EXHIBIT 10.16
PURCHASE AGREEMENT
By and Among
XXXXX HOLDINGS, INC.,
CALIFORNIA STATE TEACHERS' RETIREMENT SYSTEM,
CHILMARK FUND II L.P.,
and
MADISON DEARBORN CAPITAL PARTNERS, L.P.
November 27, 1996
TABLE OF CONTENTS
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Page
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1. Authorization and Closing..........................................................1
1A. Authorization of the Class A Preferred and the Warrants.......................1
1B. Purchase and Sale of Class A Preferred and the Warrants.......................1
1C. The Closing...................................................................1
2. Conditions of Each Purchaser's Obligation at the Closing...........................1
2A. Representations and Warranties; Covenants.....................................1
2B. Articles of Incorporation.....................................................2
2C. Sale of Class A Preferred and Warrants to Each Purchaser......................2
2D. Securities Law Compliance.....................................................2
2E. Amendment of Stockholders Agreements..........................................2
2F. Opinion of the Company's Counsel..............................................2
2G. Closing Documents.............................................................2
2H. Proceedings...................................................................3
2I. Waiver........................................................................3
3. Covenants..........................................................................3
3A. Financial Statements and Other Information....................................3
3B. Inspection of Property; Consultation Rights...................................4
3C. Covenants.....................................................................4
3D. Current Public Information....................................................6
3E. Reservation of Common Stock...................................................6
4. Transfer of Restricted Securities..................................................6
4A. General Provisions............................................................6
4B. Opinion Delivery..............................................................7
4C. Rule 144A.....................................................................7
4D. Legend Removal................................................................7
5. Representations and Warranties of the Company......................................7
5A. Organization, Corporate Power and Licenses....................................7
5B. Capital Stock and Related Matters.............................................8
5C. Subsidiaries; Investments.....................................................9
5D. Authorization; No Breach......................................................9
5E. Financial Statements..........................................................9
5F. Absence of Undisclosed Liabilities...........................................10
5G. No Material Adverse Change...................................................10
5H. Absence of Certain Xxxxxxxxxxxx..............................................00
0X. Litigation, etc..............................................................11
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5J. Brokerage....................................................................11
5K. Governmental Consent, etc....................................................11
5L. Compliance with Laws.........................................................11
5M. Affiliated Transactions......................................................12
5N. Environmental Protection.....................................................12
5O. XXXXX00
0X. Title to Properties..........................................................13
5Q. Leasehold Interests..........................................................14
6. Definitions.......................................................................14
6A. Definitions..................................................................14
7. Miscellaneous.....................................................................18
7A. Expenses.....................................................................18
7B. Remedies.....................................................................18
7C. Legend.......................................................................18
7D. Registration Rights..........................................................18
7E. Restrictions on Transfer of Stockholder Shares...............................20
7F. Sale of the Company..........................................................22
7G. Purchaser's Investment Representations.......................................23
7H. Consent to Amendments........................................................24
7I. Survival of Representations and Warranties...................................24
7J. Successors and Assigns.......................................................24
7K. Severability.................................................................24
7L. Counterparts.................................................................25
7M. Descriptive Headings; Interpretation.........................................25
7N. Governing Law................................................................25
7O. Notices......................................................................25
7P. Consideration for Warrants...................................................25
7Q. Understanding Among the Purchasers...........................................25
List of Exhibits
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Exhibit A - Articles of Incorporation
Exhibit B - Opinion of Counsel
List of Schedules
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Schedule of Purchasers
Capitalization Schedule
Subsidiary Schedule
Restrictions Schedule
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Financial Statements Schedule
Liabilities Schedule
Adverse Change Schedule
Developments Schedule
Litigation Schedule
Consents Schedule
Compliance Schedule
Affiliated Transactions Schedule
Environmental Protection Schedule
Employee Benefit Schedule
Title to Properties Schedule
Leasehold Interests Schedule
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XXXXX HOLDINGS, INC.
PURCHASE AGREEMENT
THIS AGREEMENT is made as of November 27, 1996, between Xxxxx
Holdings, Inc., a Nevada corporation (the "Company"), and the Persons listed on
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the Schedule of Purchasers attached hereto (collectively referred to herein as
the "Purchasers" and individually as a "Purchaser"). Except as otherwise
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indicated herein, capitalized terms used herein are defined in Section 6 hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing.
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1A. Authorization of the Class A Preferred and the Warrants. The
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Company shall authorize the issuance and sale to the Purchasers of 20,000 shares
of its 12% Cumulative Redeemable Senior Preferred Stock, par value $.01 per
share (the "Class A Preferred"), having the rights and preferences set forth in
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Exhibit A attached hereto, and warrants to purchase 830,000 shares of the
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Company's common stock, par value $.01 per share (the "Common Stock"), at an
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exercise price of $.01 per share (the "Warrants").
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1B. Purchase and Sale of Class A Preferred and the Warrants. At the
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Closing, the Company shall sell to each Purchaser and, subject to the terms and
conditions set forth herein, each Purchaser shall purchase from the Company the
number of shares of Class A Preferred at the price set forth opposite such
Purchaser's name on the Schedule of Purchasers attached hereto. In addition, at
the Closing, each Purchaser shall pay the Company the amount set forth opposite
such Purchaser's name on the Schedule of Purchasers in consideration for the
issuance of the Warrants. The sale of the Class A Preferred and the Warrants to
each Purchaser shall constitute a separate sale hereunder.
1C. The Closing. The closing of the separate purchases and sales of
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the Class A Preferred and the Warrants (the "Closing") shall take place at the
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offices of Xxxxxxxx & Xxxxx, 000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx at 10:00
a.m. on November 27, 1996, or at such other place or on such other date as may
be mutually agreeable to the Company and each Purchaser. At the Closing, the
Company shall deliver to each Purchaser stock certificates evidencing the Class
A Preferred to be purchased by such Purchaser and the Warrants to be purchased
by such Purchaser, registered in such Purchaser's or its nominee's name, upon
payment of the purchase price thereof by a cashier's or certified check, or by
wire transfer of immediately available funds to an account designated by the
Company, in the aggregate amount set forth opposite such Purchaser's name on the
Schedule of Purchasers.
Section 2. Conditions of Each Purchaser's Obligation at the
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Closing. The obligation of each Purchaser to purchase and pay for the Class A
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Preferred and the Warrants at the Closing is subject to the satisfaction as of
the Closing of the following conditions:
2A. Representations and Warranties; Covenants. The representations
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and warranties contained in Section 5 hereof shall be true and correct in all
material respects at and as of the Closing, and the Company shall have performed
in all material respects all of the covenants required to be performed by it
hereunder prior to the Closing.
2B. Articles of Incorporation. The Company shall have duly adopted,
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executed and filed with the Secretary of State of Nevada a Restated Articles of
Incorporation in the form set forth in Exhibit A hereto (the "Articles of
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Incorporation"). The Articles of Incorporation shall be in full force and
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effect as of the Closing under the laws of Nevada and shall not have been
further amended or modified.
2C. Sale of Class A Preferred and Warrants to Each Purchaser. The
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Company shall have simultaneously sold to each Purchaser the Class A Preferred
and the Warrants to be purchased by such Purchaser hereunder at the Closing and
shall have received payment therefor in full.
2D. Securities Law Compliance. The Company shall have made all
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filings under all applicable federal and state securities laws necessary to
consummate the issuance of the Class A Preferred and the Warrants pursuant to
this Agreement in compliance with such laws.
2E. Amendment of Stockholders Agreements. The Company and the
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requisite parties to the Stockholders Agreement, dated as of August 4, 1995 (the
"Stockholders Agreement"), by and between the Company, MDCP and the executives
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listed on Schedule I thereto (the "Executives"), shall have amended the
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Stockholders Agreement so as to allow the Purchasers to participate with the
Executives on a pari passu basis in any piggyback registration as provided in
paragraph 7D below.
