EXHIBIT I
INVESTMENT AGREEMENT
AMONG
COMPLETE WELLNESS CENTERS, INC.,
IMPRIMIS INVESTORS LLC,
AND
WEXFORD SPECTRUM INVESTORS LLC
DATED AS OF DECEMBER 19, 1997
TABLE OF CONTENTS
PAGE
I. AUTHORIZATION OF NOTES...................................... 1
II. SALE AND PURCHASE OF THE NOTES, THE
PREFERRED STOCK AND THE WARRANTS......................... 2
A. OBLIGATION TO INVEST IN THE NOTES.................. 2
B. INVESTMENT DATE.................................... 2
C. INTEREST RATE
LIMITATION........................................ 3
D. PROPOSED INVESTMENT IN THE PREFERRED
STOCK AND THE WARRANTS.......................... 3
III. CONDITIONS TO THE INVESTMENT................................... 4
A. DOCUMENTS REQUIRED................................ 4
B. OPINIONS OF COUNSEL............................... 11
C. PAYMENT OF ACCRUED FEES AND EXPENSES.............. 11
D. REPRESENTATIONS AND WARRANTIES.................... 12
E. NO DEFAULT........................................ 12
F. INVESTMENT PERMITTED BY APPLICABLE
REQUIREMENTS OF LAW, ETC........................ 12
G. NO LITIGATION OR OTHER PROCEEDINGS................ 12
H. NO MATERIAL ADVERSE CHANGE........................ 13
IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............. 13
A. ORGANIZATION; POWER AND AUTHORITY;
CAPITALIZATION; WARRANTS........................ 13
B. AUTHORIZATION, ENFORCEABILITY, ETC................ 15
C. DISCLOSURE........................................ 15
D. ORGANIZATION AND OWNERSHIP OF SHARES
OF SUBSIDIARIES, ETC. .......................... 00
X XXX XXXXXXX........................................00
F. FINANCIAL STATEMENTS.............................. 17
G. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC...... 18
H. GOVERNMENTAL AUTHORIZATIONS, ETC.................. 19
I. LITIGATION........................................ 20
J. TAXES............................................. 20
K. TITLE TO PROPERTY; LEASES......................... 21
L. SECURITY INTERESTS, ETC........................... 22
M. LICENSES, PERMITS, ETC............................ 22
N. ERISA............................................. 23
O. PRIVATE OFFERING BY THE COMPANY................... 23
P. USE OF PROCEEDS; MARGIN REGULATIONS............... 23
Q. STATUS UNDER CERTAIN STATUTES..................... 24
R. SECURITIES ACT MATTERS............................ 25
S. EMPLOYEE AND LABOR MATTERS........................ 25
T. ENVIRONMENTAL MATTERS............................. 26
U. NO BURDENSOME AGREEMENTS.......................... 27
V. EXISTING INDEBTEDNESS; FUTURE LIENS............... 28
W. SOLVENCY.......................................... 28
X. RELATED PARTY TRANSACTIONS........................ 29
Y. MATERIAL CONTRACTS................................ 29
Z. PARI PASSU OBLIGATIONS............................ 30
AA. NO SIGNIFICANT SUBSIDIARIES....................... 31
AB. NO POWER OF ATTORNEY.............................. 31
V. REPRESENTATIONS AND COVENANTS OF EACH OF
THE INVESTORS............................................ 31
A. PURCHASE FOR INVESTMENT........................... 31
B. ACCREDITED INVESTORS.............................. 31
C. POWER AND AUTHORITY............................... 32
VI. PREPAYMENTS AND REDEMPTIONS OF THE NOTES................... 32
A. OPTIONAL PREPAYMENTS OF THE NOTES................. 32
B. OFFER TO REPURCHASE NOTES AND REDUCE
COMMITMENTS IN RESPECT OF A CHANGE OF
CONTROL......................................... 32
C. MANDATORY REDEMPTIONS OF THE NOTES................ 34
D. ALLOCATION OF PARTIAL PREPAYMENTS................. 36
E. MATURITY; SURRENDER, ETC.......................... 36
F. CANCELLATION OF NOTES............................. 36
G. PAYMENT OF TRANSACTION FEE........................ 36
VII. AFFIRMATIVE COVENANTS...................................... 37
A. SHAREHOLDERS' MEETING; INFORMATION
STATEMENT........................................37
B. INFORMATION COVENANTS............................. 38
C. COMPLIANCE WITH LAW............................... 42
D. MAINTENANCE OF INSURANCE.......................... 43
E. MAINTENANCE OF PROPERTIES......................... 43
F. PAYMENT OF TAXES AND CLAIMS;
PERFORMANCE OF MATERIAL OBLIGATIONS. ........... 43
G. PRESERVATION OF CORPORATE EXISTENCE,
ETC............................................. 44
H. MAINTENANCE OF BOOKS AND RECORDS;
INSPECTION; CONFIDENTIALITY..................... 45
I. USE OF PROCEEDS................................... 46
J. SEARCH REPORTS.................................... 46
VIII. NEGATIVE COVENANTS............................................ 47
A. LIMITATIONS ON TRANSACTIONS WITH
AFFILIATES..................................... 47
B. LIMITATIONS ON LIENS.............................. 47
C. LIMITATIONS ON INDEBTEDNESS....................... 50
D. LIMITATIONS ON SALE-LEASEBACK
TRANSACTIONS.................................... 00
X. XXXXXXXXXXX XX RESTRICTED PAYMENTS................ 52
F. LIMITATIONS ON FUNDAMENTAL CHANGES,
ASSET SALES, ACQUISITIONS, ETC.................... 52
G. LIMITATIONS ON INVESTMENTS, ETC................... 55
H. LIMITATION ON ISSUANCE OF CAPITAL
STOCK........................................... 56
I. LIMITATION ON MODIFICATIONS OF
INDEBTEDNESS; MODIFICATIONS OF
CERTIFICATE OF INCORPORATION, BYLAWS
AND CERTAIN OTHER AGREEMENTS; ETC. ............... 56
J. LIMITATIONS ON CONDUCT OF BUSINESS................ 57
K. LIMITATIONS ON ACCOUNTING CHANGES
AND CHANGES IN FISCAL YEAR. ...................... 58
L. LIMITATIONS ON SPECULATIVE
TRANSACTIONS.................................... 58
M. LIMITATIONS ON CAPITAL EXPENDITURES............... 58
IX. EVENTS OF DEFAULT.............................................. 58
A. EVENTS OF DEFAULT................................. 58
B. ACCELERATION...................................... 62
C. OTHER REMEDIES.................................... 63
D. RESCISSION........................................ 63
E. RESTORATION OF RIGHTS AND REMEDIES................ 63
F. NO WAIVERS OR ELECTION OF REMEDIES,
ETC............................................. 64
X. REGISTRATION; EXCHANGE; SUBSTITUTION OF
NOTES........................................................ 64
A. REGISTRATION OF NOTES............................. 64
B. TRANSFER AND EXCHANGE OF NOTES.................... 65
C. REPLACEMENT OF NOTES.............................. 67
XI. PAYMENTS ON NOTES.............................................. 67
XII. EXPENSES, INCREASED COSTS AND
INDEMNIFICATION, ETC. ....................................... 68
A. TRANSACTION EXPENSES.............................. 68
B. INDEMNITY......................................... 69
C. SURVIVAL.......................................... 72
XIII. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; ENTIRE AGREEMENT............................... 72
XIV. AMENDMENT AND WAIVER.......................................... 73
A. REQUIREMENTS...................................... 73
B. SOLICITATION OF HOLDERS OF NOTES.................. 73
C. BINDING EFFECT, ETC............................... 73
D. NOTES HELD BY COMPANY, ETC........................ 74
XV. NOTICES....................................................... 74
A. GENERAL................................................ 74
XVI. REPRODUCTION OF DOCUMENTS..................................... 75
XVII. MISCELLANEOUS................................................. 76
A. SUCCESSORS AND ASSIGNS............................ 76
B. PAYMENTS DUE ON NON-BUSINESS DAYS................. 76
C. SATISFACTION REQUIREMENT.......................... 76
D. SEVERABILITY...................................... 77
E. CONSTRUCTION; ACCOUNTING TERMS, ETC............... 77
F. COMPUTATION OF TIME PERIODS....................... 77
G. EXECUTION IN COUNTERPARTS......................... 78
H. GOVERNING LAW; SUBMISSION TO
JURISDICTION, ETC............................... 78
I. WAIVER OF JURY TRIAL.............................. 79
SCHEDULES
Schedule IA Information Relating to the Investors
Schedule IB Defined Terms
Schedule IC Other Obligors
Schedule II(D)(2) Use of Proceeds
Schedule II(D)(3) Preferred Stock Term Sheet
Schedule II(D)(4) Warrant Term Sheet
Schedule IV(A) Capitalization
Schedule IV(D) Subsidiaries
Schedule IV(F) Financial Statements
Schedule IV(H) Governmental Authorizations,etc.
