SECURITIES PURCHASE AGREEMENT
Dated as of September 12, 1996
between
NAL FINANCIAL GROUP INC.
and
XXXXXXX XXXXX WORLD INCOME FUND, INC.
and
CONVERTIBLE HOLDINGS, INC.
TABLE OF CONTENTS
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Section Page
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1. Definitions................................................. 1
2. The Purchase of Securities
2.1. Sale and Purchase of Securities................ 9
2.2. Use of Proceeds................................ 10
3. Conditions Precedent
3.1. Conditions to the Purchase..................... 10
4. Representations and Warranties of the Purchasers
4.1. Organization................................... 12
4.2. Due Execution, Delivery and Performance
of the Agreement............................... 12
4.3. Investment Representation...................... 12
4.4 Nominee Ownership.............................. 13
5. Representations and Warranties of the Company
5.1. Corporate Existence; Compliance with Law....... 13
5.2. Executive Offices.............................. 14
5.3. Subsidiaries................................... 14
5.4. Corporate Power; Authorization;
Enforceable Obligations........................ 14
5.5. SEC Documents.................................. 15
5.6. Absence of Certain Changes or Events........... 15
5.7. Intentionally Omitted.......................... 16
5.8. Ownership of Property.......................... 16
5.9. No Default..................................... 17
5.10. Employment Matters............................. 17
5.11. Other Ventures................................. 17
5.12. Taxes.......................................... 17
5.13. ERISA.......................................... 18
5.14. No Litigation.................................. 20
5.15. Employment and Labor Agreements................ 20
5.16. Other Contracts................................ 20
5.17. Patents, Trademarks, Copyrights and
Licenses....................................... 21
5.18. Licenses....................................... 21
5.19. Capital Structure of the Company............... 21
5.20. Investment Company Act......................... 22
5.21. Underwriting Guidelines........................ 22
5.22. Senior and Other Indebtedness.................. 22
6. Financial Statements and Information
6.1. Reports and Notices............................ 22
7. Affirmative Covenants
7.1. Payment of Principal and Interest.............. 26
7.2 Notice of Default.............................. 26
7.3. Maintenance of Existence and Conduct
of Business.................................... 26
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7.4. Payment of Obligations......................... 26
7.5. Books and Records.............................. 27
7.6. Litigation..................................... 27
7.7. Insurance...................................... 27
7.8. Compliance with Law............................ 27
7.9. Agreements..................................... 27
7.10. Employee Plans................................. 27
7.11. Access......................................... 29
8. Negative Covenants
8.1. Mergers, Etc. ................................. 30
8.2. Investments; Loans and Advances................ 30
8.3. Indebtedness................................... 31
8.4. Liens.......................................... 31
8.5. Capital Expenditures........................... 31
8.6. Cancellation of Indebtedness................... 31
8.7. ERISA.......................................... 31
8.8. Tax Sharing.................................... 32
8.9 Amendment of Certificate of Incorporation...... 32
8.10 Limitation on Dividends and Other Payment
Restrictions................................... 32
8.11 Employee Loans................................. 33
8.12 Transactions with Affiliates................... 33
8.13 Sales of Assets................................ 33
9. Events of Default; Rights and Remedies
9.1. Events of Default.............................. 33
9.2. Remedies....................................... 37
10. Securities Law Matters
10.1 Legends........................................ 37
11. Miscellaneous
11.1. Press Releases................................. 38
11.2. Expenses and Other Fees........................ 38
11.3. Assignment..................................... 38
11.4. Remedies....................................... 38
11.5. Waiver of Jury Trial........................... 39
11.6. Severability................................... 39
11.7. Parties........................................ 39
11.8. Conflict of Terms.............................. 39
11.9. Governing Law.................................. 39
11.10. Notices........................................ 39
11.11. Section Titles................................. 41
11.12. Counterparts................................... 41
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EXHIBIT A - FORM OF DEBENTURE
EXHIBIT B - FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT C - FORM OF OPINION OF COUNSEL
EXHIBIT D - FORM OF WARRANT
SECURITIES PURCHASE AGREEMENT
-----------------------------
SECURITIES PURCHASE AGREEMENT, dated as of September __, 1996 between
NAL FINANCIAL GROUP INC., a Delaware corporation (the "Company") and XXXXXXX
XXXXX WORLD INCOME FUND, INC., and CONVERTIBLE HOLDINGS, INC. (together, with
their successors and assigns, the "Purchasers").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, upon the terms and conditions hereinafter provided, the
Company has agreed to issue and sell to the Purchasers or their designated
nominees, and the Purchasers have agreed to purchase from the Company, an
aggregate $5,000,000 principal amount of a Subordinated Convertible Debenture of
the Company in substantially the form attached hereto as Exhibit A (the
"Debenture") convertible into shares of Common Stock, $.15 par value, of the
Company (the "Common Stock") (the Debenture and the Common Stock are together
referred to herein as the "Securities").
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
1. DEFINITIONS
-----------
In addition to the defined terms appearing above, capitalized terms
used in this Agreement shall have (unless otherwise provided elsewhere in this
Agreement) the following respective meanings when used herein:
"Affiliate" shall mean, with respect to any Person, (i) each Person
that, directly or indirectly, owns or controls, whether of record or
beneficially, or as a trustee, guardian or other fiduciary, 5 percent or more of
the Stock having ordinary voting power in the election of directors of such
Person, (ii) each Person that controls, is controlled by or is under common
control with such Person or any Affiliate of such Person, or (iii) each of such
Person's officers, directors and general partners. For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise. For purposes of this definition the Purchasers shall not be deemed to
be an Affiliate of the Company or any of the Affiliates of the Company.
"Agreement" shall mean this Securities Purchase Agreement, including
all amendments, modifications and supplements hereto and
any appendices, exhibits or schedules to any of the foregoing, and shall refer
to this Securities Purchase Agreement as the same may be in effect at the time
such reference becomes operative.
"Ancillary Agreements" shall mean the Debenture, Registration Rights
Agreement and any supplemental agreement, undertaking, instrument, document or
other writing executed by the Company or any of its Subsidiaries or by any of
their Stockholders as a condition to purchasing any of the Securities under this
Agreement or otherwise in connection herewith.
"Bartolini" shall mean Xxxxxx X. Xxxxxxxxx, Chairman of the Board,
President and Chief Executive Officer of the Company.
"Board" shall mean the Company's Board of Directors.
"Business Day" shall mean any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Capital Lease" shall mean any obligation that is required to be
classified and accounted for as a capital lease on the face of a balance sheet
of such person prepared in accordance with GAAP; and the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"Capital Expenditures" shall mean all payments for any fixed assets or
improvements (whether paid in cash or accrued as liabilities, and including, in
all events all amounts expended or capitalized under capital leases), including,
without limitation, computer software and computer software licenses, or for
replacements, substitutions or additions thereto, that have a useful life of
more than one year and which are required to be capitalized under GAAP.
"Charges" shall mean all Federal, state, county, city, municipal,
local, foreign or other governmental taxes at the time due and payable, levies,
assessments, charges, liens, claims or encumbrances upon or relating to (i) the
Obligations, (ii) the Company or any of its Subsidiaries' employees, payroll,
income or gross receipts, (iii) the Company or any of its Subsidiaries'
ownership or use of any of its assets, or (iv) any other aspect of the Company
or any of its Affiliates' business, in each case including any and all interest
and penalties.
"Closing Date" shall mean that date upon which the Closing occurs and
shall be a date agreed upon between the Company and the Purchasers and "Closing"
shall mean the moment on the Closing Date on which the purchase and sale of the
Securities is made.
"Conseco Director" shall mean the individual designated by Conseco,
Inc. to serve as a Director of the Company pursuant to
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the terms of a Stockholders' Agreement entered into as of April 23, 1996,
between the Company, Conseco, Inc. and certain affiliates of Conseco, Inc., for
only such time or times as this individual continues to serve as a Director of
the Company.
"Default" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time.
"ERISA Affiliate" shall mean, with respect to the Company, any trade or
business (whether or not incorporated) under common control with the Company and
which, together with the Company, are treated as a single employer under Section
414(b), (c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to the Company or any ERISA
Affiliate, (i) a Reportable Event with respect to a Title IV Plan or a
Multiemployer Plan; (ii) the withdrawal of the Company, any of its Subsidiaries
or any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (iii) the complete or partial withdrawal of the Company,
any of its Subsidiaries or any ERISA Affiliate from any Multiemployer Plan; (iv)
the filing of a notice of intent to terminate a Title IV Plan or the treatment
of a plan amendment as a termination under Section 4041 of ERISA; (v) the
institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by
the PBGC; (vi) the failure to make required contributions to a Qualified Plan;
or (vii) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or the imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA.