2F. Opinion of the Company's Counsel. Each Purchaser shall have
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received from Schreck, Jones, Bernhard, Woloson & Xxxxxxx, Nevada counsel for
the Company, an opinion with respect to the matters set forth in Exhibit B
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attached hereto, which shall be addressed to each Purchaser, dated the date of
the Closing and in form and substance reasonably satisfactory to each Purchaser.
2G. Closing Documents. The Company shall have delivered to each
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Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in paragraphs 2A through 2E,
inclusive, have been fully satisfied;
(ii) certified copies of (a) the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and
performance of this Agreement and each of the other agreements contemplated
hereby, the filing of the Articles of Incorporation, the issuance and sale
of the Class A Preferred, the issuance and sale of the Warrants, the
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reservation for issuance upon exercise of the Warrants of an aggregate of
830,000 shares of Common Stock and the consummation of all other
transactions contemplated by this Agreement, and (b) the resolutions duly
adopted by the Company's stockholders adopting the Articles of
Incorporation;
(iii) certified copies of the Articles of Incorporation and the
Company's bylaws, each as in effect at the Closing; and
(iv) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of the
transactions hereunder (including, without limitation, all blue sky law
filings and waivers of all preemptive rights and rights of first refusal).
2H. Proceedings. All corporate and other proceedings taken or
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required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to each Purchaser and its special counsel.
2I. Waiver. Any condition specified in this Section 2 may be waived
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if consented to by each Purchaser; provided that no such waiver shall be
effective against any Purchaser unless it is set forth in a writing executed by
such Purchaser.
Section 3. Covenants.
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3A. Financial Statements and Other Information. The Company shall
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deliver to each Purchaser (so long as such Purchaser holds any Class A
Preferred):
(i) as soon as available but in any event within 45 days after
the end of each monthly accounting period in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such monthly period and for the period
from the beginning of the fiscal year to the end of such month, and
unaudited consolidating and consolidated balance sheets of the Company and
its Subsidiaries as of the end of such monthly period, setting forth in
each case comparisons to the corresponding period in the preceding fiscal
year and to the budget described in clause (iii) below, and all such
statements shall be prepared in accordance with generally accepted
accounting principles, consistently applied, subject to the absence of
footnote disclosures and to normal year-end adjustments;
(ii) within 120 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such fiscal year, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the
end of such fiscal year, setting forth in each case comparisons to the
preceding fiscal year, all prepared in accordance with United States
generally accepted
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accounting principles, consistently applied, and accompanied by, with
respect to the consolidated portions of such statements, an opinion of an
independent accounting firm of recognized national standing;
(iii) at least 30 days but not more than 90 days prior to the
beginning of each fiscal year, an annual budget prepared on a monthly basis
for the Company and its Subsidiaries for such fiscal year (displaying
anticipated statements of income and cash flows and balance sheets); and
(iv) within 10 days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general
written communications which the Company sends to its stockholders and
copies of all registration statements and all regular, special or periodic
reports which it files, or any of its officers or directors file with
respect to the Company, with the Securities and Exchange Commission or with
any securities exchange on which any of its securities are then listed.
Each of the financial statements referred to in subparagraph (i) and (ii) shall
present fairly in all material respects the financial condition and results of
operations as of the dates and for the periods stated therein, subject in the
case of the unaudited financial statements to changes resulting from normal
year-end adjustments. Notwithstanding the foregoing, the provisions of this
paragraph 3A shall cease to be effective so long as the Company is subject to
the periodic reporting requirements of the Securities Exchange Act and continues
to comply with such requirements. Except as otherwise required by law or
judicial order or decree or by any governmental agency or authority, each Person
entitled to receive information regarding the Company and its Subsidiaries under
paragraph 3A or 3B shall use its best efforts to maintain the confidentiality of
all nonpublic information obtained by it hereunder.
3B. Inspection of Property; Consultation Rights. The Company shall
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permit any representatives designated by any Purchaser (so long as such
Purchaser holds any equity securities of the Company) upon reasonable notice and
during normal business hours to (i) visit and inspect any of the properties of
the Company and its Subsidiaries, (ii) examine the corporate and financial
records of the Company and its Subsidiaries and make copies thereof or extracts
therefrom and (iii) discuss the affairs, finances and accounts of any such
corporations with the directors, officers, key employees and independent
accountants of the Company and its Subsidiaries. The presentation of an
executed copy of this Agreement by any Purchaser or any such holder of Class A
Preferred to the Company's independent accountants shall constitute the
Company's permission to its independent accountants to participate in
discussions with such Persons. Each Purchaser shall have the right to consult
with and advise the officers of the Company with respect to the management of
the Company and its Subsidiaries including, without limitation, with regard to
the slate of nominees submitted to the shareholders of the Company for election
to the Company's board of directors, the appointment of senior officers, the
consummation of any material transaction or change in the business of the
Company, and any holder shall be entitled, from time to time, to make proposals,
recommendations and suggestions to the Company regarding the business and
affairs of the Company and its
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Subsidiaries, and the Company shall consider in good faith any such legitimate
proposal; provided that nothing contained herein shall obligate the Company or
its Subsidiaries to adopt or implement any such proposal, recommendation or
suggestion.
3C. Covenants. So long as any of the Class A Preferred remains
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outstanding, the Company shall, and shall cause each Subsidiary to:
(i) at all times cause to be done all things necessary to
maintain, preserve and renew its corporate existence and all material
licenses, authorizations and permits required for the conduct of its
businesses, except where the failure to so maintain, preserve or renew
would not reasonably be expected to have a material adverse effect on the
financial condition, operating results, assets, properties and prospects of
the Company and its Subsidiaries taken as a whole;
(ii) maintain and keep its material properties in good repair,
working order and condition, and from time to time make all necessary or
desirable repairs, renewals and replacements, so that its businesses may be
properly conducted in all material respects at all times;
(iii) pay and discharge when payable all material taxes,
assessments and governmental charges imposed upon its properties or upon
the income or profits therefrom (in each case before the same becomes
delinquent and before penalties accrue thereon) and all material claims for
labor, materials or supplies to the extent to which the failure to pay or
discharge such obligations would reasonably be expected to have a material
adverse effect upon the financial condition, operating results, assets or
operations of the Company and its Subsidiaries taken as a whole, unless and
to the extent that the same are being contested in good faith and by
appropriate proceedings and adequate reserves (as determined in accordance
with generally accepted accounting principles, consistently applied) have
been established on its books with respect thereto;
(iv) comply with all other material obligations which it incurs
pursuant to any contract or agreement, whether oral or written, express or
implied, as such obligations become due to the extent to which the failure
to so comply would reasonably be expected to have a material adverse effect
upon the financial condition, operating results, assets or operations of
the Company and its Subsidiaries taken as a whole, unless and to the extent
that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with
generally accepted accounting principles, consistently applied) have been
established on its books with respect thereto;
(v) comply with all applicable laws, rules and regulations of
all governmental authorities, the violation of which would reasonably be
expected to have a material adverse effect upon the financial condition,
operating results, assets or operations of the Company and its Subsidiaries
taken as a whole;
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(vi) maintain proper books of record and account which present
fairly in all material respects its financial condition and results of
operations and make provisions on its financial statements for all such
proper reserves as in each case are required in accordance with generally
accepted accounting principles, consistently applied;
(vii) refrain from entering into any transaction with any
Purchaser or any Affiliate thereof, except on an arms-length basis or as
approved by a majority of the disinterested members of the Company's board
of directors; and
(viii) without the consent of the holders of a majority of the
Class A Preferred then outstanding, the Company shall not authorize, issue
or enter into any agreement providing for the issuance of (whether directly
or upon conversion or exercise of any other securities) (1) any shares of
Class A Preferred except as contemplated by this Agreement or (2) any
shares of capital stock which are senior to or on a parity with the Class A
Preferred with respect to the payment of dividends, redemptions or
distributions upon liquidation or otherwise.
