggregate could not reasonably be expected to result
in a Material Adverse Effect, (a) No part of the Company or any of its
Subsidiaries' assets, including, without limitation, any real property owned or
leased by the Company or any of its Subsidiaries contains Environmental
Contamination, (b) none of the Company or any of its Subsidiaries has caused or
suffered to occur any Hazardous Discharge, (c) none of the Company or any of its
Subsidiaries has been and such Persons are not currently involved in operations
at or near any real property owned, operated or leased by the Company or any of
its Subsidiaries which could reasonably be expected to lead to the imposition on
the Company or any of its Subsidiaries of liability or creation of a Lien on the
Company or any of its Subsidiaries's assets under any Environmental Law and
Laws, (d) none of the Company or any of its Subsidiaries has any knowledge of
any Environmental Complaint relating to past or present operations of the
Company or any of its Subsidiaries, (e) no Environmental Complaint has been
received by the Company or any of its Subsidiaries in connection with any
Hazardous Discharge at any properties or assets owned or leased by other Persons
except with respect to matters which have been fully and finally resolved to the
satisfaction of such Persons and the parties making the Environmental Complaint,
(f) all activities of the Company and its Subsidiaries are being and have been
and will at all times in the future be conducted in compliance with all
applicable Environmental Law and Laws, and (g) there are no facts, conditions or
circumstances, which if discovered by a Governmental Authority or other party,
could form the basis for or could cause such Governmental Authority or other
party to assert an Environmental Complaint.
SECTION 6.22. Burdensome Obligations. Neither the Company nor any of
its Subsidiaries nor any of their respective properties or assets is subject to
any Law, rule, regulation, order or decree of any Governmental Authority or any
pending or threatened change of Law, rule, regulation, order or decree of any
Governmental Authority, or is subject to any restriction under its Charter
Documents or under any agreement or instrument to which it is a party or by
which it or any of its properties (now owned or hereafter acquired) may be
subject or bound, which is so unusual or burdensome as to be likely in the
foreseeable future to have a Material Adverse Effect on the business, operations
or financial condition of the Company or any of its Subsidiaries.
SECTION 6.23. Fiscal Year. The Company's fiscal year is from January 1
to December 31.
SECTION 6.24. No Default. Neither a Default nor an Event of Default has
occurred.
SECTION 6.25. Insurance. Schedule 6.25 attached hereto contains a
complete and accurate list and description of all insurance policies maintained
by the Company as of the date hereof.
SECTION 6.26. Government Regulation. Neither the Company nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding the
Company Act of 1935, the Interstate Commerce Act (as either of the preceding
acts have been amended), or any other Law which regulates the incurring by the
Company or any of its Subsidiaries of Debt, including, but not limited to, Laws
relating to common contract carriers of the sale of electricity, gas, steam,
water or other public utility services.
SECTION 6.27. Casualties. Neither the businesses nor the properties of
the Company or any of its Subsidiaries are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or other casualty (whether or not covered by
insurance).
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SECTION 6.28. Investment Company Act. Neither the Company nor any of
its Subsidiaries is an "investment company" registered or required to be
registered under the Investment Company Act of 1940 as amended. Neither the
Company nor any of its Subsidiaries is controlled by such a company.
SECTION 6.29. Securities Laws. The offer, issuance and sale of the
Securities and the Warrant Shares (a) are and will be exempt from the
registration and prospectus delivery requirements of the Securities Act, (b)
have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities Laws, and (c) are and will be accomplished in
conformity with all other federal and applicable state securities Laws.
SECTION 6.30. Brokers and Finders. Schedule 6.30 attached hereto sets
forth all arrangements (including amounts payable by the Company or any of its
Subsidiaries in connection therewith) pursuant to which any Person has, or as a
result of the Closing Transactions will have, any right or valid claim against
the Company or any of its Subsidiaries for any commission, fee or other
compensation as an investment banker, finder or broker, or in any similar
capacity, other than fees payable to the Investors. No Person has or will have
any right or valid claim against either Investor for any such commission, fee or
other compensation. The Company will indemnify and hold each Investor harmless
against any liability or expense arising out of, or in connection with, any such
right or claim (including, without limitation, claims arising out of the matters
disclosed on Schedule 6.30).
SECTION 6.31. Full Disclosure. No information heretofore furnished by
or on behalf of the Company or any of its Subsidiaries to either Investor for
the purposes of this Agreement or any other Transaction Document or any
transaction contemplated hereby or thereby, contained, and no written
information hereafter furnished by or on behalf of the Company or any of its
Subsidiaries to either Investor for purposes of this Agreement or any other
Transaction Document or any transaction contemplated hereby or thereby will
contain, any untrue statement of a material fact or omit a material fact
necessary to make the statements therein not misleading. There is no fact or
circumstance known to the Company which may have a Material Adverse Effect on
the Company or any of its Subsidiaries which has not been disclosed to each
Investor.
SECTION 6.32. Small Business Concern. The Company, together with its
"affiliates" (as that term is defined in Xxxxx 00, Xxxxxx Xxxxxx Code of Federal
Regulations Section 121.103) is a "small business concern" within the meaning of
Section 107.50 of Title 13 of the United States Code of Federal Regulations. The
information to be included in the forms referred to in Section 5.1(a)(ix)
hereof, when such forms are completed and executed by the Company, will be
accurate and complete in all respects.
SECTION 6.33. Year 2000. Any reprogramming required to permit the
proper functioning in and following the year 2000 of computer systems and other
equipment containing embedded microchips, in either case owned or operated by
the Company or any of its Subsidiaries or used or relied upon in the conduct of
their business (including any such systems and other equipment supplied by
others or with which the computer systems of the Company or any of its
Subsidiaries interface), and the testing of all such systems and other equipment
as so reprogrammed, will be completed on or prior to November 30, 1999. Except
for any reprogramming referred to above, the computer systems of the Company and
its Subsidiaries are and, with ordinary course upgrading and maintenance, will
continue to be sufficient for the conduct of their business as currently
conducted.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
In order to induce the Company to issue and sell the Securities to the
Investors hereunder, each Investor hereby severally (but not jointly) represents
and warrants to the Company, with respect to itself only, as follows:
SECTION 7.1. Due Authorization; No Conflicts. The execution, delivery
and performance by each of the Investors of this Agreement and the Shareholders
Agreement (a) are within each Investor's partnership powers, (b) have been duly
authorized by all necessary partnership or corporate action on the part of each
of the Investor, and (c) do not conflict with or violate any law, rule or
regulation applicable to each Investors, including, without limitation,
applicable regulations of the Small Business Administration.