Schedule IV(I) Litigation
Schedule IV(J) Taxes
Schedule IV(M) Licenses, Permits, etc.
Schedule IV(S) Employee and Labor Matters
Schedule IV(T) Environmental Matters
Schedule IV(V) Existing Indebtedness
Schedule IV(Y) Material Contracts
Schedule IV(Z) Pari Passu Obligations
Schedule IV(AA) No Significant Subsidiaries
Schedule VIII(B) Existing Liens
Schedule VIII(E) Management and Consulting Agreements
Schedule VIII(G) Existing Investments
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Security Agreement (Other Obligors)
Exhibit C Form of Security Agreement (Company)
Exhibit D Form of Solvency Certificate
Exhibit E Forms of Opinion of Special Counsel for the Company
Exhibit F Form of Compliance Certificate
COMPLETE WELLNESS CENTERS, INC.
000 Xxxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, X.X. 00000
INVESTMENT AGREEMENT, dated as of December 19, 1997
(this "Agreement"), among Complete Wellness Centers, Inc., a Delaware
corporation (the "Company"), Imprimis Investors LLC ("Imprimis") and
Wexford Spectrum Investors LLC (together with Imprimis, the "Investors").
WHEREAS, the Company desires to issue and sell to
Imprimis, and Imprimis desires to purchase from the Company, $500,000 in
aggregate principal amount of the Company's Senior Secured Fixed Rate
Bridge Notes due March 31, 1998, the proceeds of which will be used by
the Company, among other thinhs, to complete its pending acquisition of
the assets of Nutri/System, L.P. (the "Acquisition") through the
Company's wholly-owned subsidiary, Complete Weight Management, Inc., a
Delaware corporation (the "Acquisition Subsidiary"), which will hold such
assets; and
WHEREAS, the Company desires to issue and sell to the
Investors, and, subject to the satisfactory completion of their due
diligence concerning the Company and the Acquisition and the negotiation
of satisfactory documentation, the Investors desires to purchase from
the Company, (a) 100,000 shares (the "Preferred Stock") of Series B
preferred stock, par value $.01 per share, of the Company with a
liquidation preference of $50.00 per share, and (b) Common Stock Purchase
Warrants (the "Warrants) to purchase 2,850,000 shares (the "Common
Stock") of common stock, par value $.0001665 per share,of the Company, in
each case upon the terms and conditions set forth in Section II(D).
I. AUTHORIZATION OF NOTES.
The Company has authorized the issue and sale of
$500,000 in aggregate principal amount of Senior Secured Fixed Rate
Bridge Notes due March 31, 1998 (such Notes delivered pursuant to Section
II and any such Notes issued in substitution therefor pursuant to Section
X being, collectively, the "Notes"). Each of the Notes shall be in
substantially the form of Exhibit A attached hereto, with such
amendments, supplements and other modifications thereto, if any, as shall
be approved from time to time by the Investors and the Company.
Capitalized terms used in this Agreement, unless otherwise defined in
this Agreement, shall have the meanings specified in Schedule II attached
hereto; and references in this Agreement to a "Schedule" or an "Exhibit"
are, unless otherwise specified herein, references to a Schedule or an
Exhibit attached to this Agreement.
II. SALE AND PURCHASE OF THE NOTES, THE PREFERRED STOCK
AND THE WARRANTS.
A. OBLIGATION TO INVEST IN THE NOTES.
Subject to the terms and conditions of this Agreement,
the Company will issue and sell to Imprimis, and Imprimis will purchase
from the Company on the Investment Date, Notes in the aggregate principal
amounts of $500,000 at the purchase price of 100% of the aggregate
principal amount thereof. The Notes purchased and sold under this Section
II(A) and repaid or prepaid may not be repurchased and resold. The
Company agrees to record the Notes on the Register referred to in Section
X(B). The Company agrees to execute and deliver to Imprimis a promissory
note in registered form to evidence its purchase hereunder and registered
as provided in Section X(B) (herein, a "Registered Note"), dated the
Investment Date, payable to Imprimis and otherwise duly completed. Notes
other than Registered Notes shall be null and void and shall be returned
to the Company. A Registered Note may not be exchanged for a promissory
note that is not a Registered Note.
B. INVESTMENT DATE.
The sale and purchase of the Notes shall occur at the
offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, at or before 1:00 P.M. (New York City time) on
December 19, 1997 or on such other Business Day thereafter as may be
agreed upon among the Company and the Investors (the "Investment Date").
On the Investment Date, subject to the fulfillment of the applicable
conditions set forth in Section 3, the Company will deliver to Imprimis
the Note to be purchased by it on the Investment Date in the form of a
single Note (or such greater number of Notes in denominations of at least
$25,000 or integral multiples of $25,000 in excess thereof as it may
request), dated such Investment Date and registered in the name of
Imprimis (or in the name of its nominee), against delivery by Imprimis to
the Company or their order of same day funds in the amount of the
aggregate purchase price therefor.
C. INTEREST RATE LIMITATION.
Notwithstanding any provisions of this Agreement, the
Notes or the other Note Documents, in no event shall the amount of
interest paid or agreed to be paid by the Company exceed an amount
computed at the highest rate of interest permissible under applicable
law. If, from any circumstances whatsoever, fulfillment of any provi-
sion of this Agreement, the Notes or the other Note Documents at the time
performance of such provision shall be due, shall involve exceeding the
interest rate limitation validly prescribed by law which a court of
competent jurisdiction may deem applicable hereto, then, ipso facto, the
obligations to be fulfilled shall be reduced to an amount computed at the
highest rate of interest permissible under applicable law, and if for any
reason whatsoever any Investor shall ever receive as interest an amount
which would be deemed unlawful under such applicable law such interest
shall be automatically applied to the payment of principal of the Notes
outstanding hereunder (whether or not then due and payable), without
prepayment charge, premium or penalty, and not to the payment of
interest, or shall be refunded to the Company if such principal and all
other obligations of the Company to such Investor have been paid in full.
