Exhibit 99.2
EXECUTION COPY
--------------------------------------------------------------------------------
NOTE AND WARRANT PURCHASE AGREEMENT
By and Between
PAC-WEST TELECOMM, INC.
AND
DEUTSCHE BANK AG - LONDON ACTING THROUGH
DB ADVISORS, LLC AS INVESTMENT ADVISOR
Dated as of October 17, 2003
--------------------------------------------------------------------------------
Table of Contents
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions............................................... 1
ARTICLE II
PURCHASE AND SALE OF INTERESTS
SECTION 2.01 Sale and Issuance of Notes and Warrants................... 7
SECTION 2.02 Closing................................................... 7
SECTION 2.03 Closing Deliveries by the Company......................... 7
SECTION 2.04 Closing Deliveries by the Purchaser....................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
SECTION 3.01 Organization, Authority and Qualification of the Company.. 8
SECTION 3.02 Subsidiaries.............................................. 9
SECTION 3.03 Capitalization............................................ 9
SECTION 3.04 No Conflict............................................... 10
SECTION 3.05 Governmental Consents and Approvals....................... 10
SECTION 3.06 Compliance with Laws...................................... 10
SECTION 3.07 Financial Information; Books and Records.................. 10
SECTION 3.08 Litigation................................................ 10
SECTION 3.09 SEC Reports............................................... 11
SECTION 3.10 Valid Issuance of the Note, Warrants and Warrant Shares... 11
SECTION 3.11 Absence of Certain Changes or Events; Absence of
Undisclosed Liabilities ................................ 11
SECTION 3.12 Material Contracts........................................ 12
i
SECTION 3.13 Intellectual Property..................................... 12
SECTION 3.14 Taxes..................................................... 12
SECTION 3.15 Insurance................................................. 13
SECTION 3.16 Investment Company........................................ 13
SECTION 3.17 Board Approval and Recommendation......................... 13
SECTION 3.18 Brokers................................................... 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
SECTION 4.01 Organization and Authority of the Purchaser............... 14
SECTION 4.02 No Conflict............................................... 14
SECTION 4.03 Restricted Securities..................................... 14
SECTION 4.04 Accredited Investor....................................... 14
SECTION 4.05 Purchase Entirely For Own Account......................... 15
SECTION 4.06 Full Disclosure........................................... 15
SECTION 4.07 Investment Company........................................ 15
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 Conduct of Business Prior to the Closing.................. 15
SECTION 5.02 Access to Information..................................... 15
SECTION 5.03 Notice of Developments.................................... 16
SECTION 5.04 Shareholder and Bondholder Approval....................... 16
SECTION 5.05 Further Action............................................ 17
SECTION 5.06 Corporate Actions......................................... 17
SECTION 5.07 Prohibition Against Hedging............................... 17
ii
SECTION 5.08 Procedures for Transfer of Note or Warrant................ 18
SECTION 5.09 Director.................................................. 18
SECTION 5.10 No Solicitation of Transactions........................... 18
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01 Conditions to Obligations of the Purchaser................ 19
SECTION 6.02 Conditions to Obligations of the Company.................. 21
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Survival of Representations and Warranties................ 22
SECTION 7.02 Indemnification by the Company............................ 22
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination............................................... 24
SECTION 8.02 Effect of Termination..................................... 25
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Amendment; Waiver......................................... 26
SECTION 9.02 Confidentiality........................................... 26
SECTION 9.03 Expenses.................................................. 26
SECTION 9.04 Notices................................................... 27
SECTION 9.05 Severability.............................................. 27
SECTION 9.06 Assignment................................................ 28
SECTION 9.07 Third Party Beneficiaries and Transfers................... 28
SECTION 9.08 Governing Law; Consent to Jurisdiction.................... 28
iii
SECTION 9.09 Waiver of Jury Trial...................................... 28
SECTION 9.10 Entire Agreement.......................................... 28
SECTION 9.11 Headings.................................................. 29
SECTION 9.12 Counterparts.............................................. 29
SECTION 9.13 Public Announcements...................................... 29
iv
EXECUTION COPY
NOTE AND WARRANT PURCHASE AGREEMENT, dated as of October 17, 2003
(the "Agreement"), by and between PAC-WEST TELECOMM, INC. (the "Company"), a
California corporation, and Deutsche Bank AG - London acting through DB
Advisors, LLC as investment advisor (the "Purchaser").
WHEREAS, the Company desires to sell, and the Purchaser desires to
buy, a senior secured promissory note in the principal amount of $40,000,000
(the "Note"), substantially in the form attached hereto as Exhibit A;
WHEREAS, the Company desires to sell, and the Purchaser desires to
buy, warrants to purchase 26,666,667 shares of Common Stock of the Company (the
"Warrants"), substantially in the form attached hereto as Exhibit B; and
WHEREAS, in connection with the acquisition of the Note and the
Warrants by the Purchaser, and the sale of the Note and the Warrants by the
Company, the Purchaser and the Company will enter into the Ancillary Agreements.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Company and the Purchaser
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such
specified Person;
"Agreement" shall have the meaning set forth in the Preamble.
"Ancillary Agreements" means the Security Agreement and the
Registration Rights Agreement.
"Bondholder Tender and Consent" means (i) the consent of the holders
of at least a majority of the outstanding principal amount of the Senior
Notes to an amendment and/or waiver of those provisions of the indenture
governing the Senior Notes necessary or appropriate to effect the
transactions contemplated by this Agreement and the Ancillary Agreements
and (ii) the tender by the holders thereof and the purchase by the Company
of at least a majority of the outstanding principal amount of the Senior
Notes for cash, in each case on terms and conditions reasonably acceptable
to the Purchaser and the Company, including with respect to the tender and
purchase of the Senior Notes, the
price to be paid for the Senior Notes, the aggregate amount of Senior
Notes to be purchased and any minimum condition.
"Business Day" means any day that is not a Saturday, a Sunday or
other day on which commercial banks are required or authorized by Law to
be closed in the State of New York.
"Change in the Company Recommendation" shall have the meaning set
forth in Section 5.10(c).
"Claims" means any and all administrative, regulatory or judicial
actions, suits, petitions, appeals, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigations, proceedings,
consent orders or consent agreements.
"Closing" shall have the meaning set forth in Section 2.02.
"Closing Date" shall have the meaning set forth in Section 2.02.
"Common Stock" means the common stock, $0.001 par value per share,
of the Company.
"Common Stock Equivalents" means any issuance of any warrants,
options or subscription or purchase rights with respect to shares of
Common Stock and the issuance of any securities convertible into, or
exchangeable for, shares of Common Stock and the issuance of any warrants,
options or subscription or purchase rights with respect to such
convertible or exchangeable securities.
"Company" shall have the meaning set forth in the Preamble.
"Company Recommendation" shall have the meaning set forth in Section
5.04(a).
"Company Shareholders' Meeting" shall have the meaning set forth in
Section 5.04(a).
"Company Subsidiaries" shall have the meaning set forth in Section
3.02.
"Competing Transaction" means any of the following (other than the
transactions contemplated by this Agreement and the Ancillary Agreements):
(i) any merger, consolidation, share exchange, business combination,
recapitalization or other similar transaction involving the Company; (ii)
any sale, lease, exchange, transfer or other disposition of all or
substantially all of the assets of the Company; (iii) any sale, exchange,
transfer or other disposition of 15% or more of any class of equity
securities of the Company; (iv) any tender offer or exchange offer that,
if consummated, would result in any Person beneficially owning 15% or more
of the Common Stock of the Company; (v) any financing provided to the
Company in exchange for debt or equity securities issued by the Company;
or (vi) any other transaction the consummation of which would reasonably
be expected to impede, interfere with, prevent or materially delay any of
the transactions contemplated by this Agreement or the Ancillary
Agreements.
2
"Competitor" means any Person, firm, partnership, corporation or
other entity that (i) is engaged directly or indirectly in the business of
providing telecommunication services of the type (a) provided by the
Company or (b) that the Company or its subsidiaries have taken significant
actions to begin providing or (ii) that controls, or is under common
control with, any Person, firm, partnership, corporation or other entity
identified in clause (i) above.
"Disclosure Schedule" means the schedule that modifies the
representations, warranties or covenants of the Company contained herein
and which is an integral part of this Agreement. The Disclosure Schedule,
which shall identify the representation and warranty to which the
exception identified therein relates, will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in Article
III.
"Disposition" shall have the meaning set forth in Section 5.07.
"Encumbrance" means any security interest, pledge, hypothecation,
mortgage, lien including, without limitation, Tax liens (other (a) liens
for Taxes not yet due and payable or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings, (b) purchase
money liens and liens securing rental payments under capital lease
arrangements, and (c) other liens arising in the ordinary course of
business and not incurred in the borrowing of money), charge, or
encumbrance.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
"Final Order" means action taken by the relevant regulatory
authority relating to this Agreement or the Ancillary Agreements or the
transactions contemplated hereby or thereby which has not been reversed,
stayed, enjoined, set aside, annulled or suspended, with respect to which
any waiting period prescribed by law before the transactions contemplated
hereby or thereby may be consummated has expired, and as to which all
conditions to the consummation of such transactions prescribed by Law,
regulation or order have been satisfied.
"Financial Statements" means the audited consolidated balance sheet
of each of the Company and its consolidated Subsidiaries for each of the
last three fiscal years ended December 31, 2002, 2001 and 2000 and the
related audited consolidated statements of income, retained earnings,
stockholders' equity and changes in financial position, together with the
related notes and schedules thereto, accompanied by the reports of
accountants.
"GAAP" means the generally accepted accounting principles applied in
the United States.
"Governmental Authority" means any United States or non-United
States federal, national, supranational, state, provincial, local, or
similar government, governmental, regulatory or administrative authority,
agency or commission or any court, tribunal, or judicial or arbitral body,
including the SEC or the appropriate state public utilities commissions.
3
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any
Governmental Authority.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and all rules and regulations promulgated thereunder.
"Indebtedness" of any Person means (a) all indebtedness of such
Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) all obligations
of such Person to pay the deferred purchase price of property or services
(other than trade payables and accrued liabilities arising in the ordinary
course of business), (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of
the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all capitalized
lease obligations of such Person, (f) all obligations, contingent or
otherwise, of such Person under acceptance, letter of credit or similar
facilities securing Indebtedness, (g) all unconditional obligations of
such Person to purchase, redeem, retire, defease or otherwise acquire for
value any capital stock of such Person or any warrants, rights or options
to acquire such capital stock, (h) all Indebtedness of any other Person of
the type referred to in clauses (a) through (g) guaranteed by such Person
or for which such Person shall otherwise (including pursuant to any
keepwell, makewell or similar arrangement) become directly or indirectly
liable (other than indirectly as a result of a performance guarantee not
entered into with respect to Indebtedness), and (i) all third party
Indebtedness of the type referred to in clauses (a) through (h) above
secured by any lien or security interest on property (including accounts
and contract rights) owned by the Person whose Indebtedness is being
measured, even though such Person has not assumed or become liable for the
payment of such third party Indebtedness.
"Intellectual Property" shall have the meaning set forth in Section
3.13.
"Interim Financial Statements" means the unaudited consolidated
balance sheet of the Company and its consolidated Subsidiaries as of March
31, 2003 and June 30, 2003 and related consolidated statements of income,
retained earnings, stockholders' equity and changes in financial position
together with the related notes and schedules thereto.
"Investment Company Act" means the Investment Company Act of 1940,
as amended, and all rules and regulations promulgated thereunder.
"IRS" means the Internal Revenue Service of the United States.
"Law" means any United States or non-United States federal,
national, supranational, state, provincial, local or similar statute, law,
ordinance, regulation, rule, code, order, requirement or rule of law
(including, without limitation, common law).
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising
under any Law, Action or Governmental
4
Order and those arising under any contract, agreement, arrangement,
commitment or undertaking.
"Loss" shall have the meaning set forth in Section 7.02.
"Material Adverse Effect" means any circumstance, change in or
effect on the Company or its business that, individually or in the
aggregate with all other circumstances, changes in or effects on the
Company is or is reasonably likely to be materially adverse to the
business, operations, assets or liabilities (including, without
limitation, contingent liabilities), results of operations or the
financial condition of the Company taken as a whole; provided, however,
that the term "Material Adverse Effect" shall not include (a) any
circumstance, change or effect that arises out of or is attributable to
(i) any change in the market for the Common Stock, including, without
limitation, changes in the market price or liquidity or (ii) general
economic conditions affecting the United States and California economy
generally, (b) any other circumstance, change or effect set forth in
Section 1.01 of the Disclosure Schedule or disclosed in other sections of
the Disclosure Schedule such that the Purchaser shall have been reasonably
notified of such circumstance, change or effect or (c) any circumstance,
change or effect disclosed in the Company's SEC Reports.
"Material Contract" shall have the meaning set forth in Section
3.12.
"Note" shall have the meaning set forth in the Recitals.
"Note Tender" means the tender offer to purchase at least a majority
of the outstanding principal amount of the Senior Notes for cash and
consent solicitation, on terms and conditions reasonably acceptable to the
Purchaser and the Company, including without limitation the price to be
paid for the Senior Notes, the aggregate amount of Senior Notes to be
purchased and any minimum condition.
"Permitted Transferee" means the Persons set forth on Schedule 1 to
this Agreement.
"Person" means any individual, partnership, firm, corporation,
limited liability company, association, trust, unincorporated organization
or other entity, as well as any syndicate or group that would be deemed to
be a person under Section 13(d)(3) of the Exchange Act.
"Preferred Stock" means the preferred stock, $0.001 par value per
share, of the Company.
"Proxy Statement" shall have the meaning set forth in Section
5.04(a).
"Purchase Price" shall have the meaning set forth in Section 2.01.
"Purchase Price Allocation" shall have the meaning set forth in
Section 2.01.
"Purchaser" shall have the meaning set forth in the Preamble.
5
"Purchaser Expenses" shall have the meaning set forth in Section
9.03.
"Purchaser Indemnified Party" shall have the meaning set forth in
Section 7.02(a).
"Registration Rights Agreement" means the Registration Rights
Agreement substantially in the form attached hereto as Exhibit C to be
entered into by the Purchaser and the Company as of the Closing Date.
"Required Shareholder Approval" means the approval by a majority of
the total votes cast in person or by proxy of the issuance of the Warrants
and the shares of Common Stock issuable upon exercise of the Warrants on
the terms and conditions set forth herein and shareholder approval of any
other aspects of the transactions contemplated by this Agreement, which
the board of directors of the Company may reasonably determined to be
desirable or appropriate to submit to the shareholders of the Company for
approval.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" shall have the meaning set forth in Section 3.09.
"Securities Act" means the Securities Act of 1933, as amended, and
all rules and regulations promulgated thereunder.
"Security Agreement" means the Guaranty and Security Agreement
substantially in the form attached hereto as Exhibit D to be entered into
by the Purchaser, the Company and DB Trust Company Americas as Collateral
Agent as of the Closing Date.
"Senior Notes" means the Company's 13 1/2% senior notes due 2009.
"Subsidiaries" means, with respect to any Person, any and all
corporations, partnerships, limited liability companies, joint ventures,
associations and other entities controlled by such Person directly or
indirectly through one or more intermediaries.
"Superior Proposal" means a bona fide written proposal not solicited
in violation of Section 5.10 made by a third party to consummate any of
the following transactions: (i) a merger, consolidation, share exchange,
business combination or other similar transaction involving the Company
pursuant to which the shareholders of the Company immediately preceding
such transaction would hold less than 50% of the equity interest in the
surviving or resulting entity of such transaction; (ii) the acquisition by
any Person or group (including by means of a tender offer or an exchange
offer or a two-step transaction involving a tender offer followed with
reasonable promptness by a cash-out merger involving the Company),
directly or indirectly, of at least a majority of the then outstanding
shares of Common Stock of the Company; (iii) any sale, lease, exchange,
transfer or other disposition of all or substantially all of the assets of
the Company; or (iv) any financing provided to the Company by a Person or
group in exchange for debt or equity securities issued by the Company, in
each case, on terms that the Company's board of directors determines, in
its good faith judgment (after consultation with its financial advisor)
that would if consummated (taking into account such factors as the
6
Company's board of directors in good xxxxx xxxxx relevant, including the
identity of the offeror and all legal, financial, regulatory and other
aspects of the proposal, including the terms of any financing and the
likelihood that the transaction will be consummated), be more favorable to
the Company and its shareholders than the transactions contemplated by
this Agreement and the Ancillary Agreements.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation, taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers'
compensation, unemployment compensation, or net worth; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer,
value added, or gains taxes; license, registration and documentation fees;
and customs' duties, tariffs, and similar charges.
"Tax Returns" shall have the meaning set forth in Section 3.14.
"Termination Date" shall have the meaning set forth in Section
8.01(b).
"Third Party Claims" shall have the meaning set forth in Section
7.02(c).
"Warrants" shall have the meaning set forth in the Recitals.
ARTICLE II
PURCHASE AND SALE OF INTERESTS
SECTION 2.01 Sale and Issuance of Notes and Warrants. Subject to the
terms and conditions of this Agreement, the Company hereby agrees to sell and
issue to the Purchaser, and the Purchaser hereby agrees to purchase from the
Company, the Note and the Warrants in exchange for cash in the amount of
$40,000,000 (the "Purchase Price"). The Company and Purchaser shall prior to
Closing agree on the allocation of the Purchase Price between the Note and the
Warrants in form and substance reasonably acceptable to both parties (the
"Purchase Price Allocation")
SECTION 2.02 Closing. Subject to the terms and conditions of this
Agreement, the issuance, sale and purchase of the Note and Warrants contemplated
by this Agreement shall take place at a closing (the "Closing") to be held at
the offices of Jenner & Block LLC, Xxx XXX Xxxxx, Xxxxxxx, Xxxxxxxx 00000, two
Business Days following the satisfaction or waiver of all other conditions to
the obligations of the parties set forth in Article VI (other than those
conditions that by their nature are to be fulfilled at Closing), or at such
other place or at such other time or such other date as the Purchaser and the
Company shall mutually agree upon in writing (the date on which the Closing
takes place being the "Closing Date").
SECTION 2.03 Closing Deliveries by the Company. At the Closing, the
Company shall deliver, or cause to be delivered, to the Purchaser:
7
(a) the Note executed by the Company;
(b) the Warrants executed by the Company;
(c) the Purchase Price Allocation executed by the Company; and
(d) the certificates, opinions and other documents required to be
delivered pursuant to Section 6.01 and any other certificates or documents
reasonably requested by the Purchaser.
SECTION 2.04 Closing Deliveries by the Purchaser. At the Closing,
the Purchaser shall deliver, or cause to be delivered, to the Company:
(a) the Purchase Price, net of the Purchaser Expenses, by wire
transfer in immediately available funds to an account designated in
writing by the Company to the Purchaser not later than three Business Days
prior to the Closing Date;
(b) the Purchase Price Allocation executed by the Purchaser; and
(c) the certificates, opinions and other documents required to be
delivered pursuant to Section 6.02 and any other certificates or documents
reasonably requested by the Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
As an inducement to the Purchaser to enter into this Agreement, the
Company hereby represents and warrants to the Purchaser as follows, except as
set forth in the Disclosure Schedule:
SECTION 3.01 Organization, Authority and Qualification of the
Company. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all necessary corporate power and authority to enter into this Agreement and the
Ancillary Agreements, to carry out its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The Company is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the failure to do so would have a Material Adverse Effect.
The execution and delivery of this Agreement and the Ancillary Agreements by the
Company, the performance by the Company of its respective obligations hereunder
and thereunder and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
action on the part of the Company and its stockholders, as the case may be. This
Agreement has been, and upon their execution and delivery, the Ancillary
Agreements, the Note and the Warrants shall have been, duly executed and
delivered by the Company, and (assuming in the case of this Agreement and the
Ancillary Agreements, due authorization, execution and delivery by the
Purchaser) shall constitute, legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, fraudulent conveyances,
8
moratorium or other similar Laws affecting the validity or enforcement of
creditors rights generally and the effect of general principles of equity
(regardless of whether considered in a proceeding in equity or at Law).
SECTION 3.02 Subsidiaries. (a) Section 3.02 of the Disclosure
Schedule sets forth the subsidiaries of the Company (the "Company
Subsidiaries"). Each of the Company Subsidiaries does not conduct any business
and holds only de minimis assets. Neither the Company nor any of the Company
Subsidiaries is a member of (nor is any material part of their businesses
conducted through) any partnership nor is the Company or any of the Company
Subsidiaries a participant in any joint venture or similar arrangement that is
material to the Company.
(b) Each Company Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, (ii) has all necessary power and authority to own, operate or
lease the properties and assets owned, operated or leased by such Company
Subsidiary and to carry on its business as it has been and is currently
conducted by such Company Subsidiary and (iii) is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which the failure to
do so would have a Material Adverse Effect.
SECTION 3.03 Capitalization. (a) The authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock and 10,000,000 shares of
Preferred Stock. As of the date hereof, 36,513,977 shares of Common Stock were
issued and outstanding, all of which are validly issued, fully paid and
nonassessable, and no shares of Preferred Stock were issued and outstanding.
(b) There are no outstanding options, warrants, subscriptions,
calls, convertible securities, phantom equity, equity appreciation or similar
rights, or other rights, agreements, arrangements or commitments (contingent or
otherwise) (including, without limitation, any right of conversion or exchange
under any outstanding security, instrument or other agreement or any preemptive
right) obligating the Company to deliver or sell, or cause to be issued,
delivered or sold, any shares of its capital stock or other securities,
instruments or rights which are, directly or indirectly, convertible into or
exercisable or exchangeable for any shares of its capital stock. There are no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of its capital stock or to provide funds to, or
make any material investment (in the form of a loan, capital contribution or
otherwise) in, any other Person. There are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with respect
to the voting or transfer of any of the shares of Common Stock to which the
Company is a party. As of the date hereof, the Company has not granted or agreed
to grant any holders of shares of Common Stock or securities convertible into
Common Stock registration rights with respect to such shares under the
Securities Act.
(c) The outstanding shares of Common Stock are all duly and validly
authorized and issued, fully paid and nonassessable, and were issued in
accordance with the registration or qualification provisions of the Securities
Act, and any relevant state securities laws, or pursuant to valid exemptions
therefrom. None of the issued and outstanding shares of Common Stock was issued
in violation of any preemptive rights.
9
SECTION 3.04 No Conflict. The execution, delivery and performance of
this Agreement and the Ancillary Agreements by the Company do not and will not
(a) violate, conflict with or result in the breach of any provision of the
certificate of incorporation and by-laws of the Company, (b) conflict with or
violate any Law or Governmental Order applicable to the Company or any of its
assets, properties or businesses, or (c) conflict with, result in any breach of,
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of any Encumbrance on
any of the shares of Common Stock or any of the assets of the Company pursuant
to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease,
license, permit, franchise or other instrument or arrangement to which the
Company is a party or by which any of the shares of Common Stock or any of the
assets of the Company is bound or affected, other than such conflicts or
violations described in clauses (a) through (c) above as would not reasonably be
expected to have a Material Adverse Effect.
SECTION 3.05 Governmental Consents and Approvals. Other than as set
forth in Section 3.05 of the Disclosure Schedule, the execution, delivery and
performance of this Agreement and the Ancillary Agreements by the Company do not
and will not require any material consent, approval, authorization or other
order of, action by, filing with or notification to, any Governmental Authority.
SECTION 3.06 Compliance with Laws. (a) The Company has conducted and
continues to conduct its business, in all material respects, in accordance with
all Laws and Governmental Orders applicable to the Company or its properties or
business, and the Company is not in violation in any material respect of any Law
or Governmental Order.
(b) No Governmental Order has or, to the knowledge of the Company
after reasonable inquiry, could affect the legality, validity or enforceability
of this Agreement, any Ancillary Agreement or the consummation of the
transactions contemplated hereby or thereby.
SECTION 3.07 Financial Information; Books and Records. The Financial
Statements and the Interim Financial Statements (i) were prepared in accordance
with the books of account and other financial records of the Company and its
consolidated Subsidiaries, (ii) present fairly the consolidated financial
condition and results of operations of the Company and its consolidated
Subsidiaries as of the dates thereof or for the periods covered thereby, and
(iii) have been prepared in accordance with GAAP applied on a basis consistent
with past practice (except as may be described in the notes thereto or, in the
case of the Interim Financial Statements as permitted by the Quarterly Reports
on Form 10-Q under the Exchange Act) and (iv) in the case of the Financial
Statements, include all adjustments that are necessary for a fair presentation
of consolidated financial condition and results of the operations as of the
dates thereof or for the periods covered thereby.
SECTION 3.08 Litigation. There are no material Actions by or against
the Company and relating to the Company or affecting any of the assets of the
Company pending before any Governmental Authority (or, to the knowledge of the
Company, after reasonable inquiry, threatened to be brought by or before any
Governmental Authority) and neither the Company nor any of its assets or
properties is subject to any material Governmental Order (nor,
10
to the knowledge of the Company, after reasonable inquiry, are there any such
material Governmental Orders threatened to be imposed by any Governmental
Authority).
SECTION 3.09 SEC Reports. The filings required to be made by the
Company under the Securities Act and the Exchange Act (the "SEC Reports") have
been filed in a timely manner with the SEC, including all forms, statements,
reports, written agreements and all documents, exhibits, amendments and
supplements appertaining thereto, and the Company has complied in all material
respects with all applicable requirements of the appropriate act and the rules
and regulations thereunder. As of their respective dates, the SEC Reports did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Company has timely filed all certifications and statements required by (a) Rule
13a-14 or Rule 15d-14 under the Exchange Act or (b) 18 U.S.C. Section 1350
(Section 906 of the Xxxxxxxx-Xxxxx Act of 2002) with respect to the SEC Reports
filed after July 30, 2002. The Company maintains disclosure controls and
procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange Act, and
such controls and procedures are designed to provide reasonable assurance that
all material information concerning the Company is made known on a timely basis
to the individuals responsible for the preparation of the Company's SEC filings
and other public disclosure documents. The Company maintains complete copies of
all policies, manuals and other documents promulgating such disclosure controls
and procedures (and all written descriptions thereof) in compliance with
applicable Law. As used in this Section 3.09, the term "file" shall be broadly
construed to include any document or information "filed" or "furnished" to the
SEC.
SECTION 3.10 Valid Issuance of the Note, Warrants and Warrant
Shares. At Closing the Note will be duly authorized by the Company and, when
executed and delivered by the Company, will be a valid and binding obligation of
the Company enforceable in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
fraudulent conveyances, moratorium or other similar Laws affecting the validity
or enforcement of creditors rights generally and the effect of general
principles of equity (regardless of whether considered in a proceeding in equity
or at Law). The Warrants, when issued in compliance with the provisions of this
Agreement, will be duly authorized and executed by the Company and will be valid
and binding obligations of the Company enforceable in accordance with their
terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, fraudulent conveyances, moratorium or other similar Laws
affecting the validity or enforcement of creditors rights generally and the
effect of general principles of equity (regardless of whether considered in a
proceeding in equity or at Law). The shares of Common Stock issuable upon
exercise of the Warrants have been duly authorized and validly reserved for
issuance and, upon issuance in accordance with the terms of the Warrants for the
consideration expressed therein, will be duly and validly issued, fully paid,
and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer that result from applicable state and federal
securities laws.
SECTION 3.11 Absence of Certain Changes or Events; Absence of
Undisclosed Liabilities. (a) Except as disclosed in the SEC Reports, since June
30, 2003, the Company has conducted its business only in the ordinary course of
business consistent with past
11
practice and there has not been, and no fact or condition exists which would
have, a Material Adverse Effect.
(b) Other than as disclosed in the Financial Statements, the Company
has no Liabilities or obligations (whether absolute, accrued, contingent or
otherwise), other than (i) Liabilities or obligations related to the
transactions contemplated by this Agreement, (ii) Liabilities, obligations or
contingencies that are accrued or reserved against in the Financial Statements
or disclosed in the notes thereto, (iii) Liabilities which were incurred after
June 30, 2003 in the ordinary course of business and would not be reasonably
expected to have a Material Adverse Effect or (iv) Liabilities that would not be
required by GAAP to be reflected in a consolidated corporate balance sheet.
SECTION 3.12 Material Contracts. (a) Each material contract to which
the Company is a party (a "Material Contract") (i) is valid and binding on the
parties thereto, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, fraudulent conveyances, moratorium or other similar Laws
affecting the validity or enforcement of creditors rights generally and the
effect of general principles of equity (regardless of whether considered in a
proceeding in equity or at Law), and is in full force and effect and (ii) upon
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, shall continue in full force and effect without penalty or
other adverse consequence. The Company is not in breach of, or default under,
any Material Contract.
(b) The Company has not received any notice of termination,
cancellation, breach or default under any Material Contract, and, to the
knowledge of the Company, after reasonable inquiry, no other party to any
Material Contract is in breach thereof or default thereunder.
SECTION 3.13 Intellectual Property. The Company owns and has good
title to, or are party to enforceable license agreements or possess other
sufficient rights permitting the Company the use of, all patents, patent rights,
trademarks, service marks, domain names, trade dress, logos, copyrights,
licenses, inventions, trade secrets, trade names and know-how (collectively,
"Intellectual Property") used in the conduct of its business as now conducted or
as currently proposed to be conducted, free from Encumbrances or other
restrictions, except where the failure to currently own or have permission to
use such rights would have a Material Adverse Effect. Except as would not have a
Material Adverse Effect, to the knowledge of the Company, after reasonable
inquiry, none of the products or operations of the Company, or the use by the
Company of any such Intellectual Property, infringes upon or otherwise violates,
any Intellectual Property owned by any other Person, and there is no pending or,
to the knowledge of the Company, after reasonable inquiry, threatened claim,
demand, litigation, investigation, arbitration or other proceeding against or
affecting the Company contesting the right of any of them to distribute or sell
any such product or to engage in any such operation, or to use any of such
Intellectual Property.
SECTION 3.14 Taxes. (a) All material returns and reports in respect
of Taxes ("Tax Returns") required to be filed by the Company and each of its
Subsidiaries (including any consolidated, combined or unitary Tax Returns) have
been timely filed (unless covered by valid extensions of the filing dates
therefor); (b) except where being contested in
12
good faith, all Taxes required to be shown on such Tax Returns or otherwise due
have been timely paid; (c) all such Tax Returns are true, correct and complete
in all material respects; (d) except for adjustments, actions or proceedings in
respect of which adequate reserves have been established in accordance with GAAP
applied on a basis consistent with past practice, (i) no adjustment relating to
such Tax Returns has been proposed formally or informally by any Tax authority
and, to the knowledge of the Company, after reasonable inquiry, no basis exists
for any such adjustment and (ii) there are no pending or, to the knowledge of
the Company, after reasonable inquiry, threatened actions or proceedings for the
assessment or collection of Taxes against the Company or any corporation that
was included in the filing of a Tax Return with the Company on a consolidated or
combined basis; and (e) there are no Tax liens filed against any assets of the
Company.
SECTION 3.15 Insurance. All material assets, properties and risks of
the Company are, and for the past five years have been, covered by valid and,
except for insurance policies that have expired under their terms in the
ordinary course, currently effective insurance policies or binders of insurance
issued in favor of the Company in such types and amounts and covering such risks
as are consistent with customary practices and standards of companies engaged in
businesses and operations similar to those of the Company.
SECTION 3.16 Investment Company. The Company is not, and immediately
after receipt of payment for the Note and Warrants will not be, an "investment
company" or an entity "controlled" by an "investment company" within the meaning
of the Investment Company Act and shall conduct its business in a manner so that
it will not become subject to the Investment Company Act.
SECTION 3.17 Board Approval and Recommendation. The Company's board
of directors, by resolutions duly adopted by unanimous vote of those voting at a
meeting duly called and held and not subsequently rescinded or modified in any
way, has duly (i) determined that this Agreement is fair to and in the best
interests of the Company and its shareholders, (ii) approved this Agreement and
the Ancillary Agreements and declared their advisability and (iii) recommended
that the shareholders of the Company approve the issuance of the Warrants and
the shares of Common Stock issuable upon the exercise of the Warrants
contemplated by this Agreement and the Ancillary Agreements and directed that
the issuance of the Warrants and the shares of Common Stock issuable upon the
exercise of the Warrants contemplated by this Agreement and the Ancillary
Agreements be submitted for consideration by the Company's shareholders at the
Company Stockholders' Meeting.
SECTION 3.18 Brokers. No placement agent, broker, finder or
investment banker (other than UBS Securities LLC) is entitled to any placement,
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements based
upon arrangements made by or on behalf of the Company.
13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
As an inducement to the Company to enter into this Agreement, the
Purchaser hereby represents and warrants to the Company as follows:
SECTION 4.01 Organization and Authority of the Purchaser. The
Purchaser is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has all necessary power and
authority to enter into this Agreement and the Ancillary Agreements to which it
is a party, to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated by this Agreement. The execution and
delivery by the Purchaser of this Agreement and the Ancillary Agreements, the
performance by the Purchaser of its obligations hereunder and thereunder and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby have been duly authorized by all requisite action on the part of the
Purchaser. This Agreement has been, and upon their execution and delivery the
Ancillary Agreements shall be, duly executed and delivered by the Purchaser, and
(assuming due authorization, execution and delivery by the Company) this
Agreement and the Ancillary Agreements shall constitute legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with their terms.
SECTION 4.02 No Conflict. The execution, delivery and performance by
the Purchaser of this Agreement and the Ancillary Agreements do not and will not
(a) violate, conflict with or result in the breach of any provision of the
organizational documents of the Purchaser, (b) conflict with or violate any Law
or Governmental Order applicable to the Purchaser or (c) conflict with, or
result in any breach of, constitute a default (or event which with the giving of
notice or lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which the Purchaser is a party,
which would adversely affect the ability of the Purchaser to carry out its
obligations under, and to consummate the transactions contemplated by, this
Agreement or by the Ancillary Agreements, except in the case of any of the
foregoing that would not be reasonably expected to have a material adverse
effect.
SECTION 4.03 Restricted Securities. Neither the offer nor the sale
of the Note and the Warrants purchased hereunder will be registered under the
Securities Act, or any state securities Laws. The Purchaser understands that the
offering and sale of the Note and the Warrants is intended to be exempt from
registration under the Securities Act, by virtue of Section 4(2) thereof and the
provisions of Regulation D promulgated thereunder, based, in part, upon the
representations, warranties and agreements of the Purchaser contained in this
Agreement.
SECTION 4.04 Accredited Investor. The Purchaser is an "accredited
investor" as such term is defined in Rule 501(a) of Regulation D under the
Securities Act.
14
SECTION 4.05 Purchase Entirely For Own Account. The Purchaser is
acquiring the Note and the Warrants to be acquired hereunder (and will acquire
the Common Stock upon exercise of the Warrants) for its own account, for
investment and not with a view to the public resale or distribution thereof, in
violation of any securities law. Except for the Permitted Transferees, the
Purchaser does not have, and as of the date hereof, has not engaged in any
negotiations, discussions or other communications with respect to, any contract,
agreement, understanding or arrangement with any Person to sell, grant or
transfer any portion of the Note or the Warrants.
SECTION 4.06 Full Disclosure. The Purchaser represents that it has
had the opportunity to ask questions of and receive answers from the Company
regarding the Note, the Warrant, the business, properties, prospects and
financial condition of the Company. Without limiting the foregoing, the
Purchaser has conducted both on-site and off-site business, financial and legal
due diligence of the Company. Notwithstanding the foregoing, no such diligence
shall have any impact on the accuracy of the Company's representations and
warranties hereunder and the Purchaser's remedies hereunder for any breaches of
such representations and warranties.
SECTION 4.07 Investment Company. The Purchaser is not an "investment
company" or an entity "controlled" by an "investment company" within the meaning
of the Investment Company Act.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 Conduct of Business Prior to the Closing. The Company
covenants and agrees that, between the date hereof and the time of the Closing,
the Company shall conduct its businesses in the ordinary course and consistent
with the Company's prior practice and in compliance in all material respects
with all applicable Laws. The Company shall not take any action that would, or
that is reasonably likely to, result in any of the representations and
warranties of the Company set forth in Article III (i) that are not qualified by
"materiality" or "material" or "Material Adverse Effect" to be untrue in any
material respect and (ii) that are qualified by "materiality" or "material" or
"Material Adverse Effect" to be untrue in any respect, as of the date made or as
of the Closing Date or in any of the conditions to the transactions contemplated
hereby and set forth herein not being satisfied.
SECTION 5.02 Access to Information. From the date hereof until
Closing and at any time thereafter if the Purchaser (a) does not have a director
designated to serve on the board of directors of the Company actually serving on
such board of directors and (b) continues to hold at least 25% of the Warrants
(or Common Stock received upon exercise of the Warrants) initially purchased
hereunder, upon reasonable prior notice, the Company shall cause its officers,
directors, employees, agents, representatives, accountants and counsel to grant
the Purchaser reasonable access during normal business hours to the offices,
properties, books, records and personnel of the Company and such additional
information concerning the business and properties of the Company as the
Purchaser and its representatives may reasonably request.