SECTION 7.2. Securities Representations.
(a) No Intended Distribution. Each Investor is acquiring the
Securities to be purchased by it (and, if the Warrants are exercised, the
Warrant Shares) for investment purposes only, for its own account, and not as
nominee or agent for any other Person, and not with a view to, or for resale in
connection with, any distribution thereof within the meaning of the Securities
Act.
(b) Accredited Investor. Each Investor is an "accredited
investor" within the meaning of Rule 501 under the Securities Act. Neither
Investor was organized for the specific purpose of acquiring the Securities.
(c) Investment Experience. Each Investor has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company's stage of development so as to be able to evaluate the
risks and merits of its investment in the Company, and each Investor is able
financially to bear the risks thereof.
(d) Access to Books and Records; Opportunity to Ask Questions.
(i) Each Investor has been given full and adequate access
to, and an opportunity to inspect and review, the financial statements of the
Company and to all such other books an records of the Company relating to the
business, finances and operations of the Company.
(ii) Each Investor has been given the opportunity to ask
questions of, or receive answers from, the executive officers and directors
of the Company concerning the business, financial condition and prospects of the
Company.
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ARTICLE VIII
AFFIRMATIVE COVENANTS
The Company agrees to comply in every respect with each covenant
contained in this Article VIII; provided, that, to the extent specifically
indicated in any section of this Article VIII, the Company shall not be
obligated to comply with the covenants contained in such section after the
Redemption Date; and, provided, further, that, the Company shall not be required
to comply with any covenant contained in this Article VIII (a) after the
Redemption Date to the extent the Warrants and Warrant Shares then outstanding
represent less than five percent (5%) of the issued and outstanding Common Stock
of the Company on a Fully Diluted Basis or (b) after the Redemption Date and
after the consummation of a Qualified Public Offering so long as the Company
complies with all applicable reporting requirements under the Exchange Act.
SECTION 8.1. Information. The Company will deliver, or cause to be
delivered, to each Preferred Shareholder and Warrant Holder:
(a) Annual Statements. As soon as available, and in any event
within ninety (90) days after the end of each fiscal year of the Company, a
consolidated and consolidating balance sheet of the Company and its Consolidated
Subsidiaries as of the end of such fiscal year and the related consolidated
statements of income and cash flow for such fiscal year, setting forth in each
case (i) in comparative form the figures for the previous fiscal year, and (ii)
comparative figures with respect to the operating budget required to be
delivered pursuant to Section 8.1(d) hereof, all reported by the Company in
accordance with GAAP and audited by independent public accountants of nationally
recognized standing;
(b) Monthly Statements. As soon as available, and in any event
within thirty (30) days after the end of each calendar month, a listing of all
outstanding performance and payment bonds (which only needs to be delivered
every third month), a consolidated and consolidating balance sheet of the
Company and its Consolidated Subsidiaries as of the end of such month and the
related consolidated statements of income and cash flow for such month, setting
forth in each case (i) in comparative form the figures for the corresponding
month of the Company's previous fiscal year, and (ii) comparative figures with
respect to the operating budget required to be delivered pursuant to Section
8.1(d) hereof, all certified as to fairness of presentation, GAAP and
consistency by the Financial Officer of the Company; provided, that, such
financial statements are subject to normal year end audit adjustments, which in
the aggregate will not be material, and such financial statements may not
conform to GAAP to the extent they do not contain footnotes;
(c) Financial Officer's Certificate. Together with the
financial statements and related information required to be delivered to the
holders of Securities pursuant to Sections 8.1(a) and (b) hereof, a certificate
of the Financial Officer of the Company which shall, (i) until the Redemption
Date, set forth in reasonable detail the calculations required to establish
whether the Company were in compliance with the requirements of Article X hereof
on the date of such financial statements, (ii) state whether there exists on the
date of such certificate any Default or Event of Default and, if any Default or
Event of Default then exists, setting forth the details thereof and the action
which the Company is taking or propose to take with respect thereto, and (iii)
state whether or not such financial statements fairly reflect the consolidated
business and financial condition of the Company and its Consolidated
Subsidiaries as of the date of the delivery of such financial statements;
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(d) Budget. On or before fifteen (15) days before the
commencement of each fiscal year of the Company, an operating budget for the
Company for such fiscal year which shall be prepared in the form of the monthly
financial statements required to be delivered pursuant to Section 8.1(b) hereof,
and shall set forth projected revenues, operating expenses, income, cash flow,
Capital Expenditures, Debt and balance sheet conditions of the Company for such
fiscal year. Such budget shall (i) be based on assumptions set forth therein
which the Company believes to be reasonable at the time such budget is delivered
to the holders of the Securities, (ii) be prepared based on sound financial
planning practices, (iii) represent the Company's best estimate based on then
existing circumstances of the financial condition and results of operation for
the Company for such fiscal year, and (iv) be accompanied by a certificate of
the Financial Officer of the Company certifying as to the matters set forth in
(i), (ii) and (iii) preceding;
(e) Accountant's Letters. In addition to the audit report
required by Section 8.1(a) hereof, copies of all "management letters", reports
or other material information or correspondence provided to the Company by its
auditors;
(f) Defaults. Immediately upon any Authorized Officer of the
Company becoming aware of the occurrence of any Default hereunder, a certificate
of an Authorized Officer of the Company setting forth the details thereof and
the action which the Company is taking or proposes to take with respect thereto;
(g) Shareholder Information. Promptly upon the mailing thereof
to the shareholders of the Company generally, copies of all financial
statements, reports and proxy statements so mailed;
(h) SEC Reports. Promptly upon the filing thereof, copies of
all registration statements, amendments and supplements thereto and annual,
quarterly or special reports and amendments thereto which the Company may file
with the Commission;
(i) Litigation. Promptly upon any Authorized Officer of the
Company becoming aware thereof, notice (i) of the commencement of any
litigation, arbitration or similar proceeding by or against the Company or any
of its Subsidiaries in which the amount in controversy is in excess of $100,000,
(ii) of the occurrence of any event or existence of any condition which could
reasonably be anticipated to have a Material Adverse Effect on the Company or
any of its Subsidiaries, or (iii) of the occurrence of a default under any Debt
owing by the Company or any of its Subsidiaries or any default under any
Material Agreement to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries or any of their properties is
bound; and
(j) Other Information. From time to time such additional
information regarding the financial position or businesses of the Company or any
of its Subsidiaries as any holder of Securities may reasonably request.