D. PROPOSED INVESTMENT IN THE PREFERRED STOCK AND THE WARRANTS.
The Company and the Investors will use reasonable
efforts to develop definitive documentation relating to the Investors'
proposed investment in the Preferred Stock and the Warrants on or prior
to December 31, 1997 and otherwise in accordance with the following terms
and conditions:
1. The cash purchase price payable by the
Investors for the Preferred Stock and the Warrants shall be
$5,000,000, net of a transaction fee of $100,000 payable by the
Company to the Investors on the date of issuance of the
Preferred Stock and the Warrants;
2. The net proceeds from the issuance and sale
of the Preferred Stock and Warrants shall be used as may be
agreed between the parties;
3. The Preferred Stock shall be on
substantially the terms set forth in Schedule II(D)(3) attached
hereto;
4. The Warrants shall be on substantially the
terms set forth on Schedule II(D)(4) attached hereto;
5. The Investors will be given customary
demand and piggy back registration rights relating to the Common
Stock issuable upon exercise of the Warrants, with no demand
being permitted prior to May 31, 1997; and
6. The Investors' commitment to purchase the
Preferred Stock and the Warrants is subject to satisfactory
completion of their due diligence concerning the Company and the
Acquisition and the negotiation of satisfactory documentation
and to any requisite shareholder approvals for the issuance of
the Warrants and the shares of Common Stock issuable pursuant
thereto.
III. CONDITIONS TO THE INVESTMENT.
Imprimis' obligation to purchase and pay for the Notes
to be sold on the Investment Date is subject to the fulfillment to
Imprimis' satisfaction, on or prior to the Investment Date, of the
following conditions:
A. DOCUMENTS REQUIRED.
Imprimis shall have received the following documents,
each dated as of the Investment Date (except as otherwise specified
below) and in the form of the respective Exhibit attached hereto, if any,
or otherwise in form and substance satisfactory to Imprimis:
1. Investment Agreement. This Agreement
duly executed by the Company and each of the Investors.
2. Notes. Notes, registered in the name
of Imprimis, in the aggregate principal amounts of
$500,000, duly executed by the Company.
3. Security Agreements.
a. Security agreements, each in substantially
the form of Exhibit B attached hereto (the security
agreements delivered pursuant to this subsection, as
amended, supplemented or otherwise modified from time
to time in accordance with the terms thereof and
Section XIV, the "Subsidiary Security Agreements"),
duly executed by each of the Other Obligors, together
with proper financing statements (Form UCC-1 or a
comparable form) or the equivalent thereof under the
Uniform Commercial Code (or similar law or statute) of
all jurisdictions that may be necessary or that
Imprimis may deem desirable in order to perfect and
protect the liens and security interests created under
the Subsidiary Security Agreements, covering the
Collateral described therein, in each case completed in
a manner satisfactory to Imprimis and duly executed by
each of the Other Obligors, as applicable;
b. A security agreement, in substantially the
form of Exhibit C attached hereto (the security
agreements delivered pursuant to this subsection, as
amended, supplemented or otherwise modified from time
to time in accordance with the terms thereof and
Section XIV, the "Company Security Agreement" and
together with the Subsidiary Security Agreements, the
"Security Agreements"), duly executed by the Company,
together with a stock certificate or certificates for
the shares of capital stock of the Acquisition
Subsidiary pledged pursuant thereto; and
c. evidence that all other actions
that may be necessary or that Imprimis may deem
desirable in order to perfect and protect the Liens and
security interests created under the Security
Agreements have been taken or will be taken in
accordance with the terms of the Note Documents.
4. Corporate Approvals and Other Similar
Documentation. Certified copies of the resolutions of the boards
of directors of the Company and the Acquisition Subsidiary
approving the Acquisition and each of the Note Documents to
which it is a party, the issuance and sale of the Notes and the
other transactions contemplated hereby and thereby and all
documents evidencing other necessary corporate action, including
by the Other Obligors, with respect to each Note Document, the
issuance and sale of the Notes and the other transactions
contemplated hereby and thereby.
5. Organizational Documents. A copy of the
certificate of incorporation and by-laws of each of the Company,
the Acquisition Subsidiary and the Other Obligors, and each
amendment thereto, certified as of the Investment Date by the
Secretary of State of Delaware as being a true and complete copy
thereof.
6. Good Standing Certificates. A copy of (a) a
certificate of the Secretary of State of Delaware, dated the
Investment Date, listing the certificate of incorporation of
the Company and the Acquisition Subsidiary and each amendment
thereto on file in the office of such Secretary of State and
certifying that (i) such amendments are the only amendments
to the organizational documents of the Company and the
Acquisition Subsidiary, (ii) each of the Company and the
Acquisition Subsidiary has paid all franchise taxes (or the
equivalent thereof) to the date of such certificate and (iii)
each of the Company and the Acquisition Subsidiary is duly
incorporated and in good standing under the laws of such State
and (b) a certificate of the Secretary of State of Florida,
dated the Investment Date, listing the certificate of
incorporation of the Other Obligors and each amendment thereto
on file in the office of such Secretary of State and certifying
that (i) such amendments are the only amendments to the
organizational documents of the Other Obligors, (ii) each of the
Other Obligors has paid all franchise taxes (or the equivalent
thereof) to the date of such certificate and (iii) each of the
Other Obligors is duly incorporated and in good standing under
the laws of such State .
7. Foreign Qualification Certificates. Copies
of certificates of the Secretary of State (or the equivalent
Governmental Authority) of each jurisdiction in which any of the
Company, the Acquisition Subsidiary or the Other Obligors is
qualified as a foreign corporation, dated reasonably near the
Investment Date, in each case stating that each of the Company,
the Acquisition Subsidiary and the Other Obligors is duly
qualified and in good standing as a foreign corporation in such
jurisdiction and has filed all annual reports required to be
filed, and paid all franchise taxes (or the equivalent thereof)
required to be paid, in such jurisdiction to the date of such
certificate.
8. Secretary's Certificate. A certifi-
cate from the secretary or an assistant secretary
each of the Company, the Acquisition Subsidiary and
the Other Obligors certifying:
a. the absence of any amendments to the
certificate of incorporation of such company
since the date of the Secretary of State's
certificate referred to in subsection (5) of
this Section III(A);
b. the completeness and accuracy of the
resolutions of the board of directors of such company
and all documents evidencing other necessary corporate
action thereof referred to in subsection (4) of this
Section III(A);
c. the completeness and accuracy of the bylaws
of such company as in effect on the date the
resolutions of the board of directors of such company
referred to in subsection (4) of this Section III(A)
were adopted and on the Investment Date (a copy of
which shall be attached to such certificate);
d. the names and true signatures of the
officers of such company authorized to sign each of the
Note Documents to which it is or is to be a party and
the other agreements, instruments and other documents
to be delivered hereunder or thereunder; and
e. such other matters as Imprimis shall
specify relating to the existence and good standing of
such company and the corporate and other necessary
authority for, and the validity of, each of the Note
Documents to which it is or is to be a party and any
other matters relevant to any of the foregoing.