3D. Current Public Information. At all times after the Company has
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filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder and
shall take such further action as any holder or holders of Restricted Securities
may reasonably request, all to the extent required to enable such holders to
sell Restricted Securities pursuant to (i) Rule 144 adopted by the Securities
and Exchange Commission under the Securities Act (as such rule may be amended
from time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission or (ii) a registration statement on Form S-2
or S-3 or any similar registration form hereafter adopted by the Securities and
Exchange Commission. Upon request, the Company shall deliver to any holder of
Restricted Securities a written statement as to whether it has complied with
such requirements.
3E. Reservation of Common Stock. The Company shall at all times
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reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants,
such number of shares of Common Stock issuable upon the exercise of all
outstanding Warrants, and prior to consummation of the Company's initial
Qualified Public Offering shall reserve for issuance all shares of Common Stock
issuable upon conversion of the Class A Preferred pursuant to the terms of the
Articles of Incorporation. All shares of Common Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all Liens. The Company shall take all such actions as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Common
Stock may be listed (except for official notice of issuance which shall be
immediately transmitted by the Company upon issuance).
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Section 4. Transfer of Restricted Securities.
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4A. General Provisions. Except as provided in paragraph 7E below,
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the Class A Preferred and Warrants purchased by each Purchaser hereunder are
only transferrable by any Purchaser to its Affiliates or if a Purchaser is a
limited partnership as a distribution to its limited partners upon the
dissolution thereof; provided that such Affiliate or limited partner agrees to
be bound in all respects by the provisions hereof, including, without
limitation, restrictions on transfer. Notwithstanding the foregoing, in
connection with the dissolution of any Purchaser, such Purchaser shall be
entitled, not more than nine months prior to the anticipated date of dissolution
and upon 30 days prior written notice to the Company to sell all, but not part
only, of the Class A Preferred and Warrants purchased by it hereunder to one or
more third parties reasonably acceptable to the Company. Subject to the
preceding sentences, the shares of Underlying Common Stock are transferable
only pursuant to (i) public offerings registered under the Securities Act, (ii)
Rule 144 or Rule 144A of the Securities and Exchange Commission (or any similar
rule or rules then in force) if such rule is available and (iii) subject to the
conditions specified in paragraph 4B below, any other legally available means of
transfer.
4B. Opinion Delivery. In connection with the permitted transfer of
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any Restricted Securities (other than a transfer described in paragraph 4A(i) or
(ii) above or paragraph 7E below), the holder thereof shall deliver written
notice to the Company describing in reasonable detail the transfer or proposed
transfer, together with an opinion of counsel which (to the Company's reason
able satisfaction) is knowledgeable in securities law matters to the effect that
such transfer of Restricted Securities may be effected without registration of
such Restricted Securities under the Securities Act. In addition, if the holder
of the Restricted Securities delivers to the Company an opinion of counsel that
no subsequent transfer of such Restricted Securities shall require registration
under the Securities Act, the Company shall promptly upon such contemplated
transfer deliver new certificates for such Restricted Securities which do not
bear the Securities Act legend set forth in paragraph 7C. If the Company is not
required to deliver new certificates for such Restricted Securities not bearing
such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to the Company in writing its agreement to
be bound by the conditions contained in this paragraph and paragraph 7C.
4C. Rule 144A. Upon the request of any Purchaser, the Company shall
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promptly supply to such Purchaser or its prospective transferees all information
regarding the Company required to be delivered in connection with a transfer
pursuant to Rule 144A of the Securities and Exchange Commission.
4D. Legend Removal. If any Restricted Securities become eligible for
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sale pursuant to Rule 144(k) and such transfer is otherwise permitted hereunder,
the Company shall, upon the request of the holder of such Restricted Securities,
promptly remove the legend set forth in paragraph 7C from the certificates for
such Restricted Securities.
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Section 5. Representations and Warranties of the Company. As a
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material inducement to the Purchasers to enter into this Agreement and purchase
the Class A Preferred and the Warrants hereunder, the Company hereby represents
and warrants that:
5A. Organization, Corporate Power and Licenses. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of Nevada and is qualified to do business in every jurisdiction in which the
failure to so qualify has had or would reasonably be expected to have a material
adverse effect on the financial condition, operating results, assets or
operations of the Company and its Subsidiaries taken as a whole. The Company
possesses all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to carry
on its businesses as now conducted and presently proposed to be conducted and to
carry out the transactions contemplated by this Agreement. The copies of the
Company's and each Subsidiary's charter documents and bylaws which have been
furnished to the Purchasers' special counsel reflect all amendments made thereto
at any time prior to the date of this Agreement and are correct and complete.
The designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
the Company are as set forth in the Articles of Incorporation, a copy of which
is attached hereto as Exhibit A, and all such designations, powers, preferences,
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rights, qualifications, limitations and restrictions are valid, binding and
enforceable and in accordance with all applicable laws.
5B. Capital Stock and Related Matters.
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(i) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of (a) 22,030,000 shares of preferred
stock, of which 30,000 shares shall be designated as 12% Cumulative Redeemable
Senior Preferred Stock (all of which shall be issued and outstanding) and
22,000,000 shares shall be designated as 12% Cumulative Redeemable Junior
Preferred Stock (20,471,759 of which shall be issued and outstanding) and (b)
30,000,000 shares of Common Stock, of which 10,235,844 shares shall be issued
and outstanding and 830,000 shares shall be reserved for issuance upon exercise
of the Warrants. As of the Closing, neither the Company nor any Subsidiary
shall have outstanding any stock or securities convertible or exchangeable for
any shares of its capital stock or containing any profit participation features,
nor shall it have outstanding any rights or options to subscribe for or to
purchase its capital stock or any stock or securities convertible into or
exchangeable for its capital stock or any stock appreciation rights or phantom
stock plans, except for the Class A Preferred and Warrants and except as set
forth on the attached "Capitalization Schedule." As of the Closing, neither the
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Company nor any Subsidiary shall be subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or any warrants, options or other rights to acquire its capital
stock, except as set forth on the Capitalization Schedule and except pursuant to
the Articles of Incorporation. As of the Closing, all of the outstanding shares
of the Company's capital stock shall be validly issued, fully paid and
nonassessable.
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(ii) There are no contractual stockholders preemptive rights or
rights of refusal with respect to the issuance of the Class A Preferred or the
Warrants hereunder or the issuance of the Common Stock upon exercise of the
Warrants. Assuming the accuracy of each Purchaser's representations and
warranties made hereunder, the Company has not violated any applicable federal
or state securities laws in connection with the offer, sale or issuance of any
of its capital stock, and the offer, sale and issuance of the Class A Preferred
or the Warrants hereunder do not require registration under the Securities Act
or any applicable state securities laws. To the best of the Company's
knowledge, except as set forth on the Capitalization Schedule, there are no
voting trusts or agreements, stockholders' agreements, pledge agreements, buy-
sell agreements, rights of first refusal, contractual preemptive rights or
proxies relating to any securities of the Company or any of its Subsidiaries
(whether or not the Company or any of its Subsidiaries is a party thereto).
Immediately upon Closing each Purchaser shall receive title to the Class A
Preferred and the Warrants purchased by it hereunder free and clear of all taxes
and Liens other than Liens created by such Purchaser.
5C. Subsidiaries; Investments. The attached "Subsidiary Schedule"
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lists each of the Company's Subsidiaries. Each of the Company's Subsidiaries is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, possesses all requisite corporate power and
authority and all material licenses, permits and authorizations necessary to own
its properties and to carry on its businesses as now being conducted and is
qualified to do business in every jurisdiction in which the failure to so
qualify has had or would reasonably be expected to have a material adverse
effect on the financial condition, operating results, assets or operations of
the Company and its Subsidiaries taken as a whole. All of the outstanding
shares of capital stock of each Subsidiary are validly issued, fully paid and
nonassessable, and all such shares are owned by the Company or another
Subsidiary free and clear of any Liens other than Liens arising under agreements
pertaining to the Company's existing indebtedness, and are not subject to any
option or right to purchase any such shares. Except for the Subsidiaries listed
on the Subsidiary Schedule, the Company does not (i) own of record or
beneficially, directly or indirectly, (A) any shares of capital stock or
securities convertible into capital stock of any other corporation or (B) any
participating interest in any partnership, limited liability company, joint
venture or other non-corporate business enterprise or (ii) control, directly or
indirectly, any other entity.
