Exhibit 10.2
NOTE PURCHASE AGREEMENT
by and among
VELOCITY EXPRESS, INC.
VELOCITY EXPRESS CORPORATION
THE OTHER LOAN PARTIES SIGNATORY HERETO
and
BET ASSOCIATES, L.P.
Dated as of November 26, 2003
TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS
ARTICLE 2 PURCHASE AND SALE OF SECURITIES
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
ARTICLE 5 CLOSING CONDITIONS
ARTICLE 6 AFFIRMATIVE COVENANTS OF THE COMPANY
ARTICLE 7 NEGATIVE COVENANTS OF THE COMPANY
ARTICLE 8 INDEMNIFICATION
ARTICLE 9 EVENTS OF DEFAULT
ARTICLE 10 MISCELLANEOUS
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EXHIBITS AND SCHEDULES
Exhibit A - Form of Note
Exhibit B - Form of Security Agreement
Exhibit D - Form of Guaranty
Exhibit E - Compliance Certificate
Disclosure Schedule
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NOTE PURCHASE AGREEMENT
This Agreement (this "Agreement") is made as of November 26, 2003 by and
among Velocity Express, Inc., a Delaware corporation (the "Company"), Velocity
Express Corporation, a Delaware corporation ("Parent"), the other Loan Parties
signatory hereto and BET Associates, L.P., a Delaware limited partnership ("BET"
or the "Purchaser").
BACKGROUND
A. The Company, Fleet Capital Corporation and Xxxxxxx Xxxxx Capital, a
division of Xxxxxxx Xxxxx Business Financial Services, Inc. and other syndicated
parties intend to enter into that certain Amended and Restated Loan and Security
Agreement November 26, 2003 (the "Loan Agreement") pursuant to which the Company
will borrow certain funds and grant certain security interests in its assets.
B. The Purchaser is willing to provide certain funds through a senior
subordinated loan which, along with funds provided by the Senior Lender (as each
such term is defined below), will be used to fund the Company's operations and
initiatives.
C. The Company and the Purchaser wish to specify in this Agreement the
terms on which the Company will sell and the Purchaser will purchase the Note
(as defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
set forth below, the parties agree as follows:
ARTICLE 1 DEFINITIONS
1.01 Certain Definitions . As used herein, the following terms have the
meanings indicated:
"Affiliate" means (i) any Person which directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the Company, (ii) any Person of which five percent (5%) or more of
the equity interest is held beneficially or of record by the Company or a
Subsidiary, or (iii) a spouse of any shareholder of the Company or any business
of which such spouse is a director, officer, employee or equity holder. Control
for purposes of this definition means the possession, directly or indirectly, of
the power to influence the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Ancillary Agreements" means all the agreements and instruments executed
and delivered by the Loan Parties to the Purchaser at the Closing, including,
without limitation, the Note and the Security Agreement.
"Balance Sheet Date" has the meaning set forth in Section 3.04.
"Business Day" means any day excluding Saturday, Sunday and any day that is
a legal holiday under the laws of the State of Minnesota or is a day on which
banking institutions located in such state are closed
"Change of Control" means any of the following: (a) any Person or group of
Persons (within the meaning of the Exchange Act) acquires beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Commission under the
Exchange Act) of twenty percent (20%) or more of the total voting power of the
issued and outstanding shares of capital stock of the Company (including any
shares of capital stock that may be issued upon conversion of outstanding
securities of the Company, on an as-converted basis) having the right to vote
for the election of directors of the Company under ordinary circumstances,
excluding any Person or group of Persons listed on Schedule 1.01, which Schedule
lists each of those Persons or group of Person who holds, as of the Closing
Date, such beneficial ownership of ten percent (10%) or more of the total voting
power of the issued and outstanding shares of capital stock of the Company
(including any shares of capital stock that may be issued upon conversion of
outstanding securities of the Company, on an as-converted basis) having the
right to vote for the election of directors of the Company under ordinary
circumstances, so long as any such Person or group of Person listed on Schedule
1.01 continues to have beneficial ownership of ten percent (10%) or more of such
total voting power; (b) during any period of twelve (12) consecutive calendar
months, individuals who at the beginning of such period constituted the board of
directors of the Company (together with any new directors whose election by the
board of directors of the Company or whose nomination for election by the
stockholders of the Company was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose elections or nomination for election was previously so
approved) cease for any reason other than death or disability to constitute a
majority of the directors then in office; (c) the Company ceases to own and
control all of the economic and voting rights associated with all the
outstanding capital stock of any of its Subsidiaries; or (d) any Person or group
of Persons (within the meaning of the Exchange Act) listed on Schedule 1.01 who
has since the Closing Date continuously been the beneficial owner within the
meaning of Rule 13d-3 promulgated by the Commission under the Exchange Act) of
ten percent (10%) or more of the issued and outstanding shares of capital stock
of the Company (including any shares of capital stock that may be issued upon
conversion of outstanding securities of the Company, on an as-converted basis)
having the right to vote for the election of directors of the Company under
ordinary circumstances acquires such beneficial ownership of thirty percent
(30%) or more of the total voting power of issued and outstanding shares of
capital stock of the Company (including any shares of capital stock that may be
issued upon conversion of outstanding securities of the Company, on an
as-converted basis) having the right to vote for the election of directors of
the Company under ordinary circumstances.
"Closing" and "Closing Date" have the meanings set forth in Section 2.02.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations adopted pursuant thereto.
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"Commission" means the U.S. Securities and Exchange Commission.
"Company" means Velocity Express, Inc., a Delaware corporation.
"Disclosure Schedule" means the disclosure schedule prepared by the Company
attached to this Agreement which sets forth the exceptions to the
representations and warranties contained in Article 3 and certain other
information called for by this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute and all rules and regulations from time to
time promulgated thereunder.
"Event of Default" has the meaning set forth in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the regulations adopted pursuant thereto.
"Financial Statements" has the meaning set forth in Section 3.04.
"Fixed Indebtedness" means, without duplication (i) all indebtedness for
borrowed money, (ii) all indebtedness secured by any mortgage, pledge, security
interest or lien existing on property owned subject to such mortgage, pledge,
security interest or lien whether or not the indebtedness secured thereby shall
have been assumed, (iii) all amounts representing the capitalization of rentals
in accordance with GAAP and (iv) all guarantees, endorsements and other
contingent obligations with respect to liabilities of a type described in any of
clauses (i) through (iii) above, but excluding in any of clauses (i) through
(iii) above capital stock, surplus, capital and earned surplus and redemption or
repurchase obligations with respect to the Company's outstanding shares of
preferred stock.
"GAAP" means United States generally accepted accounting principles
consistently applied with prior periods.
"Guaranties" means the Guaranties made and given by the Guarantors to and
for the benefit of the Purchaser, substantially in the form attached as Exhibit
D.
"Guarantors" means, individually and collectively, Parent; VXP Leasing
Mid-West, Inc.; VXP Mid-West, Inc.; Velocity Express Leasing Intermountain,
Inc.; Velocity Express Leasing Mid-Atlantic, Inc.; Velocity Express Leasing
Mid-West, Inc.; Velocity Express Leasing New England, Inc.; Velocity Express
Leasing Northeast, Inc.; Velocity Express Leasing Southeast, Inc.; Velocity
Express Leasing Southwest, Inc.; Velocity Express Leasing West Coast, Inc.;
Velocity Express Intermountain, Inc.; Velocity Express Mid-Atlantic, Inc.;
Velocity Express Mid-West, Inc.; Velocity Express New England, Inc.; Velocity
Express Northeast, Inc.; Velocity Express Southeast, Inc.; Velocity Express
Southwest, Inc.; Velocity Express West Coast, Inc.; Pos II, Inc.; Velocity
Express Administration, Inc.; New Delaware Delivery, Inc.; and Corporate Express
Distribution Services, Inc.
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"Indebtedness" means, without duplication, (i) all Fixed Indebtedness, and
(ii) all items not otherwise included in Fixed Indebtedness which, in accordance
with GAAP, would be included on the liability side of a balance sheet as of the
date such Indebtedness is to be determined, excluding capital stock, surplus,
capital and earned surplus and redemption or repurchase obligations with respect
to the Company's outstanding shares of preferred stock.
"Intellectual Property" means all patents and patent rights, trademarks and
trademark rights, trade names and trade name rights, service marks and service
xxxx rights, service names and service name rights, brand names, inventions,
processes, formulae, copyrights and copyright rights, trade dress, business and
product names, logos, slogans, trade secrets, industrial models, designs,
methodologies, computer programs (including all source codes) and related
documentation, technical information, manufacturing, engineering and technical
drawings, know-how and all pending applications for and registrations of
patents, trademarks, service marks and copyrights.
"Intercreditor Agreement" means those certain Intercreditor Agreements
among the Company, the Purchaser and the Senior Lender dated the date hereof.
"Interim Period Financial Statements" has the meaning set forth in Section
3.04.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, restriction on transfer or encumbrance of any kind in
respect of such asset.
"Loan Party" means the Company and each Guarantor.
"Material Adverse Effect" means, with respect to any Person, any effect or
series of effects that, in the aggregate, have a material adverse effect on (a)
the business, properties, condition (financial or otherwise), operations, or
performance of such Person and its subsidiaries or affiliates, taken as a whole,
or (b) the ability of such Person to perform its obligations under this
Agreement or the Ancillary Agreements.
"Note" means the Senior Subordinated Note in the aggregate principal amount
of Six Million Dollars ($6,000,000), substantially in the form attached as
Exhibit A, to be issued by the Company to the Purchaser.
"Obligations" means all liabilities and obligations of the Loan Parties
created under or existing pursuant to this Agreement and each of the Ancillary
Agreements.
"Permitted Liens" means any Liens permitted under clauses (i) - (viii) of
Section 8.2.5 of the Senior Credit Agreement as in effect on the date of this
Agreement.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or government, or any agency or political
subdivision thereof.
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"Preferred Stock" means the Series I Convertible Preferred stock, par value
$0.004 per share, of Parent.
"Securities" means the Note and the Preferred Stock.
"Securities Act" means the Securities Act of 1933, as amended, and the
regulations adopted pursuant thereto.
"Security Agreements" means the Security Agreements made and given by the
Company and the Guarantors to and for the benefit of the Purchaser,
substantially in the form attached as Exhibit C.