9. Officer's Certificate. A certificate of
each of the Company, the Acquisition Subsidiary, signed and the
Other Obligors, signed on behalf of each such company by the
Senior Financial Officer thereof (the statements made in which
certificate shall be true on and as of the Investment Date),
certifying as to:
a. the due organization and good
standing of such company and each of its Subsidiaries
in their respective jurisdictions of organization and
the absence of any proceeding for the dissolution or
liquidation of such company or any of its Subsidiaries;
b. the completeness and accuracy of
all of the representations and warranties made by such
company in this Agreement and the other Note Documents
to which it is or is to be a party, before and after
giving effect to the issue and sale of the Notes and to
the application of the proceeds therefrom as
contemplated by Section IV(O)(1) on the Investment
Date;
c. the absence of any event occur-
ring and continuing, or resulting from the issue and
sale of the Notes or the consummation of any of the
other transactions contemplated hereby, that
constitutes a Default or an Event of Default;
d. neither such company nor any of
its Subsidiaries having changed its jurisdiction of
organization, having been a party to any merger,
consolidation or other similar transaction or having
issued or sold any shares of its capital stock (or
other ownership or profit interests therein), or any
warrants, options or other rights therefor, at any time
following the date of the most recent unaudited
consolidated financial statements of such company and
its Subsidiaries referred to in Section IV(E)(1);
e. the absence of any existing or, to
the best of his knowledge, threatened event or
circumstance applicable to such company or any of its
Subsidiaries that could reasonably be expected to
impair the ability of such Company to repay the Notes;
and
f. the satisfaction of all condi-
tions precedent by such Company to the issuance and
sale of the Notes on and as of the Investment Date.
10. Solvency Certificates. A certificate from
the chief financial officer of each of the Company and the
Acquisition Subsidiary, in substantially the form of Exhibit D
attached hereto, attesting to the Solvency of each such company
and its Subsidiaries, taken as a whole, immediately before and
immediately after giving effect to the Note Documents and all of
the transactions contemplated hereby or thereby to occur on or
about the Investment Date and assuming the sale and purchase of
Notes on such date in an aggregate principal amount of $500,000.
11. Financial Information. Copies of (a) the
audited consolidated financial statements of the Company and its
Subsidiaries referred to in Section IV(E)(1), accompanied by an
unqualified opinion of Ernst & Young LLP, independent
accountants of the Company, and (b) the unaudited financial
statements of the Company and its Subsidiaries referred to in
Section IV(E)(1), together with a certificate of a Senior
Financial Officer of the Company with respect thereto.
12. Consents. Certified copies of all
Governmental Authorizations, and all consents, approvals and
authorizations of, and notices to and other actions by, all
Persons with whom the Company, the Acquisition Subsidiary, or
any of their respective Subsidiaries has any contractual
obligations, as shall be required for the execution, delivery or
performance of this Agreement and the other Note Documents or
the consummation of the issuance and sale of the Notes or any of
the other transactions contemplated hereby or thereby.
13. Existing Indebtedness. Certified copies of
all of the agreements, instruments and other documents
evidencing or setting forth the terms and conditions of the
Indebtedness of the Company, the Acquisition Subsidiary and
their respective Subsidiaries existing on the Investment Date
and in an aggregate amount of at least $100,000 (all of which
Indebtedness is described on Schedule IV(U) attached hereto).
14. UCC Searches. Certified copies of requests
for copies or information on Form UCC-11, listing all effective
financing statements which name as debtor the Other Obligors,
the Company or the Acquisition Subsidiary, tax liens and
judgment liens, together with copies of such financing
statements, none of which, except as otherwise agreed to in
writing by Imprimis, shall cover any of the Collateral.
15. Foreign Qualifications. A certificate,
dated as of a date not more than 10 Business Days prior to the
Investment Date, of the appropriate official(s) of the states of
incorporation and each state of foreign qualification of the
Company, the Acquisition Subsidiary and their respective
Subsidiaries, certifying as to the subsistence in good standing
of, and the payment of taxes by, such Person in such states and
listing all charter documents of such Person on file with such
official(s);
16. Acquisition. A complete and accurate copy
of the agreements pursuant to which the Acquisition is being
consummated, together with such evidence of the completion of
the Acquisition as Imprimis shall reasonably request; and
17. Additional Documentation. Such other
information as Imprimis may reasonably request.
B. OPINIONS OF COUNSEL.
Imprimis shall have received the favorable opinions,
dated the Investment Date, of (a) Xxxxxxx Xxxxxx & Green, P.C., special
counsel for the Company, in substantially the form of Exhibit E-1
attached hereto or otherwise in form and substance satisfactory to
Imprimis, and addressing such other matters as Imprimis (or its counsel)
may reasonably request (and the Company hereby instructs its special
counsel to deliver such opinion to Imprimis), and (b) Jacob & Xxxxxxxxxx,
special counsel for the Company, in substantially the form of Exhibit E-2
attached hereto or otherwise in form and substance satis factory to
Imprimis, and addressing such other matters as Imprimis (or its counsel)
may reasonably request (and the Company hereby instructs its special
counsel to deliver such opinion to Imprimis).
C. PAYMENT OF ACCRUED FEES AND EXPENSES.
Without limiting the provisions of Section XII(A), accrued fees
and expenses incurred by the Investors in connection with the
transactions contemplated by this Agreement and the other Note Documents
(including, without limitation, the accrued fees and expenses of special
counsel to the Investors), in an amount up to $75,000, to be paid by the
Company on or prior to the Investment Date shall have been paid
D. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of each of the
Obligors contained in this Agreement and each of the other Note Documents
shall be complete and correct on the Investment Date, before and after
giving effect to the issue and sale of the Notes and to the application
of the proceeds therefrom as contemplated by Section IV(O)(1).
E. NO DEFAULT.
After giving effect to the issue and sale of the Notes
and to the application of the proceeds therefrom as contemplated by
Section IV(O)(1), no Default or Event of Default shall have occurred and
be continuing.
F. INVESTMENT PERMITTED BY APPLICABLE REQUIREMENTS OF LAW, ETC.
The purchase of and any payment for the Notes to be
purchased on the Investment Date (a) shall be permitted by the applicable
Requirements of Law of each jurisdiction to which such Investor is
subject, (b) shall not violate any applicable Requirements of Law
(including, without limitation, Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System) and (c) shall not subject such
Investor to any tax, penalty or other liability under or pursuant to any
applicable Requirements of Law.
G. NO LITIGATION OR OTHER PROCEEDINGS.
Except as disclosed in the SEC Reports or as described
on Schedule IV(H) attached hereto, there shall exist no action, suit,
investigation, litigation or proceeding pending or, to the best knowledge
of the Company, threatened against or affecting any of the Obligors or
any of their respective Subsidiaries or any of the property or assets
thereof in any court or before any arbitrator or by or before any other
Governmental Authority of any kind that (a) either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect
or (b) challenges the legality, validity, binding effect or
enforceability of this Agreement or any of the other Note Documents or
the consummation of the sale and purchase of the Notes or any of the
other transactions contemplated hereby or thereby.
H. NO MATERIAL ADVERSE CHANGE.
Except as disclosed in the SEC Reports or as described
on Schedule IV(E)(2) attached hereto, since December 31, 1996, there
shall not have occurred (in the judgment of the Investors) a material
adverse change in the business, condition (financial or otherwise),
operations, results of operations, assets, property, liabilities or
prospects of the Company, the Acquisition Subsidiary or their respective
Subsidiaries.
IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the
Investors that as of the Investment Date:
A. ORGANIZATION; POWER AND AUTHORITY; CAPITALIZATION; WARRANTS.
The Company and each of its Subsidiaries are Persons
duly organized, validly existing and in good standing under the laws of
their respective jurisdictions of organization and are duly qualified as
foreign corporations or other entities and are in good standing in each
other jurisdiction in which the ownership, lease or operation of their
property and assets or the conduct of their businesses requires such
qualification, other than any such jurisdiction in which the failure to
be so qualified or in good standing, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect. The Company and each of its Subsidiaries have all corporate and
other necessary power and authority, and the legal right, to own or to
hold under lease all of the property and assets they purport to own or
hold under lease and to conduct the business they conduct and propose to
conduct. Each of the Obligors has all corporate and other necessary power
and authority, and the legal right, to execute and deliver this
Agreement, the Notes and the other Note Documents to which it is or is to
be a party, to perform its Obligations hereunder and thereunder and to
consummate all of the transactions contemplated hereby and thereby,
including the Acquisition. On the Investment Date after giving effect to
the transactions contemplated hereunder to occur on the Investment Date,
the authorized Capital Stock of the Company, the Acquisition Subsidiary
and the Other Obligors will consist of the securities described in
Schedule IV(A) hereto, all of which, in the case of the Capital Stock of
the Acquisition Subsidiary and the Other Obligors, is owned beneficially
and of record by the Company. Except for the possible issuance of the
Preferred Stock and any shares of Common Stock pursuant to the Warrants
and as disclosed in the SEC Reports or as set forth on Schedule IV(A)
hereto, there are no other shares of Capital Stock of the Company, the
Acquisition Subsidiary or the Other Obligors outstanding and no other
outstanding options, warrants, convertible or exchangeable securities,
subscriptions, rights (including pre-emptive rights), stock appreciation
rights, calls or commitments of any character whatsoever to which either
the Company, the Acquisition Subsidiary or the Other Obligors is a party
or may be bound requiring the issuance or sale of shares of any Capital
Stock of the Company, the Acquisition Subsidiary or the Other Obligors,
and there are no contracts or other agreements by which any of the
Company is or may become bound to issue additional shares of its capital
stock or any options, warrants, convertible or exchangeable securities,
subscriptions, rights (including preemptive rights), stock appreciation
rights, calls or commitments of any character whatsoever relating to such
shares. The Company has authorized, subject to requisite shareholder
approvals, the issuance of (a) the Preferred Stock, (b) the Warrants, and
(c) such number of shares of Common Stock as shall be necessary to permit
the Company to comply with its obligations to issue Common Stock upon
exercise of the Warrants, and has duly reserved such number of shares of
Common Stock solely for such purpose. The Preferred Stock and the Common
Stock to be delivered upon exercise of the Warrants, in each case if and
when issued, will be duly authorized, issued and outstanding, fully-paid
and non-assessable and will be issued free of any preemptive rights.
After giving effect to the transactions contemplated hereby and in the
Note Documents and the issuance to the Investors of, and payment of
consideration for, the Preferred Stock and the Warrants, all of the
issued and outstanding Capital Stock of the Company is and will be
validly issued, fully paid and non-assessable and free of all liens,
pledges and preemptive rights. The Warrants, if and when issued, will
evidence the right to purchase a number of shares of Common Stock equal
to 40.25% of the outstanding Common Stock on a fully diluted basis as of
the date of their issuance, taking into account any and all antidilution
adjustments necessitated by the issuance of any securities under this
Agreement.
B. AUTHORIZATION, ENFORCEABILITY, ETC.
This Agreement and each of the other Note Documents
have been duly authorized by all necessary corporate action (including,
without limitation, all necessary shareholder action) on the part of each
of the Obligors intended to be a party thereto. This Agreement has been,
and the Notes and each of the other Note Documents, when delivered
hereunder, will have been, duly executed and delivered by each of the
Obligors intended to be a party thereto. This Agreement constitutes, and
the Notes and each of the other Note Documents, when delivered hereunder,
will constitute, the legal, valid and binding obligations of each of the
Obligors intended to be a party thereto, enforceable against such Obligor
in accordance with their respective terms, except as such enforceability
may be limited by the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
C. DISCLOSURE.
All of the information furnished by or on behalf of any
of the Obligors or any of their respective Subsidiaries in writing to the
Investors pursuant to or in connection with this Agreement or any of the
other Note Documents or any other document, certificate or other writing
furnished to the Investors in connection with the sale and purchase of
the Notes or any of the other transactions contemplated hereby is
complete and correct in all material respects as of the date on which
such information was so provided; and all such information does not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made therein, in light of
the circumstances under which any such statements were made, not
misleading. All financial projections and forecasts that have been
prepared by the Company or any of its Subsidiaries and made available to
the Investors have been prepared in good faith based upon reasonable
assumptions and represented, at the time each such financial projection
or forecast was delivered to the Investors, such company's best estimate
of its future financial performance (it being recognized by the Investors
that such financial projections or forecasts are not to be viewed as
facts and that the actual results during the period or periods covered by
any such financial projections or forecasts may differ materially from
the projected or forecasted results).
D. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES, ETC.
Schedule IV(D) attached hereto sets forth all of the
Subsidiaries of the Company as of the Investment Date, showing, as to
each such Subsidiary, the correct name thereof, the jurisdiction of its
organization and the percentage of shares of each class of its capital
stock or similar equity interests outstanding that are owned by the
applicable company and/or one or more of its Subsidiaries. All of the
outstanding shares of capital stock or similar equity interests of each
Subsidiary shown on Schedule IV(D) attached hereto have been validly
issued, are fully paid and nonassessable and are owned by such company
and/or one or more of its Subsidiaries, free and clear of all Liens.
E. SEC REPORTS
The Company has filed, pursuant to the Securities Act
or the Exchange Act, as the case may be, all material forms, statements,
reports and documents (including all exhibits, amendments and supplements
thereto) (the "SEC Reports) required to be filed with respect to the
business and operations of the Company under each of the Securities Act
and the Exchange Act, and the respective rules and regulations
thereunder, and all of the SEC Reports complied in all material respects
with all applicable requirements of the Securities Act or the Exchange
Act, as the case may be, and the appropriate act and the rules and
regulations thereunder in effect on the date each such report was filed.
At the respective dates they were filed, none of the SEC Reports
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements, including
the schedules and notes thereto, of the Company included in the SEC
Reports complied as to form in all material respects with the applicable
accounting requirements and the published rules and regulations of the
SEC with respect thereto, fairly present the consolidated financial
position, results of operations and cash flows of the Company as of the
dates or for the periods indicated therein, subject, in the case of the
unaudited statements, to normal year-end adjustments and the absence of
certain footnote disclosures. All of the consolidated financial
statements referred to above in this subsection, including the schedules
and notes thereto, have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
respective periods covered thereby (except as may be indicated therein or
in the notes thereto).
F. FINANCIAL STATEMENTS.
1. The audited consolidated balance sheets of
the Company and its Subsidiaries as of December 31, 1995 and
December 31, 1996 and the related audited consolidated
statements of operations, stockholders' equity and cash flows of
the Company and their respective Subsidiaries for the Fiscal
Years ended December 31, 1995 and December 31, 1996, in each
case including the schedules and notes thereto and accompanied
by an opinion of Ernst & Young LLP, the independent accountants
of the Company, and the consolidated balance sheets of the
Company and its Subsidiaries as of September 30, 1997 and the
related consolidated statements of operations, stockholders'
equity and cash flows of the Company and its Subsidiaries for
the nine-month period then ended, duly certified by a Senior
Financial Officer of the Company, copies of all of which have
been furnished to the Investors, and fairly present (subject, in
the case of such balance sheet as of September 30, 1997 and such
statements of operations, stockholders' equity and cash flows
for the nine month period then ended, to normal year-end audit
adjustments and the inclusion of footnotes) the consolidated
financial condition of the Company and its Subsidiaries as at
such dates and the consolidated results of operations and cash
flows of the Company and its Subsidiaries for the respective
periods ended on such dates. All of the financial statements
referred to above in this subsection, including the schedules
and notes thereto, have been prepared in accordance with
generally accepted accounting principles applied consistently
throughout the respective periods covered thereby (except as may
be indicated therein or in the notes thereto).
