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Exhibit 10.18
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT, dated as of May 26, 1999, by and
between Emcore Corporation, a New Jersey corporation ("Company"), and GE Capital
Equity Investments, Inc., a Delaware corporation ("GE Capital" or "Purchaser").
W I T N E S S E T H :
WHEREAS, Company has agreed to issue and sell to Purchaser,
and Purchaser has agreed to purchase from Company, upon the terms and conditions
hereinafter provided, a subordinated convertible promissory note in the
principal amount of $7,800,000, which is initially convertible into 340,984
shares of Common Stock (as defined herein) of Company (the "Note");
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, it is agreed as follows:
1. DEFINITIONS
"Affiliate" shall mean, with respect to any Person, (i) each
Person that controls, is controlled by or is under common control with such
Person or any Affiliate of such Person, (ii) each of such Person's executive
officers and directors, (iii) any trust or beneficiary of a trust of which such
Person is the sole trustee or (iv) any lineal descendants, ancestors, spouse or
former spouses (as part of a marital dissolution) of such Person (or any trust
for the benefit of such Person). For the purpose of this definition, "control"
of a Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Note Purchase Agreement including
all amendments, modifications and supplements hereto and any appendices,
exhibits and schedules hereto or thereto, and shall refer to the Agreement as
the same may be in effect at the time such reference becomes operative.
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Change of Control" shall mean any of the following: (a) any
person or group of persons (within the meaning of the Exchange Act) (other than
GE Capital and its Affiliates and those existing shareholders of Company set
forth on Schedule 1(A) hereto) shall have acquired beneficial ownership (within
the meaning of Rule 13d-3 promulgated by the SEC under the Exchange Act) of 30%
or more of the issued and outstanding shares of Common Stock of Company; (b)
Company shall be a party to a merger or consolidation in which Company is not
the survivor or in which Company's
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stockholders immediately prior thereto own less than a majority of the
outstanding voting stock of the survivor; or (c) Company shall have sold, leased
or otherwise transferred all or substantially all of its assets.
"Charges" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental (including, without limitation,
PBGC) taxes at the time due and payable, levies, assessments, charges, liens,
claims or encumbrances upon or relating to (i) Company's or any of its
Subsidiaries' employees, payroll, income or gross receipts, (ii) Company's or
any of its Subsidiaries' ownership or use of any of its assets, or (iii) any
other aspect of Company's or any of the Subsidiaries' business.
"Closing" shall have the meaning set forth in Section 2.2
hereof.
"Closing Date" shall have the meaning set forth in Section 2.2
hereof.
"Closing Price" shall mean, in respect of any share of Common
Stock on any date herein specified which is a Business Day, (i) the last sale
price on such day on the principal stock exchange or NASDAQ National Market
System ("NASDAQ/NMS") on which such Common Stock is then listed or admitted to
trading or (ii) if no sale takes place on such day on such exchange or
NASDAQ/NMS, the average of the last reported closing bid and asked prices on
such day as officially quoted on any such exchange or NASDAQ/NMS.
"Common Stock" shall mean the common stock, no par value, of
Company.
"Conversion" shall have the meaning set forth in Section
7.1(a) hereof.
"Conversion Price" shall have the meaning set forth in Section
7.1 hereof.
"Current Market Price" shall mean, in respect of any share of
Common Stock on any date herein specified, the average of the daily market
prices for 30 consecutive Business Days commencing 45 days before such date. The
daily market price for each such Business Day shall be (i) the last sale price
on such day on the principal stock exchange or NASDAQ National Market System
("NASDAQ-NMS") on which such Common Stock is then listed or admitted to trading,
(ii) if no sale takes place on such day on any such exchange or NASDAQ-NMS, the
average of the last reported closing bid and asked prices on such day as
officially quoted on any such exchange or NASDAQ-NMS, (iii) if the Common Stock
is not then listed or admitted to trading on any stock exchange or NASDAQ-NMS,
the average of the last reported closing bid and asked prices on such day in the
over-the-counter market, as furnished by the National Association of Securities
Dealers Automatic Quotation System or the National Quotation Bureau, Inc., (iv)
if neither such corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in such business, or
(v) if there is no such firm, as furnished by any member of the National
Association of Securities Dealers ("NASD") selected mutually by the Required
Holders and Company or, if they cannot agree upon such selection, as selected by
two such members of the
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NASD, one of which shall be selected by the Required Holders and one of which
shall be selected by the Company.
"Default" shall mean any event which, with the passage of time
or notice or both, would, unless cured or waived, become an Event of Default.
"EBITDA" shall mean consolidated operating income (before
extraordinary items, interest, taxes, depreciation and amortization) of such
Person and its consolidated Subsidiaries determined in accordance with GAAP.
"Environmental Laws" shall mean all federal, state and local
laws, statutes, ordinances and regulations, now or hereafter in effect, and in
each case as amended or supplemented from time to time, and any judicial or
administrative interpretation thereof, including, without limitation, any
applicable judicial or administrative order, consent decree or judgment,
relative to the applicable Real Estate, relating to the regulation and
protection of human health, safety, the environment and natural resources
(including, without limitation, ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation). Environmental Laws include but are not limited to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. ss. 9601 et seq.) ("CERCLA"); the Hazardous Material Transportation Act,
as amended (49 U.S.C. ss. 1801 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. ss. 136 et seq.); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. ss. 6901 et seq.) ("RCRA");
the Toxic Substance Control Act, as amended (15 U.S.C. ss. 2601 et seq.); the
Clean Air Act, as amended (42 U.S.C. ss. 740 et seq.); the Federal Water
Pollution Control Act, as amended (33 U.S.C. ss. 1251 et seq.); the Occupational
Safety and Health Act, as amended (29 U.S.C. ss. 651 et seq.) ("OSHA"); and the
Safe Drinking Water Act, as amended (42 U.S.C. ss. 300f et seq.), and any and
all regulations promulgated thereunder, and all analogous state and local
counterparts or equivalents and any transfer of ownership notification or
approval statutes.
"Event of Default" shall have the meaning set forth in Section
8.1 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and all rules and regulations promulgated thereunder.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time.
"GE Capital" shall have the meaning set forth in the first
paragraph of this Agreement.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of government.
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"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any Indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) to indemnify the owner of such
primary obligation against loss in respect thereof.
"Holder" shall have the meaning assigned to such term in
Section 9.1 hereof.
"Indebtedness" of any Person shall mean without duplication
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (including, without limitation,
reimbursement and all other obligations with respect to surety bonds, letters of
credit and bankers' acceptances, whether or not matured, but not including
obligations to trade creditors incurred in the ordinary course of business),
(ii) all obligations evidenced by notes, bonds, debentures or similar
instruments, (iii) all Guaranteed Indebtedness, and (iv) all Indebtedness
referred to in clause (i), (ii) or (iii) above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon or in property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness.
"Interest Payment Date" shall have the meaning assigned to
such term in Section 2.6(a) hereof.
"IRC" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any
successor thereto.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, lien, charge, security interest, easement or
encumbrance, or preference, priority or other security agreement granting a
lender an interest in the Company's property (including, without limitation, any
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest as to assets owned
by the relevant Person under the Uniform Commercial Code or comparable law of
any jurisdiction).
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"Loan Documents" shall mean this Agreement, the Note and all
other agreements, instruments, documents and certificates, including, without
limitation, pledges, powers of attorney, consents, assignments, contracts,
notices, and all other written matter whether heretofore, now or hereafter
executed by or on behalf of Company, and delivered to Purchaser, in its capacity
as a purchaser of the Note hereunder, in connection with this Agreement or the
transactions contemplated hereby.
"Material Adverse Effect" shall mean material adverse effect
on the business, assets, operations or financial condition of Company and its
Subsidiaries, if any, taken as a whole.
"Material Subsidiary" shall mean a "significant subsidiary" as
defined in Regulation S-X as adopted by the SEC.
"Maximum Lawful Rate" shall have the meaning assigned to such
term in Section 2.6(d) hereof.
"Note" shall mean the subordinated convertible promissory note
of Company in the principal amount of $7,800,000 to be issued to Purchaser
hereunder, substantially in the form of Exhibit A hereto.
"Obligations" shall mean all amounts owing by Company to
Purchaser and any of its assignees pursuant hereto or the Note, including,
without limitation, all principal, interest, fees, expenses, attorneys' fees and
any other sum chargeable to Company under any of the Loan Documents.
"Permitted Liens" shall mean the following (i) Liens for taxes
or assessments or other governmental charges or levies, either not yet due and
payable or to the extent that nonpayment thereof is permitted by the terms of
this Agreement; (ii) pledges or deposits securing obligations under workmen's
compensation, unemployment insurance, social security or public liability laws
or similar legislation; (iii) pledges or deposits securing bids, tenders,
contracts (other than contracts for the payment of money) or leases to which
Company or any of its Subsidiaries is a party as lessee made in the ordinary
course of business; (iv) Liens arising solely by virtue of any statutory or
common law provision relating to bankers' liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; (v) workers, mechanics, suppliers, carriers,
warehousemen's or other similar liens arising in the ordinary course of business
and securing indebtedness, not yet due and payable; (vi) deposits securing or in
lieu of surety, appeal or customs bonds in proceedings to which Company or any
of its Subsidiaries is a party; (vii) Liens arising in the ordinary course of
business in connection with obligations that are not overdue or which are being
contested in good faith and by appropriate proceedings, including, but not
limited to, Liens under bid, performance and other surety bonds, supersedes and
appeal bonds, landlord Liens arising under leases of real property, Liens on
advance or progress payments received from customers under contracts for the
sale, lease or license of goods, software or services and upon the products
being sold or licensed, in each case securing performance of the underlying
contract or the repayment of such advances in the
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event final acceptance of performance under such contracts does not occur, and
Liens upon funds collected temporarily from others pending payment or remittance
on their behalf; (viii) zoning restrictions, easements, licenses, or other
restrictions on the use of real property or other minor irregularities in title
(including leasehold title) thereto, so long as the same do not materially
impair the use, value, or marketability of such real property, leases or
leasehold estates; and (ix) Liens existing on the date hereof and described on
Schedule 1 (B) hereto.
"Permitted Senior Debt" shall have the meaning assigned to
such term in Section 5.2(c) hereof.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
"Purchaser" shall have the meaning set forth in the first
paragraph of this Agreement.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement by and between Company and Purchaser, substantially in the form
attached hereto as Exhibit B, as such agreement may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof.
"Required Holders" shall mean Persons who hold at least a
majority of the outstanding principal amount of the Note.
"SEC" shall mean the U.S. Securities and Exchange Commission,
or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.