"Event of Default" shall have the meaning assigned to it in Section 9.1
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Financing Agreements" shall mean the following agreements, together
with the related documents thereto, in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, refunding, replacing or otherwise restructuring all or
any portion of the indebtedness under such agreement or any successor or
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replacement agreement and whether by the same or any other agent, lender or
group of lenders: Loan and Security Agreement between Congress Financial
Corporation and the Company, dated March 16, 1993; the Amended and Restated Loan
and Security Agreement between General Electric Capital Corporation and NAL
Acceptance Corporation ("NAC"), dated September 28, 1994; the Loan Purchase
Agreement between Fairfax Savings Bank and the Company, dated October 6, 1994;
the Participation Agreement between Fairfax Savings, FSB and NAC, dated December
14, 1993; the series of securitization transactions undertaken by the Company or
its subsidiaries, involving: (a) the Master Repurchase Agreement between
Greenwich Capital Financial Products, Inc. and Autorics, Inc., dated September
5, 1995; the Trust Agreement between Autorics II, Inc. and Wilmington Trust,
dated December 1, 1995; (b) Receivables Purchase Agreement among NAC, Autorics,
Inc. and Autorics, II dated as of March 8, 1996, Sales and Servicing Agreement
among NAL Auto Trust 1996-1, Autorics II, Inc., NAC and Bankers Trust Co. dated
as of March 8, 1996, Indenture between NAL Auto Trust 1996-1 and Bankers Trust
Co. dated as of March 8, 1996 and Trust Agreement between Autorics II, Inc. and
Wilmington Trust Co. dated as of March 8, 1996; and (c) Receivables Purchase
Agreement among NAC, Autorics, Inc. and Autorics, II dated as of June 17, 1996,
Sales and Servicing Agreement among NAL Auto Trust 1996-2, Autorics II, Inc.,
NAC and Bankers Trust Co. dated as of June 17, 1996, Indenture between NAL Auto
Trust 1996-2 and Bankers Trust Co. dated as of June 17, 1996 and Trust Agreement
between Autorics II, Inc. and Wilmington Trust Co. dated as of June 17, 1996;
Master Repurchase Agreement between Cargill Financial Services Corporation
("Cargill") and Autorics, Inc. dated as of May 1, 1996 and Annex to the Master
Repurchase Agreement (including related exhibits thereto); the Master Equipment
Lease Agreement between MITEL Financial Services and the Company, dated November
6, 1995; the Participation Agreement, dated February 25, 1993 between Fairfax
Savings, FSB and NAC for the Xxxxxxx loan portfolio; the Participation
Agreement, dated July 16, 1993, between Fairfax Savings Bank, FSB and NAC for
the Premier Bank portfolio; the Participation Agreement, dated December 14, 1993
between Fairfax Savings, FSB and NAC for the Williamette loan portfolio; the
Participation Agreement, dated April 6, 1994, between Fairfax Savings Bank, FSB
and NAC for the Premier Motors loan portfolio; the Participation Agreement,
dated May 31, 1994 between Fairfax Savings, FSB and NAC for the Park Finance of
Broward loan portfolio; the Participation Agreement, dated March 31, 1994
between Fairfax Savings, FSB and NAC for the DAIWA loan portfolio; the
Participation Agreement, dated May 3, 1995, between Fairfax Savings Bank, FSB
and NAC for the Medical Equipment Resources leases; the Participation Agreement,
dated February 22, 1995, between Fairfax Savings, FSB and NAC or the February
loan originations; Revolving Line of Credit with Xxxxxx Family Limited
Partnership for borrowing of up to $3,500,000 dated August 27, 1996.
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"Fiscal Year" shall mean the calendar year.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof, and any agency, department or other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Indebtedness" of any Person shall mean (i) all indebtedness of such
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured), but not including accounts payable and
other obligations to trade creditors and normal operating expenses characterized
as liabilities incurred in the ordinary course of business, (ii) all obligations
evidenced by notes, bonds, debentures or similar instruments (except where such
instruments evidence repayment of amounts referred to in subparagraph (i)),
(iii) any Capital Lease involving an Obligation in excess of $250,000, and (iv)
in the case of the Company, the Obligations. Indebtedness shall not include
interest rate swaps, xxxxxx, caps, collars or forward agreements.
"Investment Guidelines" shall have the meaning assigned to such term in
Section 8.3 hereof.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and any
successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
thereto.
"Licenses" shall have the meaning assigned to such term in Section
5.18; individually a "License."
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, Charge, claim, security interest,
easement or encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code as enacted in the jurisdiction of the
principal executive office of the Company; or comparable law of any such
jurisdiction).
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"Material Adverse Effect" shall mean any material adverse effect on the
business, assets, operations, or financial or other condition of the Company or
any of its Subsidiaries.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which the Company, any of its Subsidiaries
or any ERISA Affiliate is obligated to make, or has made or been obligated to
make, contributions on behalf of participants who are employed by any of them.
"Obligations" shall mean any principal, interest, premium, penalties,
fees and other liabilities and obligations due under the documentation governing
any Indebtedness (including interest after the commencement of any bankruptcy,
insolvency, rehabilitation, liquidation, conservation, supervision or similar
proceedings).
"Parent" shall mean, as to any corporate entity, the Person who owns
100 percent of the capital stock of such entity.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" shall mean an employee pension benefit plan, as defined
in Section 3(2) of ERISA (other than a Multiemployer Plan), which is not an
individual account plan, as defined in Section 3(34) of ERISA, and which the
Company, any of its Subsidiaries or, if a Title IV Plan, any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Permitted Encumbrances" shall mean the following encumbrances: (i)
Liens for taxes or assessments or other governmental charges or levies, either
not yet due and payable or to the extent that nonpayment thereof is permitted by
the terms of this Agreement; (ii) pledges or deposits securing obligations under
worker's compensation, unemployment insurance, social security or public
liability laws or similar legislation; (iii) pledges or deposits securing bids,
tenders, contracts (other than contracts for the payment of money) or leases to
which the Company or any of its Subsidiaries is a party as lessee made in the
ordinary course of business; (iv) deposits securing public or statutory
obligations of the Company or any of its Subsidiaries; (v) workers', mechanics,
suppliers', carriers', warehousemen's or other similar liens arising in the
ordinary course of business and securing indebtedness aggregating not in excess
of $250,000 at any time outstanding, not yet due and payable; (vi) deposits
securing or in lieu of surety, appeal or customs bonds in proceedings to which
the Company or any of its Subsidiaries is a party, provided that such deposits
could not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect; (vii) pledges or deposits effected by the Company or
any of its
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Subsidiaries as a condition to obtaining or maintaining any License of such
Person; (viii) any attachment or judgment lien, unless the judgment it secures
shall not, within 60 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within 60 days after the expiration of any such stay; (ix) all Liens securing
Senior Indebtedness; and (x) zoning restrictions, easements, licenses, or other
restrictions on the use of real property or other minor irregularities in title
(including leasehold title) thereto, so long as the same do not materially
impair the use, value, or marketability of such real property, leases or
leasehold estates.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, entity or
government (whether Federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
"Plan" shall mean an employee benefit plan, as defined in Section 3(3)
of ERISA, which the Company or any of its Subsidiaries maintains or makes or is
obligated to make contributions to on behalf of participants who are or were
employed by any of them.
"Qualified Plan" shall mean an employee pension benefit plan, as
defined in Section 3(2) of ERISA, which is intended to be tax-qualified under
Section 401(a) of the IRC, and which the Company, any of its Subsidiaries or any
ERISA Affiliate maintains or makes or is obligated to make contributions to on
behalf of participants who are or were employed by any of them.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement by and among the Company and the Purchasers dated as of the date
hereof and in substantially the form attached hereto as Exhibit B.
"Reserves" shall mean such reserves as may be established by the
Company or any of its Subsidiaries within the Company's Financials or as may
otherwise be required in accordance with GAAP.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall mean all reports, schedules, forms, statements
and other documents filed with the SEC.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
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"Senior Indebtedness" shall mean (i) all Indebtedness under the
Financing Agreements now existing or hereinafter incurred in accordance with the
terms thereof and whether fixed or contingent, (ii) all Indebtedness the
proceeds of which are used for the purchase and origination of automobile leases
and loans which provide the security for such Indebtedness now existing or
hereinafter incurred and whether fixed or contingent, (iii) all Indebtedness the
proceeds of which are used to finance the purchase of other financial
instruments and/or inventory including, without limitation, vehicles held for
lease or sale; and (iv) all other Indebtedness secured by purchase money
security interests whether perfected or unperfected, provided, however, that
Senior Indebtedness shall not include accounts payable and trade debt incurred
in the day-to-day operations of the Company.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Exchange Act).
"Stockholders" shall mean, with respect to any Person, all of the
holders of Stock of such Person immediately following the Closing Date.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of 50 percent or more of the outstanding Stock
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person, and (b) any partnership in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of 50 percent or
more.
"Taxes" shall mean any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding taxes imposed on or measured by the net income of the
Purchasers by the jurisdictions under the laws of which the Purchasers are
organized or is engaged in business (other than by reason of the transactions
contemplated by this Agreement or the Ancillary Agreements) or any political
subdivision thereof.
"Title IV Plan" shall mean a Pension Plan, other than a Multiemployer
Plan, which is covered by Title IV of ERISA.
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"Transactions" shall mean the purchase and sale of the Securities as
described in the recitals to this Agreement, and all transactions related or
incidental thereto.
"Unfunded Pension Liability" shall mean, at any time, the aggregate
amount, if any, of the sum of (i) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions in effect under such Title IV
Plan, and (ii) for a period of five (5) years following a transaction reasonably
likely to be covered by Section 4069 of ERISA, the liabilities (whether or not
accrued) that could be avoided by the Company, any of its Subsidiaries or any
ERISA Affiliate as a result of such transaction.
"Withdrawal Liability" shall mean, at any time, the aggregate amount of
the liabilities, if any, pursuant to Section 4201 of ERISA, and any increase in
contributions pursuant to Section 4243 of ERISA with respect to all
Multiemployer Plans.
Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given such term in
accordance with GAAP and all financial computations hereunder shall be computed,
unless otherwise specifically provided herein, in accordance with GAAP
consistently applied and consistent with the Financials. That certain terms or
computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing.