5D. Authorization; No Breach. The execution, delivery and
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performance of this Agreement and the Warrants, and the filing of the Articles
of Incorporation have been duly authorized by the Company. This Agreement, the
Warrants and the Articles of Incorporation each constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms. Except as
set forth on the attached "Restrictions Schedule," and except where such fact or
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circumstance is not reasonably likely to have a material adverse effect on the
financial condition, operating results, assets, operations, employee relations
or customer or supplier relations of the Company and its Subsidiaries taken as a
whole or the ability of the Company to fulfill its obligations to the Purchasers
under this Agreement, the Warrant or the Articles of Incorporation, the
execution and delivery by the Company of this Agreement, the offering, sale and
issuance of the Class A Preferred and the Warrants hereunder, the issuance of
the Common Stock upon exercise of Warrants
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or conversion of the Class A Preferred, the filing of the Articles of
Incorporation, and the fulfillment of and compliance with the respective terms
hereof and thereof by the Company, do not and shall not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in the creation of any Lien upon the Company's or
any Subsidiary's capital stock or assets pursuant to, (iv) give any third party
the right to modify, terminate or accelerate any obligation under, (v) result in
a violation of or (vi) require any authorization, consent, approval, exemption
or other action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency pursuant to, the Articles of
Incorporation or the charter or bylaws of the Company or any Subsidiary, or any
law, statute, rule or regulation to which the Company or any Subsidiary is
subject, or any agreement, instrument, order, judgment or decree to which the
Company or any Subsidiary is subject.
5E. Financial Statements. Attached hereto as the "Financial
-------------------- ---------
Statements Schedule" are the following financial statements:
-------------------
(i) the audited consolidated balance sheets of the Company and
its Subsidiaries as of December 31, 1993, December 31, 1994 and December
31, 1995, and the related statements of income and cash flows (or the
equivalent) for the respective twelve-month periods then ended; and
(ii) the unaudited consolidated balance sheet of the Company and
its Subsidiaries as of August 31, 1996 (the "Latest Balance Sheet"), and
--------------------
the related statements of income and cash flows (or the equivalent) for the
eight-month period then ended.
Each of the foregoing financial statements (including in all cases the notes
thereto, if any) presents fairly in all material respects the consolidated
financial condition, results of operations and cash flows of the Company and its
Subsidiaries in accordance with generally accepted accounting principles applied
on a consistent basis as of the dates and for the periods set forth therein,
except in the case of unaudited financial statements, for the absence of
footnote disclosures and subject to normal year-end adjustments.
5F. Absence of Undisclosed Liabilities. Except as set forth on the
----------------------------------
attached "Liabilities Schedule," the Company and its Subsidiaries do not have
--------------------
any material obligation or liability (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known to the Company or any
Subsidiary, whether due or to become due and regardless of when asserted)
arising out of transactions entered into at or prior to the Closing, or any
action or inaction at or prior to the Closing, or any state of facts existing at
or prior to the Closing other than: (i) liabilities set forth on the Latest
Balance Sheet (including any notes thereto), (ii) liabilities arising under
agreements, contracts, leases, licences and other arrangements, (iii)
liabilities and obligations which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business and are not reasonably likely
to have a material adverse effect on the financial condition, operating results,
assets, operations, employee relations or customer or supplier relations of the
Company and its
-10-
Subsidiaries taken as a whole and (iv) other liabilities and obligations
expressly disclosed in the other Schedules to this Agreement.
5G. No Material Adverse Change. Except as set forth on the attached
--------------------------
"Adverse Change Schedule," since the date of the Latest Balance Sheet, there has
-----------------------
been no material adverse change in the financial condition, operating results,
assets, operations, employee relations or customer or supplier relations of the
Company and its Subsidiaries taken as a whole.
5H. Absence of Certain Developments. Except as expressly
-------------------------------
contemplated by this Agreement or as set forth on the attached "Developments
------------
Schedule," since the date of the Latest Balance Sheet, neither the Company nor
--------
any Subsidiary have:
(a) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities convertible,
exchangeable or exercisable into any capital stock or other equity
securities;
(b) declared or made any payment or distribution of cash or
other property to its stockholders with respect to its capital stock or
other equity securities or purchased or redeemed any shares of its capital
stock or other equity securities (including, without limitation, any
warrants, options or other rights to acquire its capital stock or other
equity securities);
(c) mortgaged or pledged any of its material properties or
assets or subjected them to any material Lien, except Liens for current
property taxes not yet due and payable and Liens arising in the ordinary
course of business;
(d) sold, assigned or transferred any of its material
assets, except in the ordinary course of business, or canceled any material
debts or claims;
(e) suffered any material extraordinary losses;
(f) made any Investment in or taken steps to incorporate
any Subsidiary; or
(g) entered into any other material transaction other than
in the ordinary course of business.
5I. Litigation, etc. Except as set forth on the attached "Litigation
--------------- ----------
Schedule," there are no actions, suits, proceedings, orders, investigations or
--------
claims pending or, to the best of the Company's knowledge, threatened against or
affecting the Company or any Subsidiary at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality
(including, without limitation, any actions, suit, proceedings or investigations
with respect to the transactions contemplated by this Agreement), which would
reasonably be expected to have
-11-
a material adverse effect upon the financial condition, operating results,
assets or operations of the Company and its Subsidiaries taken as a whole.
5J. Brokerage. There are no claims for brokerage commissions,
---------
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Company or any Subsidiary. The Company shall pay, and hold each
Purchaser harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in
connection with any such claim.
5K. Governmental Consent, etc. No permit, consent, approval or
-------------------------
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby, except as set forth on the attached "Consents Schedule" and except as
-----------------
expressly contemplated herein or in the exhibits hereto.
5L. Compliance with Laws. Except as set forth on the attached
--------------------
"Compliance Schedule," neither the Company nor any Subsidiary has violated any
--------------------
law or any governmental regulation or requirement which violation has had or
would reasonably be expected to have a material adverse effect upon the
financial condition, operating results, assets or operations of the Company and
its Subsidiaries taken as a whole, and neither the Company nor any Subsidiary
has received notice of any such violation.
5M. Affiliated Transactions. Except as set forth on the attached
-----------------------
"Affiliated Transactions Schedule," no Affiliate of the Company or any
---------------------------------
Subsidiary or any individual related by blood, marriage or adoption to any such
individual or any entity in which any such Person or individual owns any
beneficial interest, is a party to any material agreement, contract, commitment
or transaction with the Company or any Subsidiary or has any material interest
in any material property used by the Company or any Subsidiary.
5N. Environmental Protection. Except as set forth on the attached
------------------------
"Environmental Protection Schedule" or as would not reasonably be expected to
----------------------------------
have a material adverse effect on the financial condition, operating results,
assets, properties or prospects of the Company and its Subsidiaries taken as a
whole: (a) the Company has not caused or allowed, or contracted with any party
for, the generation, use, transportation, treatment, storage or disposal of any
Hazardous Substances (as defined below) in connection with the operation of its
business or otherwise in violation of applicable Environmental Laws (as defined
below); (b) the Company, the operation of its business, and any real property
that the Company owns, leases or otherwise occupies or uses (the "Premises") are
--------
in compliance with all applicable Environmental Laws and lawful orders or
directives of any governmental authorities having jurisdiction under such
Environmental Laws; (c) the Company has not received any citation, directive,
letter or other written communication, or any notice of any proceeding, claim or
lawsuit, from any Person arising under applicable Environmental
-12-
Laws out of the ownership or occupation of the Premises, or the conduct of its
operations; (d) the Company has obtained and is maintaining in full force and
effect all necessary permits, licenses and approvals required by all
Environmental Laws applicable to the Premises and the business operations
conducted thereon (including operations conducted by tenants on the Premises),
and is in compliance with all such permits, licenses and approvals; (e) the
Company has not caused or allowed a release, or a threat of release, of any
Hazardous Substance on, under, within, at or near the Premises, and, to the
Company's knowledge, neither the Premises nor any property at or near the
Premises has ever been subject to a release, or a threat of release, of any
Hazardous Substance; (f) there are not now nor have there ever been any
underground storage tank systems or related piping for Hazardous Substances,
active or abandoned, at the Premises. For the purposes of this Agreement, the
term "Environmental Laws" shall mean any Federal, state or local law or
------------------
ordinance or regulation pertaining to the protection of human health or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq., the
-- ---
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001, et
--
seq., and the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901,
---
et seq. as enacted and in effect on or prior to the Closing Date. For purposes
-- ---
of this Agreement, the term "Hazardous Substances" shall mean all hazardous or
--------------------
toxic materials, wastes and pollutants, including, without limitation, oil and
petroleum products, asbestos, polychlorinated biphenyls, urea formaldehyde,
pesticides, fertilizers and any other materials classified as hazardous,
biohazardous, radioactive or toxic under any Environmental Laws. This Section 5N
constitutes the sole and exclusive representation and warranty of the Company
with respect to environmental, health and safety matters including, without
limitation, any arising under or relating to Environmental Laws.