15
SECTION 5.03 Notice of Developments. Prior to the Closing, to the
extent the Company has actual knowledge, the Company shall promptly notify the
Purchaser in writing of (a) all events, circumstances, facts and occurrences
arising subsequent to the date of this Agreement which would reasonably be
expected to result in any breach of a representation or warranty or covenant of
the Company in this Agreement or which could have the effect of making any
representation or warranty of the Company in this Agreement qualified by
"materiality" or "material" or "Material Adverse Effect" untrue or incorrect in
any respect or any representation or warranty of the Company in this Agreement
not qualified by "materiality" or "material" or "Material Adverse Effect" untrue
or incorrect in any material respect and (b) all other material developments
affecting the assets, liabilities, business, financial condition, or results of
operations of the Company.
SECTION 5.04 Shareholder and Bondholder Approval. (a) Except as
provided in Section 5.10, the Company shall take all action required under
applicable Law and the Company's certificate of incorporation and its by-laws to
convene a meeting of the shareholders of the Company to consider and obtain the
Required Shareholder Approvals. As promptly as practicable after the execution
of this Agreement, (i) the Company shall prepare and file with the SEC a proxy
statement (such proxy statement, as amended or supplemented, being referred to
herein as the "Proxy Statement") to be sent to the shareholders of the Company
relating to the meeting of the Company's shareholders (the "Company
Shareholders' Meeting"). Prior to filing the Proxy Statement with the SEC, the
Company shall give the Purchaser the opportunity to review and comment upon the
Proxy Statement. Except as provided in Section 5.10 or except as the Company's
board of directors may determine in good faith in order to comply with its
fiduciary duties under applicable Law, the Company covenants that none of the
Company's board of directors or any committee thereof shall withdraw or modify,
or propose to withdraw or modify, in a manner adverse to the Purchaser, the
approval or recommendation by the Company's board of directors or any committee
thereof of the transactions contemplated by this Agreement and the Ancillary
Agreements (the "Company Recommendation") and the Proxy Statement shall include
the recommendation of the Company's board of directors to the shareholders of
the Company in favor of approval of the transactions contemplated by this
Agreement and the Ancillary Agreements. The Company will promptly advise, and
provide copies to, the Purchaser of any request by the SEC for additional
information, amendment of the Proxy Statement or comments thereon and all
responses by the Company thereto. The Company shall use its reasonable best
efforts to hold the Company Shareholders' Meeting to obtain the Required
Shareholder Approvals as promptly as possible following the filing of such proxy
statement with the SEC.
(b) As promptly as practicable after the execution of this
Agreement, the Company shall use its reasonable best efforts to commence the
Note Tender and to obtain the Bondholder Tender and Consent. Prior to commencing
the Note Tender, the Company shall provide the Purchaser with an opportunity to
review and comment upon such materials.
16
SECTION 5.05 Further Action. (a) Each party hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
do or cause to be done all things necessary, proper or advisable under
applicable Law, and execute and deliver such documents and other papers as may
be reasonably required to carry out the provisions of this Agreement and the
Ancillary Agreements and consummate and make effective the transactions
contemplated by this Agreement and the Ancillary Agreements.
Each party hereto shall cooperate and use its reasonable best
efforts to (i) promptly prepare and file with the appropriate Governmental
Authorities all necessary reports, applications, petitions, forms, notices or
other applicable documents required or advisable with respect to the
transactions contemplated by this Agreement and the Ancillary Agreements (except
for necessary reports, applications, petitions, forms, notices or other
applicable documents required or advisable solely with respect to the exercise
of the Warrants which shall be promptly prepared and filed upon the request of
the Purchaser), (ii) comply, at the earliest practicable date following the date
of receipt by the Purchaser or the Company, with any request for information or
documents from a Governmental Authority related to, and appropriate in the light
of, matters within the jurisdiction of such Governmental Authority, provided
that (x) the parties shall use their reasonable best efforts to keep any such
information confidential to the extent required by the party providing the
information and (y) each party may take, in its reasonable discretion,
appropriate legal action not to provide information relating to trade or
business secrets, privileged information or other information which reasonably
should be treated as confidential, (iii) take all actions necessary or advisable
to obtain no later than the Termination Date all necessary permits, consents,
approvals and authorizations of all Governmental Authorities necessary or
advisable to consummate the transactions contemplated by this Agreement and the
Ancillary Agreements (except for all necessary permits, consents, approvals and
authorizations of all Governmental Authorities necessary or advisable solely
with respect to the exercise of the Warrants for which each party shall take all
actions necessary or advisable to obtain upon the request of the Purchaser) and
(iv) oppose vigorously any litigation that would impede or delay the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, including, without limitation, promptly appealing any
adverse court order.
SECTION 5.06 Corporate Actions. From the date hereof until the
Closing, the Company shall not issue or sell in any manner whatsoever any Common
Stock or Common Stock Equivalents if such issuance or sale would result in an
adjustment of the Exercise Price (as defined in the Warrants) if the Warrants
were executed as of the date hereof. So long as any Warrants are outstanding,
the Company shall at all times have authorized and reserved for issuance a
sufficient number of shares of Common Stock to permit the full exercise of the
Warrants issued in connection with this Agreement.
SECTION 5.07 Prohibition Against Hedging. Until the date that is six
months after the Closing Date, the Purchaser and its Affiliate transferees will
not engage in any hedging or other transaction which is designed to or could
reasonably be expected to lead to or result in the transfer of the economic risk
(collectively, a "Disposition") by the Purchaser of the Warrants or the Common
Stock issuable upon exercise of the Warrants, including, without limitation,
effecting any short sale or having in effect any short position (whether or not
such sale or position is against the box and regardless of when such position
was entered into) or any
17
purchase, sale or grant of any right (including without limitation any put or
call option) with respect to the Warrants or the Common Stock issuable upon
exercise of the Warrants or with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives a
significant part of its value from the Warrants or the Common Stock issuable
upon exercise of the Warrants; provided, however, that the foregoing shall in no
way prohibit the sale of the Warrants or the Common Stock issuable upon exercise
of the Warrants otherwise in compliance with the provisions of this Agreement.
SECTION 5.08 Procedures for Transfer of Note or Warrant. The
Purchaser shall not transfer any interest in the Note to any third party (other
than an Affiliate or Permitted Transferee) without the prior written consent of
the Company, which consent shall not be unreasonably withheld; provided,
however, that the Company may withhold its consent in its sole discretion with
respect to any transfer of any interest in the Note in a principal amount less
than $10,000,000. Transfers of the Warrants shall be subject to the restrictions
set forth in the Warrants; provided, however, that until the date that is six
months after the Closing Date, the Purchaser may not assign, in whole or in
part, the Warrants to a Permitted Transferee unless such Permitted Assignee
shall have agreed to be bound by Section 5.07 hereof.
SECTION 5.09 Director. Subject to the requirements of Law and its
fiduciary duties, the Company's board of directors shall nominate for election
to the board of directors one Person designated by the Purchaser and reasonably
acceptable to the Company so long as the Purchaser and/or its Affiliates and/or
Permitted Transferees continue to hold at least 25% of the Warrants (or Common
Stock received upon exercise of the Warrants) initially purchased hereunder.
SECTION 5.10 No Solicitation of Transactions. (a) The Company agrees
that, except as provided in Section 5.10(b), neither it nor any of its
directors, officers or employees will, and that it will cause its agents,
advisors and other representatives (including, without limitation, any
investment banker, attorney or accountant retained by it) not to, directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
nonpublic information), or take any other action to facilitate, any inquiries or
the making of any proposal or offer (including, without limitation, any proposal
or offer to its shareholders) that constitutes, or may reasonably be expected to
lead to, any Competing Transaction, or (ii) enter into or maintain or continue
discussions or negotiations with any person or entity in furtherance of such
inquiries or to obtain a proposal or offer for a Competing Transaction, or (iii)
agree to, approve, endorse or recommend any Competing Transaction or enter into
any letter of intent or other contract, agreement or commitment contemplating or
otherwise relating to any Competing Transaction, or (iv) authorize or permit any
of the officers, directors or employees of the Company, or any investment
banker, financial advisor, attorney, accountant or other representative retained
by the Company, to take any such action. The Company shall notify the Purchaser
as promptly as practicable (and in any event within twenty-four (24) hours after
the Company attains knowledge thereof), orally and in writing, if any proposal
or offer, or any inquiry or contact with any person with respect thereto,
regarding a Competing Transaction is made, specifying the material terms and
conditions thereof and the identity of the party making such proposal or offer
or inquiry or contact (including material amendments or proposed material
amendments). The Company shall keep the Purchaser reasonably informed of the
status of any such proposal, offer, inquiry or contact. The Company immediately
shall cease and cause to be terminated all existing
18
discussions or negotiations with any parties conducted heretofore with respect
to a Competing Transaction.
(b) Notwithstanding anything to the contrary in this Section 5.10,
the Company and its directors, officers, employees, agents, advisors and other
representatives may take the actions specified in Section 5.10(a) with respect
to a Person who has made an unsolicited, written, bona fide proposal or offer
regarding a Competing Transaction that the Company's board of directors has (i)
determined, in its good faith judgment (after consultation with its financial
advisor), would constitute a Superior Proposal or is reasonably likely to lead
to the delivery of a Superior Proposal, (ii) determined, in its good faith
judgment after consultation with independent legal counsel (who may be the
Company's regularly engaged independent legal counsel), that the furnishing of
information or entering into discussions or taking of other actions is required
in order to allow the Company's board of directors to comply with its fiduciary
obligations to the Company and its shareholders under applicable Law, (iii)
provided written notice to the Purchaser of its intent to furnish information or
enter into discussions with such person at least one Business Day prior to
taking any such action, and (iv) obtained from such Person an executed
confidentiality agreement on terms no less favorable to the Company than those
contained in the confidentiality agreement executed by the Purchaser.
(c) Except as set forth in this Section 5.10(c), neither the
Company's board of directors nor any committee thereof shall withdraw or modify,
or propose to withdraw or modify, in a manner adverse to the Purchaser, the
Company Recommendation (a "Change in the Company Recommendation") or approve or
recommend, or cause or permit the Company to enter into any letter of intent,
agreement or obligation with respect to, any Competing Transaction.
Notwithstanding the foregoing, if the Company's board of directors determines,
in its good faith judgment prior to the time of the Company Shareholders'
Meeting and after consultation with independent legal counsel (who may be the
Company's regularly engaged independent legal counsel), that it is required to
make a Change in the Company Recommendation to comply with its fiduciary
obligations to the Company and its shareholders under applicable Law, the
Company's board of directors may make a Change in the Company Recommendation,
but only after providing written notice to the Purchaser advising the Purchaser
that the Company's board of directors intends to effect a Change in the Company
Recommendation and the manner in which it intends (or may intend) to do so and
stating whether or not such Change in the Company Recommendation is being made
as a result of the Company's receipt of a Superior Proposal in which case notice
to the Purchaser shall specify the material terms and conditions of such
Superior Proposal and identify the Person making such Superior Proposal.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01 Conditions to Obligations of the Purchaser. The
Purchaser's obligation to purchase and to pay for the Note and the Warrants on
the Closing Date shall be subject to the satisfaction or waiver of each of the
following conditions precedent on or prior to the Closing Date:
19
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of the Company contained in this Agreement
(A) that are not qualified by "materiality" or "material" or "Material
Adverse Effect" shall have been true and correct in all material respects
when made and shall be true and correct in all material respects as of the
Closing Date with the same force and effect as if made as of the Closing
Date and (B) that are qualified by "materiality" or "material" or
"Material Adverse Effect" shall have been true and correct in all respects
when made and shall be true and correct in all respects as of the Closing
Date, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be
true and correct in all respects as of that date, in each case, with the
same force and effect as if made as of the Closing Date, other than such
representations and warranties as are made as of another date and (ii) the
covenants and agreements contained in this Agreement to be complied with
by the Company on or before the Closing Date shall have been complied with
in all material respects, and the Purchaser shall have received a
certificate of the Company to such effect signed by a duly authorized
officer thereof;
(b) No Material Adverse Effect. No event or events shall have
occurred which, individually or in the aggregate, could have a Material
Adverse Effect;
(c) Ancillary Agreements. The Company shall have executed and
delivered to the Purchaser each of the Ancillary Agreements to which it is
a party;
(d) Issuance of the Note and the Warrants. All actions required by
any applicable Law or necessary in the reasonable opinion of the Purchaser
to issue the Note and the Warrants shall have been duly taken (or
provisions therefor shall have been made), including, without limitation,
the making of all registrations and filings, and all necessary consents
shall have been received;
(e) Shareholder Approval. The Company shall have received the
Required Shareholder Approvals;
(f) Bondholder Tender and Consent. The Bondholder Tender and Consent
shall have been consummated.
(g) Nasdaq Listing. The Company shall have received approval from
The Nasdaq Stock Market for the listing of the shares of Common Stock
issuable upon exercise of the Warrants;
(h) Election of Director. A director named by the Purchaser and
reasonably acceptable to the Company shall be appointed to the Board of
Directors of the Company effective as of the Closing;
(i) Opinion of Counsel. The Purchaser shall have received from
Jenner & Block, counsel for the Company, a legal opinion dated as of the
Closing Date in form and substance mutually agreed upon by the Company and
the Purchaser;
(j) Approval of Governmental Authorities. Any authorization, consent
or approval of any Governmental Authority necessary for the execution,
delivery and
20
performance of this Agreement by the Company shall have been obtained
prior to the Closing and such authorizations, consents and approvals shall
have become Final Orders;
(k) No Proceeding or Litigation. No Action shall have been commenced
by any Governmental Authority, no Action which has a reasonable likelihood
of success shall have been commenced by a third party, and no Governmental
Order shall exist, to set aside, restrain, enjoin or otherwise prevent the
execution, delivery or performance of this Agreement, the Ancillary
Agreements or any other documents executed in connection herewith or
therewith, or the consummation of the transactions contemplated hereby or
thereby or that could in the reasonable judgment of the Purchaser
adversely alter the transactions contemplated hereby or thereby; and
(l) No Violation. There shall have been no violation of any
applicable Law in effect as of the Closing Date as a result of or giving
effect to the transactions contemplated hereby or as contemplated by the
Ancillary Agreements or by any party hereto or thereto and the Purchaser
shall not be subject to any penalty or liability under or pursuant to any
applicable Law in effect as of the Closing Date by virtue of the
transactions contemplated hereby or thereby.
SECTION 6.02 Conditions to Obligations of the Company. The
obligation of the Company to sell the Note and the Warrants on the Closing Date
shall be subject to the satisfaction or waiver of each of the following
conditions precedent on or prior to the Closing Date:
(a) Representations and Warranties. (i) The representations and
warranties of the Purchaser contained in this Agreement (A) that are not
qualified by "materiality" or "material" or "Material Adverse Effect"
shall have been true and correct in all material respects when made and
shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if made as of the Closing Date and (B)
that are qualified by "materiality" or "material" or "Material Adverse
Effect" shall have been true and correct when made and shall be true and
correct of the Closing Date, except to the extent such representations and
warranties are as of another date, in which case, such representations and
warranties shall be true and correct as of that date, in each case, with
the same force and effect as if made as of the Closing Date, other than
such representations and warranties as are made as of another date and
(ii) the covenants and agreements contained in this Agreement to be
complied with by the Purchaser on or before the Closing Date shall have
been complied with in all material respects, and the Company shall have
received a certificate of the Purchaser to such effect signed by a duly
authorized officer thereof;
(b) Ancillary Agreements. The Purchaser shall have executed and
delivered to the Purchaser each of the Ancillary Agreements to which it is
a party;
(c) Shareholder Approval. The Company shall have received the
Required Shareholder Approvals;
21
(d) Bondholder Tender and Consent or Waiver. The Bondholder Tender
and Consent shall have been consummated.
(e) Approval of Governmental Authorities. Any authorization, consent
or approval of any Governmental Authority necessary for the execution,
delivery and performance of this Agreement by the Company shall have been
obtained prior to the Closing and such authorizations, consents and
approvals shall have become Final Orders; and
(f) No Proceeding or Litigation. No Action shall have been commenced
by any Governmental Authority, no Action which has a reasonable likelihood
of success shall have been commenced by a third party, and no Governmental
Order shall exist, to set aside, restrain, enjoin or otherwise prevent the
execution, delivery or performance of this Agreement, the Ancillary
Agreements or any other documents executed in connection herewith or
therewith, or the consummation of the transactions contemplated hereby or
thereby or that could in the reasonable judgment of the Purchaser
adversely alter the transactions contemplated hereby or thereby.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Survival of Representations and Warranties. The
representations and warranties of the Company contained in this Agreement shall
survive the Closing until the first anniversary of the Closing Date, other than
the representations and warranties set forth in Sections 3.01, 3.03 and 3.10,
which shall survive indefinitely. The liability of the Company with respect to
the Company's representations and warranties shall not be reduced by any
investigation made at any time by or on behalf of the Purchaser. Notwithstanding
anything herein to the contrary, the representations and warranties contained in
Section 3.14 shall terminate at the close of business on the 30th day following
the expiration of the applicable statute of limitations with respect to the Tax
liabilities in question (giving effect to any waiver, mitigation or extension
thereof).
SECTION 7.02 Indemnification by the Company. (a) To the greatest
extent permitted by applicable Law, the Company shall indemnify and hold
harmless the Purchaser and its Affiliates, officers, directors, employees,
agents, successors and assigns (each a "Purchaser Indemnified Party") from and
against any and all Liabilities, losses, diminution in value, damages, claims,
costs and expenses, interest, awards, judgments and penalties (including,
without limitation, attorneys' and consultants' fees and expenses) suffered or
incurred by them (including, without limitation, any Action brought or otherwise
initiated by any of them) (hereinafter a "Loss"), arising out of or resulting
from: (i) the breach of any representation or warranty of the Company contained
herein, or in any agreement, certificate or instrument delivered pursuant hereto
set forth therein) and (ii) the breach of any agreement or covenant of the
Company contained herein.
(b) Notwithstanding the provisions of Section 7.02(a), (i) the
Company shall not be liable for any Loss unless the aggregate amount of Losses
exceeds $400,000 and then only
22
to the extent of such excess and (ii) the maximum liability of the Company under
this Section 7.02 shall not exceed $40,000,000; provided, however, that the
limitations in Section 7.02(b)(i) shall not apply to breaches by the Company of
its representations and warranties contained in Sections 3.01, 3.03 and 3.10 or
a breach of the covenants in Section 5.06.
(c) A Purchaser Indemnified Party shall give the Company notice of
any matter that a Purchaser Indemnified Party has determined has given or could
give rise to a right of indemnification under this Agreement within 60 days of
such determination, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and Liabilities of the Company under this Article VII
with respect to Losses arising from claims of any third party that are subject
to the indemnification provided for in this Article VII ("Third Party Claims")
shall be governed by and be contingent upon the following additional terms and
conditions: if a Purchaser Indemnified Party shall receive notice of any Third
Party Claim, the Purchaser Indemnified Party shall give the Company notice of
such Third Party Claim within 30 days after the receipt by the Purchaser
Indemnified Party of such notice; provided, however, that the failure to provide
such notice shall not release the Company from any of its obligations under this
Article VII except to the extent that the Company is materially prejudiced by
such failure and shall not relieve the Company from any other obligation or
Liability that it may have to any Purchaser Indemnified Party otherwise than
under this Article VII. If the Company acknowledges in writing its obligation to
indemnify the Purchaser Indemnified Party hereunder against any Losses that may
result from such Third Party Claim, then the Company shall be entitled to assume
and control the defense of such Third Party Claim at its expense and through
counsel of its choice if it gives notice of its intention to do so to the
Purchaser Indemnified Party within five days of the receipt of such notice from
the Purchaser Indemnified Party; provided, however, that if there exists or is
reasonably likely to exist a conflict of interest that would make it
inappropriate in the judgment of the Purchaser Indemnified Party in its sole and
absolute discretion for the same counsel to represent both the Purchaser
Indemnified Party, on the one hand, and the Company, on the other hand, then the
Purchaser Indemnified Party shall be entitled to retain its own counsel in
addition to any requisite local counsel for which the Purchaser Indemnified
Party reasonably determines counsel is required at the expense of the Company.
In the event that the Company exercises the right to undertake any such defense
against any such Third Party Claim as provided above, the Purchaser Indemnified
Party shall cooperate with the Company in such defense and make available to the
Company, at the expense of the Company, all witnesses, pertinent records,
materials and information in the Purchaser Indemnified Party's possession or
under the Purchaser Indemnified Party's control relating thereto as is
reasonably required by the Company. Similarly, in the event the Purchaser
Indemnified Party is, directly or indirectly, conducting the defense against any
such Third Party Claim, the Company shall cooperate with the Purchaser
Indemnified Party in such defense and make available to the Purchaser
Indemnified Party, at the expense of the Company, all such witnesses, records,
materials and information in the Company's possession or under the Company's
control relating thereto as is reasonably required by the Purchaser Indemnified
Party. No such Third Party Claim may be settled by the Company without the prior
written consent of the Purchaser Indemnified Party, except if such settlement
constitutes a full and unconditional release of the Purchaser Indemnified Party.
23
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by the Purchaser if, between the date hereof and the Closing:
(i) an event or condition occurs that has resulted in a Material Adverse
Effect, (ii) any representations and warranties of the Company contained
in this Agreement (1) that are not qualified by "materiality," "material"
or "Material Adverse Effect" shall not have been true and correct in all
material respects when made or (2) that are qualified by "materiality,"
"material" or "Material Adverse Effect" shall not have been true and
correct in all respects when made and, if capable of being cured, are not
cured within 30 days after written notice thereof to the Company, (iii)
the Company shall not have complied in all material respects with the
covenants or agreements contained in this Agreement to be complied with by
it and, if capable of being cured, are not cured within 30 days after
written notice thereof to the Company or (iv) the Company makes a general
assignment for the benefit of creditors, or any proceeding shall be
instituted by or against the Company seeking to adjudicate any of them a
bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or composition
of its debts under any Law relating to bankruptcy, insolvency or
reorganization;
(b) by either the Company or the Purchaser if the Closing shall not
have occurred by January 31, 2004 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section
8.01(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or shall
have resulted in, the failure of the Closing to occur on or prior to such
date (it being understood that the failure to receive the requisite
approvals by the Company's shareholders or the Bondholder Tender and
Consent shall not in itself constitute a failure to fulfill an obligation
hereunder in the absence of any other failure to fulfill any obligation
under this Agreement);
(c) by either the Purchaser or the Company in the event that any
Governmental Authority shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement or the Ancillary Agreements
and such order, decree, ruling or other action shall have become final and
nonappealable;
(d) by the Company if (i)(A) the Company is not in breach of Section
5.10, (B) the Required Shareholder Approvals have not been received, (C)
the Company's board of directors authorizes the Company, subject to
complying with the terms of this Agreement, to enter into a binding
written agreement concerning a transaction that constitutes a Superior
Proposal and the Company notifies the Purchaser in writing that it intends
to enter into such an agreement, attaching the most current version of
such agreement to such notice and (D) the Purchaser does not make, at or
before 1:00 p.m.,
24
New York City time, on the third Business Day after the Purchaser's
receipt of the Company's written notification of its intention to enter
into a binding agreement for a Superior Proposal, an offer that the
Company's board of directors determines in good faith after consultation
with its financial advisors, is at least as favorable, from a financial
point of view, to the shareholders of the Company as the Superior Proposal
or (ii) if the Company's board of directors makes a Change in the Company
Recommendation in compliance with Section 5.10(c) in the absence of a
Superior Proposal. In either such case, the Company contemporaneously with
such termination pays to the Purchaser in immediately available funds the
fee required to be paid, or grants the warrants required to be granted,
pursuant to Section 8.02 and the Purchaser Expenses pursuant to Section
9.03. The Company agrees (x) that it will not enter into a binding
agreement referred to in clause (C) above until after 1:00 p.m., New York
City time, on the fourth Business Day after it has provided the notice to
the Purchaser required thereby and (y) to notify the Purchaser promptly if
its intention to enter into the written agreement referred to in its
notification shall change at any time after giving such notification;
(e) the Purchaser if (i) the Company enters into a binding agreement
for a Superior Proposal or (ii) if there has been a Change in the Company
Recommendation; and
(f) by the mutual written consent of the Company and the Purchaser.
SECTION 8.02 Effect of Termination. (a) In the event of termination
of this Agreement as provided in Section 8.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto,
except with respect to Sections 7.02, 8.02, 9.02 and 9.03, which shall survive
any termination of this Agreement, and except that nothing herein shall relieve
either party from liability for any breach of this Agreement.
(b) In the event that this Agreement is terminated by the Company
pursuant to Section 8.01(d)(i) or by the Purchaser pursuant to Section
8.01(e)(i) or, if there is a Superior Proposal, Section 8.01(e)(ii) and the
Superior Proposal relates to (i) a merger, consolidation, share exchange,
business combination or other similar transaction involving the Company, (ii)
the acquisition by any Person or group, directly or indirectly, of at least a
majority of the then outstanding shares of Common Stock of the Company (except
for the acquisition of shares of Common Stock from the Company in a transaction
covered by Section 8.02(c)) or (iii) any sale, lease, exchange, transfer or
other disposition of all or substantially all of the assets of the Company, then
the Company shall grant to the Purchaser warrants to purchase 1,000,000 shares
of Common Stock in form and substance substantially identical to Exhibit B
hereto; provided, that the Exercise Price (as defined in Exhibit B hereto) shall
equal $4.47.
(c) In the event that this Agreement is terminated by the Company
pursuant to Section 8.01(d)(i) or by the Purchaser pursuant to Section
8.01(e)(i) or, if there is a Superior Proposal, Section 8.01(e)(ii) and the
Superior Proposal relates to the issuance by the Company to any Person or group
of debt or equity securities of the Company, then the Company shall pay to the
Purchaser an amount in immediately available funds equal to $750,000.
25
(d) In the event that this Agreement is terminated by the Company
pursuant to Section 8.01(d)(ii) or by the Purchaser pursuant to Section
8.01(e)(ii) in the absence of a Superior Proposal, then the Company shall grant
to the Purchaser warrants to purchase 1,000,000 shares of Common Stock in form
and substance substantially identical to Exhibit B hereto provided, that the
Exercise Price shall equal $4.47.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Amendment; Waiver. This Agreement may not be amended,
supplemented, modified or restated except by an instrument in writing signed by,
or on behalf of, the parties hereto or by a waiver in accordance with this
Section 9.01. Any party to this Agreement may (a) extend the time for the
performance of any of the obligations or other acts of any other party, (b)
waive any inaccuracies in the representations and warranties of any other party
contained herein or in any document delivered by any other party pursuant hereto
or (c) waive compliance with any of the agreements of any other party or
conditions to such party's obligations contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition of this
Agreement. The failure of any party to assert any of its rights hereunder shall
not constitute a waiver of any of such rights. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 9.02 Confidentiality. The Purchaser and the Company covenant
and agree that they will not, and they will cause their principals, Affiliates,
officers and other personnel and authorized representatives not to, use
information concerning another party's business, properties and personnel
received in the course of negotiating this Agreement and investigation in
connection with this transaction and will hold such information (and will cause
the aforesaid persons to hold such information) in confidence until such
information otherwise becomes publicly available or as may be required by
applicable law. Notwithstanding anything in this Section 9.02 or otherwise set
forth in this Agreement, each party (and each employee, representative or other
agent of each party) hereto may disclose to any and all persons, without
limitation of any kind, any information with respect to the Untied States
federal income "tax treatment" and "tax structure" (in each case, within the
meaning of Treasury Regulation Section 1.6011-4) of the transaction contemplated
hereby and all materials of any kind (including opinions or other tax analyses)
that are provided to such parties (or their representatives) relating to such
tax treatment and tax structure.
SECTION 9.03 Expenses. Except as otherwise specified in this
Agreement, the Company shall pay to Purchaser all reasonable documented
out-of-pocket costs and expenses up to an aggregate of $250,000 (including,
without limitation, reasonable documented fees and expenses of counsel) incurred
by Purchaser and its Affiliates in connection with the transactions contemplated
by this Agreement and the Ancillary Agreements, with respect to costs and
expenses in connection with due diligence related to the transactions
contemplated hereby and thereby, the negotiation, execution and delivery of this
Agreement, the
26
Ancillary Agreements, the Note and the Warrants and the consummation of the
transactions contemplated hereby and thereby (the "Purchaser Expenses")
regardless of whether the Closing occurs.
SECTION 9.04 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by an internationally recognized overnight courier service, by
telecopy, facsimile or registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 9.04):
if to the Company:
(a) Pac-West Telecomm, Inc.
0000 X. Xxxxx Xxxx, Xxx. 000
Xxxxxxxx, XX 00000
Facsimile:
Attention:
with a copy to:
Jenner & Block LLC
Xxx XXX Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
(b) if to the Purchaser:
DB Advisors LLC
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile:
Attention:
with a copy to:
Shearman & Sterling LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
SECTION 9.05 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all
27
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect for so long as the economic or legal substance of the
transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated by this Agreement are consummated as
originally contemplated to the greatest extent possible.
SECTION 9.06 Assignment. This Agreement may not be assigned by the
Company, by operation of law or otherwise, without the express written consent
of the Purchaser (which consent may be granted or withheld in the sole
discretion of the Purchaser). The Purchaser may assign this Agreement or any of
its rights and obligations hereunder to one or more Affiliates without the
consent of the Company or to a third party with the consent of the Company,
which consent shall not be unreasonably withheld.
SECTION 9.07 Third Party Beneficiaries and Transfers. Except for the
provisions of Article VII relating to indemnified parties, this Agreement shall
be binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person, any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 9.08 Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York. The parties hereto hereby (a) submit to the exclusive jurisdiction of
any state or federal court sitting in the Borough of Manhattan of The City of
New York for the purpose of any action arising out of or relating to this
Agreement brought by any party hereto, and (b) irrevocably waive, and agree not
to assert by way of motion, defense, or otherwise, in any such action, any claim
that it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution, that the
action is brought in an inconvenient forum, that the venue of the action is
improper, or that this Agreement or the transactions contemplated by this
Agreement may not be enforced in or by any of the above-named courts.
SECTION 9.09 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.
SECTION 9.10 Entire Agreement. This Agreement, the Note, the
Warrants and the Ancillary Agreements constitute the entire agreement of the
parties hereto with respect to the subject matter hereof and thereof and
supersede all prior agreements and undertakings, both written and oral, between
the Company and the Purchaser with respect to the subject matter hereof and
thereof.
28
SECTION 9.11 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.12 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
SECTION 9.13 Public Announcements. Subject to its legal obligations
(including requirements of stock exchanges and other similar regulatory bodies
and the requirements of the Exchange Act), no party shall make any announcement
regarding the entering into of this Agreement or the Closing to the financial
community, governmental entities, employees, customers or the general public
without the prior consent of the other party, which shall not be unreasonably
withheld, and the parties shall cooperate with each other as to the timing and
contents of any such announcement.
29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers or other representatives thereunto duly
authorized, as of the date first above written.
PAC-WEST TELECOMM, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: President and Chief
Executive Officer
DEUTSCHE BANK AG - LONDON,
BY DB ADVISORS, LLC AS INVESTMENT
ADVISOR
By: /s/ Xxxxx Xxxxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: President
SCHEDULE 1
PERMITTED TRANSFEREES
Wall Street Technology Partners LP
Rock Ridge Capital Partners and its Affiliates
EXHIBIT A
FORM OF THE NOTE
A-1
SENIOR SECURED PROMISSORY NOTE
$40,000,000 ________________, 2003
For value received, the undersigned, Pac-West Telecomm, Inc., a California
corporation (the "Company"), hereby PROMISES TO PAY to the order of Deutsche
Bank AG - London acting through DB Advisors, LLC as investment advisor (the
"Investor"), the principal sum of $40,000,000 together with interest in arrears
from and including the date hereof on the unpaid principal balance until such
principal balance is paid in full. The Company agrees to make all payments under
this Senior Secured Promissory Note to the order of the Investor, in lawful
money of the United States of America and in immediately available funds, to
such account or place as the Investor may request in writing ten (10) Business
Days (as defined herein) prior to any such payment.
The Company agrees to pay interest on the unpaid principal amount of this
Senior Secured Promissory Note until such principal amount shall be paid in
full, compounded quarterly, at a rate per annum equal to 0.50% per annum above
the rate of interest per annum (the "Eurodollar Rate") (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any
successor page) as the London interbank offered rate for deposits in U.S.
dollars at 11:00 A.M. (London time) two Business Days before the first day of
each Interest Period (as defined below) for an amount substantially equal to
such unpaid amount and for a period equal to such Interest Period (provided
that, if for any reason such rate is not available, the term "Eurodollar Rate"
shall mean, for any Interest Period, the rate of interest per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page as the London interbank offered rate for deposits in U.S. dollars at
approximately 11:00 A.M. (London time) two Business Days prior to the first day
of each Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates). Each Interest
Period shall be a period having a duration of three months. The initial Interest
Period shall begin on the date hereof and each subsequent Interest Period shall
begin on the last day of the immediately preceding Interest Period. Interest
shall be payable in arrears at the end of each Interest Period as set forth in
the relevant provision below and shall be calculated on the basis of actual
number of days elapsed and a year of 360 days. Notwithstanding any other
provision of this Senior Secured Promissory Note, the Investor does not intend
to charge, and the Company shall not be required to pay, any interest or other
fees or charges in excess of the maximum permitted by applicable law; any
payments in excess of such maximum shall be credited to reduce principal
hereunder. Except as otherwise provided herein or in the Security Agreement (as
defined below), all payments received by the Investor hereunder will be applied
first to reasonable costs of collection, if any, then to accrued but unpaid
interest and the balance to principal.
The Company shall pay interest on the amount of any principal, interest or
other amount payable hereunder that is not paid when due, from the date such
amount shall be due until such amount shall be paid in full, payable on demand,
at a rate per annum equal at all times to two
2
percent (2%) per annum above the rate per annum of interest set forth in the
immediately preceding paragraph (the "Default Rate").
Principal hereunder shall be payable in a single payment by 11:00 A.M.
(New York City time) on [insert date three years after Closing] (the "Principal
Payment Date"); provided, however, that such Principal Payment Date shall be
extended to coincide with any extension of the Expiration Date permitted under
and as provided in Section 1(a) or 1(b) of the Warrant issued to the Investor on
the date hereof. Interest hereunder shall be payable on the last day of each
Interest Period in arrears commencing on ______, 2003 (each such date being an
"Interest Payment Date") with a final payment of all unpaid interest on the date
principal is paid in full hereunder. The Company shall have the option to pay
such interest in cash or to cause such interest to be capitalized on any such
Interest Payment Date and added to the principal amount of this Senior Secured
Promissory Note, which additional amount shall bear interest and otherwise be
payable in accordance with the terms and conditions of this Senior Secured
Promissory Note.
The Investor shall have the right at any time to request that any or all
capitalized interest added to the principal amount of this Senior Secured
Promissory Note be evidenced by a separate promissory note or notes in
substantially the form of this Senior Secured Promissory Note.
If any day on which a payment is due pursuant to the terms of this Senior
Secured Promissory Note is not a day on which banks in the State of New York are
generally open (a "Business Day"), such payment shall be due on the next
Business Day following such date and interest shall be payable for such
extension of time; provided, that any such interest accruing for such extension
of time shall be due and payable on the immediately succeeding Interest Payment
Date.
This Senior Secured Promissory Note may be prepaid at any time, without
premium, penalty, breakage fees or expenses, in whole or in part, together with
accrued interest to the date of such prepayment on the portion prepaid. All
prepayments made shall be recorded by the Investor and, prior to any transfer
hereof, indorsed on the grid attached as Annex I hereto, which is part of this
Senior Secured Promissory Note; provided, that the failure of the Investor to
make any such recordation shall not affect the obligations of the Company under
this Senior Secured Promissory Note.
This Senior Secured Promissory Note is entitled to the benefits of and is
secured by the pledge, liens, security, title, rights and security interests
granted under the Guaranty and Security Agreement between the Company and
Deutsche Bank Trust Company Americas, as collateral agent (in such capacity,
together with its permitted successors and assigns in such capacity, the
"Collateral Agent"), for the Investor and the other "Lenders" referred to
therein dated as of the date hereof (the "Security Agreement"), as the same may
be amended, supplemented or renewed, from time to time. The Investor, by its
acceptance of this Note, hereby accepts and acknowledges the rights, limitation
of rights, duties, indemnities, entitlements, remedies and undertakings of a
"Lender" under and pursuant to the Security Agreement, and the appointment of
the Collateral Agent to act for and on behalf of such Lender pursuant thereto.
Upon the occurrence and during the continuation of any Event of Default (as
defined in the Security Agreement), (i) the Collateral Agent, at the direction
of the Majority Lenders (as defined in the Security Agreement), may by notice to
the Company, declare this Senior Secured Promissory Note, all interest thereon
and all other amounts payable hereunder to be forthwith due and payable,
whereupon this Senior Secured Promissory Note, all such interest and all such
other amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
3
hereby expressly waived by the Company and (ii) the Collateral Agent may pursue
its remedies against the Company and the personal property that secures the
Company's obligations, from time to time and in such order as the Collateral
Agent shall determine.
