Exhibit 10(R)(1)
CONVERTIBLE LOAN AGREEMENT
DATED JUNE 28, 2001
BY AND AMONG
COVER-ALL TECHNOLOGIES INC.
AS BORROWER
AND
XXXX XXXXXX,
XXXXXX XXXXXXXX
AND
XXXXXX XXXXXXXXX
AS LENDER
AND
XXXXXX XXXXXXXXX
AS AGENT FOR THE LENDER
Agreement (Continued)
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TABLE OF CONTENTS
Page
ARTICLE I. - DEFINITION OF TERMS ............................................ 6
SECTION 1.01 DEFINITIONS .................................................... 6
SECTION 1.02 OTHER DEFINITION PROVISIONS .................................... 12
ARTICLE II. - LOAN PROVISIONS ............................................... 13
SECTION 2.01 THE LOAN ....................................................... 13
SECTION 2.02 USE OF PROCEEDS ................................................ 13
SECTION 2.03 INTEREST RATE AND INTEREST PAYMENTS ............................ 13
SECTION 2.04 MATURITY ....................................................... 13
SECTION 2.05 MANDATORY PRINCIPAL REPAYMENT .................................. 14
SECTION 2.06 REDEMPTION ..................................................... 14
SECTION 2.07 CONVERSION ..................................................... 14
SECTION 2.08 FEES AND EXPENSES .............................................. 14
SECTION 2.09 FINDER'S FEES .................................................. 14
SECTION 2.10 TAXES .......................................................... 14
SECTION 2.11 SUBSIDIARY GUARANTY AND SECURITY AGREEMENTS .................... 15
ARTICLE III. - CONDITIONS PRECEDENT ........................................ 15
SECTION 3.01 DOCUMENT REQUIREMENTS .......................................... 15
SECTION 3.02 OTHER CONDITIONS ............................................... 16
ARTICLE IV. - REPRESENTATIONS AND WARRANTIES OF BORROWER .................... 16
SECTION 4.01 ORGANIZATION AND GOOD STANDING ................................. 17
SECTION 4.02 AUTHORIZATION AND POWER ........................................ 17
SECTION 4.03 NO CONFLICTS OR CONSENTS ....................................... 17
SECTION 4.04 ENFORCEABLE OBLIGATIONS ........................................ 17
SECTION 4.05 NO LIENS ....................................................... 17
SECTION 4.06 FINANCIAL CONDITION ............................................ 17
SECTION 4.07 NO DEFAULT ..................................................... 18
SECTION 4.08 MATERIAL AGREEMENTS ............................................ 18
SECTION 4.09 NO LITIGATION .................................................. 18
SECTION 4.10 TAXES .......................................................... 18
SECTION 4.11 CAPITALIZATION ................................................. 19
SECTION 4.12 USE OF PROCEEDS ................................................ 19
SECTION 4.13 EMPLOYEE MATTERS ............................................... 19
SECTION 4.14 EMPLOYEE BENEFIT PLANS ......................................... 20
SECTION 4.15 COMPLIANCE WITH LAWS ........................................... 20
SECTION 4.16 LICENSES AND PERMITS ........................................... 20
SECTION 4.17 CONTRACTS ...................................................... 20
SECTION 4.18 SHARES ISSUABLE UPON CONVERSION ................................ 21
SECTION 4.19 INSIDER ........................................................ 21
SECTION 4.20 SUBSIDIARIES ................................................... 21
SECTION 4.21 CASUALTIES ..................................................... 21
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SECTION 4.22 INVESTMENT COMPANY ACT ......................................... 22
SECTION 4.23 SUFFICIENCY OF CAPITAL ......................................... 22
SECTION 4.24 CORPORATE NAMES ................................................ 22
SECTION 4.25 INSURANCE ...................................................... 22
SECTION 4.26 INTELLECTUAL PROPERTY .......................................... 22
SECTION 4.27 REAL PROPERTY .................................................. 22
SECTION 4.28 ENVIRONMENTAL .................................................. 23
SECTION 4.29 SURVIVAL OF REPRESENTATIONS AND WARRANTIES ..................... 24
SECTION 4.30 FULL DISCLOSURE ................................................ 25
ARTICLE V. - AFFIRMATIVE COVENANTS OF BORROWER .............................. 26
SECTION 5.01 FINANCIAL STATEMENTS, REPORTS AND DOCUMENTS .................... 26
SECTION 5.02 PREPARATION OF BUDGETS ......................................... 27
SECTION 5.03 PAYMENT OF TAXES AND OTHER INDEBTEDNESS ........................ 27
SECTION 5.04 MAINTENANCE OF EXISTENCE AND RIGHTS; CONDUCT OF BUSINESS ....... 28
SECTION 5.05 SEC FILINGS .................................................... 28
SECTION 5.06 NOTICE ......................................................... 28
SECTION 5.07 COMPLIANCE WITH LOAN DOCUMENTS ................................. 28
SECTION 5.08 COMPLIANCE WITH MATERIAL AGREEMENTS ............................ 28
SECTION 5.09 OPERATIONS AND PROPERTIES ...................................... 28
SECTION 5.10 BOOKS AND RECORDS; ACCESS ...................................... 28
SECTION 5.11 COMPLIANCE WITH LAW ............................................ 29
SECTION 5.12 INSURANCE ...................................................... 29
SECTION 5.13 AUTHORIZATIONS AND APPROVALS ................................... 29
SECTION 5.14 ERISA COMPLIANCE ............................................... 29
SECTION 5.15 FURTHER ASSURANCES ............................................. 29
SECTION 5.16 INDEMNITY BY BORROWER .......................................... 30
SECTION 5.17 RESERVATION OF SHARES; SHAREHOLDER APPROVAL .................... 31
SECTION 5.18 OWNERSHIP OF SUBSIDIARIES ...................................... 31
SECTION 5.19 RETENTION OF STOCK OWNERSHIP ................................... 31
SECTION 5.20 SUBSEQUENTLY FORMED SUBSIDIARIES ............................... 31
ARTICLE VI. NEGATIVE COVENANTS OF BORROWER .................................. 31
SECTION 6.01 LIMITATION ON INDEBTEDNESS ..................................... 31
SECTION 6.02 LIMITATION ON LIENS ............................................ 31
SECTION 6.03 LIMITATION ON INVESTMENTS ...................................... 31
SECTION 6.04 ALTERATION OF MATERIAL AGREEMENTS .............................. 32
SECTION 6.05 TRANSACTIONS WITH AFFILIATES ................................... 32
SECTION 6.06 LIMITATIONS ON ACQUISITION OF NONRELATED BUSINESS .............. 32
SECTION 6.07 LIMITATION ON SALE OF PROPERTIES ............................... 32
SECTION 6.08 FISCAL YEAR AND ACCOUNTING METHOD .............................. 32
SECTION 6.09 LIQUIDATION .................................................... 32
SECTION 6.10 MATERIAL AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS ..... 32
SECTION 6.11 EXECUTIVE COMPENSATION ......................................... 33
SECTION 6.12 RESTRICTED PAYMENTS ............................................ 33
SECTION 6.13 CONSOLIDATION OR MERGER ........................................ 33
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ARTICLE VII. COVENANTS OF MAINTENANCE OF FINANCIAL STANDARDS ................ 33
SECTION 7.01 FINANCIAL RATIOS ............................................... 33
ARTICLE VIII. EVENTS OF DEFAULT ............................................. 34
SECTION 8.01 EVENTS OF DEFAULT .............................................. 34
SECTION 8.02 REMEDIES UPON EVENT OF DEFAULT ................................. 35
SECTION 8.03 PERFORMANCE BY THE LENDER ...................................... 35
SECTION 8.04 PAYMENT OF EXPENSES INCURRED BY THE LENDER ..................... 36
ARTICLE IX. REGISTRATION RIGHTS ............................................. 36
SECTION 9.01 [INTENTIONALLY OMITTED] ........................................ 36
SECTION 9.02 "PIGGY-BACK" REGISTRATION.36
SECTION 9.03 SHELF REGISTRATION ............................................. 37
SECTION 9.04 OBLIGATIONS OF BORROWER ........................................ 38
SECTION 9.05 FURNISH INFORMATION ............................................ 39
SECTION 9.06 EXPENSES OF REGISTRATION ....................................... 39
SECTION 9.07 INDEMNIFICATION REGARDING REGISTRATION RIGHTS .................. 39
SECTION 9.08 REPORTS UNDER THE 1934 ACT ..................................... 41
SECTION 9.09 ASSIGNMENT OF REGISTRATION RIGHTS .............................. 42
SECTION 9.10 OTHER MATTERS .................................................. 42
ARTICLE X. BOARD OF DIRECTORS ............................................... 42
SECTION 10.01 INTENTIONALLY OMITTED ......................................... 42
SECTION 10.02 INTENTIONALLY OMITTED ......................................... 43
SECTION 10.03 NONLIABILITY OF THE LENDER .................................... 43
ARTICLE XI. AGENCY PROVISIONS ............................................... 43
SECTION 11.01 THE LENDER'S REPRESENTATIONS AND WARRANTIES TO AGENT .......... 43
SECTION 11.02 WAIVER OF LOAN PROVISIONS OR INTEREST OR PRINCIPAL PAYMENTS ... 43
SECTION 11.03 AGENCY ........................................................ 44
SECTION 11.04 ACTION BY HOLDERS ............................................. 45
ARTICLE XII. MISCELLANEOUS .................................................. 45
SECTION 12.01 STRICT COMPLIANCE ............................................. 45
SECTION 12.02 WAIVERS AND MODIFICATIONS ..................................... 45
SECTION 12.03 LIMITATION ON LIABILITY ....................................... 46
SECTION 12.04 CHOICE OF FORUM; CONSENT TO SERVICE OF PROCESS AND JURISDICTION 46
SECTION 12.05 INVALID PROVISIONS ............................................ 46
SECTION 12.06 MAXIMUM INTEREST RATE ......................................... 46
SECTION 12.07 PARTICIPATIONS AND ASSIGNMENTS OF THE DEBENTURES .............. 47
SECTION 12.08 CONFIDENTIALITY ............................................... 47
SECTION 12.09 BINDING EFFECT ................................................ 48
SECTION 12.10 NO THIRD PARTY BENEFICIARY .................................... 48
SECTION 12.11 ENTIRETY ...................................................... 48
SECTION 12.12 HEADINGS ...................................................... 48
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SECTION 12.13 SURVIVAL ...................................................... 49
SECTION 12.14 MULTIPLE COUNTERPARTS ......................................... 49
SECTION 12.15 KNOWLEDGE OF BORROWER ......................................... 49
SECTION 12.16 NOTICES ....................................................... 49
SECTION 12.17 GOVERNING LAW ................................................. 50
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Agreement (Continued)
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THIS AGREEMENT, dated as of June 28, 2001, by and among Cover-All
Technologies Inc., a Delaware corporation ("Borrower"), and Xxxx Xxxxxx, Xxxxxx
Xxxxxxxx and Xxxxxx Xxxxxxxxx, (collectively, together with any permitted
assignees or successors in interest referred to as the "Lender") and Xxxxxx
Xxxxxxxxx, as agent for the Lender (the "Agent"). All references herein to
Borrower shall include the Subsidiaries, unless the context otherwise requires.
WITNESSETH:
WHEREAS, Borrower seeks to borrow a total of Four Hundred Thousand
Dollars ($400,000) from the Lender; and
WHEREAS, pursuant to that certain Convertible Loan Agreement, dated as
of June 28, 2001, by and among Cover-All Technologies Inc., a Delaware
corporation ("Borrower"), and Renaissance US Growth & Income Trust PLC, a public
limited company registered in England and Wales (individually referred to as
"Renaissance PLC") and BFSUS Special Opportunities Trust PLC, a public limited
company registered in England and Wales ("BFSUS") (Renaissance PLC and BFSUS,
together with any permitted assignees or successors in interest referred to as
the "Renaissance Lender") and Renaissance Capital Group, Inc., a Texas
corporation, as agent for the Renaissance Lender (the "Renaissance Agent"),
Borrower shall borrow an additional $1,400,000 from the Renaissance Lender on
substantially the same terms and conditions as set forth herein and evidenced by
the Borrower's 8.00% Convertible Debentures (the "Renaissance Debentures"); and;
WHEREAS, Borrower has requested that the Lender provide such loan as
herein provided, and that the Lender is willing to furnish such to Borrower upon
the terms and subject to the conditions and for the considerations hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other valuable consideration, receipt and sufficiency of which
is acknowledged, the parties hereto agree as follows:
ARTICLE I. - DEFINITION OF TERMS
SECTION 1.01 DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the
respective meanings assigned to them in this Article I or in the section or
recital referred to below:
"Affiliate" with respect to any Person shall mean a person
that directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person.
"Asset-Backed Acquisition or Operations Indebtedness" shall
mean secured Indebtedness of Borrower or a Subsidiary incurred in connection
with, or to provide all or any portion of the funds or credit support utilized
to consummate the transaction or series of related transactions pursuant to
which such Subsidiary became a Subsidiary or was acquired by Borrower or for the
operation of the Borrower's business in the ordinary course of business.
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Agreement (Continued)
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"BFSUS" shall mean BFSUS Special Opportunities Trust PLC, a
public limited company registered in England and Wales.
"Capital Expenditure" shall mean an expenditure for assets
that is properly classifiable as a capital expenditure in accordance with GAAP.
"Capital Lease" shall mean any lease of property, real or
personal, which would be properly classifiable as a capital lease in accordance
with GAAP.
"Common Stock" shall mean Borrower's common stock, $.01 per
share.
"Conversion" or "Conversion Rights" shall mean exchange of, or
the rights to exchange, the Principal Amount of the Loan, or any part thereof,
for fully paid and nonassessable Common Stock on the terms and conditions
provided in the Debentures.
"Current Assets" shall mean, for any Person as of any date,
the assets of such Person and its consolidated Subsidiaries which would be
reflected as current assets on a consolidated balance sheet for such Person and
its Subsidiaries prepared as of such date in accordance with GAAP.
"Current Liabilities" shall mean, for any Person as of any
date, the liabilities of such Person and its consolidated Subsidiaries which
would be reflected as current liabilities on a consolidated balance sheet for
such Person and its subsidiaries prepared as of such date in accordance with
GAAP. For purposes of calculating compliance with any covenant contained in this
Agreement or any other Loan Document, the principal amount of Current
Liabilities shall include any balance under any revolving credit facility of the
Borrower, regardless of whether such revolving credit facility would be
reflected as a current liability in accordance with GAAP.
"Current Ratio" shall mean, for any Person as of any date, the
ratio of such Person's Current Assets to Current Liabilities as of such date.
"Debentures" shall mean the Debentures executed by Borrower
and delivered pursuant to the terms of this Agreement, together with any
renewals, extensions or modifications thereof.
"Debtor Laws" shall mean all applicable liquidation,
conservatorship, bankruptcy, moratorium, arrangement, receivership, insolvency,
reorganization or similar laws from time to time in effect affecting the rights
of creditors or debtors generally.
"Default" or "Event of Default" shall mean any of the events
specified in Article VIII.
"Dividends," in respect of any corporation, shall mean (i)
cash distributions or any other distributions on, or in respect of, any class of
capital stock of such corporation, except for distributions made solely in
shares of stock of the same class, and (ii) any and all funds, cash and other
payments made in respect of the redemption, repurchase or acquisition of such
stock, unless such stock shall be redeemed or acquired through the exchange of
such stock with stock of the same class.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, together with all rules and regulations issued pursuant
thereto.
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Agreement (Continued)
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"FINOVA Settlement Agreement" shall mean the agreement, dated
June ___, 2001, between Borrower and FINOVA Mezzanine Capital Inc. ("FINOVA") to
repurchase the Borrower's 12.5% Convertible Debenture due March 31, 2002 issued
to FINOVA in the principal amount of $3,000,000 ("FINOVA Debenture").
"GAAP" shall mean United States generally accepted accounting
principles applied on a consistent basis, set forth in the Opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants or the Financial Accounting Standards Board or their successors,
which are applicable in the circumstances as of the date in question. The
requirement that such principles be applied on a consistent basis shall mean
that the accounting principles observed in a current period are comparable in
all material respects to those applied in a preceding period.
"Governmental Authority" shall mean any government (or any
political subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over Borrower or a Subsidiary or any
of its or their businesses, operations or properties.
"Guaranty" of any Person shall mean any contract, agreement or
understanding of such Person pursuant to which such Person in effect guarantees
the payment of any Indebtedness of any other Person (the "Primary Obligor") in
any manner, whether directly or indirectly, including, without limitation,
agreements: (i) to purchase such Indebtedness or any property constituting
security therefor; (ii) to advance or supply funds primarily for the purpose of
assuring the holder of such Indebtedness of the ability of the Primary Obligor
to make payment; or (iii) otherwise to assure the holder of the Indebtedness of
the Primary Obligor against loss in respect thereof, except that "Guaranty"
shall not include the endorsement by Borrower or a Subsidiary in the ordinary
course of business of negotiable instruments or documents for deposit or
collection.
"Holder" shall mean the owner of Registrable Securities.