"Senior Debt" shall mean:
(a) all principal of and premium, if any, and interest
(including interest at the applicable post-default interest rate) on, and all
other amounts owing (including post-petition interest whether or not such
post-petition interest is allowed as a claim under the Bankruptcy Code) in
respect of Indebtedness for borrowed money (other than the Note) of Company
listed on Schedule 5.2(d) ("Specified Senior Debt");
(b) all principal of and premium, if any, and interest
(including interest at the applicable post-default interest rate) on, and all
other amounts owing (including post-petition interest whether or not such
post-petition interest is allowed as a claim under the Bankruptcy Code) in
respect of Indebtedness for borrowed money (other than the Note) of Company
which is not expressly pari passu with or subordinated to the payment of the
Obligations and other than Indebtedness listed on Schedule 5.2(d); and
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(c) any and all increases, refinancings, replacements, or
refundings, of any of the amounts referred to in clauses (a) and (b) above;
provided that the aggregate principal of Senior Debt, including any committed
(subject to usual and customary conditions to funding any particular advance
under such commitments), but unfunded Specified Senior Debt with the Specified
Senior Creditor, shall not exceed, at any one time outstanding, the amount
permitted by the terms of Section 5.2(c) hereof, and provided further that the
aggregate principal amount of Specified Senior Debt, including any committed
(subject to usual and customary conditions to funding any particular advance
under such commitments), but unfunded portion thereof by the Specified Senior
Creditor, shall be deemed to be Senior Debt provided that such amount does not
exceed the amount of Permitted Senior Debt as defined in Section 5.2(c) hereof.
"Senior Debt Ceiling" shall have the meaning assigned to such term in Section
5.2(d) hereof.
"Senior Debt Document" shall mean any agreement, note,
instrument or other document, governing, securing, supporting, or evidencing any
Senior Debt.
"Specified Senior Creditor" shall mean First Union National
Bank and its successors and assigns as the Agent or the sole lender under the
Specified Senior Debt, provided that written notice of such successor or assign
is given to Purchaser by the Specified Senior Creditor or Company.
"Specified Senior Debt" shall have the meaning assigned to
such term in clause (a) of the definition of "Senior Debt" herein.
"Stock" shall mean all shares, options, warrants, general or
limited partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the SEC under the Exchange
Act).
"Subordinated Debt" shall have the meaning set forth in
Section 9.1 hereof.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, and (b) any partnership or other entity in which such Person and/or
one or more Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution) of more than
50%.
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"Taxes" shall have the meaning set forth in Section 2.12(a)
hereof.
"Transaction Documents" shall mean this Agreement, the Note
and the Registration Rights Agreement.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole, including the Exhibits and
Schedules hereto, as the same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or clause contained
in this Agreement. Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter.
2. PURCHASE OF NOTE
2.1 Purchase of Note. Subject to the terms and conditions set
forth in this Agreement, Purchaser agrees to purchase from Company, and Company
agrees to issue and sell to Purchaser, on the Closing Date, the Note for an
aggregate purchase price of $7,800,000, containing the terms set forth herein
and in Exhibit A hereto. The principal amount of the Note shall be $7,800,000,
and the maturity date thereof shall be May 26, 2006.
2.2 Closing. The closing of the purchase and sale of the Note
(the "Closing") shall take place within five Business Days after the
satisfaction or waiver of the conditions set forth in Section 6 hereof or such
date and time as shall be mutually agreed to by the parties hereto (the "Closing
Date") at the offices of White & Case LLP, 1155 Avenue of the Americas, Xxx
Xxxx, Xxx Xxxx 00000-0000, or such other place as shall be mutually agreed to by
the parties hereto.
On the Closing Date, Company will deliver to Purchaser the
Note payable to Purchaser against delivery by Purchaser of the purchase price
therefor by wire transfer of funds to the account of Company.
2.3 Optional Prepayment. Subject to the applicable provisions
of Article 9 hereof, so long as after the third anniversary of the Closing Date
the Closing Price of a share of Common Stock is at least 150% of the then
current Conversion Price (which as of the Closing Date shall be a Closing Price
of $34.31) for a period of thirty (30) consecutive days, Company shall have the
right, without premium or penalty, and on ten (10) days' prior written notice to
Purchaser, to voluntarily prepay all or any portion (in multiples of not less
than $500,000 or the amount outstanding on the Note) of the Note; provided,
however, Purchaser shall retain conversion rights in respect of the Note for
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such period of ten (10) days after Company has given such notice. Each
prepayment shall be accompanied by the payment of accrued and unpaid interest on
the amount being prepaid, through the date of prepayment. Company shall not have
any other right to prepay the Note.
2.4 Mandatory Redemption. Upon the occurrence of a Change of
Control, Purchaser, by written notice to Company and the Specified Senior
Creditor within thirty (30) days of the occurrence thereof, may require Company
to redeem all or a portion of the Note for a price equal to the outstanding
principal amount thereof, together with a payment of all accrued and unpaid
interest on the amount being prepaid through the date of prepayment. Company
shall give Purchaser and the Specified Senior Creditor written notice of the
occurrence of a Change of Control within ten (10) days after the occurrence
thereof.
2.5 Use of Proceeds. Company shall use the proceeds of the
purchase price to make its initial capital contribution pursuant to Section 3.01
(a)(i) of the Transaction Agreement dated January 20, 1999 between the Company
and General Electric Company.
2.6 Interest on Note. Company shall pay interest to
Purchaser, semi-annually in arrears on the last day of each October and April,
commencing on October 31, 1999 (each, an "Interest Payment Date"), at a rate
equal to 4.75% per annum, based on a year of 360 days for the actual number of
days elapsed, and based on the amounts outstanding from time to time under the
Note.
(a) If Company has not consummated a public offering of
equity securities registered under the Securities Act with gross proceeds of at
least $40 million by June 15, 1999 and until Company does consummate such an
offering, the interest rate applicable to the Note shall be at a rate equal to
13.00% per annum. After Company consummates such an offering, the interest rate
applicable to the Note shall return to 4.75% per annum.
(b) If any payment on the Note becomes due and payable on a
day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
(c) Notwithstanding anything to the contrary set forth in
this Section 2.6, if at any time until payment in full of the Note, the interest
rate payable thereon exceeds the highest rate of interest permissible under any
law which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto (the "Maximum Lawful Rate"), then in such event and so
long as the Maximum Lawful Rate would be so exceeded, the rate of interest
payable on the Note shall be equal to the Maximum Lawful Rate; provided,
however, that if at any time thereafter the interest rate payable thereon is
less than the Maximum Lawful Rate, Company shall continue to pay interest
thereunder at the Maximum Lawful Rate until such time as the total interest
received by Purchaser is equal to the total interest which it would have
received had the interest rate on the Note been (but for the operation of this
paragraph) the interest rate payable since the Closing
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Date. Thereafter, the interest rate payable shall be the stated interest rate
unless and until such rate again exceeds the Maximum Lawful Rate, in which event
this paragraph shall again apply. In no event shall the total interest received
by Purchaser pursuant to the terms hereof exceed the amount which it could
lawfully have received had the interest due hereunder been calculated for the
full term hereof at the Maximum Lawful Rate. In the event the Maximum Lawful
Rate is calculated pursuant to this paragraph, such interest shall be calculated
at a daily rate equal to the Maximum Lawful Rate divided by the number of days
in the year in which such calculation is made. In the event that a court of
competent jurisdiction, notwithstanding the provisions of this Section 2.6(d),
shall make a final determination that Purchaser has received interest hereunder
or under any of the Loan Documents in excess of the Maximum Lawful Rate,
Purchaser shall, to the extent permitted by applicable law, promptly apply such
excess first to any interest due and not yet paid under the Note, then to the
outstanding principal of the Note, then to other unpaid Obligations and
thereafter shall refund any excess to Company or as a court of competent
jurisdiction may otherwise order.
2.7 Receipt of Payments. Company shall make each payment
under the Note not later than 2:00 P.M. (New York City time) on the day when due
in lawful money of the United States of America in immediately available funds
to Purchaser's depository bank in the United States as designated by Purchaser
from time to time for deposit in Purchaser's depositary account.
2.8 Application of Payments. Company irrevocably waives the
right to direct the application of any and all payments at any time or times
hereafter received by Purchaser from or on behalf of Company pursuant to the
terms of this Agreement, and Company irrevocably agrees that Purchaser shall
have the continuing exclusive right to apply any and all such payments against
the then due and payable Obligations of Company and in repayment of the Note as
it may deem advisable. In the absence of a specific determination by Purchaser
with respect thereto, the same shall be applied in the following order: (i) then
due and payable interest payments on the Note; and (ii) then due and payable
principal payments on the Note.
2.9 Sharing of Payments. If any holder of the Note or a
portion thereof shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise) on account of the
Note held by it in excess of its ratable share of payments on account of the
Notes held by all holders thereof, such holder shall forthwith purchase from
each other holder such participations in the Note held by it as shall be
necessary to cause such purchasing holder to share the excess payment ratably
with each other holder; provided, however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing holder, such
purchase shall be rescinded and such holder shall repay to the purchasing holder
the purchase price to the extent of such recovery together with an amount equal
to such holder's ratable share (according to the proportion of (i) the amount of
such holder's required repayment to (ii) the total amount so recovered from the
purchasing holder) of any interest or other amount paid or payable by the
purchasing holder in respect of the total amount so recovered. Company agrees
that any holder so purchasing a participation from another holder pursuant to
this Section 2.9 may, to the fullest extent permitted by law, exercise all
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its rights of payment (including the right of set-off) with respect to such
participation as fully as if such holder were the direct creditor of Company in
the amount of such participation. Company further agrees to make all payments on
the Note to all holders thereof on a pro rata basis, based on the principal
amount of the Note held by each.
2.10 Indemnity. (a) Company shall indemnify and hold
Purchaser and each of its officers, directors and Affiliates harmless from and
against any and all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable attorneys'
fees and disbursements, including those incurred upon any appeal) which may be
instituted or asserted by a third party against or incurred by Purchaser or such
other indemnified person as the result of Purchaser having entered into this
Agreement or any of the other Loan Documents or purchased the Note hereunder or
arising out of any Environmental Law applicable to Company or its Subsidiaries
or otherwise relating to or arising out of the transactions contemplated hereby;
provided, however, that Company shall not be liable for such indemnification to
such indemnified Person to the extent that any such suit, action, proceeding,
claim, damage, loss, liability or expense results from such indemnified Person's
gross negligence or willful misconduct.
2.11 Access. Purchaser and any of its officers, employees
and/or agents shall have the right, during normal business hours, to visit and
inspect the properties and facilities of Company and its Subsidiaries and to
inspect, audit and make extracts from all of Company's and its Subsidiaries'
records, files, corporate books and books of account and to discuss the affairs,
finances and accounts of Company and its Subsidiaries with the principal
officers of Company, all at such reasonable times and upon reasonable notice as
Purchaser may reasonably request. Company shall deliver any document or
instrument reasonably necessary for Purchaser, as it may request, to obtain
records from any service bureau maintaining records for Company or its
Subsidiaries. In connection with its rights under this Section 2.11, Purchaser
shall be bound by the confidentiality provisions applicable to General Electric
Company contained in the Confidentiality Agreement dated May 26, 1999 among the
Company, General Electric Company and GELcore, LLC.