The Company agrees that, upon the acceleration of this Senior Secured
Promissory Note following the occurrence of an Event of Default that is not
cured within the applicable cure period, the Company shall pay to the Investor,
in addition to principal and accrued interest thereon, all reasonable
out-of-pocket costs of collection of the principal and accrued interest,
including, but not limited to, all reasonable out-of-pocket attorneys' fees,
court costs, and other reasonable out-of-pocket costs and expenses of the
Investor related to the enforcement of payment of this Senior Secured Promissory
Note. Such amounts which are not paid within 10 days after Investor's written
demand therefor shall be added to the principal of this Senior Secured
Promissory Note and will bear interest at the Default Rate.
All notices and other communications provided for under this Senior
Secured Promissory Note shall be in writing (including by facsimile
transmission) and mailed, faxed or delivered, in accordance with the terms of
the Security Agreement and, in the case of the Company and the Collateral Agent;
to the addresses provided pursuant thereto and, in the case of the Investor, to:
____________________________, Attention: ______________________.
No amendment, waiver, modification or supplement of any provision of this
Senior Secured Promissory Note, nor consent to any departure by the Company
therefrom, shall in any event be effective unless the same shall be in writing
signed by the Company and accepted and agreed to by such Investor and then such
amendment, waiver, modification, supplement or consent shall be effective only
in the specific instance and for the specific purpose for which given.
This Senior Secured Promissory Note is governed by and construed in
accordance with, the laws of the State of New York.
This Senior Secured Promissory Note may not be assigned, in whole or in
part, from time to time, by the Investor to any third party (other than an
Affiliate or Permitted Transferee (each as defined in the Note and Warrant
Purchase Agreement, dated ________, 2003, by and between the Company and the
Investor)) without the prior written consent of the Company, which consent shall
not be unreasonably withheld; provided, however, that the Company may withhold
its consent in its sole discretion with respect to any transfer of any interest
in the Note in a principal amount less than $10,000,000.
This Senior Secured Promissory Note and the rights and obligations under
this Senior Secured Promissory Note are not assignable or delegable, directly or
indirectly, in whole or in part, by the Company, without the prior written
consent of the Investor; provided, however, that the Company may transfer this
Senior Secured Promissory Note and the rights and obligations under this Senior
Secured Promissory Note to any third party that has acquired all or
substantially all of the capital stock or ownership interest in and to the
Company (including by way of merger or consolidation) or to any third party that
has acquired all or substantially all of the assets of the Company; provided
that the Collateral (as defined in the Security Agreement) is included in any
such sale. This Senior Secured Promissory Note shall be binding upon the
Company, its permitted successors and its assigns, and, in addition, shall inure
to the benefit of and be enforceable by the Investor and its successors and
assigns. Whenever possible this Senior Secured Promissory Note and each
provision hereof shall be interpreted in such manner as to be effective, valid
and
4
enforceable under applicable law. If and to the extent that any such provision
of this Senior Secured Promissory Note shall be held invalid or unenforceable by
any court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provisions hereof, and any determination that the
application of any provision hereof to any person or under any circumstance is
illegal and unenforceable shall not affect the legality, validity and
enforceability of such provision as it may be applied to any other person or in
any other circumstance. All rights and remedies provided in this Senior Secured
Promissory Note, the Security Agreement or any law shall be available to the
Investor and shall be cumulative.
The Company hereby expressly waives presentment, demand, and protest,
notice of demand, dishonor and nonpayment of this Senior Secured Promissory
Note, and all other notices or demands of any kind in connection with the
delivery, acceptance, performance, default or enforcement hereof, and hereby
consents to any delays, extensions of time, renewals, waivers or modifications
that may be granted or consented to by the Investor with respect to the time of
payment or any other provision hereof or of the Security Agreement.
No course of dealing between the Company and the Investor and no delay or
failure in exercising any rights hereunder in respect thereof shall operate as a
waiver of any rights of the Investor.
This Senior Secured Promissory Note and the indebtedness of the Company to
the Investor evidenced hereby, shall not be subject to any set-off, recoupment
or counterclaim, each of which is hereby expressly waived by the Company.
The Company hereby irrevocably submits to the non-exclusive jurisdiction
of any United States Federal or New York State court sitting in New York City in
any action or proceeding arising out of or relating to this Senior Secured
Promissory Note and hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in any such court and
irrevocably waives any objection it may now or hereafter have as to the venue of
any such suit, action or proceeding brought in such a court or that such court
is an inconvenient forum. Nothing herein shall limit the right of the Investor
to bring proceedings against the Company in the courts of any other
jurisdiction.
COMPANY:
PAC-WEST TELECOMM, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Annex I
PREPAYMENTS
DATE AMOUNT PREPAID UNPAID BALANCE NOTATION MADE BY
---- -------------- -------------- ----------------
EXHIBIT B
FORM OF THE WARRANT
B-1
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY STATE SECURITIES
LAWS. THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE BEEN OR WILL BE ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OF RESALE, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF
APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS
THEREFROM.
PAC-WEST TELECOMM, INC.
WARRANT TO PURCHASE SHARES
OF COMMON STOCK
Date of Issuance:___________ Certificate No. W-______
THIS CERTIFIES THAT, for value received, Deutsche Bank AG - London acting
through DB Advisors, LLC as investment advisor (the "Purchaser") and its
permitted assigns are entitled to subscribe for and purchase 26,666,667 shares
of duly authorized, validly issued, fully paid and nonassessable Common Stock
(as adjusted pursuant to Section 6 hereof, the "Shares") of PAC-WEST TELECOMM,
INC., a California corporation (the "Company"), at the price of $1.50 per share
(such price and such other price as shall result, from time to time, from the
adjustments specified in Section 6 hereof is herein referred to as the "Exercise
Price"), subject to the provisions and upon the terms and conditions hereinafter
set forth. As used herein the term "Date of Grant" shall mean [Closing Date].
The term "Warrant" as used herein shall be deemed to include any warrants issued
upon transfer or partial exercise of this Warrant unless the context clearly
requires otherwise. Capitalized terms used but not otherwise defined herein
shall have the respective meanings ascribed to them in the Note and Warrant
Purchase Agreement dated as of ___________, 2003 between the Company and the
Purchaser (the "Purchase Agreement").
1. Term. The purchase right represented by this Warrant is exercisable
by the holder hereof, in whole or in part, at any time and from time to time
from the Date of Grant through [insert the date three (3) years after the
Closing Date] (as such date may be extended as provided below, the "Expiration
Date"). Notwithstanding the foregoing, the Expiration Date of this Warrant and
the Principal Payment Date (as defined in the Note) may be extended as follows:
(a) Purchaser's Option. At any time prior to [insert the date
three (3) years after the Closing Date], the Purchaser may, at its option,
extend both the Expiration Date and the Principal Payment Date to any
coterminous date prior to and including [insert the date 18 months after the
initial Expiration Date]; provided, however, that the Purchaser may exercise
this option only once and only with regard to that number of Warrants and that
portion of the Note held by the Purchaser
or its Affiliates (but not with respect to Warrants held by any other successor
or assign of the Purchaser) at the time the Purchaser exercises such option.
(b) Extension. If, (i) on the Expiration Date, (A) there is no
effective Registration Statement (as defined in the Registration Rights
Agreement) covering all of the Registrable Securities (as defined in the
Registration Rights Agreement) or (B) a Blackout Period (as defined in the
Registration Rights Agreement) is then in effect, then the Expiration Date and
the Principal Payment Date shall be automatically extended until such time as a
Registration Statement covering all of the Registrable Securities has been
declared effective and/or there is no Blackout Period in effect or (ii) on the
Expiration Date, the holder hereof and the Company has made the necessary
applications or filings pursuant to Section 5(b) but the requisite approvals
from such governmental authorities have not been obtained to permit the exercise
of this Warrant (other than the expiration or early termination of the waiting
period required by the HSR Act), then the Expiration Date and the Principal
Payment Date shall be automatically extended until such time as all such
approvals have been received; provided, however, the Exercise Date and the
Principal Payment Date may not be extended pursuant to Section 1(b)(i) later
than the latest date pursuant to which the Expiration Date and the Principal
Payment Date may be extended pursuant to Section 1(a); and provided, further,
the Principal Payment Date may not be extended pursuant to Section 1(b)(ii)
later than the latest date pursuant to which the Expiration Date and the
Principal Payment Date may be extended pursuant to Section 1(a).
2. Method of Exercise.
(a) Cash and Other Exercise. Subject to Sections 1 and 5
hereof, the purchase right represented by this Warrant may be exercised by the
holder hereof, in whole or in part and from time to time, at the election of the
holder hereof, by (i) the surrender of this Warrant (with the notice of exercise
substantially in the form attached hereto as Exhibit A-1 duly completed and
executed) at the principal office of the Company and the payment to the Company
by wire transfer to an account designated by the Company (a "Wire Transfer") of
an amount equal to the then applicable Exercise Price multiplied by the number
of Shares then being purchased, or (ii) if in connection with a registered
public offering of the Common Stock, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit A-2 duly completed and
executed) at the principal office of the Company together with notice of
arrangements reasonably satisfactory to the Company for payment to the Company
by Wire Transfer from the proceeds of the sale of such number of Shares to be
sold by the holder hereof in such public offering of an amount equal to the then
applicable Exercise Price per share multiplied by the number of Shares then
being purchased, or (iii) the tender of all or a portion of the Note issued by
the Company pursuant to the Purchase Agreement in a principal amount equal to
the then applicable Exercise Price multiplied by the number of Shares then being
purchased.
(b) Cashless Exercise. Subject to Sections 1 and 5 hereof, in
lieu of exercising this Warrant pursuant to Section 2(a), if (i) the average of
the closing prices of the Common Stock (as reported in the Consolidated
Quotation System) over the twenty trading days immediately prior to the date of
exercise is equal to or greater that $5.00 per share at the time of exercise,
the holder of this Warrant may elect to receive, and (ii) if the average of the
closing prices of the Common Stock (as reported in the Consolidated Quotation
System) over the twenty trading days immediately prior
2
to the date of exercise is less than $5.00 per share at the time of exercise,
the Company may require the holder of this Warrant to receive, without the
payment by the holder of any additional consideration, Shares equal to the value
of this Warrant (or the portion hereof being canceled), together with any cash
in lieu of fractional Shares, by surrender of this Warrant at the principal
office of the Company together with an executed Notice of Exercise or Exchange
in substantially the form attached hereto as Exhibit A-1 or Exhibit A-2. For the
purposes of clarity, it is understood that the failure of the holder hereof to
elect a cashless exercise of this Warrant pursuant to clause (i) above or the
failure of the Company to require the cashless exercise of this Warrant pursuant
to clause (ii) above shall result in an exercise being effected in accordance
with the procedures identified in Section 2(a) above. In such event, the number
of Shares that the Company shall issue to the holder hereof shall be computed
using the following formula:
Y (A - B)
---------
X = A
Where: X = The adjusted number of Shares to be issued to the
Holder as a result of the cashless exchange election
under this Section 2(b);
Y = The number of Shares in respect of which the cashless
exchange election under this Section 2(b) is made;
A = The Fair Market Value of one Share at the time the
cashless exchange election is made; and
B = The Exercise Price.
3. Certificates for Shares. Within three Business Days after the
exercise of the purchase rights evidenced by this Warrant, one or more
certificates for the number of Shares so purchased shall be issued to the holder
or as the holder may direct (with appropriate restrictive legends, as
applicable). In the event of a partial exercise of this Warrant, a new warrant
or warrants (dated the date hereof) of like tenor shall be issued to the holder
or, subject to the limitations set forth herein, as the holder may direct (with
appropriate restrictive legends, as applicable), for the aggregate number of
Shares equal to the number of Shares called for on the face of this Warrant
minus the number of Shares purchased by the holder hereof upon such partial
exercise. For all purposes of this Warrant other than Sections 2(a) and 2(b),
any reference to the exercise of this Warrant shall be deemed to include a
reference to the cashless exchange of the Warrant into Common Stock, in
accordance with the terms of Section 2(b) and this Section 3. The Company shall
pay all of its expenses associated with the issuance of any Shares and
replacement Warrants in accordance with the terms hereof, including, without
limitation, any applicable issue taxes.
4. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be duly and validly issued
and fully paid and nonassessable, and free from all preemptive rights, taxes,
liens and charges with respect to the issuance thereof. During the period within
which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized, and reserved for the purpose of the issuance upon
exercise of the purchase rights
3
evidenced by this Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this Warrant.
5. Regulatory Requirements.
(a) Xxxx-Xxxxx-Xxxxxx. If any filing or notification becomes
necessary pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), based upon the planned exercise of this Warrant or
any portion hereof, the holder hereof shall notify the Company of such
requirement, and the holder and the Company shall file with the proper
authorities all forms and other documents necessary to be filed pursuant to the
HSR Act, as promptly as possible and shall cooperate with each other in promptly
producing such additional information as those authorities may reasonably
require to allow early termination of the notice period provided by the HSR Act
or as otherwise necessary to comply with requirements of the Federal Trade
Commission or the Department of Justice. The holder and the Company agree to
cooperate with each other in connection with such filings and notifications, and
to keep each other informed of the status of the proceedings and communications
with the relevant authorities. The holder shall pay any filing fee required to
be paid in connection with a filing pursuant to the HSR Act required as a result
of the exercise of Warrants. Notwithstanding the preceding sentence, the Company
shall pay one such filing fee required to be paid in connection with a filing
pursuant to the HSR Act required as a result of the exercise of Warrants held by
the Purchaser or its Affiliates (but not other successors or assigns of the
Purchaser). The holder and the Company shall each bear its own expenses (other
than such filing fees) incurred in connection with any filing required pursuant
to the HSR Act. Each holder by acceptance of this Warrant or any portion hereof
agrees to comply with the provisions of this Section 5(a).
(b) Other Regulatory Requirements. If the holder or, upon the
advice of counsel, the Company determines that the exercise of this Warrant
would require notice to, or the consent or approval by, the Federal
Communications Commission or any public utility commission or other regulatory
agency of any state in which the Company does business that is vested with
jurisdiction over Company or the provision of communication services within such
state, the holder and the Company shall make all necessary filings and
notifications required, and shall have received any required consents,
approvals, orders or otherwise, prior to effecting the exercise of this Warrant.
The holder shall be required to pay all required filing fees in connection with
such filings and notifications. Each holder by acceptance of a Warrant agrees to
comply with the provisions of this Section 5(b).
6. Adjustment of Exercise Price and Number of Shares. The number of
shares of Common Stock purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Subdivisions, Combinations and Other Issuances. Prior to
the exercise or expiration of this Warrant, if the Company shall: (i) subdivide
its outstanding shares of Common Stock into a larger number of shares of Common
Stock by stock split or otherwise, (ii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock by reverse stock split or
otherwise or (iii) issue additional shares of Common Stock or other capital
stock as a dividend or distribution on or with respect to its Common Stock, the
Exercise Price in effect prior to
4
such subdivision, combination or issuance shall forthwith be proportionately
decreased in the case of a subdivision or stock dividend or distribution, or
proportionately increased in the case of a combination and the number of Shares
issuable upon exercise of the Warrant in effect prior to such subdivision,
combination or issuance shall forthwith be proportionately increased in the case
of a subdivision, stock dividend or distribution, or proportionately decreased
in the case of a combination. Any adjustment under this Section 6(a) shall
become effective at the close of business on the date the subdivision,
combination or reclassification becomes effective, or as of the record date of
such dividend or distribution, or in the event that no record date is fixed,
upon the making of such dividend or distribution.
(b) Reclassification, Reorganization, Consolidation, etc. In
the event of any corporate reclassification, capital reorganization,
consolidation, spin-off, merger, transfer of all or a substantial portion of the
Company's properties or assets or any dissolution, liquidation or winding up of
the Company (other than as a result of a subdivision, combination, dividend or
distribution provided for in Section 6(a) above) (a "Corporate Transaction"),
then, as a condition of such event, provision shall be made, and duly executed
documents evidencing the same from the Company and any surviving or acquiring
Person (the "Successor Company") shall be delivered to the holder hereof, so
that the holder shall have the right to receive upon exercise of this Warrant
the same number of shares of Common Stock and amount of cash and other property
that such holder would have been entitled to receive upon such Corporate
Transaction had this Warrant been exercised immediately prior to the effective
date of such Corporate Transaction. The Company shall provide that any Successor
Company in such Corporate Transaction shall enter into an agreement with the
Company confirming the holder's rights pursuant to this Warrant, assuming the
Company's obligations under this Warrant, jointly and severally with the Company
if the Company shall survive such Corporate Transaction, and providing after the
date of such Corporate Transaction for adjustments, which shall be as nearly
equivalent as possible to the adjustments provided for in this Section 6. The
provisions of this Section 6(b) shall apply similarly to successive Corporate
Transactions involving any Successor Company. In the event of a Corporate
Transaction in which consideration payable to holders of Common Stock is payable
solely in cash, then the holder shall be entitled to receive in exchange for
this Warrant cash in an amount equal to the amount such holder would have
received had the holder exercised this Warrant immediately prior to such
Corporate Transaction, less the aggregate Exercise Price for this Warrant then
in effect. In case of any Corporate Transaction described in the immediately
preceding sentence of this Section 6(b), the Company or any Successor Company,
as the case may be, shall make available any funds necessary to pay to the
holder the amount to which the holder is entitled as described above in the same
manner and at the same time as holders of Common Stock would be entitled to such
funds.
(c) Issuance of Additional Shares of Common Stock. In the
event the Company at any time or from time to time shall, or shall be deemed to,
issue or sell Additional Shares of Common Stock, other than Excluded Stock, for
consideration per share received by the Company of less than the Exercise Price,
then, and in each such case, the Exercise Price for any Warrant shall be
decreased to an amount determined by dividing the previously applicable Exercise
Price by a fraction, (A) the numerator of which shall be the sum of (i) the
number of shares of Common Stock outstanding immediately prior to such issuance
or sale, plus (ii) the number of Additional Shares of Common Stock issued or
sold or deemed to be issued or sold, and (B) the denominator of which shall be
the sum of (x) the number of shares of Common Stock outstanding immediately
prior to
5
such issuance or sale, plus (y) the number of shares of Common Stock which the
aggregate consideration received by the Company for the Additional Shares of
Common Stock so issued or sold or deemed to be issued or sold would purchase at
the previously applicable Exercise Price; provided, however, that if at such
time or as a result of such adjustment the Exercise Price for any Warrant is or
would be, as the case may be, equal to or less than $.001 per share, then in
lieu of the adjustment of the Exercise Price the number of Shares purchasable
upon exercise of this Warrant shall be increased to a number determined by
multiplying the previously applicable number of Shares purchasable upon exercise
of this Warrant by a fraction, (A) the numerator of which shall be the sum of
(i) the number of shares of Common Stock outstanding immediately prior to such
issuance or sale, plus (ii) the number of Additional Shares of Common Stock
issued or sold or deemed to be issued or sold, and (B) the denominator of which
shall be the sum of (x) the number of shares of Common Stock outstanding
immediately prior to such issuance or sale, plus (y) the number of shares of
Common Stock which the aggregate consideration received by the Company for the
Additional Shares of Common Stock so issued or sold or deemed to be issued or
sold would purchase at the previously applicable Exercise Price.
(d) Options and Convertible Securities.
(i) In the event that the Company at any time or from
time to time issues, sells, grants or assumes, or fixes a record date for the
determination of holders of any class of securities entitled to receive, any
Options or Convertible Securities, other than Excluded Stock, then, and in each
such case, the number of shares of Common Stock at any time issuable upon the
exercise of such Options and/or the conversion or exchange of such Convertible
Securities, as the case may be, shall be deemed to be Additional Shares of
Common Stock issued as of the close of business on the date of the earliest of
such issuance, sale, grant, assumption or record date.
(ii) If any Options or Convertible Securities
provide, with the passage of time or otherwise, for any decrease or increase, as
the case may be, in (A) the consideration payable to the Company or for which
such Options or Convertible Securities are exercisable, convertible or
exchangeable, or (B) the number of Additional Shares of Common Stock issuable
upon the exercise and/or conversion or exchange thereof, then the Exercise Price
for this Warrant shall be adjusted upon any such decrease or increase becoming
effective to reflect such decrease or increase insofar as it affects any such
Options or Convertible Securities which are outstanding at such time, as if such
Options or Convertible Securities included such terms as adjusted upon their
original issuance, sale, grant, assumption or record date, as the case may be;
provided, however, that no adjustments relating to any Options or Convertible
Securities pursuant to this subsection, individually or in the aggregate, shall
increase the Exercise Price for this Warrant by more than all previous
reductions in the Exercise Price for such Warrant relating to the same Options
or Convertible Securities.
(iii) In any case in which Additional Shares of
Common Stock are deemed to be issued, sold, granted or assumed, no further
adjustment of the Exercise Price shall be made upon the exercise of such Options
or the conversion or exchange of such Convertible Securities and the consequent
issue or sale of Convertible Securities or shares of Common Stock.
(iv) Upon (x) the expiration, or the repurchase and
cancellation or retirement by the Company, of any Options which have not been
exercised, or (y) the expiration of
6
any rights of conversion or exchange under any Convertible Securities which have
not been exercised, or the repurchase and cancellation or retirement by the
Company of any such Convertible Securities the rights of conversion or exchange
of which have not been exercised, any adjustments to the Exercise Price computed
upon the original issuance, sale, grant, assumption or record date, and upon any
subsequent adjustments to such Options or Convertible Securities, shall,
effective as of such expiration, cancellation or retirement, as the case may be,
be recomputed as if: (i) the only Additional Shares of Common Stock (including,
without limitation, pursuant to the issuance or sale of Options or Convertible
Securities) issued or sold were the Additional Shares of Common Stock
(including, without limitation, pursuant to the issuance or sale of Options or
Convertible Securities), if any, actually issued or sold upon the exercise of
such Options or upon the conversion or exchange of such Convertible Securities;
(ii) in the case of Options, the consideration received therefor was the
consideration actually received by the Company for the issuance, sale, grant or
assumption of such Options, whether or not exercised, plus the consideration
actually received by the Company upon such exercise, plus, in the case of
Options for Convertible Securities, any additional consideration deemed to be
received by the Company upon the issuance of such Convertible Securities for
which Options were exercised; and (iii) in the case of Convertible Securities,
the consideration received therefor was the consideration actually received by
the Company for the issuance, sale, grant or assumption of such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Company upon such conversion or
exchange; provided, however, that no adjustments relating to any Options or
Convertible Securities pursuant to this subsection, individually or in the
aggregate, shall increase the Exercise Price by more than all previous
reductions in the Exercise Price relating to the same Options or Convertible
Securities.
(e) Consideration.
(i) For purposes of this Section 6, the consideration
for the issuance, sale, grant or assumption of any Additional Shares of Common
Stock, irrespective of the accounting treatment of such consideration, shall
equal:
(1) insofar as it consists of cash, the
amount of cash paid in consideration for the issuance, sale, grant or assumption
of such Additional Shares of Common Stock, without giving effect to customary
expenses, commissions or other compensation paid by the Company and customary
concessions or discounts allowed by the Company to underwriters, dealers or
others performing similar services in connection with any such issuance, sale,
grant or assumption;
(2) insofar as it consists of property
(including, without limitation, securities) other than cash actually received by
the Company as direct consideration for the issuance, sale, grant or assumption
or such Additional Shares of Common Stock, the Fair Market Value thereof at the
time of such issuance, sale, grant or assumption;
(3) insofar as it consists of other property
or consideration, including the provision of services to the Company, the Fair
Market Value of such other property or consideration; and
7
(4) in the event Additional Shares of Common
Stock are issued or sold together with other securities or property for a
consideration which covers both, the portion of such consideration so received,
computed as provided in clauses (1), (2) and (3) above, allocable to such
Additional Shares of Common Stock (as reasonably determined by the Board of
Directors of the Company in good faith, as evidenced by a written board
resolution delivered to the holder hereof).
(ii) Additional Shares of Common Stock deemed to have
been issued, sold, granted or assumed pursuant to Section 6(d) hereof shall be
deemed to have been issued, sold, granted or assumed for consideration per share
equal to the quotient of: (A) the total amount of cash and other property, if
any, received by the Company as direct consideration for the issuance, sale,
grant or assumption of the Options or Convertible Securities in question, plus
the aggregate amount of additional consideration (as set forth in the
instruments relating thereto) payable to the Company upon the exercise of such
Options or the conversion or exchange of such Convertible Securities or, in the
case of Options for Convertible Securities, the exercise of such Options and the
conversion or exchange of such Convertible Securities, divided by (B) the number
of shares of Common Stock (as set forth in the instruments relating thereto)
issuable upon the exercise of such Options and the conversion or exchange of
such Convertible Securities.
(f) Dividends and Distributions. In the event that the Company
at any time or from time to time declares, orders, pays or makes any dividend or
other distribution on the Common Stock (other than quarterly cash dividends on
the Common Stock in an amount per annum not to exceed five percent (5%) of the
Fair Market Value of the Common Stock on the date declared), including, without
limitation, distributions of cash, evidence of its indebtedness, Options,
Convertible Securities, other securities or property or rights to subscribe for
or purchase any of the forgoing, and whether by way of dividend, spin-off,
reclassification, recapitalization, similar corporate reorganization or
otherwise, other than a dividend or distribution payable in Additional Shares of
Common Stock that gives rise to an adjustment pursuant to Section 6(a) hereof,
then, and in each such case, the Exercise Price of this Warrant shall be reduced
to a number determined by dividing the previously applicable Exercise Price by a
fraction (which must be less than 1, otherwise no adjustment is to be made
pursuant to this Section 6(f)) (A) the numerator of which shall be the Fair
Market Value per share of Common Stock on the record date for such dividend or
other distribution, and (B) the denominator of which shall be the excess, if
any, of (x) such Fair Market Value per share of Common Stock, over (y) the sum
of the amount of any cash distributed per share of Common Stock plus the
positive Fair Market Value, if any, per share of Common Stock of any such
evidences of indebtedness, Options, Convertible Securities, other securities or
property or rights to be so distributed. Such adjustments shall be made whenever
any such dividend or other distribution is made and shall become effective as of
the date of such distribution, retroactive to the record date therefor.
(g) Other Events. If any event occurs as to which the
provisions of this Section 6 are not strictly applicable or if strictly
applicable would not fairly protect the purchase rights of the holder hereof in
accordance with such provisions, then the Board of Directors of the Company
shall make an adjustment in the number of Shares available under this Warrant,
the Exercise Price, or the applicability of such provisions so as to protect
such purchase rights. The adjustment shall be such as will give the holder
hereof upon exercise for the same aggregate Exercise Price the total number
8
of shares of Common Stock as the holder would have owned had this Warrant been
exercised prior to the event and had the holder continued to hold such Common
Stock until after the event requiring the adjustment, but in no event shall any
such adjustment have the effect of increasing the Exercise Price.
(h) Minimum Adjustment. The adjustments required by the
preceding subsections of this Section 6 shall be made whenever and as often as
any specified event requiring an adjustment shall occur, except that no
adjustment of the Exercise Price or the number of Shares purchasable upon
exercise of this Warrant that would otherwise be required shall be made unless
and until such adjustment either by itself or with other adjustments not
previously made decreases the Exercise Price immediately prior to the making of
such adjustment by at least $0.01 or increases or decreases the number of Shares
purchasable upon exercise of this Warrant immediately prior to the making of
such adjustment by at least one Share. Any adjustment representing a change of
less than such minimum amount shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 6 and not
previously made, would result in the requisite minimum adjustment.
(i) Accountants' Report as to Adjustments. In the case of any
adjustment in the number of Shares purchasable upon exercise of this Warrant or
the Exercise Price, the Company, at its sole expense, shall promptly (i) compute
such adjustment in accordance with the terms of this Warrant and, if the holder
hereof so requests in writing from the Company within 30 days of receipt of such
computations from the Company, cause independent certified public accountants of
recognized national standing to verify such computation (other than any
determination of the Fair Market Value of Common Stock or the fair market value
of any other property); (ii) prepare a report setting forth such adjustment and
showing in reasonable detail the method of calculation thereof and the facts
upon which such adjustment is based, including, without limitation, (a) the
event or events giving rise to such adjustment; (b) the consideration received
by the Company for any Additional Shares of Common Stock issued or sold or
deemed to have been issued or sold; (c) the number of shares of Common Stock
outstanding or deemed to be outstanding prior and subsequent to any such
transaction; (d) the method by which any such adjustment was calculated
(including a description of the basis on which the Board of Directors of the
Company made any determination of Fair Market Value or fair market value
required thereby); and (e) the number of Shares purchasable upon exercise of
this Warrant and the Exercise Price in effect immediately prior to such event or
events and as adjusted; (iii) mail a copy of each such report to the holder
hereof and, upon the request at any time of the holder hereof, furnish to the
holder a like report setting forth the number of Shares purchasable upon
exercise of this Warrant and the Exercise Price at the time in effect and
showing in reasonable detail how they were calculated; and (iv) keep copies of
all such reports available at the principal office of the Company for inspection
during normal business hours by the holder or any prospective purchaser of this
Warrant designated by the holder hereof; provided, however, if the independent
certified public accountant determines that the actual adjustment is within five
percent (5%) of the adjustment reported by the Company, the holder shall be
responsible for the fees and expenses of the independent certified public
accountant.
(j) No Dilution or Impairment. The Company shall not, by
amendment of its certificate of incorporation or other organizational document
or through any sale or other issuance of securities, capital reorganization,
reclassification, recapitalization, consolidation, merger, transfer of
9
assets, dissolution, liquidation, winding-up, any similar transaction or any
other voluntary action, solely to avoid or solely to seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all terms hereunder and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder hereof against dilution or other impairment in a manner
that is consistent with the Company's obligations hereunder. Without limiting
the generality of the foregoing, the Company (a) will not permit the par value
of any shares of Common Stock receivable upon the exercise of this Warrant to
exceed the Exercise Price, and (b) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this Warrant
by the holder hereof. Without limiting the generality of the foregoing, before
taking any action that would cause a reduction of the Exercise Price pursuant to
Section 6 hereof below the then par value (if any) of the Common Stock, the
Company shall take any and all corporate action (including, without limitation,
a reduction in par value) which shall be necessary to validly and legally issue
fully paid and nonassessable shares of Common Stock, as the case may be, at the
Exercise Price as so reduced.
(k) Contest and Appraisal Rights. If the holder hereof shall,
in good faith, disagree with any determination by the Board of Directors of the
Company of the Fair Market Value made pursuant to this Warrant, and such
disagreement is in respect of securities not traded on a national securities
exchange or quoted on an automated quotation system or other property valued by
the Board of Directors of the Company at more than $2,500,000 then the holder
may by notice to the Company (an "Appraisal Notice"), given within 30 days after
notice to the holder hereof following such determination, elect to contest such
determination; provided, however, that the holder hereof may not seek appraisal
of any determination of Fair Market Value to the extent that the Company has
received a fairness opinion or other appraisal from an Appraiser in connection
with the transaction giving rise to such determination. Within 20 days after an
Appraisal Notice, the Company shall engage an Appraiser to make an independent
determination of such Fair Market Value (the "Appraiser's Determination"), and
to deliver to the Company and the holder hereof a report describing its
methodology and results in reasonable detail within 30 days of such engagement.
In arriving at its determination, the Appraiser shall base any valuation upon:
(i) in the case of the Fair Market Value of shares of Common Stock, the fair
market value of the Company and its Subsidiaries on the basis of an arm's length
sale of a going concern between an informed and willing buyer and an informed
and willing seller, under no compulsion to buy or sell, taking into account all
the relevant facts and circumstances then prevailing, and without consideration
of (x) the lack of an actively trading public market for the Common Stock, (y)
any restrictions on the transfer of shares of Common Stock, or (z) any control
premium or minority discount, and (ii) in the case of the Fair Market Value of
any other property, the fair market value of such other property assuming that
such other property was sold in an arm's length transaction between an informed
and willing buyer and an informed and willing seller, under no compulsion to buy
or sell, taking into account all the relevant facts and circumstances then
prevailing. The holder hereof shall be afforded reasonable opportunities to
discuss the appraisal with the Appraiser. The Appraiser's Determination shall be
final and binding on the Company and the holders hereof, absent manifest error.
The costs of conducting an appraisal shall be borne by the Company.
7. Notice of Corporate Action. In the event the Company proposes to:
(i) pay, distribute, or take a record of the holders of any class of securities
for the purpose of determining the
10
holders thereof who are entitled to receive any dividend or other distribution,
or any right to subscribe for, purchase or otherwise acquire any shares of
capital stock or any other securities or property; or (ii) consummate any
capital reorganization, reclassification, recapitalization, consolidation,
merger, transfer of all or substantially all of its assets, dissolution,
liquidation or winding-up, or any similar transaction; then, at least 10 days
prior to the earlier of any applicable record date or such event, as the case
may be, the Company shall mail to the holder hereof a notice specifying: (a) the
date or expected date on which any such payment or distribution is to be made or
record is to be taken and the amount and character of any such dividend,
distribution or right; (b) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation, winding-up or similar transaction is to take
effect and any record date therefor; (c) the time as of which any holders of
record of shares of Common Stock and/or any other class of securities shall be
entitled to exchange their shares of Common Stock and/or other securities for
the securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation, winding-up or similar transaction and a description in
reasonable detail of such transaction; and (d) in each case, the expected effect
on the number of Shares purchasable upon exercise of this Warrant and the
Exercise Price of each such transaction or event. The Company shall update any
such notice to reflect any change in the foregoing information.
8. No Fractional Shares. No fractional shares of Common Stock shall be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the Fair Market
Value thereof.
9. Other Antidilution Provisions. In the event that the Company
proposes to issue, sell, grant or assume any convertible or exchangeable debt
(including, without limitation, debt issued by any Affiliate of the Company
convertible or exchangeable for shares of Common Stock) or equity securities
(including, without limitation, any Additional Shares of Common Stock or rights
to acquire Additional Shares of Common Stock) which, in the aggregate, provide
for greater or more favorable antidilution protection than the antidilution
protection provided for in Section 6 hereof, then the Company shall give the
Purchaser 15 Business Days' prior written notice of its intention to do so and
offer the Purchaser the right to participate in such issuance, sale, grant or
assumption on the same terms and conditions as proposed and to purchase a
percentage of the aggregate amount of such convertible or exchangeable debt or
aggregate number of such equity securities (or aggregate number of units, in the
event that the convertible or exchangeable debt or equity securities are
proposed to be issued, sold, granted or assumed together with other securities
of the Company) proposed to be issued, sold, granted or assumed equal to a
percentage determined by dividing (a) the total number of shares of Common Stock
issuable upon exercise of this Warrant or any portion hereof then held by the
Purchaser, its Affiliates or Permitted Transferees by (b) the total number of
outstanding shares of Common Stock on a fully diluted basis before giving effect
to any such proposed transaction. The Purchaser shall notify the Company of its
intention to participate in such transaction within five Business Days of
receipt of written notice from the Company. For the avoidance of doubt, a
different exercise price or trigger price for the application of such rights
(including any such price based on fair market value) shall not by itself be
considered more favorable. The provisions of this Section 9 shall apply only to
the Purchaser, its Affiliates and Permitted Transferees and shall not inure to
the benefit of any other successor or assign of the Purchaser, its Affiliates or
Permitted Transferees.
11
10. Compliance with Securities Act; Disposition of Warrant or Shares of
Common Stock.
(a) Compliance With Securities Act. The Holder, by acceptance
hereof, agrees that this Warrant, and the Shares issuable upon exercise of this
Warrant, are being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Warrant, or any Shares issuable upon exercise
of this Warrant, except under circumstances which will not result in a violation
of the Securities Act or any applicable state securities laws. This Warrant and
all Shares issued upon exercise of this Warrant (unless registered under the
Securities Act and any applicable state securities laws) shall be stamped or
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM."
Whenever the foregoing legend is no longer required in the opinion of counsel to
the holder hereof, upon request of the holder hereof, the Company, at its sole
expense (including, without limitation, the payment of any applicable issue
taxes), shall issue or cause to be issued in the name of and delivered to the
holder hereof or as the holder hereof may direct new Warrant Certificates of
like tenor, dated the date hereof, and/or new certificates for shares of Common
Stock.
(b) Transferability. Subject to compliance with applicable
federal and state securities laws, the holder hereof may, without the prior
written consent of the Company, transfer this Warrant, in whole or in part, at
any time to any Person or Group (including any Affiliate or Permitted
Transferee); provided, however, the holder hereof may not transfer, in one or
more series of transactions, this Warrant, in whole or in part, without the
prior written consent of the Company (i) to any Competitor or (ii) with respect
to a number of shares of Common Stock issuable upon exercise of this Warrant or
any portion hereof representing 10% or more of the outstanding Common Stock on a
fully diluted basis to any Person or Group (other than an Affiliate or Permitted
Transferee); provided, further, that with respect to clause (ii) above, the
consent of the Company shall not be unreasonably withheld. Notwithstanding the
foregoing, until the date that is six months after the Date of Grant, the
Purchaser may not assign, in whole or in part, this Warrant to a Permitted
Assignee unless such Permitted Assignee shall have agreed to be bound by Section
5.07 of the Purchase Agreement. Any transfer of this Warrant or any portion
hereof shall be recorded on the books of the Company upon the surrender of this
Warrant, properly endorsed for transfer by delivery of an Assignment Form in
substantially the form attached hereto as Exhibit B, to the Company at the
address set forth in Section 16 hereof. In the event of a partial transfer of
this Warrant, the Company shall issue to the holder one or more appropriate new
Warrants.