"Indebtedness" shall mean, with respect to any Person, without
duplication, the following indebtedness, obligations and liabilities of such
Person: (i) indebtedness for borrowed money; (ii) all obligations of such Person
in respect of any Guaranty; (iii) all obligations of such Person in respect of
any Capital Lease, (iv) all obligations, indebtedness and liabilities secured by
any lien or any security interest on any property or assets of such Person, but
only to the extent so secured; and (v) all preferred stock of such Person which
is subject, at the time of calculation of Indebtedness, to a mandatory
redemption requirement, valued at the greater of its involuntary redemption
price or liquidation preference plus accrued and unpaid dividends, and all
extensions, renewals, modifications and amendments thereto.
"Interest Coverage Ratio" means for any period, the ratio of
(a) Borrower's consolidated net income after taxes for such period (excluding
Borrower's after tax gains or losses on the sale of assets (other than the sale
of Inventory in the ordinary course of business) and excluding other after tax
extraordinary gains or losses), PLUS depreciation and amortization deducted in
determining net income for such period, PLUS interest expense for such period to
(b) interest expense for such period, all as determined on a consolidated basis
in accordance with GAAP.
"Investment" in any Person shall mean any investment, whether
by means of share purchase, loan, advance, capital contribution or otherwise, in
or to such Person, the Guaranty of any Indebtedness of such Person, or the
subordination of any claim against such Person to other Indebtedness of such
Person; provided however, that "Investment" shall not include (i) any demand
deposits in a duly
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Agreement (Continued)
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chartered state or national bank or other cash equivalent investments, (ii) any
loans permitted by Section 6.12, or (iii) any acquisitions of equity in any
other Person.
"IRS Code" shall mean the Internal Revenue Code of 1986, as
amended, together with all rules and regulations issued thereunder.
"Lien" shall mean any lien, mortgage, security interest, tax
lien, pledge, encumbrance, conditional sale or title retention arrangement, or
any other interest in property designed to secure the repayment of Indebtedness,
whether arising by agreement or under any statute or law, or otherwise.
"Loan" shall mean the money lent to Borrower pursuant to this
Agreement, along with any accrued, unpaid interest thereon.
"Loan Closing" or "Loan Closing Date" shall mean the
disbursement of Loan funds, which shall occur within ten (10) days of the
execution and delivery of this Agreement.
"Loan Documents" shall mean this Agreement, the Debentures and
any other agreements or documents required to be executed or delivered by
Borrower pursuant to the terms of this Agreement (and any amendments or
supplements hereto or modifications hereof).
"Lock-Up Agreement" shall mean the "lock-up" agreements to be
executed by the executive officers, directors and principal shareholders of
Borrower pursuant to Section 5.19 of this Agreement.
"Material Adverse Effect" or "Material Adverse Change" shall
mean (i) any change, factor or event that shall (a) have a material adverse
effect upon the validity or enforceability of any Loan Documents, (b) have a
material adverse effect upon the financial condition, results of operations,
business, properties, operations or assets of Borrower or its Subsidiaries taken
as a whole, or (c) have a material adverse effect upon the ability of Borrower
to fulfill its obligations under the Loan Documents, or (ii) any event that
causes an Event of Default or which, with notice or lapse of time or both, could
reasonably be expected to become an Event of Default.
"Net Income" shall mean, for any Person for any period,
consolidated net income of such Person and its consolidated Subsidiaries for
such period which would be reflected in accordance with GAAP, but excluding (a)
any gain or loss arising from the sale of capital assets, (b) any gain or loss
arising from any write-up or write-down of assets, (c) income or loss of any
Person, substantially all of the assets of which have been acquired by such
Person in any manner, to the extent that such earnings or losses were realized
by such other Person prior to the date of such acquisition, (d) income or loss
of any Person in which the Person has any ownership interests (other than
consolidated subsidiaries of such Person), unless such earnings have actually
been received or paid by the Person or its consolidated Subsidiaries in the form
of cash distributions or additional cash calls, (e) income or loss of any Person
to which assets of the Person or its consolidated subsidiaries shall have been
sold, transferred or disposed of, or into which the Person shall have merged, to
the extent that such earnings or losses of any other Person arise prior to the
date of such transaction, (f) any gain or loss arising from the acquisition of
any securities of the Person or any of its consolidated subsidiaries, and (g)
any extraordinary gain or loss realized by such Person or any of its
consolidated subsidiaries during such period.
"Obligation" shall mean: (i) all present and future
Indebtedness, obligations and liabilities of Borrower to the Lender arising
pursuant to this Agreement, regardless of whether such
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Agreement (Continued)
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Indebtedness, obligations and liabilities are direct, indirect, fixed,
contingent, joint, several, or joint and several; (ii) all present and future
Indebtedness, obligations and liabilities of Borrower to the Lender arising
pursuant to or represented by the Debentures and all interest accruing thereon,
and reasonable attorneys' fees incurred in the enforcement or collection
thereof; (iii) all present and future Indebtedness, obligations and liabilities
of Borrower and any Subsidiary evidenced by or arising pursuant to any of the
Loan Documents; (iv) all costs incurred by the Lender or Agent including, but
not limited to, reasonable attorneys' fees and legal expenses related to this
transaction; and (v) all renewals, extensions and modifications of the
indebtedness referred to in the foregoing clauses, or any part thereof.
"Permits" shall have the meaning set forth in Section 4.16.
"Permitted Indebtedness" shall mean Indebtedness outstanding
as of the date hereof or incurred in compliance with Section 6.01 and the other
terms of this Agreement that constitutes (i) obligations under Capital Leases,
(ii) Subordinated Debt, (iii) purchase money Indebtedness, (iv) intercompany
Indebtedness, (v) Indebtedness under this Agreement or the Debentures or the
Renaissance Debentures, and (vi) any refunding, refinancing or extension of any
of the above.
"Permitted Liens" shall mean: (i) Liens (if any) granted for
the benefit of the Lender; (ii) Liens to secure the Permitted Indebtedness;
(iii) pledges or deposits made to secure payment of worker's compensation
insurance (or to participate in any fund in connection with worker's
compensation insurance), unemployment insurance, pensions or social security
programs; (iv) Liens imposed by mandatory provisions of law such as for
carriers', landlord's, materialmen's, mechanics', warehousemen's, vendors' and
other like Liens arising in the ordinary course of business, securing
Indebtedness whose payment is made within 30 days of the date such Lien arises,
or that are being contested in good faith by appropriate proceedings as to which
adequate reserves have been established to the extent required by GAAP; (v)
Liens for taxes, assessments and governmental charges or levies imposed upon a
Person or upon such Person's income or profits or property, if the same are not
yet due and payable or if the same are being contested in good faith and as to
which adequate cash reserves have been provided; (vi) Liens arising from good
faith deposits in connection with tenders, leases, bids or contracts (other than
contracts involving the borrowing of money), pledges or deposits to secure
public or statutory obligations and deposits to secure (or in lieu of) surety,
stay, appeal or customs bonds and deposits to secure the payment of taxes,
assessments, customs duties or other similar charges; (vii) encumbrances
consisting of zoning restrictions, easements, reservations, licenses, covenants
and other minor irregularities of title or other restrictions on the use of real
property (whether owned or leased), provided that such items do not materially
impair the intended use of such property, and none of which is violated by
Borrower's existing structures or land use; (viii) mortgages, financing
statements, equipment leases or other encumbrances incurred in connection with
the acquisition of property or equipment or the replacement of existing property
or equipment, provided that such liens shall be limited to the property or
equipment then being acquired; and (ix) Liens whereas Borrower has placed its
source-code into escrow for the benefit of customers in the ordinary course of
business.
"Person" shall include an individual, a corporation, a joint
venture, a general or limited partnership, a trust, an unincorporated
organization or a government or any agency or political subdivision thereof.
"Plan" shall mean an employee benefit plan or other plan that
in either case, is a single-employee plan (i) maintained by Borrower for
employees of Borrower and/or any Subsidiaries and (ii) either is (A) and covered
by Title IV of ERISA, or (B) subject to the minimum funding standards under
Section 412 of the IRS Code.
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Agreement (Continued)
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"Principal Amount" shall mean, as of any time, the then
aggregate outstanding face amount of the Debentures after any conversions or
redemptions and after giving effect to any installment payments received by the
Lender.
"Registrable Securities" shall mean (i) the Common Stock
issuable upon Conversion of the Debentures, and (ii) any warrant, right or other
security that is issued with respect to such Common Stock by way of (a) a stock
dividend; (b) any other distribution with respect to, or in exchange for, or in
replacement of Common Stock; (c) a stock split; and (d) in connection with a
combination of shares, recapitalization, merger or consolidation excluding in
all cases, however, any Common Stock that is not a Restricted Security and any
Registrable Securities sold or transferred by a Person in a transaction in which
the rights under this Agreement are not assigned.
"Registrable Securities Then Outstanding" shall mean the
Registrable Securities then outstanding.
"Renaissance PLC" shall mean Renaissance US Growth & Income
Trust PLC, a public limited company registered in England and Wales.
"Renaissance Group" shall mean Renaissance Capital Group,
Inc., a Texas corporation.
"Restricted Security" shall mean a security that has not been
(i) registered under the 1933 Act or (ii) distributed to the public pursuant to
Rule 144 (or any similar provisions that are in force) under the 0000 Xxx.
"SEC" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the 1933 Act and the 1934
Act.
"1933 Act" shall refer to the Securities Act of 1933, as
amended, or any similar federal statute and rules and regulations promulgated
thereunder, all as the same may be in effect from time to time.
"1934 Act" shall refer to the Securities Exchange Act of 1934,
as amended, or any similar federal statute and rules and regulations promulgated
thereunder, all as the same may be in effect from time to time.
"1940 Act" shall refer to the Investment Company Act of 1940,
as amended, or any similar federal statute and rules and regulations promulgated
thereunder, all as the same may be in effect from time to time.
"Solvent" shall mean, with respect to any Person on a
particular date, that on such date: (i) the fair value of the assets of such
Person is greater than the total amount of liabilities of such Person; (ii) the
estimated present fair salable value, in the ordinary course of business, of the
assets of such Person is not less than the amount that will be required to pay
the probable liability of such Person on its debts as they become absolute and
matured; (iii) such Person is able to realize upon its assets and pay its debts
and other liabilities, contingent obligations and other commitments as they
mature in the normal course of business; (iv) as a result of this Loan, such
Person does not expect to incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature; and (v) such Person is not
engaged in business or a transaction, for which such Person's assets would
constitute unreasonably small capital after giving due consideration to the
prevailing practice in the industry in which such Person is engaged. In
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Agreement (Continued)
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computing the amount of contingent liabilities at any time, it is intended that
such liabilities will be computed at the amount which, in light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Subordinated Debt" shall mean any unsecured indebtedness of
Borrower or any Subsidiaries, now existing or hereafter incurred, which
indebtedness is, by its terms, junior in right of repayment to the payment of
the Debentures.
"Subsidiary" or "Subsidiaries" shall mean any or all
corporations or entities, whether now existing or hereafter acquired, of which
over 50% the Voting Shares or equity interests are owned, directly or
indirectly, by Borrower.
"Subsidiary Documents" shall mean the Subsidiary Guaranty,
Subsidiary Security Agreement and any other agreements or documents required to
be executed or delivered by any Subsidiary pursuant to the terms of this
Agreement (and any amendments or supplements hereto or modifications hereof).
"Trailing Twelve Months EBITDA" shall mean for any Person, for
the immediately preceding twelve-month period on such date, Net Income of such
Person and its Consolidated Subsidiaries for such twelve-month period, plus (a)
all deferred income tax expense of such Person and its Consolidated Subsidiaries
for such twelve-month period, (b) all depreciation expense of such Person and
its Consolidated Subsidiaries for such twelve-month period, and (c) all
amortization expense of such Person and its Consolidated Subsidiaries for such
twelve-month period, less capital expenditures of such Person and its
Consolidated Subsidiaries for such twelve-month period.
"Voting Shares" of any corporation shall mean shares of any
class or classes (however designated) having ordinary voting power for the
election of at least a majority of the members of the Board of Directors (or
other governing bodies) of such corporation, other than shares having such power
only by reason of the happening of a contingency.
SECTION 1.02 OTHER DEFINITION PROVISIONS.
(a) All terms defined in this Agreement shall have the above-defined
meanings when used in the Debentures or any other Loan Documents, certificate,
report or other document made or delivered pursuant to this Agreement, unless
the context therein shall otherwise require.
(b) Defined terms used herein in the singular shall import the plural
and vice versa.
(c) The words "hereof," "herein," "hereunder" and similar terms, when
used in this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
(d) References to financial statements and reports shall be deemed to
be a reference to such statements and reports prepared in accordance with GAAP.
(e) Accounting terms not specifically defined above in this Agreement
shall be construed in accordance with GAAP.
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Agreement (Continued)
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ARTICLE II. - LOAN PROVISIONS
SECTION 2.01 THE LOAN.
(a) Subject to the terms and conditions of this Agreement, and the
compliance with such terms and conditions by all parties, Lender agrees to lend
to Borrower, and Borrower agrees to borrow from the Lender, the total Principal
Amount of Four Hundred Thousand Dollars ($400,000).
(b) The Loan shall be disbursed at Loan Closing, subject to the
conditions provided hereunder, and shall be evidenced by the Debentures, in the
Principal Amount specified above. The Debentures shall rank PARI PASSU with all
Indebtedness of Borrower, other than the Subordinated Debt.
(c) Unless otherwise mutually agreed, the Loan Closing shall be at the
offices of Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP, 1251 Avenue of the Xxxxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx.
(d) If, within 10 days of the date of this Agreement, (i) Borrower has
failed to comply with the conditions precedent to the Loan Closing as specified
in Article III hereof (unless compliance with such conditions in whole or in
part has been waived or modified by the Lender its sole discretion) or (ii) the
Loan Closing has not occurred (unless the date of such Loan Closing has been
mutually extended), other than as a result of any failure of Lender to comply
with the terms of this Agreement, then, in either such case, the obligations of
the Lender under this Agreement shall terminate; provided, however, that
Borrower shall be obligated for payment of the fees and expenses provided in
Section 2.07 due and payable as of such date of termination.
SECTION 2.02 USE OF PROCEEDS.
(a) Borrower intends to apply the Loan proceeds towards repayment of
Borrower's indebtedness to FINOVA pursuant to the FINOVA Settlement Agreement
and for working capital.
(b) Borrower hereby acknowledges that the proceeds from the Loan shall
be of benefit to Borrower for the growth of its business by providing capital
not otherwise available from financial institutions.
SECTION 2.03 INTEREST RATE AND INTEREST PAYMENTS.
Interest on the Principal Amount outstanding from time to time shall
accrue at the rate of 8.00% per annum, with the first installment of accrued,
unpaid interest being due and payable on August 1, 2001 and subsequent payments
of accrued, unpaid interest being due and payable on the first day of each month
thereafter. Overdue principal and interest on the Debentures shall bear interest
at the rate of 18% per annum. Interest on the Principal Amount of the Debentures
shall be calculated, from time to time, on the basis of the actual days elapsed
in a year consisting of 365 days.
SECTION 2.04 MATURITY.
If not sooner redeemed or converted, the Debentures shall mature on
July 1, 2008, at which time all the remaining unpaid principal, interest and any
other charges then due under this Agreement shall be due and payable in full.
The Debentures shall be prepaid PRO RATA with any prepayments of Indebtedness.
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Agreement (Continued)
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SECTION 2.05 MANDATORY PRINCIPAL REPAYMENT.
The Debentures shall be subject to mandatory principal repayment as
provided in the Debentures.
SECTION 2.06 REDEMPTION.
The Debentures shall be subject to redemption as provided in the
Debentures.
SECTION 2.07 CONVERSION.
The Debentures shall be subject to conversion as provided in the
Debentures.
SECTION 2.08 FEES AND EXPENSES.
[intentionally omitted]
SECTION 2.09 FINDER'S FEES.
Borrower represents to the Lender that, except as set forth in Schedule
2.08, no placement fees, commissions, brokerage or finder's fees were incurred
by Borrower in connection with this Agreement or the Debentures. Borrower shall
be responsible for the payment of all such placement fees, commissions,
brokerage or finder's fees.
SECTION 2.10 TAXES.
(a) The Debentures shall be convertible into shares of Common Stock and
on such terms as are stated in the Debentures. Such conversion shall be made
without deduction for any present or future taxes, duties, charges or
withholdings, (excluding, in the case of the Lender, any foreign taxes, any
federal, state or local income taxes and any franchise taxes or taxes imposed
upon it by the jurisdiction, or any political subdivision thereof, under which
the Lender is organized or are qualified to do or in fact does business), and
all liabilities with respect thereto (herein "Taxes") shall be paid by Borrower.
If Borrower shall be required by law to deduct any Taxes for which Borrower is
responsible under the preceding sentence from any sum payable hereunder to the
Lender: (i) the sum payable shall be increased so that after making all required
deductions, the Lender shall receive an amount equal to the sum it would have
received had no such deductions been made; (ii) Borrower shall make such
deductions; and (iii) Borrower shall pay the full amount deducted to the
relevant taxing authority or other authority in accordance with applicable law.
Borrower shall be entitled to any refunds or returns from any such taxing
authority.
(b) Except as otherwise set forth in this Agreement or the other Loan
Documents, Borrower shall pay any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or under the Loan Documents or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or the other Loan Documents (hereinafter referred to as "Other
Taxes").
(c) Borrower shall indemnify the Lender for the full amount of Taxes
and Other Taxes reasonably paid by the Lender or any liability (including any
penalties or interest assessed because of Borrower's defaults) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. This indemnification shall be made within thirty (30) days
from the
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Agreement (Continued)
--------------------------------------------------------------------------------
date the Lender makes written demand therefor. The Lender shall subrogate any
and all rights and claims relating to such Taxes and Other Taxes to Borrower
upon payment of said indemnification.