5O. ERISA.
-----
(a) The "Employee Benefits Schedule" lists each material Employee
--------------------------
Plan that covers any employee of the Company and lists each material Benefit
Arrangement of the Company.
(b) To the knowledge of the Company, no Employee Plan is a
Multiemployer Plan and no Employee Plan is subject to Title IV of ERISA and
neither the Company nor its Affiliates have incurred any material liability
under Title IV of ERISA arising in connection with the termination of any plan
covered or previously covered by Title IV of ERISA that has not been satisfied
in full.
(c) To the knowledge of the Company, no "prohibited transaction," as
defined in Section 406 of ERISA or Section 4975 of the Code, has occurred with
respect to any Employee Plan which could subject the Company to any material
liability.
(d) The United States Internal Revenue Service has determined that
each Employee Plan that is intended to be qualified under Section 401(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"), is so
----
qualified and the Company is not aware of any event or circumstance that would
adversely effect such determination.
-13-
(e) All contributions and payments under each Employee Plan and
Benefit Arrangement which are due have been paid and if not yet due have been
properly accrued.
(f) To the knowledge of the Company, there is no contract, agreement,
plan or arrangement covering any employee or former employee of the Company
that, individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to the terms of Section 280G of the Code.
(g) To the knowledge of the Company, no tax under Section 4980B of
the Code has been incurred in respect of any Employee Plan that is a group
health plan, as defined in Section 5000(b)(1) of the Code.
(h) To the knowledge of the Company, with respect to the employees
and former employees of the Company, there are no employee post-retirement
medical or health plans in effect, except as required by Section 4980B of the
Code.
(i) No employee of the Company will become entitled to any bonus,
retirement, severance or similar benefit or enhanced benefit solely as a result
of the transactions contemplated hereby.
(j) To the knowledge of the Company, the Company does not have, nor
is it reasonably expected to have, any liability under Title IV of ERISA.
5P. Title to Properties. The Company and its subsidiaries have good,
-------------------
clear and marketable title to their respective material properties and assets
reflected on the Latest Balance Sheet or acquired by them since the date of the
Latest Balance Sheet (other than properties and assets disposed of in the
ordinary course of business since the date of the Latest Balance Sheet), and all
such properties and assets are free and clear of all Liens except for Permitted
Encumbrances. Except as set forth on the "Title to Properties Schedule," the
----------------------------
Company and its Subsidiaries have not received written notice of any
condemnation, environmental, zoning or other land use regulation proceedings or
any special assessment proceedings, which if determined adversely to the Company
or its Subsidiaries would reasonably be expected to materially and adversely
affect the financial condition, results of operations, properties, assets and
prospects of the Company and its Subsidiaries taken as a whole.
5Q. Leasehold Interests. Except as set forth on the "Leasehold
------------------- ---------
Interests Schedule," (i) each lease or agreement to which the Company is a party
------------------
under which it is a lessee of any material property, real or personal, is a
valid and subsisting agreement, duly authorized and entered into, without any
default of the Company thereunder and, to the Company's knowledge, without any
default thereunder of any other party thereto, (ii) to the Company's knowledge,
no event has occurred and is continuing which, with due notice or lapse of time
or both, would constitute a default or event of default by the Company under any
such lease or agreement or, to the best of the Company's knowledge, by any other
party thereto and (iii) to the Company's knowledge, the
-14-
Company's possession of such property has not been disturbed and the Company has
not received written notice of any claim asserted against the Company adverse to
its rights in such leasehold interests.
Section 6. Definitions.
-----------
6A. Definitions. For the purposes of this Agreement, the following
-----------
terms have the meanings set forth below:
"Affiliate" of any particular Person means any other Person
---------
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Benefit Arrangement" means each employment, severance or other
-------------------
similar contract, arrangement of policy (written or oral) and each plan or
arrangement (written or oral) providing for severance benefits, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan and (ii) covers any employee or former employee of the Company or any of
its Subsidiaries.
"Employee Plan" means each "employee benefit plan," as such term is
-------------
defined in Section 3(3) of ERISA, that (A)(i) is subject to any provision of
ERISA and (ii) is maintained or contributed to by the Company, or (B)(i) is
subject to any provision of Title IV or ERISA and (ii) is maintained or
contributed to by any of the Company's ERISA Affiliates.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"ERISA Affiliate" of any entity means any other entity that, together
---------------
with such entity, would be treated as a single employer under Section 414 of the
Code.
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 5%, on a fully-diluted
basis, of the Company's voting capital stock (a "5% Owner"), who is not
--------
controlling, controlled by or under common control with any such 5% Owner and
who is not the spouse or descendent (by birth or adoption) of any such 5% Owner
or a trust for the benefit of such 5% Owner and/or such other Persons.
"Investment" as applied to any Person means (i) any direct or indirect
----------
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
-15-
"Liens" means any mortgage, pledge, security interest, encumbrance,
-----
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof).
"MDCP" means Madison Dearborn Capital Partners, L.P., a Delaware
----
limited partnership.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
------------------
plan, as defined in Section 3(37) of ERISA.
"Permitted Encumbrances" shall mean (i) minor imperfections of title,
----------------------
if any, none of which materially detracts from the value or impairs the use of
any such asset subject thereto, (ii) lessor's, materialmen's, mechanics',
warehousemen's, carriers', repairmen's or other like liens arising in the
ordinary course of business for amounts not yet due and which are not in the
aggregate material to the Company and its Subsidiaries, (iii) liens for current
taxes, assessments or other governmental charges not yet due, (iv) statutory
liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, performance and return-of-
money bonds, and similar obligations which are not yet delinquent and (v) liens
or encumbrances arising or existing under the Company's and its Subsidiaries
existing credit facilities.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Sale" means any sale of Stockholder Shares to the public
-----------
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
"Qualified Public Offering" means the sale in an underwritten public
-------------------------
offering registered under the Securities Act of shares of the Company's Common
Stock having an aggregate offering value of at least $10 million.
"Registrable Securities" means (i) any Common Stock issued upon the
----------------------
conversion of any Class A Preferred issued pursuant to this Agreement or
otherwise acquired by any Purchaser, (ii) any Common Stock issued upon the
exercise of the Warrants and (iii) any Common Stock issued or issuable with
respect to the securities referred to in clause (i) and (ii) by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities when they have been distributed to the public pursuant to a offering
registered under the Securities Act or sold to the public through a broker,
dealer or market maker in compliance with Rule 144 under the Securities Act (or
any similar rule then in force). For purposes of this
-16-
Agreement, a Person shall be deemed to be a holder of Registrable Securities
whenever such Person has the right to acquire such Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or otherwise,
but disregarding any restrictions or limitations upon the exercise of such
right), whether or not such acquisition has actually been effected.