11. No Stockholder Rights or Liabilities. Prior to the exercise of this
Warrant, the holder hereof shall not be entitled to any rights of a stockholder
with respect to the Shares, including (without limitation) the right to vote
such Shares or receive dividends or other distributions thereon,
12
and the holder hereof shall not be entitled to any notice or other communication
concerning the business or affairs of the Company, other than as specifically
required by this Warrant. Nothing contained in this Warrant shall be construed
as imposing any obligation on any holder to purchase any securities or as
imposing any liabilities on such holder as a stockholder of the Company, whether
such obligation or liabilities are asserted by the Company or by creditors of
the Company or otherwise.
12. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant held by any Person other than the initial holder hereof or any
institutional investor, upon delivery of an indemnity reasonably satisfactory to
the Company or, in the case of any such mutilation, upon surrender of this
Warrant for cancellation at the principal office of the Company, the Company, at
the expense of the holder (including, without limitation, the payment of any
applicable issue taxes), shall execute and deliver, in lieu thereof, a new
Warrant of like tenor and dated the date hereof.
13. Remedies. The Company stipulates that the remedies at law available
to the holder hereof in the event of any default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise. No failure or delay on the part of the holder
hereof, in exercising any right, power or remedy hereunder shall operate as a
suspension or waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The remedies herein
provided are in addition to and not exclusive of any other remedies provided at
law or in equity.
14. Successors and Assigns. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and the holder
hereof from time to time of this Warrant and the Shares issuable upon exercise
of this Warrant.
15. Amendments and Waivers. Any term of this Warrant may be amended,
altered or modified and the observance of any term of this Warrant may be waived
(either generally or in a particular instance and either retroactively or
prospectively), upon the written consent of the Company and the holder hereof.
Any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
16. Notices. All notices required under this Warrant shall be deemed to
have been given or made for all purposes (i) upon personal delivery, (ii) upon
confirmation receipt that the communication was successfully sent to the
applicable number if sent by facsimile, (iii) one day after being sent, when
sent by professional overnight courier service, or (iv) five days after posting
when sent by registered or certified mail. Notices to the Company shall be sent
to the address of the Company set forth below (or at such other place as the
Company shall notify the Holders hereof in writing) and notices to the Holder
shall be sent to the address of the Holder set forth on the signature page
hereto (or at such other place as the Holder shall notify the Company in
writing):
13
To the Company: Pac-West Telecomm, Inc.
0000 X. Xxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: General Counsel
17. Headings. The section and subsection headings of this Warrant are
inserted for convenience only and shall not constitute a part of this Warrant in
construing or interpreting any provision hereof.
18. Governing Law. This Warrant and the rights and duties of the
parties hereto hereunder and (unless otherwise provided) all amendments and
supplements to, and all consents and waivers pursuant to, this Warrant shall in
all respects be governed by, and construed and enforced in accordance with, the
laws of the State of New York, without giving effect to its conflict of laws
principles or rules.
19. Severability. If any provision of this Warrant is held to be
invalid or unenforceable for any reason, it shall be adjusted rather than
voided, if possible, to achieve the intent of the parties hereto to the maximum
extent possible. Any provision of this Warrant which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
20. Defined Terms.
(a) Definitions. The following terms have the meanings
indicated below, unless the context otherwise requires:
"Additional Shares of Common Stock" means all shares, including treasury shares,
of Common Stock, issued, sold or granted, or deemed to be issued, sold or
granted pursuant to the terms hereof, by the Company after the date hereof,
whether or not subsequently reacquired or retired by the Company, other than the
shares of Common Stock issued upon the exercise of this Warrant.
"Affiliate" means, with respect to any specified Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"Appraiser" means an independent nationally recognized investment bank or other
qualified financial institution acceptable to the Company and the holder hereof.
"Business Day" means any day other than a Saturday or a Sunday or a day on which
commercial banking institutions in New York City are authorized or required to
be closed.
14
"Common Stock" means the common stock of the Company, par value $0.001 per
share, any capital stock into which such Common Stock shall have been changed or
converted, any capital stock resulting from any reclassification of such Common
Stock, and all other capital stock of any class or classes of the Company, other
than preference stock, the holders of which share equally with the Common Stock
in current dividends and liquidating dividends after the payment of dividends
and distributions on any shares entitled to preference.
"Competitor" means any Person, firm, partnership, corporation or other entity
that (i) is engaged directly or indirectly in the business of providing
telecommunication services of the type (a) provided by the Company or (b) that
the Company or its subsidiaries have taken significant actions to begin
providing or (ii) that controls, or is under common control with, any Person,
firm, partnership, corporation or other entity identified in clause (i) above.
"Convertible Securities" means any evidences of indebtedness, shares of capital
stock or any other securities convertible into or exchangeable for, directly or
indirectly, shares of Common Stock.
"Current Market Value" means the average of the closing prices of the Common
Stock during the five-day trading period ending immediately prior to the date of
determination as quoted on the Nasdaq Small Cap Market or any United States
automated quotation system or national securities exchange or national market
system on which the Common Stock is then quoted or traded, as applicable
"Excluded Stock" means (a) securities issued, or deemed issued (as provided
below), to directors, officers, employees or consultants of the Company or a
subsidiary of the Company in connection with their service as directors of the
Company or a subsidiary of the Company, their employment by the Company or a
subsidiary of the Company or their retention as consultants by the Company or a
subsidiary of the Company under the Company's employee benefit plans approved by
the Company's board of directors, including, without limitation, the 1999 Stock
Incentive Plan, the 1998 Xxxxxxx Non-Qualified Stock Incentive Plan and the 2000
Napa Valley Non-Qualified Stock Incentive Plan (collectively, the "Plans"), as
such plans may be amended from time to time with the approval of the Company's
board of directors, or under other plans, adopted or assumed by the Company with
the approval of the Company's board of directors, and (b) shares of Common Stock
issued, or deemed issued (as provided below), pursuant to merger, consolidation
or stock or asset acquisition approved by the Company's board of directors.
"Fair Market Value" means (i) with respect to any share of Common Stock,
including with respect to a Share for purposes of Section 2(b), the Current
Market Price; provided, that, if the Common Stock is not then quoted on the
Nasdaq Small Cap Market or any United States automated quotation system or
national securities exchange or national market system or the OTC Bulletin Board
or Pink Sheets, the fair market value shall be: (A) the value based on the most
recently completed arm's length transaction between the Company and a Person
other than an affiliate of the Company within the three-month period prior to
the date of determination with respect to such security, or (B) if (A) does not
apply, the fair market value as reasonably determined by the Board of Directors
of the Company in good faith, as evidenced by a written board resolution
delivered to the holder hereof; and (ii) with respect to any other property
other than cash or Common Stock, (A) the value based on the most recently
completed arm's length transaction between the Company and a Person other than
15
an affiliate of the Company within the three-month period prior to the date of
determination with respect to such property, or (B) if (A) does not apply, the
fair market value as reasonably determined by the Board of Directors of the
Company in good faith, as evidenced by a written board resolution delivered to
the holder hereof. Any determination pursuant to subsections (i)(B) or (ii)(B)
shall be made on the basis of an arm's length sale of a going concern between an
informed and willing buyer and an informed and willing seller, under no
compulsion to buy or sell, taking into account all the relevant facts and
circumstances then prevailing and without consideration of (x) the lack of an
actively trading public market for the Common Stock, (y) any restrictions on the
transfer of shares of Common Stock or (z) any control premium or minority
discount. For the avoidance of doubt, any determination pursuant to subsections
(i)(B) or (ii)(B) shall be subject to Section 6(k).
"Group" shall have the meaning given to such term in Section 13(d)(3) of
Securities Exchange Act of 1934, as amended.
"Note" means the senior secured promissory note issued to the Purchaser on the
date hereof pursuant to the Purchase Agreement.
"Options" means rights, options or warrants to subscribe for, purchase or
otherwise acquire, directly or indirectly, shares of Common Stock, including,
without limitation, Convertible Securities.
"Permitted Transferee" means any Person listed in Schedule 1 of the Purchase
Agreement.
"Person" means any individual, partnership, limited liability company, unlimited
liability company, corporation, association, joint stock company, trust, joint
venture, unincorporated organization or any federal, state, county or municipal
governmental or quasi-governmental agency, department, commission, board,
bureau, instrumentality or similar entity.
"Registration Rights Agreement" means the Registration Rights Agreement entered
into by the Company and the Purchaser on the date hereof.
"Securities Act" means the Securities Act of 1933 and all rules and regulations
of the Securities and Exchange Commission thereunder, as amended from time to
time.
16
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in its
corporate name by its duly authorized officer and to be dated as of the Date of
Grant set forth on the first page to this Warrant.
PAC-WEST TELECOMM, INC.
By:
-------------------------------------
Name:
Title:
EXHIBIT A-1
NOTICE OF EXERCISE
TO: PAC-WEST TELECOMM, INC. (THE "COMPANY")
1. The undersigned hereby:
elects to purchase shares of Common Stock of the Company pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full, or elects to exercise its net issuance rights
pursuant to Section 2(b) of the attached Warrant with respect to shares of
Common Stock.
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name or names as are specified below:
----------------------------------------
(Name)
----------------------------------------
----------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.
----------------------------------------
(Signature)
----------------------------------------
(Date)
A-1
EXHIBIT A-2
NOTICE OF EXERCISE
TO: PAC-WEST TELECOMM, INC. (THE "COMPANY")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S-__ (File No. ______________), which was filed with the
Securities and Exchange Commission on ____________, 20__, the undersigned
hereby:
elects to purchase shares of Common Stock of the Company (or such lesser
number of shares as may be sold on behalf of the undersigned at the Closing)
pursuant to the terms of the attached Warrant, or elects to exercise its net
issuance rights pursuant to Section 2(b) of the attached Warrant with respect to
Shares of Common Stock.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such shares.
3. The undersigned has instructed the custodian for the selling shareholders to
deliver to the Company $ or, if less, the net proceeds due the
undersigned from the sale of shares in the aforesaid public offering. If such
net proceeds are less than the purchase price for such shares, the undersigned
agrees to deliver the difference to the Company prior to the Closing.
----------------------------------------
(Name)
----------------------------------------
----------------------------------------
(Address)
---------------------------
(Date)
A-2
EXHIBIT B
ASSIGNMENT FORM
TO: PAC-WEST TELECOMM, INC. (THE "COMPANY")
The undersigned hereby assigns and transfers unto _____________________________
_______________________________________________________________________ (Please
typewrite or print in block letters) the right to purchase ____________ Shares
(as defined in the Warrant) of Pac-West Telecomm, Inc., subject to the Warrant,
dated as of _____________________________, granted to the undersigned (the
"Warrant").
This assignment complies with the provisions of Section 10 of the Warrant.
Date:
----------------------
By:
---------------------------------
------------------------------------
(Print Name of Signatory)
------------------------------------
(Title of Signatory)
B-1
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of [____], 2003 (this
"Agreement"), by and between Pac-West Telecomm, Inc., a California corporation
(the "Company"), and Deutsche Bank AG - London acting through DB Advisors, LLC
as investment advisor (the "Purchaser").
WHEREAS, the Purchaser is purchasing warrants (the "Warrants") to
purchase [26,666,667] shares of the Company's common stock, par value $0.001 per
share (the "Common Stock"), and a senior secured promissory note in the
principal amount of $40,000,000 (the "Note") pursuant to that certain Note and
Warrant Purchase Agreement dated _________ __, 2003 (the "Purchase Agreement"),
between the Company and the Purchaser.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, it is agreed as follows:
1. Definitions. (a) Unless otherwise defined herein, the terms below
shall have the following meanings (such meanings being equally applicable to
both the singular and plural form of the terms defined):
"Affiliate" shall mean, with respect to any specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, such specified
Person.
"Agreement" shall mean this Registration Rights Agreement, including
all amendments, modifications and supplements and any exhibits or schedules to
any of the foregoing.
"Business Day" shall mean any day that is not a Saturday, a Sunday
or a day on which commercial banks are required or authorized by law to be
closed in the State of New York.
"Control" (including the terms "Controlled by" and "under common
Control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Effective Period" shall mean the period commencing with the
effective date of the Shelf Registration Statement and ending upon the earlier
of (i) the termination of the registration rights pursuant to Section 5 hereof
and (ii) such time as the Purchaser ceases to own any Registrable Securities.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
"Holder" shall mean the Purchaser, and any transferees of the
Purchaser to whom New Registrable Securities are permitted to be transferred in
accordance with the terms of this Agreement and the Purchase Agreement, and, in
each case, who continue to be entitled to the rights of a Holder hereunder.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor entity thereof.
"New Registrable Securities" shall mean (a) the shares of Common
Stock issuable upon exercise of the Warrants and (b) any securities issuable or
issued or distributed in respect of any of the Common Stock identified in clause
(a) by way of stock dividend or stock split or in connection with a combination
of shares, recapitalization, reorganization, merger, consolidation or otherwise.
For purposes of this Agreement, New Registrable Securities shall cease to be New
Registrable Securities when a Registration Statement covering such New
Registrable Securities has been declared effective under the Securities Act by
the SEC and such New Registrable Securities have been disposed of pursuant to
such effective Registration Statement.
"Old Piggy-Back Holder" shall mean any holder of Common Stock with
piggy-back registration rights pursuant to Section 3 of the Old Registration
Agreement.
"Old Registrable Securities" shall mean Registrable Securities, as
that term is defined in the Old Registration Agreement.
"Old Registration Agreement" shall mean that certain Registration
Agreement, dated as of September 16, 1998, by and among the Company and certain
investors, as may be amended from time to time in accordance with its terms.
"Person" shall mean any individual, corporation, partnership, joint
venture, firm, trust, unincorporated organization, government or any agency or
political subdivision thereof or other entity.
"Prospectus" means the Prospectus (including any summary Prospectus,
preliminary Prospectus and any final Prospectus) included in the Registration
Statement as amended or supplemented by any supplement with respect to the terms
of the offering of any portion of the Registrable Securities pursuant to a
Demand Registration or Piggy-Back Registration and by all other amendments and
supplements thereto, including post-effective amendments and any material
incorporated by reference therein.
"Registrable Securities" shall mean Old Registrable Securities
and New Registrable Securities.
"Registration Statement" shall mean the Demand Registration
Statement, the Piggy-Back Registration Statement and/or the Shelf Registration
Statement, as the case may be, including the Prospectus contained therein, any
amendments to such Registration Statement
2
(including post-effective amendments) and all exhibits and any material
incorporated by reference in such Registration Statement.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and all rules and regulations promulgated thereunder.
"SEC" shall mean the Securities and Exchange Commission, or any
successor thereto.
(b) The following terms have the meanings set forth it the Section
set forth opposite such term:
TERM SECTION
---- -------
Blackout Period 6
Common Stock Recitals
Demand for Registration 3(c)
Demand Registration 3(a)
Demand Registration Statement 3(a)
Indemnified Party 10(d)
Indemnifying Party 10(d)
Maximum Number of Securities 3(b)
Note Recitals
Participating Demand Holders 3(a)
Participating Piggy-Back Holders 4(b)
Piggy-Back Registration 4(a)
Piggy-Back Registration Statement 4(a)
Purchase Agreement Recitals
Purchaser Recitals
Shelf Registration Statement 2
Warrants Recitals
2. Shelf Registration Statement. Within 90 days after the date
hereof, the Company shall file with the SEC, and thereafter use its reasonable
best efforts to have declared effective as soon as practicable after the filing
thereof, a "shelf" Registration Statement (a "Shelf Registration Statement") on
Form S-3 (or any successor form) pursuant to Rule 415 under the Securities Act
or on such other form as may be appropriate under the Securities Act, in each
case, covering the resale of all of the New Registrable Securities. The Company
shall, subject to customary terms and conditions, use its reasonable best
efforts to keep the Shelf Registration Statement continuously effective from the
date that such Shelf Registration Statement is declared effective during the
Effective Period to the extent required to permit the disposition (in accordance
with the intended method or methods thereof, as aforesaid) of the New
Registrable Securities so registered.
3. Demand Registration.
(a) After receipt of a written request from one or more Holders
requesting that the Company effect a registration (a "Demand Registration")
under the Securities Act covering
3
all or part of the New Registrable Securities which specifies the intended
method or methods of disposition thereof, the Company shall promptly notify all
Holders in writing of the receipt of such request and each such Holder, in lieu
of exercising its rights under Section 4 hereof, may elect (by written notice
sent to the Company within ten (10) Business Days from the date of such Holder's
receipt of the aforementioned notice from the Company) to have all or part of
such Holder's New Registrable Securities included in such registration thereof
pursuant to this Section 3, and such Holder shall specify in such notice the
number of New Registrable Securities that such Holder elects to include in such
registration. Thereupon, the Company shall, as expeditiously as is possible, but
in any event no later than thirty (30) days (excluding any days which occur
during a permitted Blackout Period under Section 6 below) after receipt of a
written request for a Demand Registration, file with the SEC and use its
reasonable best efforts to cause to be declared effective, a registration
statement (a "Demand Registration Statement") relating to all shares of New
Registrable Securities that the Company has been so requested to register by
such Holders ("Participating Demand Holders") for sale, to the extent required
to permit the disposition (in accordance with the intended method or methods
thereof, as aforesaid) of the Registrable Securities so registered; provided,
however, that the aggregate value of the Registrable Securities requested to be
registered (i) be at least $10,000,000, based on the closing trading price of
the Common Stock on the date the demand to file such Demand Registration
Statement is made or (ii) be at least 20% of the New Registrable Securities
initially issuable upon exercise of the Warrants.
(b) If the majority-in-interest of the Participating Demand Holders
in a Demand Registration relating to a public offering requests that the
offering be underwritten with a managing underwriter selected in the manner set
forth in Section 14 below and such managing underwriter of such Demand
Registration advises the Company in writing that, in its opinion, the number of
securities to be included in such offering is greater than the total number of
securities which can be sold therein without having a material adverse effect on
the distribution of such securities or otherwise having a material adverse
effect on the marketability thereof (the "Maximum Number of Securities"), then
the Company shall include in such Demand Registration the Registrable Securities
that the Participating Demand Holders and the participating Old Piggy-Back
Holders have requested to be registered thereunder only to the extent the number
of such Registrable Securities does not exceed the Maximum Number of Securities.
If such amount exceeds the Maximum Number of Securities, the number of
Registrable Securities included in such Demand Registration shall be allocated
among all the Participating Demand Holders and the participating Old Piggy-Back
Holders on a pro rata basis (based on the number of Registrable Securities held
by each Participating Demand Holder and participating Old Piggy-Back Holder). If
the amount of such Registrable Securities does not exceed the Maximum Number of
Securities, the Company may include in such Demand Registration any other
securities of the Company and other securities held by other security holders of
the Company as the Company may in its discretion determine or be obligated to
allow, in an amount, which together with the Registrable Securities included in
such Demand Registration, shall not exceed the Maximum Number of Securities.
(c) Holders shall be entitled to an aggregate of two (2)
registrations of New Registrable Securities pursuant to this Section 3 (each, a
"Demand for Registration") in addition to the Shelf Registration Statement
pursuant to Section 2; provided that a registration requested pursuant to this
Section 3 shall not be deemed to have been effected for purposes of this Section
4
3(c) unless (i) it has been declared effective by the SEC, (ii) it has remained
effective for the period set forth in Section 7(a), (iii) Holders of New
Registrable Securities included in such registration have not, prior to the
filing of the relevant Demand Registration Statement, withdrawn sufficient
shares from such registration such that the remaining Holders requesting
registration would not have been able to request registration under the
provisions of Section 3, and (iv) the offering of New Registrable Securities
pursuant to such registration is not subject to any stop order, injunction or
other order or requirement of the SEC (other than any such stop order,
injunction, or other order or requirement of the SEC prompted by act or omission
of Holders of New Registrable Securities); provided, however, that if, as a
result of the inclusion of Old Registrable Securities held by participating Old
Piggy-Back Holders, the Participating Demand Holders are not able to register
and sell at least two-thirds of the New Registrable Securities requested to be
included in a Demand Registration, then such Demand Registration shall not be
counted as one of the two Demands for Registration provided for pursuant to this
Section 3(c).
(d) Notwithstanding anything to the contrary contained herein, the
Company shall not be required to prepare and file (i) more than two (2) Demand
Registration Statements in any twelve-month period, (ii) any Demand Registration
Statement within 180 days following the date of effectiveness of any other
Registration Statement or (iii) any Demand Registration Statement within 90 days
following the date of effectiveness of any other registration statement filed
pursuant to the Old Registration Agreement or with respect to the sale of Common
Stock by the Company (or such longer period of time as may be specified in an
underwriting agreement relating to such registration statement).
4. Piggy-Back Registration.
(a) If the Company proposes to file on its behalf and/or on behalf
of any holder of its securities (other than a Holder of New Registrable
Securities) a registration statement under the Securities Act on any form (other
than a registration statement on Form S-4 or S-8 or any successor form for
securities to be offered in a transaction of the type referred to in Rule 145
under the Securities Act or to employees of the Company pursuant to any employee
benefit plan, respectively) for the registration of Common Stock (a "Piggy-Back
Registration"), it will give written notice to all Holders at least twenty (20)
days before the initial filing with the SEC of such registration statement (a
"Piggy-Back Registration Statement"), which notice shall set forth the intended
method of disposition of the securities proposed to be registered by the
Company. The notice shall offer to include in such filing the aggregate number
of shares of New Registrable Securities as such Holders may request.
(b) Each Holder desiring to have New Registrable Securities
registered under this Section 4 ("Participating Piggy-Back Holders") shall
advise the Company in writing within ten (10) days after the date of receipt of
such offer from the Company, setting forth the amount of such New Registrable
Securities for which registration is requested. The Company shall thereupon
include in such filing the number or amount of New Registrable Securities for
which registration is so requested, subject to paragraph (c) below, and shall
use its reasonable best efforts to effect registration of such New Registrable
Securities under the Securities Act.
5
(c) If the Piggy-Back Registration relates to an underwritten public
offering and the managing underwriter of such proposed public offering advises
in writing that, in its opinion, the amount of Registrable Securities requested
to be included in the Piggy-Back Registration in addition to the securities
being registered by the Company would be greater than the Maximum Number of
Securities (having the same meaning as defined in Section 3 but replacing the
term "Demand Registration" with "Piggy-Back Registration"), then:
(i) in the event the Company initiated the Piggy-Back Registration,
the Company shall include in such Piggy-Back Registration, first, the
securities the Company proposes to register and, second, the Registrable
Securities of all Participating Piggy-Back Holders and participating Old
Piggy-Back Holders, to be included in such Piggy-Back Registration in an
amount which, together with the securities the Company proposes to
register, shall not exceed the Maximum Number of Securities, such amount
to be allocated among such Participating Piggy-Back Holders and
participating Old Piggy-Back Holders on a pro rata basis (based on the
aggregate number of Registrable Securities requested by the Participating
Piggy-Back Holders and participating Old Piggy-Back Holders to be included
in the Piggy-Back Registration Statement); provided, however, that in no
event may less than 25% of the Maximum Number of Securities be made
available for the Participating Piggy-Back Holders;
(ii) in the event any holder or holders of securities of the Company
initiated the Piggy-Back Registration, the Company shall include in such
Piggy-Back Registration, first, the securities such initiating security
holder or holders propose to register, second, the Registrable Securities
of all Participating Piggy-Back Holders and participating Old Piggy-Back
Holders to be included in such Piggy-Back Registration, in an amount which
together with the securities the initiating security holder or holders
propose to register, shall not exceed the Maximum Number of Securities,
such amount to be allocated among the Participating Piggy-Back Holders and
participating Old Piggy-Back Holders on a pro rata basis (based on the
aggregate number of Registrable Securities requested by the Participating
Piggy-Back Holders and participating Old Piggy-Back Holders to be included
in the Piggy-Back Registration Statement) and, third, any securities the
Company proposes to register, in an amount which together with the
securities the initiating security holder or holders and the Participating
Piggy-Back Holders and participating Old Piggy-Back Holders propose to
register, shall not exceed the Maximum Number of Securities; provided,
however, that in no event may less than 25% of the Maximum Number of
Securities be made available for the Participating Piggy-Back Holders;
(d) The Company will not hereafter enter into any agreement, which
is inconsistent with the rights of priority provided in paragraph (c) above.
5. Termination of Registration Rights. The registration rights set
forth in Sections 1, 2 and 3 above shall terminate upon the later of (i) the
second anniversary of the Expiration Date (as defined in the Warrants) and (ii)
three (3) months after the date Purchaser ceases to be an "Affiliate" of the
Company pursuant to Rule 144 of the Securities Act.
6
6. Blackout Periods. The Company shall have the right to delay the
filing or effectiveness of a Registration Statement required pursuant to
Sections 3 and 4 hereof or suspend sales under any Shelf Registration Statement
filed hereunder during no more than three (3) periods aggregating to not more
than 90 days in any twelve-month period (a "Blackout Period") in the event that
(i) the Company would, in accordance with the advice of its counsel, be required
to disclose in the Prospectus information not otherwise then required by law to
be publicly disclosed and (ii) in the reasonable judgment of the Company's Board
of Directors, (a) there is a reasonable likelihood that such disclosure, or any
other action to be taken in connection with the prospectus, would materially and
adversely affect or interfere with any financing, acquisition, merger,
disposition of assets (not in the ordinary course of business), corporate
reorganization or other similar transaction involving the Company or (b) there
is a reasonable likelihood that such disclosure would materially and adversely
affect or interfere with the best interests of the Company or its shareholders
and such disclosure relates to material legal and regulatory developments;
provided, however, that the Company shall delay during such Blackout Period the
filing or effectiveness of, or suspend sales under, any Registration Statement
required pursuant to the registration rights of the holders of any other
securities of the Company. The Company shall promptly give the Holders written
notice of such determination containing a general statement of the reasons for
such postponement and an approximation of the anticipated delay. Notwithstanding
anything else herein to the contrary, the Company shall not be required to
disclose to the Holders any of the facts or circumstances regarding material
non-public information giving rise to any Blackout Period. The Holders agree
that, as a condition to their rights under this Agreement, they will treat all
notices of proposed registrations and all information relating to any Blackout
Periods with the strictest confidence and will not disseminate such information.
7. Registration Procedures. Except as otherwise provided herein, if
the Company is required by the provisions of Section 2, 3 or 4 to use its
reasonable best efforts to effect the registration of any of its securities
under the Securities Act, the Company will, as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement with
respect to such securities and use its reasonable best efforts to cause such
Registration Statement promptly to become and remain effective for a period of
time required for the disposition of such securities by the holders thereof but
not to exceed 30 days (except with respect to a Shelf Registration Statement
which shall remain effective during the Effective Period); provided, however,
that before filing such Registration Statement or any amendments or supplements
thereto (for purposes of this subsection, amendments shall not be deemed to
include any filing that the Company is required to make pursuant to the Exchange
Act), the Company shall furnish the representatives of the Holders referred to
in Section 7(m) copies of all documents proposed to be filed, which documents
will be subject to the review and comment of such counsel. The Company shall not
be deemed to have used its reasonable best efforts to keep a Registration
Statement effective during the applicable period if it voluntarily takes any
action that would result in the Holders of such New Registrable Securities not
being able to sell such New Registrable Securities during that period, unless
such action is required under applicable law or by a regulatory authority with
jurisdiction over the Company;
7
(b) prepare and file with the SEC such amendments and supplements to
such Registration Statement as may be reasonably necessary to keep such
Registration Statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all securities
covered by such Registration Statement until the earlier of such time as all of
such securities have been disposed of in a public offering or the expiration of
30 days (except with respect to the Shelf Registration Statement, for which such
period shall be the Effective Period);
(c) furnish to such Holders such number of conformed copies of the
applicable Registration Statement and each such amendment and supplement thereto
(including in each case all exhibits), and of any Prospectus in conformity with
the requirements of the Securities Act, and such other documents, as such
selling security holders may reasonably request;
(d) use its reasonable best efforts to register or qualify the
securities covered by such Registration Statement under such other securities or
blue sky laws of such jurisdictions within the United States and Puerto Rico as
each Holder of such securities shall reasonably request, to keep such
registration or qualification in effect for so long as such Registration
Statement remains in effect, and to take any other action which may be
reasonably necessary to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such Holder (provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business, subject itself to taxation in or to file a
general consent to service of process in any jurisdiction wherein it would not
but for the requirements of this paragraph (d) be obligated to do so; and
provided further that the Company shall not be required to qualify such New
Registrable Securities in any jurisdiction in which the securities regulatory
authority requires that any Holder submit any shares of its New Registrable
Securities to the terms, provisions and restrictions of any escrow, lockup or
similar agreement(s) for consent to sell New Registrable Securities in such
jurisdiction unless such Holder agrees to do so), and do such other reasonable
acts and things as may be required of it to enable such Holder to consummate the
disposition in such jurisdiction of the securities covered by such Registration
Statement;
(e) furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to Section 3 or 4, if the method of distribution
is by means of an underwriting, on the date that the shares of New Registrable
Securities are delivered to the underwriters for sale pursuant to such
registration, or if such New Registrable Securities are not being sold through
underwriters, on the date that the registration statement with respect to such
shares of New Registrable Securities becomes effective, (1) a signed opinion,
dated such date, of the independent legal counsel representing the Company for
the purpose of such registration, addressed to the underwriters, if any, and if
such New Registrable Securities are not being sold through underwriters, then to
the Holders making such request, as to such matters as such underwriters or the
Holders holding a majority of the New Registrable Securities included in such
registration, as the case may be, may reasonably request and as would be
customary in such a transaction; and (2) letters dated such date and the date
the offering is priced from the independent certified public accountants of the
Company, addressed to the underwriters, if any, and if
8
such New Registrable Securities are not being sold through underwriters, then to
the Holders making such request and, if such accountants refuse to deliver such
letters to such Holders, then to the Company (i) stating that they are
independent certified public accountants within the meaning of the Securities
Act and that, in the opinion of such accountants, the financial statements and
other financial data of the Company included in the Registration Statement
(except with respect to financial statements audited by Xxxxxx Xxxxxxxx LLP)
comply as to form in all material respects with the applicable accounting
requirements of the Securities Act and (ii) covering such other financial
matters (including information as to the period ending not more than five (5)
Business Days prior to the date of such letters) with respect to the
registration in respect of which such letter is being given as such underwriters
or the Holders holding a majority of the New Registrable Securities included in
such registration, as the case may be, may reasonably request and as would be
customary in such a transaction;
(f) enter into customary agreements (including if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of such New Registrable Securities;
(g) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make earnings statements
satisfying the provisions of Section 11(a) of the Securities Act generally
available to the Holders no later than 45 days after the end of any twelve-month
period (or 90 days, if such period is a fiscal year) (i) commencing at the end
of any fiscal quarter in which New Registrable Securities are sold to
underwriters in an underwritten public offering, or (ii) if not sold to
underwriters in such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
Registration Statement, which statements shall cover said twelve-month periods;
(h) use its reasonable best efforts to cause all such New
Registrable Securities to be listed on each securities exchange or quotation
system on which similar securities issued by the Company are listed or traded;
(i) give written notice to the Holders:
(i) when such Registration Statement or any amendment thereto
has been filed with the SEC and when such Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the SEC for amendments or supplements to
such Registration Statement or for additional information;
(iii) of the issuance by the SEC of any stop order suspending
the effectiveness of such Registration Statement or the initiation
of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of
the Common
9
Stock for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the existence of any fact that results in: (A) the
Registration Statement containing an untrue statement of material fact or
omitting to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and (B) the
Prospectus containing an untrue statement of material fact or omitting to
state a material fact necessary in order to make the statements therein
not misleading (which notice shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes have been
made);
(j) use its reasonable best efforts to prevent the issuance or
obtain the withdrawal of any order suspending the effectiveness of such
Registration Statement at the earliest possible time;
(k) furnish to each Holder, without charge, at least one copy of
such Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in writing,
all exhibits (including those, if any, incorporated by reference);
(l) upon the occurrence of any event contemplated by Section 7(i)(v)
above, promptly prepare a post-effective amendment to such Registration
Statement or a supplement to the related Prospectus or file any other required
document so that, as thereafter delivered to the Holders, the Prospectus will
not contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. If the Company notifies the Holders
in accordance with Section 7(i)(v) above to suspend the use of the Prospectus
until the requisite changes to the Prospectus have been made, then the Holders
shall suspend use of such Prospectus and use their reasonable best efforts to
return to the Company all copies of such Prospectus (at the Company's expense)
other than permanent file copies then in such Holder's possession, and the
period of effectiveness of such Registration Statement provided for above shall
be extended by the number of days from and including the date of the giving of
such notice to the date Holders shall have received such amended or supplemented
Prospectus pursuant to this Section 7(l);
(m) make reasonably available for inspection by representatives of
the Holders, any underwriter participating in any disposition pursuant to such
Registration Statement and any attorney, accountant or other agent retained by
such representative or any such underwriter all relevant financial and other
records, pertinent corporate documents and properties of the Company and cause
the Company's officers, directors and employees to supply all relevant
information reasonably requested by such representative or any such underwriter,
attorney, accountant or agent in connection with the registration; and
10
(n) use its reasonable best efforts to procure the cooperation of
the Company's transfer agent in settling any offering or sale of New Registrable
Securities, including with respect to the transfer of physical stock
certificates into book-entry form in accordance with any procedures reasonably
requested by the Holders or the underwriters.
It shall be a condition precedent to the obligation of the Company
to take any action pursuant to this Agreement in respect of the New Registrable
Securities which are to be registered at the request of any Holder that such
Holder shall furnish to the Company such information regarding the New
Registrable Securities held by such Holder and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action taken by the Company.
8. Expenses. All expenses incurred in connection with each
registration pursuant to Sections 2, 3 and 4 of this Agreement, excluding
underwriters' discounts and commissions, but including without limitation all
registration, filing and qualification fees, word processing, duplicating,
printers' and accounting fees (including the expenses of any special audits or
"comfort" letters required by or incidental to such performance and compliance),
fees of the NASD or listing fees, messenger and delivery expenses, all fees and
expenses of complying with state securities or blue sky laws, fees and
disbursements of counsel for the Company and the reasonable documented fees and
disbursements of one counsel for the selling Holders (which counsel shall be
selected by the Holders holding a majority in interest of the New Registrable
Securities being registered), shall be paid by the Company.
9. Rule 144 Information.
(a) At all times after ninety (90) days after any Registration
Statement covering securities of the Company shall have become effective, the
Company agrees to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act; and
(ii) use its best efforts to file with the SEC in a timely manner
all reports and other documents required of the Company under the
Securities Act and the Exchange Act.
(b) At all times during which the Company is neither subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, nor exempt
from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, it will
provide, upon the written request of any Holder of New Registrable Securities in
written form (as promptly as practicable and in any event within 15 Business
Days), to any prospective buyer of such stock designated by such Holder, all
information required by Rule 144A(d)(4)(i) of the General Regulations
promulgated by the SEC under the Securities Act.
10. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Holder, such
Holder's directors and officers, each person who participates in the offering of
such New Registrable Securities, including underwriters (as defined in the
Securities Act), and each person,
11
if any, who controls such Holder or participating person within the meaning of
the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which they may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or proceedings in
respect thereof) arise out of or are based on any untrue or alleged untrue
statement of any material fact contained in such registration statement on the
effective date thereof (including any Prospectus filed under Rule 424 under the
Securities Act or any amendments or supplements thereto) or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse each such Holder, such Holder's directors and
officers, such participating person or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company shall not be liable to any Holder, such Holder's directors and
officers, participating person or controlling person in any such case for any
such loss, claim, damage, liability or action to the extent that it arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in connection with such registration statement,
preliminary prospectus, final prospectus or amendments or supplements thereto,
in reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by any such Holder, such Holder's
directors and officers, participating person or controlling person. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of any such Holder, such Holder's directors and officers,
participating person or controlling person, and shall survive the transfer of
such securities by such Holder.
(b) Each Holder requesting or joining in a registration severally
and not jointly shall indemnify and hold harmless the Company, each of its
directors and officers, each person, if any, who controls the Company within the
meaning of the Securities Act, and each agent and any underwriter for the
Company (within the meaning of the Securities Act) against any losses, claims,
damages or liabilities, joint or several, to which the Company or any such
director, officer, controlling person, agent or underwriter may become subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or proceedings in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in such registration statement on the effective date thereof
(including any Prospectus filed under Rule 424 under the Securities Act or any
amendments or supplements thereto) or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
registration statement, preliminary or final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written information
furnished by or on behalf of such Holder expressly for use in connection with
such registration; and each such Holder shall reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person, agent or underwriter in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the liability of each Holder hereunder shall be limited to the aggregate
net proceeds received by such Holder in connection with any such registration
under the Securities Act.