(d) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower in this Section
2.10 shall survive the payment in full of the Obligation.
(e) Borrower shall have no liability or obligation with respect to
taxes on or measured by income recognized by the Lender with respect to the
Debentures.
SECTION 2.11 SUBSIDIARY GUARANTY AND SECURITY AGREEMENTS.
The due and prompt performance of the obligations of Borrower to the
Lender under the Loan Agreement and the Debentures shall be guaranteed by
certain of the Subsidiaries and secured by all tangible and intangible assets of
Borrower and the Subsidiaries (exclusive of mortgages on real property) and
shall be evidenced by Security Agreements executed by and between the Lender and
the Subsidiaries. Financing statements shall be executed in favor of the Lender
by Borrower and certain of the Subsidiaries. There shall be no prior security
interests on any Subsidiary assets or capital stock, except for Permitted Liens.
ARTICLE III. - CONDITIONS PRECEDENT
SECTION 3.01 DOCUMENT REQUIREMENTS.
The obligation of the Lender to advance funds at the Loan Closing Date
hereof is subject to the condition precedent that, on or before the date of such
advance, the Lenders shall have received the following:
(a) DEBENTURES. Duly executed Debentures from Borrower in the Principal
Amounts as follows:
$100,000 Xxxx Xxxxxx
$100,000 Xxxxxx Xxxxxxxx
$200,000 Xxxxxx Xxxxxxxxx
(b) BORROWER SECURITY AGREEMENT. Duly executed Borrower Security
Agreement from Borrower, which shall be in the form and substance acceptable to
the Lender and its counsel.
(c) SUBSIDIARY GUARANTY AND SUBSIDIARY SECURITY AGREEMENT. Duly
executed Subsidiary Guaranty and Subsidiary Security Agreement from each of the
Subsidiaries of Borrower, which shall be in the form and substance acceptable to
the Lender and its counsel.
(e) CEO'S CERTIFICATE. A certificate signed by the chief executive
officer of Borrower, in his capacity as such, and dated as of the Loan Closing
Date stating that: (i) all of the representations and warranties contained in
Article IV hereof and the other Loan Documents are true and correct in all
material respects as of the Loan Closing Date; and (ii) no event has occurred
and is continuing, or would result from the Loan, which constitutes, or with
notice or lapse of time or both would constitute, a Default or an Event of
Default.
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Agreement (Continued)
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(f) SECRETARY'S CERTIFICATES. A signed certificate of the Secretary of
Borrower which shall certify (i) copies of the Certificate of Incorporation (or
other organizational document) of Borrower and each Subsidiary and all
amendments thereto, certified by the Secretary of State of the state of
incorporation (or other appropriate authority) and dated within ten (10) days
prior to Loan Closing, a copy of the Certificate of Incorporation (or other
organizational document) of each Subsidiary and all amendments thereto,
certified by the Secretary of Borrower as of the date of such certification;
(ii) a copy of the Bylaws of Borrower and each Subsidiary and all amendments
thereto certified by the Secretary of Borrower and each such Subsidiary as of
the date of such certification; (iii) copies of resolutions, as adopted by
Borrower's and each Subsidiary's Board of Directors, approving the execution,
delivery and performance, as applicable, of this Agreement, the Debentures, the
Guaranties and the other Loan Documents, including the transactions contemplated
herein, stating that such resolutions have been duly adopted, are true and
correct, have not been altered or repealed and are in full force and effect;
(iv) certificates of good standing (or other similar instrument) for Borrower
and each Subsidiary issued by the appropriate official of the state of
incorporation of Borrower and each Subsidiary and certificates of qualification
and good standing for Borrower and each Subsidiary issued by the appropriate
official of each of the states for which Borrower and each Subsidiary is
required to be qualified to do business as a foreign corporation, dated within
ten (10) days prior to Loan Closing; and (v) the names of the officers of
Borrower and each Subsidiary authorized to sign the Loan Documents to be
executed by such officer, together with the true signatures of each such
officer. It is herewith stipulated and agreed that the Lender may thereafter
rely conclusively on the validity of this certificate as a representation of the
officers of Borrower and each Subsidiary duly authorized to act with respect to
the Loan Documents until such time as the Lender shall receive a further
certificate of the Secretary or Assistant Secretary of Borrower and each
Subsidiary canceling or amending the prior certificate and submitting the
signatures of the officers thereupon authorized in such further certificate.
(g) [Internationally omitted].
(h) "LOCK-UP" AGREEMENTS. "Lock-Up" Agreements, in the form and
substance satisfactory to the Lender and its counsel.
(j) OTHER DOCUMENTS. Such other information, documents and agreements
as may reasonably be required by the Lender and the Lender's counsel to
substantiate Borrower's compliance with the requirements of this Agreement and
the Lender's compliance with the 1940 Act.
SECTION 3.02 OTHER CONDITIONS.
At the Loan Closing, the FINOVA Debentures issued by the Borrower to
FINOVA shall be repurchased pursuant to the terms and provisions of the
agreement in the form attached hereto as Exhibit A.
ARTICLE IV. - REPRESENTATIONS AND WARRANTIES OF BORROWER
All references in this Article to Borrower shall include the
Subsidiaries, unless the context otherwise requires. To induce the Lender to
make the Loan hereunder, Borrower represents and warrants to the Lender that:
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Agreement (Continued)
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SECTION 4.01 ORGANIZATION AND GOOD STANDING.
Each of Borrower and Subsidiary is duly organized and existing in good
standing under the laws of the state of its incorporation, and Subsidiary is
duly qualified as a foreign corporation and in good standing in all states in
which failure to qualify would have a Material Adverse Effect, and has the
corporate power and authority to own its properties and assets and to transact
the business in which it is engaged.
SECTION 4.02 AUTHORIZATION AND POWER.
Borrower has the corporate power and requisite authority to execute,
deliver and perform the Loan Documents to be executed by Borrower. Borrower is
duly authorized to, and has taken all corporate action necessary to authorize,
execute, deliver and perform the Loan Documents executed by Borrower. Borrower
is and will continue to be duly authorized to perform the Loan Documents
executed by Borrower.
SECTION 4.03 NO CONFLICTS OR CONSENTS.
Except as disclosed on Schedule 4.03, neither the execution and
delivery of the Loan Documents, nor the consummation of any of the transactions
therein contemplated, nor compliance with the terms and provisions thereof, will
contravene or materially conflict with any judgment, license, order or permit
applicable to Borrower, or any indenture, loan agreement, mortgage, deed of
trust, or other agreement or instrument to which Borrower is a party or by which
Borrower is or may become bound, or to which Borrower is or may become subject,
or violate any provision of the charter or bylaws of Borrower or trigger any
preemptive rights or rights of first refusal of any third party. No consent,
approval, authorization or order of any court or governmental authority or third
party is required in connection with the execution and delivery by Borrower of
the Loan Documents or to consummate the transactions contemplated hereby or
thereby except those that have been obtained.
SECTION 4.04 ENFORCEABLE OBLIGATIONS.
The Loan Documents have been duly executed and delivered by Borrower
and are the legal, valid and binding obligations of Borrower, enforceable in
accordance with their respective terms.
SECTION 4.05 NO LIENS.
Except for Permitted Liens, all of the properties and assets owned or
leased by Borrower are free and clear of all Liens and other adverse claims of
any nature, and Borrower has good and marketable title to such properties and
assets. A true and complete list of all known or recorded liens securing
Indebtedness for borrowed money is disclosed on Schedule 4.05.
SECTION 4.06 FINANCIAL CONDITION.
Borrower has delivered to the Lender the consolidated balance sheet of
Borrower and the Subsidiaries as of December 31, 2000, and the related
consolidated statement of income, stockholders' equity and statement of cash
flow for the year then ended, audited by its independent certified public
accountants. Borrower has also delivered to the Lender the unaudited
consolidated balance sheet of Borrower and the Subsidiaries as of March 31, 2001
and the related unaudited consolidated statement of income, stockholders' equity
and statement of cash flow for the three (3) months then ended. Such
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Agreement (Continued)
--------------------------------------------------------------------------------
financial statements fairly present the consolidated financial condition of
Borrower as of such dates and have been prepared in accordance with GAAP (except
that unaudited financial statements omit certain footnotes); and as of the date
hereof, there are no obligations, liabilities or Indebtedness (including
contingent and indirect liabilities and obligations) of Borrower which are
(separately or in the aggregate) material and are required under GAAP to be
reflected in such financial statements or otherwise disclosed herein or in the
Schedules. Since the date of the above-referenced year end financial statements,
there have not been, except as disclosed in Schedule 4.06: (i) any Material
Adverse Change; (ii) any Dividend declared or paid or distribution made on the
capital stock of Borrower or any capital stock thereof redeemed or repurchased;
(iii) any incurrence of long-term debt by Borrower; (iv) any salary, bonus or
compensation increases to any officers, key employees or agents of Borrower,
other than in the ordinary course of business and consistent with past practice;
or (v) any other material transaction entered into by Borrower, except in the
ordinary course of business and consistent with past practice.
SECTION 4.07 NO DEFAULT.
No event has occurred and is continuing which constitutes, or, with
notice or lapse of time or both, would constitute, a Default or an Event of
Default under this Agreement.
SECTION 4.08 MATERIAL AGREEMENTS.
Neither Borrower nor any Subsidiary nor any other party is in default,
and no event has occurred and is continuing which, with notice or lapse of time
or both, would constitute a default, under any contract, lease, loan agreement,
indenture, mortgage, security agreement, license agreement or other agreement or
obligation to which it is a party or by which any of its properties is subject
which could reasonably be expected to have a Material Adverse Effect, except as
described on Schedule 4.08. To the best knowledge of Borrower, it is not a party
to, or bound by, any contract or agreement, the faithful performance of which is
so onerous so as to create, or to likely create, a Material Adverse Effect on
the business, operations or financial condition of Borrower.
SECTION 4.09 NO LITIGATION.
Except as disclosed on Schedule 4.09, there are no actions, suits,
investigations, arbitrations or administrative proceedings pending or, to the
best knowledge of Borrower, threatened, against Borrower which could reasonably
be expected to have a Material Adverse Effect on Borrower, and there has been no
change in the status of any of the actions, suits, investigations, litigation or
proceedings disclosed to the Lender which could reasonably be expected to have a
Material Adverse Effect on Borrower or on any transactions contemplated by any
Loan Document. Borrower has not received any claim that Borrower currently
violates any federal, state or local law, ordinance, rule or regulation, which
could have a Material Adverse Effect on its business and, to the best of
Borrower's knowledge, no such claim is or has been threatened; and, except as
disclosed on Schedule 4.09, there have been no developments adverse to Borrower
with respect to any pending or threatened claim, action or proceeding of an
administrative or judicial nature.
SECTION 4.10 TAXES.
All tax returns required to be filed by Borrower in any jurisdiction
have been filed and all taxes (including mortgage recording taxes), assessments,
fees and other governmental charges upon Borrower or upon any of its properties,
income or franchises now due have been paid, in each case, except where the same
are being contested in good faith by appropriate proceedings, as disclosed on
Schedule 4.10.
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Agreement (Continued)
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Except as disclosed on Schedule 4.10, Borrower has not received any
notice of deficiency or other adjustment from any taxing authority that is
unresolved as of the Loan Closing. No audit or examination, claim or proposed
assessment by any taxing authority is pending or, to the best knowledge of
Borrower, threatened against Borrower or any of its properties. All ad valorem
and other property taxes imposed on Borrower, or that may become a lien on
Borrower's assets and that are due and payable, have been paid in full, except
where the failure to pay could reasonably be expected to constitute a Material
Adverse Effect. Borrower has withheld or collected from each payment made to
each of its U.S. employees the amount of all taxes (including federal income
taxes, Federal Insurance Contributions Act ("FICA") taxes, and state and local
income, payroll, and wage taxes, among others) required to be withheld or
collected.
SECTION 4.11 CAPITALIZATION.
The authorized capital stock of Borrower consists of 75,000,000 shares
of Common Stock, $.01 par value, of which 15,181,172 shares of Common Stock are
issued and outstanding as of June 25, 2001. All of such outstanding shares have
been duly authorized and validly issued, are fully paid and nonassessable, and
were not issued in violation of the preemptive rights or rights of first refusal
of any person. Schedule 4.11 sets forth all stock options, warrants, conversion
rights, subscription rights, preemptive rights, rights of first refusal and
other rights or agreements to acquire securities of Borrower and any shares held
in treasury or reserved for issuance upon exercise of such stock options,
warrants or conversion rights, subscription rights and other rights or
agreements to acquire securities. Borrower has, and will continue to have as
long as the Debentures remains outstanding, authorized and reserved an adequate
number of shares of Common Stock to permit Conversion of the Debentures.
SECTION 4.12 USE OF PROCEEDS.
Borrower intends to use proceeds from the Loan as disclosed in Section
2.02 hereof.
SECTION 4.13 EMPLOYEE MATTERS.
(a) Except as set forth on Schedule 4.13, Borrower is not a party to
any collective bargaining agreement and is not aware of any activities of any
labor union that is currently seeking to represent or organize its employees;
(b) Borrower is in material compliance with all federal, state and
municipal laws respecting employment and employment practices, occupational
health and safety, and wages and hours, and is not engaged in any unfair labor
practice, and there are no arrears in the payment of wages or social security
taxes;
(c) there is no unfair labor practice complaint against Borrower
pending before the National Labor Relations Board or any state or local agency;
(d) to the best knowledge of Borrower, there is no pending labor strike
or other material labor trouble affecting Borrower (including, without
limitation, any organizational drive);
(e) to the best knowledge of Borrower, there is no material labor
grievance pending against Borrower;
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Agreement (Continued)
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(f) there is no pending representation question respecting the
employees of Borrower before any local, state or federal agency;
(g) except as set forth on Schedule 4.13, there are no pending
proceedings arising out of or under any collective bargaining agreement to which
Borrower is a party, or to the best knowledge of Borrower, any basis for which a
claim may be made under any collective bargaining agreement to which Borrower is
a party; and
(h) there are no pending proceedings arising out of any employment
discrimination claim.
SECTION 4.14 EMPLOYEE BENEFIT PLANS.
Schedule 4.14 lists all Plans. Neither Borrower nor any Subsidiary has
engaged in a transaction with respect to any employee benefit plan as defined in
Section 3(3) of ERISA which could subject Borrower, a Subsidiary or the Lender
to a penalty under Section 502(i) of ERISA or a tax under Section 4975 of the
IRS Code. Each of the Plans listed, or required to be listed, on Schedule 4.14
has been operated and administered in accordance with applicable law, including
without limitation, ERISA. Neither Borrower nor any Subsidiary has incurred any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA, to which Borrower or Lender could be subject or for which it might be
liable. None of Borrower or the Subsidiaries is, and immediately after the Loan
Closing will be, a party to a "multi-employer plan," as defined in Section 3(37)
of ERISA.
SECTION 4.15 COMPLIANCE WITH LAWS.
Except as set forth on Schedule 4.15, each of Borrower and the
Subsidiaries has all requisite licenses, permits and certificates including
without limitation, drug, environmental and health and safety permits from
federal, state and local authorities necessary to conduct its business and own
and operate its assets (collectively, the "Permits"), except where the failure
to have such licenses would not reasonably be expected to have a Material
Adverse Effect. Except as set forth on Schedule 4.15, neither Borrower nor any
Subsidiary is in violation of any law, rule, regulation or order relating to its
business, operations and properties which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect. Except as set
forth on Schedule 4.15, Borrower and the Subsidiaries have not received any
notice or communication from any federal, state, local or foreign governmental
or regulatory authority or agency. Borrower and the Subsidiaries have not
engaged in any practices in violation of any antitrust law or regulation of any
federal, state, local or foreign Governmental Authority.
SECTION 4.16 LICENSES AND PERMITS.
Borrower and the Subsidiaries have all licenses and franchises relating
to the operation of their respective businesses as are necessary and required
for such ownership and operation, except where the failure to have such licenses
and franchises would not have a Material Adverse Effect, and all of which are in
good standing and, except as expressly set forth on Schedule 4.16, are not
subject to renewal within less than one (1) year.
SECTION 4.17 CONTRACTS.
Schedule 4.17 lists all contracts to which Borrower or the Subsidiaries
are a party involving obligations in respect of the business for payment,
performance of services or delivery of goods in excess of $50,000 or which
require Borrower to continue to perform for a period of longer than twelve (12)
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Agreement (Continued)
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months (the "Scheduled Contracts"). Borrower has delivered to the Lender true
and correct copies of all the Scheduled Contracts. All of such Scheduled
Contracts are valid and binding obligations of Borrower or the Subsidiaries, are
in full force and effect, and, to the best knowledge of Borrower or the
Subsidiaries, are enforceable against the parties thereto in accordance with
their respective terms. Neither Borrower nor the Subsidiaries has received any
notice that the other parties to the Scheduled Contracts are (i) in default
under such Scheduled Contracts, or (ii) consider Borrower to be in default
thereunder. Except as expressly noted in Schedule 4.17, to the best knowledge of
Borrower or the Subsidiaries, no party to any of the Scheduled Contracts intends
to terminate or adversely modify its agreement(s) with respect thereto or
adversely change the volume of business done thereunder.
SECTION 4.18 SHARES ISSUABLE UPON CONVERSION.