"Senior Credit Agreement" means the Credit Agreement among the Loan Parties
and the Senior Lender dated the date hereof.
"Senior Indebtedness" means all indebtedness of the Company to the Senior
Lender and all other Lenders (as defined in the Senior Credit Agreement)
provided for under the Senior Credit Agreement.
"Senior Lender" means Fleet Capital Corporation, a Rhode Island
corporation.
"Subsidiary" means any Person of which an aggregate of 50% or more of the
outstanding securities of any class or classes entitled to vote with respect to
the election of corporate directors (or Persons performing similar functions) is
at any time directly or indirectly owned by the Company or Parent, by one or
more of their respective Subsidiaries, or by the Company or Parent and one or
more of their respective Subsidiaries.
ARTICLE 2 PURCHASE AND SALE OF SECURITIES
2.01 Purchase and Sale.
(a) Subject to the terms and conditions of this Agreement, the Company
hereby agree to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company at the closing contemplated by this Agreement (the
"Closing"), the Note.
(b) Subject to the terms and conditions of this Agreement, Parent
hereby agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from Parent at the Closing, 416,666 shares of the Preferred Stock.
(c) The aggregate purchase price for the Note and the Preferred Stock
is $6,000,000 (the "Purchase Price").
2.02 The Closing. The Closing will occur at the offices of the Company on
November 26, 2003 (the "Closing Date") or such later date as all of the
conditions precedent stated in Article 5 have been satisfied. At the Closing,
the Purchaser will deliver to the Company
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payment of the Purchase Price by wire transfer to an account designated by the
Company in writing no less than two Business Days prior to the Closing.
2.03 Use of Proceeds. The Company will apply the proceeds of the sale of
the Securities first to the payment of the fees and expenses associated with the
transactions contemplated under this Agreement. The Company will use the
proceeds of the sale of the Securities only in accordance with this Agreement
and the Senior Credit Agreement.
2.04 Closing Fee. The Company will pay a closing fee (the "Closing Fee")
equal to one hundred eighty thousand dollars ($180,000). The Closing Fee shall
be payable as follows: (a) a payment to MYFM Capital LLC, as designee of
Purchaser, of ninety thousand dollars ($90,000) at the Closing, payment of which
shall be a condition precedent to the Closing, and (b) 60,000 shares of the
Preferred Stock which shall be delivered to MYFM Capital LLC, as designee of
Purchaser in accordance with a Stock Purchase Agreement of even date herewith
between the Company and MYFM Capital LLC.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES
Each Loan Party jointly and severally represents and warrants to the
Purchaser as of the Closing Date, except as expressly indicated on the
Disclosure Schedule, with specific reference to the Section or Subsection of
this Agreement to which the information stated in such disclosure relates, which
exceptions are deemed to be representations and warranties as if made within
this Article 3, as follows:
3.01 Organization, Standing and Qualification of the Loan Parties . Each
Loan Party is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation. Each Loan Party has
all requisite corporate power and authority to carry on its business as now
being conducted and proposed to be conducted and to own, lease or operate its
properties as and in the places where such business is now conducted or proposed
to be conducted and such properties are now owned, leased or operated. Each Loan
Party is duly qualified and in good standing as a foreign corporation authorized
to carry on its business in the states where the nature of the activities
conducted or proposed to be conducted by such Loan Party, or the character of
the properties owned, leased or operated by such Loan Party require such
qualification except where the failure to be so qualified would not have a
Material Adverse Effect on such Loan Party.
3.02 Subsidiaries and Investments. Except as set forth on the Disclosure
Schedule, no Loan Party has any Subsidiary or investment, equity or ownership
interest (whether controlling or not) of any kind in any other Person. No Loan
Party is engaged in any joint venture or partnership with any other Person.
3.03 Execution, Delivery and Performance of Agreement; Authority .
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(a) The execution, delivery and performance of this Agreement and the
Ancillary Agreements (to which they are a party) by the Loan Parties have been
duly authorized by all necessary corporate action on the part of each Loan
Party's Board of Directors and stockholders and do not conflict with, result in
a default, right to accelerate, or loss of rights under, or result in the
creation of any Lien pursuant to, any provision of the Articles or Certificate
of Incorporation or Bylaws of any Loan Party, or any agreement, law, rule or
regulation, or any order, judgment or decree to which any Loan Party is a party
or by which any Loan Party, or their respective properties are bound or affected
(except for any Lien created under this Agreement or the Ancillary Agreements).
No consent is required to be obtained or made by any Loan Party in connection
with the execution and delivery by the Loan Parties of this Agreement or the
Ancillary Agreements.
(b) Each Loan Party has full power and authority to enter into this
Agreement and the Ancillary Agreements and to carry out the transactions
contemplated hereby and thereby. This Agreement has been duly executed and
delivered on behalf of the Loan Parties, as applicable, and constitutes, and the
Ancillary Agreements when executed and delivered will constitute, valid and
binding obligations of the Loan Parties enforceable in accordance with their
respective terms, except to the extent that enforcement may be limited by
applicable bankruptcy, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and subject to
general equitable principles which may limit the right to obtain equitable
remedies.
3.04 Financial Statements.
(a) The Company and Parent have delivered to the Purchaser the
following financial statements (collectively, the "Financial Statements"): (a)
Parent's audited consolidated balance sheet as of June 28, 2003 and related
statements of income for the twelve (12) month period then ended which are
attached as part of the Disclosure Schedule; (b) Parent's audited consolidated
financial statements for the fiscal years 2001 and 2002; (c) Parent's unaudited
consolidated balance sheet as of September 27, 2003 (the "Balance Sheet Date")
and related statements of income for the three (3) month period then ended which
are attached as part of the Disclosure Schedule. All of the Financial Statements
have been prepared from the books and records of Parent and its Subsidiaries in
accordance with GAAP and fairly present in all material respects the financial
condition of Parent as of their respective dates and the results of operations
for the periods covered thereby. The income statements included in the Financial
Statements do not contain any material items of special or nonrecurring income
or any other material income not earned in the ordinary course of business
except as expressly specified therein, and the Financial Statements include all
material adjustments, which consist only of normal recurring accruals, necessary
for such fair presentation, subject in the case of the Interim Period Financial
Statements to normal year-end adjustments.
(b) Attached to the Disclosure Schedule is a forecasted pro forma
consolidated and consolidating balance sheet (the "Pro Forma Balance Sheet") of
Parent and its
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Subsidiaries as of October 31, 2003, giving effect to the transactions
contemplated by this Agreement and the Senior Credit Agreement. The Pro Forma
Balance Sheet fairly presents, in all material respects, a reasonable forecast
on a pro forma basis of the financial condition of Parent and its Subsidiaries
at the date thereof and giving effect to such transactions.
3.05 Capitalization.
(a) As of the date of this Agreement, the authorized capital shares of
Parent consists solely of 150,000,000 shares of Common Stock, par value $0.004
per share ("Parent Common Shares"), and 50,000,000 shares of Preferred Stock,
par value $0.004 per share ("Parent Preferred Shares"), of which 10,000,000
shares are designated as Series B Convertible Preferred Stock, 5,000,000 shares
are designated as Series C Convertible Preferred Stock, 3,000,000 shares are
designated as Series D Convertible Preferred Stock, 1,200,000 shares are
designated as Series F Convertible Preferred Stock, 9,000,000 shares are
designated as Series G Convertible Preferred Stock and 500,000 shares are
designated as Series H Convertible Preferred Stock. As of November 25, 2003,
5,462,161 Parent Common Shares, 2,806,797 shares of Series B Convertible
Preferred Stock, 2,000,000 shares of Series C Convertible Preferred Stock,
1,517,444 shares of Series D Convertible Preferred Stock, 921,898 shares of
Series F Convertible Preferred Stock, 5,865,331 shares of Series G Convertible
Preferred Stock and 500,000 shares of Series H Convertible Preferred Stock were
issued and outstanding. As of November 25, 2003, Parent had authorized for
issuance 243,406 Parent Common Shares pursuant to the 1995 Stock Option Plan and
awards relating to 188,244 Parent Common Shares are outstanding and have a
weighted average exercise price of $8.87 per share, 1,912,332 Parent Common
Shares pursuant to the 2000 Stock Option Plan and awards relating to 997,659
Parent Common Shares are outstanding and have a weighted average exercise price
of $12.36 per share, and 117,000 Parent Common Shares pursuant to the 1996 Stock
Option Plan and awards relating to 18,000 Parent Common Shares are outstanding
and have a weighted average exercise price of $11.28 per share. In addition, as
of November 25, 2003, there are options outstanding that are not issued pursuant
to any plan to purchase 130,000 Parent Common Shares which have a weighted
average exercise price of $17.45 per share. As of the date hereof, there are
warrants outstanding to purchase an aggregate of 7,934,989 Parent Common Shares
at a price of $1.29 per share, 825,484 shares of Series C Convertible Preferred
Stock at a price of $0.01 per share, and 216,533 shares of Series D Convertible
Preferred Stock at a price of $0.01 per share. All of the issued and outstanding
Parent Common Shares and Parent Preferred Shares are, and all Parent Common
Shares and Parent Preferred Shares reserved for issuance pursuant to outstanding
options and warrants or upon conversion of convertible Parent Preferred Shares
will be upon issuance in accordance with the terms specified in the applicable
plans, agreements and designations pursuant to which they are issuable, duly
authorized, validly issued, fully paid and non-assessable. Except as set forth
herein, there are no outstanding subscriptions, options, warrants, rights
(including "phantom" stock rights), preemptive rights or other contracts,
commitments, understandings or arrangements, including any right of conversion
or exchange under any outstanding security, instrument or agreement (together,
"Options"), obligating the
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Parent or any of its Subsidiaries to issue or sell any capital shares of the
Parent or to grant, extend or enter into any Option with respect thereto.