12
(c) If the indemnification provided for in this Section 10 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding. If the allocation provided in this paragraph (c) is
not permitted by applicable law, the parties shall contribute based upon the
relevant benefits received by the Company from the initial offering of the
Securities on the one hand and the net proceeds received by the Holders from the
sale of Securities on the other.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 10(c) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(d) Any Person entitled to indemnification hereunder (the
"Indemnified Party") agrees to give prompt written notice to the indemnifying
party (the "Indemnifying Party") after the receipt by the Indemnified Party of
any written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which the Indemnified Party
intends to claim indemnification or contribution pursuant to this Agreement;
provided that the failure so to notify the Indemnified Party shall not relieve
the Indemnifying Party of any liability that it may have to the Indemnifying
Party hereunder unless such failure is materially prejudicial to the
Indemnifying Party. If notice of commencement of any such action is given to the
Indemnifying Party as provided above, the Indemnifying Party shall be entitled
to participate in and, to the extent it may wish, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such Indemnified Party. The Indemnified Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be paid by the Indemnified Party
unless (i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying
Party fails to assume the defense of such action, or (iii) the named parties to
any such action (including any impleaded parties) have been advised by such
counsel that either (A) representation of such Indemnified Party and the
Indemnifying Party by the same counsel would be inappropriate under applicable
standards of professional conduct or (B) there are one or more legal defenses
available to it which are substantially different from or additional to those
13
available to the Indemnifying Party. No Indemnifying Party shall be liable for
any settlement entered into without its written consent, which consent shall not
be unreasonably withheld.
(e) The agreements contained in this Section 10 shall survive the
transfer of the Registration Statement and shall remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
such director, officer or participating or controlling Person.
11. Certain Additional Limitations on Registration Rights.
Notwithstanding the other provisions of this Agreement, the Company shall not be
obligated to register the Registrable Securities of any Holder (i) if such
Holder or any underwriter of such New Registrable Securities shall fail to
furnish to the Company necessary information in respect of the distribution of
such New Registrable Securities, or (ii) if such registration involves an
underwritten offering, such New Registrable Securities are not included in such
underwritten offering on the same terms and conditions as shall be applicable to
the other securities being sold through underwriters in the registration or such
Holder fails to enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwritten offering.
12. Limitations on Registration of Other Securities; Representation.
From and after the date of this Agreement, the Company shall not, without the
prior written consent of a majority-in-interest of the Holders, enter into any
agreement with any holder or prospective holder of any securities of the Company
giving such holder or prospective holder any registration rights the terms of
which are as or more favorable taken as a whole than the registration rights
granted to the Holders hereunder unless the Company shall also give such rights
to the Holders hereunder.
13. No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities, which is inconsistent in any
material respects with the rights granted to the Holders in this Agreement.
14. Selection of Managing Underwriters. In the event the
Participating Demand Holders have requested an underwritten offering, the
underwriter or underwriters shall be selected by the Company and shall be
approved by the Holders of a majority of the shares being so registered, which
approval shall not be unreasonably withheld or delayed, provided (i) that all of
the representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made to
and for the benefit of such Holders of New Registrable Securities, (ii) that any
or all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement shall be conditions precedent to the obligations of
such Holders of New Registrable Securities, and (iii) that no Holder shall be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding such Holder, the New Registrable Securities of such Holder and such
Holder's intended method of distribution and any other representations required
by law or reasonably required by the lead underwriter. Subject to the foregoing,
all Holders proposing to distribute New Registrable Securities through such
underwritten offering shall enter into an underwriting agreement in customary
form with the underwriter or underwriters. Subject to the provisions of Section
9(b),
14
if any Holder of New Registrable Securities disapproves of the terms of the
underwriting, such Holder may elect to withdraw all its New Registrable
Securities by written notice to the Company, the managing underwriter and the
other Holders participating in such registration. The securities so withdrawn
shall also be withdrawn from registration.
15. Miscellaneous.
(a) Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of the Agreement was not performed
in accordance with the terms hereof and that the parties hereto shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
(b) Amendments and Waivers; Assignment. (i) Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by the Company and a
majority in interest of the Holders or, in the case of a waiver, by the party or
parties against whom the waiver is to be effective; provided, however, that
waiver by the Holders shall require the consent of a majority in interest of the
Holders.
(i) No failure or delay by any party in exercising any right, power
or privilege hereunder (other than a failure or delay beyond a period of time
specified herein) shall operate as a waiver thereof and no single or partial
exercise thereof shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
(c) Notice Generally. All notices, request, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
courier service, by fax or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses:
(i) If to any Holder, at its last known address appearing on the
books of the Company maintained for such purpose.
(ii) If to the Company, at:
0000 X. Xxxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to:
Jenner & Block LLC
Xxx XXX Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx
Facsimile: (000) 000-0000
or at such other address as may be substituted by notice given as herein
provided.
15
(d) Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto as hereinafter provided. The
registration rights of any Holder with respect to any Registrable Securities
shall be transferred to any Person who is the transferee of such Registrable
Securities. All of the obligations of the Company hereunder shall survive any
such transfer. Except as provided in Sections 3, 4 and 10, no Person other than
the parties hereto and their successors and permitted assigns is intended to be
a beneficiary of this Agreement.
(e) Headings. The headings and subheadings in this Agreement are
included for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
(f) Governing Law; Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.
(i) Any claim, action, suit or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby may be heard and
determined in any New York state or federal court sitting in The City of
New York, County of Manhattan, and each of the parties hereto hereby
consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom in any such claim, action, suit or
proceeding) and irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of
venue of any such claim, action, suit or proceeding in any such court or
that any such claim, action, suit or proceeding that is brought in any
such court has been brought in an inconvenient forum.
(ii) Subject to applicable law, process in any such claim, action,
suit or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Without
limiting the foregoing and subject to applicable law, each party agrees
that service of process on such party as provided in Section 15(c) shall
be deemed effective service of process on such party. Nothing herein shall
affect the right of any party to serve legal process in any other manner
permitted by law or at equity. WITH RESPECT TO ANY SUCH CLAIM, ACTION,
SUIT OR PROCEEDING IN ANY SUCH COURT, EACH OF THE PARTIES IRREVOCABLY
WAIVES AND RELEASES TO THE OTHER ITS RIGHT TO A TRIAL BY JURY, AND AGREES
THAT IT WILL NOT SEEK A TRIAL BY JURY IN ANY SUCH PROCEEDING.
(g) Severability. If, at any time, any provision hereof is or
becomes illegal, invalid or unenforceable in any respect under the law of any
jurisdiction, neither the legality, validity or enforceability of the remaining
provisions hereof nor the legality, validity or enforceability of such provision
under the law of any other jurisdiction shall in any way be affected or impaired
thereby.
(h) Entire Agreement. This Agreement, the Purchase Agreement, the
Note, the Warrants and the Security Agreement constitute the entire agreement
among the parties
16
hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
(i) Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Such
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance or otherwise.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURE APPEARS ON NEXT PAGE]
17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
PAC-WEST TELECOMM, INC.
By:
----------------------------------
Name:
Title:
DEUTSCHE BANK AG - LONDON,
BY DB ADVISORS, LLC AS INVESTMENT
ADVISOR
By:
----------------------------------
Name:
Title:
18
EXHIBIT D
FORM OF GUARANTY AND SECURITY AGREEMENT
D-1
GUARANTY AND SECURITY AGREEMENT
Dated October ____, 2003
Between
PAC-WEST TELECOMM, INC.
as Grantor
and
DEUTSCHE BANK TRUST COMPANY AMERICAS
as Collateral Agent
TABLE OF CONTENTS
SECTION PAGE
------- ----
Section 1. Certain Defined Terms......................................... 2
Section 2. Guaranty...................................................... 9
Section 3. Grant of Security............................................. 14
Section 4. Security for Obligations...................................... 17
Section 5. Grantors Remain Liable........................................ 17
Section 6. Delivery and Control of Security Collateral................... 18
Section 7. Maintaining the Account Collateral............................ 19
Section 8. Representations and Warranties................................ 21
Section 9. Affirmative Covenants......................................... 23
Section 10. Negative Covenants............................................ 25
Section 11. Further Assurances............................................ 27
Section 12. Insurance..................................................... 28
Section 13. Post-Closing Changes; Bailees; Collections on Assigned
Agreements, Receivables and Related Contracts ................ 29
Section 14. As to Intellectual Property Collateral........................ 30
Section 15. Voting Rights; Dividends; Etc................................. 31
Section 16. Additional Shares............................................. 32
Section 17. The Collateral Agent -Authorization and Action................ 32
Section 18. Collateral Agent Appointed Attorney-in-Fact................... 33
Section 19. Collateral Agent May Perform.................................. 33
Section 20. The Collateral Agent's Duties ................................ 33
Section 21. Remedies...................................................... 35
Section 22. Indemnity and Expenses........................................ 38
Section 23. Amendments; Waivers; Additional Grantors; Etc................. 38
Section 24. Notices, Etc.................................................. 39
i
Section 25. Continuing Security Interest; Assignments under the
Credit Agreement ............................................. 39
Section 26. Termination................................................... 39
Section 27. Execution in Counterparts..................................... 39
Section 28. Governing Law................................................. 40
Section 29. Jurisdiction, Etc............................................. 40
Section 30. Waiver of Jury Trial.......................................... 41
Schedules I - Location, Chief Executive Office, Type Of Organization,
Jurisdiction Of Organization And Organizational
Identification Number
Schedule II - Pledged Equity
Schedule III - Locations of Equipment and Inventory
Schedule IV - Changes in Name, Location, Etc.
Schedule V - Patents, Trademarks and Trade Names, Copyrights and IP
Agreements
Schedule VI - Account Collateral
Exhibits
Exhibit A - Form of Security Agreement Supplement
Exhibit B - Form of Guaranty Supplement
Exhibit C - Form of Account Control Agreement (Deposit Account/Securities
Account)
Exhibit D - Form of Intellectual Property Security Agreement
Exhibit E - Form of Intellectual Property Security Agreement Supplement
ii
GUARANTY AND SECURITY AGREEMENT
GUARANTY AND SECURITY AGREEMENT dated October __, 2003 made by
Pac-West Telecomm, Inc., a California corporation (the "BORROWER"), the other
Persons listed on the signature pages hereof, the Additional Guarantors (as
defined in Section 2) and the Additional Grantors (as defined in Section 23)
(the Persons so listed, the Additional Guarantors and the Additional Grantors
(but not the Borrower) being, collectively, the "GUARANTORS" and, together with
the Borrower, the "GRANTORS"), to Deutsche Bank Trust Company Americas, as
collateral agent (together with any successor collateral agent, the "COLLATERAL
AGENT") for Deutsche Bank AG - London, acting through DB Advisors, LLC ("DB")
and each of its permitted successors, transferees and assigns (collectively with
DB, the "LENDERS").
PRELIMINARY STATEMENTS.
(1) The Borrower has issued its Senior Secured Promissory Note,
dated October ___, 2003 made payable to DB in the principal amount of
$40,000,000 (said Note, as it may hereafter be amended, amended and restated,
supplemented or otherwise modified from time to time, being the "NOTE" and,
together with this Agreement and each supplement hereto, the "LOAN DOCUMENTS").
(2) The Borrower has also (a) issued a Warrant to Purchase Shares of
Common Stock to DB dated as of October ___, 2003 (the "WARRANT"), (b) entered
into a Note and Warrant Purchase Agreement, dated as of October ___, 2003 with
DB (the "PURCHASE AGREEMENT") and (c) entered into a Registration Rights
Agreement, dated as of October ___, 2003 with DB (the "REGISTRATION RIGHTS
AGREEMENT" and, together with the Warrant, the Purchase Agreement, this
Agreement and the Note, the "INVESTMENT DOCUMENTS").
(3) Pursuant to the Note, the Grantors are entering into this
Agreement in order to guarantee the obligations of the Borrower under the Note
and in order to grant to the Collateral Agent for the benefit of the Lenders a
security interest in the Collateral (as hereinafter defined).
(4) Each Grantor is the owner of the shares of stock or other Equity
Interests (the "INITIAL PLEDGED EQUITY") set forth opposite such Grantor's name
on and as otherwise described in Schedule II hereto and issued by the
Subsidiaries named therein.
(5) The Borrower has opened deposit accounts (the "DEPOSIT
ACCOUNTS") with banks, in the name of the Borrower and subject to the terms of
this Agreement, as described in Schedule VI hereto.
(6) It is a condition precedent to the purchase of the Note by DB
that the Grantors shall have made the guarantees and granted the assignment and
security interest and made the pledge and assignment contemplated by this
Agreement.
(7) Each Grantor will derive substantial direct and indirect benefit
from the transactions contemplated by the Note and the other Investment
Documents.
(8) Terms defined in the Purchase Agreement and not otherwise
defined in this Agreement are used in this Agreement as defined in the Purchase
Agreement. Further, unless otherwise defined in this Agreement or in the
Purchase Agreement, terms defined in Article 8 or 9 of the UCC (as defined
below) are used in this Agreement as such terms are defined in such Article 8 or
9. "UCC" means the Uniform Commercial Code as in effect, from time to time, in
the State of New York; provided that, if perfection or the effect of perfection
or non-perfection or the priority of any security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, "UCC" means the Uniform Commercial Code as in effect
from time to time in such other jurisdiction for purposes of the provisions
hereof relating to such perfection, effect of perfection or non-perfection or
priority.
NOW, THEREFORE, in consideration of the premises and in order to
induce DB to purchase the Note, each Grantor hereby agrees with the Collateral
Agent for the benefit of the Lenders as follows:
Section 1. Certain Defined Terms
As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"BANKRUPTCY PROCEEDING" means any proceeding of the type referred to
in clause (f) of the definition of "Event of Default" or Xxxxx 00, Xxxxxx
Xxxxxx Code, or any similar foreign, federal or state law for the relief
of debtors.
"CAPITALIZED LEASES" means all leases that have been or should be,
in accordance with GAAP, recorded as capitalized leases.
"CONFIDENTIAL INFORMATION" means information that any Grantor
furnishes to any Lender Party on a confidential basis, but does not
include any such information that is or becomes generally available to the
public other than as a result of a breach by any Lender Party of its
obligations hereunder or that is or becomes available to such Lender Party
from a source other than the Grantors that is not, to the best of such
Lender Party's knowledge, acting in violation of a confidentiality
agreement with a Grantor.
"DEBT" of any Person means (a) all indebtedness of such Person for
borrowed money, (b) all Obligations of such Person for the deferred
purchase price of property or services (excluding trade debt), (c) all
Obligations of such Person for the payment of money evidenced by notes,
bonds, debentures or other similar instruments, (d) all Obligations of
such Person for the payment of money created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of
the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all Obligations of
such Person for the payment of money as lessee under Capitalized Leases,
(f) all Obligations of such Person for the payment of money under
acceptance, letter of credit or similar facilities, (g) all monetary
Obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any Equity
2
Interests in such Person or any other Person or any warrants, rights or
options to acquire such capital stock, (h) all Obligations of such Person
for the payment of money in respect of hedge agreements, (i) all
contingent Obligations of such Person for the payment of money and (j) all
indebtedness and other payment Obligations referred to in clauses (a)
through (i) above of another Person secured by (or for which the holder of
such Debt has an existing right, contingent or otherwise, to be secured
by) any Lien on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such indebtedness or other
payment Obligations.
"DEFAULT" means any event that would constitute an Event of Default
but for the requirement that notice be given or time elapse or both.
"EVENT OF DEFAULT" means any of the following:
(a) (i) the Borrower shall fail to pay any principal under the
Note when the same shall become due and payable or (ii) the Borrower
shall fail to pay any interest under the Note within three Business
Days after the same becomes due and payable, it being agreed that
such payment maybe made in kind as provided in the Note, or (iii)
any Grantor shall fail to make any other payment under any Loan
Document, in each case under this clause (iii) within five Business
Days after demand therefor by the Collateral Agent; or
(b) any representation or warranty made by any Grantor (or any
of its officers) under or in connection with any Loan Document shall
prove to have been incorrect in any material respect when made; or
(c) the Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 9(c) or (e) or Section 10
(other than Section 10(a)); or
(d) any Grantor shall fail to perform or observe any other
term, covenant or agreement contained in any Loan Document on its
part to be performed or observed if such failure shall remain
unremedied for 20 days after the earlier of the date on which (i) a
Responsible Officer of the Borrower becomes aware of such failure or
(ii) written notice thereof shall have been given to the Borrower by
any Lender Party; or
(e) any Grantor or any of its Subsidiaries shall fail to pay
any principal of, premium or interest on or any other amount payable
in respect of any Debt of such Grantor or such Subsidiary (as the
case may be) that is outstanding in a principal amount of at least
$[10,000,000] either individually or in the aggregate (but excluding
Debt outstanding hereunder), when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) but after giving effect to all applicable grace
periods therefor; or any other event shall occur or condition shall
exist under any agreement or instrument relating to any such Debt,
if the effect of such event or
3
condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt or otherwise to cause, or to permit the holder
thereof to cause, such Debt to mature or any such Debt shall be
declared to be due and payable or required to be prepaid or redeemed
(other than by a regularly scheduled required prepayment or
redemption), purchased or defeased, or an offer to prepay, redeem,
purchase or defease such Debt shall be required to be made, in each
case prior to the stated maturity thereof; or
(f) any Grantor or any of its Subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against any Grantor or any of its Subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for it
or for any substantial part of its property and, in the case of any
such proceeding instituted against it (but not instituted by it)
that is being diligently contested by it in good faith, either such
proceeding shall remain undismissed or unstayed for a period of 45
days or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar
official for, it or any substantial part of its property) shall
occur; or any Grantor or any of its Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in
this subsection (f); or
(g) any judgments or orders, either individually or in the
aggregate, for the payment of money in excess of $[20,000,000]
(which are not covered by insurance) shall be rendered against any
Grantor or any of its Subsidiaries and there shall be any period of
10 consecutive days during which either such judgment remains unpaid
or a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(h) any non-monetary judgment or order shall be rendered
against any Grantor or any of its Subsidiaries that could reasonably
be expected to have a Material Adverse Effect, and there shall be
any period of 10 consecutive days during which such judgment remains
unsatisfied or a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; or
(i) any material provision of the Note shall for any reason
cease to be valid and binding on or enforceable against any Grantor
party to it, or any such Grantor shall so state in writing; or
(j) this Agreement or any financing statement filed pursuant
hereto shall for any reason (other than pursuant to the terms
thereof) cease to create a
4
valid and perfected first priority lien on and security interest in
an material portion of the Collateral purported to be covered
thereby, except with respect to Liens incurred with respect to a
Permitted Facility or as otherwise permitted hereunder; or
(k) a default shall have occurred and be continuing beyond the
applicable grace period under the Warrant, the Registration Rights
Agreement or the Note Purchase Agreement, the result of which, in
the reasonable opinion of the Majority Lenders, could reasonably be
expected to have a Material Adverse Effect.
"EQUITY INTERESTS" means, with respect to any Person, shares of
capital stock of (or other ownership or profit interests in) such Person,
warrants, options or other rights for the purchase or other acquisition
from such Person of shares of capital stock of (or other ownership or
profit interests in) such Person, securities convertible into or
exchangeable for shares of capital stock of (or other ownership or profit
interests in) such Person or warrants, rights or options for the purchase
or other acquisition from such Person of such shares (or such other
interests), and other ownership or profit interests in such Person
(including, without limitation, partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares,
warrants, options, rights or other interests are authorized or otherwise
existing on any date of determination.
"GAAP" means generally accepted accounting principles applied in the
United States.
"LENDER PARTIES" means the Collateral Agent and the Lenders.
"LIEN" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on
title to real property.
"MAJORITY LENDERS" means, at any time, Lenders owed or holding at
least 66 2/3% of the principal outstanding under the Note at such time.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance or
properties of the Grantors taken as a whole, (b) the material rights and
remedies, taken as a whole, of the Collateral Agent or the Lenders under
any Investment Document or (c) the ability of any Grantor to perform its
material Obligations, taken as a whole, under any Investment Document to
which it is or is to be a party, provided, however, that the term
"Material Adverse Effect" shall not include (a) any circumstance, change
or effect that arises out of or is attributable to (i) any change in the
market for the Common Stock, including, without limitation, changes in the
market price or liquidity or (ii) general economic conditions affecting
the United States and California economy generally, (b) any other
circumstance, change or effect set forth in Section 1.01 of the Disclosure
Schedule to the Purchase Agreement or disclosed in other sections of the
Disclosure Schedule to the Purchase Agreement such
5
that the Purchaser shall have been reasonably notified of such
circumstance, change or effect or (c) any circumstance, change or effect
disclosed in the Borrower's SEC Reports.
"MATERIAL SUBSIDIARY" means, at any time, a Subsidiary of the
Borrower having assets in an amount equal to at least 5% of the amount of
total consolidated assets of the Borrower and its Subsidiaries (determined
as of the last day of the most recent fiscal quarter of the Borrower) or
revenues or net income in an amount equal to at least 5% of the amount of
total consolidated revenues or net income of the Borrower and its
Subsidiaries for the 12-month period ending on the last day of the most
recent fiscal quarter of the Borrower.
"OBLIGATION" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether or
not the right of any creditor to payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured or unsecured, and whether
or not such claim is discharged, stayed or otherwise affected by any
proceeding referred to in clause (f) of the definition of "Event of
Default." Without limiting the generality of the foregoing, the
Obligations of any Grantor under the Loan Documents include (a) the
obligation to pay principal, interest, charges, expenses, fees, attorneys'
fees and disbursements, indemnities and other amounts payable by such
Grantor under any Loan Document and (b) the obligation of such Grantor to
reimburse any amount in respect of any of the foregoing that any Lender
Party, in its sole discretion, may elect to pay or advance on behalf of
such Grantor.
"PERSON" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government
or any political subdivision or agency thereof.
"PERMITTED ACQUISITION" means the acquisition of the stock, other
equity interest or assets of any other Person (or of any remaining
interest in any less than wholly-owned affiliate), either directly or
indirectly, by way of merger, consolidation, amalgamation acquisition or
otherwise and for cash, stock or Debt (including deferred or contingent
Debt), by any Grantor or its Subsidiaries which has been approved by the
board of directors (or the equivalent body) of such Grantor or such
Subsidiary and the consummation of which would not cause a Default or
Event of Default hereunder or under any of the other Loan Documents (other
than pursuant to a provision purporting to prohibit the acquisition of
stock, equity interests or assets of any other Person, if any).
"PERMITTED COLLATERAL LIENS" means Permitted Liens described in
clauses (i), [(v)] (xi) and (xiii) of the definition thereof and in
existence on the date hereof; purchase money Liens described in clause
(xii) of the definition of "Permitted Liens"; and (c) Liens securing real
estate taxes that by operation of law have priority over the Liens created
pursuant to this Agreement.
6
"PERMITTED FACILITY" shall mean a revolving credit facility or an
asset securitization facility, provided that the total amount of Debt
under such facility is less than or equal to the greater of (a)
$10,000,000 and (b) 70% of the aggregate outstanding balance of the
Grantors' account receivables and provided, further that in no case shall
the total amount of Debt under such facility be greater than $25,000,000.
"PERMITTED LIENS" means:
(i) statutory Liens of landlords, carriers, warehousemen,
processors, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet due or
declared to be due by the claimant thereunder or amounts which are
being contested in good faith and by appropriate proceedings and for
which adequate reserves are being maintained on the applicable
Grantor's financial statements;
(ii) Liens for taxes, fees, assessments and other governmental
charges (A) which are not yet due or declared to be due by the
governmental authority thereunder or (B) which are being contested
in good faith and by appropriate proceedings and for which adequate
reserves arc being maintained on the applicable Grantor's books and
records;
(iii) Liens consisting of pledges or deposits required in the
ordinary course of business in connection with worker's
compensation, unemployment insurance and other social security
legislation or securing liability to insurance carriers in respect
of deductibles;
(iv) Liens (including pledges or deposits) to secure the
performance of tenders, statutory obligations, surety, stay, customs
and appeals bonds, bids, leases, governmental contract, trade
contracts, performance and return of money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money) incurred in the ordinary course of business;
(v) Liens consisting of the interest of the lessee under any
lease or sublease granted to others by any Grantor in its ordinary
course of business; provided that such Liens attach only to the
assets subject to such lease or sublease;
(vi) customary rights of setoff, revocation, refund or
chargeback under deposit agreements or under the UCC of banks or
other financial institutions where any Grantor maintains deposits in
the ordinary course of business, except to the extent waived under
any Account Control Agreement;
(vii) Liens arising from the granting of a license to any
Person in the ordinary course of business of a Grantor; provided
that such Liens attach only to the assets subject to such license
and the granting of such license is permitted hereunder;
7
(viii) Liens attaching to xxxx xxxxxxx money deposits made by
a Grantor or its Subsidiaries in connection with any letter of
intent or purchase agreement pursuant to a Permitted Acquisition;
(ix) Liens or security interests in favor of the Lender
Parties granted pursuant to or in connection with the Loan Documents
or the Investment Documents;
(x) Liens arising by operation of law or contract on insurance
policies and the proceeds thereof to secure premiums thereunder;
(xi) zoning restrictions and easements, licenses, covenants,
encroachments and other restrictions affecting the use of the
Grantor's and its Subsidiaries' real property that do not
individually, or in the aggregate have a material adverse effect on
the market value thereof or on the Grantors' or their Subsidiaries'
ability to use such real property for its intended purpose in
connection with its business;
(xii) Liens securing Debt (including Capitalized Leases)
incurred by the Borrower and/or its Subsidiaries to finance the
purchase, lease or improvement of real property or equipment that is
used or useful in the business of the Borrower or such Subsidiary;
provided the aggregate principal amount of such the principal amount
of such Debt secured by such Liens permitted pursuant to this clause
(xii) shall not exceed [$_________] at any time outstanding;
(xiii) Liens existing as of the date of this Agreement and
securing existing Indebtedness, as listed on Schedule ____, and/or
refinancings thereof;
(xiv) Liens on property of a Person existing at the time such
Person is merged into or consolidated with any Grantor or becomes a
Subsidiary of any Grantor; provided that such Liens were not created
in contemplation of such merger, consolidation or investment and do
not extend to any assets other than those of the Person merged into
or consolidated with such Grantor or acquired by such Grantor;
(xv) Liens on Receivables to secure Permitted Facility,
provided that the Collateral Agent for the benefit of the Lenders
shall have a second priority Lien in any such Receivables, which
shall be subordinated in all respects and under all circumstances to
the lien thereof in favor of the lender under the Permitted
Facility.
"RESPONSIBLE OFFICER" means, with respect to any Person, any of the
principal executive officers, directors, managing members or general
partners of such Person.
"SUBSIDIARY" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of
such corporation (irrespective of whether at the time capital
8
stock of any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency), (b) the
interest in the capital or profits of such partnership, joint venture or
limited liability company or (c) the beneficial interest in such trust or
estate is at the time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other Subsidiaries or by one
or more of such Person's other Subsidiaries.
Section 2. Guaranty
(a) Guaranty; Limitation of Liability. (i) Each Guarantor, jointly
and severally, hereby absolutely, unconditionally and irrevocably
guarantees the punctual payment when due, whether at scheduled maturity or
on any date of a required prepayment or by acceleration, demand or
otherwise, of all Obligations of each other Grantor now or hereafter
existing under or in respect of the Loan Documents (including, without
limitation, any extensions, modifications, substitutions, amendments or
renewals of any or all of the foregoing Obligations), whether direct or
indirect, absolute or contingent, and whether for principal, interest,
premiums, fees, indemnities, contract causes of action, costs, expenses or
otherwise (such Obligations being the "GUARANTEED OBLIGATIONS"), and
agrees to pay any and all reasonable out-of-pocket expenses (including,
without limitation, reasonable fees and expenses of counsel) incurred by
any Lender Party in enforcing any rights with respect to the guaranty set
forth in this Agreement (this "GUARANTY") or with respect to any Loan
Document. Without limiting the generality of the foregoing, each
Guarantor's liability shall extend to all amounts that constitute part of
the Guaranteed Obligations and would be owed by any other Grantor to any
Lender Party under or in respect of the Loan Documents but for the fact
that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving such other
Grantor.
(ii) Each Guarantor, and by its acceptance of this Guaranty, each
Lender Party, hereby confirms that it is the intention of all such Persons
that this Guaranty and the Obligations of each Guarantor hereunder not
constitute a fraudulent transfer or conveyance for purposes of any
Bankruptcy Proceeding, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar foreign, federal or state law to
the extent applicable to this Guaranty and the Obligations of each
Guarantor hereunder. To effectuate the foregoing intention, each Lender
Party and each Guarantor hereby irrevocably agree that the Obligations of
each Guarantor under this Guaranty at any time shall be limited to the
maximum amount as will result in the Obligations of such Guarantor under
this Guaranty not constituting a fraudulent transfer or conveyance.
(iii) Each Guarantor hereby unconditionally and irrevocably agrees
that in the event any payment shall be required to be made to any Lender
Party under this Guaranty or any other guaranty, such Guarantor will
contribute, to the maximum extent permitted by law and clause (ii) above,
such amounts to each other Guarantor and each other guarantor so as to
maximize the aggregate amount paid to the Lender Parties under or in
respect of the Loan Documents.
9
(b) Guaranty Absolute. Each Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Loan
Documents, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of any Lender
Party with respect thereto. The Obligations of each Guarantor under or in
respect of this Guaranty are independent of the Guaranteed Obligations or any
other Obligations of any other Grantor under or in respect of the Loan
Documents, and a separate action or actions may be brought and prosecuted
against each Guarantor to enforce this Guaranty, irrespective of whether any
action is brought against the Borrower or any other Grantor or whether the
Borrower or any other Grantor is joined in any such action or actions. The
liability of each Guarantor under this Guaranty shall be irrevocable, absolute
and unconditional irrespective of, and each Guarantor hereby irrevocably waives
any defenses it may now have or hereafter acquire in any way relating to, any or
all of the following:
(i) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Guaranteed Obligations or any other
Obligations of any other Grantor under or in respect of the Loan
Documents, or any other amendment or waiver of or any consent to departure
from any Loan Document, including, without limitation, any increase in the
Guaranteed Obligations resulting from the extension of additional credit
to any Grantor or any of its Subsidiaries or otherwise;
(iii) any taking, exchange, release or non-perfection of any
Collateral or any other collateral, or any taking, release or amendment or
waiver of, or consent to departure from, any other guaranty, for all or
any of the Guaranteed Obligations;
(iv) any manner of application of Collateral or any other
collateral, or proceeds thereof, to all or any of the Guaranteed
Obligations, or any manner of sale or other disposition of any Collateral
or any other collateral for all or any of the Guaranteed Obligations or
any other Obligations of any Grantor under the Loan Documents or any other
assets of any Grantor or any of its Subsidiaries;
(v) any change, restructuring or termination of the corporate
structure or existence of any Grantor or any of its Subsidiaries;
(vi) any failure of any Lender Party to disclose to any Grantor any
information relating to the business, condition (financial or otherwise),
operations, performance, properties or prospects of any other Grantor now
or hereafter known to such Lender Party (each Guarantor waiving any duty
on the part of the Lender Parties to disclose such information);
(vii) the failure of any other Person to execute or deliver this
Guaranty, any Guaranty Supplement or any other guaranty or agreement or
the release or reduction of liability of any Guarantor or other guarantor
or surety with respect to the Guaranteed Obligations; or
10
(viii) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by any Lender Party that might otherwise constitute a
defense available to, or a discharge of, any Grantor or any other
guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Guaranteed Obligations
is rescinded or must otherwise be returned by any Lender Party or any other
Person upon the insolvency, bankruptcy or reorganization of the Borrower or any
other Grantor or otherwise, all as though such payment had not been made.
(b) Waivers and Acknowledgments. (i) Each Guarantor hereby
unconditionally and irrevocably waives promptness, diligence, notice of
acceptance, presentment, demand for performance, notice of nonperformance,
default, acceleration, protest or dishonor and any other notice with
respect to any of the Guaranteed Obligations and this Guaranty and any
requirement that any Lender Party protect, secure, perfect or insure any
Lien or any property subject thereto or exhaust any right or take any
action against any Grantor or any other Person or any Collateral.
(ii) Each Guarantor hereby unconditionally and irrevocably waives
any right to revoke this Guaranty and acknowledges that this Guaranty is
continuing in nature and applies to all Guaranteed Obligations, whether
existing now or in the future.
(iii) Each Guarantor hereby unconditionally and irrevocably waives
(A) any defense arising by reason of any claim or defense based upon an
election of remedies by any Lender Party that in any manner impairs,
reduces, releases or otherwise adversely affects the subrogation,
reimbursement, exoneration, contribution or indemnification rights of such
Guarantor or other rights of such Guarantor to proceed against any of the
other Grantors, any other guarantor or any other Person or any Collateral
and (B) any defense based on any right of set-off or counterclaim against
or in respect of the Obligations of such Guarantor hereunder.
(iv) Each Guarantor hereby unconditionally and irrevocably waives
any duty on the part of either Lender Party to disclose to such Guarantor
any matter, fact or thing relating to the business, condition (financial
or otherwise), operations, performance, properties or prospects of any
other Grantor or any of its Subsidiaries now or hereafter known by such
Lender Party.
(v) Each Guarantor acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements contemplated
by the Loan Documents and that the waivers set forth in Section 2(b) and
this Section 2(c) are knowingly made in contemplation of such benefits.
(d) Subrogation. Each Guarantor hereby unconditionally and
irrevocably agrees not to exercise any rights that it may now have or hereafter
acquire against the Borrower, any other Grantor or any other insider guarantor
that arise from the existence, payment, performance or enforcement of such
Guarantor's Obligations under or in respect of this Guaranty or any other
11
Loan Document, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of either Lender Party against the Borrower,
any other Grantor or any other insider guarantor or any Collateral, whether or
not such claim, remedy or right arises in equity or under contract, statute or
common law, including, without limitation, the right to take or receive from the
Borrower, any other Grantor or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, unless and until
all of the Guaranteed Obligations (other than unmatured contingent Obligations
for indemnification) and all other amounts payable under this Guaranty shall
have been paid in full in cash. If any amount shall be paid to any Guarantor in
violation of the immediately preceding sentence at any time prior to the payment
in full in cash of the Guaranteed Obligations (other than unmatured contingent
Obligations for indemnification) and all other amounts payable under this
Guaranty, such amount shall be received and held in trust for the benefit of the
Lender Parties and shall forthwith be paid or delivered to the Lender in the
same form as so received (with any necessary endorsement or assignment) to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty, in accordance with the terms of the Loan Documents, or to
be held as Collateral for any Guaranteed Obligations or other amounts payable
under this Guaranty thereafter arising. If (i) any Guarantor shall make payment
to either Lender Party of all or any part of the Guaranteed Obligations and (ii)
all of the Guaranteed Obligations and all other amounts payable under this
Guaranty shall have been paid in full in cash, the Lender Parties will, at such
Guarantor's request and expense, execute and deliver to such Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to such Guarantor of an
interest in the Guaranteed Obligations resulting from such payment made by such
Guarantor pursuant to this Guaranty.
(e) Guaranty Supplements. Upon the execution and delivery by any
Person of a guaranty supplement in substantially the form of Exhibit B hereto
(each, a "GUARANTY SUPPLEMENT"), (i) such Person shall be referred to as an
"ADDITIONAL GUARANTOR" and shall become and be a Guarantor hereunder, and each
reference in this Guaranty to a "Guarantor" shall also mean and be a reference
to such Additional Guarantor and (ii) each reference herein to "this Guaranty",
"hereunder", "hereof" or words of like import referring to this Guaranty, and
each reference in any other Loan Document to the "Guaranty", "thereunder",
"thereof" or words of like import referring to this Guaranty, shall mean and be
a reference to this Guaranty as supplemented by such Guaranty Supplement.
(f) Subordination. Each Guarantor hereby subordinates any and all
debts, liabilities and other Obligations owed to such Guarantor by each other
Grantor (the "SUBORDINATED OBLIGATIONS") to the Guaranteed Obligations (other
than unmatured contingent Obligations for indemnification) to the extent and in
the manner hereinafter set forth in this Section 2(f):
(i) Prohibited Payments, Etc. Except during the continuance of an
Event of Default (including the commencement and continuation of any
proceeding under any Bankruptcy Proceeding relating to any other Grantor),
each Guarantor may receive regularly scheduled payments from any other
Grantor on account of the Subordinated Obligations. After the occurrence
and during the continuance of any Event of Default
12
(including the commencement and continuation of any proceeding under any
Bankruptcy Proceeding relating to any other Grantor), however, unless the
Lender otherwise agrees, no Guarantor shall demand, accept or take any
action to collect any payment on account of the Subordinated Obligations.
(ii) Prior Payment of Guaranteed Obligations. In any proceeding
under any Bankruptcy Proceeding relating to any other Grantor, each
Guarantor agrees that the Lender Parties shall be entitled to receive
payment in full in cash of all Guaranteed Obligations (other than
unmatured contingent Obligations for indemnification) (including all
interest and expenses accruing after the commencement of a proceeding
under any Bankruptcy Proceeding, whether or not constituting an allowed
claim in such proceeding ("POST PETITION INTEREST")) before such Guarantor
receives payment of any Subordinated Obligations.