The shares of Common Stock of Borrower when issued to the Lender upon
conversion of the Debentures, will be duly and validly issued, fully paid and
nonassessable and in compliance with all applicable securities laws. Except as
set forth on Schedule 4.18, such issuance will not give rise to preemptive
rights, rights of first refusal or similar rights by any other security holder
of Borrower.
SECTION 4.19 INSIDER.
All material agreements between Borrower and any of its officers,
directors and principal shareholders, including employment agreements, required
to be disclosed are disclosed in the reports and filings made with the SEC or
listed on Schedule 4.19.
SECTION 4.20 SUBSIDIARIES.
(a) All of the Subsidiaries of Borrower are listed on Schedule 4.20.
Except as disclosed on Schedule 4.20, Borrower owns all of the outstanding
capital stock or other equity interests of the Subsidiaries, free and clear of
all adverse claims. All of such outstanding capital stock of each Subsidiary has
been duly and validly authorized and issued and is fully paid and nonassessable.
All such Subsidiaries are duly organized and existing in good standing under the
laws of the respective jurisdictions of their incorporation or organization, are
duly qualified as foreign corporations and in good standing in all jurisdictions
in which failure to qualify would have a Material Adverse Effect, and have the
corporate power and authority to own their respective properties and assets and
to transact the business in which they are engaged and are or will be qualified
in those jurisdictions wherein they propose to transact material business
operations in the future.
(b) Except as disclosed on Schedule 4.20, Borrower does not own any
equity or long-term debt interest in any other Person, or any right or option to
acquire any such interest in any such Person.
(c) There are no restrictions on the payment of dividends by or
advances from any Subsidiary to Borrower.
SECTION 4.21 CASUALTIES.
Except as disclosed on Schedule 4.21, neither the business, operations
or properties of Borrower is currently affected by any environmental hazard,
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), which would have a Material Adverse Effect.
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Agreement (Continued)
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SECTION 4.22 INVESTMENT COMPANY ACT.
Borrower is not an "investment company," as defined in Section 3 of the
1940 Act, nor a company that would be an investment company, except for the
exclusions from the definition of an investment company in Section 3(C) of the
1940 Act, and Borrower is not controlled by such a company.
SECTION 4.23 SUFFICIENCY OF CAPITAL.
Borrower is, and after consummation of this Agreement and giving effect
to all Indebtedness incurred and transactions contemplated in connection
herewith will be, Solvent.
SECTION 4.24 CORPORATE NAMES.
Borrower has not, during the preceding five (5) years, done business
under or used any assumed, fictitious or trade names, in its current businesses,
except as disclosed on Schedule 4.24.
SECTION 4.25 INSURANCE.
All of the insurable properties of Borrower are insured for its benefit
under valid and enforceable policies issued by insurers of recognized
responsibility in amounts and against such risks and losses as is customary in
Borrower's industry for companies of similar size. Schedule 4.25 sets forth all
of Borrower's property insurance policies.
SECTION 4.26 INTELLECTUAL PROPERTY.
Borrower owns, or is licensed to use, all material trademarks, service
marks, trade names, patents and copyrights presently used to conduct its
business, except those for which the failure to obtain could not be reasonably
expected to have a Material Adverse Effect. To the best of its knowledge,
Borrower has the right to use such intellectual property rights without
infringing or violating the rights of any third parties. No claim has been
asserted by any person to the ownership of or right to use any such rights or
challenging or questioning the validity or effectiveness of any such license or
agreement. Borrower is not in default of any such license agreements in any
material respect, and no event has occurred and is continuing which, with notice
or lapse of time or both, would constitute a material default. Each license
agreement is enforceable in accordance with its terms and has not been canceled,
abandoned or terminated, nor has Borrower received notice thereof. Except as set
forth on Schedule 4.26, there are no claims for trademark or copyright
infringement pending or threatened against Borrower or the Subsidiaries or their
respective officers or directors. Neither Borrower nor any Subsidiary is
currently using copyrightable material for which Borrower or any Subsidiary
needs, but does not have, a license to conduct its existing business. Neither
Borrower nor any Subsidiary is currently using any trademarks for which Borrower
or any Subsidiary needs, but does not have, a valid character or trademark
license to conduct its existing business.
SECTION 4.27 REAL PROPERTY.
(a) Set forth on Schedule 4.27 is a list of the addresses of each
parcel of real property leased to Borrower. Borrower does not own any real
property.
(b) Borrower has delivered to the Lender true and correct copies of all
of its leases or subleases and all related amendments, supplements and
modifications and related documents (the
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Agreement (Continued)
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"Scheduled Lease Documents"), which require payments or contingent payments by
Borrower of any of the Subsidiaries subsequent to the date hereof in excess of
$25,000. There are no other agreements, written or oral, between Borrower and
any third parties claiming an interest in Borrower's interest in the Scheduled
Leases or otherwise relating to Borrower's use and occupancy of any leased real
property. All such leases are valid and binding obligations of Borrower, are in
full force and effect and enforceable against Borrower in accordance with their
terms; and no event has occurred including, but not limited to, the executed,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby which (whether with or without notice, lapse of
time or both) would constitute a default thereunder. Except as described on
Schedule 4.27, no property leased by Borrower is subject to any lien,
encumbrance, easement, right-of-way, building or use restriction, exception,
variance, reservation or limitation which materially interferes with or impairs
the use thereof in the usual and normal conduct of Borrower's business.
SECTION 4.28 ENVIRONMENTAL.
(a) Borrower is currently in compliance with all applicable
Environmental Laws (as defined below) which compliance includes, but is not
limited to, the possession by Borrower of all permits and other governmental
authorization required under applicable Environmental Laws, and compliance in
all material respects with the terms and conditions thereof, except in any case
where the failure to be in compliance would not have a Material Adverse Effect.
(b) Except as set forth on Schedule 4.28, Borrower has not stored,
disposed of or arranged for disposal of any Hazardous Substances (as defined
below) on any of the real property, except in compliance with applicable
Environmental Laws.
(c) Borrower has not received any communication (written or oral),
whether from a governmental authority, citizens group, employee or otherwise,
that alleges that Borrower is not in compliance with Environmental Laws, and
there are no circumstances known to Borrower that may prevent or interfere with
such compliance in the future. There is no Environmental Claim (as defined
below) pending or, to Borrower's knowledge, threatened against Borrower.
(d) Except as set forth on Schedule 4.28, during the period the
facilities have been held by Borrower, its affiliates or, to Borrower's
knowledge, its predecessors in interest, there have been no actions, activities,
circumstances, conditions, events or incidents including, without limitation,
the generation, handling, transportation, treatment, storage, release, emission,
discharge, presence or disposal of any Hazardous Substance (as defined below),
that could reasonably be expected to form the basis of any Environmental Claim
against Borrower under any Environmental Law in effect at, or at any time prior
to, the Loan Closing.
(e) Without in any way limiting the generality of the foregoing, to the
knowledge of Borrower, (i) there are no underground storage tanks located on the
property owned or leased by Borrower or the Subsidiaries, (ii) there is no
asbestos contained in or forming part of any building, building component,
structure or office space owned or leased by Borrower or the Subsidiaries, and
(iii) no polychlorinated biphenyls ("PCBs") are used or stored at any property
owned or leased by Borrower or the Subsidiaries.
The following terms shall have the following meanings:
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Agreement (Continued)
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"Environmental Claim" means any claim, action, cause of
action, investigation or notice (written or oral) by any person or entity
alleging Borrower' liability under any Environmental Law (including, without
limitation, liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from (a) the presence, or
release into the environment, of any Hazardous Substances at any location,
whether or not owned or operated by Borrower, or (b) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means the federal, state and local
environmental, health or safety laws, regulations, ordinances, rules and
policies and common law in effect on the date hereof and the Loan Closing Date
relating to the use, refinement, handling, treatment, removal, storage,
production, manufacture, transportation or disposal, emissions, discharges,
releases or threatened releases of Hazardous Substances, or otherwise relating
to protection of the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), as the same may
be amended or modified to the date hereof and the Loan Closing Date including,
without limitation, the statutes listed below:
Federal Resources Conservation and Recovery Act of
1976, 42 U.S.C. Section 6901, et seq.
Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et seq.
Federal Clean Air Act, 42 U.S.C. Section 7401, et
seq.
Federal Water Pollution Control Act, Federal Clean
Water Act of 1977, 33 U.S.C. Section 1251, et seq.
Federal Insecticide, Fungicide and Rodenticide Act,
Federal Pesticide Act of 1978, 7 U.S.C. Section 136, et seq.
Federal Hazardous Materials Transportation Act, 48
U.S.C. Section 1801, et seq.
Federal Toxic Substances Control Act, 15 U.S.C.
Section 2601, et seq.
Federal Safe Drinking Water Act, 42 U.S.C. Section
300f, et seq.
"Hazardous Substances" means any toxic or hazardous waste,
pollutants or substances including, without limitation, asbestos, PCBs,
petroleum products and byproducts, substances defined or listed as "hazardous
substance," "toxic substance," "toxic pollutant" or similarly identified
substance or mixture, in or pursuant to any Environmental Law.
SECTION 4.29 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties of Borrower herein shall survive the
Loan Closing and the delivery of the Debentures, and any investigation at any
time made by or on behalf of the Lender shall not diminish the Lender's right to
rely on Borrower's representations and warranties as herein set forth.
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Agreement (Continued)
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SECTION 4.30 FULL DISCLOSURE.
Neither the representations or warranties of Borrower, the schedules to
this Agreement, the financial statements referenced in Section 4.06, nor any SEC
registration statement, report or proxy statement filed by the Borrower contains
or will contain, as of the date thereon, any untrue statement of a material fact
or omits or will omit to state any material fact necessary to keep the
statements contained herein or therein from being misleading in any material
respect.
ARTICLE IVA. - REPRESENTATIONS AND WARRANTIES OF THE LENDER
The Lender hereby represents and warrants to the Borrower as follows:
SECTION 4A.01. DOMICILE.
Each Lender is a citizen of the United States, at least eighteen (18)
years of age, and is a bona fide resident and domiciliary (not a temporary or
transient resident) of the state of residence set forth opposite such Lender's
name on Schedule 4A.01.
SECTION 4A.02. AUTHORIZATION AND PERFORMANCE OF THIS AGREEMENT.
[Intentionally Omitted]
SECTION 4A.03. INVESTMENT REPRESENTATIONS.
(a) Each Lender is purchasing the Debentures for his own account
without a view to any distribution thereof in violation of the Securities Act of
1933, as amended (the "SECURITIES ACT"), subject, nevertheless, to any
requirements of law that the disposition of his property shall at all times be
within his control. Each Lender represents that he (i) is an "Accredited
Investor" as that term is defined under Rule 502 under the Securities Act; (ii)
has no contract, undertaking, agreement or arrangement with any person to sell,
transfer or pledge to such person or anyone else the Debentures or any part
thereof; (iii) has had the opportunity to ask questions relating to Borrower and
its business of management of Borrower and such questions have been answered to
the Lender's satisfaction; (iv) has sufficient knowledge and experience in
business matters to evaluate the merits and risks of an investment in Borrower;
(v) has adequate means of providing for his current needs and possible
contingencies, has no need for liquidity of its investment in Borrower; and (vi)
would be able to bear the economic risk of a complete loss of his proposed
investment hereunder. Each Lender acknowledges that Borrower is allocating and
selling the Debentures in reliance upon the exemption from registration provided
in Section 4(2) of the Securities Act and is relying upon these representations
and that the Debentures may only be transferred if registered under the
Securities Act or pursuant to an exemption from such registration requirements.
Each Lender understands that Rule 144 promulgated under the Securities Act is
not presently available with respect to the Debentures or the Registrable
Securities, and that absent registration of the Debentures or the Registrable
Securities under the Securities Act, compliance with an applicable exemption
under the Securities Act is required for any public sale or other disposition of
the Debentures or the Registrable Securities. Each Lender agrees that prior to
any proposed transfer of the Debentures or the Registrable Securities and as a
condition thereto, if such transfer is not made pursuant to an effective
registration statement under the Securities Act or an opinion of counsel to
Borrower (or other counsel acceptable to Borrower and its counsel) that the
Debentures or the Registrable Securities may be sold publicly without
registration under the Securities Act, the undersigned will, if requested by
Borrower, deliver to Borrower
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Agreement (Continued)
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an investment covenant signed by the proposed transferee, and such other
documents and instruments as Borrower may reasonably request.
(b) Each Lender acknowledges that each certificate representing
Debentures shall bear a legend substantially in the following form:
"This Debenture has not been registered under the Securities Act of
1933, as amended ("Act"), or applicable state securities laws ("State Acts"),
and shall not be offered, sold, pledged, hypothecated, or otherwise transferred,
unless such transfer is made in compliance with the Act and the State Acts."
ARTICLE V. - AFFIRMATIVE COVENANTS OF BORROWER
So long as any part of the Debentures remains unpaid or has not been
redeemed or converted hereunder, and until such payment, redemption or
conversion in full, unless the Lender shall otherwise consent in writing,
Borrower agrees that:
SECTION 5.01 FINANCIAL STATEMENTS, REPORTS AND DOCUMENTS.
(a) Borrower shall accurately and fairly maintain its books of account
in accordance with GAAP and retain the firm of Xxxxx Xxxxxxxx, P.C. as its
independent certified public accountants to make annual audits of its accounts
in accordance with generally accepted auditing standards. Any replacement firm
shall be approved by the Lender.
(b) Borrower shall provide the following reports and information to
Lender:
(i) As soon as publicly available, and in any event within
forty-five (45) days after the close of each fiscal quarter, or as such deadline
may be extended under applicable SEC rules, Borrower's quarterly reports on Form
10-Q with exhibits. As soon as publicly available, Borrower's reports on Form
8-K with any exhibits.
(ii) As soon as publicly available, and in any event within
ninety (90) days after the close of each fiscal year, or as such deadline may be
extended under applicable SEC rules, Borrower's annual report on Form 10-K, with
exhibits.
(iii) Each fiscal quarter, concurrent with the Form 10-Q
required above, a certificate executed by the Chief Financial Officer or Chief
Executive Officer of Borrower (A) stating that a review of the activities of
Borrower during such fiscal period has been made under his supervision and that
Borrower has observed, performed and fulfilled each and every obligation and
covenant contained herein and is not in Default under any of the same or, if any
such Default shall have occurred, specifying the nature and status thereof, and
(B) stating that Borrower and the Subsidiaries are in compliance as of the end
of such fiscal quarter with the agreed minimum financial ratios and standards
set forth in Schedule 7.01 to this Agreement.
(iv) Promptly (but in any event within ten (10) business days)
upon becoming aware of the existence of any condition or event which constitutes
a Default or which, with notice or the passage of time or both would become a
Default or an Event of Default, written notice specifying the nature and period
of existence thereof and the action which Borrower is taking or proposes to take
with respect thereto.
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Agreement (Continued)
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(v) Promptly (but in any event within ten (10) business days)
upon the receipt thereof by Borrower or the Board of Directors of Borrower,
copies of all reports, all management letters and other detailed information
submitted to Borrower or the Board by independent accountants in connection with
each annual or interim audit or review of the accounts or affairs of Borrower
made by such accountants.
(vi) Promptly (but in any event within ten (10) business
days), such other information relating to the finances, budgets, properties,
business and affairs of Borrower and each Subsidiary, as the Lender or the Agent
may reasonably request from time to time.
(vii) Promptly upon its becoming available, one copy of each
financial statement, report, press release, notice or proxy statement sent by
Borrower to stockholders generally, and of each regular or periodic report,
registration statement or prospectus filed by Borrower with any securities
exchange or the SEC or any successor agency, and of any order issued by any
Governmental Authority in any proceeding to which Borrower is a party.
(viii) Concurrent with Borrower's timely filing and delivery
of its Form 10-Q SB upon the close of each fiscal quarter, a report setting
forth the number of stock options, and their respective prices and terms, issued
during such quarter and cumulatively.
SECTION 5.02 PREPARATION OF BUDGETS.
(a) Prior to the beginning of Borrower's fiscal year Borrower agrees to
prepare and submit to the Board and furnish to Lender a copy of an annual plan
for such year which shall include, without limitation, plans for expansion, if
any, plans for incurrences of Indebtedness and projections regarding other
sources of funds, quarterly projected capital and operating expense budgets,
cash flow statements, profit and loss statements and balance sheet projections,
itemized in such detail as the Board may request.
(b) Borrower shall furnish to the Lender monthly financial reports,
including budgets (as currently used by management in the conduct of business)
within 30 days of the end of each month thereafter.
(c) Borrower agrees that it will review its operations with Agent. Such
operations reviews will be in such depth and detail as Agent shall reasonably
request and will be held as reasonably necessary, generally once a fiscal
quarter.
SECTION 5.03 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.
Borrower shall, and shall cause its Subsidiaries to, pay and discharge
(i) all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits, or upon any property belonging to it, before
delinquent, (ii) all lawful claims (including claims for labor, materials and
supplies) which, if unpaid, will give rise to a Lien upon any of its property,
other than a Permitted Lien, and (iii) all of its other Indebtedness in
accordance with their respective terms, except as prohibited hereunder;
provided, however, that Borrower and its Subsidiaries, if any, shall not be
required to pay any such tax, assessment, charge, levy or other claim if and so
long as the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings and appropriate accruals and
reserves therefor have been established in accordance with GAAP.