The words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the Exhibits and Schedules
hereto, as the same may from time to time be amended, modified or supplemented
and not to any particular section, subsection or clause contained in this
Agreement. As used herein, the word "or" is not exclusive.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
2. THE PURCHASE OF SECURITIES
--------------------------
2.1. Sale and Purchase of Securities. (a) Subject to the terms and
conditions herein, on the Closing Date, the Purchasers agree to purchase from
the Company, and the Company agrees to issue and sell to the Purchasers,
Debentures for a total purchase price of $5,000,000 in such name or names as
Purchasers shall specify as nominees of the Purchasers (the "Nominees").
Schedule 2.1
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attached hereto shall identify the nominees of the Purchasers. The Debenture
shall be in the forms attached hereto as Exhibit A. The Closing shall take place
in New York, New York, or such other place as agreed to among the parties, on
the Closing Date. On the Closing Date, the Company will deliver to Purchasers
the Debentures against delivery by the Purchasers of the purchase price to the
Company.
2.2. Use of Proceeds. The Company shall use the proceeds of the sale of
the Securities to purchase and originate automobile loans and leases and fund
working capital needs in connection with such purchases and originations and for
other purposes consistent with the principal business objectives of the Company
including those expenses identified at Section 11.2 hereof.
3. CONDITIONS PRECEDENT
--------------------
3.1. Conditions to the Purchase. Notwithstanding any other provision of
this Agreement and without affecting in any manner the rights of the Purchasers
hereunder, the Company shall have no rights under this Agreement (but shall have
all applicable obligations hereunder), and the Purchasers shall not be obligated
to make the purchases of the Securities hereunder, unless and until each of the
following conditions precedent shall have been fulfilled or waived by the
Purchasers, and the Company shall have delivered, where applicable, in form and
substance satisfactory to the Purchasers, and (unless otherwise indicated) each
dated the Closing Date:
(a) All of the representations and warranties of the Company contained
in this Agreement or in any of the Ancillary Agreements shall be correct in all
material respects as though made on and as of the Closing Date, except to the
extent that any such representation or warranties expressly relates to an
earlier date and for changes therein permitted or contemplated by this
Agreement.
(b) The Purchasers shall have received a written certification by the
principal financial officer of the Company as to the matters set forth in
Section 3.1(a) hereof.
(c) A favorable opinion of counsel for the Company substantially in the
form attached hereto as Exhibit C, it being understood that to the extent that
such opinion of counsel shall rely upon any other opinion of counsel, each such
other opinion shall be in form and substance satisfactory to the Purchasers and
shall provide that the Purchasers may rely thereon.
(d) Resolutions of the Board certified by the Secretary or Assistant
Secretary of the Company, to be dated, duly adopted and in full force and effect
as of the Closing Date, authorizing
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(i) the consummation of the Transactions, and (ii) specific officers to execute
and deliver the Ancillary Agreements.
(e) Certificates of the secretary or an assistant secretary of the
Company, dated the Closing Date, as to the incumbency and signatures of the
officers or representatives of such entity executing this Agreement and the
Ancillary Agreements and any other certificates or other documents to be
delivered pursuant hereto or thereto, together with evidence of the incumbency
of such secretary or assistant secretary.
(f) Governmental certificates, dated the most recent practicable date
prior to the Closing Date, with telegram updates where available, showing that
each of the Company and its Subsidiaries is organized and in good standing in
the jurisdiction of its organization and is qualified as a foreign corporation
and in good standing in all other jurisdictions in which it is qualified to
transact business.
(g) Each consent, license and approval required in connection with (i)
the execution, delivery, performance, validity and enforceability of this
Agreement, the Ancillary Agreements, and the consummation of the Transactions
and (ii) the conduct by each of the Company and its Subsidiaries of its business
after the Closing Date; such consents, licenses and approvals shall be in full
force and effect and be satisfactory in form and substance to the Purchasers.
(h) A copy of the certificate of incorporation and all amendments
thereto of each of the Company, Autorics II, Inc., Autorics, Inc. and NAC and
copies of its bylaws all of which shall be certified by the secretary or
assistant secretary of each respective corporation as true and correct as of the
Closing Date.
(i) A certificate of the Chief Executive Officer of the Company,
satisfactory in form and substance to the Purchasers, stating that, as of the
Closing Date, no change has occurred in the business, assets, operating
properties, operations, prospects, financial or other condition of the Company
or any of its Subsidiaries since June 30, 1996, which would result in a Material
Adverse Effect.
(j) The Registration Rights Agreement.
(k) The Debentures.
(l) Common Stock Purchase Warrants for the purchase of 62,500 shares of
Common Stock of the Company (the "Warrants").
(m) Such additional information and materials as the Purchasers may
request.
-11-
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
The Purchasers, with respect to each Purchaser, individually and not
jointly, as to matters related to each respective Purchaser, make the following
representations and warranties to the Company, each and all of which shall
survive the execution and delivery of this Agreement and the Closing until the
date twenty-four months from the date hereof.
4.1 Organization. The Purchasers are corporations duly organized,
validly existing, and in good standing under the laws of the states of their
respective incorporation and each have full corporate power and authority to
enter into this Agreement and to perform its obligations hereunder.
4.2 Due Execution, Delivery and Performance of the Agreement. The
execution, delivery, and performance of this Agreement and any Ancillary
Agreement (i) have been duly authorized by all requisite corporate action by
each respective Purchaser, and (ii) will not violate the Certificate or Articles
of Incorporation or Bylaws of each respective Purchaser or any provision of any
material indenture, mortgage, agreement, contract, or other instrument to which
it is a party or by which it or any of its material properties or assets are
bound, or be in conflict with, result in a breach of or constitute (upon notice
or lapse of time or both) a default under any such indenture, mortgage,
agreement, contract, or other instrument. This Agreement is a legal, valid, and
binding obligation of each of the Purchasers enforceable against each respective
Purchaser in accordance with its terms.
4.3 Investment Representation. The Purchasers represent and warrant
that each respective Purchaser is purchasing the Debentures for their own
account, for investment purposes and not with a view to the distribution
thereof. The Purchasers agree that they will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of any of the
Securities (or solicit any offers to buy, purchase, or otherwise acquire or take
a pledge of any of the Securities), except in compliance with the Securities
Act, the rules and regulations thereunder and any applicable state securities
laws.
The Purchasers each recognize that investing in the Securities involves
a high degree of risk, and each Purchaser is in a financial position to hold the
Securities indefinitely and is able to bear the economic risk and withstand a
complete loss of its investment in the Securities. Each Purchaser is a
sophisticated investor and is capable of evaluating the merits and risks of
investing in the Company. The Purchasers acknowledge that they have been
provided with and reviewed copies of the Company's SEC Documents. The Purchasers
have had an opportunity to discuss the Company's business, management and
financial
-12-
affairs with the Company's management, have been given full and complete access
to information concerning the Company, and have utilized such access to its
satisfaction for the purpose of obtaining information or verifying information
and have had the opportunity to inspect the Company's operations. Purchasers
have had the opportunity to ask questions of, and receive answers from the
management of the Company (and, except for any of the Company's investment
bankers, any person acting on its behalf) concerning the Securities and the
terms and conditions of this Agreement and the agreements and transactions
contemplated hereby, and to obtain any additional information as the Purchasers
may have requested in making their investment decision. Each Purchaser is an
"accredited investor", as defined by Regulation D promulgated under the
Securities Act. Each Purchaser understands that the Securities have not been,
and will not be registered under the Securities Act by reason of their issuance
by the Company in a transaction exempt from the registration requirements of the
Securities Act; and that the Securities must be held by the Purchasers
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from registration.
4.4 Nominee Ownership. The Nominees are acting in connection with this
transaction as nominee of the Purchasers. The Purchasers shall remain, until and
unless an assignment occurs pursuant to Section 11.3, the beneficial owners of
the Debentures (as the term "beneficial ownership" is defined under applicable
federal securities laws).
Notwithstanding anything to the contrary in this Agreement, no
investigation by the Purchasers shall affect the representations and warranties
of the Company under this Agreement or contained in any document, certificate or
other writing furnished or to be furnished to Purchasers in connection with the
transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
To induce the Purchasers to purchase the Securities as herein provided,
the Company makes the following representations and warranties to the
Purchasers, each and all of which shall survive the execution and delivery of
this Agreement and the Closing until the date twenty-four months from the date
hereof:
5.1. Corporate Existence; Compliance with Law. Each of the Company and
its subsidiaries (i) is a corporation duly organized, validly existing and in
good standing under the laws of its state or country of incorporation; (ii) is
duly qualified to do business and is in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification (except for jurisdictions in which such
failure to so qualify or to be in good standing would not
-13-
have a Material Adverse Effect); (iii) has the requisite corporate power and
authority and the legal right to own, pledge, mortgage or otherwise encumber and
operate its properties, to lease the property it operates under lease, and to
conduct its business as now, heretofore and proposed to be conducted; (iv) has
all material licenses, permits, consents or approvals from or by, and has made
all material filings with, and given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct (including, without limitation, the consummation of the
Transactions) (v) is in compliance with its certificate or articles of
incorporation, as applicable, and by-laws; and (vi) is in compliance with all
applicable provisions of law where the failure to comply would have a Material
Adverse Effect.
5.2. Executive Offices. The current location of the Company's and each
of its Subsidiaries' executive offices and principal place of business is set
forth on Schedule 5.2 hereto.
5.3. Subsidiaries. There currently exist, and upon consummation of the
Transactions there shall exist, no Subsidiaries of the Company other than as set
forth on Schedule 5.3 hereto, which sets forth such Subsidiaries, together with
their respective jurisdictions of organization, and the authorized and
outstanding capital Stock of each such Subsidiary, by class and number and
percentage of each class legally owned by the Company or a Subsidiary of the
Company or any other Person, or to be owned on the Closing Date. There are no
options, warrants, rights to purchase or similar rights covering capital Stock
of any such Subsidiary.