(b) All of the outstanding capital shares of each Subsidiary of the
Parent are duly authorized, validly issued, fully paid and non-assessable and
are owned, beneficially and of record, by the Parent or a Subsidiary wholly
owned, directly or indirectly, by the Parent, free and clear of any Liens of any
kind. There are no (i) outstanding Options obligating the Parent or any of its
Subsidiaries to issue or sell any capital shares of any Subsidiary of the Parent
or agreements to grant, extend or enter into any such Option or (ii) voting
trusts, proxies or other commitments, understandings, restrictions or
arrangements in favor of any Person other than the Parent or a Subsidiary wholly
owned, directly or indirectly, by the Parent with respect to the voting of or
the right to participate in dividends or other earnings on any capital shares of
any Subsidiary of the Parent.
(c) There are no outstanding contractual obligations of the Parent or
any Subsidiary of the Parent to repurchase, redeem or otherwise acquire any
Parent Common Shares or Parent Preferred Shares or any capital shares of any
Subsidiary of the Parent or to provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise) in, any Subsidiary of the
Parent or any other Person. There are no commitments of the Company to
distribute to holders of any class of its capital stock any evidences of
indebtedness or assets, or to pay any dividend or make any other distribution in
respect thereof.
(d) The Preferred Stock when issued pursuant to the terms of this
Agreement and any shares of capital stock of Parent issued upon conversion of
the Preferred Stock when issued, will be duly authorized, validly issued, fully
paid and nonassessable.
3.06 No Material Adverse Change. Since the Balance Sheet Date there has
been no event or occurrence, which has had or is reasonably likely to have a
Material Adverse Effect on any Loan Party.
3.07 Litigation. Except as described on the Disclosure Schedule, there is
no claim, legal action, suit, arbitration, governmental investigation or other
legal or administrative proceeding, nor any order, decree or judgment, pending
or threatened against (i) any Loan Party, (ii) any Loan Party's officers,
directors or employees for acts or omissions relating to such Loan Party, (iii)
any Loan Party's properties, assets or business, or (iv) the transactions
contemplated by this Agreement, which, with respect to clauses (i)-(iii), has a
reasonable risk of being determined adversely to any such party, properties,
assets or business and which, if so determined, could reasonably be expected to
have a Material Adverse Effect on any Loan Party, and neither Parent nor the
Company has knowledge of any basis for any of the foregoing. No Loan Party is in
default with respect to any order, writ, injunction, judgment, decree or rule of
any court, governmental authority or arbitration board or tribunal that, singly
or in the aggregate, could reasonably expected to have a Material Adverse
Effect.
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3.08 Compliance with Laws and Other Instruments.
(a) Each Loan Party is in compliance, and has complied with all laws,
rules, regulations, ordinances, orders, judgments and decrees applicable to its
business, properties or operations except where the failure to so comply would
not have a Material Adverse Effect. Neither the ownership nor use of any Loan
Party's properties nor the conduct or currently proposed conduct of its business
(i) conflicts with the rights of any other Person or (ii) violates or (with or
without the giving of notice or the passage of time, or both) will violate,
conflict with, or result in a default, right to accelerate, or loss of rights
under, any provision of the Articles or Certificate of Incorporation or the
Bylaws of such Loan Party, or any Lien, lease, license, agreement,
understanding, law, ordinance, rule, regulation, zoning regulation, order,
judgment or decree to which such Loan Party is a party or by which it or its
assets may be bound or affected except as could not reasonably be expected to
have a Material Adverse Effect.
(b) As of their respective dates, each form, report, schedule,
registration statement, definitive proxy statement and other document (together
with all amendments thereof and supplements thereto) filed by Parent or any of
its Subsidiaries with the Commission (as such documents have since the time of
their filing been amended or supplemented, the "Parent SEC Reports"), which are
all of the documents that Parent and its Subsidiaries were required to file with
the Commission since such date: (i) complied as to form in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and if applicable, the Xxxxxxxx-Xxxxx Act of 2002 and the rules and
regulations promulgated thereunder (the "Xxxxxxxx-Xxxxx Act"), and (ii) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited interim
consolidated financial statements (including, in each case, the notes, if any,
thereto) included in the Parent SEC Reports (the "Parent Financial Statements")
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission,
including, without limitation, the Xxxxxxxx-Xxxxx Act, applicable thereto, were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto and except with respect to unaudited statements
as permitted by Form 10-Q of the Commission) and fairly present (subject, in the
case of the unaudited interim financial statements, to normal, recurring
year-end audit adjustments) the consolidated financial position of Parent and
its consolidated Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and cash flows for the respective
periods then ended. Each Subsidiary of Parent is treated as a consolidated
Subsidiary of Parent in the Parent Financial Statements for all periods covered
thereby.
(c) Parent maintains disclosure controls and procedures required by
Rule 13a-15 or 15d-15 under the Exchange Act and applicable to Parent; such
controls and procedures are effective to ensure that all material information
concerning Parent and its Subsidiaries is made
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known on a timely basis to the individuals responsible for the preparation of
Parent's filings with the Commission and other public disclosure documents.
(d) As used in this Section 3.08, the term "file" shall be broadly
construed to include any manner in which a document or information is furnished,
supplied or otherwise made available to the Commission.
3.09 Title to and Liens on Properties.
(a) The Disclosure Schedule contains a description of the real
property owned by each Loan Party and the real property leased by each Loan
Party (as lessee or lessor).
(b) Each Loan Party has good and marketable title (which is of record
as to any real estate) to all the properties and assets which its owns or
purports to own, including without limitation those properties and assets
reflected in the Interim Period Financial Statements as of the Balance Sheet
Date, except to the extent they have been sold or disposed of in the ordinary
course of business subsequent to the Balance Sheet Date. None of the properties
and assets are subject to any Lien, restriction, lease, license, easement,
liability or adverse claim of any nature whatsoever, direct or indirect, whether
accrued, absolute, contingent or otherwise, except: (i) those imperfections of
title and encumbrances, if any, which (A) are not substantial in character,
amount, or extent and do not so materially detract from the value of the
properties subject thereto so as to render them unmarketable, (B) do not
interfere with either the present and continued use of such property or the
conduct of normal operations, and (C) have arisen only in the ordinary course of
business; and (ii) Permitted Liens.
3.10 Solvency. After giving effect to the transactions contemplated by
this Agreement and the Ancillary Agreements each Loan Party will be solvent. For
purposes of this Section, "solvent" means, with respect to any Person on any
date of determination, that on such date (a) the fair market value of the assets
of such Person on a going concern basis is in excess of the total amount of its
liabilities (including, without limitation, contingent liabilities); (b) the
present fair saleable value of the assets of such Person is greater than its
probable liability on its existing debts as such debts become absolute and
matured; (c) such Person is able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as they
mature; and (d) such Person has capital sufficient to carry on its business as
presently conducted and as proposed to be conducted.
3.11 Permits and Licenses. Except as set forth on the Disclosure Schedule,
each Loan Party has all federal, state and local licenses and permits required
to be maintained in connection with and material to the operation of its
business, and all such licenses and permits are valid and fully effective in all
material respects.
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3.12 Intellectual Property Rights.
(a) The Disclosure Schedule lists (i) the federal registration number
and the date of registration of registered patents and trademarks and of other
registered marks, trade names, brand names or other trade rights currently used
by each Loan Party in the conduct of its business, (ii) all of the copyrights
and all applications for any of the items referred to in clause (i) above, and
(iii) all other material marks, trade names, brand names or other trade rights
currently used by each Loan Party in the conduct of its business and whether
such use is or will be pursuant to license, sub-license, agreement or
permission. The Company has delivered to the Purchaser complete and accurate
copies of each material agreement, registration and other document relating to
the Intellectual Property set forth on the Disclosure Schedule.
(b) Each Loan Party owns or possesses adequate and enforceable
licenses or other rights to use (i) all Intellectual Property rights listed on
the Disclosure Schedule and (ii) all other patents, trademarks, service marks,
brand names and trade names, all applications for any of the foregoing, all
other trade secrets, designs, plans, specifications and other rights of every
kind related to all Intellectual Property used in, possessed by or necessary for
the conduct of such Loan Party's business. Entry into this Agreement and
consummation of the transactions contemplated hereby will not impair any Loan
Party's ownership or use of such Intellectual Property.
(c) Except as set forth in the Disclosure Schedule, no Person has a
right to receive a royalty or similar payment in respect of any item of
Intellectual Property pursuant to any contractual arrangements entered into by
any Loan Party. No Loan Party has granted any license, sub-license or other
similar agreement relating in whole or in part to any Intellectual Property. No
Loan Party has received any notice that its or any third party's use of any item
of Intellectual Property is interfering with, infringing upon or otherwise
violating the rights of any Loan Party, or any third party in or to such
Intellectual Property, and no proceedings have been instituted against or
notices received by any Loan Party alleging that the use or proposed use of any
item of Intellectual Property by any Loan Party or any third party infringes
upon or otherwise violates any rights of any Loan Party or a third party in or
to such Intellectual Property, and, to the knowledge of each Loan Party, there
is no basis for such claim or proceeding. To the knowledge of each Loan Party,
no third party is interfering with, infringing upon, or otherwise violating the
rights of any Loan Party in any Intellectual Property.
3.13 Environmental Protection. Except as set forth in the Disclosure
Schedule, each Loan Party has obtained all material permits, licenses and other
authorizations which are required under federal, state and local laws relating
to pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, hazardous or toxic materials or wastes into ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
("Environmental Law"). Except as set forth in the Disclosure Schedule, each
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Loan Party is in material compliance with all terms and conditions of such
required permits, licenses and authorizations and are also in material
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any Environmental Law or contained in any plan, order, decree, judgment or
notice from any governmental authority. Except as set forth in the Disclosure
Schedule, no Loan Party is aware of, nor has received notice from any Person of,
any events, conditions, circumstances, activities, practices, incidents, actions
or plans which interfere with or prevent continued compliance or which give rise
to any liability under any Environmental Law.
3.14 Employment or Severance Agreements. Except for those listed on the
Disclosure Schedule, no Loan Party is a party to or bound by (i) any collective
bargaining agreement, (ii) any material agreement providing for a term of
employment or for any severance payment to any executive officer of any Loan
Party, or (iii) any material agreement providing any deferred compensation,
bonus or profit sharing payment to any executive officer of any Loan Party.