2.12 Taxes. Any and all payments by Company hereunder or
under the Note shall be made, in accordance with this Section 2.12, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding taxes imposed on or measured by the net income or net profits
of Purchaser, or any franchise or similar tax imposed on or measured by the net
income of Purchaser, by the jurisdiction under the laws of which it is organized
or any political subdivision thereof (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If Company shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder or under the Note to Purchaser,
(i) the sum payable shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.12) Purchaser receives an amount equal to the sum
it would have received had no such deductions been made, (ii) Company shall make
such deductions, and (iii)
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Company shall pay the full amount deducted to the relevant taxing or other
authority in accordance with applicable law.
(a) In addition, Company agrees to pay any present or future
stamp or documentary taxes or any other sales, or exercise taxes, charges or
similar levies that arise from any payment made hereunder or under the Note or
from the execution, sale, delivery or registration of, or otherwise with respect
to, any of the Transaction Documents (hereinafter referred to as "Other Taxes").
(b) Within 45 days after the date of any payment of Taxes,
Company shall furnish to Purchaser the original or a certified copy of a receipt
evidencing payment thereof.
(c) Without prejudice to the survival of any other agreement
of Company hereunder, the agreements and obligations of Company contained in
this Section 2.12 shall survive the payment in full of the Note.
3. PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser makes the following representations and warranties
to Company, each and all of which shall survive the execution and delivery of
this Agreement and the Closing hereunder:
3.1 Investment Intention. Purchaser is purchasing the Note
for its own account, for investment purposes and not with a view to the
distribution thereof. Purchaser will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of the Note (or
solicit any offers to buy, purchase, or otherwise acquire any of the Note),
except in compliance with the Securities Act.
3.2 Accredited Investor. Purchaser is an "accredited
investor" (as that term is defined in Rule 501 of Regulation D under the
Securities Act) and by reason of its business and financial experience, it has
such knowledge, sophistication and experience in business and financial matters
as to be capable of evaluating the merits and risks of the prospective
investment, is able to bear the economic risk of such investment and is able to
afford a complete loss of such investment.
3.3 Corporate Existence. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
3.4 Corporate Power; Authorization; Enforceable Obligations.
The execution, delivery and performance by Purchaser of this Agreement and the
other Transaction Documents to be executed by it: (i) are within Purchaser's
corporate power; (ii) have been duly authorized by all necessary corporate
action; (iii) are not in contravention of any provision of Purchaser's
certificate of incorporation or by-laws; and (iv) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality
binding on Purchaser. This Agreement and the other Transaction Documents to
which Purchaser is a party have each been duly executed and delivered by
Purchaser and constitute the legal, valid and binding obligations of
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Purchaser, enforceable against it in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
4. COMPANY'S REPRESENTATIONS AND WARRANTIES
Company makes the following representations and warranties to
Purchaser, each and all of which shall survive the execution and delivery of
this Agreement and the Closing hereunder:
4.1 Authorization and Issuance of Note. Upon delivery to
Purchaser of the Note against payment in accordance with the terms hereof, the
Note will have been validly issued, free and clear of all pledges, liens,
encumbrances and preemptive rights. The issuance of shares of Common Stock upon
conversion of the Note has been duly authorized by all necessary corporate
action on the part of Company and, when issued upon conversion of the Note, such
Common Stock will have been validly issued and fully paid and non-assessable.
Company has duly reserved 340,984 shares of Common Stock for issuance pursuant
to the terms of the Note.
4.2 Corporate Existence; Compliance with Law. Company and
each of its Subsidiaries, if any, (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey in the
case of Company and as set forth on Schedule 4.2 in the case of its
Subsidiaries; (ii) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification (except for
jurisdictions in which such failure to so qualify or to be in good standing
would not have a Material Adverse Effect); (iii) has the requisite corporate
power and authority and the legal right to own, pledge, mortgage or otherwise
encumber and operate its properties, to lease the property it operates under
lease, and to conduct its business as now being conducted; (iv) has, or has
applied for, all material licenses, permits, consents or approvals from or by,
and has made all material filings with, and has given all material notices to,
all Governmental Authorities having jurisdiction, to the extent required for
such ownership, operation and conduct; (v) is in compliance with its certificate
or articles of incorporation and by-laws; and (vi) is in compliance with all
applicable provisions of law, except for such non-compliance which would not
have a Material Adverse Effect.
4.3 Securities Laws. In reliance on the investment
representations contained in Sections 3.1 and 3.2, the offer, issuance, sale and
delivery of the Note, as provided in this Agreement, are exempt from the
registration requirements of the Securities Act and all applicable state
securities laws, and are otherwise in compliance with such laws. Neither Company
nor any Person acting on its behalf has taken or will take any action
(including, without limitation, any offering of any securities of Company under
circumstances which would require the integration of such offering with the
offering of the Note under the Securities Act and the rules and regulations of
the SEC
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thereunder) which might subject the offering, issuance or sale of the Note, to
the registration requirements of Section 5 of the Securities Act.
4.4 Corporate Power; Authorization; Enforceable Obligations.
The execution, delivery and performance by Company of this Agreement, the other
Transaction Documents to which it is a party and all instruments and documents
to be delivered by Company, the issuance and sale of the Note and the
consummation of the other transactions contemplated by any of the foregoing: (i)
are within Company's corporate power and authority; (ii) have been duly
authorized by all necessary or proper corporate action; (iii) are not in
contravention of any provision of Company's certificate of incorporation or
by-laws; (iv) will not violate any law or regulation, or any order or decree of
any court or governmental instrumentality; (v) will not conflict with or result
in the breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which Company or any of its Subsidiaries is a
party or by which Company, any of its Subsidiaries or any of their property is
bound; (vi) will not result in the creation or imposition of any Lien upon any
of the property of Company or any of its Subsidiaries; and (vii) do not require
on the part of Company the consent or approval of, or any filing with, any
Governmental Authority or any other Person (except (A) for those filings
required by the Registration Rights Agreement and (B) to the extent previously
obtained or made). At or prior to the Closing Date, each of this Agreement and
the other Transaction Documents shall have been duly executed and delivered by
Company and each shall then constitute a legal, valid and binding obligation of
Company, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
4.5 Financial Statements. The audited consolidated balance
sheet of Company as at September 30, 1998, and the related consolidated
statements of income and cash flows for the year then ended, with the opinion
thereon of Pricewaterhouse Coopers LLP, and the unaudited consolidated balance
sheet of Company as at March 31, 1999 (the "Balance Sheet") and the related
unaudited consolidated statements of income, and cash flows for the six months
then ended, copies of which have previously been delivered to Purchaser, have
been, except as noted therein, prepared in conformity with GAAP consistently
applied throughout the periods involved and present fairly in all material
respects the consolidated financial position of Company as at the dates thereof,
and the consolidated results of its operations and cash flows for the periods
then ended, subject, in the case of the interim financial statements, to normal
year-end audit adjustments.
4.6 Brokers. No broker or finder acting on behalf of Company
or any of its Subsidiaries brought about the consummation of the transactions
contemplated pursuant to this Agreement and neither Company nor any of its
Subsidiaries has any obligation to any Person in respect of any finder's or
brokerage fees (or any similar
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obligation) in connection with the transactions contemplated by this Agreement.
Company is solely responsible for the payment of all such finder's or brokerage
fees.
4.7 Patents, Trademarks, Copyrights and Licenses. Company and
each of its Subsidiaries owns or has a license or other right to use all
patents, patent applications, copyrights, service marks, trademarks and
registrations and applications for registration thereof, and trade names
necessary to continue to conduct its business as heretofore conducted by it and
now being conducted by it, except where the failure to have such right would not
be reasonably expected to have a Material Adverse Effect. To Company's
knowledge, there are no pending or threatened claims alleging or potential
claims that could reasonably be expected to be alleged, that any or all such
intellectual property rights of Company and its Subsidiaries infringes or
conflicts with the intellectual property rights of others.
4.8 No Material Adverse Effect. Except as set forth on
Schedule 4.8, no event has occurred since December 31, 1998 which has had or
could be reasonably expected to have a Material Adverse Effect.
4.9 SEC Documents. Company has made available to Purchaser a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by Company with the SEC since January 1, 1998
and prior to the date of this Agreement (the "Company SEC Documents"), which are
all the documents (other than preliminary material) that Company was required to
file with the SEC since such date. As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Company SEC Documents, and
none of the Company SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.10 Full Disclosure. No information contained in this
Agreement, any other Transaction Document or any financial statements furnished
by or on behalf of Company pursuant to the terms of this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein not misleading in light of
the circumstances under which made.
5. COVENANTS
5.1 Affirmative Covenants. Company covenants and agrees that
from and after the date hereof (except as otherwise provided herein, or unless
the Required Holders have given their prior written consent) so long as the Note
is outstanding:
(a) Tax Compliance. Company shall pay all transfer, excise or
similar taxes (not including income, profits or franchise taxes) in connection
with the issuance, sale, delivery or transfer by Company to Purchaser of the
Note and the Common Stock issuable upon conversion thereof, and shall indemnify
and save Purchaser harmless
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without limitation as to time against any and all liabilities with respect to
such taxes. Company shall not be responsible for any taxes in connection with
the transfer of the Note or such Common Stock by the holder thereof. The
obligations of Company under this Section 5.1(a) shall survive the payment,
prepayment or redemption of the Note and the termination of this Agreement.
(b) Insurance. Company shall and shall cause each Subsidiary
of Company to maintain insurance covering, without limitation, fire, theft,
burglary, public liability, property damage, product liability, workers'
compensation, directors' and officers' insurance and insurance on all property
and assets material to the operation of the business, all in amounts customary
for the industry. Company shall, and shall cause each of its Subsidiaries to,
pay all insurance premiums payable by them.
(c) Compliance with Law. Company shall, and shall cause each
of its Subsidiaries to, comply with all laws, including Environmental Laws,
applicable to it, except where the failure to comply would not be reasonably
likely to result in a Material Adverse Effect.
(d) Maintenance of Existence. Company shall, and shall cause
each of its Subsidiaries to do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, and its
rights and franchises.
(e) Senior Debt Compliance. As soon as available and in any
event within 45 days after the end of each fiscal quarter, Company shall deliver
to Purchaser a certificate of the chief financial officer of Company certifying
Company's compliance with the covenant contained in Section 5.2(c) hereof as of
the last day of the immediate preceding fiscal quarter, showing the calculation
thereof.