5.4. Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by the Company of this Agreement and the
Ancillary Agreements and all instruments and documents to be delivered by the
Company: (i) are within the Company's and its Subsidiaries' corporate power;
(ii) have been, or by the Closing Date will be, duly authorized by all necessary
or proper corporate action; (iii) are not in contravention of any provision of
the Company's or its Subsidiaries' respective certificates or articles of
incorporation, as applicable, or by-laws; (iv) will not violate, in any material
respect, any law or regulation, including any and all Federal and state
securities laws, or any order or decree of any court or governmental
instrumentality; (v) except as set forth on Schedule 5.4, will not, in any
material respect, conflict with or result in the breach or termination of,
constitute a default under or accelerate any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other material
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any of their property is bound;
and (vi) will not result in the creation or imposition of any Lien upon any of
the property of the Company
-14-
or any of its Subsidiaries. Except as set forth on Schedule 5.4, no consent,
waiver or authorization of, or filing with, any Person (including, without
limitation, any Governmental Authority), which has not been obtained as of the
Closing Date is required in connection with the execution, delivery, performance
by, or validity of this Agreement or the Ancillary Agreements, except those
which the failure to obtain will not have a Material Adverse Effect. All such
consents, waivers, authorizations and filings, except as set forth on Schedule
5.4, have been obtained or made. On or prior to the Closing Date, each of this
Agreement and the Ancillary Agreements shall have been duly executed and
delivered for the benefit of or on behalf of the Company or its Subsidiaries, as
the case may be, and each shall then constitute a legal, valid and binding
obligation of the Company or its Subsidiaries, to the extent they are parties
thereto, enforceable against them in accordance with its terms.
5.5. SEC Documents. (i) The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC since November 30,
1994 (such reports, schedules, forms, statements and other documents filed
and/or required to be filed are hereinafter referred to as the "SEC Documents");
(ii) as of their respective dates, the SEC Documents complied, in all material
respects, with the requirements of the Securities Act, or the Exchange Act, as
the case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents as of such dates
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and (iii) the consolidated financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Item 310 of Regulation S-B) and fairly
present the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year-end audit adjustments).
5.6. Absence of Certain Changes or Events. Except as disclosed in the
SEC Documents filed and publicly available prior to the date of this Agreement
(the "Filed SEC Documents") or in Schedule 5.6 attached hereto, since June 30,
1996 (the date of the most recent financial statements included in the Filed SEC
Documents), the Company and its subsidiaries have conducted their
-15-
business only in the ordinary course, and there has not been (i) any change
which would have a Material Adverse Effect on the business, financial condition
or results of operations of the Company and its subsidiaries taken as a whole,
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of the
Company's outstanding capital stock, (iii) any split, combination or
reclassification of any of its outstanding capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its outstanding capital stock, (iv) (x) any
granting by the Company or any of its subsidiaries to any executive officer or
other employee of the Company or any of its subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the date
of the most recent audited financial statements included in the Filed SEC
Documents, (y) any granting by the Company or any of its subsidiaries to any
such executive officer or other employee of any increase in severance or
termination pay, except in the ordinary course of business consistent with prior
practice or as was required under any employment, severance or termination
agreements in effect as of the date of the most recent audited financial
statements included in the Filed SEC Documents or (z) any entry by the Company
or any of its subsidiaries into any employment, severance or termination
agreement with any such executive officer or other employee or (v) any change in
accounting methods, principles or practices by the Company or any of its
subsidiaries materially affecting its assets, liability or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
5.7. Intentionally Omitted.
5.8. Ownership of Property. (a) Except as disclosed in Schedule 5.8(a),
the Company and its Subsidiaries do not own any real property.
(b) All real property leased by the Company or any of its Subsidiaries
is set forth on Schedule 5.8(b). Each of such leases is valid and enforceable in
accordance with its terms and is in full force and effect. Except leases or real
property that is the subject of a security interest in favor of the Company,
neither the Company nor the applicable Subsidiary nor any other party to any
such lease is in default of its obligations thereunder or has delivered or
received any notice of default under any such lease, nor has any event occurred
which, with the giving of notice, the passage of time or both, would constitute
a default under any such lease, except for any default which would not have a
Material Adverse Effect.
-16-
5.9. No Default. Neither the Company nor any of its subsidiaries is in
default, nor to the knowledge of any of the Company or any of its subsidiaries
is any third party in default, under or with respect to any contract, agreement,
lease or other instrument, including, but not limited to, the Financing
Agreements, to which any of the Company or its Subsidiaries is a party, except
for any default which (either individually or collectively with other defaults
arising out of the same event or events) would not have a Material Adverse
Effect. No Default or Event of Default exists on the date hereof.
5.10. Employment Matters. Hours worked by and payments made to
employees of the Company or any of its Subsidiaries are not in violation of the
Fair Labor Standards Act or any other applicable law dealing with such matters
which would have a Material Adverse Effect. All payments due from the Company or
any of its Subsidiaries on account of employee health and welfare insurance
which would have a Material Adverse Effect if not paid have been paid or accrued
as a liability on the books of the Company or such Subsidiary.
5.11. Other Ventures. Except as set forth in the Filed SEC Documents or
on Schedule 5.11 hereto, neither the Company nor any of its Subsidiaries is
engaged in any joint venture or partnership with any other Person.
5.12. Taxes. Except as set forth on Schedule 5.12 hereto, all federal,
state, local and foreign tax returns, reports and statements required to be
filed (including, for all purposes of this Section 5.12, any filed or to be
filed on a consolidated, combined or unitary basis with any other company) by
each of the Company or any of its subsidiaries have been timely filed with the
appropriate Governmental Authority and such returns, reports and statements were
true, correct and complete in all material respects. All Charges and other
impositions due and payable have been paid prior to the date on which any fine,
penalty, interest or late charge may be added thereto for nonpayment thereof, or
any such fine, penalty, interest or late charge has been paid. Proper and
accurate amounts have been withheld by each of the Company and its Subsidiaries
from their respective employees for all periods in full and complete compliance
with the tax, social security and unemployment withholding provisions of
applicable federal, state, local and foreign law and such withholdings have been
timely paid to the respective Governmental Authorities. Except as set forth on
Schedule 5.12., no deficiency for any Charges has been proposed, asserted or
assessed against any of the Company or its subsidiaries by any federal, state,
local or foreign Governmental Authority; nor are any federal, state, local or
foreign tax audits or other administrative proceedings or court proceedings are
presently pending with regard to any Charges or tax returns of any of the
Company or its subsidiaries. Except as described in Schedule 5.12 hereto, none
of the Company or its subsidiaries has
-17-
executed or filed with the IRS or any other Governmental Authority any agreement
or other document extending, or having the effect of extending, the period of
time within which to file a tax return, report or statement which has not since
been filed or the period for assessment or collection of any Charges. None of
the Company or its subsidiaries has agreed or has been requested to or has an
application pending to make any adjustment under IRC Section 481(a) by reason of
a change in accounting method or otherwise. Except as set forth on Schedule 5.12
hereto, neither the Company nor any of its Subsidiaries is a party to, bound by
or has any obligation under any tax sharing or similar agreement or arrangement.
5.13. ERISA.
-----
(a) Schedule 5.13 lists all Plans maintained or contributed to by the
Company or any of its Subsidiaries and all Qualified Plans maintained or
contributed to by any ERISA Affiliate, and of those plans listed separately
identifies the Title IV Plans, Multiemployer Plans, unfunded Pension Plans and
welfare plans, as defined in Section 3(l) of ERISA, providing retiree benefits.
(b) Each Qualified Plan has been determined by the IRS to qualify under
Section 401 of the IRC, and the trusts created thereunder have been determined
to be exempt from tax under the provisions of Section 501 of the IRC, and to the
best knowledge of the Company nothing has occurred which would cause the loss of
such qualification or tax-exempt status.
(c) Each Plan set forth on Schedule 5.13 is in compliance in all
material respects with the applicable provisions of ERISA and the IRC, including
the filing of reports required under the IRC or ERISA which are true and correct
in all material respects as of the date filed, and with respect to each Plan,
other than a Qualified Plan, all required contributions and benefits, have been
paid in accordance with the provisions of each such Plan.
(d) None of the Company, its Subsidiaries or any ERISA Affiliate, with
respect to any Qualified Plan, has failed to make any contribution or pay any
amount due as required by Section 412 of the IRC or Section 302 of ERISA or the
terms of any such plan.
(e) Except as set forth on Schedule 5.13, no Title IV Plan has any
Unfunded Pension Liability.
(f) Except as set forth on Schedule 5.13, with respect to all Plans
which are welfare plans, as defined in Section 3(1) of ERISA, providing retiree
benefits the present value of future anticipated expenses pursuant to the latest
actuarial projections of liabilities does not exceed $100,000.
-18-
(g) Except as set forth on Schedule 5.13, with respect to Pension
Plans, other than Qualified Plans, the present value of the liabilities for
current participants thereunder using reasonable interest assumptions does not
exceed $50,000.
(h) Except as set forth on Schedule 5.13, there has been no, nor is
there reasonably expected to occur any, ERISA Event or event described in
Section 4068 of ERISA with respect to any Title IV Plan.
(i) Except set forth on Schedule 5.13, there are no pending, or to the
knowledge of the Company or any of its Subsidiaries, threatened claims, actions
or lawsuits (other than claims for benefits in the normal course), asserted or
instituted against (i) any Plan or its assets, (ii) any fiduciary with respect
to any Plan or (iii) the Company, any of its Subsidiaries or any ERISA Affiliate
with respect to any Plan.