3.15 Taxes. Parent's federal tax identification number is 00-0000000 and
the company's federal tax identification number is 00-0000000. The federal tax
identification number of each of the other Loan Parties is set forth in the
Disclosure Schedule. Parent and each of its Subsidiaries has filed all federal,
state and local tax returns and other reports it is required by law to file and
has paid, or made provision for the payment of, all taxes, assessments, fees,
levies and other governmental charges upon it, its income and properties as and
when such taxes, assessments, fees, levies and charges are due and payable,
unless and to the extent any thereof are being actively contested in good faith
and by appropriate proceedings and Parent and each of its Subsidiaries maintain
reasonable reserves on its books therefor. The provision for taxes on the books
of Parent and its Subsidiaries are adequate for all years not closed by
applicable statutes, and for the current fiscal year.
3.16 Pension Plans. Except as set forth in the Disclosure Schedule,
neither Parent nor any of its Subsidiaries has any employee benefit plan now or
hereafter maintained for employees of Parent or any of its Subsidiaries that is
covered by Title IV of ERISA (a "Plan"). Parent and each of its Subsidiaries is
in compliance with the requirements of ERISA and the regulations promulgated
thereunder with respect to each Plan, except where the failure to so comply
could not reasonably be expected to have a Material Adverse Effect. No fact or
situation that could reasonably be expected to result in a material adverse
change in the financial condition of Parent or any of its Subsidiaries exists in
connection with any Plan. Neither Parent nor any of its Subsidiaries has any
withdrawal liability in connection with a Multiemployer Plan (as such term is
defined in Section 4001(a)(3) of ERISA).
3.17 Labor Relations. Except as set forth in the Disclosure Schedule,
neither Parent nor any of its Subsidiaries is a party to any collective
bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of Parent's or any of its
Subsidiaries' employees, or threats of strikes, work stoppages or any
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asserted pending demands for collective bargaining by any union or organization,
except those that could not reasonably be expected to have a Material Adverse
Effect
3.18 Disclosure. No representation or warranty by any Loan Party in this
Agreement or any of the Ancillary Agreements, nor any statement, document or
certificate furnished or required to be furnished under the terms of this
Agreement by the Loan Parties, or their representatives to the Purchaser or the
Purchaser's representatives in connection with this Agreement or any of the
Ancillary Agreements, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact necessary to
make the facts stated therein not misleading.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
4.01 Partnership Existence and Power. The Purchaser is duly organized,
validly existing and in good standing as a limited partnership under the laws of
the State of Delaware and has all requisite partnership power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it is a
party and to purchase the Securities as provided in this Agreement.
4.02 Authorization. All partnership proceedings or partnership action
required to be taken by the Purchaser relating to its execution and performance
of this Agreement have been taken at or will be taken prior to the Closing.
4.03 Litigation. There is no legal action, suit, arbitration, governmental
investigation or other legal or administrative proceeding, nor any order, decree
or judgment in progress, pending or in effect, or to the knowledge of the
Purchaser threatened, against or relating to the Purchaser, in connection with
or relating to the transactions contemplated by this Agreement and the Ancillary
Agreements to which it is a party, and the Purchaser has no knowledge of any
basis for the same.
4.04 Investment Intent. The Purchaser is an "accredited investor", as
defined under Rule 501(a) of Regulation D of the Securities Act. The Securities
are being purchased for the Purchaser's own account and not with a view to, or
for resale in connection with, any distribution or public offering within the
meaning of the Securities Act. The Purchaser understands that the Securities
have not been registered under the Securities Act by reason of their
contemplated issuance in transactions exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section 4(2)
thereof, and that the reliance of the Company upon this exemption is predicated
in part upon this representation and warranty by the Purchaser.
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ARTICLE 5 CLOSING CONDITIONS
The Purchaser's obligations to purchase and pay for the Securities are
subject to the following conditions, any of which may be waived in whole or in
part by the Purchaser in writing:
5.01 Representations and Warranties True. The representations and
warranties of the Loan Parties in this Agreement are true and correct in all
material respects on and as of the Closing Date.
5.02 Compliance with Agreement. The Loan Parties have performed and
complied with in all material respects all agreements and conditions required by
this Agreement to be performed and complied with by them prior to or as of the
Closing Date.
5.03 No Event of Default. At the time of Closing no condition or event
exists or has occurred which would constitute an Event of Default or which,
after notice or lapse of time or both, would constitute an Event of Default.
5.04 Documents Required for the Closing. The Loan Parties have delivered
to the Purchaser the following, duly executed as appropriate:
(a) this Note Purchase Agreement;
(b) the Note;
(c) the Security Agreement;
(d) the Guaranties;
(e) the Intercreditor Agreement;
(f) a certificate or certificates registered in the name of Purchaser
representing the shares of Preferred Stock referred to in Section 2.01(b);
(g) the Closing Fee payable at the Closing referred to in Section
2.04;
(h) a certificate dated as of the Closing Date, signed by an officer
of Parent and the Company certifying that the conditions specified in Sections
5.01 through 5.03 are true and correct;
(i) a certificate dated as of the Closing Date from Parent and the
Company, signed by the Secretary of each such company and in form and substance
satisfactory to the Purchaser and its counsel, (i) certifying that resolutions
have been duly adopted by such company's Board of Directors (and to the extent
necessary, its shareholders) authorizing the execution of this Agreement and the
Ancillary Agreements, the issuance of the Securities, and all
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of the other transactions to be consummated pursuant hereto, (ii) certifying as
to the names of the members of its Board of Directors and the names and
incumbency of its officers who are empowered to execute the foregoing documents
for and on behalf of such company, (iii) certifying the authenticity of attached
copies of the charter documents and Bylaws of such company, and (iv) certifying
the continued good standing of such company in its State of incorporation, as
evidenced by a reasonably current Certificate of Good Standing;
(j) a favorable opinion of Parent's and the Company's legal counsel as
to matters and in form reasonably acceptable to the Purchaser;
(k) UCC-1 financing statements;
(l) a solvency certificate, in form reasonably acceptable to the
Purchaser;
(m) documents, in form reasonably acceptable to the Purchaser,
evidencing the obtaining of all necessary releases, consents or approvals
requested by the Purchaser for the transactions contemplated by this Agreement;
(n) a copy, certified by the Company as true and correct, of the
Senior Credit Agreement and the closing documents related thereto;
(o) three year pro forma projections for Parent and its Subsidiaries
with the first fiscal year of such projections being on a monthly basis;
(p) such other documents, certificates, instruments or opinions as the
Purchaser or their legal counsel may reasonably request, in form reasonably
satisfactory to the Purchaser.
5.05 Proceedings Satisfactory . All proceedings to be taken in connection
with the transactions contemplated by this Agreement and all documents incident
to such transaction are satisfactory in form and substance to the Purchaser and
its counsel.
ARTICLE 6 AFFIRMATIVE COVENANTS OF PARENT AND THE COMPANY
Parent and the Company covenant and agree that from and after the Closing,
so long as the Note remains outstanding, unless the Purchaser otherwise consents
in writing:
6.01 Payment of Notes. The Company will pay (i) the principal of and
interest on the Note, and (ii) the Service Fee at the time and place and in the
manner specified in the Note.
6.02 Reporting. The Company will furnish to the Purchaser:
(a) as soon as available, and in any event within ninety (90) days
after the end of each fiscal year of the Company, a copy of the annual audit
report of the Company and its Subsidiaries, which report is certified by an
independent certified public accountant who is
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selected by the Company and is acceptable to the Purchaser, without
qualification as to scope of audit or opinion. Such annual report will include a
balance sheet of the Company and its Subsidiaries as of the end of such fiscal
year and the related statements of income, retained earnings and cash flows of
the Company and its Subsidiaries for the fiscal year then ended, all in
reasonable detail and all prepared in accordance with GAAP, together with (i) a
report signed by such accountants stating that in making the investigations
necessary for their opinion they obtained no knowledge, except as specifically
stated, of any Event of Default and all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Company is in
compliance with the requirements set forth in Section 6.09; (ii) any management
letters from such accountants; (iii) a Compliance Certificate of the chief
executive officer and chief financial officer of the Company in substantially
the form of Exhibit F stating that such financial statements have been prepared
in accordance with GAAP and whether or not any of them has knowledge of the
occurrence of any Event of Default hereunder and, if so, stating in reasonable
detail the facts with respect thereto;
(b) within thirty (30) days after the end of each month, a balance
sheet, statement of income and statement of cash flows of the Company and its
Subsidiaries as of the end of and for such month and for the period
year-to-date, each prepared in accordance with GAAP except for the statement of
cash flows;
(c) within thirty (30) days after the end of each month, comparisons
of actual results with the budget for such month and for the period
year-to-date, and management's discussion of such variances, all in such detail
as the Purchaser may reasonably request;
(d) within forty-five (45) days after the end of each fiscal quarter,
a balance sheet, statement of income and statement of cash flows of the Company
and its Subsidiaries as of the end of such fiscal quarter and for the period
year-to-date, each prepared in accordance with GAAP, and a Compliance
Certificate signed by the Company's chief financial officer as to whether or not
he or she has any knowledge of the occurrence of any Event of Default and, if
so, stating in reasonable detail the facts with respect thereto and the
computations as to whether the Company is in compliance with the requirements of
Section 6.09;
(e) within 30 days after the beginning of each fiscal year of the
Company, an annual plan for such year, which includes major operating goals and
milestones, monthly profit and loss projections, cash flow statements and
monthly capital and operating expense budgets, itemized in such detail as the
Board of Directors may reasonably request. Each annual plan will be modified as
often as is necessary in the judgment of the Board of Directors to reflect
changes required as a result of operating results and other events that occur,
or may be reasonably expected to occur, during the year covered by the annual
plan, and copies of each such modification will be provided to the Purchaser;
(f) to the extent not already delivered to the Purchaser, promptly
upon their distribution, copies of all financial statements, reports and proxy
statements that the Company delivers to its stockholders;
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(g) promptly after the sending or filing thereof, copies of all
filings which Parent or its Subsidiaries make with any national securities
exchange or the National Association of Securities Dealers, Inc. or to the
Commission pursuant to the Securities Act or pursuant to Sections 13, 14 or
15(d) under the Exchange Act;
(h) immediately after Parent or the Company receives notice of the
commencement or threatened commencement of any suit, legal or equitable, or of
any administrative, arbitration or other proceeding against the Parent, any of
its Subsidiaries, or their business, assets or properties, in each case
reasonably likely to have a Material Adverse Effect on Parent and its
Subsidiaries on a consolidated basis, written notice of the nature and extent of
such suit or proceeding;
(i) as promptly as practicable, but in any event not later than five
(5) days after an officer of Parent or the Company obtains knowledge thereof,
notice of the occurrence of:
(i) any adverse development in any litigation, arbitration or
governmental investigation or proceeding previously disclosed by Parent or
the Company to the Purchaser in each case reasonably likely to have a
Material Adverse Effect on Parent and its Subsidiaries on a consolidated
basis;
(ii) any event which constitutes an Event of Default; or
(iii) any condition or event regarding the business, properties,
condition or prospects (financial or otherwise) of Parent or its
Subsidiaries which has or may reasonably be expected to have a Material
Adverse Effect;
together with a detailed statement by a responsible officer of the Company of
the steps being taken by the Company to cure the effect of such occurrence or
event;
(j) as soon as possible and in any event within thirty (30) days after
Parent or the Company knows or has reason to know that any Reportable Event with
respect to any Plan of Parent or its Subsidiaries has occurred, the statement of
the chief financial officer of Parent setting forth details as to such
Reportable Event and the action which Parent proposes to take with respect
thereto, together with a copy of the notice of such Reportable Event to the
Pension Benefit Guaranty Corporation;
(k) promptly with the sending or filing thereof, copies of all reports
and documents that the Company sends or provides to any of its material
creditors, whether upon such creditors' request or otherwise, and copies of all
reports, audits and work papers, prepared by or for its creditors, or their
designees, whether during the course of a periodic audit or otherwise, which
examine the loans, collateral, controls, policies or procedures of the Company;
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(l) immediately upon the receipt thereof from any creditor, copies of
any notices of default regarding any material ($500,000 or more) credit facility
maintained by Parent or any of its Subsidiaries with any creditor other than the
Purchaser;
(m) upon the request of the Purchaser, as soon as available with
respect to each fiscal year of the Company ending after the Closing Date, a true
and correct copy of its consolidated federal income tax returns as filed and all
schedules thereto;
(n) such other data and information (financial or otherwise) as
Purchaser, from time to time, may reasonably request, bearing upon or related to
the assets of Parent and its Subsidiaries or Parent's or any of its Subsidiaries
financial condition or results of operations.