SECTION 8.2. Right of Inspection. The Company will, and will cause each
of its Subsidiaries to, permit any officer, employee or agent of any holder of
Securities or any of its Affiliates upon reasonable notice and during normal
business hours to visit and inspect any of the assets of the Company or any of
its Subsidiaries, to examine the Company's or any its Subsidiaries' books,
records, accounts and correspondence, take copies and extracts therefrom, and
discuss the affairs, finances and accounts of the Company or any of its
Subsidiaries with their respective officers, accountants, auditors and
customers, including the review of any assets of the Company or any its
Subsidiaries located at third-party locations.
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SECTION 8.3. Maintenance of Insurance. The Company will, and will cause
each of its Subsidiaries to, at all times maintain or cause to be maintained
insurance issued by insurers of recognized responsibility covering such risks
and in such amounts as are customary in the case of companies of established
reputation engaged in the same or similar business and similarly situated.
SECTION 8.4. Payment of Taxes and Claims. The Company will, and will
cause each of its Subsidiaries to, pay when due (a) all Taxes imposed upon it or
its respective assets and, with respect to its respective franchises, business,
income or profits, pay such Taxes before any material penalty or interest
accrues thereon, and (b) all material claims (including, without limitation,
claims for labor, services, materials and supplies) for sums which have become
due and payable; provided, however, no payment of Taxes or claims shall be
required if (i) the amount, applicability or validity thereof is being contested
in good faith by appropriate action promptly initiated and diligently conducted
in accordance with good business practices and no material part of the property
or assets of each holder of Securities is the subject of any pending levy or
execution, and (ii) the Company has notified each holder of Securities of such
circumstances in reasonable detail.
SECTION 8.5. Compliance with Laws and Documents. The Company will, and
will cause each of its Subsidiaries to, comply in all material respects with the
provisions of (a) all Laws, (b) its Charter Documents, and (c) every Material
Agreement to which the Company or any of its Subsidiaries is a party or by which
the Company's or any of its Subsidiaries' properties are bound.
SECTION 8.6. Operation of Properties and Equipment. The Company will,
and will cause each of its Subsidiaries to, at all times, maintain, preserve and
keep all operating equipment used or useful in the operation of their respective
businesses in proper repair, working order and condition, and make all necessary
or appropriate repairs, renewals, replacements, additions and improvements
thereto so that the efficiency of such equipment shall at all times be properly
preserved and maintained; provided, that, no item of operating equipment need be
so repaired, renewed, replaced, added to or improved, if the Company shall in
good faith determine that such action is not necessary or desirable for the
continued efficient and profitable operation of the Company's and its
Subsidiaries' businesses.
SECTION 8.7. Additional Documents. The Company will, and will cause
each of its Subsidiaries to, cure promptly any defects in the creation and
issuance of the Securities, and the execution and delivery of this Agreement and
the other Transaction Documents, and, at the Company's sole expense, promptly
and duly execute and deliver, and cause each of its Subsidiaries to promptly
execute and deliver, to the holders of the Securities, upon reasonable request,
all such other and further documents, agreements and instruments in compliance
with or accomplishment of the covenants and agreements of the Company and each
of its Subsidiaries in this Agreement and the other Transaction Documents, all
as may be reasonably necessary or appropriate in connection therewith.
SECTION 8.8. ERISA. Within thirty (30) days after receipt thereof, the
Company shall furnish to each holder of Securities (a) a copy of any notice,
determination letter, ruling or opinion the Company or any of its Subsidiaries
or any ERISA Affiliate receives from the United States Department of Labor or
the Internal Revenue Service with respect to any Plan, (b) notification of any
material increases in the benefits of any existing Plan or the establishment of
any new Plan, or the commencement of contributions to any Plan to which the or
any of its Subsidiaries or any ERISA Affiliate was not previously contributing,
and (c) notice of all actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency or instrumentality
affecting the Company or any of its Subsidiaries or any ERISA Affiliate
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with respect to any Plan, except those which, in the aggregate, if adversely
determined could not have a Material Adverse Effect.
SECTION 8.9. Election as Director; Directors Meetings; Representation.
(a) As provided in the Series D Stock Designation, the Preferred Shareholders
(or the Warrant Holders after the Redemption Date) shall have the right to elect
one (1) person to the Company's board of directors. After the Redemption Date,
the Warrant Holders shall have the right to designate one person to be elected
to the Company's board of directors and the Company shall cause its shareholders
to elect such person designated by the Warrant Holders. At any time when either
of the Preferred Shareholders or the Warrant Holders, as the case may be, have
not made such designation, the Company shall permit a representative of the
Preferred Shareholders or the Warrant Holders, as the case may be, to attend as
an observer all meetings of the Company's board of directors. At any time when
the Preferred Shareholders or the Warrant Holders, as the case may be, have the
right to require its designee to be elected to the board of directors of the
Company pursuant to the Series D Stock Designation or this Section 8.9, the
Company shall hold a meeting of its board of directors not less often than
quarterly and will provide the Preferred Shareholders' or the Warrant Holders',
as the case may be, designee on the board (or its representative observer) the
same notice of meetings provided to other directors generally; provided, that,
in no event will the Company provide such designee or representative observer
less than five (5) Business Days' notice of any meeting of the board of
directors (or less than two (2) Business Days' notice in the case of any
telephonic meeting of the board of directors).
(b) In the event the Company proposes to take any action by written
consent of directors in lieu of a meeting, the Company shall provide a copy of
the proposed written consent to the Preferred Shareholders' or Warrant Holders'
designee or representative observer not less than one (1) Business Day prior to
the date such consent is to be executed. The Company will provide to the
Preferred Shareholders' or the Warrant Holders' designee or representative
observer all other written information provided to directors of the Company
generally.