(j) Except as set forth on Schedule 5.13 none of the Company, any of
its Subsidiaries or any ERISA Affiliate has incurred or reasonably expects to
incur any Withdrawal Liability (and no event has occurred which, with the giving
of notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 of ERISA as a result of a complete or partial withdrawal from a
Multiemployer Plan.
(k) Except as set forth in Schedule 5.13, none of the Company, any of
its Subsidiaries or any ERISA Affiliate has engaged in a transaction which
resulted or could result in any liability under Section 4069 of ERISA.
(l) Except as set forth on Schedule 5.13, no plan which is a welfare
benefit plan, as defined in Section 3(1) of ERISA, provides for continuing
benefits or coverage for any participant or any beneficiary of a participant
after such participant's termination of employment (except as may be required by
Section 4980B of the IRC and at the sole expense of the participant or the
beneficiary of the participant) which would result in a liability in an amount
which would have a Material Adverse Effect. The Company, its Subsidiaries and
each ERISA Affiliate have complied with the notice and continuation coverage
requirements of Section 4980B of the IRC and the regulations thereunder, except
where the failure to comply would not result in any Material Adverse Effect.
(m) Neither the Company nor any of its Subsidiaries has engaged in a
prohibited transaction, as defined in Section 4975 of the IRC or Section 406 of
ERISA, in connection with any Plan, which would subject the Company or any of
its Subsidiaries (after giving effect to any exemption) to a material tax on
prohibited transactions imposed by Section 4975 of the IRC or any other material
liability.
-19-
5.14. No Litigation. Except as set forth in the Filed SEC Documents or
on Schedule 5.14 hereto, no material action, claim or proceeding is now pending
or, to the knowledge of the Company or any of its subsidiaries, threatened
against any of the Company or any of its subsidiaries, at law, in equity or
otherwise, before any court, board, commission, agency or instrumentality of any
Federal, state, local or foreign government or of any agency or subdivision
thereof, or before any arbitrator or panel of arbitrators nor to the knowledge
of any of the Company or any of its subsidiaries does a state of facts exist
which is reasonably likely to give rise to such proceedings. None of the matters
set forth therein questions the validity of any of this Agreement or the
Ancillary Documents or any action taken or to be taken pursuant thereto, or
would have either individually or in the aggregate a Material Adverse Effect.
5.15. Employment and Labor Agreements. Except as set forth in the Filed
SEC Documents, there are no employment, consulting, servicing or management
agreements with respect to management of the Company or any of its Subsidiaries
and there are no collective bargaining agreements or other labor agreements
covering any employees of the Company or any of its Subsidiaries. A true and
complete copy of each such agreement has been furnished to the Purchasers.
5.16. Other Contracts. Schedule 5.16 attached hereto, the Filed SEC
Documents and the Financing Agreements, in the aggregate, identify each
agreement, contract, lease, sublease, promissory note or evidence of
indebtedness (whether written or oral) that involves the payment or potential
payment by or to the Company or any of its Subsidiaries of more than One Hundred
Thousand Dollars ($100,000) or that is otherwise individually material to the
business of the Company or such Subsidiary.
To the Company's knowledge, each of the agreements, contracts,
commitments, leases, plans and other instruments, documents and undertakings to
be listed in Schedule 5.16 in response to this Section is valid and enforceable
in accordance with its terms, except to the extent that (a) enforcement may be
limited by or subject to the principles of public policy and any bankruptcy and
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to or limited to creditors' rights generally and (b) the remedy
of specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court or
other similar entity before which any proceeding therefor may be brought. To the
knowledge of the Company, there does not exist any default by any third party to
any such agreement, contract, commitment, lease, plan or other instrument,
document or undertaking which default would have a Material Adverse Effect.
-20-
5.17. Patents, Trademarks, Copyrights and Licenses. Each of the Company
and its Subsidiaries own all material licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, and trade names
necessary to continue to conduct its business as heretofore conducted, now
conducted and proposed to be conducted, each of which is listed on Schedule 5.17
hereto. To the knowledge of the Company, the Company and its Subsidiaries
conduct their respective businesses without infringement or claim of
infringement of any license, patent, copyright, service xxxx, trademark, trade
name, trade secret or other intellectual property right of others, except where
such infringement or claim of infringement would not have a Material Adverse
Effect. There is no infringement or claim of infringement by others of any
material license, patent, copyright, service xxxx, trademark, trade name, trade
secret or other intellectual property right of the Company or any of its
Subsidiaries.
5.18. Licenses. Schedule 5.18 attached hereto lists all of the
jurisdictions in which the Company or any of its Subsidiaries hold active
licenses, permits or authorizations to transact business (collectively, the
"Licenses"). Except as set forth on Schedule 5.18, no such License is the
subject of a proceeding for suspension or revocation or any similar proceedings
and to the Company's knowledge no such suspension or revocation has been
threatened by any licensing authority.
5.19. Capital Structure of the Company. The authorized capital stock of
the Company consists solely of 50,000,000 shares of common stock, par value $.15
per share, of which 7,002,815 shares are issued and outstanding as of September
10, 1996, and 10,000,000 shares of preferred stock, $1,000 par value, none of
which are outstanding. All of the issued and outstanding shares of capital stock
of the Company have been duly authorized, are not subject to preemptive rights
and were issued in full compliance with all federal, state and local laws, rules
and regulations. Except for conversion rights to purchase shares of Common Stock
issued to holders of convertible subordinated debentures of the Company, options
to purchase Common Stock and warrants to purchase Common Stock as set forth on
Schedule 5.19 hereto, the options issuable under the Company's Stock Option Plan
to purchase 628,500 shares of Common Stock and options to purchase 40,000 shares
of Common Stock granted to the directors of the Company, which have been
disclosed to the Purchasers by the Company, and in the SEC Documents there are
no outstanding or authorized subscriptions, options, warrants, calls,
commitments, agreements or arrangements of any kind relating to the issuance,
transfer, delivery or sale by the Company of any additional shares of capital
stock or other securities of the Company, including, but not limited to, any
right of conversion or exchange granted by the Company under any outstanding
security, agreement or other instrument. Except as set forth in Schedule 5.19
hereto, there are no authorized or
-21-
outstanding voting agreements, voting trusts, proxies, stockholder agreements,
rights to purchase, transfer restrictions, or other similar arrangements with
respect to any of the capital stock of the Company except as identified within
the SEC Documents. Except with respect to its outstanding convertible debentures
and except as otherwise set forth on Schedule 5.19 hereto, there are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the capital stock of the Company. Except as set forth on
Schedule 5.19, the Company has no indebtedness for dividends, interest or other
distributions declared or accumulated but unpaid with respect to any securities
of the Company. No Person has a claim arising out of a violation of any
preemptive rights of a stockholder of the Company, nor any claim based upon
ownership, repurchase or redemption of any shares of the Company's capital
stock.
5.20. Investment Company Act. The Company is not, and is not directly
or indirectly controlled by or acting on behalf of any Person which is, required
to register as an "investment company" under the Investment Company Act of 1940,
as amended.
5.21. Underwriting Guidelines. Each automobile loan originated or
purchased by the Company since May 22, 1995 which is reflected on the balance
sheet and included in the securitization pools of the Company at June 30, 1996
was originated or purchased in accordance with the Company's underwriting
guidelines with such exceptions which, in the aggregate, do not have a Material
Adverse Effect. The Company's current underwriting guidelines are contained in
Schedule 5.21. Since June 30, 1996, the Company has originated or purchased
automobile loans and leases in accordance with the underwriting guidelines
contained in Schedule 5.21 with such exceptions which, in the aggregate, do not
have a Material Adverse Effect.
5.22 Senior and Other Indebtedness. Schedule 5.22 identifies as of the
Closing Date all presently existing Senior Indebtedness of the Company and its
subsidiaries, and all of the Indebtedness of the Company other than Senior
Indebtedness that upon purchase of the Debentures will be pari pasu with the
Debentures.
6. FINANCIAL STATEMENTS AND INFORMATION
------------------------------------
6.1. Reports and Notices. The Company covenants and agrees that from
and after the Closing Date until such time as no amounts are owing under the
Debentures, it shall deliver to the Purchasers:
(a) SEC Documents; Reports; Notices:
-------------------------------
Within 10 days after the Company's issuance or receipt thereof,
copies of (v) the preliminary prospectus and the
-22-
effective prospectus contained in any registration statement filed with the SEC
or any state securities law authority; (x) any annual, periodic or other reports
filed with the SEC; (y) any listing application filed with any stock exchange or
amendment thereof; and (z) each annual report and all other reports or
information, including proxy solicitations, which the Company shall from time to
time send to any of its stockholders.
(b) As soon as practicable, but in any event within two (2) Business
Days after the Company becomes aware of the existence of any Event of Default,
telephonic or telegraphic notice specifying the nature of such Event of Default
or development or information, including the expected effect thereof, which
notice shall be promptly confirmed in writing within five (5) Business Days.
7. AFFIRMATIVE COVENANTS
---------------------
The Company covenants and agrees that, unless the Purchasers shall
otherwise consent in writing, from and after the date hereof and until such time
as no amounts remain due and owing under the Debentures.
7.1. Payment of Principal and Interest. The Company will duly and
punctually pay principal of and interest on the Debentures in accordance with
the terms of the Debentures.
7.2. Notice of Default. When any event has occurred and is continuing
which is, or after notice or lapse of time or both would become, an Event of
Default (as defined in Section 9.1 herein), or if the holder of any other
evidence of Indebtedness of the Company or any Subsidiary gives any notice or
takes any other action with respect to a claimed default, the Company shall
immediately notify the Purchasers by telegram, telex or facsimile transmission
notice specifying such event within five days of its occurrence.