(iii) Turn-Over. After the occurrence and during the continuance of
any Event of Default (including the commencement and continuation of any
proceeding under any Bankruptcy Proceeding relating to any other Grantor),
each Guarantor shall, if the Collateral Agent so requests, collect,
enforce and receive payments on account of the Subordinated Obligations as
trustee for the Collateral Agent and deliver such payments to the
Collateral Agent on account of the Guaranteed Obligations (including all
Post Petition Interest), together with any necessary endorsements or other
instruments of transfer, but without reducing or affecting in any manner
the liability of such Guarantor under the other provisions of this
Guaranty.
(iv) Collateral Agent Authorization. After the occurrence and during
the continuance of any Event of Default (including the commencement and
continuation of any proceeding under any Bankruptcy Proceeding relating to
any other Grantor), the Collateral Agent, in accordance with the direction
of the Majority Lenders, is authorized and empowered (but without any
obligation to so do), (A) in the name of each Guarantor, to collect and
enforce, and to submit claims in respect of, Subordinated Obligations and
to apply any amounts received thereon to the Guaranteed Obligations (other
than unmatured contingent Obligations for indemnification) (including any
and all Post Petition Interest), and (B) to require each Guarantor (x) to
collect and enforce, and to submit claims in respect of, Subordinated
Obligations and (y) to pay any amounts received on such obligations to the
Collateral Agent for application to the Guaranteed Obligations (other than
unmatured contingent Obligations for indemnification) (including any and
all Post Petition Interest).
(g) Continuing Guaranty; Assignments. This Guaranty is a continuing
guaranty and shall (i) remain in full force and effect until the payment in full
in cash of the Guaranteed Obligations and all other amounts payable under this
Guaranty, (ii) be binding upon each Guarantor, its successors and assigns and
(iii) inure to the benefit of, and be enforceable by the the Collateral Agent
for the benefit of the Lenders, and their permitted successors, transferees and
assigns. Without limiting the generality of clause (iii) of the immediately
preceding sentence, the Lenders may assign or otherwise transfer all or any
portion of their beneficial rights and obligations under this Agreement to any
other Person in accordance with Section 26 and the Note, and such other Person
shall thereupon become vested with all the benefits, limitations,
13
duties, indemnities and obligations (including the appointment of the Collateral
Agent as its agent hereunder) in respect thereof of such assignor Lender Party
hereunder, under the Note, the Investment Documents or otherwise. No Guarantor
shall have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Collateral Agent, except as permitted
pursuant to the Note.
Section 3. Grant of Security. Each Grantor hereby grants to the
Collateral Agent, for the benefit of each Lender, a security interest in, such
Grantor's right, title and interest in and to the following, in each case, as to
each type of property described below, whether now owned or hereafter acquired
by such Grantor, wherever located, and whether now or hereafter existing or
arising (collectively, the "COLLATERAL"):
(a) all equipment in all of its forms and all software related
thereto, including, without limitation, software that is embedded in and
is part of the equipment (any and all such property being the
"EQUIPMENT");
(b) all inventory in all of its forms (any and all such property
being the "INVENTORY");
(c) all accounts (including, without limitation,
health-care-insurance receivables), chattel paper (including, without
limitation, tangible chattel paper and electronic chattel paper),
instruments (including, without limitation, promissory notes), deposit
accounts, letter-of-credit rights, general intangibles (including, without
limitation, payment intangibles) and other obligations of any kind,
whether or not arising out of or in connection with the sale or lease of
goods or the rendering of services and whether or not earned by
performance, and all rights now or hereafter existing in and to all
supporting obligations and in and to all security agreements, mortgages,
Liens, leases, letters of credit and other contracts securing or otherwise
relating to the foregoing property (any and all of such accounts, chattel
paper, instruments, deposit accounts, letter-of-credit rights, general
intangibles and other obligations, to the extent not referred to in clause
(d), (e) or (f) below, being the "RECEIVABLES", and any and all such
supporting obligations, security agreements, mortgages, Liens, leases,
letters of credit and other contracts being the "RELATED CONTRACTS");
(d) the following (the "SECURITY COLLATERAL"):
(i) the Initial Pledged Equity and the certificates, if any,
representing the Initial Pledged Equity, and all dividends,
distributions, return of capital, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
Initial Pledged Equity and all subscription warrants, rights or
options issued thereon or with respect thereto;
(ii) all additional shares of stock and other Equity Interests
from time to time acquired by such Grantor in any manner (such
shares and other Equity Interests, together with the Initial Pledged
Equity, being the "PLEDGED EQUITY"), and the certificates, if any,
representing such additional shares or other Equity
14
Interests, and all dividends, distributions, return of capital,
cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of such shares or other Equity Interests and all
subscription warrants, rights or options issued thereon or with
respect thereto;
(iii) all indebtedness from time to time owed to such Grantor
(the "PLEDGED DEBT") and the instruments, if any, evidencing such
indebtedness, and all interest, cash, instruments and other property
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness;;
(iv) all other investment property (including, without
limitation, all (A) securities, whether certificated or
uncertificated, (B) security entitlements, (C) securities accounts,
(D) commodity contracts and (E) commodity accounts) in which such
Grantor has now, or acquires from time to time hereafter, any right,
title or interest in any manner, and the certificates or
instruments, if any, representing or evidencing such investment
property, and all dividends, distributions, return of capital,
interest, distributions, value, cash, instruments and other property
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such investment property
and all subscription warrants, rights or options issued thereon or
with respect thereto;
(e) the IP Agreements (as hereinafter defined) in each case as such
agreements may be amended, amended and restated, supplemented or otherwise
modified from time to time (collectively, the "ASSIGNED AGREEMENTS"),
including, without limitation, (i) all rights of such Grantor to receive
moneys due and to become due under or pursuant to the Assigned Agreements,
(ii) all rights of such Grantor to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to the Assigned Agreements,
(iii) claims of such Grantor for damages arising out of or for breach of
or default under the Assigned Agreements and (iv) the right of such
Grantor to terminate the Assigned Agreements, to perform thereunder and to
compel performance and otherwise exercise all remedies thereunder (all
such Collateral being the "AGREEMENT COLLATERAL");
(f) the following (collectively, the "ACCOUNT COLLATERAL"):
(i) the Deposit Accounts and all funds and financial assets
from time to time credited thereto, all interest, dividends,
distributions, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such funds and financial assets, and
all certificates and instruments, if any, from time to time
representing or evidencing the Deposit Accounts;
(ii) all promissory notes, certificates of deposit, deposit
accounts, checks and other instruments from time to time delivered
to or otherwise possessed by the Collateral Agent for or on behalf
of such Grantor, including,
15
without limitation, those delivered or possessed in substitution for
or in addition to any or all of the then existing Account
Collateral; and
(iii) all interest, dividends, distributions, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of the then existing Account Collateral; and
(g) the following (collectively, the "INTELLECTUAL PROPERTY
COLLATERAL"):
(i) all patents and patent applications ("PATENTS"), all
trademarks, service marks, domain names, trade dress and other
source identifiers (provided that no security interest shall be
granted in United States intent-to-use trademark applications to the
extent that, and solely during the period in which, the grant of a
security interest therein would impair the validity or
enforceability of such intent-to-use trademark applications under
applicable federal law), together, in each case, with the goodwill
symbolized thereby ("TRADEMARKS"), all copyrights ("COPYRIGHTS"),
all computer software, programs and databases (including, without
limitation, source code, object code and all related applications
and data files) ("COMPUTER SOFTWARE") and all confidential and
proprietary information ("TRADE SECRETS"), and all other
intellectual, industrial and intangible property of any type,
including, without limitation, industrial designs and mask works
(collectively, "INTELLECTUAL PROPERTY");
(ii) all registrations and applications for registration for
any of the foregoing, including, without limitation, those
registrations and applications for registration set forth in
Schedule V hereto (as such Schedule V may be supplemented from time
to time by supplements to this Agreement, each such supplement being
substantially in the form of Exhibit G hereto (an "IP SECURITY
AGREEMENT SUPPLEMENT") executed by such Grantor to the Collateral
Agent from time to time);
(iii) all tangible embodiments of the foregoing, all rights in
the foregoing provided by international treaties or conventions, all
rights corresponding thereto throughout the world and all other
rights of any kind whatsoever of such Grantor accruing thereunder or
pertaining thereto;
(iv) all agreements, permits, consents, orders and franchises
relating to the license, development, use or disclosure of any of
the foregoing to which such Grantor, now or hereafter, is a party or
a beneficiary, including, without limitation, the agreements set
forth in Schedule V hereto ("IP AGREEMENTS"); and
(v) any and all claims for damages and injunctive relief for
past, present and future infringement, dilution, misappropriation,
violation, misuse or breach with respect to any of the foregoing,
with the right, but not the obligation, to xxx for and collect, or
otherwise recover, such damages;
(h) all books and records (including, without limitation,
customer lists, credit files, printouts and other computer output
materials and records) of such Grantor pertaining to any of the
Collateral; and
(i) all proceeds of, collateral for, income, royalties and
other payments now or hereafter due and payable with respect to, and
supporting obligations relating to, any and all of the Collateral
(including, without limitation, proceeds, collateral and supporting
obligations that constitute property of the types described in clauses
(a) through (h) of this Section 1 and this clause (j)) and, to the
extent not otherwise included, all (A) payments under insurance
(whether or not the Collateral Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to
or otherwise with respect to any of the foregoing Collateral, (B) tort
claims, including, without limitation, all commercial tort claims and
(C) cash.
The term Collateral (or any component definition thereof, such as
Initial Pledged Equity, Pledged Equity, Security Collateral, IP Agreements,
Intellectual Property Collateral, etc.) shall in no event include (i) any rights
under any contract, license or other agreement or any Receivable or Intellectual
Property Collateral, in each case to the extent (and only to the extent) the
grant of a security interest pursuant to this Agreement and/or the other Loan
Documents (1) would invalidate the underlying rights of such Grantor in such
contract, license, other agreement, Receivable or Intellectual Property
Collateral (2) is prohibited by such contract, license, agreement, Receivable or
Intellectual Property Collateral without the consent of any other party thereto,
(3) would give any other party to such contract, license, agreement, Receivable
or Intellectual Property Collateral the right to terminate its obligations
thereunder, or (4) is not permitted without consent, unless in each case, all
necessary consents to such grant of a security interest have been obtained from
the other parties thereto; provided, however, that nothing herein shall be
intended to limit the affect of 9-406 of the UCC or otherwise limit or restrict
the conveyance by the Grantors of any rights under any such contracts, licenses,
agreements, Receivable or Intellectual Property to the extent which would not be
violative of the restrictive terms thereof; (ii) any assets of, or any Equity
Interest in excess of 65% of, the issued and outstanding Equity Interests of any
direct Subsidiary of any Grantor, which Subsidiary is organized under the laws
of any country other than the United States of America; or (iii) any assets of,
or Equity Interest of, any Subsidiary of any other Subsidiary, each of which are
organized under the laws of any country other than the United States.
Notwithstanding the foregoing, the Grantors agree to use reasonable efforts to
obtain such consents as may be required to the grant of a security interest
under this Agreement with respect to the property described in clauses (1)
through (4) above, unless such property is not, in the reasonable opinion of the
Collateral Agent, material.
Section 4. Security for Obligations. This Agreement secures, in the
case of each Grantor, the payment of all Obligations of such Grantor now or
hereafter existing under the Loan Documents, whether direct or indirect,
absolute or contingent, and whether for principal, reimbursement obligations,
interest, fees, premiums, penalties, indemnifications, contract causes of
action, costs, expenses or otherwise (all such Obligations being the "SECURED
OBLIGATIONS").
Section 5. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements
17
included in such Grantor's Collateral to the extent set forth therein
to perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Collateral Agent
of any of the rights hereunder shall not release any Grantor from any of its
duties or obligations under the contracts and agreements included in the
Collateral and (c) no Lender Party shall have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Agreement or any other Loan Document, nor shall any Lender Party be obligated to
perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
Section 6. Delivery and Control of Security Collateral. (a) All
certificates or instruments representing or evidencing Pledged Equity or other
Security Collateral which individually or in the aggregate has a value of
$[250,000] or more, shall be delivered to and held by or on behalf of the
Collateral Agent pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance reasonably satisfactory to the
Collateral Agent. Upon the occurrence and during the continuance of an Event of
Default, the Collateral Agent shall have the right, without notice to any
Grantor, to transfer to or to register in the name of the Collateral Agent or
any of its nominees any or all of the Security Collateral, subject only to the
revocable rights specified in Section 15(a).
(b) With respect to any Security Collateral in which any Grantor has
any right, title or interest and that constitutes an uncertificated security,
such Grantor will cause the issuer thereof, at such Grantor's election, either
(i) register the Collateral Agent for the benefit of the Lenders as the
registered owner of such security or (ii) agree in an authenticated record with
such Grantor and the Collateral Agent that such issuer will comply with
instructions with respect to such security originated by the Collateral Agent
without further consent of such Grantor, such authenticated record to be in form
and substance reasonably satisfactory to the Collateral Agent. With respect to
any Security Collateral in which any Grantor has any right, title or interest
and that is not an uncertificated security, upon the request of the Collateral
Agent after the occurrence and during the continuance of an Event of Default,
such Grantor will notify each such issuer of Pledged Equity that such Pledged
Equity is subject to the security interest granted hereunder.
(c) With respect to any Security Collateral in which any Grantor has
any right, title or interest and that constitutes a security entitlement in
which the Collateral Agent is not the entitlement holder, such Grantor will
cause the securities intermediary with respect to such security entitlement to,
at such Grantor's option, either (i) identify in its records the Collateral
Agent as the entitlement holder of such security entitlement against such
securities intermediary or (ii) agree in an authenticated record with such
Grantor and the Collateral Agent that such securities intermediary will comply
with entitlement orders (that is, notifications communicated to such securities
intermediary directing transfer or redemption of the financial asset to which
such Grantor has a security entitlement) originated by the Collateral Agent, who
shall act at the direction of the Lender, without further consent of such
Grantor, such authenticated record to be in substantially the form of Exhibit D
hereto or otherwise in form and substance reasonably satisfactory to the
Collateral Agent (such agreement being a "SECURITIES ACCOUNT CONTROL
AGREEMENT").
18
(d) With respect to any Security Collateral in which any Grantor has
any right, title or interest and that constitutes a commodity contract, such
Grantor shall cause the commodity intermediary with respect to such commodity
contract to agree in an authenticated record with such Grantor and the
Collateral Agent that such commodity intermediary will apply any value
distributed on account of such commodity contract as directed by the Collateral
Agent, who shall act at the direction of the Lender, without further consent of
such Grantor.
(e) Notwithstanding any other provision of this Section 6, it is agreed
that other than upon the occurrence and during the continuance of an Event of
Default, the Collateral Agent shall not issue any instructions with respect to
the Securities Accounts or other Security Collateral and hereby authorizes and
consents to the giving of all instructions and taking of all other actions with
respect to the Securities Accounts and the Security Collateral by the Grantors
until such occurrence or, with respect to Security Collateral subject to a
Securities Account Control Agreement, receipt of notice by the Securities
Intermediary thereunder in accordance with the terms thereof.
(f) No Grantor will change or add any securities intermediary or commodity
intermediary that maintains any securities account or commodity account in which
any of the Collateral is credited or carried, or change or add any such
securities account or commodity account, in each case without first complying
with the above provisions of this Section 6 in order to perfect the security
interest granted hereunder in such Collateral.
(g)Upon the request of the Collateral Agent, such Grantor will notify each
issuer of Pledged Debt that such Pledged Debt is subject to the security
interest granted hereunder; provided that other than after the occurrence and
during the continuance of an Event of Default, the Collateral Agent will not
require any such notification be given to the issuer of any Pledged Debt that is
not a Grantor or a Subsidiary thereof.
Section 7. Maintaining the Account Collateral. So long as any
Obligation of any Grantor under any Loan Document shall remain unpaid:
(a) Each Grantor will maintain all Account Collateral only with the
Collateral Agent or with banks (the "PLEDGED ACCOUNT BANKS") that have
agreed, in a record authenticated by the Grantor, the Collateral Agent and
the Pledged Account Banks, to (i) comply with instructions originated by
the Collateral Agent, who shall act at the direction of the Majority
Lenders, directing the disposition of funds in the Account Collateral
without the further consent of the Grantor (it being agreed that other
than upon the occurrence and during the continuance of an Event of
Default, the Collateral Agent shall not issue any such instructions and
hereby authorizes and consents to the giving of all instructions and
taking of all other actions with respect to the Account Collateral by the
Grantors until receipt of notice by the applicable Pledged Account Bank
under the applicable Account Control Agreement (as defined below) in
accordance with the terms thereof) and (ii) waive or subordinate in favor
of the Collateral Agent all claims of the Pledged Account Banks
(including, without limitation, claims by way of a security interest, lien
or right of setoff or right of recoupment) to the Account Collateral
(except for claims for its fees and charges relating to the applicable
Deposit Account or for assets deposited into the applicable Deposit
Account returned unpaid for any reason, and as
19
otherwise agreed to by the Collateral Agent), which authenticated record
shall be substantially in the form of Exhibit B hereto, or shall otherwise
be in form and substance satisfactory to the Collateral Agent (the
"ACCOUNT CONTROL AGREEMENT"); it being agreed that in connection with the
Grantors' entering into a Permitted Facility, the Collateral Agent shall
subordinate its security interest to that of the lenders under such
facility to the extent that the assets held in the applicable Deposit
Account constitute proceeds of the Receivables subject to a first priority
security interest in favor of such lenders.
(b) Each Grantor will, within two Business Days of receipt thereof,
(i) remit all payments made to it by each Person obligated at any time to
make any payment to such Grantor on account of Receivables owing by such
Person (an "OBLIGOR") to a Deposit Account and (ii) deposit in a Deposit
Account, at the end of each Business Day, all proceeds of Collateral and
all other cash of such Grantor available for deposit at such time.
(c) Each Grantor agrees that it will not add any bank that maintains
a deposit account for such Grantor or open any new deposit account with
any then existing Pledged Account Bank unless (i) the Collateral Agent
shall have received at least 10 days' prior written notice of such
additional bank or such new deposit account and (ii) the Collateral Agent
shall have received, in the case of a bank or Pledged Account Bank that is
not the Collateral Agent, an Account Control Agreement authenticated by
such new bank and such Grantor, or a supplement to an existing Account
Control Agreement with such then existing Pledged Account Bank, covering
such new deposit account (and, upon the receipt by the Collateral Agent of
such Account Control Agreement or supplement, Schedule VI hereto shall be
automatically amended to include such Deposit Account). Each Grantor
agrees that it will not terminate any bank as a Pledged Account Bank or
terminate any Account Collateral, except that the Grantor may terminate a
Deposit Account, and terminate a bank as a Pledged Account Bank with
respect to such Deposit Account, if it gives the Collateral Agent at least
10 days' prior written notice of such termination (and, upon such
termination, Schedule VI hereto shall be automatically amended to delete
such Pledged Account Bank and Deposit Account).
(d) Upon any termination by a Grantor of any Deposit Account by such
Grantor, or any Pledged Account Bank with respect thereto, such Grantor
will immediately (i) transfer all funds and property held in such
terminated Deposit Account (other than an amount reasonably estimated to
cover the balance of any outstanding checks, reserves for returned items
and the reasonable fees of the applicable Pledged Account Bank) to another
Deposit Account listed in Schedule VI and (ii) notify all Obligors that
were making payments to such Deposit Account to make all future payments
to another Deposit Account listed in Schedule VI hereto, in each case so
that the Collateral Agent shall have a continuously perfected security
interest in such Account Collateral, funds and property (other than such
amount as is not required to be transferred referred to above).
(e) The Collateral Agent shall have sole right to direct the
disposition of funds with respect to each of the Deposit Accounts; and it
shall be a term and condition of each of the Deposit Accounts,
notwithstanding any term or condition to the contrary in any
20
other agreement relating to the Deposit Accounts that no amount
(including, without limitation, interest on other assets credited thereto)
will be paid or released to or for the account of, or withdrawn by or for
the account of, the Borrower or any other Person from the Deposit Accounts
other than with the consent of the Collateral Agent; it being agreed that
the Collateral Agent hereby authorizes and consents to the giving of all
instructions, making of withdrawals and taking of all other actions with
respect to the Deposit Accounts and the Account Collateral by the
Grantors, and the Collateral Agent shall take no such actions, until the
occurrence and during the continuance of an Event of Default and receipt
of notice by the applicable Pledged Account Bank from the Collateral Agent
under the applicable Account Control Agreement (as defined below) in
accordance with the terms thereof.
(f) The Collateral Agent may, at any time and without notice to, or
consent from, the Grantor transfer, or direct the transfer of, funds from
the Account Collateral to satisfy the Grantor's obligations under the Loan
Documents if an Event of Default shall have occurred and be continuing.
Section 8. Representations and Warranties. Each Grantor represents
and warrants as follows:
(a) Such Grantor's exact legal name, as defined in Section 9-503(a)
of the UCC, is correctly set forth in Schedule 1 hereto. Such Grantor has
only the trade names, domain names and marks listed on Schedule V hereto.
Such Grantor is located (within the meaning of Section 9-307 of the UCC)
and has its chief executive office in the state or jurisdiction set forth
in Schedule I hereto. The information set forth in Schedule I hereto with
respect to such Grantor is true and accurate in all respects. Such Grantor
has not, within the last five years, changed its name, location, chief
executive office, type of organization, jurisdiction of organization or
organizational identification number from those set forth in Schedule I
hereto except as disclosed in Schedule IV hereto.
(b) All of the Equipment and Inventory of such Grantor are located
at the places specified therefor in Schedule III hereto. Within the 5
years preceding the execution of this Agreement, such Grantor has not
previously changed the location of its Equipment and Inventory except as
set forth in Schedule IV hereto. All Security Collateral consisting of
Pledged Equity and other Security Collateral consisting of certificated
securities and instruments and having a value, individually or in the
aggregate, of $[250,000] or more, have been delivered to the Collateral
Agent. None of the Receivables or Agreement Collateral is evidenced by a
promissory note or other instrument having a face value, individually or
in aggregate in excess of $[250,000] that has not been delivered to the
Collateral Agent.
(c) Such Grantor is the legal and beneficial owner of the Collateral
of such Grantor free and clear of any Lien, claim, option or right of
others, except for Permitted Liens. No effective financing statement or
other instrument similar in effect covering all or any part of such
Collateral or listing such Grantor or any trade name of such Grantor as
debtor is on file in any recording office, except such as may have been
filed in connection with Permitted Collateral Liens.
21
(d) The Pledged Equity pledged by such Grantor hereunder is fully
paid and non-assessable. If such Grantor is an issuer of Pledged Equity,
such Grantor confirms that it has received notice of such security
interest and that such Pledged Equity has been duly authorized and
validly issued.
(e) The Initial Pledged Equity pledged by such Grantor constitutes
the percentage of the issued and outstanding Equity Interests of the
issuers thereof indicated on Schedule II hereto.
(f) Such Grantor has no deposit accounts, other than the Account
Collateral listed on Schedule VI hereto, as such Schedule VI may be
amended from time to time pursuant to Section 7(d).
(g) All filings and other actions required to be made by the
Grantors pursuant to the terms hereof (including, without limitation, (A)
actions necessary to obtain control of Collateral as provided in Sections
9-104 and 9-106 of the UCC and Section 16 of UETA and (B) actions
necessary to perfect the Collateral Agent's security interest with respect
to Collateral evidenced by a certificate of ownership) necessary to
perfect the security interest in the Collateral of such Grantor created
under this Agreement have been duly made or taken and are in full force
and effect (other than the filing of UCC financing statements which shall
be done by the Collateral Agent), and this Agreement creates in favor of
the Collateral Agent as of the Closing Date for the benefit of the Lenders
a valid and, together with such filings and other actions, perfected first
priority security interest in the Collateral of such Grantor, securing the
payment of the Secured Obligations (subject to Permitted Collateral
Liens).
(h) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any
other third party is required for (i) the grant by such Grantor of the
security interest granted hereunder or for the execution, delivery or
performance of this Agreement by such Grantor, (ii) the perfection or
maintenance of the security interest created hereunder (including, where
applicable, the first priority nature of such security interest), except
for the filing of financing and continuation statements under the UCC, the
recordation of the Intellectual Property Security Agreements referred to
in Section 14(f) with the U.S. Patent and Trademark Office and the U.S.
Copyright Office and the actions described in Section 6 with respect to
Security Collateral and Account Collateral, which actions described in
Section 6 have been taken and are in full force and effect, or (iii) the
exercise by the Collateral Agent of its voting or other rights provided
for in this Agreement or the remedies in respect of the Collateral
pursuant to this Agreement, except as may be required in connection with
the disposition of any portion of the Security Collateral by laws
affecting the offering and sale of securities generally and except where
the failure to have obtained any such authorization or approval or given
such notice or taken such action could not reasonably be expected to have
a Material Adverse Effect.
(i) As to itself and its Intellectual Property Collateral:
22
(i) The Intellectual Property Collateral set forth on Schedule
V hereto includes (A) all material IP Agreements to which such
Grantor is a party, (B) patents, patent applications and any
registrations or applications for registration of any Intellectual
Property owned by Grantor (collectively, and together with any of
the foregoing in After-Acquired Intellectual Property, "Registered
IP"), and (C) all material Intellectual Property owned by Grantor.
Each such IP Agreement is in effect, such Grantor has not received
any notice of termination and no breach or default which could
subject such IP Agreement to termination has been committed by
Grantor, in either case, where such termination could reasonably
be expect to result in a Material Adverse Effect. To the knowledge
of such Grantor, the Intellectual Property owned by third parties
and used by such Grantor pursuant to an IP Agreement is valid and
enforceable and no actions are pending or have been threatened
that could restrict or deny Grantor's right to use such
Intellectual Property, where such denial could reasonably be
expected to result in a Material Adverse Effect.
(ii) The Intellectual Property Collateral includes all
Intellectual Property and IP Agreements needed to conduct such
Grantor's business as currently conducted. Such Grantor has the
right to use all material Intellectual Property Collateral as
currently used to conduct the business. The operation of such
Grantor's business as currently conducted does not conflict with,
infringe, misappropriate, dilute, misuse or otherwise violate
the intellectual property rights of any third party, except as
would not have a Material Adverse Effect.
(j) Such Grantor is not a beneficiary or assignee under any material
letter of credit, owns no material commodities accounts, securities
entitlements or uncertificated Pledged Equity, has no deposit account
outside of the United States, has no commercial tort claims (as defined in
Section 9-102(13) of the UCC), and is not owed any material intercompany
or other material debt (other than Receivables and trade debt).
Section 9. Affirmative Covenants
So long as any Obligation of any Grantor under any Loan Document
shall remain unpaid, the Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, the failure to comply with which could reasonably
be expected to have a Material Adverse Effect.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent, (i)
all federal and other material taxes, assessments and governmental charges or
levies imposed upon it or upon its property and (ii) all material lawful claims
that, if unpaid, might by law become a Lien upon its property; provided,
however, that neither the Borrower nor any of its Subsidiaries shall be required
to pay or discharge any such tax, assessment, charge or claim that is being
contested in good faith and by proper proceedings and as to which appropriate
reserves are being maintained, unless and until any Lien (other than a Permitted
Lien) resulting therefrom attaches to its property and becomes enforceable
against its other creditors.
23
(c) Preservation of Corporate Existence, Etc. Except where failure
to do so could not reasonably be expected to have a Material Adverse Effect,
reserve and maintain, and cause each of its Subsidiaries to preserve and
maintain, its existence, legal structure, legal name, rights (charter and
statutory), permits, licenses, approvals, privileges and franchises (other than,
in each case, in connection with a merger, consolidation or amalgamation (i) of
any Grantor (other than the Borrower) or any Subsidiary of any Grantor, with and
into any Grantor, (ii) of any Subsidiary which is not a Grantor with and into
any other such Subsidiary or (iii) of any entity that is not a Grantor or a
Subsidiary of a Grantor with a Grantor, so long as the surviving entity is or
becomes a Grantor); provided that neither the Borrower nor any of its
Subsidiaries shall be required to preserve any right, permit, license, approval,
privilege or franchise if the loss thereof would not have a Material Adverse
Effect.
(d) Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of its properties that
are used or useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted, except where the failure to do so
would not have a Material Adverse Effect.
(e) Transactions with Affiliates. Except where failure to do so
could not reasonably be expected to have a Material Adverse Effect, conduct, and
cause each of its Subsidiaries to conduct, all transactions otherwise permitted
under the Loan Documents with any of their Affiliates on terms that are fair and
reasonable and no less favorable to the Borrower or such Subsidiary than it
would obtain in a comparable arm's-length transaction with a Person not an
Affiliate; provided that the Borrower and its Subsidiaries may (i) make loans
and advances to its employees in respect of travel, relocation and educational
expenses and allowances, (ii) make loans, advances and investments in, otherwise
transfer assets to, or incur Debt to or for the account of, the Borrower or any
Subsidiary that is, or concurrently therewith will become, a Grantor hereunder,
in each case, not otherwise prohibited hereunder and (iii) make the payments
permitted pursuant to Section 10(d).
(f) Covenant to Guarantee Obligations and Give Security. Upon (x)
the formation or acquisition of any new direct or indirect Material Subsidiary
organized under the laws of the United States by any Grantor or (y) any direct
or indirect Subsidiary of the Borrowerl organized under the laws of the United
States that is not a Grantor becoming a Material Subsidiary (measured at the end
of each fiscal quarter of the Borrower) or (z) the acquisition of any property
by any Grantor, and such property, in the judgment of the Collateral Agent,
shall not already be subject to a perfected security interest in favor of the
Collateral Agent for the benefit of the Lenders (and the Collateral Agent is
entitled to a perfected security interest in such property pursuant to the terms
hereof), then the Borrower shall, in each case at the Borrower's expense:
(i) in connection with (x) or (y) above, within 10 days after such
formation or acquisition, in the case of (x) and within 30 days of the end
of the relevant fiscal quarter, in the case of (y), cause each such
Subsidiary to duly execute and deliver to the Collateral Agent (1) a
Guaranty Supplement, in the form of Exhibit B hereto, guaranteeing the
other Grantors' obligations under the Loan Documents and (2) a security
Agreement Supplement, in the form of Exhibit A hereto; and
24
(ii) within 15 days after such formation or acquisition, in the case
of (x) and within 30 days of the end of the relevant fiscal quarter, in
the case of (y), duly execute and deliver such agreements and take such
other actions (or cause such Subsidiaries to duly execute and deliver such
agreements and take such other actions) as may be reasonably necessary or
advisable, in the opinion of the Collateral Agent to vest in the
Collateral Agent valid and subsisting Liens on the properties purported to
be subject to the security documents delivered pursuant to this Section
10(f), securing payment of all the Obligations of the applicable Grantor.
(g) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform all obligations in respect of all leases of real property to
which the Borrower or any of its Subsidiaries is a party, keep such leases in
full force and effect and not allow such leases to lapse or be terminated or any
rights to renew such leases to be forfeited or cancelled, in each case to the
extent that failure to do so would be reasonably likely to have a Material
Adverse Effect.
(i) Default Notice. As soon as possible, and in any event within two
Business Days after a Responsible Officer of the Borrower obtains actual
knowledge of the occurrence of each Default, Event of Default or any event,
development or occurrence reasonably likely to have a Material Adverse Effect
continuing on the date of such statement, deliver to the Collateral Agent a
statement of the chief financial officer of the Borrower setting forth details
of such Default, Event of Default or such other event, development or occurrence
and the action that the Borrower has taken and proposes to take with respect
thereto.
Section 10. Negative Covenants
So long as any Obligation of any Grantor under any Loan Document
shall remain unpaid, the Borrower will not, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit
any of its [Material] Subsidiaries to create, incur, assume or suffer to exist,
any Lien (other than a Permitted Lien) on or with respect to any of its
properties of any character (including, without limitation, accounts) whether
now owned or hereafter acquired, or sign or file or suffer to exist, or permit
any of its [Material] Subsidiaries to sign or file or suffer to exist, under the
Uniform Commercial Code of any jurisdiction, a financing statement (other than
in respect of a Permitted Lien or that is invalid or ineffective) that names the
Borrower or any of its Subsidiaries as debtor, or sign or suffer to exist, or
permit any of its Subsidiaries to sign or suffer to exist, any security
agreement authorizing any secured party thereunder to file such financing
statement, or assign, or permit any of its Subsidiaries to assign, any accounts
or other right to receive income, other than in respect of a Permitted Lien.
(b) Debt. Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Debt, except:
(i) Debt under the Loan Documents;
(ii) Debt existing as of the date of this Agreement and listed
on Schedule together with any refinancing or reinstatement
thereof;
25
(iii) Debt owed to a Grantor; provided that, in each case
where the aggregate amount of Debt owed by any Grantor to any other
Grantor is equal to or greater than $[250,000], such Debt (x) shall
constitute Pledged Debt, (y) shall be evidenced by promissory notes
in form and substance satisfactory to the Collateral Agent and such
promissory notes shall be pledged as security for the Obligations of
the holder thereof under the Loan Documents and delivered to the
Collateral Agent pursuant to the terms of this Agreement; and
(iv) additional Debt, provided that after giving effect to
the incurrence of such Debt, the ratio of total consolidated Debt to
stockholder equity of the Borrower and its Subsidiaries, in each
case as determined in accordance with GAAP, is greater than or equal
to 2.5:1.
(c) Sales, Etc., of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, transfer or
otherwise dispose of, any assets, or grant any option or other right to
purchase, lease or otherwise acquire any assets, other than (i) sales of
outdated, obsolete, surplus or redundant assets and (ii) sales of Inventory in
the ordinary course of business.
(d) Restricted Payments. Declare or pay any dividends, purchase,
redeem, retire, defease or otherwise acquire for value any Equity Interests
issued by it now or hereafter outstanding, return any capital to its
stockholders, partners or members (or the equivalent Persons thereof) as such,
make any distribution of assets, Equity Interests, obligations or securities to
its stockholders, partners or members (or the equivalent Persons thereof) as
such or permit any of its Material Subsidiaries to do any of the foregoing, or
permit any of its Material Subsidiaries to purchase, redeem, retire, defease or
otherwise acquire for value any Equity Interests in the Borrower, except that
(i) the Borrower may declare and pay dividends and distributions payable only in
common stock of the Borrower and (ii) any Subsidiary of the Borrower may (A)
declare and pay cash dividends to the Borrower, (B) declare and pay cash
dividends to any other Grantor of which it is a Subsidiary and (C) if it is a
Grantor, accept capital contributions from its parent and (iii) the Borrower and
any Subsidiary of the Borrower may purchase or redeem for cash the Equity
Interests of any employee, officer or director upon the termination of any such
Person's employment with the Grantors or any Subsidiary thereof to the extent
required under any contract or agreement binding upon such Grantor or
Subsidiary.
(e) Prepayments, Etc., of Debt. Prepay, redeem, purchase, defease or
otherwise satisfy prior to the scheduled maturity thereof in any manner, or make
any payment in violation of any subordination terms of, any Debt, except (i) the
prepayment of the Note in accordance with the terms thereof and (ii) the
redemption of the Borrower's existing 13 1/2% Senior Notes Due 2009, or permit
any of its Subsidiaries to do any of the foregoing other than to prepay any Debt
payable to the Borrower.
(f) Amendments of Constitutive Documents. Amend, or permit any of
its Subsidiaries to amend, its certificate of incorporation or bylaws or other
constitutive documents in any manner that would be materially adverse to the
rights of the Lender Parties under the Loan Documents.
26
(g) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in (i) accounting policies or
reporting practices, except as required by generally accepted accounting
principles, or (ii) fiscal year, in each case, if such change would be
materially adverse to the rights of the Lender Parties under the Loan Documents.
(h) Negative Pledge. Enter into or suffer to exist, or permit any of
its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or
conditioning the creation or assumption of any Lien upon any of its property or
assets except (i) as permitted under Section 10(a), (ii) agreements existing on
the date hereof and listed on Schedule ___, and (iii) agreements binding upon
property acquired in a Permitted Acquisition, provided that such restrictions on
such property exist at the time of acquisition of such property and were not
created in contemplation of such acquisition and do not extend to any assets
other than those being acquired.