5.2 Negative Covenants. Company covenants and agrees that
from and after the date hereof (except as otherwise provided herein, or unless
the Required Holders have given their prior written consent) so long as the Note
is outstanding:
(a) Sales of Assets; Liquidation. Company shall not, and
shall not permit any Material Subsidiary of Company to, (i) sell, transfer,
convey or otherwise dispose of all or substantially all of its assets or
properties or (ii) liquidate, dissolve or wind up Company, or any of its
Material Subsidiaries, except for transfers to Company, whether voluntary or
involuntary; provided, however, that the foregoing shall not prohibit (i) the
sale of inventory in the ordinary course of business, (ii) the sale of surplus
or obsolete equipment and fixtures, (iii) transfers resulting from any casualty
or condemnation of assets or properties or (iv) sales as to which the net
proceeds are either (x) reinvested in Company's or, if sold by a Material
Subsidiary, such Material Subsidiary's or Company's existing or related lines of
business or (y) applied to repay Indebtedness, within 180 days after such sale.
(b) Transactions with Affiliates. Company shall not and shall
not permit any Subsidiary of Company to enter into or be a party to any
transaction involving $250,000 or more in any single transaction or $1,000,000
or more in the aggregate for all
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such transactions with any Affiliate of Company or such Subsidiary, except (i)
transactions expressly permitted hereby, (ii) transactions in the ordinary
course of and pursuant to the reasonable requirements of Company's or such
Subsidiary's business and upon fair and reasonable terms that are fully
disclosed to Purchaser and are no less favorable to Company or such Subsidiary
than would be obtained in a comparable arm's-length transaction (as determined
by disinterested members of the board of directors of Company) with a Person not
an Affiliate of Company or such Subsidiary, (iii) transactions between Company
and its wholly-owned Subsidiaries or between such Subsidiaries and (iv) payment
of compensation to employees and directors' fees. For the avoidance of doubt,
Company and Purchaser hereby acknowledge that the foregoing shall not restrict
or prohibit certain transactions between Company and certain of its Affiliates
which are in any way related to the guaranty of, or collateral security provided
for, any and all of the Specified Senior Debt.
(c) Senior Debt. Company shall not and shall not permit any
Subsidiary of Company to incur or suffer to exist Senior Debt in an aggregate
principal amount in excess of the greater of (X) the Permitted Senior Debt and
(Y) the product obtained by multiplying Company's EBITDA (determined on the
basis of the immediately preceding four fiscal quarters ending on the last day
of the most recent fiscal quarter) by four (such greater amount, as may be
adjusted from time to time, the "Senior Debt Ceiling"). For purposes hereof,
"Permitted Senior Debt" shall be an aggregate principal amount equal to $30
million plus any additional amounts of which Purchaser is given notice by
Company which would constitute an Event of Default and as a result of which
Purchaser does not elect to accelerate the amounts due under the Note in
accordance with the provisions of Section 8.2 hereof. Notwithstanding the
foregoing, if the amount of Senior Debt outstanding exceeds the Senior Debt
Ceiling pursuant to the calculation of the amount in clause (Y) above, it shall
not be deemed a Default or an Event of Default hereunder so long as such excess
Senior Debt does not exceed fifteen percent (15%) of the total amount of Senior
Debt outstanding.
(d) Indebtedness. Company shall not, and shall not permit any
Subsidiary of Company to, incur or suffer to exist any Indebtedness other than
(i) Senior Debt permitted pursuant to Section 5.2(c) hereof, (ii) Indebtedness
listed on Schedule 5.2(d) and (iii) Indebtedness subordinated to the Note on
terms and conditions (including, without limitation, subordination terms)
reasonably acceptable to Purchaser. It is understood that Purchaser shall be
acting reasonably in not agreeing to any subordinated Indebtedness which has
payments of principal (other than, with respect to all subordinated
Indebtedness, an aggregate principal amount of $1,000,000) prior to the payment
in full of the Note or which has interest payments Purchaser reasonably believes
to be excessive.
(e) Liens. Company shall not, and shall not permit any
Subsidiary of Company to, incur or suffer to exist any Liens on any of its
assets, except Permitted Liens and Liens securing Senior Debt permitted
hereunder.
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(f) Mergers. Company shall not, directly or indirectly, by
operation of law or otherwise, merge with, consolidate with, or otherwise
combine with any Person where there is a Change in Control or would result in a
Default or Event of Default.
6. CONDITIONS PRECEDENT
6.1 Conditions Precedent. The obligation of Purchaser to
purchase the Note pursuant to Section 2.1 hereof, is subject to the condition
that Purchaser shall have received, on the Closing Date, the following, each
dated the Closing Date unless otherwise indicated, in form and substance
satisfactory to Purchaser:
(a) Favorable opinions of White & Case, special counsel to
Company, and Xxxxxx, Xxxxx & Xxxxxx, L.L.C., special New Jersey counsel to
Company, substantially in the form attached hereto as Exhibits C-1 and C-2,
respectively.
(b) Resolutions of the board of directors of Company,
certified by the Secretary or Assistant Secretary of Company, as of the Closing
Date, to be duly adopted and in full force and effect on such date, authorizing
(i) the consummation of each of the transactions contemplated by this Agreement
and (ii) specific officers to execute and deliver this Agreement and each other
Transaction Document to which it is a party.
(c) Governmental certificates, dated the most recent
practicable date prior to the Closing Date, with telegram updates where
available, showing that Company is organized and in good standing in the State
of New Jersey and is qualified as a foreign corporation and in good standing in
all other jurisdictions in which it is qualified to transact business.
(d) A copy of the certificate of incorporation and all
amendments thereto of Company, certified by the Secretary or Assistant Secretary
of Company, and copies of Company's by-laws, certified by the Secretary or
Assistant Secretary of Company as true and correct as of the Closing Date.
(e) The Registration Rights Agreement duly executed by the
parties thereto.
(f) Certificates of the Secretary or an Assistant Secretary
of Company, dated the Closing Date, as to the incumbency and signatures of the
officers of Company executing this Agreement, the Note, each other Transaction
Document to which it is a party and any other certificate or other document to
be delivered pursuant hereto or thereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary.
(g) Certificate of the President of Company, dated the
Closing Date, stating that all of the representations and warranties of Company
contained herein or in the other Transaction Documents are true and correct on
and as of the Closing Date as if made on such date and that no breach of any
covenant contained in Article V has occurred or would result from the Closing
hereunder.
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(h) Receipt of all requisite third-party consents to the
transactions contemplated hereby, including an acknowledgment from the Specified
Senior Creditor concerning the incurrence of the Obligations hereunder as
constituting "Subordinated Debt", as defined in the Specified Senior Creditor's
Senior Debt Documents and consenting to the use of proceeds described in Section
2.5 hereof.
6.2 Additional Conditions. The obligation of Purchaser to
purchase the Note pursuant to Section 2.1 is subject to the additional
conditions precedent that:
(a) Except as disclosed pursuant to Article IV, there shall
not have occurred any event or condition since December 31, 1998 which could
have a Material Adverse Effect.
(b) All of the representations and warranties of Company
contained herein or in the other Transaction Documents shall be true and correct
on and as of the Closing Date as if made on such date and no breach of any
covenant contained in Article V shall have occurred or would result from the
Closing hereunder.
(c) The Closing shall have occurred no later than May 27,
1999.
7. CONVERSION
7.1 Conversion of Note.
(a) Subject to the provisions for adjustment hereinafter set
forth, the Note shall be convertible, in whole or in part, at any time and from
time to time, at the option of the holder thereof (a "Conversion"), up to the
outstanding principal amount of the Note held by Purchaser at the time of such
conversion into a number of fully paid and nonassessable shares of Common Stock
equal to the quotient obtained by dividing (A) the principal amount of the Note
to be converted by (B) the Conversion Price (as hereinafter defined). The
Conversion Price shall initially be $22.875 per share of Common Stock and shall
be subject to further adjustments from time to time pursuant to Section 7.1(f)
below.
No fractional shares shall be issued upon the conversion of
the Note. All shares of Common Stock (including fractions thereof) issuable upon
conversion of the Note by Purchaser shall be aggregated for purposes of
determining whether conversion would result in the issuance of any fractional
share. If, after the aforementioned aggregation, the conversion would result in
the issuance of a fraction of a share of Common Stock, Company shall, in lieu of
issuing any fractional share, pay Purchaser a sum in cash equal to the Current
Market Price of such fraction on the date of conversion.
(b) A conversion of the Note may be effected by Purchaser
upon the surrender to Company at the principal office of Company of the Note to
be converted accompanied by a written notice stating that Purchaser elects to
convert all or a specified amount of its Note in accordance with the provisions
of this Section 7.1 and specifying the name or names in which Purchaser wishes
the certificate or certificates for shares of Common Stock to be issued.
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(c) In case the written notice specifying the name or names
in which Purchaser wishes the certificate or certificates for shares of Common
Stock to be issued shall specify a name or names other than that of Purchaser,
such notice shall be accompanied by payment of all transfer taxes payable upon
the issuance of shares of Common Stock in such name or names. Other than such
taxes, Company will pay any and all issue and other taxes (other than taxes
based on income) that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of the Note pursuant hereto. As promptly as
practicable, and in any event within five Business Days after the surrender of
the Note and the receipt of such notice relating thereto and, if applicable,
payment of all transfer taxes (or the demonstration to the satisfaction of
Company that such taxes have been paid), Company shall deliver or cause to be
delivered (1) certificate(s) representing the number of validly issued, fully
paid and nonassessable full shares of Common Stock to which the holder of the
Note being converted shall be entitled and (2) if less than all of principal
amount of the Note evidenced by the surrendered Note is being converted, in
exchange for the Note surrendered, a new Note, of like tenor, in a principal
amount equal the full principal amount of the Note surrendered less the
principal amount being converted.
(d) A conversion shall be deemed to have been made at the
close of business on the date of giving the written notice referred to in the
first sentence of (b) above and of such surrender of the certificate or
certificates representing the Note to be converted so that the rights of the
holder thereof as to the Note being converted shall cease except for the right
to receive shares of Common Stock in accordance herewith, and the Person
entitled to receive the shares of Common Stock shall be treated for all purposes
as having become the record holder of such shares of Common Stock at such time.
(e) Company shall at all times reserve, and keep available
for issuance upon the conversion of the Note, such number of its authorized but
unissued shares of Common Stock as will from time to time be sufficient to
permit the conversion of all of the outstanding principal balance of the Note,
and shall take all action required to increase the authorized number of shares
of Common Stock if necessary to permit the conversion of all of the outstanding
principal balance of the Note.
(f) The Conversion Price will be subject to adjustment from
time to time as follows:
(i) In case Company shall at any time or from
time to time after the Closing Date (A) pay a dividend, or
make a distribution, on the outstanding shares of Common Stock
in shares of Common Stock, (B) subdivide the outstanding
shares of Common Stock, (C) combine the outstanding shares of
Common Stock into a smaller number of shares or (D) issue by
reclassification of the shares of Common Stock any shares of
capital stock of Company, then, and in each such case, the
Conversion Price in effect immediately prior to such event or
the record date therefor, whichever is earlier, shall be
adjusted so that the holder of any Note thereafter surrendered
for conversion shall be entitled to receive the
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number of shares of Common Stock or other securities of
Company which Purchaser would have owned or have been entitled
to receive after the happening of any of the events described
above, had such Note been surrendered for conversion
immediately prior to the happening of such event or the record
date therefor, whichever is earlier. An adjustment made
pursuant to this clause (i) shall become effective (x) in the
case of any such dividend or distribution, immediately after
the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of such
subdivision, reclassification or combination, at the close of
business on the day upon which such corporate action becomes
effective. No adjustment shall be made pursuant to this clause
(i) in connection with any transaction to which Section 7.1(g)
applies.