(c) The Company will reimburse the Preferred Shareholders' or the
Warrant Holders', as the case may be, designee or representative observer of all
reasonable costs incurred in connection with attending any meeting of the board
of directors or otherwise incurred in connection with fulfilling its duties as a
director of the Company. All directors designated or elected by the Preferred
Shareholders or Warrant Holders shall be paid the same board of directors fees
paid to all other non-employee directors of the Company.
SECTION 8.10. Maintenance of Books and Records. The Company will, and
will cause each of its Subsidiaries to, maintain proper books of record and
account in which true and correct entries in conformity with GAAP shall be made
on a timely basis of all dealings and transactions in relation to the Company's
and its Subsidiaries' businesses and activities.
SECTION 8.11. Environmental Matters.
(a) The Company will, and will cause each of its Subsidiaries to,
comply with all Environmental Law and Laws applicable to their respective
properties and operations, including, without limitation, all Hazardous
Substances transportation, storage, disposal, remediation and similar
requirements of applicable Environmental Law and Laws.
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(b) Notwithstanding any other provision contained within this Agreement
or the other Transaction Documents, the Company shall immediately orally notify
each holder of Securities of any Hazardous Discharge or the receipt of any
Environmental Complaint relating to any property or assets owned by the Company
or any of its Subsidiaries or affecting any properties or assets owned or leased
by other Persons and shall furnish each holder of Securities with written notice
of such Hazardous Discharge or Environmental Complaint within five (5) days of
the oral notification.
SECTION 8.12 Additional Subscription Rights. In the event that the
Company determines to issue or sell additional, unissued or treasury shares of
its capital stock (or securities convertible into or having a right to acquire
or subscribe for such additional shares), subject to the limitation herein, the
Company shall notify each Warrant Holder in writing of such determination and
shall afford each of them the opportunity to subscribe for their respective
ratable portion of such additional shares or securities, as the case may be, at
the price and on the terms that such shares or securities, as the case may be,
are proposed to be issued or sold by the Company in order that each Warrant
Holder may maintain their respective proportionate interests in the Company.
Each Warrant Holder shall have 15 calendar days from the date of such notice to
notify the Company in writing of their respective intentions to purchase their
respective ratable share of such shares or securities, as the case may be. The
failure by a Warrant Holder to so notify the Company during such time period
shall be deemed a waiver of such Warrant Holder's rights hereunder. If any
issuance or sale of capital stock described in this section has not been
completed within 150 days following the date that the Company delivers its
notice to each Warrant Holder pursuant to this section, the Company shall not
thereafter issue or sell any additional shares or securities described in this
section without first offering such securities to each Warrant Holder in the
manner provided above. Notwithstanding the foregoing, pursuant to this section,
no Warrant Holder shall have the right to acquire (a) any shares of Common Stock
to be sold in a Qualified Public Offering or (b) any Exempt Shares.
SECTION 8.13 Year 2000. The Company shall, and shall cause each of its
Subsidiaries to, take all actions reasonably necessary to assure that the
Company's and its Subsidiaries' computer based systems are able to operate and
effectively process data which includes dates on and after January 1, 2000. At
the request of either Investor, the Company shall provide reasonable assurances
satisfactory to the Investors of the Company's and its Subsidiaries' Year 2000
compatibility.
SECTION 8.14 Unlocking Right. If at any time after November 1, 2004,
the Company receives a bona fide, unsolicited offer from any Person to
consummate a transaction which would result in a Sale and in which the
consideration to be received by the Company's shareholders consist solely of
cash or publicly traded securities (the "Offer"), then the Company shall provide
within one (1) Business Day of the receipt of such Offer by the Company written
notice to each Holder of the Offer which shall contain the material terms of the
Offer ("Offer Notice"). For a period of thirty (30) days from the date of the
Offer Notice, the Holders by written notice to the Company ("Acceptance Notice")
shall have the right to elect to accept the Offer and sell the Securities owned
by it on the terms and conditions set forth in the Offer. Upon receipt of any
Acceptance Notice, the Company shall have the right to either (a) accept the
Offer and consummate the transaction proposed in the Offer or (b) purchase all
of the Securities held by such Holders at the Unlocking Price. If the Company
elects to purchase all of the Securities held by such Holders at the Unlocking
Price, the Company shall make payment for such Securities in cash within thirty
(30) days of the date of the Acceptance Notice.
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ARTICLE IX
NEGATIVE COVENANTS
Until the Redemption Date, the Company will comply in every respect
with each covenant contained in this Article IX; provided, however, the Company
shall not be required to comply with any covenant contained in this Article IX
to the extent such non-compliance has been consented to in writing by the
holders of a majority of the outstanding Preferred Shares.
SECTION 9.1. Distributions. The Company will not, nor will it permit
any of its Subsidiaries to, make any Distribution other than (a) Distributions
to the Investors required hereunder, (b) the Subsidiaries of the Company may
make Distributions to the Company and to wholly owned Subsidiaries of the
Company (c) so long as no Default or Event of Default exists or would result
from payment thereof and all accrued dividends on the Preferred Stock have been
paid in full in cash, regularly scheduled cash Distributions in respect of the
Junior Preferred Stock, and (d) regularly scheduled Distributions in respect of
Junior Preferred Stock paid solely in shares of such class of Junior Preferred
Stock for which such Distribution is being paid.
SECTION 9.2. Business of the Company. The Company and its Subsidiaries
will not engage in any business other than the business conducted as of the
Closing Date.
SECTION 9.3. Liens. The Company will not, and will not permit any of
its Subsidiaries to, create, assume or permit to exist any Lien of any kind
against any of the assets of any character of the Company or any of its
Subsidiaries, whether owned as of the date of this Agreement or hereafter
acquired, except Permitted Encumbrances.
SECTION 9.4. Incurrence of Debt and Guarantees. The Company will not,
and will not permit any of its Subsidiaries to, incur, become or remain liable
for any Debt other than Permitted Debt.
SECTION 9.5. Modification of Capitalization Documents; Ancillary
Agreements. The Company will not, nor will it permit any of its Subsidiaries to,
enter into any amendment or modification of its Charter Documents or the
Ancillary Agreements or waive or fail to enforce any material right of the
Company or any of its Subsidiaries thereunder; provided, however, the Company
and its Subsidiaries shall be permitted to amend the Wachovia Senior Debt
Documents and the ACS Subordinate Debt Documents so long as such amendments do
not (a) accelerate the date on which payments are due under the Wachovia Senior
Debt Documents or the ACS Subordinate Debt Documents, (b) increase the interest
rate applicable to the Wachovia Senior Debt or ACS Subordinate Debt, or (c) make
more restrictive any covenant in the Wachovia Senior Debt Documents or the ACS
Subordinate Debt Documents.