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Agreement (Continued)
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SECTION 5.04 MAINTENANCE OF EXISTENCE AND RIGHTS; CONDUCT OF BUSINESS.
Subject to Section 6.13, Borrower shall, and shall cause its operating
Subsidiaries to, preserve and maintain their respective corporate existence and
all of their respective material rights and privileges necessary in the normal
conduct of their respective businesses, and to conduct their respective
businesses in an orderly and efficient manner consistent with good business
practices and in accordance with all valid regulations and orders of any
Governmental Authority. Borrower shall keep its principal place of business
within the United States.
SECTION 5.05 SEC FILINGS.
So long as Borrower has a class of securities registered pursuant to
Section 12 of the 1934 Act, Borrower shall duly file, when due, all reports and
proxy statements required of a company whose securities are registered for
public trading under and pursuant to the 1934 Act and any rules and regulations
issued thereunder.
SECTION 5.06 NOTICE.
Borrower shall promptly notify the Lender of (i) any Material Adverse
Change, (ii) any default under any other Indebtedness having an aggregate
principal amount in excess of $50,000, material agreement, contract or other
instrument to which it is a party or by which any of its properties are bound,
or any acceleration of the maturity of any Indebtedness having an aggregate
principal amount in excess of $50,000, if any, (iii) any material adverse claim
against or affecting Borrower or its Subsidiaries, if any, or any of its
properties, and (iv) the commencement of, and any determination in, any material
litigation with any third party or any proceeding before any Governmental
Authority.
SECTION 5.07 COMPLIANCE WITH LOAN DOCUMENTS.
Borrower shall, and shall cause its Subsidiaries to, promptly comply
with any and all covenants and provisions of the Loan Documents.
SECTION 5.08 COMPLIANCE WITH MATERIAL AGREEMENTS.
Borrower shall, and shall cause each of its Subsidiaries to, comply in
all material respects with all Senior Documents, material agreements,
indentures, mortgages or documents binding on it or affecting its properties or
business.
SECTION 5.09 OPERATIONS AND PROPERTIES.
Borrower shall, and shall cause each of its Subsidiaries to, act
prudently and in accordance with customary industry standards in managing or
operating its assets, properties, business and investments. Borrower shall, and
shall cause each of its Subsidiaries to, keep in good working order and
condition, ordinary wear and tear excepted, all of its assets and properties
which are necessary to the conduct of its business.
SECTION 5.10 BOOKS AND RECORDS; ACCESS.
Borrower shall, and shall cause each of its Subsidiaries to, maintain
complete and accurate books and records of its transactions in accordance with
good accounting practices. Borrower shall give each
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Agreement (Continued)
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duly authorized representative of the Lender access during all normal business
hours, upon reasonable notice, to, and shall permit such representative to
examine, copy or make excerpts from, any and all books, records and documents in
the possession of Borrower and its Subsidiaries and relating to its affairs, and
to inspect any of the properties of Borrower and its Subsidiaries; provided that
the Lender agrees that any such inspection will be performed so as not to
interfere with Borrower's normal business operations. Borrower shall make a copy
of this Agreement, along with any waivers, consents, modifications or
amendments, available for review at its principal office by the Lender or the
Lender's representatives.
SECTION 5.11 COMPLIANCE WITH LAW.
Borrower shall, and shall cause each of its Subsidiaries to, comply in
all material respects with all applicable laws, rules, regulations, ordinances
and all orders and decrees of any Governmental Authority applicable to it or any
of its properties, businesses or operations.
SECTION 5.12 INSURANCE.
Borrower shall, and shall cause each of its Subsidiaries to, maintain
such worker's compensation insurance, liability insurance and insurance on its
properties, assets and business, now owned or hereafter acquired, against such
casualties, risks and contingencies, and in such types and amounts, as are
consistent with customary practices and standards of companies of similar size
engaged in similar businesses.
SECTION 5.13 AUTHORIZATIONS AND APPROVALS.
Borrower shall, and shall cause each of its Subsidiaries to, promptly
obtain, from time to time and at its own expense, all such governmental
licenses, authorizations, consents, permits and approvals as may be required to
enable it to comply with its obligations hereunder and under the other Loan
Documents.
SECTION 5.14 ERISA COMPLIANCE.
Borrower shall, at all times,(i) make prompt payment of all
contributions required under all Plans, if any, and shall meet the minimum
funding standards set forth in ERISA with respect to its Plans subject to ERISA,
if any, (ii) notify the Lender immediately of any fact in connection with any of
its Plans, which might constitute grounds for termination thereof by the Pension
Benefit Guaranty Corporation or for the appointment, by the appropriate United
States District Court, of a trustee to administer such Plan, together with a
statement, if requested by the Lender, as to the reason therefor and the action,
if any, proposed to be taken with respect thereto, and (iii) furnish to the
Lender, upon its request, such additional information concerning any of its
Plans as may be reasonably requested.
SECTION 5.15 FURTHER ASSURANCES.
Borrower shall, and shall cause each of its Subsidiaries to, make,
execute or endorse, and acknowledge and deliver or file or cause the same to be
done, all such notices, certifications and additional agreements, undertakings,
transfers, assignments or other assurances, and take any and all such other
action as the Lender may, from time to time, deem reasonably necessary or proper
in connection with any of the Loan Documents, or the obligations of Borrower or
its Subsidiaries, if any, thereunder, which the Lender may request from time to
time.
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Agreement (Continued)
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SECTION 5.16 INDEMNITY BY BORROWER.
Borrower shall indemnify, save and hold harmless the Lender and its
directors, officers, lenders, attorneys and employees (the "Indemnitee") from
and against (i) any and all claims, demands, actions or causes of action that
are asserted against any Indemnitee if the claim, demand, action or cause of
action, directly or indirectly, relates to this Agreement and the other Loan
Documents issued pursuant thereto, the use of proceeds of the Loans, or the
relationship of Borrower and the Lender under this Agreement or any transaction
contemplated pursuant to this Agreement, (ii) any administrative or
investigative proceeding by any Governmental Authority, directly or indirectly,
related to a claim, demand, action or cause of action described in clause (i)
above, and (iii) any and all liabilities, losses, costs or expenses (including
reasonable attorneys' fees and disbursements) that any Indemnitee suffers or
incurs as a result of any of the foregoing; PROVIDED, HOWEVER, that Borrower
shall have no obligation under this Section 5.16 to the Lender with respect to
any of the foregoing arising out of the gross negligence or willful misconduct
of the Lender or its assignees or the breach by Lender or its assignees of this
Agreement or any other Loan Document or other document executed in connection
with any of the aforesaid, the breach by the Lender or its assignees of any
intercreditor or participation agreement or commitment with other parties, the
violation or alleged violation of any law, rule or regulation by the Lender or
its assignees, or from the transfer or disposition by the Lender of any
Debentures or the Common Stock issued upon conversion of the Debentures. If any
claim, demand, action or cause of action is asserted against any Indemnitee,
such Indemnitee shall promptly notify Borrower, but the failure to so promptly
notify Borrower shall not affect Borrower's obligations under this Section
except to the extent such failure prejudices Borrower's right or ability to
participate in the contest of such claim, demand, action or cause of action, as
hereinafter provided. In the event that such Indemnitee's failure to properly
notify Borrower materially prejudices Borrower's right or ability to participate
in the contest of such claim, demand action or cause of action, then said
Indemnitee shall have no right to receive, and Borrower shall have no obligation
to pay, any indemnification amounts hereunder. Borrower may elect to defend any
such claim, demand, action or cause of action (at its own expense) asserted
against said Indemnitee and, if requested by Borrower in writing and so long as
no Default or Event of Default shall have occurred and be continuing, such
Indemnitee (at Borrower's expense) shall, in good faith, contest the validity,
applicability and amount of such claim, demand, action or cause of action and
shall permit Borrower to participate in such contest. Any Indemnitee that
proposes to settle or compromise any claim or proceeding for which Borrower may
be liable, for payment to or on behalf of an Indemnitee hereunder, shall give
Borrower written notice of the terms of such proposed settlement or compromise
reasonably in advance of settling or compromising such claim or proceeding and
shall obtain Borrower's written concurrence thereto. In the event that said
Indemnitee fails to obtain Borrower's prior written consent to any such
settlement or compromise, said Indemnitee shall have no right to receive, and
Borrower shall have no obligation to pay, any indemnification amounts hereunder.
Each Indemnitee may employ counsel, which counsel shall be reasonably acceptable
to Borrower, in enforcing its rights hereunder and in defending against any
claim, demand, action or cause of action covered by this Section 5.16; PROVIDED,
HOWEVER, that each Indemnitee shall endeavor in connection with any matter
covered by this Section 5.16 which also involves any other Indemnitee, use
reasonable efforts to avoid unnecessary duplication of effort by counsel for all
Indemnitees, including allowing Borrower to select one lawyer for all parties,
such selection to be subject to the approval of such parties, which approval
shall not be unreasonably withheld. Any obligation or liability of Borrower to
any Indemnitee under this Section 5.16 shall survive the expiration or
termination of this Agreement and the repayment of the Debentures.
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SECTION 5.17 RESERVATION OF SHARES; SHAREHOLDER APPROVAL.
Borrower shall, at all times, reserve and keep available sufficient
authorized and unissued shares of Common Stock to effect the conversion of the
Debentures.
SECTION 5.18 OWNERSHIP OF SUBSIDIARIES.
Borrower shall own, at all times, all of the capital stock of, or other
equity interests in, the Subsidiaries, except as disclosed on Schedule 5.18.
SECTION 5.19 RETENTION OF STOCK OWNERSHIP.
[intentionally omitted]
SECTION 5.20 SUBSEQUENTLY FORMED SUBSIDIARIES.
Borrower shall cause all subsequently-formed Subsidiaries to execute
the Subsidiaries' Guaranty and Subsidiary Security Agreement referenced in
Section 3.01(c).
ARTICLE VI. NEGATIVE COVENANTS OF BORROWER
So long as any part of the Debentures has not been redeemed or
converted hereunder, and until such redemption or conversion in full, unless the
Lender shall otherwise consent in writing, Borrower agrees that:
SECTION 6.01 LIMITATION ON INDEBTEDNESS.
At Loan Closing, Borrower and its Subsidiaries shall not have any
outstanding Indebtedness, except Indebtedness arising under this Agreement, the
Debentures, the Guaranties, or Permitted Indebtedness. Borrower and its
Subsidiaries will not incur or guarantee any Indebtedness senior to or PARI
PASSU with the Debentures and the Renaissance Debentures, without the consent of
the Lender, except for Asset-Backed Acquisition or Operations Indebtedness.
SECTION 6.02 LIMITATION ON LIENS.
Borrower shall not, and shall not permit its Subsidiaries to, create,
cause, incur, permit or suffer to exist any Lien upon any of its properties or
assets, other than Permitted Liens.
SECTION 6.03 LIMITATION ON INVESTMENTS.
Borrower shall not, and shall not permit its Subsidiaries to, make or
have outstanding any Investments in any Person, except for Borrower's or any
Subsidiary's acquisition or ownership of stock of or other equity interests in
Subsidiaries (including Persons that will be Subsidiaries after giving effect to
such Investments), loans and other transactions between Borrower and any
Subsidiaries, short term bank deposits, money market investments,
investment-grade commercial paper, government securities and such other "cash
equivalent" investments as the Lender may, from time to time, approve, and
customer obligations and receivables arising out of sales or leases made or the
rendering of services in the ordinary course of business.
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Agreement (Continued)
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SECTION 6.04 ALTERATION OF MATERIAL AGREEMENTS.
Borrower shall not, and shall not permit its Subsidiaries to, consent
to or permit any material alteration, amendment, modification, release, waiver
or termination of any Senior Documentation or material agreement to which it is
a party, other than in the ordinary course of business.
SECTION 6.05 TRANSACTIONS WITH AFFILIATES.
Except as disclosed in Schedule 6.05, Borrower shall not, and shall not
permit its Subsidiaries to, enter into any transaction not in the ordinary
course of business with, or pay any management fees to, any Affiliate, except
for intercompany transactions, unless the terms thereof (i) are no less
favorable to Borrower or such Subsidiary than those that could be obtained at
the time of such transaction in arm's-length dealings with a Person who is not
an Affiliate, or (ii) if such transaction involves an amount less than $60,000,
are set forth in writing and have been approved by a majority of the members of
the Board of Directors having no personal stake in the transaction.
Notwithstanding the foregoing, Borrower may grant options to employees or
directors if otherwise permitted under this Agreement.
SECTION 6.06 LIMITATIONS ON ACQUISITION OF NONRELATED BUSINESS.
Borrower shall not, and shall not permit its Subsidiaries to, engage in
any line of business, or acquire any new product lines or business, or acquire
any companies unless such new product line or business acquired is primarily
involved in, or substantially similar or related to, Borrower's current lines of
business or extensions thereof.
SECTION 6.07 LIMITATION ON SALE OF PROPERTIES.
Borrower shall not, and shall not permit its Subsidiaries to, (i) sell,
assign, convey, exchange, lease or otherwise dispose of any of its properties,
rights, assets or business (including the capital stock of its operating
Subsidiaries), whether now owned or hereafter acquired, without the consent of
the Lender, except in the ordinary course of business, or (ii) sell, assign or
discount any accounts receivable, except in the ordinary course of business
(which shall include receivable financing or securitization).
SECTION 6.08 FISCAL YEAR AND ACCOUNTING METHOD.
Borrower shall not, and shall not permit its Subsidiaries to, change
its fiscal year or method of accounting, except as permitted by GAAP.
SECTION 6.09 LIQUIDATION.
Borrower shall not, and shall not permit its Subsidiaries to, (i)
dissolve or liquidate (except for dissolution or liquidation of inactive
Subsidiaries in the ordinary course of business), or (ii) enter into any other
transaction that has a similar effect.
SECTION 6.10 MATERIAL AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS.
Borrower shall not, and shall not permit its Subsidiaries to, amend its
Certificate or Articles of Incorporation (or other charter document) or bylaws
in any material respect.
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Agreement (Continued)
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SECTION 6.11 EXECUTIVE COMPENSATION.
(a) Borrower will not increase the salary, bonus, or other compensation
programs (whether in cash, securities or other property, and whether payment is
deferred or current) of its chief executive officer and chief financial officer,
unless such compensation increase is approved by a majority of the Board or a
Compensation Committee of the Board, a majority of whom shall be nonemployee
Directors. Compensation to other senior executive officers, including division
managers, shall be consistent with the policies of the Compensation Committee.
(b) Borrower shall not implement any bonus, profit sharing or other
incentive plans for its executive officers, until such plans are formally
adopted by the majority of the Board or a Compensation Committee of the Board, a
majority of whom shall be nonemployee Directors. Borrower's executive
compensation shall be consistent with the general compensation policies adopted
by the Compensation Committee of the Board. SECTION 6.12 RESTRICTED PAYMENTS.
Borrower shall not (i) without the consent of the Lender, declare or
pay any Dividend (other than stock dividends) or make any other cash
distribution on any Common Stock or any Preferred Stock, (ii) purchase, redeem
or otherwise acquire any shares of Common Stock or any shares of Preferred
Stock, without the consent of the Lender, (iii) make any payments of
Indebtedness (other than trade payables) which are PARI PASSU or subordinated to
the Debentures and the Renaissance Debentures, if at the time of such payment,
Borrower is in Default with respect to the Loan, or (iv) make any prepayments of
Indebtedness (other than trade payables) which are PARI passu or subordinated to
the Debentures and the Renaissance Debentures, unless the Debentures are prepaid
on a PRO RATA basis. Borrower shall not permit its Subsidiaries to enter into
any agreements restricting the payment of dividends from the Subsidiaries to
Borrower, without the consent of the Lender.
SECTION 6.13 CONSOLIDATION OR MERGER.
Borrower shall not consolidate with or merge into any other
corporation, unless the surviving corporation, after such merger or
consolidation, will not be in Default and the surviving corporation becomes a
party to this Agreement. Subsidiaries shall only consolidate with or merge into
Borrower or another Subsidiary; provided, however, that a Subsidiary may merge
or consolidate with any other entity as long as such Subsidiary is the surviving
corporation of such merger or consolidation, and Borrower is not in Default.
ARTICLE VII. COVENANTS OF MAINTENANCE OF FINANCIAL STANDARDS
SECTION 7.01 FINANCIAL RATIOS.
So long as any of the Debentures has not been redeemed or converted
hereunder, and until such redemption or conversion has been made in full, or
unless the Lender shall otherwise consent in writing, Borrower, on a
consolidated basis, shall be in compliance with the agreed minimum financial
ratios and standards provided in Schedule 7.01, as of the end of each fiscal
quarter of Borrower and as set forth in its most recent quarterly compliance
certificates delivered pursuant to Section 5.01.
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ARTICLE VIII. EVENTS OF DEFAULT
SECTION 8.01 EVENTS OF DEFAULT.