2. Except as disclosed in the SEC Reports or
as set forth on Schedule IV(F)(2) attached hereto, since
December 31, 1996, there has been (i) no material adverse change
in the business, condition (financial or otherwise), operations,
results of operations, assets, property, liabilities or
prospects of the Company or its Subsidiaries, and (ii) no
development, event or circumstance relating to or affecting the
Company or any of its Subsidiaries that, either individually or
in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect, provided that no development,
event or circumstance set forth on Schedule IV(F)(2) has had or
could reasonably be expected to have a Material Adverse Effect
of the type described in clauses (b) or (c) of the definition
thereof.
3. There are no liabilities or obligations of
the Company or any of its Subsidiaries of any nature whatsoever
(whether absolute, contingent, accrued or otherwise and whether
or not due) that, either individually or in the aggregate, could
reasonably be expected to be material to the Company, either
individually or together with its Subsidiaries, in each case
except for those liabilities and obligations that are fully
disclosed in the unaudited consolidated financial statements of
the Company referred to in subsection (1) of this Section IV(F)
or on Schedule IV(F)(2) or IV(F)(3) attached hereto.
G. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by each of the
Obligors of each of the Note Documents to which it is or is to be a party
and the consummation of the sale and purchase of the Notes and the other
transactions contemplated hereby and thereby do not (a) contravene such
Obligor's certificate of incorporation or bylaws (or similar
organizational documents), (b) violate any Requirement of Law, (c)
conflict with or result in the breach of, or constitute a default under,
any loan or purchase agreement, indenture, mortgage, deed of trust,
lease, instrument, contract or other agreement binding on or affecting
such Obligor, any of its Subsidiaries or any of their respective property
or assets the violation or breach of which, either individually or in the
aggregate, could reasonable be expected to have a Material Adverse Effect
or (d) except for the Liens created under the Collateral Documents,
result in or require the creation or imposition of any Lien upon or with
respect to any of the property or assets of such Obligor or any of its
Subsidiaries. Neither of the Obligors nor any of their respective
Subsidiaries is in violation of any of the terms of its certificate of
incorporation or bylaws (or similar organizational documents) or any
Requirement of Law or in breach of any loan or purchase agreement,
indenture, mortgage, deed of trust, lease, instrument, contract or other
agreement referred to in the immediately preceding sentence, the
violation or breach of which, either individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
H. GOVERNMENTAL AUTHORIZATIONS, ETC.
1. Except as disclosed in the SEC Reports, the
Company and, except as set forth on Schedule IV(H)(1), each of
its Subsidiaries and employees (i) own or possess all of the
Governmental Authorizations that are necessary to own or lease
and operate their respective property and assets and to conduct
their respective businesses as presently conducted, except where
and to the extent that the failure to obtain or maintain in
effect any such Governmental Authorization, either individually
or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, and (ii) have not received any notice
relating to or threatening the revocation, termination,
cancellation, denial, impairment or modification of any such
Governmental Authorization, nor is the Company or any of its
Subsidiaries in violation or contravention of, or in default
under, any such Governmental Authorization.
2. Except for requisite shareholder approvals
and SEC approvals requisite in connection with the filing of
documents related thereto, no Governmental Authorization, and no
consent, approval or authorization of, or notice to, or other
action by, any other Person, is required for the due execution,
delivery, recordation, filing or performance by any of the
Obligors of this Agreement or any of the other Note Documents to
which it is or is to be a party, or for the consummation of the
sale and purchase of the Notes or any of the other transactions
contemplated hereby and thereby, except for such Governmental
Authorizations, and such consents, approvals, authorizations,
notices and other actions, as are described on Schedule IV(H)(2)
attached hereto, all of which have been obtained or made on or
prior to the Investment Date and are in full force and effect or
will be obtained or made in accordance with the terms of the
Note Documents and, thereafter, will be in full force and
effect.
I. LITIGATION.
Except as described on Schedule IV(I) attached hereto,
there is no action, suit, investigation, litigation or proceeding pending
or, to the best knowledge of the Company, threatened against or affecting
any of the Obligors or any of their respective Subsidiaries or any of the
property or assets thereof in any court or before any arbitrator or by or
before any other Governmental Authority of any kind that (a) either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or (b) challenges the legality, validity, binding
effect or enforceability of this Agreement or any of the other Note
Documents or the consummation of the sale and purchase of the Notes or
any of the other transactions contemplated hereby or thereby, including
the Acquisition.
J. TAXES.
1. Each of the Obligors and, except as set
forth on Schedule IV(J), each of their respective Subsidiaries,
have filed or caused to be filed all tax returns and reports
that are required to have been filed in any jurisdiction, and
have paid all taxes shown to be due and payable on such returns
and all taxes shown to be due and payable on any assessments of
which such Obligor or such Subsidiary, as the case may be, has
received notice and all other taxes, assessments, levies, fees
and other governmental charges imposed upon any of the Obligors
or any of their respective Subsidiaries, or their property,
assets, income or franchises, to the extent such taxes,
assessments, levies, fees and other charges have become due and
payable and before they have become delinquent, except for
taxes, assessments, levies, fees or other governmental charg-
es the amount, applicability or validity of which is being
contested in good faith and by appropriate proceedings
diligently conducted and with respect to which such Obligor or
such Subsidiary, as the case may be, has established reserves in
accordance with GAAP in effect from time to time.
2. As of the Investment Date, neither any of
the Obligors nor any of their respective Subsidiaries or
Affiliates has entered into an agreement or waiver or been
requested to enter into an agreement or waiver extending any
statute of limitations relating to the payment or collection of
taxes of any such Obligor or any such Subsidiary or Affiliate,
or is aware of any circumstances that would cause the taxable
years or other taxable periods of any of the Obligors or any of
their respective Subsidiaries or Affiliates not to be subject to
the normally applicable statute of limitations.
3. Neither the Company nor any of its
Subsidiaries is or at any time has been a member of an
affiliated, consolidated, combined or unitary group other than
such group of which the Company is the common parent (within the
meaning of Section 1504(a)(1) of the Internal Revenue Code).
4. None of the Obligors is an S corporation
with the meaning of Section 1361 of the Internal Revenue Code.
K. TITLE TO PROPERTY; LEASES.
The Obligors and each of their respective Subsidiaries
have good and sufficient title to, or a valid and enforceable leasehold
interest in, all of their respective property and assets that, either
individually or in the aggregate, are material, in each case free and
clear of all Liens other than the Liens expressly permitted under
Section VIII(B). All leases under which any of the Obligors or any of
their respective Subsidiaries are a lessor or a lessee are valid and
subsisting and are in full force and effect in all material respects.
L. SECURITY INTERESTS, ETC.
Each of the Collateral Documents create valid and
perfected first priority Liens on and security interests in the
Collateral (subject to Permitted Liens) in favor of Imprimis, securing
the payment of the Notes and all of the other Obligations of the Obligors
under or in respect of the Note Documents. All filings and other actions
necessary to perfect and protect such Liens and security interests have
been duly made or taken and are in full force and effect or will be duly
made or taken in accordance with the terms of the Note Documents; and all
filing and recording fees and taxes have been duly paid.