SECTION 9.6. Consolidations, Mergers, Sales of Assets, and Maintenance.
The Company will not, nor will it permit any of its Subsidiaries to, (a)
consolidate or merge with or into any other Person, (b) sell, lease, transfer or
otherwise dispose of, in one or more transactions or series of transactions,
assets of the Company and its Subsidiaries which represent five percent (5%) or
more of the fair market value of all of the assets of the Company and its
Subsidiaries, taken as whole (other than the sale of Inventory in the ordinary
course of business or the sale or exchange of trade equipment), (c) terminate,
or fail to maintain its existence in its jurisdiction of incorporation, or (d)
terminate, or fail to maintain its good standing and qualification to transact
business in all jurisdictions where the failure to maintain its good standing or
qualification to transact business could have a Material Adverse Effect.
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SECTION 9.7. Use of Proceeds. The proceeds of the issuance and sale of
the Securities hereunder will be used by the Company solely (a) to fund a
portion of the purchase prices of the TWR Acquisition and the MTG Acquisition,
(b) to pay the fees and closing expenses directly related to the Closing
Transactions and (c) for general corporate purposes including but not limited to
the repayment of debt and funding working capital requirements.
SECTION 9.8. Investments. The Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, make any Investment other than
Permitted Investments.
SECTION 9.9. Transactions with Affiliates. The Company will not, and
will not permit any of its Subsidiaries to, enter into any transaction with an
Affiliate or make any payment to an Affiliate (whether in cash or property) of
any type other than (a) compensation paid to the executive officers of the
Company or any of its Subsidiaries which is permitted pursuant to Section 9.14
hereof and (b) advances for, and reimbursement of, reasonable travel,
entertainment and similar expenses.
SECTION 9.10. ERISA. The Company will not, and will not permit any of
its Subsidiaries or any ERISA Affiliate to, directly or indirectly, (a)
terminate any Pension Plan so as to result in any material liability to the
Company or any of its Subsidiaries or any ERISA Affiliate, (b) establish, or
become obligated to contribute to or provide benefits under, any Pension Plan,
(c) incur any obligation to provide post-employment health care benefits to any
of their current or former employees, except as required by COBRA and except as
required by the employment agreements described on Schedule 7.12 attached
hereto, (d) enter into any new Plan or modify any existing Plan so as to
increase its obligations thereunder except in the ordinary course of business
consistent with past practice which could result in any material liability to
the Company or any of its Subsidiaries or any ERISA Affiliate, or (e) permit to
exist any circumstances with respect to any Pension Plan that would have a
Material Adverse Effect.
SECTION 9.11. Fiscal Year. The Company will not change its fiscal year.
SECTION 9.12. Capital Expenditures. The Company will not, and will not
permit any of its Subsidiaries to, make Capital Expenditures in any fiscal year
in excess of $1,500,000.
SECTION 9.13. Lease Obligations. The Company will not, and will not
permit any of its Subsidiaries to, enter into or become or remain liable as
lessee under any Operating Leases which require aggregate annual Rentals in
excess of $1,800,000.
SECTION 9.14. Executive Compensation. The Company will not, and will
not permit any of its Subsidiaries to, make payments of salary or bonus or
otherwise provide compensation (including benefits) to its principal executive
officers or employees which are in excess of those customarily paid by companies
engaged in the industry in which the Company and its Subsidiaries is engaged and
which have been approved by the compensation committee of the Company's board of
directors.
SECTION 9.15. Acquisitions. The Company will not, and will not permit
any of its Subsidiaries to, acquire all or substantially all of the assets of
any Person or any operating division of any Person other than Permitted
Acquisitions.
SECTION 9.16. Equity Issuances. The Company will not, and will not
permit any of its Subsidiaries, to issue any shares of Common Stock or any
options, rights or warrants to subscribe for or
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purchase such Common Stock (or securities convertible into such Common Stock)
other than (a) Exempt Shares or (b) securities issued in connection with
Permitted Acquisitions.
ARTICLE X
DEFAULTS
SECTION 10.1. Events of Default. If one or more of the following events
(collectively, "Events of Default" and individually, an "Event of Default")
shall have occurred and be continuing:
(a) the Company shall fail to pay when due any redemption
obligation with respect to the Preferred Shares or the Company shall fail to pay
any amount payable upon an exercise of the Put; provided, however, the issuance
of a Put Note shall not be deemed a failure to pay under this subsection;
(b) the Company shall fail to pay when due any fees, expenses,
reimbursements, indemnification payments or other monetary obligations in an
aggregate amount in excess of $25,000 when due under any of the Transaction
Documents (other than amounts referenced in Section 10(a) or (b)) and such
failure shall continue for ten (10) days following the notice of such
non-payment;
(c) the Company shall fail to observe or perform any covenant
or agreement contained in Section 8.9 or Article IX hereof;
(d) the Company shall fail to observe or perform any covenant
or agreement contained in this Agreement or any other Transaction Document
(other than those covenants referenced in Sections 10.1(a), (b) and (c)) and
such failure shall continue for a period of thirty (30) days following the
earlier of (i) the discovery of such failure by an Authorized Officer of the
Company, or (ii) the date notice of such failure is given by the Investors to
the Company;
(e) any representation, warranty, certification or statement
made or deemed to have been made by the Company in this Agreement or any of the
other Transaction Documents or the Company or any other Person on behalf of the
Company in any certificate, financial statement or other document delivered
pursuant to this Agreement or any of the other Transaction Documents, shall
prove to have been incorrect in any material respect when made;
(f) a default or event which, with the giving of notice, lapse
of time or both could (unless cured or waived) become a default, shall occur
under the terms of the ACS Subordinate Debt or Wachovia Senior Debt;
(g) the Company or any of its Subsidiaries shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar Law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
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(h) an involuntary case or other proceeding shall be commenced
against the Company or any of its Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar Law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of sixty (60) days; or an order for relief shall be entered against the
Company under the federal bankruptcy Laws as now or hereafter in effect;
(i) one (1) or more final, non-appealable judgments or orders
for the payment of money aggregating in excess of $250,000 which is not fully
covered by insurance shall be rendered against any member of the Company or any
of its Subsidiaries and such judgment or order (i) shall continue unsatisfied
and unstayed for a period of thirty (30) days, or (ii) is not fully paid and
satisfied at least ten (10) days prior to the date on which any of its assets
may be lawfully sold to satisfy such judgment or order; or
(j) any Change of Control;
then, so long as any such event is continuing, (i) the Preferred Shareholders
may exercise all rights provided in the Series D Stock Designation, including,
without limitation, the right to require the redemption of the Preferred Shares
at the Liquidation Value as defined and specified herein and in the Series D
Stock Designation, and (ii) the Holders of the Securities and any outstanding
Warrant Shares may take such other actions as may be permitted by the
Transaction Documents or applicable Law.