(ii) In case Company shall issue shares of Common
Stock (or rights, warrants or other securities convertible
into or exchangeable for shares of Common Stock) after the
Closing Date, other than (A) pursuant to existing obligations,
including, without limitation, under agreements with existing
lenders, outstanding options, rights, warrants or other
securities convertible into or exchangeable for shares of
Common Stock, or pursuant to any existing employee benefit
plan, (B) pursuant to any joint venture or other strategic
alliance, with the prior written consent of Purchaser, (C)
issuances covered by clause (i) above, and (D) issuances
pursuant to a registration statement under the Securities Act,
for consideration in an amount per share of Common Stock (or
having an exercise, conversion or exchange price per share)
less than an amount equal to 25% below the Current Market
Price, then (i) the number of shares of Common Stock for which
this Note is convertible shall be adjusted to equal the
product obtained by multiplying the number of shares of Common
Stock for which this Note is convertible immediately prior to
such issue or sale by a fraction (A) the numerator of which
shall be the number of shares of Common Stock outstanding
immediately after such issue or sale, and (B) the denominator
of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue or sale plus the
number of shares which the aggregate offering price of the
total number of such additional shares of Common Stock would
purchase at the then Current Market Price; and (ii) the
Conversion Price as to the number of shares for which this
Note is convertible prior to such adjustment shall be adjusted
by multiplying such Conversion Price by a fraction (X) the
numerator of which shall be the number of shares for which
this Note is convertible immediately prior to such issue or
sale; and (Y) the denominator of which shall be the number of
shares of Common Stock purchasable immediately after such
issue or sale. An example of the calculation required pursuant
to this clause (ii) is annexed hereto as Exhibit D.
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(iii) An adjustment made pursuant to clause (ii)
above shall be made on the next Business Day following the
date on which any such issuance is made and shall be effective
retroactively immediately after the close of business on such
date. No adjustment shall be made pursuant to clause (ii) in
respect of any issuance of shares of Common Stock on or prior
to the Closing Date. For purposes of clause (ii), the
aggregate consideration received by Company in connection with
the issuance of shares of Common Stock or of rights, warrants
or other securities exchangeable or convertible into shares of
Common Stock shall be deemed to be equal to the sum of the
aggregate offering price of all such Common Stock and such
rights, warrants, or other exchangeable or convertible
securities plus the aggregate amount, if any, receivable upon
exchange or conversion of any such exchangeable or convertible
securities into shares of Common Stock.
(iv) In case Company shall at any time or from
time to time after the Closing Date declare, order, pay or
make a dividend or other distribution (including, without
limitation, any distribution of stock or other securities or
property or rights or warrants to subscribe for securities of
Company or any of its Subsidiaries by way of dividend or
spinoff), on its Common Stock, other than dividends or
distributions of shares of Common Stock which are referred to
in clause (i) above and cash dividends paid out of retained
earnings, then the Conversion Price shall be adjusted so that
it shall equal the price determined by multiplying (A) the
applicable Conversion Price on the day immediately prior to
the record date fixed for the determination of stockholders
entitled to receive such dividend or distribution by (B) a
fraction, the numerator of which shall be the Current Market
Price per share of Common Stock on the day immediately prior
to such record date less the amount of such dividend or
distribution per share of Common Stock, and the denominator of
which shall be such Current Market Price per share of Common
Stock on the day immediately prior to such record date. No
adjustment shall be made pursuant to this clause (iv) in
connection with any transaction to which Section 7.1(g)
applies.
(v) For purposes of this Section 7.1(f), the
number of shares of Common Stock at any time outstanding shall
not include any shares of Common Stock then owned or held by
or for the account of Company or any of its Subsidiaries.
(vi) If Company shall take a record of the
holders of its Common Stock for the purpose of entitling them
to receive a dividend or other distribution, and shall
thereafter and before the distribution to stockholders thereof
legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of
shares of Common Stock issuable upon exercise of the right of
conversion
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granted by this Section 7.1(f) or in the Conversion Price then
in effect shall be required by reason of the taking of such
record.
(vii) Anything in this Section 7.1(f) to the
contrary notwithstanding, Company shall not be required to
give effect to any adjustment in the Conversion Price unless
and until the net effect of one or more adjustments (each of
which shall be carried forward), determined as above provided,
shall have resulted in a change of the Conversion Price by at
least 1%, and when the cumulative net effect of more than one
adjustment so determined shall be to change the Conversion
Price by at least one cent, such change in Conversion Price
shall thereupon be given effect.
(viii) If any option or warrant expires or is
cancelled without having been exercised, then, for the
purposes of the adjustments set forth above, such option or
warrant shall have been deemed not to have been issued and the
Conversion Price shall be adjusted accordingly. No holder of
Common Stock which was previously issued upon conversion of
the Note shall have any obligation to redeem or cancel any
such shares of Common Stock as a result of the operation of
this clause (viii).
(g) In case of any reorganization of capital,
reclassification of capital stock (other than a reclassification of capital
subject to 7.1(f)(i)), consolidation or merger with or into another corporation,
or sale, transfer or disposition of all or substantially all the property,
assets or business of Company to another corporation (any one or more of such
events being an "Organic Change"), the Note then outstanding, shall thereafter
be convertible into, in lieu of the Common Stock issuable upon such conversion
prior to consummation of such Organic Change, the kind and amount of shares of
stock and other securities and property receivable (including cash) upon the
consummation of such Organic Change by a holder of that number of shares of
Common Stock into which the Note was convertible immediately prior to such
Organic Change (including, on a pro rata basis, the cash, securities or property
received by holders of Common Stock in any tender or exchange offer that is a
step in such Organic Change). In case securities or property other than Common
Stock shall be issuable or deliverable upon conversion as aforesaid, then all
references in this Section 7.1(g) shall be deemed to apply, so far as
appropriate and nearly as may be, to such other securities or property.
(h) In case at any time or from time to time Company shall
pay any stock dividend or make any other non-cash distribution to the holders of
its Common Stock, or shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or any other right, or
there shall be any capital reorganization or reclassification of the Common
Stock of Company or consolidation or merger of Company with or into another
corporation, or any sale or conveyance to another corporation of the property of
Company as an entirety or substantially as an entirety, or there shall be a
voluntary or involuntary dissolution, liquidation or winding up of Company,
then, in any one or more of said cases, Company shall give at least 20 days'
prior written notice to the registered holder of the Note at the address of each
as shown
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on the books of Company as of the date on which (i) the books of Company shall
close or a record shall be taken for such stock dividend, distribution or
subscription rights or (ii) such non-bankruptcy reorganization,
reclassification, consolidation, merger, sale or conveyance, dissolution,
liquidation or winding up shall take place, as the case may be, provided that in
the case of any Organic Change to which Section 7.1(g) applies Company shall
give at least 20 days' prior written notice as aforesaid. Such notice shall also
specify the date as of which the holders of the Common Stock of record shall
participate in such dividend, distribution or subscription rights or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such non-bankruptcy reorganization, reclassification,
consolidation, merger, sale or conveyance or participate in such dissolution,
liquidation or winding up, as the case may be. Failure to give such notice shall
not invalidate any action so taken.
(i) Upon any adjustment of the Conversion Price then in
effect and any increase or decrease in the number of shares of Common Stock
issuable upon the operation of the conversion set forth in this Section 7.1,
then, and in each such case, Company shall promptly deliver to the holder of the
Note, a certificate signed by the President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of Company setting forth in reasonable detail the event requiring the adjustment
and the method by which such adjustment was calculated and specifying the
Conversion Price then in effect following such adjustment and the increased or
decreased number of shares issuable upon the conversion granted by this Section
7.1, and shall set forth in reasonable detail the method of calculation of each
and a brief statement of the facts requiring such adjustment.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of
the following events (regardless of the reason therefor) shall constitute an
"Event of Default" hereunder and under the Note:
(a) Company shall fail to make any payment of principal of,
or interest on or any other amount owing in respect of, the Note, or any of the
other Obligations when due and payable or declared due and payable, including
pursuant to Section 2.4 hereof, which, other than principal or interest, shall
have remained unremedied for a period of ten (10) days.
(b) Company shall fail or neglect to perform, keep or
observe any of the provisions of Section 5.2 hereof (other than Section 5.2(c)).
(i) Company shall fail or neglect to perform, keep or observe
any of the provisions of Section 5.2(c) hereof and such
non-compliance shall have remained unremedied for a period of
45 days after the last day of the fiscal quarter during which
such non-compliance occurred.
(c) Company shall fail or neglect to perform, keep or observe
any other provision of this Agreement or of any of the other Loan Documents, and
the same shall
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remain unremedied for a period of thirty (30) days after Company shall receive
written notice of any such failure from Purchaser.
(d) A default shall occur under any other agreement, document
or instrument to which Company or any Subsidiary is a party or by which Company
or any of its Subsidiaries or any of their property is bound, and such default
(i) involves the failure to make any payment (whether of principal, interest or
otherwise) due at the scheduled final maturity date thereof beyond the period of
grace, if any, applicable thereto in respect of any Indebtedness of Company or
any of its Subsidiaries in an aggregate amount exceeding $1,000,000, or (ii)
causes such Indebtedness or a portion thereof in an aggregate amount exceeding
$1,000,000, to become due prior to its stated maturity.
(e) Any representation or warranty herein or in any Loan
Document or in any written statement pursuant thereto or hereto, report,
financial statement or certificate made or delivered to Purchaser by Company
pursuant hereto or thereto shall be untrue or incorrect in any material respect,
as of the date when made.
(f) Any of the assets of Company or any of its Subsidiaries
shall be attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the possession of any receiver, trustee, custodian or
assignee for the benefit of creditors of Company or any of its Subsidiaries and
shall remain unstayed or undismissed for sixty (60) consecutive days; or Company
or any of its Subsidiaries shall have concealed, removed or permitted to be
concealed or removed, any part of its property, with intent to hinder, delay or
defraud its creditors or any of them or made or suffered a transfer of any of
its property or the incurring of an obligation which may be fraudulent under any
bankruptcy, fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced against
Company or any of its Subsidiaries in a court having competent jurisdiction
seeking a decree or order in respect of Company or any of its Subsidiaries (i)
under title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable federal, state or foreign bankruptcy or other
similar law, (ii) appointing a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) of Company or any of its
Subsidiaries or of any substantial part of its or their properties, or (iii)
ordering the winding-up or liquidation of the affairs of Company or any of its
Subsidiaries and such case or proceeding shall remain undismissed or unstayed
for sixty (60) consecutive days or such court shall enter a decree or order
granting the relief sought in such case or proceeding.