7.3. Maintenance of Existence and Conduct of Business. The Company
shall and shall cause each of its Subsidiaries to (a) do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, including, without limitation, all Licenses or similar qualifications
required by them to engage in their business in all jurisdictions in which they
are at the time so engaged; (b) continue to conduct its business substantially
as now conducted or as otherwise permitted hereunder; and (c) at all times
maintain, preserve and protect all of its trademarks and tradenames (if any),
and preserve all the remainder of its material property, in use or useful in the
conduct of its business and keep the same in good repair, working order and
condition (taking into consideration ordinary wear and tear) and from time to
time make, or cause to be made, all needful and proper repairs, renewals and
replacements, betterments and
-23-
improvements thereto consistent with industry practices, so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times
7.4. Payment of Obligations. (a) Subject to subsection (b) below, the
Company shall and shall cause each of its Subsidiaries to pay and discharge or
cause to be paid and discharged all its Indebtedness, as and when due and
payable (including any applicable grace period).
(b) The Company and each of its Subsidiaries shall have the right to
pay the Indebtedness arising under Section 7.4(a) and in good faith contest, by
proper legal actions or proceedings, the validity or amount of such Indebtedness
or claims.
7.5. Books and Records. The Company shall and shall cause each of its
Subsidiaries to keep adequate records and books of account with respect to its
business activities, in which proper entries, reflecting all of their financial
transactions, are made in accordance with GAAP and on a basis consistent with
the Financials.
7.6. Litigation. The Company shall notify the Purchasers in writing,
promptly upon learning thereof, of any material litigation or administrative
proceeding commenced or threatened against the Company or any of its
Subsidiaries.
7.7. Insurance. Schedule 7.7 lists in summary form all insurance
maintained by the Company and its Subsidiaries. The Company shall and shall
cause each of its Subsidiaries to continue to maintain such insurance. The
Company shall and shall cause each of its Subsidiaries to pay all insurance
premiums payable by them.
7.8. Compliance with Law. The Company shall and shall cause each of its
Subsidiaries to comply, in all material respects, with all Federal, state and
local laws and regulations applicable to it, including, without limitation,
ERISA, those regarding the collection, payment and deposit of employees' income,
unemployment and social security taxes and those relating to insurance or
environmental matters, where the failure to comply would have a Material Adverse
Effect.
7.9. Agreements. The Company shall and shall cause each of its
Subsidiaries to perform, within all required time periods (after giving effect
to any applicable grace periods), all of its obligations and enforce all of its
rights under each material agreement to which it is a party. The Company shall
not and shall cause each of its Subsidiaries not to terminate or modify in any
manner adverse to any such party any provision of any such material agreement to
which it is a party except in the ordinary course of business, consistent with
past practice.
-24-
7.10. Employee Plans. (a) With respect to other than a Multiemployer
Plan, for each Qualified Plan hereafter adopted or maintained by the Company,
any of its Subsidiaries or any ERISA Affiliate, the Company shall (i) be in
possession of, or cause its Subsidiaries or ERISA Affiliates to be in possession
of, determination letters from the IRS to the effect that such Qualified Plan is
qualified within the meaning of Section 401(a) of the IRC; and (ii) from and
after the adoption of any such Qualified Plan, cause such plan to be qualified
within the meaning of Section 401(a) of the IRC and to be administered in all
material respects in accordance with the requirements of ERISA and Section
401(a) of the IRC.
(b) With respect to each welfare benefit plan, as defined in Section
3(1) of ERISA, hereafter adopted or maintained by the Company, any of its
Subsidiaries or any ERISA Affiliate, the Company shall comply, in all material
respects, or cause its Subsidiaries or ERISA Affiliates to comply, in all
material respects with the notice and continuation coverage requirements of
Section 4980B of the IRC and the regulations thereunder.
(c) (i) Promptly and in any event within thirty (30) days after the
Company, any of its Subsidiaries or any ERISA Affiliate knows or has reason to
know that any ERISA Event has occurred, and (ii) promptly and in any event
within ten (10) days after the Company, any of its Subsidiaries or any ERISA
Affiliate knows or has reason to know that a request for a minimum funding
waiver under Section 412 of the IRC has been filed with respect to any Qualified
Plan, the Company shall furnish to the Purchasers a written statement of the
principal financial officer or other appropriate officer of the Company
describing such ERISA Event or waiver request and the action, if any, which the
Company, any of its Subsidiaries or any ERISA Affiliate proposes to take with
respect thereto and a copy of any notice filed with the PBGC or the IRS
pertaining thereto.
(d) Promptly and in any event within thirty (30) days after the filing
thereof by the Company, any of its Subsidiaries or any ERISA Affiliate, the
Company shall furnish to the Purchasers a copy of each annual report (Form 5500
Series, including Schedule B thereto) with respect to each Pension Plan, and
upon request by the Purchasers, with respect to any other Plan.
(e) Promptly and in any event within thirty (30) days after receipt
thereof, the Company shall furnish to the Purchasers a copy of any adverse
notice, determination letter, ruling or opinion the Company, any of its
Subsidiaries or any ERISA Affiliate received from the PBGC, DOL or IRS with
respect to any Qualified Plan.
-25-
(f) Promptly and in any event within ten (10) Business Days after
receipt thereof, the Company shall furnish to the Purchasers a copy of any
correspondence the Company, any of its Subsidiaries or any ERISA Affiliate
receives from the plan sponsor (as defined by Section 4001(a)(10) of ERISA) of
any Multiemployer Plan concerning potential withdrawal liability of the Company,
any of its Subsidiaries or any ERISA Affiliate, or notice of any reorganization,
with respect to any Multiemployer Plan, together with a written statement of the
principal financial officer or other appropriate officer of the Company of the
action which the Company, any of its Subsidiaries or any ERISA Affiliate
proposes to take with respect thereto.
(g) Promptly and in any event within thirty (30) Business Days after
the adoption thereof, the Company shall furnish to the Purchasers notice of (i)
any amendment to a Title IV Plan which results in an increase in benefits or the
adoption of any new Title IV Plan, (ii) any amendment to a, or adoption of a
new, welfare benefit plan, as defined in Section 3(1) of ERISA, which the
Company or any of its Subsidiaries maintains, contributes or has an obligation
to contribute to, and which results in an increase in benefits for retirees or
new benefits for retirees, and (iii) any amendment to terminate a Title IV Plan
or treatment of a plan amendment as a termination under Section 4041 of ERISA.
(h) Promptly and in any event after receipt of written notice of
commencement thereof, the Company shall furnish to the Purchasers notice of any
action, suit or proceeding before any court or other governmental authority
affecting the Company, any of its Subsidiaries or any ERISA Affiliate with
respect to any Plan, except those which, in the aggregate, if adversely
determined could not have a Material Adverse Effect.
(i) Promptly and in any event within thirty (30) days after notice or
knowledge thereof, the Company shall furnish to the Purchasers notice that the
Company or any of its Subsidiaries, has become or may become subject to a
material tax on prohibited transactions imposed by Section 4975 of the IRC,
together with a copy of Form 5330.
7.11. Access. (a) The Company shall and shall cause each of its
Subsidiaries to allow the Purchasers and any of its officers, employees and/or
agents, upon reasonable notice (unless a Default or Event of Default has
occurred and is continuing, in which case no notice shall be required),
exercisable as frequently as the Purchasers (or representative thereof)
reasonably determines to be appropriate, during normal business hours (or at
such other times as may reasonably be requested by the Purchasers or
representative), confer with senior management of the Company and its
Subsidiaries, to inspect the properties and facilities of the Company or any of
its Subsidiaries and, at its own expense, to inspect, audit and make extracts
from all of the Company's or
-26-
any of its Subsidiaries' records, files and books of account. The Company shall
obtain and deliver any document or instrument reasonably necessary for the
Purchasers (or representative), as any of them may reasonably request, to obtain
records from any service bureau maintaining records for the Company or any of
its Subsidiaries as any of the Purchasers may reasonably request. The Company
shall also maintain duplicate records or supporting documentation on media,
including, without limitation, computer tapes and discs owned by the Company or
any of its Subsidiaries.
(b) The Purchasers shall not use and shall cause to be kept
confidential any non-public information obtained pursuant to this Agreement and
pursuant to any access granted pursuant to Section 7.11(a) above and not
otherwise disclose such information to any third party or otherwise utilize such
information in a manner that is in violation of, or inconsistent with the
Company's xxxxxxx xxxxxxx policies as reasonably constituted from time to time,
except (i) as may be required in connection with the administration of matters
relating to this Agreement, (ii) as may be required in connection with the
enforcement of any rights of the Purchasers pursuant to this Agreement or any of
the Ancillary Agreements, or (iii) as may otherwise be required by law.
8. NEGATIVE COVENANTS
------------------
The Company covenants and agrees that, without the Purchasers' prior written
consent, from and after the date hereof and until the date that no amounts are
due and owing under the Debentures:
8.1. Mergers, Etc. Neither the Company nor any Subsidiary thereof,
shall directly or indirectly, by operation of law or otherwise, merge with,
consolidate with, acquire all or substantially all of the assets or capital
stock of, or otherwise combine with, any Person or form or acquire any
Subsidiary without the consent of the Board (inclusive of the Conseco Director
if , the Conseco Director is still at that time a director of the Company).