"Restricted Securities" means (i) the Class A Preferred issued
---------------------
hereunder, (ii) the Class A Preferred Stock of the Company outstanding prior to
the purchase and sale of Class A Preferred contemplated by this Agreement, (iii)
the Warrants issued hereunder, (iv) the Common Stock issued upon conversion of
Class A Preferred or upon exercise of the Warrants and (v) any securities issued
with respect to the securities referred to in clauses (i), (ii), (iii) or (iv)
above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when they have (a) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) been distributed to the public through
a broker, dealer or market maker pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act or become eligible for sale pursuant to
Rule 144(k) (or any similar provision then in force) under the Securities Act or
(c) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in paragraph 7C have been delivered by the
Company in accordance with paragraph 4(ii). Whenever any particular securities
cease to be Restricted Securities, the holder thereof shall be entitled to
receive from the Company, without expense, new securities of like tenor not
bearing a Securities Act legend of the character set forth in paragraph 7C.
"Sale of the Company" means the sale of the Company to an Independent
-------------------
Third Party or group of Independent Third Parties pursuant to which such party
or parties acquire (i) capital stock of the Company possessing the voting power
under normal circumstances to elect a majority of the Company's board of
directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar federal law then in force.
"Securities and Exchange Commission" means the United States
----------------------------------
Securities and Exchange Commission and any governmental body or agency
succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended, or any similar federal law then in force.
"Stockholder Shares" means (i) any Class A Preferred purchased
------------------
hereunder or otherwise acquired by any Purchaser, (ii) any Common Stock issued
or issuable directly or indirectly upon conversion of any Class A Preferred,
(iii) any Common Stock issued or issuable directly or indirectly upon exercise
of the Warrants and (iv) any Common Stock or Class A Preferred issued
-17-
or issuable with respect to the securities referred to in clauses (i), (ii) and
(iii) above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Stockholder Shares, such shares shall cease
to be Stockholder Shares when they have been (a) effectively registered under
the Securities Act and disposed of in accordance with the registration statement
covering them or (b) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force).
"Subsidiary" means, with respect to any Person, any corporation,
----------
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Underlying Common Stock" means (i) the Common Stock issued or
-----------------------
issuable upon conversion of the Class A Preferred or upon exercise of the
Warrants and (ii) any Common Stock issued or issuable with respect to the
securities referred to in clause (i) above by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. For purposes of this Agreement, any
Person who holds Class A Preferred or Warrants shall be deemed to be the holder
of the Underlying Common Stock obtainable upon conversion of the Class A
Preferred or exercise of the Warrants in connection with the transfer thereof or
otherwise regardless of any restriction or limitation on the conversion of the
Class A Preferred or exercise of the Warrants. As to any particular shares of
Underlying Common Stock, such shares shall cease to be Underlying Common Stock
when they have been (a) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them, (b)
distributed to the public through a broker, dealer or market maker pursuant to
Rule 144 under the Securities Act (or any similar provision then in force) or
(c) repurchased by the Company or any Subsidiary.
Section 7. Miscellaneous.
-------------
7A. Expenses. The Company shall pay, and hold each Purchaser
--------
harmless against liability for the payment of, (i) the reasonable expenses of
such Purchaser and its agents incurred in connection with the negotiation and
execution of this Agreement and the consummation of the
-18-
transactions contemplated by this hereby including, without limitation, the
reasonable fees and expenses of each Purchaser's special counsel, and
reimbursement or payment therefor shall be made at the Closing, (ii) the fees
and expenses incurred with respect to any amendments or waivers (whether or not
the same become effective) under or in respect of this Agreement, the agreements
contemplated hereby or the Articles of Incorporation (including, without
limitation, in connection with any proposed merger, sale or recapitalization of
the Company); (iii) stamp and other taxes which may be payable in respect of the
execution and delivery of this Agreement or the issuance, delivery or
acquisition of any shares of Class A Preferred or any shares of Common Stock
issuable upon conversion of Class A Preferred; and (iv) the fees and expenses
incurred with respect to the enforcement of the rights granted under this
Agreement, the agreements contemplated hereby and the Articles of Incorporation.
7B. Remedies. Each holder of Class A Preferred and Underlying Common
--------
Stock shall have all rights and remedies set forth in this Agreement, the
Articles of Incorporation and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
7C. Legend. Each certificate or instrument representing Restricted
------
Securities shall be imprinted with a legend in substantially the following form:
"The securities represented by this certificate were originally
issued on November 27, and have not been registered under the
Securities Act of 1933, as amended. The transfer of the
securities represented by this certificate is subject to the
conditions specified in the Purchase Agreement, dated as of
November 27, 1996 and as amended and modified from time to time,
between the issuer (the "Company") and certain investors, and the
Company reserves the right to refuse the transfer of such
securities until such conditions have been fulfilled with respect
to such transfer. A copy of such conditions shall be furnished by
the Company to the holder hereof upon written request and without
charge."
7D. Registration Rights.
-------------------
(i) At any time more than 180 days following a Qualified Public
Offering, the holders of Registrable Securities may request up to two
registrations under the Securities Act of all or any portion of their
Registrable Securities on Form S-2 or S-3 or any similar short-form registration
("Short-Form Demand Registrations") if available; provided that the aggregate
-------------------------------
offering value of the securities so registered (net of all underwriting
discounts and sales commissions) is at least $3,000,000. Each request for a
Short-Form Demand Registration shall specify the approximate number of
Registrable Securities requested to be registered and the anticipated per share
price range for such offering. Within 10 days after receipt of any such
request, the Company shall give written
-19-
notice of such requested registration to all other holders of Registrable
Securities and shall include in such registration on a pro-rata basis all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 15 days after the receipt of the Company's
notice.
(ii) Whenever the Company proposes to register any of its Common Stock
or securities convertible into or exchangeable for Common Stock under the
Securities Act (other than a registration statement on Form S-8 or Form S-4 or
successor forms thereto) and the registration form to be used may be used for
the registration of shares of Registrable Securities, the Company will give
prompt written notice to all holders of Registrable Securities of its intention
to effect such a registration and, subject to the provisions of this paragraph
7D, shall include in such registration all Registrable Securities with respect
to which the Company has received written requests for inclusion within 30 days
after the receipt of the Company's notice (a "Piggyback Registration").
----------------------
(iii) If a Piggyback Registration is an underwritten primary
registration on behalf of the Company and the managing underwriter advises the
Company that in its opinion the number of shares requested to be included in
such registration exceeds the number of shares which can be sold in such
offering, the Company will include in such registration (i) first, the
securities the Company proposes to sell and (ii) second, the Registrable
Securities requested to be included in such registration together with the other
securities requested to be included in such registration by stockholders
exercising contractual piggyback registration rights, pro rata among the holders
of Registrable Securities and such other holders on the basis of the number of
shares requested to be included therein by each holder.
(iv) If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company's securities and the managing
underwriter advises the Company that in its opinion the number of shares
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities requested to be included therein by the holders initiating the
registration together with the other securities requested to be included in such
registration by stockholders exercising contractual rights to participate on a
pro rata basis with the initiating holder in any piggyback registration and (ii)
second, the Registrable Securities requested to be included in such registration
together with the other securities requested to be included in such registration
by stockholders exercising other contractual piggyback registration rights, pro
rata among the holders of Registrable Securities and such other holders on the
basis of the number of shares requested to be included therein by each holder.
(v) The Company shall bear the costs of (i) Short-Form Demand
Registrations and Piggyback Registrations pursuant to this paragraph 7D, and
(ii) each proposed registration which is initiated as a Short-Form Demand
Registration or Piggyback Registration, in each case including the reasonable
fees and expenses of one counsel for the selling holders of Registrable
Securities but excluding any underwriting discounts or commissions on the sale
of Registrable Securities or the fees and expenses of any additional counsel
retained by the selling holders of Registrable Securities.