(h) Company or any of its Subsidiaries shall (i) file a
petition seeking relief under title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of Company or any of its
Subsidiaries or of any substantial part of its properties, (iii) fail generally
to pay its debts
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as such debts become due, or (iv) take any corporate action in furtherance of
any such action.
(i) Final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of $1,000,000 in
the aggregate shall be rendered against Company or any of its Subsidiaries and
the same shall not be (i) fully covered by insurance, or (ii) vacated, stayed,
bonded, paid or discharged for a period of thirty (30) days.
8.2 Remedies. (a) If any Event of Default specified in
Section 8.1 other than a default specified in Section 8.1(b)(ii) shall have
occurred and be continuing, Purchaser may, subject to the applicable provisions
of Article 9, without notice, declare all Obligations to be forthwith due and
payable, whereupon all such Obligations shall become and be due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are expressly waived by Borrower; provided, however, that upon the occurrence of
an Event of Default specified in Section 8.1(f), (g) or (h) hereof, such
Obligations shall become due and payable without declaration, notice or demand
by Purchaser.
(a) If an Event of Default specified in Section 8.1(b)(ii)
shall have occurred and be continuing, Purchaser shall have 50 days after
delivery of the certificate of Company required under Section 5.1(e) hereof or
50 days after the date such certificate is required to be delivered, if earlier,
to declare, with notice to the Specified Senior Creditor, all Obligations due
and payable; provided, however, that if prior to the time Purchaser makes such
declaration Company has repaid its Senior Debt such that the Senior Debt is not
in excess of the Senior Debt Ceiling, Purchaser shall not declare the
Obligations due and payable. Purchaser shall give Company 10 days' notice prior
to the time that it makes such declaration. If Purchaser elects not to make such
declaration, such Event of Default under Section 8.1(b)(ii) shall be deemed to
be waived for such fiscal quarter only. The amount payable upon an acceleration
because of an Event of Default under Section 8.1(b)(ii) hereof shall include a
premium equal to the percentage set forth below of the outstanding principal
amount of the Note corresponding to the number of years after the Closing Date
set forth below during which such acceleration occurs:
Year after Closing Date Premium
----------------------- -------
Less than or equal to 1 19%
Greater than 1, but less than or equal to 2 17%
Greater than 2, but less than or equal to 3 15%
Greater than 3 12.5%
Subject to the applicable provisions of Article 9, Purchaser
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to
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such Default or Event of Default as it shall deem advisable in its best
interests, including any action (or the failure to act) pursuant to the Loan
Documents.
In the event of a declaration of acceleration by Purchaser (an
"Applicable Acceleration") because of an Event of Default set forth in Section
8.1(d) above has occurred and is continuing solely as a result of the
acceleration of Senior Debt by the holders thereof (a "Senior Debt
Acceleration"), such Applicable Acceleration shall be automatically annulled if
the holders of such Senior Debt have rescinded such Senior Debt Acceleration
within 20 days thereof (but not beyond 90 days after the occurrence of such
Event of Default) and if (x) the annulment of such Applicable Acceleration would
not conflict with any judgment or decree of a court of competent jurisdiction
and (y) all existing Events of Default, except the non-payment of principal or
interest on the Note hereunder which shall have become due solely because of
such Applicable Acceleration, have been cured or waived.
8.3 Waivers by Company. Except as otherwise provided for in
this Agreement and applicable law, Company waives (i) presentment, demand and
protest and notice of presentment, dishonor notice of intent to accelerate and
notice of acceleration, (ii) all rights to notice and a hearing prior to
Purchaser's taking possession or control of, or to Purchaser's replevy,
attachment or levy upon, the Collateral or any bond or security which might be
required by any court prior to allowing Purchaser to exercise any of its
remedies, and (iii) the benefit of all valuation, appraisal and exemption laws.
Company acknowledges that it has been advised by counsel of its choice with
respect to this Agreement, the other Loan Documents and the transactions
evidenced by this Agreement and the other Loan Documents.
9. SUBORDINATION
9.1 Note Subordinated to Senior Debt. Company covenants and
agrees, and Purchaser and any other holder of the Note (Purchaser and such
holders being hereinafter referred to collectively as "Holder") by its
acceptance thereof likewise covenants and agrees, that all payments of the
principal of and interest on the Note and all other Obligations (whether in the
form of distribution of assets, set-off of other claims or other forms of cash
or non-cash exchanges) of Company pursuant to this Agreement or under the Note
(collectively the "Subordinated Debt") shall be subordinated in accordance with
the provisions of this Section 9 to the prior payment in full of all Senior Debt
of Company. For purposes of this Section 9, the term "Senior Debt" shall mean
the Senior Debt of Company and shall include principal of and premium, if any,
and interest (including interest accruing at the rate provided for in the
documents evidencing such Senior Debt after the commencement of any proceedings
of the type referred to in Section 9.2(a) hereof, whether or not an allowed
claim in such proceeding) on all loans and other extensions of credit under, and
all expenses, fees, reimbursements, indemnities and other amounts owing pursuant
to, the Senior Debt, to the extent permitted to be incurred pursuant hereto.
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9.2 Priority and Payment Over of Proceeds in Certain Events.
(a) Subordination on Dissolution, Liquidation or
Reorganization of Company. Upon payment or distribution of assets or securities
of Company of any kind or character, whether in cash, property or securities,
upon any dissolution or winding up or total or partial liquidation or
reorganization of Company, whether voluntary or involuntary, or in bankruptcy,
insolvency, receivership or other proceedings or upon an assignment for the
benefit of creditors or any other marshalling of the assets and liabilities of
Company (any such proceeding, an "Insolvency Proceeding"), all Senior Debt shall
first be paid in full in cash, or payment provided for in cash or cash
equivalents in a manner satisfactory to the holders of Senior Debt, before any
direct or indirect payments or distributions, including, without limitation, by
exercise of set-off, of any cash, property or securities on account of principal
of (or premium, if any) or interest on the Note and to that end the holders of
Senior Debt shall be entitled to receive (pro rata on the basis of the
respective amounts of Senior Debt held by them) directly, for application to the
payment thereof (to the extent necessary to pay all Senior Debt in full after
giving effect to any substantially concurrent payment or distribution to or
provision for payment to the holders of such Senior Debt), any payment or
distribution of any kind or character, whether in cash, property or securities,
in respect of the Subordinated Debt. The holders of Senior Debt are hereby
authorized to file an appropriate claim for and on behalf of the Holders if they
or any of them do not file, and there is not otherwise filed on behalf of the
Holders, a proper claim or proof of claim in the form required in any such
proceeding prior to 30 days before the expiration of the time to file such claim
or claims.
(b) Subordination on Default in Senior Debt. No direct or
indirect payment, prepayment pursuant to Section 2.3 hereof or payment
incidental to the redemption of the Note pursuant to Section 2.4 hereof or
pursuant to Section 8.2(b) hereof, by or on behalf of Company of principal of
(premium, if any), or interest on, the Subordinated Debt, whether pursuant to
the terms of the Note, upon acceleration or otherwise, shall be made if at the
time of such payment there exists (i) a default in the payment of all or any
portion of principal of (premium, if any), interest on, fees or other amounts
owing in connection with any Senior Debt, or (ii) any other default (howsoever)
characterized) under any document or instrument governing, securing, supporting
or evidencing any Senior Debt, and Purchaser has received written notice of such
default (a "Blockage Notice") from a holder or representative of the holders of
Senior Debt, and, in either case, such default shall not have been cured or
waived in writing, provided however, that if within the period specified in the
next sentence with respect to a default referred to in clause (ii) above, the
holders of Senior Debt have not declared the Senior Debt to be immediately due
and payable (or have declared such Senior Debt to be immediately due and payable
and within such period have rescinded such acceleration), then and in that
event, payment of principal of, and interest on, the Note shall be resumed. With
respect to any default under clause (ii) above, the period referred to in the
preceding sentence shall commence upon receipt by Purchaser of a Blockage Notice
(which shall specify the defaults existing under the Senior Debt on the date of
such notice which is the basis for the blockage of payments on the Note
contemplated herein), and shall end at the completion of the 179th day after the
beginning of such period (a "Blockage Period"). Only one such 179 day period may
commence within any period of
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360 consecutive days. Upon termination of any Blockage Period, Company shall
resume payments on account of the principal of (premium, if any), and interest
on, the Note, and on account of all other Subordinated Debt, subject to the
provisions of Sections 9.1 and 9.2 hereof.
(c) Rights and Obligations of Holders.
(i) In the event that, notwithstanding the
foregoing provision prohibiting such payment or distribution,
the Holders shall have received any payment on account of the
Subordinated Debt at a time when such payment is prohibited by
such provision before the Senior Debt is paid in full, then
and in such event, such payment or distribution shall be
received and held in trust by the Holders apart from their
other assets and paid over or delivered to the holders of the
Senior Debt remaining unpaid to the extent necessary to pay in
full in cash the principal of (premium, if any), and interest
on, such Senior Debt in accordance with its terms and after
giving effect to any concurrent payment or distribution to the
holders of such Senior Debt.
(ii) Upon any payment or distribution of assets or
securities referred to in this Section 9, the Holders shall be
entitled to rely upon any order or decree of a court of
competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, and
upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making any such
payment or distribution, delivered to the Holders for the
purpose of ascertaining the persons entitled to participate in
such distribution, the holders of Senior Debt and other
Indebtedness of Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and
all other facts pertinent thereto or to this Section 9.
9.3 Rights of Holders of Senior Debt Not To Be Impaired. No
right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act by any such holder, or by any
noncompliance by Company with the terms and provisions and covenants herein
regardless of any knowledge thereof such holder may have or otherwise be charged
with.
The provisions of this Section 9 are intended to be for the
benefit of, and shall be enforceable directly by, the holders of the Senior
Debt. Company and each Holder of a Note, by its acceptance thereof, acknowledges
that the holders of the Senior Debt are relying upon the provisions of this
Section 9 in extending such Senior Debt.
9.4 Limitation on Rights and Remedies; Notice of Exercise of
Remedies.
(a) Notwithstanding anything contained herein to the
contrary, for any period during which Holder shall be blocked from receiving
payments in respect of the
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Subordinated Debt pursuant to Section 9.2(b) hereof (but in no event exceeding
90 consecutive days, provided that the Holder complies with the notice
requirements of clause (b) below), Holder shall not (i) accelerate any portion
of the Subordinated Debt, (ii) initiate any judicial proceeding or action to
collect any portion of the Subordinated Debt or (iii) initiate or join in any
Insolvency Proceeding unless, prior to the expiration of such period, the
holders of the Senior Debt shall take an action of such type in respect of the
Senior Debt, provided, however, that this Section 9.4(a) shall not apply to an
Event of Default under Section 8.1(b)(ii) hereof, except that Holder agrees that
it shall not accelerate any portion of the Subordinated Debt or take any other
action proscribed by this Section 9.4(a) pursuant to such Event of Default prior
to 90 days after the end of the applicable fiscal quarter to which such Event of
Default relates.