6.03 Books and Records; Inspection and Examination.
(a) Each of Parent and the Company will keep, and will cause each
Subsidiary to keep, accurate books of record and account for itself in which
true and complete entries will be made in accordance with GAAP and, upon request
of the Purchaser, will give any representative of the Purchaser access to, and
permit such representative to examine, audit, copy or make extracts from, any
and all books, records and documents in Parent's, the Company's or any
Subsidiary's possession, to inspect Parent's, the Company's or any Subsidiary's
properties and to discuss Parent's, the Company's or any Subsidiary's affairs,
finances and accounts with their principal officers or independent accountants,
all at such times during normal business hours and as often as the Purchaser may
reasonably request. Parent and the Company agree to reimburse the Purchaser for
the reasonable fees and charges incurred in connection with any such inspection
or audit, including costs of personnel time and out-of-pocket expenses, which is
conducted once during any fiscal year of Parent or at any time after an Event of
Default has occurred and is continuing. Without limiting the foregoing, Parent
will participate and will cause its key management personnel to participate in a
meeting with Purchaser periodically (but at least annually) during each year
(except that during the continuation of an Event of Default such meetings may be
held more frequently as requested by Purchaser), which meeting(s) shall be held
at such times and such places as may be reasonably requested by Purchaser. In
addition, Parent will cause its Chief Executive Officer to participate in a
conference telephone call with Purchaser to discuss such matters as Purchaser
may reasonably request, but at least once in each calendar month if so requested
by Purchaser.
(b) Any information or document obtained by the Purchaser in any
examination, audit, inspection or discussion pursuant to this Section 6.03 will
be used by the Purchaser only for those purposes the Purchaser believes to be
appropriate to protect its interests under this Agreement and the Ancillary
Agreements or in obtaining payment of amounts owed pursuant to the Note,
provided that the foregoing shall not limit the Purchaser's use of such
information or document (i) if such information or document has become generally
available to the public through no fault of the Purchaser, (ii) if use of such
information or document is required or appropriate in any report, statement or
testimony submitted to any municipal, state or federal regulatory body having or
claiming to have jurisdiction over the Purchaser, (iii) if use of
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such information or document may be required or appropriate in response to any
summons or subpoena or in connection with any litigation (provided that the
Purchaser provides advance written notice to the Company of such subpoena), (iv)
if such information or document is disclosed or given to the Purchaser in good
faith by a third party who had independent rights to such information or
document, (v) if such information or document is obsolete, (vi) if use of such
information or document is believed by the Purchaser to be appropriate in order
to comply with any law, order, regulation or ruling applicable to the Purchaser,
or (vii) if such information or document is disclosed or given to a prospective
transferee in connection with any contemplated transfer of any of the
Securities; provided, further, that in the case of proposed disclosures pursuant
to clauses (ii), (iii) or (vi) above the Purchaser will endeavor to give the
Company prior notice before complying with such request or order so as to give
the Company an opportunity to appear and contest the disclosure of such
information or document.
6.04 Compliance with Laws. Parent will comply, and will cause each
Subsidiary to comply, with all applicable statutes, rules, regulations, orders
and restrictions of the United States of America, foreign countries, states and
municipalities and of any governmental department, commission, board, regulatory
authority, bureau, agency, and instrumentality of the foregoing, and of any
court, arbitrator or grand jury, in respect of the conduct of its business and
the ownership of its properties.
6.05 Maintenance of Properties. Parent will keep and maintain, and cause
each Subsidiary to keep and maintain, its properties in good repair, working
order and condition, ordinary wear and tear excepted, and from time to time
make, or cause to be made, all reasonable repairs and renewals and replacements
which in the opinion of Parent are necessary and proper so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times. Parent will maintain, and cause each Subsidiary to maintain, or
cause to be maintained back-up copies of all valuable papers and software.
6.06 Insurance. Parent will obtain insurance, for itself and each
Subsidiary, against loss or damage of the kinds customarily insured against by
corporations similarly situated, with reputable insurers, in such amounts, with
such deductibles and by such methods as shall be adequate, and in any event in
amounts not less than amounts generally maintained by other companies engaged in
similar businesses.
6.07 Payment of Taxes and Claims. The Company will, and will cause each
Subsidiary to, duly pay and discharge, as the same become due and payable, all
taxes, assessments and governmental and other charges, levies or claims levied
or imposed, which are, or which if unpaid might become, a Lien upon the
properties, assets, earnings or business of the Company or any Subsidiary;
provided, however, that nothing contained in this Section will require the
Company or any Subsidiary to pay and discharge, or cause to be paid and
discharged, any such tax, assessment, charge, levy or claim so long as the
Company in good faith contests the validity thereof and sets aside on its books
adequate reserves with respect thereto. In the event the Company or any
Subsidiary fails to satisfy its obligations under this Section, the
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Purchaser may but is not obligated to satisfy such obligations in whole or in
part and any payments made and reasonable expenses incurred in doing so will
constitute, to the extent satisfied by the Purchaser, an obligation by the
Company immediately due and payable to the Purchaser and such obligation will be
immediately paid by the Company with interest at a rate of fourteen percent
(14%) per annum.
6.08 Maintenance of Corporate Existence.
(a) The Company will, and will cause each Subsidiary to, at all times
do or cause to be done all things necessary to maintain, preserve and renew its
corporate charter and existence and its rights, patents and franchises, and
comply with all material laws applicable thereto; provided, however, that
nothing contained in this Section will (i) require the Company or any Subsidiary
to maintain, preserve or renew any right, patent or franchise not necessary or
desirable in the conduct of the business of the Company or such Subsidiary, or
(ii) prevent the termination of the corporate existence of any Subsidiary if the
Board of Directors of the Company reasonably believes in good faith that such
termination is not disadvantageous to the Purchaser.
(b) The Company will at all times maintain their corporate offices at
the addresses herein to which notices, presentations and demands to or upon the
Company in respect of the Note may be given or made; provided, however, that the
Company may change the location of its corporate headquarters upon not less than
thirty (30) days prior written notice to the Purchaser.
6.09 Financial Covenants.
(a) Maximum Capital Expenditures. Parent and its Subsidiaries on a
consolidated basis will not make any Capital Expenditures (including, without
limitation, by way of capitalized leases but excluding Capital Expenditures
incurred in connection with the permitted replacement of equipment pursuant to
the Senior Credit Agreement) during the following periods that exceed in the
aggregate the amounts set forth opposite each such period:
--------------------------------------------------------
Maximum Capital
Fiscal Year Ending Expenditures per Period
--------------------------------------------------------
Saturday nearest June 30, 2004 $3,300,000
--------------------------------------------------------
Saturday nearest June 30, 2005 $3,575,000
--------------------------------------------------------
Saturday nearest June 30, 2006 $3,850,000
--------------------------------------------------------
Saturday nearest June 30, 2007 $3,850,000
(b) Interest Coverage Ratio - Parent and its Subsidiaries shall not
permit the Interest Coverage Ratio for Parent and its Subsidiaries, on a
consolidated basis, for any fiscal
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period listed below to be less than the ratio set forth opposite such fiscal
period in the following schedule:
-------------------------------------------------------------------------------
Fiscal Period Interest Coverage Ratio
-------------------------------------------------------------------------------
Two month period ending nearest December 31, 2003 1.08
-------------------------------------------------------------------------------
Five month period ending at end of Fiscal Quarter 1.49
ending nearest March 31, 2004
-------------------------------------------------------------------------------
Eight month period ending at end of Fiscal Quarter 1.8
ending nearest June 30, 2004
-------------------------------------------------------------------------------
Eleven month period ending at end of Fiscal Quarter 1.8
ending nearest September 30, 2004
-------------------------------------------------------------------------------
Four Fiscal Quarters period ending nearest December 2.0
31, 2004 and each March 31, June 30, September 30
and December 31 thereafter
(c) EBITDA. For the six month period ending on the last day of the
Fiscal Quarter ending closest to June 30, 2004, and for each six month period
ending on the last day of each Fiscal Quarter thereafter, Parent and its
Subsidiaries on a consolidated basis shall achieve an EBITDA of at least Three
Million Dollars ($3,000,000).