An "Event of Default" shall exist if any one or more of the following
events (herein collectively called "Events of Default") shall occur and be
continuing:
(a) Borrower shall fail to pay within five (5) days after it becomes
due (or shall state in writing an intention not to pay or its inability to pay)
any installment of interest on or principal of, any Debentures, or Borrower
shall fail to pay any fee, expense or other payment required hereunder within
thirty (30) days after receipt of invoice;
(b) Any representation or warranty made under this Agreement, or any of
the other Loan Documents, or in any certificate or statement furnished or made
to Agent pursuant hereto or in connection herewith or with the Loans hereunder,
or in any Subsidiary Document shall prove to be untrue or inaccurate in any
material respect as of the date on which such representation or warranty was
made;
(c) Default shall occur in the performance of any of the covenants or
agreements of Borrower or of its Subsidiaries contained herein, or in any of the
other Loan Documents or in any Subsidiary Document if such Default is not cured
within 30 days after written notice of such Default from Lender to Borrower;
(d) Default shall occur in the payment of any other Indebtedness having
an aggregate principal amount in excess of $50,000, or nonmonetary default shall
occur in respect of any note, loan agreement or credit agreement relating to any
Indebtedness having an aggregate principal amount in excess of $50,000, and such
default continues for more than the period of grace, if any, specified therein
or any Indebtedness having an aggregate principal amount in excess of $50,000,
shall become due before its stated maturity by acceleration of the maturity, or
any indebtedness having an aggregate principal amount in excess of $50,000,
shall become due by its terms and shall not be promptly paid or extended;
(e) Any of the Loan Documents shall cease to be legal, valid and
binding agreements enforceable against Borrower in accordance with the
respective terms, or shall, in any way, be terminated or become or be declared
by any court or by Borrower or any Subsidiary in any legal proceeding to be
ineffective or inoperative, or shall in any way whatsoever cease to give or
provide the respective rights, titles, interests, remedies, powers or privileges
stated therein to be created thereby;
(f) Borrower or its Subsidiaries shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian, intervenor or liquidator of
itself, or of all or substantially all of such Person's assets, (ii) file a
voluntary petition in bankruptcy, admit in writing that such Person is unable to
pay such Person's debts as they become due or generally not pay such Person's
debts as they become due, (iii) make a general assignment for the benefit of
creditors, (iv) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy or insolvency
laws, (v) file an answer admitting the material allegations of, or consent to,
or default in answering, a petition filed against such Person in any bankruptcy,
reorganization or insolvency proceeding, or (vi) take corporate action for the
purpose of effecting any of the foregoing;
(g) An involuntary petition or complaint shall be filed against
Borrower or any of its Subsidiaries seeking bankruptcy or reorganization of such
Person or the appointment of a receiver, custodian, trustee, intervenor or
liquidator of such Person, or all or substantially all of such Person's
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Agreement (Continued)
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assets, and such petition or complaint shall not have been dismissed within
sixty (60) days of the filing thereof or an order, order for relief, judgment or
decree shall be entered by any court of competent jurisdiction or other
competent authority approving a petition or complaint seeking reorganization of
Borrower or its subsidiary or appointing a receiver, custodian, trustee,
intervenor or liquidator of such Person, or of all or substantially all of such
Person's assets;
(h) Any final judgment(s) for the payment of money in excess of the sum
of $50,000 in the aggregate shall be rendered against Borrower or any Subsidiary
and such judgment or judgments shall not be satisfied or discharged prior to the
date on which any of its assets could be lawfully sold to satisfy such judgment;
or
(i) Borrower shall fail to issue and deliver shares of Common Stock as
provided herein upon conversion of the Debentures.
SECTION 8.02 REMEDIES UPON EVENT OF DEFAULT.
(a) If an Event of Default shall have occurred and be continuing, then
the Lender may exercise any one or more of the following rights and remedies,
and any other remedies provided in any of the Loan Documents, as the Lender in
its sole discretion may deem necessary or appropriate:
(i) declare the unpaid Principal Amount (after application of
any payments or installments received by the Lender) of, and all interest then
accrued but unpaid on, the Debentures and any other liabilities hereunder to be
forthwith due and payable, whereupon the same shall forthwith become due and
payable without presentment, demand, protest, notice of default, notice of
acceleration or of intention to accelerate or other notice of any kind, all of
which Borrower hereby expressly waives, anything contained herein or in the
Debentures to the contrary notwithstanding;
(ii) reduce any claim to judgment; and
(iii) without notice of default or demand, pursue and enforce
any of the Lender's rights and remedies under the Loan Documents and the
Subsidiary Documents, or otherwise provided under or pursuant to any applicable
law or agreement, all of which rights may be specifically enforced.
(b) In the event of a Default by Borrower under Article VI, the Lender
may, in its sole discretion, (i) waive compliance with the covenants, provided
Borrower is in compliance with Section 7.01 hereof; or (ii) require Borrower to
redeem the Debentures at the higher of market value or the unpaid principal
amount of the Debentures, together with an amount equal to an 18% annual yield
on the principal amount from the date hereof through the Redemption Date,
whichever is greater (calculated after giving effect to any and all payments
made by Borrower to Lender under the Debenture).
SECTION 8.03 PERFORMANCE BY THE LENDER.
Should Borrower or any Subsidiary fail to perform any covenant, duty or
agreement contained herein or in any of the other Loan Documents or in any
Subsidiary Document, Lender or Agent may perform or attempt to perform such
covenant, duty or agreement on behalf of Borrower. In such event, Borrower
shall, at the request of Lender or Agent, promptly pay any amount reasonably
expended by Lender or Agent in such performance or attempted performance to
Lender or Agent at its principal office, together with interest thereon, at the
interest rate specified in the Debentures, from the date of such expenditure
until paid. Notwithstanding the foregoing, it is expressly understood that
Lender or Agent
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Agreement (Continued)
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assumes no liability or responsibility for the performance of any duties of
Borrower or any Subsidiary hereunder or under any of the other Loan Documents or
under any Subsidiary Document.
SECTION 8.04 PAYMENT OF EXPENSES INCURRED BY THE LENDER.
Upon the occurrence of a Default or an Event of Default, which
occurrence is not cured within the notice provisions, if any, provided herein,
Borrower agrees to pay and shall pay all costs and expenses (including
reasonable attorneys' fees and expenses) incurred by Lender or Agent in
connection with the preservation and enforcement of the Lender's rights under
this Agreement, the Debentures or any other Loan Document.
ARTICLE IX. REGISTRATION RIGHTS
SECTION 9.01 [INTENTIONALLY OMITTED].
SECTION 9.02 "PIGGY-BACK" REGISTRATION.
If Borrower proposes to register any of its capital stock under the
1933 Act in connection with the public offering of such securities for its own
account or for the account of its security holders, other than Holders of
Registrable Securities pursuant hereto (a "Piggy-Back Registration Statement"),
except for (i) a registration relating solely to the sale of securities to
participants in Borrower's stock or stock option plans or employee benefit plans
or (ii) a registration relating solely to a transaction for which Form S-4 may
be used, then:
(a) Borrower shall give written notice of such determination to each
Holder of Registrable Securities, and each such Holder shall have the right to
request, by written notice given to Borrower within 15 days of the date that
such written notice was mailed by Borrower to such Holder, that a specific
number of Registrable Securities held by such Holder be included in the
Piggy-Back Registration Statement (and related underwritten offering, if any)
and the states in which such Registrable Securities are to be sold;
(b) If the Piggy-Back Registration Statement relates to an underwritten
offering, the notice given to each Holder shall specify the name or names of the
managing underwriter or underwriters for such offering. In addition, such notice
shall also specify the number of securities to be registered for the account of
Borrower and for the account of its shareholders (other than the Holders of
Registrable Securities), if any;
(c) If the Piggy-Back Registration Statement relates to an underwritten
offering, each Holder of Registrable Securities to be included therein must
agree (i) to sell such Holder's Registrable Securities on the same basis as
provided in the underwriting arrangement approved by Borrower, and (ii) to
timely complete and execute all questionnaires, powers of attorney, indemnities,
hold-back agreements, lock-up agreements, underwriting agreements and other
documents required under the terms of such underwriting arrangements or by the
SEC or by any state securities regulatory body;
(d) If the managing underwriter or underwriters for the underwritten
offering under the Piggy-Back Registration Statement determines that inclusion
of all or any portion of the Registrable Securities in such offering would
materially adversely affect the ability of the underwriters for such
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Agreement (Continued)
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offering to sell all of the securities requested to be included for sale in such
offering at the best price obtainable therefor, the aggregate number of
Registrable Securities that may be sold by the Holders shall be limited to such
number of Registrable Securities, if any, that the managing underwriter or
underwriters determine may be included therein without such adverse effect as
provided below. If the number of securities proposed to be sold in such
underwritten offering exceeds the number of securities that may be sold in such
offering, there shall be included in the offering, first, up to the maximum
number of securities to be sold by Borrower for its own account and for the
account of other stockholders (other than Holders of Registrable Securities), as
they may agree among themselves, and second, as to the balance, if any,
Registrable Securities requested to be included therein by the Holders thereof
(pro rata as between such Holders based upon the number of Registrable
Securities initially proposed to be registered by each), or in such other
proportions as the managing underwriter or underwriters for the offering may
require; PROVIDED, HOWEVER, that in the event that the number of securities
proposed to be sold in such underwritten offering exceeds the number of
securities that may be sold in such offering pursuant to the terms and
conditions set forth above and the Piggy-Back Registration Statement is a result
of public offering by Borrower of its securities for its own account, there
shall be included in the offering, first, up to the maximum number of securities
to be sold by Borrower for its own account and second, as to the balance, if
any, securities to be sold for the account of Borrower's stockholders (both the
Holders of Registrable Securities requested and such other stockholders of
Borrower requested to be included therein) on a PRO RATA basis;
(e) Holders of Registrable Securities shall have the right to withdraw
their Registrable Securities from the Piggy-Back Registration Statement, but if
the same relates to an underwritten offering, they may only do so during the
time period and on the terms agreed upon among the underwriters for such
underwritten offering and the Holders of Registrable Securities;
(f) The exercise of the registration rights of the Holders with respect
to any specific underwritten offering shall be subject to a 90-day delay at the
request of the managing underwriter;
(g) All demand and piggy-back registration rights of the Holders shall
terminate when all of the Registrable Securities Then Outstanding may be sold
pursuant to Rule 144(k).
SECTION 9.03 SHELF REGISTRATION.
Borrower shall file a "shelf" registration statement on Form S-3 under
the 1933 Act (the "Shelf Registration") covering all of the Registrable
Securities within 180 days of the date of the Debentures, or 60 days after the
Borrower becomes eligible to use Form S-3, whichever is later, and Borrower
shall use its best efforts to cause the Shelf Registration to be declared
effective and to keep the Shelf Registration continuously effective until all of
the Registrable Securities registered therein cease to be Registrable
Securities. Notwithstanding anything to the contrary contained herein, if
Borrower at any time becomes ineligible to use Form S-3, any failure to cause
the Shelf Registration to be declared effective or to be kept effective shall
not be a breach or violation of this Section 9.03. The securities shall cease to
be Registrable Securities (a) when the Shelf Registration shall have become
effective under the 1933 Act and such securities shall have been disposed of
pursuant to the Shelf Registration, or (b) such securities shall have been sold
as permitted by Rule 144 under the 1933 Act or the date on which the Registrable
Securities may be sold pursuant to Rule 144(k), whichever is the first to occur.
Borrower agrees, if necessary, to supplement or amend the Shelf Registration, as
required by the registration form utilized by Borrower or by the instructions
applicable to such registration form or by the 1933 Act, and Borrower agrees to
furnish to the holders of the Registrable Securities copies of any such
supplement or amendment prior to its being used.
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Agreement (Continued)
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SECTION 9.04 OBLIGATIONS OF BORROWER.
Whenever required to effect the registration of any Registrable
Securities pursuant to this Agreement, Borrower shall, as expeditiously as
reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use all reasonable efforts to cause such
registration statement to become effective, subject to the receipt of all
required information from the Holders, and keep such registration statement
effective until the sooner of all such Registrable Securities having been
distributed, or until 180 days have elapsed since such registration statement
became effective (subject to an extension of this period as provided below);
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement, or 180 days have elapsed since such registration
statement became effective (subject to the extension of this period as provided
below);
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them;
(d) Use all reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that Borrower shall not be required, in connection therewith or as a
condition thereto, to qualify as a broker-dealer in any states or jurisdictions
or to do business or to file a general consent to service of process in any such
states or jurisdictions;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement with the managing
underwriter of such offering, in usual and customary form reasonably
satisfactory to Borrower and the Holders of a majority of the Registrable
Securities to be included in such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement;
(f) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto and
covered by such registration statement is required to be delivered under the
1933 Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing; and
(g) In the event of the notification provided for in Section 9.04(f)
above, Borrower shall use its best efforts to prepare and file with the SEC (and
to provide copies thereof to the Holders) as soon as reasonably possible an
amended prospectus complying with the 1933 Act, and the period during which the
prospectus referred to in the notice provided for in Section 9.04(f) above
cannot be used and the time period prior to the use of the amended prospectus
referred to in this Section 9.04(g) shall not be counted in the 180 day period
of this Section 9.04.
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Agreement (Continued)
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SECTION 9.05 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of Borrower to
take any action pursuant to this Article IX that the selling Holders shall
furnish to Borrower any and all information reasonably requested by Borrower,
its officers, directors, employees, counsel, agents or representatives, the
underwriter or underwriters, if any, and the SEC or any other Governmental
Authority, including, but not limited to: (i) such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities, as shall be required to effect the registration
of their Registrable Securities; and (ii) the identity of and compensation to be
paid to any proposed underwriter or broker-dealer to be employed in connection
therewith.
(b) In connection with the preparation and filing of each registration
statement registering Registrable Securities under the 1933 Act, Borrower shall
give the Holders of Registrable Securities on whose behalf such Registrable
Securities are to be registered and their underwriters, if any, and their
respective counsel and accountants, at such Holders' sole cost and expense
(except as otherwise set forth herein), such access to copies of Borrower's
records and documents and such opportunities to discuss the business of Borrower
with its officers and the independent public accountants who have certified its
financial statements as shall be reasonably necessary in the opinion of such
Holders and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the 1933 Act.
SECTION 9.06 EXPENSES OF REGISTRATION.
All expenses, other than underwriting discounts and commissions
applicable to the Registrable Securities sold by selling Holders, incurred in
connection with the registration of the Registrable Securities pursuant to this
Article, including, without limitation, all registration, filing and
qualification fees, printer's expenses, and accounting and legal fees and
expenses of Borrower, shall be borne by Borrower; provided, however, selling
Holders shall be responsible for all costs of their due diligence and legal
counsel and other advisors in connection with a registration of Registrable
Securities.
SECTION 9.07 INDEMNIFICATION REGARDING REGISTRATION RIGHTS.
If any Registrable Securities are included in a registration statement
under this Article:
(a) To the extent permitted by law, Borrower will indemnify and hold
harmless each Holder, the officers and directors of each Holder, any underwriter
(as defined in the 0000 Xxx) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the 1933 Act or the
1934 Act, against any losses, claims, damages, liabilities (joint or several) or
any legal or other costs and expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action to which they may become subject under the 1933 Act, the 1934 Act or
state law, insofar as such losses, claims, damages, costs, expenses or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (each a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact with respect
to Borrower or its securities contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements therein; (ii) the omission or alleged omission to
state therein a material fact with respect to Borrower or its securities
required to be stated therein or necessary to make the statements therein not
misleading; or (iii) any violation or alleged violation by Borrower of the 1933
Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the 1933 Act, the 1934 Act or any state securities law.
Notwithstanding the foregoing,
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Agreement (Continued)
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the indemnity agreement contained in this Section 9.07(a) shall not apply and
Borrower shall not be liable (i) in any such case for any such loss, claim,
damage, costs, expenses, liability or action to the extent that it arises out of
or is based upon a Violation which occurs in reliance upon, and in conformity
with, written information furnished expressly for use in connection with such
registration by any such Holder or its authorized agent, underwriter or
controlling person, or (ii) for amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
prior written consent of Borrower, which consent shall not be unreasonably
withheld.
(b) To the extent permitted by law, each Holder who participates in a
registration pursuant to the terms and conditions of this Agreement shall
indemnify and hold harmless Borrower, each of its directors and officers who
have signed the registration statement, each Person, if any, who controls
Borrower within the meaning of the 1933 Act, the 1934 Act, any state securities
law or any rule or regulation promulgated under the 1933 Act, the 1934 Act or
any state securities law, each of Borrower's employees, agents, counsel and
representatives, any underwriter and any other Holder selling securities in such
registration statement, or any of its directors or officers, or any person who
controls such Holder, against any losses, claims, damages, costs, expenses or
liabilities (joint or several) to which Borrower or any such director, officer,
controlling person, employee, agent, representative, underwriter or other such
Holder, or director, officer or controlling person thereof, may become subject,
under the 1933 Act, the 1934 Act or other federal or state law, only insofar as
such losses, claims, damages, costs, expenses or liabilities or actions in
respect thereto arise out of or are based upon any Violation, in each case to
the extent, and only to the extent, that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such Registration. Each such Holder will indemnify
any legal or other expenses reasonably incurred by Borrower or any such
director, officer, employee, agent, representative, controlling person,
underwriter or other Holder, or officer, director or any controlling person
thereof, in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the indemnity agreement
contained in this Section 9.07(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, costs, expenses, liability or action if such
settlement is effected without the prior written consent of the Holder, which
consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section
9.07 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 9.07, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
of such counsel to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve the indemnifying party of its obligations under this Section 9.07,
except to the extent that the failure results in a failure of actual notice to
the indemnifying party and such indemnifying party is materially prejudiced in
its ability to defend such action solely as a result of the failure to give such
notice.