M. LICENSES, PERMITS, ETC.
1. The Company and, except as set forth on
Schedule IV(M)(1), each of its Subsidiaries and employees own or
possess all of the licenses, permits, franchises,
authorizations, consents and approvals, and own or have the
legal right to use all of the patents, copyrights, service
marks, trademarks and trade names (or other rights thereto),
that are necessary to own or lease and operate their respective
property and assets and to conduct their respective businesses
as presently conducted, without known conflict with the rights
of any other Person. Except as described on Part 1 of Schedule
IV(M) attached hereto, no action, suit, investigation,
litigation or proceeding of any Person is pending or, to the
best knowledge of the Company, is threatened challenging the use
of any such license, permit, franchise, authorization, consent,
approval, patent, copyright, service xxxx, trademark, trade name
or other right, or the validity or effectiveness thereof.
2. No product or service of the Company or,
except as set forth on Schedule IV(M)(2), any of its
Subsidiaries, materially infringes on any license, permit,
franchise, authorization, consent, approval, patent, copyright,
service xxxx, trademark, trade name or other right owned by any
other Person.
3. There is no material violation by any
Person of any right of the Company or, except as set forth on
Schedule IV(M)(3), any of its Subsidiaries, with respect to any
license, permit, franchise, authorization, consent, approval,
patent, copyright, service xxxx, trademark, trade name or other
right owned or used by the Company or, except as set forth on
Schedule IV(M)(3), any such Subsidiary.
N. ERISA.
1. The Company has not established, does not
maintain or sponsor, and is not required to contribute to any
ERISA Plan.
O. PRIVATE OFFERING BY THE COMPANY.
1. Neither the Company nor any Person acting
on their behalf has taken, or will take, any action that would
subject the issuance and sale of the Notes to the registration
requirements of Section 5 of the Securities Act.
2. Neither the Company nor any Person acting
on their behalf has directly or indirectly offered or sold the
Notes by any form of general solicitation or general
advertising, including, without limitation, any advertisement,
article, notice or other communication published in any
newspaper, magazine or similar media or any broadcast over
television or radio or any seminar or meeting whose attendees
have been invited by any form of general solicitation or general
advertising (within the meaning of Rule 502(c) of Regulation D
under the Securities Act).
P. USE OF PROCEEDS; MARGIN REGULATIONS.
1. The proceeds received from the sale of the
Notes will be used by the Company solely (i) to pay the
transaction costs and expenses incurred in connection with the
sale of the Notes as set forth in Schedule IV(P) hereof, (ii) to
complete the Acquisition, (iii) for working capital purposes of
the Acquisition Subsidiary and (iv) for general and
administrative expenses of the Company.
2. Neither the Company nor any of its
Subsidiaries is engaged in the business of extending credit for
the purpose of purchasing or carrying any "margin stock" (within
the meaning of Regulation G or U of the Board of Governors of
the Federal Reserve System (12 CFR 207)). No part of the
proceeds from the sale of the Notes will be used, directly or
indirectly, for the purpose of purchasing or carrying any
margin stock or for the purpose of purchasing, carrying or
trading in any securities under such circumstances as to involve
the Company in a violation of Regulation X of the Board of
Governors of the Federal Reserve System (12 CFR 224) or to
involve any broker or dealer in a violation of Regulation T of
the Board of Governors of the Federal Reserve System (12 CFR
220). Margin stock does not constitute more than 25% of the
value of the consolidated property and assets of the Company or
its Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 25% of the
value of such consolidated property and assets. None of the
transactions contemplated by this Agreement and the Note
Documents (including, without limitation, the direct and
indirect use of proceeds of the Notes) will violate or result in
a violation of the Securities Act or the Exchange Act or any of
the rules and regulations promulgated thereunder or in such
Regulation G, T, U or X, as applicable.
Q. STATUS UNDER CERTAIN STATUTES.
1. Neither the Company nor any of its
Subsidiaries is subject to regulation under the Investment
Company Act of 1940, as amended, the Public Utility Act of 1935,
as amended, or the Federal Power Act, as amended.
2. Neither the Company nor any of its
Subsidiaries is an "investment company", or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an
"investment company" (each as defined in the Investment Company
Act of 1940, as amended). Neither the sale and purchase of the
Notes nor the application of the proceeds therefrom or the
repayment thereof by the Company, nor the consummation of any
of the other transactions contemplated hereby, will violate any
provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
3. Neither the Company nor any of its
Subsidiaries is a "holding company," or a "subsidiary company"
of a "holding company", or an "affiliate" of a "holding company"
or of a "subsidiary company" of a "holding company" (each within
the meaning of the Public Utility Holding Company Act of 1935,
as amended).
4. Neither the Company nor any of its
Subsidiaries is a "personal holding company" (as defined in
Section 542 of the Internal Revenue Code).
5. The Company and each of its Subsidiaries
are current with all reports and documents, if any, required to
be filed with any securities commission or similar agency of any
applicable jurisdiction and are in compliance with all
applicable rules and regulations of such commissions and
agencies.
R. SECURITIES ACT MATTERS.
Subject to the accuracy of the Investors'
representations in V(A) and (V)(B), the offer, sale and issuance of the
Notes, the Preferred Stock and the Warrants to the Investors as
contemplated by this Agreement and the issuance and delivery of the
shares of Common Stock upon exercise of the Warrants are and will be
exempt from the registration and prospectus delivery requirements of the
Securities Act.
S. EMPLOYEE AND LABOR MATTERS.
Except as set forth in Schedule IV(S), during the three
years preceding the Investment Date, there has been no strike, work
stoppage, slowdown or other material labor dispute or grievance involving
the Company or any of its Subsidiaries or their respective employees, nor
is any such action, dispute or grievance pending or to the knowledge of
the Company, after due inquiry, threatened against the Company or any of
its Subsidiaries as of the Investment Date. Except as set forth in
Schedule IV(S), as of the Investment Date, neither the Company nor any of
its Subsidiaries is a party to any collective bargaining agreement and
has no knowledge after due inquiry of any pending or threatened effort to
organize any of their employees. Except as set forth in Schedule IV(S),
there are no pending retaliatory or wrongful discharge claims or
employment discrimination charges or complaints or administrative or
judicial complaints arising therefrom pending against the Company or any
of its Subsidiaries or against any of their employees before any
Governmental Authority, which have had or could reasonably be expected to
have a Material Adverse Effect, nor to the knowledge of the Company after
due inquiry are any such charges or complaints threatened against the
Company or any of its Subsidiaries. The Company and its Subsidiaries are
in compliance with all applicable statutes and orders relating to the
employment of labor, including, without limitation, any provision thereof
relating to wages, bonuses, collective bargaining agreements, equal pay,
occupational safety and health, equal employment opportunity and wrongful
or retaliatory termination of employment, except for such noncompliance
as in the aggregate would not result in a Material Adverse Effect.
T. ENVIRONMENTAL MATTERS.
Except as described on Schedule IV(T) attached hereto:
1. The operations and properties (whether
owned or eased) of the Company and each of its Subsidiaries
comply in all material respects with all Environmental Laws and
Environmental Permits, and all necessary Environmental Permits
have been obtained and are in full force and effect for all of
the operations and properties of the Company and each such
Subsidiary. All past noncompliance with any such Environmental
Laws or Environmental Permits, if any, has been resolved without
ongoing material obligations or costs to the Company or any of
its Subsidiaries. To the best knowledge of the Company, no
circumstances exist that, either individually or in the
aggregate, could reasonably be expected (i) to form the basis of
an Environmental Action against the Company or any of its
Subsidiaries or any of their properties or (ii) to cause any
such property to be subject to any restrictions on ownership,
occupancy, use or transferability under any Environmental Law.