(d) The following terms used in this Section 6.09 shall be defined as
follows:
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness)
by such Person made or liabilities incurred for the acquisition of any
fixed assets or improvements, replacements, substitutions or additions
thereto that have a useful life of more than one year, including the total
principal portion of Capitalized Lease Obligations.
"Capital Lease" shall mean, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that,
in accordance with GAAP, would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person.
"Capitalized Lease Obligation" shall mean, with respect to any Capital
Lease of any Person, the amount of the obligation of the lessee thereunder
that, in accordance with GAAP, would appear on a balance sheet of such
lessee in respect of such Capital Lease.
-22-
"EBITDA" shall mean, with respect to any Person for any fiscal period, an
amount equal to (a) consolidated net income of such Person for such period,
minus (b) the sum of (i) income tax credits, (ii) interest income, (iii)
gain from extraordinary items for such period, (iv) any aggregate net gain
(but not any aggregate net loss) during such period arising from the sale,
exchange or other disposition of capital assets by such Person (including
any fixed assets, whether tangible or intangible, all inventory sold in
conjunction with the disposition of fixed assets and all securities), and
(v) any other non-cash gains which have been added in determining
consolidated net income, in each case to the extent included in the
calculation of consolidated net income of such Person for such period in
accordance with GAAP, but without duplication, plus (c) the sum of (i) any
provision for income taxes, (ii) Interest Expense, (iii) loss from
extraordinary items for such period, (iv) the amount of non-cash charges
(including depreciation and amortization) for such period, (v) amortized
debt discount for such period, and (vi) the amount of any deduction to
consolidated net income as the result of any grant to any members of the
management of such Person of any Stock, in each case to the extent included
in the calculation of consolidated net income of such Person for such
period in accordance with GAAP, but without duplication. For purposes of
this definition, the following items shall be excluded in determining
consolidated net income of a Person: (1) the income (or deficit) of any
other Person accrued prior to the date it became a Subsidiary of, or was
merged or consolidated into, such Person or any of such Person's
Subsidiaries; (2) the income (or deficit) of any other Person (other than a
Subsidiary) in which such Person has an ownership interest, except to the
extent any such income has actually been received by such Person in the
form of cash dividends or distributions; (3) the undistributed earnings of
any Subsidiary of such Person to the extent that the declaration or payment
of dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary; (4) any restoration to income of any
contingency reserve, except to the extent that provision for such reserve
was made out of income accrued during such period; (5) any write-up of any
asset; (6) any net gain from the collection of the proceeds of life
insurance policies; (7) any net gain arising from the acquisition of any
securities, or the extinguishment, under GAAP, of any Indebtedness, of such
Person, (8) in the case of a successor to such Person by consolidation or
merger or as a transferee of its assets, any earnings of such successor
prior to such consolidation, merger or transfer of assets, and (9) any
deferred credit representing the excess of equity in any Subsidiary of such
Person at the date of acquisition of such Subsidiary over the cost to such
Person of the investment in such Subsidiary.
"Fiscal Quarter" shall mean any of the quarterly accounting periods of the
Company, ending on the day closest to September 30, December 31, March 31
and June 30 of each year.
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"Funded Debt" shall mean, with respect to any Person, all Indebtedness for
borrowed money evidenced by notes, bonds, debentures, or similar evidences
of Indebtedness and which by its terms matures more than one (1) year from,
or is directly or indirectly renewable or extendible at such Person's
option under a revolving credit or similar agreement obligating the lender
or lenders to extend credit over a period of more than one (1) year from
the date of creation thereof, and specifically including Capital Lease
Obligations, current maturities of long-term debt, revolving credit and
short-term debt extendible beyond one (1) year at the option of the debtor,
and also including, in the case of the Company, the Note and all
obligations under this Agreement and the Senior Credit Agreement and,
without duplication, guaranties of Funded Debt of other Persons.
"Indebtedness" of any Person shall mean without duplication (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred six (6) months or more, but
excluding obligations to trade creditors incurred in the ordinary course of
business that are not overdue by more than ninety (90) days unless being
contested in good faith, (b) all reimbursement and other obligations with
respect to letters of credit, bankers' acceptances and surety bonds,
whether or not matured, (c) all obligations evidenced by notes, bonds,
debentures or similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect
to property acquired by such Person (even though the rights and remedies of
the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all Capital Lease
Obligations and the present value (discounted at the Index Rate as in
effect on the Closing Date) of future rental payments under all synthetic
leases, (f) all obligations of such Person under commodity purchase or
option agreements or other commodity price hedging arrangements, in each
case whether contingent or matured, (g) all obligations of such Person
under any foreign exchange contract, currency swap agreement, interest rate
swap, cap or collar agreement or other similar agreement or arrangement
designed to alter the risks of that Person arising from fluctuations in
currency values or interest rates, in each case whether contingent or
matured, (h) all Indebtedness referred to above secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property or other assets
(including accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness, and (i) the Note and all obligations under this Agreement and
the Senior Credit Agreement.
"Index Rate" shall mean, for any day, a floating rate equal to the higher
of (i) the rate publicly quoted from time to time by The Wall Street
Journal as the "base rate on corporate loans at large U.S. money center
commercial banks" (or, if The Wall Street Journal ceases quoting a base
rate of the type described, the highest
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per annum rate of interest published by the Federal Reserve Board in
Federal Reserve statistical release H.15 (519) entitled "Selected Interest
Rates" as the Bank prime loan rate or its equivalent), and (ii) the Federal
Funds Rate plus fifty (50) basis points per annum.
"Interest Coverage Ratio" shall mean, with respect to any Person for any
fiscal period, the ratio of (i) EBITDA for such period to (ii) Interest
Expense for such period.
"Interest Expense" shall mean, with respect to any Person for any fiscal
period, cash interest expense of such Person determined in accordance with
GAAP for the relevant period ended on such date, including, in any event,
interest expense with respect to any Funded Debt of such Person and
interest expense for the relevant period that has been capitalized on the
balance sheet of such Person.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests or other equivalents (regardless of how designated)
of or in a corporation, partnership or equivalent entity whether voting or
nonvoting, including common stock, preferred stock or any other "equity
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Commission under the Exchange Act).
(e) Unless otherwise specifically provided herein, any accounting term
used in this Agreement shall have the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be computed
in accordance with GAAP consistently applied. That certain items or computations
are explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any "Accounting Changes" (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in this Agreement or any other
Ancillary Agreement, then Parent and the Purchaser agree to enter into
negotiations in order to amend such provisions of this Agreement so as to
equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating Parent's and its Subsidiaries' financial condition shall
be the same after such Accounting Changes as if such Accounting Changes had not
been made. "Accounting Changes" means (a) changes in accounting principles
required by the promulgation of any rule, regulation, pronouncement or opinion
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants (or successor thereto or any agency with similar
functions), (b) changes in accounting principles concurred in by Parent's
certified public accountants; (c) purchase accounting adjustments under A.P.B.
16 and/or 17 and EITF 88-16, and the application of the accounting principles
set forth in FASB 109, including the establishment of reserves pursuant thereto
and any subsequent reversal (in whole or in part) of such reserves; and (d) the
reversal of any reserves established as a result of purchase accounting
adjustments. All such adjustments resulting from expenditures made subsequent to
the Closing Date (including capitalization of costs and expenses or payment of
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pre-Closing Date liabilities) shall be treated as expenses in the period the
expenditures are made and deducted as part of the calculation of EBITDA in such
period. If Parent and the Purchaser agree upon the required amendments, then
after appropriate amendments have been executed and the underlying Accounting
Change with respect thereto has been implemented, any reference to GAAP
contained in this Agreement or in any Ancillary Agreement shall, only to the
extent of such Accounting Change, refer to GAAP, consistently applied after
giving effect to the implementation of such Accounting Change. If Parent and the
Purchaser cannot agree upon the required amendments within thirty (30) days
following the date of implementation of any Accounting Change, then all
financial statements delivered and all calculations of financial covenants and
other standards and terms in accordance with this Agreement and the Ancillary
Agreements shall be prepared, delivered and made without regard to the
underlying Accounting Change.
6.10 Replacement of Certificates. Upon delivery of an affidavit in a form
reasonably satisfactory to the Company from the Purchaser as to the loss, theft,
destruction or mutilation of the Note, and upon receipt of an indemnity
reasonably satisfactory to the Company from the Purchaser, or in the case of
mutilation, upon surrender of the mutilated Note, the Company will make and
deliver a new Note of like tenor in lieu of such Note.
6.11 Filing of Reports. Parent will make timely filing of such reports as
are required to be filed by it with the Commission so that Rule 144 under the
Securities Act or any successor provision thereto will be available to the
security holders of the Company who are otherwise able to take advantage of the
provisions of such rule.
6.12 Other Agreements. Parent will, and will cause each Subsidiary to,
faithfully observe, perform and discharge in all material respects all of their
respective covenants, agreements, conditions and obligations under any and all
material agreements, whether now existing or hereafter created or arising, to
which it is a party or under which it has any obligation (other than those
covenants, agreements, conditions, or obligations subject to a bona fide
dispute).
ARTICLE 7 NEGATIVE COVENANTS OF PARENT AND THE COMPANY
Parent and the Company covenant and agree that from and after the Closing,
so long as the Note remains outstanding, unless the Purchaser otherwise consents
in writing:
7.01 Liens. The Company will not, and will not permit any Subsidiary to,
create, incur, assume or suffer to exist any Liens, other than Permitted Liens,
on any of its assets now owned or hereafter acquired, or assign or otherwise
convey any right to receive income or give its consent to the subordination of
any right or claim of the Company, or any Subsidiary to any right or claim of
any other Person if such Lien would have a Material Adverse Affect upon the
Company.