ARTICLE XII
MISCELLANEOUS
SECTION 11.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex, telecopy
or similar writing) and shall be given to such party at its address, telex or
telecopy number set forth on the signature pages hereof or such other address,
telex or telecopy number as such party may hereafter specify for the purpose by
notice to the other party. Each such notice, request or other communication
shall be effective (i) if given by telex or telecopy, when such telex or
telecopy is transmitted to the telex or telecopy number specified in this
Section 11.1 and the appropriate answer back is received or receipt is otherwise
confirmed, (ii) if given by mail, three (3) Business Days after deposit in the
mails with first class postage prepaid, addressed as aforesaid, or (iii) if
given by any other means, when delivered at the address specified in this
Section 11.1.
SECTION 11.2. No Waivers. No failure or delay by any holder of
Securities in exercising any right, power or privilege hereunder or under any
other Transaction Document shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by Law or in any of the other Transaction Documents.
SECTION 11.3. Expenses; Indemnification. (a) The Company shall pay on
demand (i) all out-of-pocket expenses incurred by the Investors, including
reasonable fees and disbursements of counsel for the Investors, in connection
with (A) the Investors' due diligence investigation and analysis of the Company
and the Closing Transactions, (B) the preparation and negotiation of this
Agreement and the other Transaction Documents and the closing of the
transactions contemplated hereby and thereby, and (C) any
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waiver or consent which may be granted in connection herewith, or any amendment
hereof or of any other Transaction Document, and (ii) if an Event of Default
occurs, all out-of-pocket expenses incurred by each holder of Securities,
including (A) reasonable fees and disbursements of counsel to each holder of
Securities in connection with such Event of Default and collection and other
enforcement proceedings resulting therefrom, and (B) reasonable fees of auditors
and consultants incurred by each holder of Securities in connection therewith.
(b) The Company agrees to indemnify and hold harmless, each
Investor and each subsequent holder of Securities and their respective
directors, officers, employees, agents, successors and assigns (collectively,
the "Indemnified Parties") from and against any and all liabilities, losses,
damages, costs and expenses of any kind (including, without limitation, the
reasonable fees and disbursements of counsel for the Indemnified Parties in
connection with any investigative, administrative or judicial proceeding,
whether or not any such Indemnified Party shall be designated a party thereto)
which may be incurred by any Indemnified Party relating to or arising out of (a)
this Agreement, the other Transaction Documents, the Closing Transactions and
all other transactions contemplated hereby or thereby and (b) any actual or
proposed use of proceeds of the issuance and sale of the Securities hereunder,
including without limitation, any liability, loss, damage, cost or expense
incurred by any Indemnified Party with respect to, or resulting from any failure
to comply with any or all Laws applicable to the Company or any of its
Subsidiaries; provided, that, no Indemnified Party shall have the right to be
indemnified hereunder for its own gross negligence or willful misconduct, IT
BEING THE INTENTION HEREBY THAT THE INDEMNIFIED PARTIES SHALL BE INDEMNIFIED FOR
THE CONSEQUENCES OF THEIR OWN NEGLIGENCE.
SECTION 11.4. Amendments and Waivers; Sale of Interest. Any provision
of this Agreement and the other Transaction Documents may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Company and (a) prior to the Redemption Date, the Holders of a majority of the
outstanding Preferred Shares, and (b) thereafter, the Majority Warrant Holder.
The Company hereby consents to any participation, sale, assignment, transfer or
other disposition which complies with Article IV, at any time or times
hereafter, of any Securities or Warrant Shares, this Agreement and any of the
other Transaction Documents, or of any portion hereof or thereof, including,
without limitation, any Investor's rights, title, interests, remedies, powers,
and duties hereunder or thereunder.
SECTION 11.5. Survival. All representations, warranties and covenants
made by the Company herein or in any certificate or other instrument delivered
by it or in its behalf under the Transaction Documents shall be considered to
have been relied upon by the Investors and shall survive the delivery to the
Investors of such Transaction Documents and the purchase of the Securities,
regardless of any investigation made by or on behalf of either Investor.
SECTION 11.6. Invalid Provisions. If any provision of the Transaction
Documents is held to be illegal, invalid, or unenforceable under present or
future Laws effective during the term thereof, such provision shall be fully
severable, the Transaction Documents shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part thereof,
and the remaining provisions thereof shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or by
its severance therefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision there shall be added automatically as a part of the
Transaction Documents a provision as similar in terms to such illegal, invalid,
or unenforceable provision as may be possible and be legal, valid and
enforceable.
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SECTION 11.7. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
otherwise transfer any of its rights or obligations under this Agreement.
SECTION 11.8. GOVERNING LAW. THIS AGREEMENT AND THE TRANSACTION
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS.
SECTION 11.9. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when the Investors shall have received
counterparts hereof signed by all of the parties hereto.
SECTION 11.10. No Third Party Beneficiaries. It is expressly
intended that there shall be no third party beneficiaries of the covenants,
agreements, representations or warranties herein contained other than
transferees or assignees of all or any part of the Investors' interest
hereunder.