(d) If the indemnification provided for in this Section 9.07 is
unavailable to an indemnified party under this Section in respect of any losses,
claims, damages, costs, expenses, liabilities or actions referred to herein,
then each indemnifying party, in lieu of indemnifying such indemnified party,
shall
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Agreement (Continued)
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contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, costs, expenses, liabilities or actions in such
proportion as is appropriate to reflect the relative fault of Borrower, on the
one hand and of the Holder, on the other, in connection with the Violation that
resulted in such losses, claims, damages, costs, expenses, liabilities or
actions. The relative fault of Borrower, on the one hand, and of the Holder, on
the other, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of the material fact or the omission to state
a material fact relates to information supplied by Borrower or by the Holder,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) Borrower, on the one hand, and the Holders, on the other, agree
that it would not be just and equitable if contribution pursuant to this Section
9.07 were determined by a PRO RATA allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of losses, claims, damages, costs, expenses,
liabilities and actions referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses incurred by such indemnified party in connection with
defending any such action or claim. Notwithstanding the provisions of this
Section 9.07, neither Borrower nor the Holders shall be required to contribute
any amount in excess of the amount by which the total price at which the
securities were offered to the public exceeds the amount of any damages which
Borrower or each such Holder has otherwise been required to pay by reason of
such Violation. No person guilty of fraudulent misrepresentations (within the
meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation.
SECTION 9.08 REPORTS UNDER THE 1934 ACT.
So long as Borrower has a class of securities registered pursuant to
Section 12 of the 1934 Act, with a view to making available to the Holders the
benefits of Rule 144 promulgated under the 1933 Act ("Rule 144") and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
securities of Borrower to the public without registration or pursuant to a
registration on Form S-3, if applicable, Borrower agrees to use its reasonable
efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144, at all times;
(b) File with the SEC, in a timely manner, all reports and other
documents required of Borrower under the 1933 Act and the 1934 Act;
(c) Use its best efforts to include all Common Stock covered by such
registration statement on Nasdaq if the Common Stock is then quoted on Nasdaq;
or list all Common Stock covered by such registration statement on such
securities exchange on which any of the Common Stock is then listed; or, if the
Common Stock is not then quoted on Nasdaq or listed on any national securities
exchange, use its best efforts to have such Common Stock covered by such
registration statement quoted on Nasdaq or, at the option of Borrower, listed on
a national securities exchange if eligible for listing, PROVIDED, HOWEVER, that
nothing contained herein shall require Borrower to have such Common Stock quoted
on Nasdaq so long as Borrower remains ineligible to be listed on Nasdaq; and
(d) Furnish to any Holder, so long as the Holder owns any Registrable
Securities, (i) forthwith upon request, a copy of the most recent annual or
quarterly report of Borrower and such other SEC reports and documents so filed
by Borrower, and (ii) such other information (but not any opinion of
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Agreement (Continued)
--------------------------------------------------------------------------------
counsel) as may be reasonably requested by any Holder seeking to avail himself
of any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
SECTION 9.09 ASSIGNMENT OF REGISTRATION RIGHTS.
Subject to the terms and conditions of this Agreement, and the
Debentures, the right to cause Borrower to register Registrable Securities
pursuant to this Agreement may be assigned by Holder to any transferee or
assignee of such securities; provided that (i) such transferee or assignee is a
transferee or assignee of at least ten percent (10%) of the Registrable
Securities, (ii) such transferee or assignee is not a Person who is a direct,
material competitor of Borrower, (iii) Borrower is, within a reasonable time
after such transfer, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned; and, (iv) such assignment shall be
effective only if, immediately following such transfer, the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act. Other than as set forth above, the parties hereto hereby agree that the
registration rights hereunder shall not be transferable or assigned and any
contemplated transfer or assignment in contravention of this Agreement shall be
deemed null and void and of no effect whatsoever. SECTION 9.10 OTHER MATTERS.
(a) Each Holder of Registrable Securities hereby agrees by acquisition
of such Registrable Securities that, with respect to each offering of the
Registrable Securities, whether each Holder is offering such Registrable
Securities in an underwritten or nonunderwritten offering, such Holder will
comply with Regulation M or such other or additional anti-manipulation rules
then in effect until such offering has been completed, and in respect of any
nonunderwritten offering, in writing will inform Borrower, any other Holders who
are selling shareholders, and any national securities exchange upon which the
securities of Borrower are listed, that the Registrable Securities have been
sold and will, upon Borrower's request, furnish the distribution list of the
Registrable Securities. In addition, upon the request of Borrower, each Holder
will supply Borrower with such documents and information as Borrower may
reasonably request with respect to the subject matter set forth and described in
this Section 9.10.
(b) Each Holder of Registrable Securities hereby agrees by acquisition
of such Registrable Securities that, upon receipt of any notice from Borrower of
the happening of any event which makes any statement made in the registration
statement, the prospectus or any document incorporated therein by reference,
untrue in any material respect or which requires the making of any changes in
the registration statement, the prospectus or any document incorporated therein
by reference, in order to make the statements therein not misleading in any
material respect, such Holder will forthwith discontinue disposition of
Registrable Securities under the prospectus related to the applicable
registration statement until such Holder's receipt of the copies of the
supplemented or amended prospectus, or until it is advised in writing by
Borrower that the use of the prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by reference in
the prospectus.
ARTICLE X. BOARD OF DIRECTORS
SECTION 10.01 INTENTIONALLY OMITTED.
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Agreement (Continued)
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SECTION 10.02 INTENTIONALLY OMITTED.
SECTION 10.03 NONLIABILITY OF THE LENDER.
The relationship between Borrower and the Lender is, and shall at all
times remain, solely that of borrower and lender. The Lender neither undertakes
nor assumes any responsibility or duty to Borrower to review, inspect,
supervise, pass judgment upon or inform Borrower of any matter in connection
with any phase of Borrower's business, operations or condition, financial or
otherwise. Borrower shall rely entirely upon its own judgment with respect to
such matters, and any review, inspection, supervision, exercise of judgment or
information supplied to Borrower by the Lender, or any representative or agent
of the Lender, in connection with any such matter is for the protection of the
Lender, and neither Borrower nor any third party is entitled to rely thereon.
ARTICLE XI. AGENCY PROVISIONS
SECTION 11.01 THE LENDER'S REPRESENTATIONS AND WARRANTIES TO AGENT.
Lender represents and warrants to the Agent:
(a) It is legal for it to make the Loan, and the making of such Loan
complies with laws applicable to it;
(b) It has made, its own independent review (including any desired
investigations and inspections) of, and it accepts and approves, the Loan, this
Agreement and the associated documents and all other matters and information
which it deems pertinent. It acknowledges that the Loan Documents and the
Subsidiary Documents are a complete statement of all understandings and
respective rights and obligations between and among the Lender, Subsidiaries and
Borrower regarding the Loan;
(c) Lender has not made any express or implied representation or
warranty to any other lender with respect to this transaction;
(d) It will, independently and without reliance upon any other lender,
and based upon such documents and information as it shall deem appropriate at
the time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement, and will make such
investigation as it deems necessary to inform itself as to the Loan, the Loan
Documents, the Subsidiary Documents, Borrower and any collateral; PROVIDED,
HOWEVER, nothing contained in this Section shall limit Agent's obligation to
provide the Lender with the information and documents Agent is expressly
required to deliver under this Agreement;
(f) The Loan Documents executed by the Lender are valid and binding
obligations of the Lender.
SECTION 11.02 WAIVER OF LOAN PROVISIONS OR INTEREST OR PRINCIPAL PAYMENTS.
A waiver of an interest or principal payment, a declaration of a
Default or any amendment, modification or waiver of this Agreement or the
Debentures will require the consent of the Lender.
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Agreement (Continued)
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SECTION 11.03 AGENCY.
(a) Lender hereby designates and appoints Xxxxxx Xxxxxxxxx as its Agent
under this Agreement and authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and the
Subsidiary Documents and to exercise such powers as are set forth herein or
therein, together with such other powers as are reasonably incidental thereto.
In performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Lender and does not assume, and shall not be deemed to
have assumed, any obligation toward or relationship of agency or trust with or
for Borrower. The Agent may perform any of its duties under this Agreement, or
under the other Loan Documents or the Subsidiary Documents, by or through its
agents or employees.
(b) The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement, in the other Loan Documents or in the
Subsidiary Documents. Except as expressly provided herein, the duties of the
Agent shall be mechanical and administrative in nature. The Agent shall have,
and may use, its sole discretion with respect to exercising or refraining from
taking any actions which the Agent is expressly entitled to take or assert under
this Agreement, the other Loan Documents and the Subsidiary Documents. The Agent
shall not have, by reason of this Agreement, a fiduciary relationship with
respect to the Lender. Nothing in this Agreement, any of the other Loan
Documents or any of the Subsidiary Documents, express or implied, is intended to
or shall be construed to impose upon the Agent any obligations in respect of
this Agreement, any of the other Loan Documents or any of the Subsidiary
Documents except as expressly set forth herein or therein. If the Agent seeks
the consent or approval of the Lender to the taking or refraining from taking
any action hereunder, the Agent shall send notice thereof to the Lender. The
Agent may employ agents, co-agents and attorneys-in-fact and shall not be
responsible to the Lender or Borrower, except as to money or securities received
by it or its authorized agents, for the negligence or misconduct of any such
agents or attorneys-in-fact selected by it with reasonable care.
(c) Neither the Agent nor any of its agents shall be liable to the
Lender for any action taken or omitted by it or any of them under this
Agreement, any of the other Loan Documents or any of the Subsidiary Documents,
or in connection herewith or therewith, except that no Person shall be relieved
of any liability imposed by law, intentional tort or gross negligence. The Agent
shall not be responsible to the Lender for any recitals, statements,
representations or warranties contained in this Agreement or for the execution,
effectiveness, genuineness, validity, enforceability, collectability or
sufficiency of this Agreement, any of the other Loan Documents or any of the
Subsidiary Documents or any of the transactions contemplated thereby, or for the
financial condition of Borrower or the Subsidiaries. The Agent shall not be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement, any of the other
Loan Documents or any of the Subsidiary Documents or the financial condition of
Borrower, or the existence or possible existence of any Default or Event of
Default. Agent shall give the Lender notice of any Default or Event of Default
of which Agent has actual notice. The Agent may, at any time, request
instructions from the Lender with respect to any actions or approvals which, by
the terms of this Agreement, of any of the other Loan Documents or of any of the
Subsidiary Documents, the Agent is permitted or required to take or to grant,
and if such instructions are promptly requested, the Agent shall be absolutely
entitled to refrain from taking any action or to withhold any approval and shall
not be under any liability whatsoever to any Person for refraining from any
action or withholding any approval under any of the Loan Documents or any of the
Subsidiary Documents until it shall have received such instructions from the
Lender. Without limiting the foregoing, the Lender shall not have any right of
action whatsoever against the Agent as a
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Agreement (Continued)
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result of the Agent acting or refraining from acting under this Agreement, any
of the other Loan Documents or any of the Subsidiary Documents in accordance
with the instructions of the Lender.
(d) The Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone message
believed by it, in good faith, to be genuine and correct and to have been
signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement, any of the other Loan Documents or any of the
Subsidiary Documents and its duties hereunder or thereunder, upon advice of
counsel selected by it.
(e) To the extent that the Agent is not reimbursed and indemnified by
Borrower, the Lender will reimburse and indemnify the Agent for and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, advances or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of this Agreement, any of the other
Loan Documents, or any of the Subsidiary Documents or any action taken or
omitted by the Agent under this Agreement, any of the other Loan Documents or
any of the Subsidiary Documents. The obligations of the Lender under this
indemnification provision shall survive the payment in full of the Loans and the
termination of this Agreement.
SECTION 11.04 ACTION BY HOLDERS.
Unless otherwise set forth herein, any approval, consent, waiver or
action required or permitted by Lender herein shall be deemed to be on behalf of
Lender representing at least a majority of the then-outstanding principal amount
of the Debentures and Renaissance Debentures (taken as a whole).
ARTICLE XII. MISCELLANEOUS
SECTION 12.01 STRICT COMPLIANCE.
Any waiver by the Lender of any breach or any term or condition of this
Agreement, the other Loan Documents or the Subsidiary Documents shall not be
deemed a waiver of any other breach, nor shall any failure to enforce any
provision of this Agreement, the other Loan Documents or the Subsidiary
Documents operate as a waiver of such provision or of any other provision, nor
constitute nor be deemed a waiver or release of Borrower for anything arising
out of, connected with or based upon this Agreement, the other Loan Documents or
the Subsidiary Documents.
SECTION 12.02 WAIVERS AND MODIFICATIONS.
All modifications, consents, amendments or waivers (herein "Waivers")
of any provision of this Agreement, the Debentures, any other Loan Documents or
any Subsidiary Documents, and any consent to departure therefrom, shall be
effective only if the same shall be in writing by the Lender and then shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand given, in any case, shall constitute a waiver of the right to
take other action in the same, similar or other instances without such notice or
demand. No failure to exercise, and no delay in exercising, on the part of Agent
or Lender, any right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right. The rights of Lender hereunder,
under the other Loan Documents and under the Subsidiary Documents shall be in
addition to all other rights provided by law.
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Agreement (Continued)
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SECTION 12.03 LIMITATION ON LIABILITY.
The duties, warranties, covenants and promises arising from the Loan
Documents and the Subsidiary Documents of Lender or Agent to Borrower shall be
several and not joint, and Borrower shall have no legal or equitable cause of
action against Lender or Agent (or their successors or assigns) for any
liability of the other (or its successors or assigns).
SECTION 12.04 CHOICE OF FORUM; CONSENT TO SERVICE OF PROCESS AND JURISDICTION.
Any suit, action or proceeding against Borrower with respect to this
Agreement or the Debentures or any judgment entered by any court in respect
thereof, may be brought in the courts of the State of New York, County of New
York, or in the United States federal courts located in the State of New York,
as Lender or Agent, in its sole discretion, may elect, and Borrower hereby
submits to the nonexclusive jurisdiction of such courts for the purpose of any
such suit, action or proceeding. Borrower hereby agrees that service of all
writs, process and summonses in any such suit, action or proceeding brought in
the State of New York may be brought upon, and Borrower hereby irrevocably
appoints, CT Corporation System, New York, New York as its true and lawful
attorney-in-fact in the name, place and stead of Borrower to accept such service
of any and all such writs, process and summonses. Borrower 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 Debentures brought in such courts, and hereby further irrevocably waives
any claim that any such suit, action or proceeding brought in any such court has
been brought in any inconvenient forum.
SECTION 12.05 INVALID PROVISIONS.
If any provision of any Loan Document is held to be illegal, invalid or
unenforceable under present or future laws during the term of this Agreement,
such provision shall be fully severable; such Loan Document shall be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of such Loan Document; and the remaining provisions of such
Loan Document shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance from such
Loan Document. Furthermore, in lieu of each such illegal, invalid or
unenforceable provision shall be added as part of such Loan Document a provision
mutually agreeable to Borrower and Lender as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and
enforceable. In the event Borrower and Lender are unable to agree upon a
provision to be added to the Loan Document within a period of ten (10) business
days after a provision of the Loan Document is held to be illegal, invalid or
unenforceable, then a provision acceptable to independent arbitrators, such to
be selected in accordance with the provisions of the American Arbitration
Association, as similar in terms to the illegal, invalid or unenforceable
provision as is possible and be legal, valid and enforceable shall be added
automatically to such Loan Document. In either case, the effective date of the
added provision shall be the date upon which the prior provision was held to be
illegal, invalid or unenforceable.
SECTION 12.06 MAXIMUM INTEREST RATE.
(a) Regardless of any provision contained in any of the Loan Documents,
Lender shall never be entitled to receive, collect or apply as interest on the
Debentures any amount in excess of interest calculated at the Maximum Rate, and,
in the event that Lender ever receives, collects or applies as interest any such
excess, the amount which would be excessive interest shall be deemed to be a
partial prepayment of principal and treated hereunder as such; and, if the
principal amount of the Obligation is
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Agreement (Continued)
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paid in full, any remaining excess shall forthwith be paid to Borrower. In
determining whether or not the interest paid or payable under any specific
contingency exceeds interest calculated at the Maximum Rate, Borrower and Lender
shall, to the maximum extent permitted under applicable law, (i) characterize
any nonprincipal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
pro rate, allocate and spread, in equal parts, the total amount of interest
throughout the entire contemplated term of the Debentures; provided that, if the
Debentures is paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period of
existence thereof exceeds interest calculated at the Maximum Rate, Lender shall
refund to Borrower the amount of such excess or credit the amount of such excess
against the principal amount of the Debentures and, in such event, Lender shall
not be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving or receiving interest in excess of interest
calculated at the Maximum Rate.
(b) "Maximum Rate" shall mean, on any day, the highest nonusurious rate
of interest permitted by applicable law on such day that, at any time or from
time to time, may be contracted for, taken, reserved, charged or received on the
Indebtedness evidenced by the Debentures under the laws which are presently in
effect of the United States of America and the laws of any other jurisdiction
which are or may be applicable to the holder of the Debentures and such
Indebtedness or, to the extent permitted by law, under such applicable laws of
the United States of America and the laws of any other jurisdiction which are or
may be applicable to the holder of the Debentures and which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
SECTION 12.07 PARTICIPATIONS AND ASSIGNMENTS OF THE DEBENTURES.