8.2. Investments; Loans and Advances. (a) Except as otherwise permitted
in this Agreement and except in connection with its purchases and originations
of sub-prime automobile loans and leases, the Company shall not, and shall not
permit any of its Subsidiaries, to make any investment in, or make or accrue
loans or advances of money to, any Person' provided, however, that the Company
and its Subsidiaries may make and own investments in (i) other business
corporations, partnerships, trusts or other entities in connection with business
transactions, acquisitions or business combinations that are approved by the
Board; (ii) marketable direct obligations issued or unconditionally guaranteed
by the United States of America or any agency thereof maturing within thirty
days from the date of acquisition thereof; (iii) commercial paper maturing no
more than thirty days from the date
-27-
of creation thereof and at the time of their acquisition having the highest
rating obtainable from either Standard & Poor's Corporation or Xxxxx'x Investors
Service, Inc.; and (iv) certificates of deposit, maturing no more than thirty
days from the date of creation thereof, issued by commercial banks incorporated
under the laws of the United States of America, each having at the time of the
acquisition of any such certificate of deposit combined capital, surplus and
undivided profits of not less than $200,000,000 and a rating of "A" or better by
a nationally recognized rating agency (collectively the "Investment
Guidelines").
8.3. Indebtedness. Except as otherwise expressly permitted by this
Section 8.3 or by any other Section of this Agreement or upon unanimous vote of
the Company's Board of Directors, the Company shall not, nor shall it permit any
of its Subsidiaries to, create, incur, assume or permit to exist any
Indebtedness, whether recourse or nonrecourse, and whether superior, pari passu
or junior, except (i) Senior Indebtedness; (ii) lease payment obligations under
leases which the Company or such Subsidiary is not prohibited from entering into
under this Agreement; (iii) deferred taxes; and (iv) unfunded pension fund and
other employee benefit plan obligations and liabilities but only to the extent
they are permitted to remain unfunded under applicable law.
8.4. Liens. The Company shall not and shall not permit any of its
Subsidiaries to create or permit any Lien on any of its properties or assets
which would have a Material Adverse Effect except Permitted Encumbrances.
8.5. Capital Expenditures. The Company shall not and shall not permit
any of its Subsidiaries to make Capital Expenditures that, in the aggregate
shall exceed the amounts of such expenditures provided for in the business plan
or budget of the Company in effect from time to time for any Fiscal Year, or
individually, shall exceed $75,000 (unless such individual expenditures are
provided for in the Company's business plans or budgets, as in effect from time
to time), which are not approved by the Company's Board of Directors or
otherwise approved in advance in writing by the Purchasers.
8.6. Cancellation of Indebtedness. The Company shall not and shall not
permit any of its Subsidiaries to cancel any claim or debt owing to it, except
for reasonable consideration and in the ordinary course of business, consistent
with past practice.
8.7. ERISA. The Company shall not, directly or indirectly, and
shall not permit its Subsidiaries or any ERISA Affiliate to directly or
indirectly by reason of an amendment or amendments to, or the adoption of, one
or more Title IV Plans, permit the present value of all benefit liabilities, as
defined in
-28-
Title IV of ERISA (using the actuarial assumptions utilized by the PBGC upon
termination of a plan), to exceed the fair market value of assets allocable to
such benefits, all determined as of the most recent valuation date for each such
Title IV Plan, by more than $100,000, or to increase such benefit liabilities to
the extent security must be provided to any Title IV Plan under Section
401(a)(29) of the IRC. Neither the Company nor any of its Subsidiaries shall
establish or become obligated to any new welfare benefit plan, as defined in
Section 3(1) of ERISA, or modify any existing welfare benefit plan, for
retirees, which would result in the present value of future liabilities under
any such plans to increase by more than $100,000. Except as set forth on
Schedule 5.13, neither the Company nor any of its Subsidiaries shall establish
or become obligated to any new unfunded Pension Plan, which would result in the
present value of future liabilities under any such plans to increase by more
than $100,000.
8.8. Tax Sharing. The Company shall not make any tax sharing or similar
payment to any Affiliate in excess of: (a) its separate state, local and/or
foreign income tax liability; plus (b) its pro rata share of the consolidated
Federal income tax liability as determined under Treas. Reg. (section)
1.1552-1(a)(1); plus (c) its pro rata share of any consolidated, combined or
unitary state, local and/or foreign income tax computed similarly as under
subparagraph (b).
8.9 Amendment of Certificate of Incorporation. The Company and each of
its Subsidiaries shall not amend its articles or certificate of incorporation or
organization without the consent of the Board (inclusive of the Conseco Director
if the Conseco Director is still at that time a director of the Company) and
shall not amend their certificate or articles of incorporation or by-laws in any
manner which would adversely affect the rights of the Purchasers.
8.10. Limitation on Dividends and Other Payment Restrictions. The
Company will not, and will not permit any Subsidiary to, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind, other than those in existence immediately after the
Closing Date, on the ability any Subsidiary to (a) pay dividends or make any
other distribution on its capital stock, (b) pay any indebtedness owed to the
Company or any other Subsidiary, or (c) make loans or advances to the Company or
any other Subsidiary.
8.11. Employee Loans. Except automobile loans or leases entered into in
the ordinary course of business consistent with past practice, the Company shall
not and shall not permit any of its Subsidiaries to without the consent of its
Board of Directors make or accrue any loans or other advances of money to any
employee of the Company or any such Subsidiary.
-29-
8.12. Transactions with Affiliates. (a) The Company shall not as
disclosed in the SEC Filed Documents and except for compensation arrangements
entered into with the consent of the independent members of the Company's Board
of Directors, (which shall include the Conseco Director if the Conseco Director
remains at that time a director of the Company) and shall not permit any of its
Subsidiaries to, enter into or be a party to any transaction with any Affiliates
of the Company except in the ordinary course of and pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon fair and
reasonable terms that are no less favorable to the Company or such Subsidiary
than would be obtained at the time of such transaction in a comparable
arm's-length transaction with a Person not an Affiliate of the Company or such
Subsidiary and in any event only if such transaction is effected in accordance
with all applicable laws and regulations and is not in an amount in excess of
$100,000 or is approved by the Board inclusive of the Conseco Director
(provided, however, the Conseco Director remains at that time a director of the
Company).
8.13. Sales of Assets. The Company shall not and shall not permit any
of its Subsidiaries to sell, transfer, or otherwise dispose of any assets or
properties; provided, however, that the foregoing shall not prohibit (i) the
sale of assets in the ordinary course of business, consistent with past practice
at a value not less than fair market value as determined in good faith by the
Company; (ii) the sale of surplus or obsolete equipment and fixtures; and (iii)
transfers resulting from any casualty or condemnation of assets or properties.
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
--------------------------------------
9.1. Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder until the date no amounts remain outstanding under the
Debentures:
(a) The Company shall default in the payment of any interest
on any Debenture when it becomes due and payable, and such failure to pay
continues for a period of five days.
(b) The Company shall default in the payment of the Principal
of any Debenture when it becomes due and payable.
(c) The Company shall fail or neglect to perform, keep or
observe any of the provisions of Sections 6, 7 or 8 of this Agreement and the
same shall remain unremedied for a period ending on the first to occur of five
(5) days after the Company shall receive written notice of any such failure from
either Purchaser or fifteen (15) days after the Company shall become aware
thereof.
-30-
(d) The Company shall fail or neglect to perform, keep or
observe any other provision of this Agreement or of any of the other Ancillary
Agreements and the same shall remain unremedied for a period ending on the first
to occur of ten (10) days after the Company shall receive written notice of any
such failure from either Purchaser or thirty (30) days after the Company shall
become aware thereof.
(e) A default shall occur under any other agreement, document
or instrument to which the Company or any Subsidiary thereof is a party or by
which the Company or such Subsidiary or any of the Company's or such
Subsidiary's property is bound, and such default (i) involves the failure to
make any payment (whether of principal, interest or otherwise) due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) in
respect of any Indebtedness of the Company or such Subsidiary in an aggregate
amount exceeding $100,000, or (ii) causes (or permits any holder of such
Indebtedness of a trustee to cause) such Indebtedness or a portion thereof in an
aggregate amount exceeding $100,000, to become due prior to its stated maturity
or prior to its regularly scheduled dates of payment.
(f) Any representation or warranty herein or in this Agreement
or any Ancillary Agreement or in any written statement pursuant thereto or
hereto, report, financial statement or certificate made or delivered to the
Purchasers by the Company or any of its Subsidiaries shall be untrue or
incorrect in any material respect, as of the date when made or deemed made, and
the same shall remain unremedied for a period ending on the first to occur of
five (5) days after the Company shall receive written notice of any such failure
from the Purchasers or fifteen (15) days after the Company shall become aware
thereof.
(g) The Company shall fail to make any principal or interest
payment with respect to any Senior Indebtedness when the same shall be due and
payable (including any applicable grace period), or any maturity date under the
Senior Indebtedness is accelerated.
(h) Any of the material assets of the Company or any of its
Subsidiaries thereof shall be attached, seized, levied upon or subject to a writ
or distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of the Company or any of its
Subsidiaries and shall remain unstayed or undismissed for thirty (30)
consecutive days; or any Person other than the Company or such Subsidiary shall
apply for the appointment of a receiver, trustee or custodian for any of the
assets of the Company or such Subsidiary and such application shall remain
unstayed or undismissed for thirty (30) consecutive days; or the Company or such
Subsidiary shall have concealed, removed or permitted to be concealed or
-31-
removed, any part of its property, with intent to hinder, delay or defraud its
creditors or any of them or made or suffered a transfer of any of its property
or the incurring of an obligation which may be fraudulent under any bankruptcy,
fraudulent conveyance or other similar law.