(b) Should the Holder desire to take any action of the type
referred to in clauses (i), (ii) and (iii) of Section 9.4(a) hereof, Holder
shall (i) give the Specified Senior Creditor not less than 30 days' notice (or
in the case of an Event of Default under Section 8.1(b)(ii) hereof, 10 days'
notice) of Holder's intent to take any such action (which notice may be given
during the continuation of any period during which Holder is blocked from
receiving payments under Section 9.2 hereof), which notice shall detail the
facts and circumstances on which the Holder is basing its entitlement to take
such action, and (ii) obtain the prior written consent of the Required Holders.
9.5 In Furtherance of Subordination.
(a) At all times during which any of the Senior Debt is
outstanding or there shall be any commitment to extend credit to Company
thereunder, without the prior written consent of the holders of Senior Debt,
Holder shall not
(i) cancel or otherwise discharge any of the
obligations of Company in respect of the Subordinated Debt or
subordinate such obligations to any other Indebtedness of
Company, other than the Senior Debt;
(ii) accept any voluntary or optional prepayment
of the principal of, or interest on, the Subordinated Debt; or
(iii) amend, modify, supplement or restate (w) the
definition of "Permitted Liens", "Permitted Senior Debt",
"Senior Debt", "Senior Debt Ceiling", "Senior Debt Document",
"Specified Senior Creditor", "Specified Senior Debt" or
"Subordinated Debt" set forth in Section 1 hereof, (x) the
principal amortization of the Note; (y) Sections 2.3, 2.4,
2.6, 5.2, 8.1, 9.1 through 9.12 hereof, or the amount of any
premium payable pursuant to Section 8.2(b) hereof or (z) any
other provision hereunder which expressly inures to the
benefit of the Holder of the Senior Debt.
(b) In no event shall Holder commence or join in any action
or proceeding to contest the validity of the provisions of this Article 9.
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9.6 Subordination Hereunder Not Affected.
(a) The provisions of this Article 9 shall remain in full
force and effect irrespective of:
(i) any lack of validity or enforceability of any
of the Senior Debt Documents;
(ii) any change in the time, manner of place or
payment of, or in any other term of, all or any part of the
Senior Debt, or any other amendment or waiver of or any
consent to any departure from the Senior Debt, including,
without limitation, extending loans or other forms of credit
above the amounts stated therein (subject, however, to the
exclusion of such additional loans and credits in excess of
the Senior Debt Ceiling from the benefit of this Section
9.6(a) as "Senior Debt"), whether resulting from the extension
of additional credit to Company or any of its Subsidiaries or
Affiliate or otherwise;
(iii) any taking, exchange, release or
non-perfection of any other collateral, or any taking, release
or amendment or waiver of or consent to any departure from any
guaranty, for all or any of the Senior Debt;
(iv) any manner of application of collateral, or
proceeds thereof, to all or any of the Senior Debt, or any
manner of sale or other disposition of any collateral for all
or any of the Senior Debt or any other assets of Company or
any of its Subsidiaries; or
(v) any dissolution, merger, consolidation or
other form of corporate restructuring of Company or the
termination of corporate existence of Company.
(b) The provisions of this Section 9 constitute a continuing
agreement and shall (i) remain in full force and effect until the payment in
full in cash or cash equivalents acceptable to holders of the Senior Debt in
their sole discretion, of the Senior Debt and the termination of any commitment
to lend or otherwise extend credit thereunder, (ii) be binding upon any
successors or assignees of Holders or subsequent holders of the Subordinated
Debt, and (iii) inure to the benefit of, and be enforceable by, the holders of
the Senior Debt and their respective successors, transferees and assigns.
9.7 Relative Rights. The provisions of this Article 9 are for
the benefit of the holders of Senior Debt (and their successor and assigns) and
shall be enforceable by them directly against each holder of the Note. Each
Purchaser or holder of the Note acknowledges and agrees that any breach of the
provisions of this Article 9 will cause irreparable harm for which the payment
of monetary damages may be inadequate. For this reason, each holder of the Note
agrees that, in addition to any remedies at law or equity to which a holder of
the Senior Debt
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may be entitled, a holder of the Senior Debt will be entitled to an injunction
or other equitable relief to prevent breaches of the provisions of this Article
9 and/or to compel specific performance of such provisions.
9.8 Subrogation. Upon the payment in full of all Senior Debt
and the termination of any commitment to extend credit thereunder, the Holders
shall be subrogated to the extent of the payments or distributions made to the
holders of, or otherwise applied to payment of, the Senior Debt pursuant to the
provisions of this Section 9 and to the rights of the holders of Senior Debt to
receive payments or distributions of assets of Company made on the Senior Debt
until the Note shall be paid in full; and for the purposes of such subrogation,
no payments or distributions to holders of Senior Debt of any cash, property or
securities to which Holders of the Note would be entitled except for the
provisions of this Section 9, no payment over pursuant to the provisions of this
Section 9 to holders of Senior Debt by the Holders, shall, as between Company,
its creditors other than holders of Senior Debt and the Holders, be deemed to be
payment by Company to or on account of Senior Debt, it being understood that the
provisions of this Section 9 are solely for the purpose of defining the relative
rights of the holders of Senior Debt, on the one hand, and the Holders, on the
other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Section 9 shall have
been applied, pursuant to the provisions of this Section 9, to the payment of
Senior Debt, then and in such case, the Holders shall be entitled to receive
from the holders of Senior Debt at the time outstanding any payments or
distributions received by such holders of Senior Debt in excess of the amount
sufficient to pay all Senior Debt in full.
9.9 Obligations of Company Unconditional. Nothing contained
in this Section 9 or elsewhere in this Agreement or in the Note is intended to
or shall impair, as between Company and the Holders, the obligations of Company,
which are absolute and unconditional, to pay to the Holders the principal of
(premium, if any), and interest on, the Note as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the Holders and creditors of Company other than
the holders of the Senior Debt, nor shall anything herein or therein prevent any
Holder from exercising all remedies otherwise permitted by applicable law upon
the occurrence of a Default or Event of Default under this Agreement, subject to
the rights, if any, under this Section 9 of the holders of Senior Debt in
respect of cash, property or securities of Company received upon the exercise of
any such remedy.
The failure to make a payment on account of principal of, or
interest on, the Note by reason of any provision of this Section 9 shall not be
construed as preventing the occurrence of a Default or an Event of Default
hereunder.
9.10 Notice to Holders. Company shall give prompt written
notice to each Holder of any fact known to Company which would prohibit the
making of any payment on or in respect of the Note, but failure to give such
notice shall not affect the subordination of the Subordinated Debt to the Senior
Debt provided in this Section 9. Notwithstanding the provisions of this Section
9 or any other provision of this Agreement or the Note, no Holder shall be
charged with knowledge of the existence of any facts
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which would prohibit the making of any payment to or in respect of the Note,
unless and until the Holders shall have actual knowledge thereof or the Holders
shall have received written notice thereof from Company or a representative of
or holder of Senior Debt, and, prior to the receipt of any such written notice,
subject to the provisions of this Section 9, the Holders shall be entitled in
all respects to assume no such facts exist. Nothing contained in this Section
9.10 shall limit the right of the holders of Senior Debt to recover payments as
contemplated by 9.1 and 9.2.
9.11 Right of Any Holder as Holder of Senior Debt. Any Holder
in its individual capacity shall be entitled to all the rights set forth in this
Section 9 with respect to any Senior Debt which may at any time be held by it,
to the same extent as any other holder of Senior Debt, and nothing in this
Agreement shall deprive such Holder of any of its rights as such holder.
9.12 Reinstatement. The provisions of this Section 9 shall
continue to be effective or be reinstated, and the Senior Debt shall not be
deemed to be paid in full, as the case may be, if at any time any payment of any
of the Senior Debt is rescinded or must otherwise be returned by the holder
thereof upon the insolvency, bankruptcy or reorganization of the Company or
otherwise, all as though such payment had not been made.
10. [Intentionally omitted.]
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement; Sale of
Interest.
(a) The Transaction Documents constitute the complete
agreement between the parties with respect to the subject matter hereof and may
not be modified, altered or amended except as provided therein, or in the case
of the Loan Documents by an agreement in writing signed by Company and Purchaser
in accordance with Section 11.1(d) hereof. Company may not sell, assign or
transfer any of the Loan Documents or any portion thereof, including, without
limitation, Company's rights, title, interests, remedies, powers and duties
hereunder or thereunder. Company hereby consents to Purchaser's sale of
participations, assignment, transfer or other disposition, at any time or times,
of any of the Loan Documents or of any portion thereof or interest therein,
including, without limitation, Purchaser's rights, title, interests, remedies,
powers or duties thereunder, whether evidenced by a writing or not.
(b) In the event Purchaser assigns or otherwise transfers all
or any part of the Note, Company shall, upon the request of Purchaser issue new
Notes to effectuate such assignment or transfer. Any such assignment or transfer
must comply with applicable securities laws and, at the request of Company,
Purchaser shall deliver to Company an opinion of counsel as to such compliance,
which counsel may be in-house counsel to Purchaser.
(b) Subject to the provisions of clause (ii) below, Purchaser
may sell, assign, transfer or negotiate to one or more other
lenders, commercial
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banks, insurance companies, other financial institutions or
any other Person acceptable to Purchaser all or a portion of
its rights and obligations under the Note held by Purchaser
and this Agreement; provided, however, that acceptance of such
assignment by any assignee shall constitute the agreement of
such assignee to be bound by the terms of this Agreement
applicable to Purchaser. From and after the effective date of
such an assignment, (x) the assignees thereunder shall, in
addition to the rights and obligations hereunder held by it
immediately prior to such effective date, have the rights and
obligations hereunder that have been assigned to it pursuant
to such assignment and (y) the assignor thereunder shall, to
the extent that rights and obligations hereunder have been
assigned by it pursuant to such assignment, relinquish its
rights and be released from its obligations under this
Agreement (and, in the case of an assignment and acceptance
covering all or the remaining portion of an assignor's rights
and obligations under this Agreement, such assignor shall
cease to be a party hereto).
(i) Purchaser shall not assign or otherwise
transfer the Note to a Person which is not an Affiliate of
Purchase unless Purchaser first gives Company a notice of its
intention to do so. Company will then have a period of ten
(10) Business Days to make an offer to purchase the Note or
portion thereof which Purchaser indicates it intends to
transfer. Purchaser may then either accept such offer or
effectuate a transfer to a Person which is not an Affiliate of
Purchaser at a price higher than that offered by Company, if
any, provided that such transfer takes place no later than 90
days after the date of the notice by Purchaser to Company. If
at the end of the 90-day period Purchaser has not completed
the transfer of the Note, such transfer may not occur and the
Note shall again be subject to the restriction in this Section
11.1(c).