(a) Lender and the Agent shall have the right to enter into a
participation agreement with any other party or its Affiliates with respect to
the Debentures, or to sell all or any part of the Debentures, but any
participation or sale shall not affect the rights and duties of Lender or the
Agent hereunder vis-a-vis Borrower. In the event that all or any portion of the
Loan shall be at any time, assigned, transferred or conveyed to other parties,
any action, consent or waiver (except for compromise or extension of maturity),
to be given or taken by Lender or the Agent hereunder (herein "Action"), shall
be such action as taken by the holder of a majority in amount of the Principal
Amount of the Debentures then outstanding, as such holder are recorded on the
books of Borrower and represented by the Agent as described in subsection (b)
below.
(b) Assignment or sale of the Debentures shall be effective on the
books of Borrower only upon (i) endorsement of the Debentures, or part thereof,
to the proposed new holder, along with a current notation of the amount of
payments or installments received and net Principal Amount yet unfunded or
unpaid, and presentment of such Debentures to Borrower for issue of a
replacement Debentures, in the name of the new holder; and (ii) delivery of an
opinion of counsel, reasonably satisfactory to Borrower, that transfer shall not
require registration or qualification under applicable state or federal
securities laws.
(c) The Debentures may be sold, transferred or assigned only to
Affiliates of Lender or permitted transferees in multiples of $100,000.
SECTION 12.08 CONFIDENTIALITY.
(a) All financial reports or information that are furnished to Lender
or Holders, or their respective director designees or other representatives,
pursuant to this Agreement or pursuant to the Debentures, the other Loan
Documents or the Subsidiary Documents shall be treated as confidential and
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Agreement (Continued)
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shall not be disclosed to any third parties without an appropriate
confidentiality agreement, unless and to the extent that such information has
been otherwise disclosed publicly to third parties or filed with the SEC by
Borrower, but nothing herein contained shall limit or impair the Lender's or
Holders' right to disclose such reports to any appropriate Governmental
Authority, or to use such information to the extent pertinent to an evaluation
of the Obligation, or to enforce compliance with the terms and conditions of
this Agreement, or to take any lawful action which the Lender or Holders deem
necessary to protect their respective interests under this Agreement.
(b) Lender and the Agent shall use their reasonable efforts to protect
and preserve the confidentiality of such information, except for such disclosure
as shall be required for compliance by Lender or its respective director
designees with SEC reporting requirements or any administrative or judicial
proceeding or otherwise as a matter of law. The provisions of Section 5.01
notwithstanding, Borrower may refuse to provide information as required pursuant
thereto to an assignee or successor in interest to Lender, unless and until such
assignee or successor shall have executed an agreement to maintain the
confidentiality of the information as provided herein.
SECTION 12.09 BINDING EFFECT.
The Loan Documents shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors, assigns and legal
representatives; PROVIDED, HOWEVER, that Borrower may not, without the prior
written consent of Lender, assign any rights, powers, duties or obligations
thereunder.
SECTION 12.10 NO THIRD PARTY BENEFICIARY.
The parties do not intend the benefits of this Agreement to inure to
any third party, nor shall this Agreement be construed to make or render Lender
liable to any materialman, supplier, contractor, subcontractor, purchaser or
lessee of any property owned by Borrower, or for debts or claims accruing to any
such persons against Borrower. Notwithstanding anything contained herein, in the
Debentures, in any other Loan Document or in any Subsidiary Document, no conduct
by any or all of the parties hereto, before or after signing this Agreement, any
other Loan Document nor any Subsidiary Document, shall be construed as creating
any right, claim or cause of action against Lender, or any of its respective
officers, directors, agents or employees, in favor of any materialman, supplier,
contractor, subcontractor, purchaser or lessee of any property owned by
Borrower, nor to any other person or entity other than Borrower.
SECTION 12.11 ENTIRETY.
This Agreement and the Debentures, the other Loan Documents, the
Subsidiary Documents and any other documents or instruments issued or entered
into pursuant hereto and thereto contain the entire agreement between the
parties and supersede all prior agreements and understandings, written or oral
(if any), relating to the subject matter hereof and thereof.
SECTION 12.12 HEADINGS.
Section headings are for convenience of reference only and, except as a
means of identification of reference, shall in no way affect the interpretation
of this Agreement.
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Agreement (Continued)
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SECTION 12.13 SURVIVAL.
All representations and warranties made by Borrower herein shall
survive delivery of the Debentures and the making of the Loans.
SECTION 12.14 MULTIPLE COUNTERPARTS.
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart.
SECTION 12.15 KNOWLEDGE OF BORROWER.
As used herein or in any of the other Loan Documents, all references to
"Borrower's best knowledge" or "to the knowledge of Borrower" or words or
phrases of similar import (whether or not modified by any additional phrase)
shall in each case mean the knowledge of Borrower, the Subsidiaries or their
respective executive officers. The current executive officers are Xxxx X.
Xxxxxx, Xxxxxxx Xxxxxxxxx, Xxxxx Xxxxxx and Xxx Xxxxxx. SECTION 12.16 NOTICES.
Any notices or other communications required or permitted to be given
by this Agreement or any other documents and instruments referred to herein must
be (i) given in writing and personally delivered, mailed by prepaid certified or
registered mail or sent by overnight service, such as FedEx, or (ii) made by
telex or facsimile transmission delivered or transmitted to the party to whom
such notice or communication is directed, with confirmation thereupon given in
writing and personally delivered or mailed by prepaid certified or registered
mail.
If to Borrower to:
Cover-All Technologies Inc.
00-00 Xxxxxxx Xxxxx
Xxxx Xxxx, XX 00000
Attn.: Xxxx X. Xxxxxx
Chairman and CEO
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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Agreement (Continued)
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If to Lender to:
Xxxx Xxxxxx
c/o 00-00 Xxxxxxx Xxxxx
Xxxx Xxxx, XX 00000
Attn.: Xxxx X. Xxxxxx
Chairman and CEO
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxxx Xxxxxxxx
c/o Spear, Leeds & Xxxxxxx
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xxxxxx Xxxxxxxxx
c/o Spear, Leeds & Xxxxxxx
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Agent to:
Xxxxxx Xxxxxxxxx
c/o Spear, Leeds & Xxxxxxx
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any notice delivered personally in the manner provided herein will be
deemed given to the party to whom it is directed upon the party's (or its
agent's) actual receipt. Any notice addressed and mailed in the manner provided
herein will be deemed given to the party to whom it is addressed at the close of
business, local time of the recipient, on the fourth business day after the day
it is placed in the mail, or, if earlier, the time of actual receipt.
SECTION 12.17 GOVERNING LAW.
THIS LOAN AGREEMENT HAS BEEN PREPARED, IS BEING EXECUTED AND DELIVERED,
AND IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND THE SUBSTANTIVE
LAWS OF SUCH STATE AND THE APPLICABLE FEDERAL LAWS OF THE
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Agreement (Continued)
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UNITED STATES OF AMERICA SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT
AND INTERPRETATION OF THIS LOAN AGREEMENT.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS.]
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Agreement (Continued)
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IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
executed and delivered, as of the date and year first above written.
BORROWER:
COVER-ALL TECHNOLOGIES INC.
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Xxxx X. Xxxxxx, Chairman and CEO
LENDER:
By: /s/ Xxxx Xxxxxx
------------------------------------
Xxxx Xxxxxx
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Xxxxxx Xxxxxxxx
By: /s/ Xxxxxx Xxxxxxxxx
------------------------------------
Xxxxxx Xxxxxxxxx
AGENT:
By: /s/ Xxxxxx Xxxxxxxxx
------------------------------------
Xxxxxx Xxxxxxxxx
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SCHEDULES TO CONVERTIBLE LOAN AGREEMENT
Schedule 2.08 Schedule of Brokers/Finders
Schedule 4.03 Schedule of Conflicts or Consents
Schedule 4.05 Schedule of Permitted Liens
Schedule 4.06 Schedule of Any Material Adverse Change
Schedule 4.08 Schedule of Material Agreements
Schedule 4.09 Schedule of Litigation
Schedule 4.10 Schedule of Unpaid Taxes
Schedule 4.11 Schedule of Capitalization
Schedule 4.13 Schedule of Employee Matters
Schedule 4.14 Schedule of Employee Benefit Plans
Schedule 4.15 Schedule of Compliance with Laws Matters
Schedule 4.16 Schedule of Licenses and Permits
Schedule 4.17 Schedule of Contracts
Schedule 4.18 Schedule of Shares Issuable Upon Conversion
Schedule 4.19 Schedule of Agreements between Borrower and any of its
officers, directors, and principal shareholders, including
employment agreements
Schedule 4.20 Schedule of Subsidiaries
Schedule 4.21 Schedule of Casualties
Schedule 4.24 Schedule of Corporate Names
Schedule 4.25 Schedule of Insurance
Schedule 4.26 Schedule of Intellectual Property
Schedule 4.27 Schedule of Real Property
Schedule 4.28 Schedule of Environmental Matters
Schedule 4A.01 Schedule of Residence
Schedule 5.18 Schedule of Ownership of Subsidiaries
Schedule 6.05 Schedule of Transactions with Affiliates
Schedule 7.01 Schedule of Financial Ratios
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Exhibit A
AGREEMENT
This Agreement is entered into as of the 29th day of June, 2001, by and
between FINOVA MEZZANINE CAPITAL INC. ("LENDER"), a Tennessee corporation,
formerly known as Sirrom Capital Corporation and successor by merger to Sirrom
Investments, Inc., and COVER-ALL TECHNOLOGIES INC. ("COMPANY"), a Delaware
corporation.
R E C I T A L S:
WHEREAS, Lender and Company entered into that certain Debenture
Purchase Agreement dated March 31, 1997 (the "PURCHASE AGREEMENT");
WHEREAS, pursuant to the terms and conditions of the Purchase
Agreement, Company agreed to issue and sell to Lender, and Lender agreed to
purchase from Company, 12.5% Convertible Debentures in the aggregate principal
amount of $3,000,000.00;
WHEREAS, Company executed that certain 12.5% Convertible Debenture Due
March 31, 2002, dated March 31, 1997, in favor of Lender in the principal amount
of $3,000,000.00 (the "DEBENTURE");
WHEREAS, Lender has agreed to settle the Debenture at a discount and to
release Company from its obligations under the Debenture and the Purchase
Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are acknowledged, the parties agree as follows:
1. DEFINITIONS.
(a) As used herein, "CLAIMS" shall mean any and all
accounts, covenants, agreements, and obligations (other than those contained in
this Agreement), and any and all claims, debts, liabilities, offsets, demands,
costs, expenses, actions or causes of action of every nature, character and
description, without limitation in law, equity or otherwise, of any kind or
character whatsoever, known or unknown, suspected or unsuspected, whether
arising in contract or tort, or at law, in equity or pursuant to administrative
rule or regulation.
(b) As used herein, "LENDER PARTIES" shall mean
Lender, its participants, predecessors, successors and assigns and its present
and previous agents, attorneys, representatives, subsidiaries, affiliates,
officers, directors, and each of them.
2. SETTLEMENT PAYMENT. Concurrently with the execution
hereof, Company shall pay Lender the sum of $1,742,708.34 in cash via wire
transfer in accordance with the wiring instructions provided by Lender (the
"SETTLEMENT PAYMENT"). The Settlement Payment includes $1,650,000.00 in
principal and $92,708.34 in accrued interest through June 29, 2001.
3. RELEASE OF LENDER. Company does hereby release,
acquit and forever discharge the Lender Parties from any and all Claims that
Company ever had, now has, or might hereafter have against such parties, for or
by reason of any matter, cause or thing whatsoever occurring on or prior to the
date hereof. Company agrees not to commence, join in or prosecute any suit or
other proceeding in a position which is adverse to any Lender Party arising
directly or indirectly from any matter released herein. Company represents and
warrants that Company has not purported to transfer, assign or otherwise convey
any interest in any matter released herein to any other person or entity and
that Company's execution hereof does not require the consent of or notice to any
third party. Company agrees to indemnify, defend (with counsel satisfactory to
Lender) and hold the Lender Parties harmless against any and all loss,
liability, claim or expense, including attorneys' fees, that the Lender Parties
might incur as a result of any breach of this Agreement by Company or the
assertion of any claim or defense by Company that should not have been raised by
virtue of this Agreement.
4. RELEASE OF COMPANY. Lender does hereby release,
acquit and forever discharge Company from any and all liability under the
Debenture and the Purchase Agreement (subject to any provision in the Debenture
and/or Purchase Agreement which by its terms states that it shall survive the
termination and release thereof) and from any and all Claims that Company ever
had, now has, or might hereafter have against such party, for or by reason of
any matter, cause or thing whatsoever occurring on or prior to the date hereof.
Lender agrees not to commence, join in or prosecute any suit or other proceeding
in a position which is adverse to Company arising directly or indirectly from
any matter released herein. Lender represents and warrants that it has not
purported to transfer, assign or otherwise convey any interest in any matter
released herein to any other person or entity and that Lender's execution hereof
does not require the consent of or notice to any third party. Lender agrees to
indemnify, defend (with counsel satisfactory to Company) and hold Company
harmless against any and all loss, liability, claim or expense, including
attorneys' fees, that Company might incur as a result of any breach of this
Agreement by Lender or the assertion of any claim or defense by Lender that
should not have been raised by virtue of this Agreement. Notwithstanding
anything contained herein to the contrary, if the Settlement Payment or any
portion thereof is avoided as an avoidable transfer or set aside for any reason
whatsoever, the release, agreements and covenants contained in this SECTION 4
shall be void AB INITIO and of no force and effect and the indebtedness
evidenced by the Debenture shall be immediately due and payable in full.
5. VOLUNTARY AGREEMENT. The parties hereto are
represented by legal counsel of their choice, have investigated fully their
alternatives to the execution and performance of this Agreement, are fully aware
of the terms contained in this Agreement and have voluntarily and without
coercion or duress of any kind entered into this Agreement.
6. FURTHER ASSURANCES. The parties hereto agree to
execute and deliver, and to cause their respective counsel to execute and
deliver, all such other instruments and documents, and to take all such other
action as any party hereto may reasonably request from time to time without
delay or the payment of further consideration, to effectuate the settlement of
the Debenture and the other obligations provided for in this Agreement. The
parties shall
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cooperate fully with each other and their respective counsel in connection with
any actions required to be taken as part of their respective obligations under
this Agreement.
7. RECITALS. The parties hereto warrant and represent
that all the Recitals in this Agreement are true and correct in all respects.
8. TIME. Time is of the essence of this Agreement and
each provision of this Agreement.
9. ENTIRE AGREEMENT. This Agreement constitutes the
entire Agreement and understanding of the parties hereto concerning the subject
matter hereof and supersedes and replaces all prior negotiations, proposed
agreements, and all understandings, inducements or conditions, express or
implied, either written or oral, which are not contained herein concerning the
subject matter of this Agreement.
10. BINDING EFFECT. This Agreement will inure to the
benefit of and bind the respective heirs, personal representatives, successors
and permitted assigns of the parties hereto.
11. SEVERABILITY. If any clause or provision of this
Agreement is determined to be illegal, invalid or unenforceable under any
present or future law by the final judgment of a court of competent
jurisdiction, the remainder of this Agreement will not be affected thereby,
except as expressly provided elsewhere herein. It is the intention of the
parties that if any such provision is held to be illegal, invalid or
unenforceable, there will be added in lieu thereof a provision as similar in
terms to such provision as is legal, valid and enforceable.
12. AMENDMENT. Neither this Agreement nor any of the
provisions hereof can be changed, waived, discharged or terminated, except by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
13. EXPENSES. In the event legal action is commenced to
enforce or interpret any part of this Agreement, the prevailing party shall be
entitled to recover as an element of its costs of suit and not as damages,
reasonable attorney's fees to be fixed by the court.
14. GOVERNING LAW. This Agreement will be interpreted and
construed under the internal laws of the State of Tennessee, regardless of the
domicile of any party.
15. CONSENT TO JURISDICTION. Lender and Company hereby
irrevocably consent to the jurisdiction of the United States District Court for
the Middle District of Tennessee and of all Tennessee state courts sitting in
Davidson County, Tennessee, for the purpose of any litigation to which Lender
may be a party and which concerns this Agreement. It is further agreed that
venue for any such action shall lie exclusively with courts sitting in Davidson
County, Tennessee, unless Lender agrees to the contrary in writing.
16. WAIVER OF JURY TRIAL. LENDER AND COMPANY HEREBY
KNOWINGLY AND VOLUNTARILY WAIVE ANY RIGHT TO A TRIAL BY JURY WITH REGARD TO ANY
ACTIONS, PROCEEDINGS, CLAIMS OR
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COUNTERCLAIMS, WHETHER IN CONTRACT OR IN TORT, AT LAW OR IN EQUITY, OF ANY TYPE
OR NATURE WHATSOEVER ARISING UNDER OR CONCERNING THIS AGREEMENT.
17. COUNTERPART EXECUTION. This Agreement may be executed
in counterparts via facsimile, each of which will be deemed an original
document, but all of which will constitute a single document. This document will
not be binding on or constitute evidence of a contract among the parties until
such time as a counterpart of this document has been executed by each party to
this Agreement.
18. HEADINGS. Paragraph or other headings contained in
this Agreement are for reference purposes only and are not intended to affect in
any way the meaning or interpretation of this Agreement.
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Dated as of the date stated above.
LENDER:
FINOVA MEZZANINE CAPITAL INC.
By:
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Title:
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COMPANY:
COVER-ALL TECHNOLOGIES INC.
By:
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Title:
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