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7.02 Indebtedness. Parent will not, and will not permit any Subsidiary to,
incur, create, assume or permit to exist any Indebtedness, except:
(a) Fixed Indebtedness evidenced by the Note;
(b) the Senior Indebtedness in an amount not exceeding that amount
specified in the Intercreditor Agreement;
(c) Unfunded pension fund and other employee benefit plan obligations
and liabilities to the extent they are permitted to remain unfunded under
applicable law;
(d) Fixed Indebtedness consisting of intercompany loans and advances
made by Parent or the Company to any other Loan Party that is both a Guarantor
and a Subsidiary;
(e) Indebtedness permitted under the Senior Credit Agreement as of the
Closing Date;
(f) Fixed Indebtedness, other than that permitted under Sections
7.02(a)-(d) above, not to exceed $1,000,000 for Parent and its Subsidiaries in
aggregate.
7.03 Guaranties. Except for the Guaranties and the guaranties of the
Senior Indebtedness as contemplated by the Senior Credit Agreement, Parent will
not, and will not permit any Subsidiary to, assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligations of any Person, except endorsements of negotiable instruments for
deposit or collection in the ordinary course of business.
7.04 Dividends; Distributions. Parent will not declare or pay any
dividends on any class of its stock or make any payment on account of the
purchase, redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly; provided,
however, that the foregoing prohibition will not prevent Parent from satisfying
its obligations under this Agreement and the Ancillary Agreements.
7.05 Sale of Assets. Parent will not, and will not permit any Subsidiary
to, sell, lease, assign, transfer or otherwise dispose of (whether in one
transaction or in a series of transactions) all or a substantial part of its
assets to any Person; provided, however, that the restrictions contained in this
Section 7.05 will not apply to or prevent (i) the sale of inventory in the
ordinary course of business, (ii) the sale of assets or properties which are
obsolete or no longer used or useful in the business of any Loan Party, or (iii)
the sale of assets or properties having a value of not more than $500,000 in any
single transaction or $1,000,000 in the aggregate in any fiscal year of Parent.
For purposes of this Section 7.06, "substantial part" means a material amount of
the assets of Parent and its Subsidiaries taken as a whole.
7.06 Consolidation and Merger; Acquisitions. Parent will not, and will not
permit any Subsidiary to, consolidate with or merge into any entity or permit
any entity to merge into it, or
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acquire (whether or not in a transaction analogous in purpose or effect to a
consolidation or merger) all or substantially all of the assets or securities of
another Person; provided, that any Loan Party may (i) merge with any other Loan
Party (including Parent) so long as each of Parent and the Company remains in
existence after such merger (and, if a constituent party to such merger, is the
surviving corporation of the merger) and no Event of Default has occurred prior
to the effective time of such merger and is continuing and the consummation of
such merger does not result in the occurrence of an Event of Default and (ii)
merge or consolidate with any other entity if (w) the total enterprise value of
all other entities in the transaction is less than $50 million in the aggregate
and (x) each of Parent and the Company remains in existence after such merger or
consolidation (and if a constituent party to any such transaction, is the
surviving corporation of the transaction) and (y) no Stock of Parent or any of
its Subsidiaries is issued in connection with the merger or consolidation to any
Person other than a Loan Party except that shares of Parent common stock
representing less than an aggregate (for all mergers and consolidations
permitted by this Section 7.06 after the date of this Agreement) of 10% of the
outstanding shares of Parent common stock, on a fully diluted basis, prior to
the date of this Agreement or, if less, the date of the merger or consolidation,
may be issued to Persons other than Loan Parties in connection with such merger
or consolidation at any time after the date of this Agreement and (z) no Event
of Default has occurred prior to the effective time of such merger or
consolidation and is continuing and the consummation of such merger or
consolidation does not result in the occurrence of an Event of Default.
7.07 Sale and Leaseback. Parent will not, and will not permit any
Subsidiary to, enter into any arrangement, directly or indirectly, with any
entity whereby it will sell or transfer any real or personal property, whether
now owned or hereafter acquired, and then or thereafter rent or lease as lessee
such property or any part thereof or any other property which it intends to use
for substantially the same purpose or purposes as the property being sold or
transferred.
7.08 Restrictions on Nature of Business. Parent and its Subsidiaries,
viewed as a consolidated entity, will not engage, directly or indirectly, in any
line of business materially different from or unrelated to that engaged in prior
to the Closing.
7.09 Accounting. Parent will not, and will not permit any Subsidiary to,
adopt, permit or consent to any material change in accounting principles other
than as required by GAAP, except as permitted by GAAP and expressly concurred
with by certified public accountants selected by Parent and acceptable to the
Purchaser and, in the event of any material change in accounting principles,
Parent will, at the Purchaser's request, provide the financial statements on a
comparative basis showing the financial condition and the results of operations
of Parent and its Subsidiaries under both the prior accounting principle and the
accounting principle as changed, and Parent and the Company will comply with the
financial covenants hereof under the prior principles. Parent will not adopt,
permit or consent to any change in its fiscal year or that of any of its
Subsidiaries or file a consolidated tax return with any other unrelated Person.
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7.10 Conflicts of Interest. Parent will, and will cause each of its
Subsidiaries to, conduct its business in such a manner that no officer or
director will have any direct or indirect material equity interest in any entity
which does business with Parent or any Subsidiary or in any property, asset or
right which is used by Parent or any Subsidiary in the conduct of its business,
except for transactions upon fair and reasonable terms no less favorable to
Parent or such Subsidiary than would arise in a comparable arm's length
transaction with a third party.
7.11 Transactions with Affiliates. Parent will not, and will not permit
any Subsidiary to, enter into or continue in effect any transaction with any
Affiliate or an officer or employee thereof except transactions upon fair and
reasonable terms no less favorable to Parent or such Subsidiary than would arise
in a comparable arm's length transaction with a Person not an Affiliate.
7.12 Inconsistent Agreements. Parent will not, and will not permit any
Subsidiary to, enter into any agreement containing any provision which would be
materially violated or breached by this Agreement or by the performance by
Parent or any of its Subsidiaries of its obligations hereunder or under any
document executed pursuant hereto.
ARTICLE 8 INDEMNIFICATION
8.01 Indemnification by Parent and the Company. Each of Parent and the
Company, jointly and severally, agrees to defend, indemnify and hold harmless
the Purchaser, its Affiliates and each of their respective directors, officers,
employees, partners, shareholders, representatives and agents from and against
any and all claims, causes of action, losses, costs, damages, deficiencies or
expenses, including reasonable attorneys' fees (collectively "Damages")
sustained by any of them arising from or related to any and all
misrepresentations or breach of a representation, warranty or covenant of the
Loan Parties set forth in this Agreement, any of the Ancillary Agreements, or
any certificate, financial statement, document, instrument or other material
furnished to the Purchaser as required by this Agreement or any of the Ancillary
Agreements. Without limiting the generality of the foregoing, these indemnities
shall extend to any claims asserted against the Purchaser (and each of its
Affiliates) by any Person under any Environmental Laws by reason of Parent's,
the Company's or any other Person's failure to comply with laws applicable to
solid or hazardous waste materials or other toxic substances. Notwithstanding
any contrary provision in this Agreement, the obligation of Parent and the
Company under this Section shall survive the payment in full of the Note and the
termination of this Agreement
8.02 Indemnification by the Purchaser. The Purchaser agrees to defend,
indemnify and hold harmless Parent and the Company from and against any and all
Damages sustained by either of them arising from or related to any and all
misrepresentations or breach of a representation, warranty or covenant of the
Purchaser set forth in Article 4 of this Agreement.
8.03 Notice. Each party agrees to give the other prompt written notice of
any event or assertion of which it has knowledge concerning any Damages or other
obligation and as to which
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it may request indemnification hereunder. A failure to give timely notice or to
provide copies of documents or to furnish relevant data in connection with any
third party claim by a party who suffers Damages will not constitute a defense
(in part or in whole) to any claim for indemnification by such party, except and
only to the extent that such failure shall result in material prejudice to the
indemnifying party.
8.04 Defense. A party obligated to provide indemnification under this
Article 8 will be entitled to participate in any investigation of any claim,
action or proceeding involving any third party and, upon written notice to the
indemnified party, assume the investigation and defense of such claim, action,
or proceeding with counsel of its choice at its expense, provided that such
counsel is reasonably acceptable to the indemnified party.