-20-
The Company shall, and as a condition to the inclusion of Registrable Securities
of any holder in any registration, such holder shall, execute an underwriting
agreement or similar agreement in a form reasonably acceptable to the Company
and the underwriter(s), if any, for such offering containing customary
indemnification and holdback provisions and provisions obligating the selling
holders of Registrable Securities to supply customary information for inclusion
in the registration statement. Notwithstanding the foregoing, (i) no holder of
Registrable Securities shall be required to incur indemnification obligations in
excess of the net proceeds received by such holder pursuant to such registration
or that relate to information not supplied by such holder for inclusion in the
registration statement, and (ii) the Company shall indemnify each holder of
Registrable Securities with respect to liabilities arising from such
registration statement other than as a result of information supplied by such
holder of Registrable Securities for inclusion therein.
(vi) Each holder of Registrable Securities agrees not to effect any
public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 90-day
period beginning on the effective date of any underwritten Short-Form Demand
Registration or any underwritten Piggyback Registration in which Registrable
Securities are included (except as part of such underwritten registration) if so
requested by the underwriters managing the registered public offering.
(vii) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any underwritten
Short-Form Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-8 or any successor form), unless the underwriters managing the
registered public offering otherwise agree, and (ii) to cause each holder of its
Common Stock, or any securities convertible into or exchangeable or exercisable
for Common Stock, purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) to agree not to effect
any public sale or distribution (including sales pursuant to Rule 144) of any
such securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
7E. Restrictions on Transfer of Stockholder Shares.
----------------------------------------------
(i) Transfer of Stockholder Shares. No holder of Stockholder Shares,
------------------------------
or in the case of MDCP any Stockholder Shares or other shares of Common Stock,
shall sell, transfer, assign, pledge or otherwise dispose of (whether with or
without consideration and whether voluntarily or involuntarily or by operation
of law) any interest in Stockholder Shares (a "Transfer"), except pursuant to
--------
the provisions of this paragraph 7E or pursuant to a Sale of the Company or a
Public Sale. No holder of Stockholder Shares shall consummate any Transfer
(other than pursuant to a Public Sale or a Sale of the Company) until 30 days
after the later of the delivery to the Company and the other holders of
Stockholder Shares of such Person's Sale Notice (if any), unless the parties
-21-
to the Transfer have been finally determined pursuant to this paragraph 7E prior
to the expiration of such 30-day period (the "Election Period"). So long as any
---------------
Class A Preferred is outstanding, MDCP shall not Transfer any shares of capital
stock of the Company which are neither Stockholder Shares nor shares of Common
Stock without the prior written consent of the holders of a majority of
Stockholder Shares other than Stockholder Shares held by MDCP.
(ii) Participation Rights. At least 30 days prior to any Transfer of
--------------------
Stockholder Shares (other than pursuant to a Public Sale or Sale of the
Company), the holder of Stockholder Shares, or in the case of MDCP any
Stockholder Shares or other shares of Common Stock, making such Transfer (the
"Transferring Stockholder") shall deliver a written notice (the "Sale Notice")
------------------------- -----------
to the Company and the other holders of Stockholder Shares of the same class or
series as the shares of capital stock of the Company which the Transferring
Stockholder proposes to transfer (the "Other Stockholders"), specifying in
------------------
reasonable detail the identity of the prospective transferee(s), the class or
series of Stockholder Shares to be transferred, the number of shares to be
transferred and the terms and conditions of the Transfer. The Other
Stockholders may elect to participate in the contemplated Transfer at the same
price per share and on the same terms by delivering written notice to the
Transferring Stockholder within 30 days after delivery of the Sale Notice. If
any Other Stockholders have elected to participate in such Transfer, the
Transferring Stockholder and such Other Stockholders shall be entitled to sell
in the contemplated Transfer, at the same price and on the same terms, a number
of Stockholder Shares of such class or series equal to the product of (i) the
quotient determined by dividing the percentage of Stockholder Shares of such
class or series owned by such Person by the aggregate percentage of Stockholder
Shares of such class or series owned by the Transferring Stockholder and the
Other Stockholders participating in such sale and (ii) the number of Stockholder
Shares to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100 Stockholder
-----------
Shares of a certain class or series by the Transferring Stockholder, and if
the Transferring Stockholder at such time owns 30% of all Stockholder
Shares of such class or series and if one Other Stockholder elects to
participate and owns 20% of all Stockholder Shares of such class or series,
the Transferring Stockholder would be entitled to sell 60 such shares (30%
divided by 50% x 100 shares) and the Other Stockholder would be entitled to
sell 40 such shares (20% divided by 50% x 100 shares).
Each Transferring Stockholder shall use its best efforts to obtain the agreement
of the prospective transferee(s) to the participation of the Other Stockholders
in any contemplated Transfer, and no Transferring Stockholder shall transfer any
of its Stockholder Shares to any prospective transferee if such prospective
transferee(s) declines to allow the participation of the Other Stockholders.
Each Stockholder transferring Stockholder Shares pursuant to this paragraph
7E(ii) shall pay its pro rata share (based on the number of Stockholder Shares
to be sold) of the expenses incurred by the holders of Stockholder Shares in
connection with such transfer and shall be obligated to join on a pro rata basis
(based on the number of shares of capital stock to be sold) in any
indemnification or other obligations that the Transferring Stockholder agrees to
provide in connection with such transfer (other than any such obligations that
relate specifically to a particular holder of Stockholder Shares
-22-
such as indemnification with respect to representations and warranties given by
a holder of Stockholder Shares regarding such holder's title to and ownership of
Stockholder Shares; provided that no holder shall be obligated in connection
with such Transfer to agree to indemnify or hold harmless the transferees with
respect to an amount in excess of the net cash proceeds paid to such holder in
connection with such Transfer). In the event any Transfer by MDCP of shares of
capital stock of the Company gives any Person participation rights similar to
those set forth in this paragraph 7E under any agreement entered into prior to
the date hereof by and between the Company, MDCP and such other Person, MDCP
agrees that such participation rights shall reduce only the number of shares of
capital stock of the Company to be Transferred by MDCP in accordance with the
provisions of this paragraph 7E.
(iii) Permitted Transfers. The restrictions set forth in this
-------------------
paragraph 7E shall not apply with respect to any Transfer of Stockholder Shares
by any holder of Stockholder Shares among its Affiliates (collectively referred
to herein as "Permitted Transferees"); provided that the restrictions contained
---------------------
in this paragraph 7E shall continue to be applicable to the Stockholder Shares
after any such Transfer and provided further that the transferees of such
Stockholder Shares shall have agreed in writing to be bound by the provisions of
this Agreement affecting the Stockholder Shares so transferred.
Notwithstanding anything contained herein to the contrary, the parties hereto
presently contemplate, acknowledge and agree that within 90 days from the date
hereof MDCP may sell, assign, transfer and convey 72 shares of Class A Preferred
and Warrants to purchase 2,988 shares of Common Stock purchased hereunder for an
aggregate purchase price of $72,000 to an entity to be formed by Xxxxxx Capital
Management, and upon the consummation of such transaction it is intended that
such newly-formed entity shall have all of the rights and obligations of each
Purchaser and holder of Class A Preferred, Warrants or Underlying Common Stock
hereunder.
(iv) Termination of Restrictions. The provisions of this paragraph 7E
---------------------------
shall terminate upon completion of a Qualified Public Offering.
7F. Sale of the Company.
-------------------
(i) If the board of directors of the Company, and holders of at least
a majority of all Common Stock outstanding approve a Sale of the Company (the
"Approved Sale"), the holders of Underlying Common Stock shall consent to and
--------------
raise no objections against the Approved Sale of the Company, and if the
Approved Sale of the Company is structured as a sale of stock, the holders of
Underlying Common Stock (determined as of the date of the consummation of the
Approved Sale) shall agree to sell all shares of Underlying Common Stock on the
terms and conditions so approved. The holders of Underlying Common Stock shall
take all necessary and desirable actions in connection with the consummation of
the Approved Sale.
(ii) Upon the consummation of the Approved Sale, each holder of
Underlying Common Stock shall receive the form and amount of consideration as
set forth in subparagraph (v) below.