SECTION 11.11. FINAL AGREEMENT. THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS COLLECTIVELY REPRESENT THE FINAL AGREEMENT AMONG
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 11.12. SUBMISSION TO JURISDICTION; WAIVER OF SERVICE AND
VENUE. ANY SUIT, ACTION OR PROCEEDING BROUGHT BY INVESTORS WITH RESPECT TO THIS
AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS MAY BE BROUGHT IN THE COURTS
OF THE STATE OF TEXAS, COUNTY OF DALLAS, OR IN THE FEDERAL COURTS LOCATED IN THE
NORTHERN DISTRICT OF TEXAS, AS THE INVESTORS MAY SELECT IN ITS SOLE DISCRETION.
THE COMPANY HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS FOR
THE PURPOSE OF ANY SUCH SUIT, ACTION OR PROCEEDING. THE COMPANY HEREBY
IRREVOCABLY WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT BROUGHT IN THE COURTS LOCATED
IN THE STATE OF TEXAS, COUNTY OF DALLAS, AND HEREBY WAIVES ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
ANY INCONVENIENT FORUM.
SECTION 11.13. WAIVER OF RIGHT TO TRIAL BY JURY. EACH INVESTOR AND
THE COMPANY EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT, ANY
TRANSACTION DOCUMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM IN RESPECT TO THIS AGREEMENT. THE INVESTORS AND THE
COMPANY EACH AGREE THAT THE OTHER MAY FILE A COPY OF THIS AGREEMENT WITH
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ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
SECTION 11.14 Issue Price. The Company and the Investors hereby
agree that for purposes of IRC Treasury Regulations Section 1.305-5(b), (a) the
"issue price" of the Preferred Shares is $7,000,000 and (b) the fair market
value of the Warrants is $500,000. The Company and the Investors agree to use
the foregoing issue price and fair market value for U.S. federal tax purposes
with respect to the transactions contemplated by this Agreement (unless
otherwise required by a final determination by the Internal Revenue Service or a
court of competent jurisdiction).
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective Authorized Officers on the day and year first
above written.
COMPANY:
CLEAR HOLDINGS, INC. Address for Notice:
Clear Holdings, Inc.
000 Xxxxxxxxxx Xxxxx Xxxxxxx
By: /s/ Xxxxxxx X. Xxxxxxxx Xxxxxxx, Xxxxxxx 00000
------------------------------------ Fax No. (000) 000-0000
Its: Chairman and Chief Executive Officer Attn: Xxxxxxx Xxxxxxxx, Sr.
------------------------------------
STRATFORD CAPITAL:
STRATFORD CAPITAL PARTNERS, L.P. Address for Notice:
By: Stratford Capital GP Associates, L.P.,
its General Partner Stratford Capital Partners, L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 000
By: Stratford Capital Corporation, Fax No. (000)000-0000
its General Partner Attn: Xxxx X. Xxxxxx
By: /s/ Xxxx X. Xxxxxx
----------------------------------
Xxxx X. Xxxxxx,
Managing Director
STRATFORD EQUITY:
STRATFORD EQUITY PARTNERS, L.P. Address for Notice:
By: Stratford Capital GP Associates, L.P.,
its General Partner Stratford Equity Partners, L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 000
By: Stratford Capital Corporation, Fax No. (000) 000-0000
its General Partner Attn: Xxxx X. Xxxxxx
By: /s/ Xxxx X. Xxxxxx
----------------------------------
Xxxx X. Xxxxxx,
Managing Director
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EXHIBIT A
PROMISSORY NOTE
$ Dallas, Texas [Put Closing Date]
---------------
FOR VALUE RECEIVED, the undersigned, Clear Holdings, Inc., a Georgia
corporation ("Maker"), promises to pay to the order of [Name of Holder]
("Payee"), at its offices in Atlanta, Georgia the sum of
_________________________ and __/100 Dollars ($_________), together with
interest thereon from and after the Put Closing Date at a per annum rate equal
to the prime lending rate as reported daily in The Wall Street Journal as of the
Put Closing Date plus 3%. Interest shall accrue on past due amounts at the
maximum lawful rate. This Note may be prepaid at any time in whole or in part
without premium or penalty.
1. Put Note; Securities Agreement. This Note is issued pursuant to
Section 3.4 of a Securities Agreement dated November 1, 1999, as amended through
the date hereof (the "Agreement") and is a "Put Note" as defined therein. Unless
otherwise defined herein, all terms used herein with their initial letter
capitalized shall have the meaning set forth in the Agreement. This Note
evidences all or a part of the aggregate Put Price paid to Payee by Maker with
respect to Preferred Shares, Warrants and Warrant Shares held by Payee.
2. Terms of Payment. The outstanding principal balance of this Note
shall be payable in equal quarterly installments of $ [8.34% OF THE AGGREGATE
PRINCIPAL AMOUNT OF THE NOTE] on the last day of each ________, ________,
________, and ________ commencing ________ [THREE MONTHS FOLLOWING PUT CLOSING
DATE]. Interest shall be payable on this Note as it accrues on the first day of
each month. The entire outstanding principal balance of this Note and all
accrued but unpaid interest thereon shall be due and payable in full on [3 YEARS
FOLLOWING PUT CLOSING DATE]. This Note may be prepaid in whole or in part at any
time without premium or penalty.
3. Security. [ADDED AS AVAILABLE]
4. Events of Default and Remedies. Without notice or demand (which are
hereby waived), the entire unpaid principal balance of, and all accrued interest
on, this Note shall immediately become due and payable to the option of the
holder hereof upon the occurrence of any of the following events ("Put Note
Event of Default"):
(a) The failure or refusal of Maker to make any payment on this Note on
the date due in accordance with the terms hereof.
(b) The occurrence of an Event of Default (as defined in the
Agreement).
In the event a Put Note Event of Default shall occur, the holder of
this Note may (a) accelerate the maturity of this Note, (b) offset against this
Note any sum or sums owed by the holder hereof to Maker, or (c) proceed to
protect and enforce its rights either by suit in equity and/or by action at law,
or by other appropriate proceedings, whether for the specific performance of any
covenant or agreement contained in this Note or in aid of the exercise of any
power or right granted by this Note or to enforce any other legal or equitable
right of the holder of this Note.
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5. Cumulative Rights. No delay on the part of the holder of this Note
in the exercise of any power or right under this Note or any document,
installment or agreement executed in connection herewith shall operate as a
waiver thereof, nor shall a single or partial exercise of any such power or
right. Enforcement by the holder of this Note of any security for the payment
hereof shall not constitute any election by it of remedies so as to preclude the
exercise of any other remedy available to it.