Section 11. Further Assurances. (a) Each Grantor agrees that from
time to time, at the expense of such Grantor, such Grantor will promptly execute
and deliver, or otherwise authenticate, all further instruments and documents,
and take all further action that may be reasonably necessary or desirable, or
that the Collateral Agent may reasonably request, in order to perfect and
protect any pledge or security interest granted or purported to be granted by
such Grantor hereunder or to enable the Collateral Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral of such
Grantor. Without limiting the generality of the foregoing, each Grantor will
promptly with respect to Collateral of such Grantor: (i) upon the request of the
Collateral Agent at the direction of the Majority Lenders at any time following
the occurrence and during the continuance of an Event of Default, xxxx
conspicuously, or segregate in an area marked conspicuously, each document
included in Inventory, each chattel paper included in Receivables, each Related
Contract, each Assigned Agreement and, at the request of the Collateral Agent,
each of its records pertaining to such Collateral with a legend stating that
such document, chattel paper, Related Contract, Assigned Agreement or Collateral
is subject to the security interest granted hereby; (ii) except to the extent
not otherwise required pursuant to the terms hereof, if any such Collateral
shall be evidenced by a promissory note or other instrument, deliver and pledge
to the Collateral Agent hereunder such note or instrument, duly indorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to the Collateral Agent; (iii) execute or
authenticate and deliver to the Collateral Agent for filing such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be reasonably necessary or desirable, or as the Collateral Agent
may reasonably request, in order to perfect and preserve the security interest
granted or purported to be granted by such Grantor hereunder; (iv) except to the
extent not otherwise required pursuant to the terms hereof, deliver and pledge
to the Collateral Agent for benefit of the Lenders certificates representing
Security Collateral that constitutes certificated securities, accompanied by
undated stock or bond powers executed in blank; (v) take all action reasonably
necessary to ensure that the Collateral Agent has control of Collateral
consisting of deposit accounts, investment property and transferable records as
provided in Sections 9-104 and 9-106 of the UCC; and (vi) deliver to the
Collateral Agent, as soon as practicable after its request, evidence that all
other action that the Collateral Agent may deem reasonably necessary or
desirable in order to perfect (to the extent required hereunder) and protect the
security interest created by such Grantor under this Agreement has been taken.
27
(b) Each Grantor hereby authorizes the Collateral Agent, to file one
or more financing or continuation statements, and amendments thereto, including,
without limitation, one or more financing statements indicating that such
financing statements cover all assets or all personal property (or words of
similar effect) of such Grantor, in each case without the signature of such
Grantor, and regardless of whether any particular asset described in such
financing statements falls within the scope of the UCC or the granting clause of
this Agreement. A photocopy or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. Each Grantor
ratifies its authorization for the Collateral Agent to have filed such financing
statements, continuation statements or amendments filed prior to the date
hereof.
(c) Each Grantor will furnish to the Collateral Agent from time to
time statements and schedules further identifying and describing the Collateral
of such Grantor and such other reports in connection with such Collateral as the
Collateral Agent may reasonably request, all in reasonable detail.
Section 12. Insurance. (a) Each Grantor will, at its own expense,
maintain insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which such Grantor operates; it being acknowledged by the
Lenders that the Grantors' current insurance coverage and carriers are currently
sufficient for purposes of this covenant. Each policy of each Grantor for
liability insurance shall name the Collateral Agent as an additional insured.
Each property policy shall in addition (i) name the Collateral Agent as an
additional insured party thereunder (without any representation or warranty by
or obligation upon the Collateral Agent) and (ii) contain, including by way of
loss payee indorsement, the agreement by the insurer (except to the extent
otherwise consented to by the Collateral Agent) that (x) any loss thereunder
shall be payable to the Collateral Agent notwithstanding any action, inaction or
breach of representation or warranty by such Grantor, (y) provide that there
shall be no recourse against the Collateral Agent for payment of premiums or
other amounts with respect thereto and (z) provide that at least 10 days' prior
written notice of cancellation or of lapse shall be given to the Collateral
Agent by the insurer. Each Grantor will, if so requested by the Collateral
Agent, deliver to the Collateral Agent original or duplicate policies of such
insurance and, if requested by the Collateral Agent upon the occurrence and
during the continuance of an Event of Default, certificates of insurance from
such Grantor's insurance broker with respect to such insurance. Further, each
Grantor will, at the request of the Collateral Agent after the occurrence and
during the continuance of an Event of Default and to the extent permitted under
such policies, duly execute and deliver instruments of assignment of such
insurance policies and cause the insurers to acknowledge notice of such
assignment; provided that all payments thereunder will continue to be payable to
the Grantors unless an Event of Default shall have occurred and be continuing
and the Collateral Agent shall have delivered written notice to the contrary to
the insurer.
(b) Upon the occurrence and during the continuance of any Event of
Default and after notice to such effect from the Collateral Agent to the
insurer, all insurance payments shall be paid to the Collateral Agent and shall,
in the Collateral Agent's sole discretion, (i) be released to the applicable
Grantor or (ii) be held as additional Collateral hereunder or applied as
specified in Section 21(c).
28
Section 13. Post-Closing Changes; Bailees; Collections on Assigned
Agreements, Receivables and Related Contracts. a. No Grantor will change its
name, type of organization, jurisdiction of organization or organizational
identification number from those set forth in Section 8(a) of this Agreement
without first giving at least 10 Business Days' prior written notice to the
Collateral Agent and taking all action reasonably required by the Collateral
Agent, pursuant to instructions of the Majority Lenders, for the purpose of
perfecting (to the extent required hereunder) or protecting the security
interest granted by this Agreement. No Grantor will become bound by a security
agreement (other than in connection with a Permitted Lien) authenticated by
another Person (determined as provided in Section 9-203(d) of the UCC) without
giving the Collateral Agent 10 Business Days' prior written notice thereof and
taking all action required by the Collateral Agent to ensure that the perfection
and first priority nature (in each case, to the extent required hereunder) of
the Collateral Agent's security interest in the Collateral will be maintained.
Each Grantor will hold and preserve its records relating to the Collateral,
including, without limitation, the Assigned Agreements and Related Contracts,
and will permit representatives of the Collateral Agent at any time during
normal business hours and on reasonably advance notice (and, if an Event of
Default has occurred and is continuing, at the expense of the Borrower) to
inspect and make abstracts from such records and other documents. If the Grantor
does not have an organizational identification number and later obtains one, it
will forthwith notify the Collateral Agent of such organizational identification
number.
(b) Except as otherwise provided in this subsection (b), each
Grantor will continue to collect, at its own expense, all amounts due or to
become due such Grantor under the Assigned Agreements, Receivables and Related
Contracts, except where such Grantor has made a reasonable business
determination with respect to specific assets that such efforts will not be
productive. In connection with such collections, such Grantor may take (and, at
the Collateral Agent's direction at any time during the continuance of an Event
of Default, will take) such action as such Grantor or the Collateral Agent may
deem reasonably necessary or advisable to enforce collection of the Assigned
Agreements, Receivables and Related Contracts; provided, however, that the
Collateral Agent shall have the right at any time upon the occurrence and during
the continuance of an Event of Default and upon written notice to such Grantor
of its intention to do so, to notify the Obligors under any Assigned Agreements,
Receivables and Related Contracts of the assignment of such Assigned Agreements,
Receivables and Related Contracts to the Collateral Agent and to direct such
Obligors to make payment of all amounts due or to become due to such Grantor
thereunder directly to the Collateral Agent and, upon such notification and at
the expense of such Grantor, to enforce collection of any such Assigned
Agreements, Receivables and Related Contracts, to adjust, settle or compromise
the amount or payment thereof, in the same manner and to the same extent as such
Grantor might have done, and to otherwise exercise all rights with respect to
such Assigned Agreements, Receivables and Related Contracts, including, without
limitation, those set forth set forth in Section 9-607 of the UCC. After receipt
by any Grantor of the notice from the Collateral Agent referred to in the
proviso to the preceding sentence (and until the earlier of the waiver in
writing of such Event of Default or the recission, if any, of such notice by the
Collateral Agent), (i) all amounts and proceeds (including, without limitation,
instruments) received by such Grantor in respect of the Assigned Agreements,
Receivables and Related Contracts of such Grantor shall be received in trust for
the benefit of the Collateral Agent hereunder, shall be segregated from other
funds of such Grantor and shall be forthwith paid over to the Collateral Agent
in the same form as so received (with any necessary indorsement) to be either
(A) released to such Grantor on the terms
29
set forth in Section 8 or (B) if any Default shall have occurred and be
continuing, applied as provided in Section 21(c) and (ii) such Grantor will not
adjust, settle or compromise the amount or payment of any Receivable or amount
due on any Assigned Agreement or Related Contract, release wholly or partly any
Obligor thereof, or allow any credit or discount thereon. No Grantor will permit
or consent to the subordination of its right to payment under any of the
Assigned Agreements, Receivables and Related Contracts to any other indebtedness
or obligations of the Obligor thereof.
Section 14. As to Intellectual Property Collateral
(a) Each Grantor agrees that should it obtain an ownership interest
in any Intellectual Property that is not on the date hereof a part of the
Intellectual Property Collateral ("AFTER-ACQUIRED INTELLECTUAL PROPERTY") or
becomes a party to any IP Agreement (i) the provisions of this Agreement shall
automatically apply thereto, and (ii) any such After-Acquired Intellectual
Property and, in the case of trademarks, the goodwill symbolized thereby, shall
automatically become part of the Intellectual Property Collateral subject to the
terms and conditions of this Agreement with respect thereto. Within twenty (20)
days after the acquisition of any material After-Acquired Intellectual Property
or any Registered IP, each Grantor shall give prompt written notice to the
Collateral Agent identifying such After-Acquired Intellectual Property or
Registered IP. For any such Registered IP, such Grantor shall execute and
deliver to the Collateral Agent with such written notice, or otherwise
authenticate, an agreement substantially in the form of Exhibit G hereto or
otherwise in form and substance reasonably satisfactory to the Collateral Agent
(an "IP SECURITY AGREEMENT SUPPLEMENT") covering such Registered IP, which IP
Security Agreement Supplement shall be recorded with the U.S. Patent and
Trademark Office, the U.S. Copyright Office and any other governmental
authorities necessary to perfect the security interest hereunder in such
Registered IP.
(b) With respect to each item of Registered IP, each Grantor agrees
to take, at its expense, (i) all necessary steps, including, without limitation,
in the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other
governmental authority, to maintain the validity and enforceability of such
Registered IP except where such Grantor has decided to let such Registered IP
lapse and such lapse would not have a Material Adverse Effect, and (ii) all
steps which it or the Collateral Agent reasonably deems necessary under the
circumstances to preserve and protect each item of its Registered IP. With
respect to Trademarks, each Grantor agrees to take, at its expense all steps
which it or the Collateral Agent reasonably deems necessary to maintain the
quality of any and all products or services used or provided in connection with
any of the Trademarks, consistent with the quality of the products and services
as of the date hereof, and taking all steps necessary to ensure that all
licensed users of any of the Trademarks use such consistent standards of
quality, except where failure to do so would not have a Material Adverse Effect.
No Grantor shall discontinue use of or otherwise abandon any Registered IP or
Trademarks, unless such Grantor shall have previously determined that such use
or the pursuit or maintenance of such Intellectual Property Collateral is no
longer desirable in the conduct of such Grantor's business and that the loss
thereof would not be reasonably likely to have a Material Adverse Effect.
(c) Each Grantor agrees promptly to notify the Collateral Agent if
such Grantor becomes aware (i) that any material Registered IP may have become
abandoned, placed in the
30
public domain, invalid or unenforceable, or of any adverse determination or
development regarding such Grantor's ownership of any of such Registered IP, or
(ii) of any adverse determination or the institution of any proceeding
(including, without limitation, the institution of any proceeding in the U.S.
Patent and Trademark Office or any court) regarding any material item of the
Registered IP or any material Trademarks.
(d) In the event that any Grantor becomes aware that any item of
the After-Acquired Intellectual Property is being materially infringed or
misappropriated by a third party, such Grantor shall promptly notify the
Collateral Agent and shall take such actions, at its expense, as such Grantor
or the Collateral Agent reasonably deems necessary under the circumstances to
protect or enforce such After-Acquired Intellectual Property, except where the
failure to do so would not have a Material Adverse Effect.
(e) Each Grantor shall use proper statutory notice in connection
with its use of each item of its Copyrights and Trademarks included in the
After-Acquired Intellectual Property, except where the failure to do so would
not have a Material Adverse Effect.
Section 15. Voting Rights; Dividends; Etc. b) So long as no Event
of Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Security Collateral of such
Grantor or any part thereof for any purpose; provided however, that such
Grantor will not exercise or refrain from exercising any such right if
such action would have a Material Adverse Effect.
(ii) Each Grantor shall be entitled to receive and retain any and
all dividends, interest and other distributions paid in respect of the
Security Collateral of such Grantor if and to the extent that the payment
thereof is not otherwise prohibited by the terms of the Loan Documents;
provided, however, that any and all
(A) dividends, interest and other distributions paid or
payable other than in cash in respect of, and instruments and other
property received, receivable or otherwise distributed in respect
of, or in exchange for, any Security Collateral,
(B) dividends and other distributions paid or payable in cash
in respect of any Security Collateral in connection with a partial
or total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in-surplus and
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Security
Collateral
shall constitute Collateral hereunder.
(iii) The Collateral Agent will execute and deliver (or cause to be
executed and delivered) to each Grantor all such proxies and other
instruments as such Grantor may reasonably request for the purpose of
enabling such Grantor to exercise the voting and other rights that it is
entitled to exercise pursuant to paragraph (i) above and to receive the
31
dividends or interest payments that it is authorized to receive and retain
pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) All rights of each Grantor (x) to exercise or refrain from
exercising the voting and other consensual rights that it would otherwise
be entitled to exercise pursuant to Section 15(a)(i) shall, upon notice to
such Grantor by the Collateral Agent, cease and (y) to receive the
dividends, interest and other distributions that it would otherwise be
authorized to receive and retain pursuant to Section 15(a)(ii) shall
automatically cease, and all such rights shall thereupon become vested in
the Collateral Agent, which shall, at the direction of the Majority
Lenders, thereupon have the sole right to exercise or refrain from
exercising such voting and other consensual rights and to receive and hold
as Security Collateral such dividends, interest and other distributions.
(ii) All dividends, interest and other distributions that are
received by any Grantor contrary to the provisions of paragraph (i) of
this Section 15(b) shall be received in trust for the benefit of the
Collateral Agent and shall be forthwith paid over to the Collateral Agent
as Security Collateral in the same form as so received (with any necessary
indorsement).
(iii) Subject to the other provisions of this Agreement, the
Collateral Agent shall be authorized to send to each Securities
Intermediary or commodity intermediary as defined in and under any
Securities Account Control Agreement or commodities account control
agreement a Notice of Exclusive Control as defined in and under such
agreement.
Section 16. Additional Shares. Each Grantor agrees that it will
pledge hereunder, immediately upon its acquisition thereof, any and all
additional Equity Interests or other securities.
Section 17. The Collateral Agent -Authorization and Action. Each
Lender, by its acceptance of the security interest granted hereunder and by its
acceptance of any rights or interest under the Note, hereby appoints and
authorizes the Collateral Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement as are directed by the Majority
Lenders. As to any matters not expressly provided for by this Agreement, the
Collateral Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Lenders, and such instructions shall be binding upon all Lenders;
provided, however, that the Collateral Agent shall not be required to take any
action that exposes it to personal liability or that is contrary to this
Agreement or applicable law. The Collateral Agent agrees to give to the Lenders
prompt notice of each notice given to it by the Borrower pursuant to the terms
of this Agreement.
[Notwithstanding any other provision of this Agreement, the
Collateral Agent will take all actions hereunder, including, without limitation,
issuing demands, directions, requests and consents and exercising all manner of
discretion, on the direction of the Majority Lenders. For the avoidance of
doubt, references to the "opinion," "discretion," "satisfaction" and
32
"agreement" of the Collateral Agent shall be deemed to mean references to the
"opinion," "discretion," "satisfaction" and "agreement" of the Majority
Lenders.] [XXXXXX & XXXXXX TO REVIEW]
Section 18. Collateral Agent Appointed Attorney-in-Fact. Each
Grantor hereby irrevocably appoints the Collateral Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise, from time to time, upon the occurrence
and during the continuance of an Event of Default, to take any action and to
execute any instrument that the Collateral Agent may reasonably deem necessary
or advisable to accomplish the purposes of this Agreement, including, without
limitation:
(a) to obtain and adjust insurance required to be paid to the
Collateral Agent pursuant to Section 12,
(b) to ask for, demand, collect, xxx for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral,
(c) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) or (b) above,
and
(d) to file any claims or take any action or institute any
proceedings that the Collateral Agent may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce compliance
with the terms and conditions of any Assigned Agreement or the rights of
the Collateral Agent with respect to any of the Collateral.
Section 19. Collateral Agent May Perform. If any Grantor fails to
perform any agreement contained herein after notice thereof from the Collateral
Agent, the Collateral Agent may, but without any obligation to do so and without
notice, itself perform, or cause performance of, such agreement, and the
reasonable out-of-pocket expenses of the Collateral Agent incurred in connection
therewith shall be payable by such Grantor under Section 22.
Section 20. The Collateral Agent's Duties. c) The powers conferred
on the Collateral Agent hereunder are solely to protect the Lender's interest in
the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Lenders have or are
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against any parties or any other rights pertaining to
any Collateral. The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which it accords property with respect to which it acts as Collateral Agent.
(b) Anything contained herein to the contrary notwithstanding, the
Collateral Agent may from time to time, when the Collateral Agent deems it to be
necessary, appoint one or
33
more subagents (each a "SUBAGENT") reasonably acceptable to the Borrower for the
Collateral Agent hereunder with respect to all or any part of the Collateral. In
the event that the Collateral Agent so appoints any Subagent with respect to any
Collateral, (i) the assignment and pledge of such Collateral and the security
interest granted in such Collateral by each Grantor hereunder shall be deemed
for purposes of this Security Agreement to have been made to such Subagent, in
addition to the Collateral Agent, for the benefit of the Lender, as security for
the Secured Obligations of such Grantor, (ii) such Subagent shall automatically
be vested, in addition to the Collateral Agent, with all rights, powers,
privileges, interests and remedies of the Collateral Agent hereunder with
respect to such Collateral, and (iii) the term "Collateral Agent," when used
herein in relation to any rights, powers, privileges, interests and remedies of
the Collateral Agent with respect to such Collateral, shall include such
Subagent; provided, however, that no such Subagent shall be authorized to take
any action with respect to any such Collateral unless and except to the extent
expressly authorized in writing by the Collateral Agent or the Majority Lenders.
(c) In the absence of bad faith on the part of the Collateral Agent,
the Collateral Agent may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Collateral Agent which conform to the requirements of
this Agreement.
(d) The Collateral Agent shall not be liable for any error of
judgment made in good faith by an officer or officers of the Collateral Agent,
unless it shall be conclusively determined by a court of competent jurisdiction
that the Collateral Agent was grossly negligent in ascertaining the pertinent
facts.
(e) The Collateral Agent shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with any
direction of the Majority Lenders given under this Agreement.
(f) None of the provisions of this Agreement shall require the
Collateral Agent to expend or risk its own funds or otherwise to incur any
liability, financial or otherwise, in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or indemnity
satisfactory to it against such risk or liability is not assured to it.
(g) The Collateral Agent may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval or other paper or document believed by it in good faith to be genuine
and to have been signed or presented by the proper party or parties.
(h) The Collateral Agent may consult with counsel and the advice or
any opinion of counsel shall be full and complete authorization and protection
in respect of any action taken or omitted by it hereunder in good faith and in
accordance with such advice or opinion of counsel.
34
(i) The Collateral Agent shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, entitlement
order, approval or other paper or document.
(j) The Collateral Agent may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, attorneys, custodians or nominees appointed with due care, and shall not
be responsible for any willful misconduct or negligence on the part of any
agent, attorney, custodian or nominee so appointed.
(k) The Collateral Agent may at any time resign by giving 30 days
written notice of resignation to the Borrower. Upon receiving such notice of
resignation, the Majority Lenders shall promptly appoint a successor reasonably
acceptable to the Borrower and, upon the acceptance by the successor of such
appointment, release the resigning Collateral Agent from its obligations
hereunder by written instrument, a copy of which instrument shall be delivered
to each Lender, the Grantors, the resigning Collateral Agent and the successor.
If no successor shall have been so appointed and have accepted appointment
within 45 days after the giving of such notice of resignation, the resigning
Collateral Agent may petition any court of competent jurisdiction for the
appointment of a successor. Notwithstanding the foregoing, the Lenders, by
acceptance of this Agreement, agree that for so long as DB or any affiliate
thereof holds any interest in the Note or the Warrant, DB or an affiliate
thereof shall serve as the Collateral Agent unless the Borrower agrees otherwise
in writing (such agreement not to be unreasonably withheld).
(l) Any corporation into which the Collateral Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Collateral Agent shall
be a party, or any corporation succeeding to the business of the Collateral
Agent shall be the successor of the Collateral Agent hereunder without the
execution or filing of any paper with any party hereto or any further act on the
part of any of the parties hereto except where an instrument of transfer or
assignment is required by law to effect such succession, anything herein to the
contrary notwithstanding.
Section 21. Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent, on instructions of the Majority Lenders
and by notice to the Borrower, may declare the Note, all interest thereon and
all other amounts payable under this Agreement and the other Loan Documents to
be forthwith due and payable, whereupon the Note, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower.
(b) The Collateral Agent may, in accordance with the written
direction of the Majority Lenders, exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party upon default under the UCC
(whether or not the UCC applies to the affected Collateral) and also may: (i)
require each Grantor to, and each Grantor hereby agrees that it will at its
reasonable expense and upon request of the Collateral Agent forthwith, assemble
all or part of the Collateral
35
as directed by the Collateral Agent and make it available to the Collateral
Agent at a place and time to be designated by the Collateral Agent that is
reasonably convenient to both parties; (ii) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Collateral Agent's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Collateral Agent may deem commercially reasonable; (iii) occupy any premises
owned or leased by any of the Grantors where the Collateral or any part thereof
is assembled or located for a reasonable period in order to effectuate its
rights and remedies hereunder or under law, without obligation to such Grantor
in respect of such occupation; and (iv) exercise any and all rights and remedies
of any of the Grantors under or in connection with the Collateral, or otherwise
in respect of the Collateral, including, without limitation, (A) any and all
rights of such Grantor to demand or otherwise require payment of any amount
under, or performance of any provision of, the Assigned Agreements, the
Receivables, the Related Contracts and the other Collateral, (B) withdraw, or
cause or direct the withdrawal, of all funds with respect to the Account
Collateral and (C) exercise all other rights and remedies with respect to the
Assigned Agreements, the Receivables, the Related Contracts and the other
Collateral, including, without limitation, those set forth in Section 9-607 of
the UCC. Each Grantor agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to such Grantor of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
The Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(c) Any cash held by or on behalf of the Collateral Agent and all
cash proceeds received by or on behalf of the Collateral Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Collateral Agent, be held by the
Collateral Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Collateral Agent pursuant
to Section 22) in whole or in part by the Collateral Agent for the ratable
benefit of the Lender against, all or any part of the Secured Obligations, in
the following manner:
(i) first, paid to the Collateral Agent for any amounts then
owing to the Collateral Agent pursuant to the Loan Documents; and
(ii) second, paid to the Lender, for any amounts then owing to
it under the Loan Documents.
Any surplus of such cash or cash proceeds held by or on the behalf of the
Collateral Agent and remaining after payment in full of all the Secured
Obligations shall be paid over to the applicable Grantor or to whomsoever may be
lawfully entitled to receive such surplus.
(d) From and after the earlier of (i) a Responsible Officer of the
Borrower becoming aware of such Event of Default or (ii) notice from the
Collateral Agent to the Borrower instructing the Borrower to do so, the Borrower
shall, and shall cause each Grantor to, receive in trust for the benefit of the
Collateral Agent, segregate from other funds of such Grantor and forthwith pay
over to the Collateral Agent in the same form as received (with any
36
necessary indorsement), all payments received by any Grantor under or in
connection with any Assigned Agreement or otherwise in respect of the
Collateral.
(e) The Collateral Agent may, without notice to any Grantor except
as required by law and at any time or from time to time, charge, set-off and
otherwise apply all or any part of the Secured Obligations against any funds
held with respect to the Account Collateral or in any other deposit account.
(f) In the event of any sale or other disposition of any of the
Intellectual Property Collateral of any Grantor pursuant to this Section 21, the
goodwill symbolized by any Trademarks subject to such sale or other disposition
shall be included therein, and such Grantor shall supply to the Collateral Agent
or its designee such Grantor's know-how and expertise, and documents and things
relating to any Intellectual Property Collateral subject to such sale or other
disposition, and such Grantor's customer lists and other records and documents
relating to such Intellectual Property Collateral and to the manufacture,
distribution, advertising and sale of products and services of such Grantor.
(g) If the Collateral Agent shall determine to exercise its right to
sell all or any of the Security Collateral of any Grantor pursuant to this
Section 21, each Grantor agrees that, upon request of the Collateral Agent, such
Grantor will, at its own expense:
(i) use its best efforts to qualify the Security Collateral
under the state securities or "Blue Sky" laws and to obtain all
necessary governmental approvals for the private (if not registered
under the Securities Act or representing restricted shares
thereunder) or public or private (if so registered and freely
tradeable) sale of such Security Collateral, as requested by the
Collateral Agent;
(ii) cause each such issuer of such Security Collateral to
make available to its security holders, as soon as practicable, an
earnings statement that will satisfy the provisions of Section 11(a)
of the Securities Act;
(iii) provide the Collateral Agent with such other information
and projections as may be reasonably necessary or, in the opinion of
the Lender, reasonably advisable to enable the Collateral Agent to
effect the sale of such Security Collateral as set forth above; and
(iv) do or cause to be done all such other acts and things as
may be reasonably necessary to make such sale of such Security
Collateral or any part thereof valid and binding and in compliance
with applicable law and as set forth above.
(h) The Collateral Agent is authorized, in connection with any sale
of the Security Collateral pursuant to this Section 21, to deliver or otherwise
disclose to any prospective purchaser of the Security Collateral: (i) any
information and projections provided to it pursuant to subsection (g)(iii)
above; and (ii) any other information in its possession relating to such
Security Collateral.
37
Section 22. Indemnity and Expenses. d) Each Grantor agrees to
indemnify, defend and save and hold harmless the Lender, the Collateral Agent
and each of their Affiliates and their respective officers, directors,
employees, agents and advisors (each, an "INDEMNIFIED PARTY") from and against,
and shall pay on demand, any and all claims, damages, losses, liabilities and
reasonable out-of-pocket expenses (including, without limitation, reasonable
fees and expenses of counsel) that may be incurred by or asserted or awarded
against any Indemnified Party, in each case arising out of or in connection with
or resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except to the extent such claim, damage, loss, liability or
expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct; provided, that the Grantors shall have no liability for any
such costs, fees, expenses, losses, claims or damages to the extent relating to
claims, suits or actions by any Lender Party against any other Lender Party; and
provided, further that no Grantor or Lender Party shall have any liability to
any other Grantor or Lender Party hereunder for any special, consequential,
punitive or exemplary damages.
(b) Each Grantor will upon demand pay to the Collateral Agent its
fees and the amount of any and all reasonable out-of-pocket expenses, including,
without limitation, the reasonable fees and out-of-pocket expenses of its
counsel and of any experts and agents, that the Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from or other
realization upon, any of the Collateral of such Grantor, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent or the Lender hereunder
or (iv) the failure by such Grantor to perform or observe any of the provisions
hereof.
Section 23. Amendments; Waivers; Additional Grantors; Etc. e) No
amendment or waiver of any provision of this Agreement, and no consent to any
departure by any Grantor herefrom, shall in any event be effective unless the
same shall be in writing and signed by the Collateral Agent and each Grantor,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No failure on the part of the
Collateral Agent (or the Lenders, through the Collateral Agent) to exercise, and
no delay in exercising any right hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.
(b) Upon the execution and delivery, or authentication, by any
Person of a security agreement supplement in substantially the form of Exhibit A
hereto (each a "SECURITY AGREEMENT SUPPLEMENT"), (i) such Person shall be
referred to as an "ADDITIONAL GRANTOR" and shall be and become a Grantor
hereunder, and each reference in this Agreement and the other Loan Documents to
"Grantor" shall also mean and be a reference to such Additional Grantor, and
each reference in this Agreement and the other Loan Documents to "Collateral"
shall also mean and be a reference to the Collateral of such Additional Grantor,
and (ii) the supplemental schedules I-VI attached to each Security Agreement
Supplement shall be incorporated into and become a part of and supplement
Schedules I-VI, respectively, hereto, and the Collateral Agent may attach such
supplemental schedules to such Schedules; and each reference to such Schedules
shall mean and be a reference to such Schedules as supplemented pursuant to each
Security Agreement Supplement.
38
Section 24. Notices, Etc. All notices and other communications
provided for hereunder shall be either (i) in writing (including telegraphic,
telecopier or telex communication) and mailed, telegraphed, telecopied, telexed
or otherwise delivered or (ii) by electronic mail (if electronic mail addresses
are designated as provided below) confirmed immediately in writing, in the case
of the Lender, addressed to it at its address at
__________________________________________; in the case of the Collateral Agent,
addressed to it at its address at 0000 Xxxx Xx. Xxxxxx Xxxxx, Xxxxx Xxx,
Xxxxxxxxxx 00000, Attn: Pac West Telecom; and in the case of each Grantor,
addressed to it at its address set forth opposite such Grantor's name on the
signature pages hereto or on the signature page to the Security Agreement
Supplement pursuant to which it became a party hereto; or, as to any party, at
such other address as shall be designated by such party in a written notice to
the other parties. All such notices and other communications shall, when mailed,
telegraphed, telecopied, telexed, sent by electronic mail or otherwise, be
effective when deposited in the mails, delivered to the telegraph company,
telecopied, confirmed by telex answerback, sent by electronic mail and confirmed
in writing, or otherwise delivered (or confirmed by a signed receipt),
respectively, addressed as aforesaid; except that notices and other
communications to the Collateral Agent shall not be effective until received by
the Collateral Agent. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or of any Security
Agreement Supplement or Schedule hereto shall be effective as delivery of an
original executed counterpart thereof.
Section 25. Confidentiality. No Lender Party shall disclose any
Confidential Information to any Person without the consent of the Borrower,
other than (a) to such Lender Party's Affiliates and their officers, directors,
employees, agents and advisors and to actual or prospective Eligible Assignees
and participants, and then only on a confidential basis, (b) as required by any
law, rule or regulation or judicial process, (c) as requested or required by any
state, Federal or foreign authority or examiner regulating such Lender Party and
(d) to any rating agency when required by it, provided that, prior to any such
disclosure, such rating agency shall undertake to preserve the confidentiality
of any Confidential Information relating to the Grantors received by it from
such Lender Party.
Section 26. Continuing Security Interest; Assignments under the
Note. This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full in cash of the Secured Obligations (other than unmatured contingent
Obligations for indemnification), (b) be binding upon each Grantor, its
permitted successors and assigns and (c) inure, together with the rights and
remedies of the Collateral Agent hereunder, to the benefit of the Lender and its
permitted successors, transferees and assigns. Without limiting the generality
of the foregoing, clause (c), any Lender may assign or otherwise transfer all or
any portion of its rights hereunder together with an assignment of its rights
under the Note in accordance with the provisions thereof. No Grantor may assign
any of its rights or obligations hereunder other than to a successor by merger
permitted hereunder or as otherwise permitted pursuant to the Note.
Section 27. Termination. Upon the payment in full in cash of the
Secured Obligations, the pledge and security interest granted hereby shall
terminate and all rights to the Collateral shall revert to the applicable
Grantor. Upon any such termination, the Collateral
39
Agent will, at the applicable Grantor's expense, promptly execute and deliver to
such Grantor such documents as such Grantor shall reasonably request to evidence
such termination.
Section 28. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier shall be effective as delivery of an original
executed counterpart of this Agreement.
Section 29. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
Section 30. Jurisdiction, Etc.
(a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or Federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or any
of the other Loan Documents to which it is a party, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State court or, to
the fullest extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that any party may otherwise have to bring any action or proceeding
relating to this Agreement or any of the other Loan Documents in the courts of
any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any of the
other Loan Documents to which it is a party in any New York State or Federal
court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
40
Section 31. Waiver of Jury Trial. Each Grantor and each Lender Party
irrevocably waives all right to trial by jury in any action, proceeding or
counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to any of the Loan Documents, the other Investment Documents or the
actions of any Lender Party in the negotiation, administration, performance or
enforcement thereof.
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
Address for Notices: PAC-WEST TELECOMM, INC.
------------------------------
------------------------------
By ------------------------------
Title:
Accepted and Agreed:
DEUTSCHE BANK TRUST
COMPANY AMERICAS, as
Collateral Agent
By:
-----------------------
Title:
41
SCHEDULE I TO THE SECURITY AGREEMENT
LOCATION, CHIEF EXECUTIVE OFFICE, TYPE OF ORGANIZATION, JURISDICTION OF
ORGANIZATION AND ORGANIZATIONAL IDENTIFICATION NUMBER
CHIEF JURISDICTION
EXECUTIVE TYPE OF OF ORGANIZATIONAL
GRANTOR LOCATION OFFICE ORGANIZATION ORGANIZATION I.D. NO.
------- -------- ------ ------------ ------------ --------
SCHEDULE II TO THE
SECURITY AGREEMENT
PLEDGED EQUITY
PART I
PERCENTAGE
CLASS OF OF
EQUITY PAR CERTIFICATE NUMBER OUTSTANDING
GRANTOR ISSUER INTEREST VALUE NO(S) OF SHARES SHARES
------- ------ -------- ----- ----- --------- ------
SCHEDULE III TO THE
SECURITY AGREEMENT
LOCATION OF EQUIPMENT AND INVENTORY
[NAME OF GRANTOR]
LOCATIONS OF EQUIPMENT:
LOCATIONS OF INVENTORY:
[NAME OF GRANTOR]
LOCATIONS OF EQUIPMENT:
LOCATIONS OF INVENTORY:
[ETC.]
SCHEDULE IV TO THE
SECURITY AGREEMENT
CHANGES IN NAME, LOCATION, ETC.
CHANGES IN THE GRANTOR'S NAME (INCLUDING NEW GRANTOR WITH A NEW NAME AND NAMES
ASSOCIATED WITH ALL PREDECESSORS IN INTEREST OF THE GRANTOR)
CHANGES IN THE GRANTOR'S LOCATION
CHANGES IN THE GRANTOR'S CHIEF EXECUTIVE OFFICE CHANGES IN THE LOCATION OF
EQUIPMENT AND INVENTORY
CHANGES IN THE PLACE WHERE AGREEMENTS ARE MAINTAINED
CHANGES IN THE TYPE OF ORGANIZATION
CHANGES IN THE JURISDICTION OF ORGANIZATION
CHANGES IN THE ORGANIZATIONAL IDENTIFICATION NUMBER
SCHEDULE V TO THE
SECURITY AGREEMENT
INTELLECTUAL PROPERTY
I. PATENTS
PATENT FILING
GRANTOR TITLES COUNTRY PATENT NO. APPLIC. NO. DATE ISSUE DATE
------- ------ ------- ---------- ----------- ---- ----------
II. DOMAIN NAMES AND TRADEMARKS
REG. APPLIC. FILING ISSUE
GRANTOR DOMAIN NAME/XXXX COUNTRY XXXX NO. NO. DATE DATE
------- ---------------- ------- ---- --- --- ---- ----
III. TRADE NAMES
NAMES
IV. COPYRIGHTS
TITLE OF FILING ISSUE
GRANTOR WORK COUNTRY TITLE REG. NO. APPLIC. NO. DATE DATE
------- ---- ------- ----- -------- ----------- ---- ----
V. IP AGREEMENTS
GRANTOR IP AGREEMENTS
------- -------------
SCHEDULE VI TO THE
SECURITY AGREEMENT
ACCOUNT COLLATERAL
NAME AND ADDRESS OF MAILING ADDRESS OF
GRANTOR PLEDGED ACCOUNT BANK PLEDGED ACCOUNT ACCOUNT NUMBER
------- -------------------- --------------- --------------
EXHIBIT A TO THE
SECURITY AGREEMENT
FORM OF SECURITY AGREEMENT SUPPLEMENT
[Date of Security Agreement Supplement]
Deutsche Bank Trust Company Americas,
as the Collateral Agent for the
Lender referred to below
0000 Xxxx Xx. Xxxxxx Xxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Attn: Pac West Telecom
Pac-West Telecomm, Inc.
Ladies and Gentlemen:
Reference is made to (i) the Senior Secured Promissory Note, dated October
___, 2003 made by Pac-West Telecomm, Inc. (the "BORROWER") payable to Deutsche
Bank AG - London, acting through DB Advisors, LLC (together with its permitted
successors and assigns thereunder, the "Lenders") in the principal amount of
$40,000,000 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "NOTE") and (ii) the Security Agreement dated
October ___, 2003 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "SECURITY AGREEMENT") among the Grantors from
time to time party thereto and Deutsche Bank Trust Company Americas, as
collateral agent (together with any successor collateral agent, the "COLLATERAL
AGENT") for the Lenders. Terms defined in the Security Agreement and not
otherwise defined herein are used herein as defined in the Security Agreement.
SECTION 1. Grant of Security. The undersigned hereby grants to the
Collateral Agent, for the ratable benefit of the Lenders, a security interest
in, all of its right, title and interest in and to all of the Collateral of the
undersigned, whether now owned or hereafter acquired by the undersigned,
wherever located and whether now or hereafter existing or arising, including,
without limitation, the property and assets of the undersigned set forth on the
attached supplemental schedules to the Schedules to the Security Agreement.