(d) No amendment or waiver of any provision of this Agreement
or the Note or any other Loan Document, nor consent to any departure by Company
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Holders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by each holder of a Note affected thereby do any of the
following: (i) subject such holder to any additional obligations, (ii) reduce
the principal of, or interest on, the Note or other amounts payable hereunder or
release or discharge Company from its obligations to make such payments, (iii)
postpone any date fixed for any payment of principal of, or interest on, the
Note or other amounts payable hereunder, (iv) change the aggregate unpaid
principal amount of the Note, or the number of holders thereof, which shall be
required for such holders or any of them to take any action hereunder, or (v)
amend this Section 11.1(d).
11.2 Fees and Expenses. If an Event of Default shall have
occurred and be continuing and Purchaser shall employ counsel or other advisors
for advice or other representation or shall incur reasonable legal or other
costs and expenses in connection
34
35
with any attempt to enforce any rights of Purchaser against Company, any
Subsidiary of Company or any other Person, that may be obligated to Purchaser by
virtue of any of the Loan Documents then, and in any such event, the reasonable
attorneys' and other parties' fees arising from such services, including those
of any appellate proceedings, and all expenses, costs, charges and other fees
incurred by such counsel and others in any way or respect arising in connection
with or relating to any of the events or actions described in this Section shall
be payable, on demand, by Company to Purchaser and shall be additional
Obligations under this Agreement and the other Loan Documents. Without limiting
the generality of the foregoing, such expenses, costs, charges and fees may
include: paralegal fees, costs and expenses; accountants' and investment
bankers' fees, costs and expenses; court costs and expenses; photocopying and
duplicating expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram charges; secretarial overtime
charges; and expenses for travel, lodging and food paid or incurred in
connection with the performance of such legal services.
11.3 No Waiver by Purchaser. Purchaser's failure, at any time
or times, to require strict performance by Company of any provision of this
Agreement and any of the other Loan Documents shall not waive, affect or
diminish any right of Purchaser thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by Purchaser of an Event of
Default by Company under the Loan Documents shall not suspend, waive or affect
any other Event of Default by Company under this Agreement and any of the other
Loan Documents whether the same is prior or subsequent thereto and whether of
the same or of a different type. None of the undertakings, agreements,
warranties, covenants and representations of Company contained in this Agreement
or any of the other Loan Documents and no Event of Default by Company under this
Agreement and no defaults by Company under any of the other Loan Documents shall
be deemed to have been suspended or waived by Purchaser, unless such suspension
or waiver is by an instrument in writing signed by an officer of Purchaser and
the Required Holders and directed to Company specifying such suspension or
waiver.
11.4 Remedies. Purchaser's rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
which Purchaser may have under any other agreement, including without
limitation, the Loan Documents, the other Transaction Documents, by operation of
law or otherwise.
11.5 Waiver of Jury Trial. The parties hereto waive all right
to trial by jury in any action or proceeding to enforce or defend any rights
under the Transaction Documents.
11.6 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
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11.7 Binding Effect; Benefits. This Agreement and the other
Transaction Documents shall be binding upon, and inure to the benefit of, the
successors of Company and Purchaser and the assigns, transferees and endorsees
of Purchaser.
11.8 Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of the
other Loan Documents, the provision contained in this Agreement shall govern and
control.
11.9 Governing Law. Except as otherwise expressly provided in
any of the Transaction Documents, in all respects, including all matters of
construction, validity and performance, this Agreement and the Obligations
arising hereunder shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York applicable to contracts made and
performed in such state, without regard to the principles thereof regarding
conflict of laws, and any applicable laws of the United States of America.
Purchaser and Company agree to submit to personal jurisdiction and to waive any
objection as to venue in the federal or New York State courts located in the
County of New York, State of New York. Nothing herein shall preclude Purchaser
or Company from bringing suit or taking other legal action in any other
jurisdiction.
11.10 Notices. Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by another, or whenever any of the parties desires to give or
serve upon another any such communication with respect to this Agreement, each
such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person with
receipt acknowledged or by registered or certified mail, return receipt
requested, postage prepaid, or by telecopy and confirmed by telecopy answerback
addressed as follows:
If to Company:
Emcore Corporation
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Chief Financial Officer
Telecopy Number: (000) 000-0000
with a copy to:
White & Case
First Union Financial Center
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Telecopy Number: (000) 000-0000
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37
If to Purchaser:
GE Capital Equity Investments, Inc.
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: GE Equity Group-Emcore
Telecopy Number: (000) 000-0000
with copies to:
General Electric Capital Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: GE Equity Group Legal Counsel
Telecopy Number: (000) 000-0000
and
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxx X. Xxxxxxx, Esq.
Telecopy Number: (000) 000-0000
If to the Specified Senior Creditor:
First Union National Bank
000 Xxxxxx Xxxx - XX 00000
Xxxx Xxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxxx X. Xxxxxxxxxxx, Senior Vice President
Telecopy Number: (000) 000-0000
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback, or
three (3) Business Days after the same shall have been deposited with the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the Persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
11.11 Survival. The representations and warranties of Company
in this Agreement shall survive the execution, delivery and acceptance hereof by
the parties hereto and the closing of the transactions described herein or
related hereto.
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11.12 Section and Other Headings. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
11.13 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
11.14 Publicity. Neither Purchaser nor Company shall issue
any press release or make any public disclosure regarding the transactions
contemplated hereby unless such press release or public disclosure is approved
by the other party in advance, which approval shall not be unreasonably
withheld. Notwithstanding the foregoing, each of the parties hereto may, in
documents required to be filed by it with the SEC or other regulatory bodies,
make such statements with respect to the transactions contemplated hereby as
each may be advised by counsel is legally necessary or advisable, and may make
such disclosure as it is advised by its counsel is required by law, subject to
advance consultation with the other party.
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IN WITNESS WHEREOF, Company and Purchaser have executed this
Agreement as of the day and year first above written.
EMCORE CORPORATION
By:
--------------------------------------
Name:
Title:
Purchaser:
GE CAPITAL EQUITY INVESTMENTS, INC.
By:
--------------------------------------
Name:
Title:
[SIGNATURE PAGE - NOTE PURCHASE AGREEMENT]
40
NOTE PURCHASE AGREEMENT
dated as of May 26, 1999
by and between
EMCORE CORPORATION
and
GE CAPITAL EQUITY INVESTMENTS, INC.
41
TABLE OF CONTENTS
NOTE PURCHASE AGREEMENT
Section Page
------- ----
1. DEFINITIONS....................................................................................1
2. PURCHASE OF NOTE...............................................................................8
2.1 Purchase of Note......................................................................8
2.2 Closing...............................................................................8
2.3 Optional Prepayment...................................................................8
2.4 Mandatory Redemption..................................................................9
2.5 Use of Proceeds.......................................................................9
2.6 Interest on Note......................................................................9
2.7 Receipt of Payments..................................................................10
2.8 Application of Payments..............................................................10
2.9 Sharing of Payments..................................................................10
2.10 Indemnity............................................................................11
2.11 Access...............................................................................11
2.12 Taxes................................................................................11
3. PURCHASER'S REPRESENTATIONS AND WARRANTIES....................................................12
3.1 Investment Intention.................................................................12
3.2 Accredited Investor..................................................................12
3.3 Corporate Existence..................................................................12
3.4 Corporate Power; Authorization; Enforceable Obligations..............................12
4. COMPANY'S REPRESENTATIONS AND WARRANTIES......................................................13
4.1 Authorization and Issuance of Note...................................................13
4.2 Corporate Existence; Compliance with Law.............................................13
4.3 Securities Laws......................................................................13
4.4 Corporate Power; Authorization; Enforceable Obligations..............................14
4.5 Financial Statements.................................................................14
4.6 Brokers..............................................................................14
4.7 Patents, Trademarks, Copyrights and Licenses.........................................15
4.8 No Material Adverse Effect...........................................................15
4.9 SEC Documents........................................................................15
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TABLE OF CONTENTS
NOTE PURCHASE AGREEMENT
Section Page
------- ----
4.10 Full Disclosure......................................................................15
5. COVENANTS.....................................................................................15
5.1 Affirmative Covenants................................................................15
5.2 Negative Covenants...................................................................16
6. CONDITIONS PRECEDENT..........................................................................18
6.1 Conditions Precedent.................................................................18
6.2 Additional Conditions................................................................19
7. CONVERSION....................................................................................19
7.1 Conversion of Note...................................................................19
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES........................................................24
8.1 Events of Default....................................................................24
8.2 Remedies.............................................................................26
8.3 Waivers by Company...................................................................27
9. SUBORDINATION.................................................................................27
9.1 Note Subordinated to Senior Debt.....................................................27
9.2 Priority and Payment Over of Proceeds in Certain Events..............................28
9.3 Rights of Holders of Senior Debt Not To Be Impaired..................................29
9.4 Limitation on Rights and Remedies; Notice of Exercise of Remedies....................29
9.5 In Furtherance of Subordination......................................................30
9.6 Subordination Hereunder Not Affected.................................................31
9.7 Relative Rights......................................................................31
9.8 Subrogation..........................................................................32
9.9 Obligations of Company Unconditional.................................................32
9.10 Notice to Holders....................................................................32
9.11 Right of Any Holder as Holder of Senior Debt.........................................33
9.12 Reinstatement........................................................................33
10. [Intentionally omitted.]......................................................................33
11. MISCELLANEOUS.................................................................................33
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TABLE OF CONTENTS
NOTE PURCHASE AGREEMENT
Section Page
------- ----
11.1 Complete Agreement; Modification of Agreement; Sale of Interest......................33
11.2 Fees and Expenses....................................................................34
11.3 No Waiver by Purchaser...............................................................35
11.4 Remedies.............................................................................35
11.5 Waiver of Jury Trial.................................................................35
11.6 Severability.........................................................................35
11.7 Binding Effect; Benefits.............................................................36
11.8 Conflict of Terms....................................................................36
11.9 Governing Law........................................................................36
11.10 Notices..............................................................................36
11.11 Survival.............................................................................37
11.12 Section and Other Headings...........................................................38
11.13 Counterparts.........................................................................38
11.14 Publicity............................................................................38
Schedules
Schedule 1(A) - Existing Shareholders
Schedule 1(B) - Liens
Schedule 4.2 - Subsidiaries
Schedule 4.8 - Material Adverse Effect
Schedule 5.2(d) - Senior Debt
Exhibits
Exhibit A Form of Note
Exhibit B Registration Rights Agreement
Exhibit C-1 Opinion of White & Case, special counsel to Company
Exhibit C-2 Opinion of Xxxxxx, Xxxxx & Xxxxxx L.L.C., special New
Jersey counsel to Company
Exhibit D Example of Anti-Dilution Adjustment
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