ARTICLE 9 EVENTS OF DEFAULT
9.01 Events of Default. An "Event of Default" means any of the following:
(a) Failure to pay principal owed under the Note when due; or
(b) Failure to pay any interest, fees or expenses or other amounts due
under the Note, this Agreement or any of the Ancillary Agreements, when due and
such failure continues for five (5) days with respect to interest or ten (10)
days with respect to fees, expenses or such other amounts; or
(c) Default by the Company or any Subsidiary in the performance or
observance of any respective covenant, condition, undertaking or agreement
applicable to such party contained in this Agreement or any of the Ancillary
Agreements (other than those referred to in paragraphs (a) and (b) of this
Section) and the continuance of such default for a period of thirty (30) days
after the Company has knowledge of the occurrence thereof; or
(d) Any warranty, representation or other statement by or on behalf of
the Company or any Subsidiary contained in this Agreement or any of the
Ancillary Agreements, or in any instrument furnished in compliance with or in
reference hereto or thereto, is false or misleading when made, furnished or
reaffirmed with respect to those qualified by materiality and, with respect to
those not qualified by materiality, is false or misleading in any material
respect when made, furnished or reaffirmed; or
(e) Any event of default occurs under the Senior Credit Agreement if
the effect of such event of default causes such Senior Indebtedness to become
due prior to its stated maturity; or
(f) The Company or any Subsidiary: (i) files a petition seeking relief
for itself under the United States Bankruptcy Code, as now constituted or
hereafter amended, or files an answer consenting to, admitting the material
allegations of, or otherwise not controverting, or fails timely to controvert a
petition filed against it seeking relief under the United States
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Bankruptcy Code, as now constituted or hereafter amended; or (ii) files such a
petition or answer with respect to relief under the provisions of any other now
existing or future applicable bankruptcy, insolvency or similar law of the
United States of America or any state thereof providing for the reorganization,
winding-up or liquidation of corporations or an arrangement, composition,
extension or adjustment with creditors; or
(g) An order for relief is entered against the Company or any
Subsidiary under the United States Bankruptcy Code, as now constituted or
hereafter amended, which order is not stayed; or upon the entry of an order,
judgment or decree by operation of law or by any court having jurisdiction in
the premises which is not stayed, adjudging it bankrupt or insolvent under, or
ordering relief against it under, or approving a properly filed petition seeking
relief against it under the provisions of any other now existing or future
applicable bankruptcy, insolvency or other similar law of the United States or
any state thereof providing for the reorganization, winding-up or liquidation of
corporations or any arrangement, composition, extension or adjustment with
creditors, or appointing a receiver, liquidator, assignee, sequestrator, trustee
or custodian of the Company any Subsidiary, or any substantial part of its
property, or ordering the reorganization, winding-up or liquidation of its
affairs, or upon the expiration of sixty (60) days after the filing of any
involuntary petition against the Company or any Subsidiary seeking any of the
relief specified in Sections 9.01(g) and (h) hereof without the petition being
dismissed prior to that time; or
(h) The Company or any Subsidiary: (i) makes a general assignment for
the benefit of creditors; (ii) consents to the appointment of or taking
possession by a receiver, liquidator, assignee, sequestrator, trustee or
custodian of all or a substantial part of its property; (iii) admits its
insolvency or inability to pay its debts generally as such debts become due;
(iv) fails generally to pay its debts as such debts become due; or (v) takes any
action in furtherance of its dissolution or liquidation; or
(i) Default by the Company or any Subsidiary under any covenant,
provision or condition contained in any material ($550,000 or more) bond,
debenture, note or other evidence of Indebtedness for borrowed money (other than
the Note and the Senior Indebtedness) or under any indenture or other instrument
under which any such evidence of Indebtedness has been issued or by which it is
governed and the expiration of the applicable period of grace, if any, specified
in such evidence of Indebtedness, indenture or other instrument; provided,
however, that if such default under such evidence of Indebtedness, indenture or
other instrument shall be timely cured, or waived by the holder of such
Indebtedness (with written notice of such waiver delivered to Purchaser), in
each case as may be permitted by such evidence of Indebtedness, indenture or
other instrument, then the Event of Default hereunder by reason of such default
will be deemed likewise to have been thereupon cured; or
(j) Any Change of Control occurs; or
(k) There shall occur a cessation of a substantial part of the
business of Parent or any Subsidiary of Parent for a period that materially
adversely affects Parent's or such
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Subsidiary's, in each case taken as a whole, capacity to continue its business
on a profitable basis; or Parent or any Subsidiary of Parent shall suffer the
loss or revocation of any material license or permit now held or hereafter
acquired by Parent or any Subsidiary of Parent that is necessary to the
continued or lawful operation of its business and such loss or revocation has or
evidences a Material Adverse Effect; or Parent or any Subsidiary of Parent shall
be enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs and such injunction or restraint has or evidences a Material Adverse
Effect; or any material lease or agreement pursuant to which Parent or any
Subsidiary of Parent leases, uses or occupies any property shall be canceled or
terminated prior to the expiration of its stated term, except any such lease or
agreement the cancellation or termination of which could not reasonably be
expected to have a Material Adverse Effect; or any material portion of the
Collateral (as defined in the Ancillary Agreements) shall be taken through
condemnation or the value of such property shall be impaired through
condemnation and such condemnation has or evidences a Material Adverse Effect;
or
(l) Parent or any Subsidiary of Parent, or any Affiliate of any of
them, shall challenge or contest in any action, suit or proceeding the validity
or enforceability of this Agreement or any of the other Ancillary Agreements,
the legality or enforceability of any of the obligations of Parent, the Company
or the Guarantors or the perfection or priority of any Lien granted to Purchaser
or shall revoke or attempt to revoke this Agreement or any Ancillary Agreement
or shall repudiate any liability thereunder.
9.02 Remedies.
(a) Upon the occurrence of any Event of Default, the holder or holders
of at least a two-thirds of the unpaid principal amount of the Note at the time
outstanding will be entitled to:
(i) declare all indebtedness evidenced by the Note to be
immediately due and payable, and upon such acceleration the Note will
thereupon become forthwith due and payable without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly
waived;
(ii) apply any and all amounts owed to Parent, the Company or any
of the other Loan Parties by the Purchaser or by the holder of the Note to
the payment of the Note;
(iii) exercise and enforce their rights and remedies under this
Agreement or any of the Ancillary Agreements; and
(iv) proceed to protect and enforce their rights under applicable
law;
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provided, that if a petition is filed by or against Parent or any Subsidiary
under the United States Bankruptcy Code, the entire unpaid principal amount of
the Note then outstanding, all interest accrued and unpaid thereon, and all
other amounts payable under this Agreement and the Ancillary Agreements will be
immediately due and payable without presentment, demand, protest or notice of
any kind.
(b) No course of dealing on the part of the Purchaser or any delay or
failure on the part of the Purchaser to exercise any right will operate as a
waiver of such right or otherwise prejudice the Purchaser's rights, powers and
remedies.
(c) Parent and the Company will, jointly and severally, indemnify and
pay to the Purchaser such additional amounts as are sufficient to cover the
costs and expenses, including without limitation, reasonable attorneys' fees,
incurred by the Purchaser in collecting any sums due on account of the Note or
otherwise in enforcing its rights under this Agreement or the Ancillary
Agreements.
ARTICLE 10 MISCELLANEOUS
10.01 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements set forth in this Agreement (including the
Disclosure Schedule), the Ancillary Agreements, or any writing delivered by or
on behalf of a party to this Agreement to another party to this Agreement in
connection with this Agreement, will survive the Closing Date and the
consummation of the transactions contemplated hereby and will not be affected by
any examination or knowledge, or the acceptance of any certificate or opinion.
10.02 Expenses. At the Closing, the Company will pay the reasonable legal,
accounting, environmental, travel and other out-of-pocket expenses of the
Purchaser relating to the Company this Agreement, and the Ancillary Agreements,
not to exceed $75,000, and subject to a credit of $50,000 previously paid to
Purchaser.
10.03 Governing Law. This Agreement and the Ancillary Agreements will be
construed and enforced in accordance with the substantive laws of the
Commonwealth of Pennsylvania without giving effect to its conflict of laws
principles.
10.04 Notices. All notices, consents, requests, instructions, approvals
and other communications herein required will be validly given, made or served
if in writing and delivered personally, sent by certified mail (postage
prepaid), facsimile transmission, or by a nationally recognized overnight
delivery service, addressed as follows (or such other address as is furnished in
writing by either party to the other parties):
(a) If to BET:
BET Associates, L.P
0000 Xxxxxxxx Xxxxxx
-00-
Xxxxxxxxxx Xxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxx X. Toll
Fax: 000-000-0000
with a copy to:
MYFM Capital LLC
000 Xxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxxx, CFA
Fax: 000-000-0000
and to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx
Fax: 000-000-0000
(b) If to Parent or the Company:
Velocity Express Corporation
0000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxx Ties
Fax: 000-000-0000
with a copy to:
Velocity Express Corporation
0000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxx Xxxxxxxxxx
Fax: 000-000-0000
10.05 Entire Agreement. This Agreement and the Ancillary Agreements,
including the other documents referred to herein, contain the entire
understanding of the parties hereto with respect to the subject matter contained
herein. There are no restrictions, promises, warranties, covenants, or
undertakings, other than those expressly provided for herein. This Agreement and
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the Ancillary Agreements supersede all prior agreements and undertakings between
the parties with respect to such subject matter.
10.06 Amendments; Consents; Waivers. The holder or holders of at least
two-thirds of the unpaid principal amount of the Note at the time outstanding
may by written agreement with Parent amend this Agreement, and any consent,
notice, request, demand or waiver required or permitted to be given by the
Purchaser or the holders of the Note by any provision hereof will be sufficient
and binding on all holders of the Note if given in writing by the holder or
holders of at least two-thirds of the unpaid principal amount of the Note at the
time outstanding except that, without the written consent of the holder or
holders of all the Notes at the time outstanding, no amendment to this Agreement
will extend the maturity of any Note, or alter the rate of interest or any
premium payable with respect to any Note, or affect the amount or timing of any
required prepayments, or reduce the proportion of the principal amount of the
Note required with respect to any consent. No waiver of any term or condition of
this Agreement, in any one or more instances, will constitute a waiver of the
same term or condition of this Agreement on any future occasion.
10.07 Severability of Invalid Provision. If any one or more covenants or
agreements provided in this Agreement should be contrary to law, then such
covenant(s) or agreement(s) will be null and void and will in no way affect the
validity of the other provisions of this Agreement, which will otherwise be
fully effective and enforceable.
10.08 Successors and Assigns. This Agreement and the various instruments
and agreements delivered in connection with the consummation of this Agreement
will be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, including one or more future holders of the
Notes.
10.09 Rules of Construction. Section headings contained in this Agreement
are inserted only as a matter of convenience and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any of the provisions
hereof. This Agreement and the Ancillary Agreements have been negotiated on
behalf of the parties with the advice of legal counsel and no general rule of
contract construction requiring an agreement to be more stringently construed
against the drafter or proponent of any particular provision will be applied in
the construction or interpretation of this Agreement or the Ancillary
Agreements.
10.10 Counterparts. This Agreement may be executed in two or more
counterparts, and will become effective when two or more counterparts have been
signed by each of the parties.
10.11 Cumulative Remedies. The rights, remedies, powers and privileges
provided in this Agreement are cumulative and not exclusive and will be in
addition to any and all other rights, remedies, powers and privileges granted by
law, rule, regulation or instrument.
10.12 Time is of the Essence. Time is of the essence as to the payment and
performance of all obligations and agreements of Parent and the Company
hereunder.
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10.13 Consent to Jurisdiction; Jury Waiver . THIS AGREEMENT, THE NOTE AND
THE ANCILLARY AGREEMENTS MAY BE ENFORCED IN ANY FEDERAL COURT OR PENNSYLVANIA
STATE COURT SITTING IN PHILADELPHIA COUNTY; AND THE PARTIES CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVE ANY ARGUMENT THAT VENUE IN
SUCH FORUMS IS NOT CONVENIENT.
* * * * *
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto on the day and year first above written.
VELOCITY EXPRESS CORPORATION
By:
------------------------------------
Name:
Title:
VELOCITY EXPRESS, INC.
By:
------------------------------------
Name:
Title:
BET ASSOCIATES, L.P.
By: BRU HOLDING CO., LLC
Its: General Partner
By:
------------------------------------
Name:
Title:
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