-23-
(iii) The holders of Underlying Common Stock shall bear their pro-rata
share (based upon the number of shares sold) of the costs of any sale of
Underlying Common Stock pursuant to an Approved Sale to the extent such costs
are incurred for the benefit of all holders of Underlying Common Stock and are
not otherwise paid by the Company or the acquiring party. Costs incurred by
holders of Underlying Common Stock on their own behalf shall not be considered
costs of the transaction hereunder. In addition, each Person transferring
Underlying Common Stock pursuant to this paragraph 7F shall be obligated to join
on a pro rata basis (based on the number of shares of Underlying Common Stock
to be transferred) in any indemnification or other obligations that the Board
agrees to provide in connection with such transfer (other than any such
obligations that relate specifically to a particular Person such as
indemnification with respect to representations and warranties given by a Person
regarding such Person's title to and ownership of Underlying Common Stock);
provided that no holder shall be obligated in connection with such transaction
to agree to indemnify or hold harmless the transferees with respect to an amount
in excess of the net cash proceeds paid to such holder in connection with such
transaction.
(iv) The provisions of this paragraph 7F shall terminate upon the
completion of a Qualified Public Offering.
(v) In the event of a Sale of the Company, each holder of Underlying
Common Stock shall receive in exchange for all of its Underlying Common Stock,
the same portion of the aggregate consideration from such transaction that such
holder of Underlying Common Stock would have received if such aggregate
consideration had been distributed by the Company in complete liquidation
pursuant to the rights and preferences set forth in the Company's Articles of
Incorporation as in effect immediately prior to such transaction. Each holder
of Underlying Common Stock shall take all necessary or desirable actions in
connection with the allocation and distribution of the aggregate consideration
from such transaction as reasonably requested by the Company in order to
effectuate the provisions of this paragraph 7F.
7G. Purchaser's Investment Representations. Each Purchaser hereby
--------------------------------------
represents and warrants to the Company as follows: (i) this Agreement has been
duly authorized, executed and delivered by Purchaser and constitutes a valid and
legally binding obligation of such Purchaser enforceable in accordance with its
terms, (ii) the execution, delivery and performance of this Agreement by
Purchaser does not conflict with, violate or result in the breach of any
agreement, instrument, order, judgement, decree, law or governmental regulation
to which such Purchaser is a party or by which it is bound, (iii) Purchaser is
an "Accredited Investor" as defined in Regulation D promulgated under the
Securities Act and has substantial experience in evaluating and investing in
similar private placement transactions, is capable of evaluating the merits and
risks of this investment in the Company and has the capacity to protect its own
interests, (iv) Purchaser understands and acknowledges that the purchase of
Class A Preferred and Warrants hereunder represents a speculative investment,
and that Purchaser is able, without impairing its financial condition, to hold
such investment for an indefinite period of time and/or to suffer a complete
loss of such investment, (v) Purchaser is acquiring the Restricted Securities
purchased hereunder for its own account with the present intention of holding
such securities for purposes of investment, and
-24-
that it has no intention of selling such securities in a public distribution in
violation of the federal securities laws or any applicable state securities
laws, and (vi) Purchaser is aware of and has investigated the Company's
business, management and financial condition, has had a satisfactory opportunity
to ask questions of, and receive answers from, agents and employees of the
Company concerning the business of the Company and the terms and conditions of
this transaction and has had access to such other information about the Company
as Purchaser deemed necessary or desirable to reach an informed and
knowledgeable decision to purchase Class A Preferred and Warrants.
7H. Consent to Amendments. Except as otherwise expressly provided
---------------------
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of at least a majority of the outstanding Class A Preferred; provided
that if there is no Class A Preferred outstanding, the provisions of this
Agreement may be amended and the Company may take any action herein prohibited,
only if the Company has obtained the written consent of the holders of at least
a majority of the Underlying Common Stock; provided further, that no amendment
shall be enforceable against one holder of Stockholder Shares without also being
enforceable against all other holders of Stockholder Shares. In exercising its
rights hereunder, the Company shall exercise such rights in the same manner with
respect to each holder of Class A Preferred, Warrants or Underlying Common
Stock, as applicable. The Company shall not enter into any other agreement or
conduct any course of dealing which alters the rights or obligations of any
holder of Class A Preferred, Warrants or Underlying Common Stock, without first
offering to each other holder of Class A Preferred, Warrants or Underlying
Common Stock, as applicable, the opportunity to enter into such agreement or
course of dealing. No other course of dealing between the Company and the
holder of any Class A Preferred, Warrant or Underlying Common Stock or any
delay in exercising any rights hereunder or under the Articles of Incorporation
shall operate as a waiver of any rights of any such holders. For purposes of
this Agreement, shares of Class A Preferred or Underlying Common Stock held by
the Company or any Subsidiaries shall not be deemed to be outstanding. The
failure of any party at any time to insist upon strict performance of any
condition, promise, agreement or understanding set forth herein shall not be
construed as a waiver or relinquishment of the right to insist upon strict
performance of the same or any other condition, promise, agreement or
understanding at a future time.
7I. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby for a
period of one year, regardless of any investigation made by any Purchaser or on
its behalf.
7J. Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
-25-
7K. Severability. Whenever 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 is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
7L. Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
7M. Descriptive Headings; Interpretation. The descriptive headings
------------------------------------
of this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation.
7N. Governing Law. All issues and questions concerning the
-------------
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of Nevada, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the State of Nevada or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Nevada.
7O. Notices. All notices, demands or other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Purchaser at the address indicated on the
Schedule of Purchasers and to the Company at the address indicated below:
Xxxxx Holdings, Inc.
00000 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: President
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
7P. Consideration for Warrants. The Purchasers and the Company
--------------------------
acknowledge and agree that the fair market value of the Class A Preferred issued
hereunder is $19,170,000 and the fair market value of the Warrants issued
hereunder is $830,000 and that, for all purposes (including tax and accounting),
the consideration for the issuance of the Warrants shall be allocated by each
Purchaser and the Company as set forth on the Schedule of Purchasers attached
hereto. Each
-26-
Purchaser and the Company shall file their respective federal, state and local
tax returns in a manner which is consistent with such valuation and allocation
and shall not take any contrary position with any taxing authority.
7Q. Understanding Among the Purchasers. The determination of each
----------------------------------
Purchaser to purchase the Class A Preferred pursuant to this Agreement has been
made by such Purchaser independent of any other Purchaser and independent of any
statements or opinions as to the advisability of such purchase or as to the
properties, business, prospects or condition (financial or otherwise) of the
Company and its Subsidiaries which may have been made or given by any other
Purchaser or by any agent or employee of any other Purchaser.
* * * * *
-27-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
XXXXX HOLDINGS, INC.
By: ________________________________
Its: _______________________________
PURCHASERS
CALIFORNIA STATE TEACHERS'
RETIREMENT SYSTEM
By: ________________________________
Its: _______________________________
CHILMARK FUND II, L.P.
By: CHILMARK II, L.L.C.
Its: General Partner
By: CHILMARK HOLDINGS, L.L.C.
Its: sole member
By: ________________________________
Its: _______________________________
MADISON DEARBORN CAPITAL
PARTNERS, L.P.
By: MADISON DEARBORN PARTNERS,
L.P.
Its: General Partner
By: MADISON DEARBORN PARTNERS,
INC.
Its: General Partner
By: ______________________________
Its: ______________________________
SCHEDULE OF PURCHASERS
----------------------
Total No. of
No. of Purchase Shares
Shares Price issuable
of for upon Purchase
Names and Class A Class A Exercise of Price for
Addresses Preferred Preferred Warrant Warrant
--------- --------- --------- ----------- ---------
California State Teachers' 17,000 $16,294,500 705,500 $705,500
Retirement System
x/x Xxxxxx Xxxxxxx Xxxxxxxxxx
0000 Avenue of the Americas
Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Chilmark Fund II, L.P. 1,000 $ 958,500 41,500 $ 41,500
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Madison Dearborn Capital 2,000 $ 1,917,000 83,000 $ 83,000
Partners, L.P.
Three First Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxx
------- ----------- -------- ---------
TOTAL 20,000 $19,170,000 830,000 $830,000