SECTION 2. Security for Obligations. The grant of a security interest in
the Collateral by the undersigned under this Security Agreement Supplement and
the Security Agreement, secures the payment of all Obligations of the
undersigned now or hereafter existing under or in respect of the Loan Documents,
whether direct or indirect, absolute or contingent, and whether for principal,
reimbursement obligations, interest, premiums, penalties, fees,
indemnifications, contract causes of action, costs, expenses or otherwise.
2
SECTION 3. Supplements to Security Agreement Schedules. The undersigned
has attached hereto supplemental Schedules I through VI to Schedules I through
VI, respectively, to the Security Agreement, and the undersigned hereby
certifies, as of the date first above written, that such supplemental schedules
have been prepared by the undersigned in substantially the form of the
equivalent Schedules to the Security Agreement and are complete and correct.
SECTION 4. Representations and Warranties. The undersigned hereby makes
each representation and warranty set forth in Section 9 of the Security
Agreement (as supplemented by the attached supplemental schedules) to the same
extent as each other Grantor.
SECTION 5. Obligations Under the Security Agreement. The undersigned
hereby agrees, as of the date first above written, to be bound as a Grantor by
all of the terms and provisions of the Security Agreement to the same extent as
each of the other Grantors. The undersigned further agrees, as of the date first
above written, that each reference in the Security Agreement to an "Additional
Grantor" or a "Grantor" shall also mean and be a reference to the undersigned.
SECTION 6. Governing Law. This Security Agreement Supplement shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 7. Jurisdiction, Etc.
(a) The undersigned hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or any of the other Loan Documents to which
it is a party, or for recognition or enforcement of any judgment, and the
undersigned hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any such
New York State court or, to the fullest extent permitted by law, in such Federal
court. The undersigned agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement or any of the other Loan
Documents in the courts of any jurisdiction.
(b) The undersigned irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or any of the other Loan Documents to which
it is a party in any New York State or Federal court. The undersigned hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
SECTION 8. Waiver of Jury Trial. THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE
LOAN DOCUMENTS,
3
THE ADVANCES OR THE ACTIONS OF ANY LENDER PARTY IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Very truly yours,
[NAME OF ADDITIONAL GRANTOR]
By
---------------------------
Title:
Address for notices:
-----------------------
-----------------------
-----------------------
EXHIBIT B
FORM OF
GUARANTY SUPPLEMENT
Deutsche Bank Trust Company Americas,
as the Collateral Agent for the
Lender referred to below
0000 Xxxx Xx. Xxxxxx Xxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Attn: Pac West Telecom
Re: West-Pac Telecomm, Inc.
Ladies and Gentlemen:
Reference is made to (i) the Senior Secured Promissory Note, dated October
___, 2003 made by Pac-West Telecomm, Inc. (the "BORROWER") payable to Deutsche
Bank AG - London, acting through DB Advisors, LLC (together with its permitted
successors and assigns, the "LENDERS") in the principal amount of $40,000,000
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "NOTE"), (ii) the Security Agreement dated October ___, 2003 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "SECURITY Agreement") among the Grantors from time to time party
thereto and Deutsche Bank Trust Company Americas, as collateral agent (together
with any successor collateral agent, the "COLLATERAL AGENT") for the Lenders and
(iii) the Guaranty referred to in the Security Agreement (such Guaranty, as in
effect on the date hereof and as it may hereafter be amended, supplemented or
otherwise modified from time to time, together with this Guaranty Supplement,
being the "GUARANTY"). Terms defined in the Security Agreement and not otherwise
defined herein are used herein as defined in the Security Agreement.
Section 1. Guaranty; Limitation of Liability. (a) The undersigned hereby
absolutely, unconditionally and irrevocably guarantees the punctual payment when
due, whether at scheduled maturity or on any date of a required prepayment or by
acceleration, demand or otherwise, of all Obligations of each other Grantor now
or hereafter existing under or in respect of the Loan Documents (including,
without limitation, any extensions, modifications, substitutions, amendments or
renewals of any or all of the foregoing Obligations), whether direct or
indirect, absolute or contingent, and whether for principal, interest, premium,
fees, indemnities, contract causes of action, costs, expenses or otherwise (such
Obligations being the "GUARANTEED OBLIGATIONS") and agrees to pay any and all
reasonable out-of-pocket expenses
2
(including, without limitation, reasonable fees and expenses of counsel)
incurred by any Lender Party in enforcing any rights under this Guaranty
Supplement, the Note or any other Loan Document. Without limiting the generality
of the foregoing, the undersigned's liability shall extend to all amounts that
constitute part of the Guaranteed Obligations that would be owed by any other
Grantor to any Lender Party under or in respect of the Loan Documents but for
the fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving such other Grantor.
(b) The undersigned, and by its acceptance of this Guaranty Supplement,
each Lender Party, hereby confirms that it is the intention of all such Persons
that this Guaranty Supplement, the Note and the Obligations of each undersigned
not constitute a fraudulent transfer or conveyance for purposes of any
Bankruptcy Proceeding, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar foreign, federal or state law to the
extent applicable to this Guaranty Supplement, the Guaranty and the Obligations
of the undersigned hereunder and thereunder. To effectuate the foregoing
intention, each Lender Party and the undersigned hereby irrevocably agree that
the Obligations of the undersigned with respect to the Guaranty at any time
shall be limited to the maximum amount as will result in the Obligations of the
undersigned under the Guaranty not constituting a fraudulent transfer or
conveyance.
(c) The undersigned hereby unconditionally and irrevocably agrees that in
the event any payment shall be required to be made to any Lender Party with
respect to the Guaranty or any other guaranty, the undersigned will contribute,
to the maximum extent permitted by law, such amounts to each other Guarantor and
each other guarantor so as to maximize the aggregate amount paid to the Lender
Parties under or in respect of the Loan Documents.
Section 2. Obligations Under the Guaranty. The undersigned hereby agrees,
as of the date first above written, to be bound as a Guarantor by all of the
terms and conditions of the Security Agreement to the same extent as each of the
other Guarantors thereunder. The undersigned further agrees, as of the date
first above written, that each reference in the Security Agreement to an
"Additional Guarantor" or a "Guarantor" shall also mean and be a reference to
the undersigned, and each reference in any other Loan Document to a
"Guarantor"shall also mean and be a reference to the undersigned.
Section 3. Delivery by Telecopier. Delivery of an executed counterpart of
a signature page to this Guaranty Supplement by telecopier shall be effective as
delivery of an original executed counterpart of this Guaranty Supplement.
Section 4. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.
(a) This Guaranty Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.
(b) The undersigned hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or any Federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Guaranty Supplement, the
3
Note or any of the other Loan Documents to which it is or is to be a party, or
for recognition or enforcement of any judgment, and the undersigned hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such Federal court. The undersigned
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Guaranty Supplement or the
Note or any other Loan Document shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Guaranty
Supplement, the Note or any of the other Loan Documents to which it is or is to
be a party in the courts of any other jurisdiction.
(c) The undersigned irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Guaranty Supplement, the Note or any of the other
Loan Documents to which it is or is to be a party in any New York State or
Federal court. The undersigned hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such suit, action or proceeding in any such court.
(d) THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES
OR THE ACTIONS OF ANY LENDER PARTY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT THEREOF.
Very truly yours,
[NAME OF ADDITIONAL GUARANTOR]
By
-----------------------------------
-----------------------------------
-----------------------------------
Title:
[etc.]
4
EXHIBIT C TO THE
SECURITY AGREEMENT
FORM OF ACCOUNT CONTROL AGREEMENT (1)
(DEPOSIT ACCOUNT/SECURITIES ACCOUNT)
ACCOUNT CONTROL AGREEMENT (this "AGREEMENT") dated as of ________, ____,
among____________, a ___________ (the "GRANTOR"), Deutsche Bank Trust Company
Americas, as collateral agent (together with any successor collateral agent, the
"COLLATERAL AGENT") for Deutsche Bank AG - London, acting through DB Advisors,
LLC, and _________, a _________ ("____________"), as securities intermediary and
depository bank (the "ACCOUNT HOLDER").
PRELIMINARY STATEMENTS:
(1) The Grantor has granted the Collateral Agent for the benefit of the
Lenders a security interest (the "SECURITY INTEREST") in the following accounts
maintained by the Account Holder for the Grantor (each, an "ACCOUNT" and
collectively, the "ACCOUNTS"):
[Insert account numbers and other identifying information.]
(2) Terms defined in Article 8 or 9 of the Uniform Commercial Code in
effect in the State of New York ("N.Y. UNIFORM COMMERCIAL CODE") are used in
this Agreement as such terms are defined in such Article 8 or 9.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto hereby agree as follows:
SECTION 1. The Accounts. The Grantor and Account Holder represent and
warrant to, and agree with, the Collateral Agent that:
(a) The Account Holder maintains each Account for the Grantor, and
all property (including, without limitation, all funds and financial
assets) held by the Account Holder
1 This Agreement should be used for deposit accounts as collateral and
covers funds in the deposit account as well as financial assets acquired
with such funds as long as the financial assets are maintained in such
account as opposed to a separate securities account. The Agreement is not
necessary if the Collateral Agent is the depository bank with respect to
the account since a security interest in a depository account maintained
with the Collateral Agent, as depository bank, is automatically perfected
without the need to obtain a control agreement. UCC 9-104(a)(1). If any
financial asset is maintained in a separate account with a Person other
than the Collateral Agent, a Securities Account Control Agreement (Exhibit
D) is necessary.
5
for the account of the Grantor are, and will continue to be, credited to
an Account in accordance with instructions given by the Grantor (unless
otherwise provided herein).
(b) To the extent that funds are credited to any Account, such
Account is a deposit account; and to the extent that financial assets are
credited to any Account, such Account is a securities account. The Account
Holder is (i) the bank with which each Account that is a deposit account
is maintained and (ii) the securities intermediary with respect to
financial assets held in any Account that is a securities account. The
Grantor is (x) the Account Holder's customer with respect to the Accounts
and (y) the entitlement holder with respect to financial assets credited
from time to time to any Account.
(c) Notwithstanding any other agreement to the contrary, the Account
Holder's jurisdiction with respect to each Account for purposes of the
N.Y. Uniform Commercial Code is, and will continue to be for so long as
the Security Interest shall be in effect, the State of New York.
[(d) Attached as Exhibit A hereto are statements of the respective
Accounts as of the date hereof showing the property credited to each
Account.]
(e) The Grantor and Account Holder do not know of any claim to or
interest in any Account or any property (including, without limitation,
funds and financial assets) credited to any Account, except for claims and
interests of the parties referred to in this Agreement and claims of the
Account Holder permitted under the Security Agreement dated October ___,
2003 (as amended, amended and restated, supplemented or otherwise modified
from time to time, the "SECURITY AGREEMENT") among the Grantors from time
to time party thereto and the Collateral Agent.
SECTION 2. Control by Collateral Agent. The Account Holder will comply
with (i) all instructions directing disposition of the funds in any and all of
the Accounts, (ii) all notifications and entitlement orders that the Account
Holder receives directing it to transfer or redeem any financial asset in any
and all of the Accounts, and (iii) all other directions concerning any and all
of the Accounts, including, without limitation, directions to distribute to the
Collateral Agent proceeds of any such transfer or redemption or interest or
dividends on property in any and all of the Accounts (any such instruction,
notification or direction referred to in clause (i), (ii) or (iii) above being
an "ACCOUNT DIRECTION"), in each case of clauses (i), (ii) and (iii) above
originated by the Collateral Agent without further consent by the Grantor or any
other Person.
SECTION 3. Grantor's Rights in Accounts.
(a) The Account Holder will comply with Account Directions and other
directions concerning each Account originated by, and only by, the Collateral
Agent.
(b) Until the Account Holder receives a notice from the Collateral Agent
that an Event of Default has occurred and is continuing under the Security
Agreement and that in connection therewith the Collateral Agent will exercise
exclusive control over any Account (a "NOTICE OF EXCLUSIVE Control" with respect
to such Account), the Account Holder may distribute to the Grantor all interest
and regular cash dividends on property (including, without limitation,
6
funds and financial assets) in such Account and the Grantor may give any Account
Directions relating to the Accounts and the Financial Assets held therein
(including withdrawal, transfer and deposit instructions).
(c) If the Account Holder receives from the Collateral Agent a Notice of
Exclusive Control with respect to any Account, the Account Holder will cease
distributing to the Grantor all interest and dividends on property (including,
without limitation, funds and financial assets) in such Account.
SECTION 4. Priority of Collateral Agent's Security Interest. (a) The
Account Holder (i) subordinates to the security interest and in favor of the
Collateral Agent any security interest, lien, or right of recoupment or setoff
that the Account Holder may have, now or in the future, against any Account or
property (including, without limitation, any funds and financial assets)
credited to any Account, and (ii) agrees that it will not exercise any right in
respect of any such security interest or lien or any such right of recoupment or
setoff until the Security Interest is terminated, except that the Account Holder
(A) will retain its prior security interest and lien on property credited to any
Account, (B) may exercise any right in respect of such security interest or
lien, and (C) may exercise any right of recoupment or setoff against any
Account, in the case of clauses (A), (B) and (C) above, to secure or to satisfy,
and only to secure or to satisfy, payment (x) for such property, (y) for its
customary fees and expenses for the routine maintenance and operation of such
Account, and (z) if such Account is a deposit account, for the face amount of
any items that have been credited to such Account but are subsequently returned
unpaid because of uncollected or insufficient funds.
(a) The Account Holder will not enter into any other agreement with any
Person relating to Account Directions or other directions with respect to any
Account.
SECTION 5. Statements, Confirmations, and Notices of Adverse Claims. (a)
The Account Holder will send copies of all statements and confirmations for each
Account simultaneously to the Collateral Agent and the Grantor.
(a) When the Account Holder knows of any claim or interest in any Account
or any property (including, without limitation, funds and financial assets)
credited to any Account other than the claims and interests of the parties
referred to in this Agreement, the Account Holder will promptly notify the
Collateral Agent and the Grantor of such claim or interest.
SECTION 6. The Account Holder's Responsibility. (a) Except for permitting
a withdrawal, delivery, or payment in violation of Section 3, the Account Holder
will not be liable to the Collateral Agent for complying with Account Directions
or other directions concerning any Account from the Grantor that are received by
the Account Holder before the Account Holder receives and has a reasonable
opportunity to act on a Notice of Exclusive Control.
(b) The Account Holder will not be liable to the Grantor or the Collateral
Agent for complying with a Notice of Exclusive Control or with an Account
Direction or other direction concerning any Account originated by the Collateral
Agent, even if the Grantor notifies the Account Holder that the Collateral Agent
is not legally entitled to issue the Notice of Exclusive Control or Account
Direction or such other direction unless the Account Holder takes
7
the action after it is served with an injunction, restraining order, or other
legal process enjoining it from doing so, issued by a court of competent
jurisdiction, and had a reasonable opportunity to act on the injunction,
restraining order or other legal process.
(c) This Agreement does not create any obligation of the Account Holder
except for those expressly set forth in this Agreement and, in the case of any
Account that is a securities account, in Part 5 of Article 8 of the N.Y. Uniform
Commercial Code and, in the case of any Account that is a deposit account, in
Article 4 of the N.Y. Uniform Commercial Code. In particular, the Account Holder
need not investigate whether the Collateral Agent is entitled under the
Collateral Agent's agreements with the Grantor to give an Account Direction or
other direction concerning any Account or a Notice of Exclusive Control. The
Account Holder may rely on notices and communications it believes given by the
appropriate party.
SECTION 7. Indemnity. The Grantor will indemnify the Account Holder, its
officers, directors, employees and agents against claims, liabilities and
reasonable out-of-pocket expenses arising out of this Agreement (including,
without limitation, reasonable attorney's fees and disbursements), except to the
extent the claims, liabilities or expenses are caused by the Account Holder's
gross negligence or willful misconduct.
SECTION 8. Termination; Survival. (a) The Collateral Agent may terminate
this Agreement by notice to the Account Holder and the Grantor. If the
Collateral Agent notifies the Account Holder that the Security Interest has
terminated, this Agreement will immediately terminate.
(a) The Account Holder may terminate this Agreement on 30 days' prior
notice to the Collateral Agent and the Grantor, provided that before such
termination the Account Holder and the Grantor shall make arrangements to
transfer the property (including, without limitation, all funds and financial
assets but less an amount reasonably estimated to cover the balance of any
outstanding checks, reserves for returned items and the reasonable fees of the
Account Holder) credited to each Account to another Account Holder that shall
have executed, together with the Grantor, a control agreement in favor of the
Collateral Agent in respect of such property in substantially the form of this
Agreement or otherwise in form and substance satisfactory to the Collateral
Agent.
(b) Sections 6 and 7 will survive termination of this Agreement.
SECTION 9. Governing Law. This Agreement and each Account will be governed
by the law of the State of New York. The Account Holder and the Grantor may not
change the law governing any Account without the Collateral Agent's express
prior written agreement.
SECTION 10. Entire Agreement. This Agreement is the entire agreement, and
supersedes any prior agreements, and contemporaneous oral agreements, of the
parties concerning its subject matter.
SECTION 11. Amendments. No amendment of, or waiver of a right under, this
Agreement will be binding unless it is in writing and signed by the party to be
charged.
8
SECTION 12. Financial Assets. The Account Holder agrees with the
Collateral Agent and the Grantor that, to the fullest extent permitted by
applicable law, all property (other than funds) credited from time to time to
any Account will be treated as financial assets under Article 8 of the N.Y.
Uniform Commercial Code.
SECTION 13. Notices. A notice or other communication to a party under this
Agreement will be in writing (except that Account Directions may be given
orally), will be sent to the party's address set forth under its name below or
to such other address as the party may notify the other parties and will be
effective on receipt.
SECTION 14. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Grantor, the Collateral Agent and the Account
Holder, and thereafter shall be binding upon and inure to the benefit of the
Grantor, the Collateral Agent and the Account Holder and their respective
successors and assigns.
SECTION 15. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of an original executed counterpart of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
[NAME OF GRANTOR]
By
------------------------------
Name:
Title:
Address:
------------------------------
------------------------------
[NAME OF COLLATERAL AGENT], as
Collateral Agent
By
------------------------------
Name:
Title:
Address:
------------------------------
------------------------------
9
[NAME OF ACCOUNT HOLDER]
By
------------------------------
Name:
Title:
Address:
------------------------------
------------------------------
EXHIBIT A
[Statements of the various Accounts showing the property credited to
each Account]
EXHIBIT D TO THE
SECURITY AGREEMENT
FORM OF SECURITIES ACCOUNT CONTROL AGREEMENT (2)
CONTROL AGREEMENT (this "AGREEMENT") dated as of October ____, 2003,
among____________, a ___________ (the "GRANTOR"), Deutsche Bank Trust Company
Americas, as collateral agent (together with any successor collateral agent, the
"COLLATERAL AGENT") for Deutsche Bank AG - London, acting through DB Advisors,
LLC, and _________, a _________ ("____________"), as securities intermediary
(the "SECURITIES Intermediary").
PRELIMINARY STATEMENTS:
(1) The Grantor has granted the Collateral Agent a security interest (the
"SECURITY INTEREST") in account no. _______________ maintained by the Securities
Intermediary for the Grantor (the "ACCOUNT").
(2) Terms defined in Article 8 or 9 of the Uniform Commercial Code in
effect in the State of New York ("N.Y. UNIFORM COMMERCIAL CODE") are used in
this Agreement as such terms are defined in such Article 8 or 9.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto hereby agree as follows:
SECTION 1. The Account. The Grantor and Securities Intermediary represent
and warrant to, and agree with, the Collateral Agent that:
(a) The Securities Intermediary maintains the Account for the
Grantor, and all property held by the Securities Intermediary for the
account of the Grantor is, and will continue to be, credited to the
Account.
(b) The Account is a securities account. The Securities Intermediary
is the securities intermediary with respect to the property credited from
time to time to the Account. The Grantor is the entitlement holder with
respect to the property credited from time to time to the Account.
2 This Agreement should be used for a securities account as collateral. The
Agreement is not necessary if (i) the securities are maintained in an
account subject to an Account Control Agreement (Exhibit B) or (ii) the
Collateral Agent is the securities intermediary with respect to the
securities since a security interest in securities entitlements maintained
with the Collateral Agent, as securities intermediary, is automatically
perfected without the need to obtain a control agreement. See UCC
8-106(e).
2
(c) The State of New York is, and will continue to be, the
Securities Intermediary's jurisdiction of organization for purposes of
Section 8-110(e) of the UCC so long as the Security Interest shall remain
in effect.
(d) Exhibit A attached hereto is a statement of the property
credited to the Account on the date hereof.
(e) The Grantor and Securities Intermediary do not know of any claim
to or interest in the Account or any property credited to the Account,
except for claims and interests of the parties referred to in this
Agreement.
SECTION 2. Control by Collateral Agent. The Securities Intermediary will
comply with all notifications it receives directing it to transfer or redeem any
property in the Account (each an "ENTITLEMENT ORDER") or other directions
concerning the Account (including, without limitation, directions to distribute
to the Collateral Agent proceeds of any such transfer or redemption or interest
or dividends on property in the Account) originated by the Collateral Agent
without further consent by the Grantor or any other person.
SECTION 3. Grantor's Rights in Account.
(a) The Securities Intermediary will comply with Entitlement Orders and
other directions concerning the Account originated by, and only by, the
Collateral Agent.
(b) Until the Securities Intermediary receives a notice from the
Collateral Agent that that an Event of Default has occurred and is continuing
under the Security Agreement and that in connection therewith the Collateral
Agent will exercise exclusive control over the Account (a "NOTICE OF EXCLUSIVE
CONTROL"), the Securities Intermediary may distribute to the Grantor all
interest and regular cash dividends on property in the Account.
(c) Until the Account Holder receives a notice from the Collateral Agent
that an Event of Default has occurred and is continuing under the Security
Agreement and that in connection therewith the Collateral Agent will exercise
exclusive control over any Account (a "NOTICE OF EXCLUSIVE Control" with respect
to such Account), the Account Holder may distribute to the Grantor all interest
and regular cash dividends on property (including, without limitation, funds and
financial assets) in such Account and the Grantor may give any Account
Directions relating to the Accounts and the Financial Assets held therein
(including withdrawal, transfer and deposit instructions)
(d) If the Securities Intermediary receives from the Collateral Agent a
Notice of Exclusive Control, the Securities Intermediary will cease distributing
to the Grantor all interest and dividends on property in the Account.
SECTION 4. Priority of Collateral Agent's Security Interest. (a) The
Securities Intermediary subordinates in favor of the Collateral Agent any
security interest, lien, or right of setoff it may have, now or in the future,
against the Account or property in the Account, except that the Securities
Intermediary will retain its prior lien on property in the Account to secure
payment for property purchased for the Account and normal commissions and fees
for the Account.
3
(a) The Securities Intermediary will not agree with any Person not party
to this Agreement that the Securities Intermediary will comply with Entitlement
Orders originated by such Person.
SECTION 5. Statements, Confirmations, and Notices of Adverse Claims. (a)
The Securities Intermediary will send copies of all statements and confirmations
for the Account simultaneously to the Grantor and the Collateral Agent.
(a) When the Securities Intermediary knows of any claim or interest in the
Account or any property credited to the Account other than the claims and
interests of the parties referred to in this Agreement, the Securities
Intermediary will promptly notify the Collateral Agent and the Grantor of such
claim or interest.
SECTION 6. The Securities Intermediary's Responsibility. (a) Except for
permitting a withdrawal, delivery, or payment in violation of Section 3, the
Securities Intermediary will not be liable to the Collateral Agent for complying
with Entitlement Orders or other directions concerning the Account from the
Grantor that are received by the Securities Intermediary before the Securities
Intermediary receives and has a reasonable opportunity to act on a Notice of
Exclusive Control.
(a) The Securities Intermediary will not be liable to the Grantor or the
Collateral Agent for complying with a Notice of Exclusive Control or with an
Entitlement Order or other direction concerning the Account originated by the
Collateral Agent, even if the Grantor notifies the Securities Intermediary that
the Collateral Agent is not legally entitled to issue the Notice of Exclusive
Control or Entitlement Order or such other direction unless the Securities
Intermediary takes the action after it is served with an injunction, restraining
order, or other legal process enjoining it from doing so, issued by a court of
competent jurisdiction, and had a reasonable opportunity to act on the
injunction, restraining order or other legal process.
(b) This Agreement does not create any obligation of the Securities
Intermediary except for those expressly set forth in this Agreement and in Part
5 of Article 8 of the N.Y. Uniform Commercial Code. In particular, the
Securities Intermediary need not investigate whether the Collateral Agent is
entitled under the Collateral Agent's agreements with the Grantor to give an
Entitlement Order or other direction concerning the Account or a Notice of
Exclusive Control. The Securities Intermediary may rely on notices and
communications it believes given by the appropriate party.
SECTION 7. Indemnity. The Grantor will indemnify the Securities
Intermediary, its officers, directors, employees and agents against claims,
liabilities and expenses arising out of this Agreement (including, without
limitation, reasonable attorney's fees and disbursements), except to the extent
the claims, liabilities or expenses are caused by the Securities Intermediary's
gross negligence or willful misconduct as found by a court of competent
jurisdiction in a final, non-appealable judgment.
SECTION 8. Termination; Survival. (a) The Collateral Agent may terminate
this Agreement by notice to the Securities Intermediary and the Grantor. If the
Collateral Agent
4
notifies the Securities Intermediary that the Security Interest has terminated,
this Agreement will immediately terminate.
(b) The Securities Intermediary may terminate this Agreement on 60 days'
prior notice to the Collateral Agent and the Grantor, provided that before such
termination the Securities Intermediary and the Grantor shall make arrangements
to transfer the property in the Account to another securities intermediary that
shall have executed, together with the Grantor, a control agreement in favor of
the Collateral Agent in respect of such property in substantially the form of
this Agreement or otherwise in form and substance satisfactory to the Collateral
Agent.
(c) Sections 6 and 7 will survive termination of this Agreement.
SECTION 9. Governing Law. This Agreement and the Account will be governed
by the law of the State of New York. The Securities Intermediary and the Grantor
may not change the law governing the Account without the Collateral Agent's
express prior written agreement.
SECTION 10. Entire Agreement. This Agreement is the entire agreement, and
supersedes any prior agreements, and contemporaneous oral agreements, of the
parties concerning its subject matter.
SECTION 11. Amendments. No amendment of, or waiver of a right under, this
Agreement will be binding unless it is in writing and signed by the party to be
charged.
SECTION 12. Financial Assets. The Securities Intermediary agrees with the
Collateral Agent and the Grantor that, to the fullest extent permitted by
applicable law, all property credited from time to time to the Account will be
treated as financial assets under Article 8 of the N.Y. Uniform Commercial Code.
SECTION 13. Notices. A notice or other communication to a party under this
Agreement will be in writing (except that Entitlement Orders may be given
orally), will be sent to the party's address set forth under its name below or
to such other address as the party may notify the other parties and will be
effective on receipt.
SECTION 14. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Grantor, the Collateral Agent and the Securities
Intermediary, and thereafter shall be binding upon and inure to the benefit of
the Grantor, the Collateral Agent and the Securities Intermediary and their
respective successors and assigns.
SECTION 15. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of an original executed counterpart of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
5
[NAME OF GRANTOR]
By
------------------------------
Title:
Address:
------------------------------
------------------------------
[NAME OF COLLATERAL AGENT], as
Collateral Agent
By
------------------------------
Title:
Address:
------------------------------
------------------------------
[NAME OF SECURITIES
INTERMEDIARY]
By
------------------------------
Title:
Address:
------------------------------
------------------------------
EXHIBIT E TO THE
SECURITY AGREEMENT
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
This INTELLECTUAL PROPERTY SECURITY AGREEMENT (as amended, amended and
restated, supplemented or otherwise modified from time to time, the "IP SECURITY
AGREEMENT") dated ________, ____, is made by the Persons listed on the signature
pages hereof (collectively, the "Grantors") in favor of Deutsche Bank Trust
Company Americas, as collateral agent (together with any successor collateral
agent, the "COLLATERAL Agent") for Deutsche Bank AG - London, acting through DB
Advisors, LLC (the "LENDER").
WHEREAS, Pac-West Telecomm, Inc., a California corporation (the
"BORROWER"), has issued its Senior Secured Promissory Note, dated October ___,
2003 (the "NOTE") to the Lender in the principal amount of $40,000,000 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "NOTE") and, as a condition to the purchase of the Note by the Lender,
has entered into that certain Security Agreement dated October ___, 2003 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "SECURITY AGREEMENT") made by the Borrower and the other Grantors from
time to time party thereto in favor of the Collateral Agent for the Lender.
Terms defined in the Security Agreement and not otherwise defined herein are
used herein as defined in the Security Agreement.
WHEREAS, under the terms of the Security Agreement, the Grantors have
granted to the Collateral Agent, for the benefit of the Lender, a security
interest in, among other property, certain intellectual property of the
Grantors, and have agreed as a condition thereof to execute this IP Security
Agreement for recording with the U.S. Patent and Trademark Office, the United
States Copyright Office and other governmental authorities.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Grantor agrees as follows:
SECTION 1. Grant of Security. Each Grantor hereby grants to the Collateral
Agent for the ratable benefit of the Lender a security interest in all of such
Grantor's right, title and interest in and to the following (the "COLLATERAL"):
(i) the patents and patent applications set forth in Schedule A
hereto (the "PATENTS");
(ii) the trademark and service xxxx registrations and applications
set forth in Schedule B hereto (provided that no security interest shall
be granted in United States intent-to-use trademark applications to the
extent that, and solely during the period in which, the grant of a
security interest therein would impair the validity or enforceability of
such intent-to-use trademark applications under applicable federal law),
together with the goodwill symbolized thereby (the "TRADEMARKS");
2
(iii) all copyrights, whether registered or unregistered, now owned
or hereafter acquired by such Grantor, including, without limitation, the
copyright registrations and applications and exclusive copyright licenses
set forth in Schedule C hereto (the "COPYRIGHTS");
(iv) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the foregoing, all
rights in the foregoing provided by international treaties or conventions,
all rights corresponding thereto throughout the world and all other rights
of any kind whatsoever of such Grantor accruing thereunder or pertaining
thereto;
(v) any and all claims for damages and injunctive relief for past,
present and future infringement, dilution, misappropriation, violation,
misuse or breach with respect to any of the foregoing, with the right, but
not the obligation, to xxx for and collect, or otherwise recover, such
damages; and
(vi) any and all proceeds of, collateral for, income, royalties and
other payments now or hereafter due and payable with respect to, and
supporting obligations relating to, any and all of the Collateral of or
arising from any of the foregoing.
SECTION 2. Security for Obligations. The grant of a security interest in,
the Collateral by each Grantor under this IP Security Agreement secures the
payment of all Obligations of such Grantor now or hereafter existing under or in
respect of the Loan Documents, whether direct or indirect, absolute or
contingent, and whether for principal, reimbursement obligations, interest,
premiums, penalties, fees, indemnifications, contract causes of action, costs,
expenses or otherwise. 3[Without limiting the generality of the foregoing, this
IP Security Agreement secures, as to each Grantor, the payment of all amounts
that constitute part of the Secured Obligations and that would be owed by such
Grantor to either Lender under the Loan Documents but for the fact that such
Secured Obligations are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving a Grantor.]
SECTION 3. Recordation. Each Grantor authorizes and requests that the
Register of Copyrights, the Commissioner for Patents and the Commissioner for
Trademarks and any other applicable government officer record this IP Security
Agreement.
3 Include this sentence only if the Additional Grantor delivering this IP
Security Agreement will not be required under the Loan Documents to become
a Guarantor. Also, in that case, the first sentence of this Section 2
should be revised to reflect that this pledge, assignment and grant
secures the payment of all Obligations of each Grantor.
3
SECTION 4. Execution in Counterparts. This IP Security Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
SECTION 5. Grants, Rights and Remedies. This IP Security Agreement has
been entered into in conjunction with the provisions of the Security Agreement.
Each Grantor does hereby acknowledge and confirm that the grant of the security
interest hereunder to, and the rights and remedies of, the Collateral Agent with
respect to the Collateral are more fully set forth in the Security Agreement,
the terms and provisions of which are incorporated herein by reference as if
fully set forth herein.
SECTION 6. Governing Law. This IP Security Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, each Grantor has caused this IP Security Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
[NAME OF BORROWER]
By
------------------------------
Name:
Title:
Address for Notices:
------------------------------
------------------------------
------------------------------
[NAME OF GRANTOR]
By
------------------------------
Name:
Title:
Address for Notices:
------------------------------
------------------------------
------------------------------
4
[NAME OF GRANTOR]
By
------------------------------
Name:
Title:
Address for Notices:
------------------------------
------------------------------
------------------------------
[ETC.]
EXHIBIT F TO THE
SECURITY AGREEMENt
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT
This INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT (this "IP
SECURITY AGREEMENT SUPPLEMENT") dated ________, ____, is made by the Person
listed on the signature pages hereof (the "GRANTOR") in favor of Deutsche Bank
Trust Company Americas, as collateral agent (together with any successor
collateral agent, the "COLLATERAL AGENT") for Deutsche Bank AG - London, acting
through DB Advisors, LLC (the "LENDER").
WHEREAS, Pac-West Telecomm, Inc., a California corporation (the
"BORROWER"), has issued its Senior Secured Promissory Note, dated October ___,
2003 (the "NOTE") to the Lender in the principal amount of $40,000,000 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "NOTE") and, as a condition to the purchase of the Note by the Lender,
has entered into that certain Security Agreement dated October ___, 2003 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "SECURITY AGREEMENT") made by the Borrower and the other Grantors from
time to time party thereto in favor of the Collateral Agent for the Lender and
that certain Intellectual Property Security Agreement dated October ___, 2003
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "IP SECURITY AGREEMENT"). Terms defined in the Security Agreement
and not otherwise defined herein are used herein as defined in the Security
Agreement.
WHEREAS, under the terms of the Security Agreement, the Grantor has
granted to the Collateral Agent, for the benefit of the Lender, a security
interest in the Additional Collateral (as defined in Section 1 below) of the
Grantor and has agreed as a condition thereof to execute this IP Security
Agreement Supplement for recording with the U.S. Patent and Trademark Office,
the United States Copyright Office and other governmental authorities.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Grantor agrees as follows:
SECTION 1. Grant of Security. Each Grantor hereby grants to the Collateral
Agent, for the ratable benefit of the Lender, a security interest in all of such
Grantor's right, title and interest in and to the following (the "COLLATERAL"):
(i) the patents and patent applications set forth in Schedule A
hereto (the "PATENTS");
(ii) the trademark and service xxxx registrations and applications
set forth in Schedule B hereto (provided that no security interest shall
be granted in United States intent-to-use trademark applications to the
extent that, and solely during the period in which, the grant of a
security interest therein would impair the validity or enforceability of
such intent-to-use trademark applications under
2
applicable federal law), together with the goodwill symbolized thereby
(the "TRADEMARKS");
(iii) the copyright registrations and applications and exclusive
copyright licenses set forth in Schedule C hereto (the "COPYRIGHTS");
(iv) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the foregoing, all
rights in the foregoing provided by international treaties or conventions,
all rights corresponding thereto throughout the world and all other rights
of any kind whatsoever of such Grantor accruing thereunder or pertaining
thereto;
(v) all any and all claims for damages and injunctive relief for
past, present and future infringement, dilution, misappropriation,
violation, misuse or breach with respect to any of the foregoing, with the
right, but not the obligation, to xxx for and collect, or otherwise
recover, such damages; and
(vi) any and all proceeds of, collateral for, income, royalties and
other payments now or hereafter due and payable with respect to, and
supporting obligations relating to, any and all of the foregoing or
arising from any of the foregoing.
SECTION 2. Supplement to Security Agreement. Schedule V to the Security
Agreement is, effective as of the date hereof, hereby supplemented to add to
such Schedule the Additional Collateral.
SECTION 3. Security for Obligations. The grant of a security interest in
the Additional Collateral by the Grantor under this IP Security Agreement
Supplement secures the payment of all Obligations of the Grantor now or
hereafter existing under or in respect of the Loan Documents, whether direct or
indirect, absolute or contingent, and whether for principal, reimbursement
obligations, interest, premiums, penalties, fees, indemnifications, contract
causes of action, costs, expenses or otherwise.
SECTION 4. Recordation. The Grantor authorizes and requests that the
Register of Copyrights, the Commissioner for Patents and the Commissioner for
Trademarks and any other applicable government officer to record this IP
Security Agreement Supplement.
SECTION 5. Grants, Rights and Remedies. This IP Security Agreement
Supplement has been entered into in conjunction with the provisions of the
Security Agreement. The Grantor does hereby acknowledge and confirm that the
grant of the security interest hereunder to, and the rights and remedies of, the
Collateral Agent with respect to the Additional Collateral are more fully set
forth in the Security Agreement, the terms and provisions of which are
incorporated herein by reference as if fully set forth herein.
SECTION 6. Governing Law. This IP Security Agreement Supplement shall be
governed by, and construed in accordance with, the laws of the State of New
York.
3
IN WITNESS WHEREOF, the Grantor has caused this IP Security Agreement
Supplement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
[NAME OF GRANTOR]
By
------------------------------
Name:
Title:
Address for Notices:
------------------------------
------------------------------
------------------------------