6. Waiver. Maker, and each surety, endorser, guarantor, and other party
ever liable for the payment of any sum of money payable on this Note, jointly
and severally waive presentment, protest, notice of nonpayment, notice of
intention to accelerate and of acceleration, notice of protest, and any and all
lack of diligence or any delay in collection or the filing of suit hereon which
may occur, and agree that their liability on this Note shall not be affected by
a renewal or extension in the time of payment hereof, by any indulgences, or by
any release or change in any security for the payment of this Note, and hereby
consent to any and all renewals, extensions, indulgences, releases or changes,
regardless of the number of such renewals, extensions, indulgences, releases or
changes.
7. Attorneys Fees and Costs. In the event an Event of Default shall
occur, and in the event that hereafter this Note is placed in the hands of an
attorney for collection, or in the event this Note is collected in whole or in
part through legal proceedings of any nature, then and in any such case Maker
promises to pay all costs of collection, including, but not limited to,
reasonable attorneys' fees incurred by the holder hereof on account of such
collection, whether or not suit is filed.
8. Successors and Assigns. All of the covenants, stipulations,
promises, and agreements contained in this Note by or on behalf of Maker shall
bind its successors and assigns, whether so expressed or not.
9. FINAL AGREEMENT. THIS NOTE, THE AGREEMENT AND THE OTHER WARRANT
DOCUMENTS COLLECTIVELY REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
day and year first above written.
CLEAR HOLDINGS, INC.
By:
-----------------------------------------
Name:
Title:
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FIRST AMENDMENT
TO
SECURITIES PURCHASE AGREEMENT
This First Amendment ("Amendment") to the Purchase Agreement, dated as
of November 1, 1999 (the "Purchase Agreement"), by and among Stratford Capital
Partners, L.P., a Texas limited partnership ("Stratford Capital"), Stratford
Equity Partners, L.P., a Texas limited partnership ("Stratford Equity", and
together with Stratford Capital, the "Investors") and Clear Holdings, Inc., a
Georgia corporation (the "Company"), is made and entered into as of May 9, 2000.
RECITALS
WHEREAS, the Company and the Investors entered into the Purchase
Agreement, pursuant to which (a) the Investors purchased shares of the Company's
Series D Senior Redeemable Preferred Stock and (b) the Investors purchased and
the Company sold and issued warrants to purchase shares of Common Stock of the
Company; and
WHEREAS, the Company and the Investors have agreed to amend the
Purchase Agreement as specifically set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the adequacy, receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise specified herein, all
capitalized terms herein shall have the same meaning as those terms have in the
Purchase Agreement.
2. Amendments.
(a) Section 1.1 of the Purchase Agreement is amended by deleting
the definition of "Put Exercise Date" and replacing it with the following new
definition of "Put Exercise Date":
"Put Exercise Date" means (a) with respect to the Warrants
and Warrant Shares, the earliest of (i) May 9, 2001, (ii) the date of
any Material Event of Default or (iii) the date on which all of the
Preferred Shares have been redeemed, and (b) with respect to the
Preferred Shares, the date of any Mandatory Redemption Event.
(b) Section 3.4(a) of the Purchase Agreement is amended by
adding the following sentence to the end of such section:
54
Notwithstanding the foregoing, the right of any Triggering Holder to
exercise the Put shall terminate and have no further force or effect
from and after the date of the consummation of a Qualified Public
Offering.
(c) Section 3.4 of the Purchase Agreement is hereby further amended by
adding a clause (c) which shall read in full as follows:
(c) Notwithstanding anything to the contrary contained herein,
the Company shall not be required to pay more than $13,425,795 ("Put
Price Limit") in respect of any exercise of the Put with respect to the
Warrants and Warrant Shares. If the Put Purchase Price in respect of
the exercise of the Put with respect to the Warrants and Warrant Shares
("Warrant Put Purchase Price") exceeds the Put Price Limit, each
Warrant Holder shall receive upon exercise of the Put (i) an amount in
cash equal to the pro rata portion of the Put Price Limit (based on the
percentage that the number of Warrants and Warrant Shares owned by such
Warrant Holder bears to the aggregate number of Warrants and Warrant
Shares owned by all Warrants Holders ("Pro Rata Share")) and (ii) at
the option of such Warrant Holder, either (A) a new Warrant Certificate
evidencing the right to purchase such Warrant Holder's Pro Rata Share
of the Non-Put Shares (as defined below) or (B) a certificate
evidencing shares of Common Stock equal to such Warrant Holder's Pro
Rata Share of the Non-Put Shares. For purposes of this Section 3.4(c),
Non-Put Shares shall mean the quotient determined by dividing (x) the
remainder of (1) the Warrant Put Purchase Price minus (2) Put Price
Limit, by (y) the Put Price with respect to the Common Stock. After
payment to the Warrant Holders of the Put Price Limit in respect of the
exercise of the Put, there shall no longer exist any right to Put the
Non-Put Shares or the warrants to purchase Non-Put Shares by the
holders thereof.
3. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be considered an original for all purposes,
and all of which when taken together shall constitute a single counterpart
instrument. Executed signature pages to any counterpart instrument may be
detached and affixed to a single counterpart, with such single counterpart with
multiple executed signature pages affixed thereto constituting the original
counterpart instrument. All of those counterpart pages shall be read as though
one, and they shall have the same force and effect as if all the signers had
executed a single signature page.
4. Reaffirmation. Except as amended hereby, the Agreement shall remain
in full force and effect, the parties hereto hereby restate and reaffirm all of
the terms and provisions of the Agreement.
-2-
55
The undersigned have executed this Amendment as of the date first set
forth above.
Stratford:
STRATFORD CAPITAL PARTNERS, L.P.
By: Stratford Capital GP Associates,
L.P., its General partner
By: Stratford Capital Corporation,
its General partner
By: /s/ Xxxx Xxxxxx
------------------------------
Xxxx Xxxxxx
Managing Director
STRATFORD EQUITY PARTNERS, L.P.
By: Stratford Capital GP Associates,
L.P., its General partner
By: Stratford Capital Corporation,
its General partner
By: /s/ Xxxx Xxxxxx
---------------------------------
Xxxx Xxxxxx
Managing Director
CLEAR HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx, Xx.
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx, Xx.
Title: Chairman of the Board