(i) A case or proceeding shall have been commenced against the
Company or any of its Subsidiaries in a court having competent jurisdiction
seeking a decree or order in respect of the Company or such Subsidiary (i) under
title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal, state or foreign bankruptcy or other similar law;
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of the Company or such Subsidiary or of any
substantial part of its or their properties; or (iii) ordering the winding-up or
liquidation of the affairs of the Company or such Subsidiary and such case or
proceeding shall remain undismissed or unstayed for sixty (60) consecutive days
or such court shall enter a decree or order granting the relief sought in such
case or proceeding.
(j) The Company or any of its Subsidiaries shall (i) file a
petition seeking relief under title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal, state or
foreign bankruptcy or other similar law; (ii) consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of the Company or such
Subsidiary or of any substantial part of its properties; (iii) fail generally to
pay its debts as such debts become due; or (iv) take any corporate action in
furtherance of any such action.
(k) Final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of $100,000 in the
aggregate shall be rendered against the Company or any of its Subsidiaries and
the same shall not be (i) fully covered by insurance in accordance with Section
7.7 hereof, or (ii) vacated, stayed, bonded, paid or discharged for a period of
thirty (30) days.
(l) Any other event shall have occurred and be continuing,
including the revocation of any License or other material suspension of the
authority of the Company to conduct its business, which would have a Material
Adverse Effect, or which upon Notice or passage of time would have a Material
Adverse Effect, and either Purchaser shall have given the Company at least
twenty (20) days' notice thereof.
(m) With respect to any Plan, (i) a prohibited transaction
within the meaning of Section 4975 of the IRC or Section 406 of ERISA occurs
which in the reasonable determination
-32-
of the Purchasers could result in direct or indirect liability to the Company or
any of its Subsidiaries, (ii) with respect to any Title IV Plan, the filing of a
notice to voluntarily terminate any such plan in a distress termination, (iii)
with respect to any Multiemployer Plan, the Company, any of its Subsidiaries or
any ERISA Affiliate shall incur any Withdrawal Liability, (iv) with respect to
any Qualified Plan, the Company, any of its Subsidiaries or any ERISA Affiliate
shall incur an accumulated funding deficiency or request a funding waiver from
the IRS, or (v) with respect to any Title IV Plan or Multiemployer Plan which
has an ERISA Event not described in clauses (ii) - (iv) hereof, in the
reasonable determination of the Purchasers there is a reasonable likelihood for
termination of any such plan by the PBGC; provided, however, that the events
listed in clauses (i) - (v) hereof shall constitute Events of Default only if
the liability, deficiency or waiver request of the Company, any of its
Subsidiaries or any ERISA Affiliate, whether or not assessed, exceeds $50,000,
in any case set forth in (i) through (v) above, or exceeds $100,000, in the
aggregate for all such cases.
(n) If the Company fails or refuses to register shares of
Common Stock issued or issuable to the Purchasers pursuant to the Registration
Rights Agreement.
(o) Bartolini shall cease to serve as the Chief Executive
Officer of the Company by reason of death, disability, termination or any other
reason and a replacement acceptable to the Purchasers has not been hired by the
Company within fifteen (15) days of such event; provided, however, that if
Bartolini dies and Xxxx X. Xxxxxxxxx is then the President and Chief Operating
Officer of NAC and an employee of the Company in good standing and so long as
Xxxx X. Xxxxxxxxx continues in such position, no Event of Default shall have
occurred.
9.2. Remedies.
--------
(a) If any Event of Default other than specified in Sections 9.1 (i) or
(j) shall have occurred and be continuing, the Purchasers shall have the right
to require full payment of the principal amount of the Debentures together with
all accrued and unpaid interest, and if any Event of Default specified in
Sections 9.1 (i) or (j) shall have occurred and be continuing, then the
principal amount of the Debentures together with all accrued and unpaid interest
shall be immediately due and payable without any further action by Purchasers.
(b) If an Event of Default specified in Section 9.1(n) shall have
occurred and be continuing (a "Triggering Event of Default"), Purchasers shall
be entitled following fifteen (15) days notice with a right to cure, to cause
the Company to redeem the Debenture in such amount as may be specified by the
Purchasers in a request
-33-
delivered to the Company by the Purchasers, and the Company shall redeem such
Debenture, by paying to the holder thereof an amount equal to the market value
of the greatest number of shares of Common Stock into which the Debenture is
convertible. The market value and the maximum number of shares of Common Stock
into which the Debenture is convertible shall be determined using the higher of
the average of the closing prices of a share of Common Stock, as reported by the
principal stock exchange upon which shares of Common Stock are traded, for the
20 trading days prior to (i) the day of the public announcement of a Triggering
Event of Default or (ii) the day of the event giving rise to the to the
Triggering Event of Default. If the Common Stock is not listed for trading on a
nationally recognized stock exchange or on the NASDAQ System on the day before
the Triggering Event of Default, for purposes of determining the number of
shares of Common Stock issuable upon conversion of the Debentures and the
redemption price provided for in this Section 9.2(b), the market value of a
share of Common Stock shall be determined by reference to the closing price of a
share of Common Stock as reported by the NASDAQ/NMS on the date of this
Agreement.
10. SECURITIES LAW MATTERS
----------------------
10.1 Legends. Each certificate or instrument representing the
Securities shall bear a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SECURITIES AND ANY SECURITIES OR SHARES ISSUED UPON CONVERSION THEREOF
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT.
11. MISCELLANEOUS
-------------
11.1. Press Releases. Except as required by applicable law, Purchasers
and the Company will not give notice to third parties or otherwise make any
public statement or releases concerning this Agreement or the transactions
contemplated hereby except for such written information as shall have been
approved in writing as to form and content by the other party, which approval
shall not be unreasonably withheld.
11.2. Expenses and Other Fees. The Company shall pay any and all
expenses of the Purchasers (including reasonable expenses of their counsel) in
connection with their decision to provide financing to the Company, the
preparation and review of this Agreement and Ancillary Agreements and the
consummation of the transactions in connection herewith, which expenses shall
not exceed the sum of $17,500.00. Except with respect to Sands
Brothers & Co., Ltd., who acted as a financial advisor to the
-34-
Company in connection with this Transaction, there will be no fees or
commissions due and owing by any of the parties hereto in connection with the
Transaction, to any broker, finder, agent, adviser or third party.
11.3. Assignment. The Company may not assign any of its rights, title,
interest, remedies, powers and duties hereunder. The Company hereby consents to
the Purchasers' assignments, at any time or times, of any of the Purchasers'
rights, title, interests, remedies, powers and duties hereunder. The Company
agrees that it will use its best efforts to assist and cooperate with the
Purchasers in any manner reasonably requested by the Purchasers to effect such
assignments.
11.4. Remedies. The Purchasers' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
which the Purchasers may have under any other agreement, including without
limitation, the Ancillary Agreements, by operation of law or otherwise.
11.5. Waiver of Jury Trial. The parties hereto waive all right to trial
by jury in any action or proceeding to enforce or defend any rights under this
Agreement or the Ancillary Agreements.
11.6. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
11.7. Parties. This Agreement and the other Ancillary Agreements shall
be binding upon, and inure to the benefit of, the successors of the Company, and
the successors and assigns of the Purchasers.
11.8. Conflict of Terms. Except as otherwise provided in this Agreement
or any of the Ancillary Agreements by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the Ancillary
Agreements, the provision contained in this Agreement shall govern and control.
11.9. GOVERNING LAW. THIS AGREEMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS,
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE PURCHASERS
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AND THE COMPANY AGREE TO SUBMIT TO PERSONAL JURISDICTION AND TO WAIVE ANY
OBJECTION AS TO VENUE IN THE FEDERAL OR STATE COURTS IN THE COUNTY OF NEW
CASTLE, STATE OF DELAWARE. SERVICE OF PROCESS ON THE COMPANY OR THE PURCHASERS
IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
ANCILLARY AGREEMENTS SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY AT THE ADDRESS
LISTED IN SECTION 11.09 HEREOF. NOTHING HEREIN SHALL PRECLUDE THE PURCHASERS OR
THE COMPANY FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION.
11.10. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another, or whenever any of the parties desires to give or serve upon
another any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and either shall be delivered in person with receipt acknowledged or
by registered or certified mail, return receipt requested, postage prepaid, or
telecopied and confirmed by telecopy answer back, addressed as follows:
(a) If to the Purchasers at:
Xxxxxx Xxxxxxxxx
Xxxxxxx Xxxxx Asset Management
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
(b) If to the Company at:
NAL Financial Group Inc.
000 Xxxxxxx Xxxxx Xxxx Xxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, President
With a copy to:
Xxxxxxx X. Xxxxx, Esquire
Xxxxxxxx Ingersoll Professional Corporation
Two Xxxxx Square, 12th Floor
00xx xxx Xxxx Xxxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Telecopy Number: (000) 000-0000
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, or upon receipt if the same shall have been
telecopied and confirmed by telecopy answer back or three (3)
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Business Days after the same shall have been deposited in the United States
mail. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the persons designated
above to receive copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration or other
communication. Delivery of notices as provided herein shall be deemed to provide
notice to both Purchasers.
11.11. Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
11.12. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
XXXXXXX XXXXX WORLD INCOME FUND, INC.
As one of the Purchasers
By:_____________________________
Name:___________________________
Title:__________________________
CONVERTIBLE HOLDINGS, INC.
As one of the Purchasers
By:_____________________________
Name:___________________________
Title:__________________________
NAL FINANCIAL GROUP INC.
As the Company
By:_____________________________
Xxxxxx X. Xxxxxxxxx
Chief Executive Officer
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