2. There is no asbestos or asbestos-containing
material On any property owned or operated by the Company or any
of its Subsidiaries in violation of applicable Environmental Law
that could reasonably be expected to give rise to liability
thereunder.
3. Neither the Company nor any of its
Subsidiaries is undertaking, nor has any of them completed,
either individually or together with other potentially
responsible parties, any investigation or assessment or remedial
or response action relating to any actual or threatened release,
discharge or disposal of Hazardous Materials at any site,
location or operation, either voluntarily or pursuant to the
order of any Governmental Authority or the requirements of any
Environmental Law; and all Hazardous Materials generated, used,
treated, handled or stored at, or released, discharged or
disposed of on, or transported to or from, any property owned or
operated by the Company or any of its Subsidiaries have been
disposed of in a manner that does not violate, and could not
reasonably be expected to give rise to liability under, any
applicable Environmental Law.
4. Neither the Company nor any of its
Subsidiaries has received any notice from any Governmental
Authority regarding any violation or alleged violation of,
noncompliance or alleged noncompliance with, or liability or
potential liability under or in respect of, any Environmental
Law or Environmental Permit by the Company or any such
Subsidiary, nor does the Company or any such Subsidiary have
knowledge or have any reason to believe that any such notice
will be received or is being threatened.
U. NO BURDENSOME AGREEMENTS.
Neither the Company nor any of its Subsidiaries is a
party to any loan or purchase agreement, indenture, mortgage, deed of
trust, lease, instrument, contract or other agreement or subject to any
Requirement of Law or any charter or corporate or other similar
restriction that, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
V. EXISTING INDEBTEDNESS; FUTURE LIENS.
1. The SEC Reports, together with Schedule
IV(V) attached hereto, set forth a complete and correct list of
all outstanding Indebtedness of the Company and each of its
Subsidiaries as of the Investment Date after giving effect to
the Acquisition and the maturity dates of all such Indebtedness.
Neither the Company nor any of its Subsidiaries is in default,
and no waiver of default is currently in effect, in the payment
of any principal of or interest on any Indebtedness of the
Company or any such Subsidiary, and no event or condition exists
with respect to any Indebtedness of the Company or any such
Subsidiary that would permit (or that with notice or the lapse
of time, or both, would permit) one or more Persons to cause
such Indebtedness to become due and payable, or would require an
offer to prepay, redeem, repurchase, purchase or defease such
Indebtedness to be made, in each case prior to its stated
maturity or its regularly scheduled dates of payment.
2. Neither the Company nor any of its
Subsidiaries has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of
its property or assets, whether now owned or hereafter acquired,
to be subject to a Lien not expressly permitted under Section
VIII(B).
W. SOLVENCY.
The Company is and the Company and its Subsidiaries,
taken as a whole, are, and upon giving effect to the issuance and sale of
all of the Notes and the other transactions contemplated hereby,
including the Acquisition, will be, Solvent.
X. RELATED PARTY TRANSACTIONS.
Except as set forth in the SEC Reports:
1. no officer or director of the Company or
any of its subsidiaries and no member of the immediate family of
any officer or director thereof is indebted to the Company or
any of its Subsidiaries in any amount, nor is the Company or any
of its Subsidiaries indebted to (or committed to make loans or
extend or guarantee credit to or otherwise to make Investments
in) any of them;
2. to the best knowledge of the Company,
neither any officer or director of any of the Company or any
of its Subsidiaries nor any member of the immediate family of
any officer or director thereof has any direct or indirect
ownership or profit interest in any corporation or other entity
with which the Company or any of its Subsidiaries is affiliated
or with which the Company or any of its Subsidiaries has an
ongoing business relationship, or in any corporation or other
entity that competes with the Company or any of its
Subsidiaries, that exceeds 1% of the aggregate ownership and
profit interests therein; and
3. no officer or director of the Company or
any of its Subsidiaries and no member of the immediate family of
any officer or director thereof has any direct or indirect
financial interest in any material contract of the Company or
any of its Subsidiaries.
Y. MATERIAL CONTRACTS.
1. Except for the agreements, contracts,
plans, leases, arrangements and commitments set forth in the SEC
Reports or in Schedule IV(Y) attached hereto, neither the
Company nor any of its Subsidiaries is a party or subject to any
agreement, contract, plan, lease, arrangement or commitment that
(i) is material to the business, condition (financial or
otherwise), operations, results of operations, assets, property
or liabilities of the Company and its Subsidiaries, taken as a
whole, (ii) provides for the purchase in excess of $100,000 of
materials, supplies, goods, services, equipment or other
property or assets, except in the ordinary course of business,
(iii) involves any partnership, joint venture or other similar
arrangement or (iv) restricts the Company or any of its
Subsidiaries from engaging in or competing in any line of
business, with any Person or, except for limitations in standard
contracts, forms of which have been furnished to the Investors,
in any geographic area.
2. Each agreement, contract, plan, lease,
arrangement and commitment disclosed or required to be disclosed
pursuant to clause (1) of this Section IV(X) is the legal, valid
and binding obligation of the Company or its applicable
Subsidiary, enforceable against the Company or such Subsidiary
in accordance with its terms, and is in full force and effect;
and neither Company nor any of its Subsidiaries or, to the best
knowledge of the Company, any other party thereto is in
default in any material respect under the terms of any such
agreement, contract, plan, lease, arrangement or commitment.
Z. PARI PASSU OBLIGATIONS.
The Obligations for the payment of money of the Company
under this Agreement and the other Note Documents rank senior in right of
payment to all other Obligations for the payment of money of the Company
other than the outstanding Indebtedness of or to be assumed, in connec-
tion with the Acquisition, by the Company described on Schedule IV(Z)
attached hereto and any purchase money Indebtedness of the Company
incurred pursuant to Section VIII(C)(3). The Obligations for the payment
of money of the Company under this Agreement and the other Note Docu-
ments rank at least pari passu in right of payment with all outstanding
Indebtedness of the Company described on Schedule IV(Z) attached hereto
and all purchase money Indebtedness of the Company incurred pursuant to
Section VIII(C)(3).
AA. NO SIGNIFICANT SUBSIDIARIES.
Except as set forth on Schedule IV(AA), none of the
Subsidiaries of the Company is a "significant subsidiary" within the
meaning of Regulation S-X promulgated by the Securities and Exchange
Commission under the Securities Act.
AB. NO POWER OF ATTORNEY.
Neither the Company nor any of its Subsidiaries has
granted a power of attorney to any Person that would allow such Person to
sign or file any financing statement, mortgage, indenture, document,
agreement or other instrument that grants or creates a Lien on any
Collateral or any of the Company' or its Subsidiaries' assets.
V. REPRESENTATIONS AND COVENANTS OF THE INVESTORS.
A. PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for
your own account or for one or more separate accounts maintained by you,
in each case for investment and not with a view to the distribution
thereof or with any present intention of distributing or selling the
Notes; provided that the disposition of your property shall at all times
be within your control.
B. ACCREDITED INVESTORS.
You are an "accredited investor" (as defined in Rule
501 of Regulation D under the Securities Act) and by reason of your
business and financial experience, and the business and financial
experience of those Persons retained to advise you with respect to your
investment in the Notes and the Warrants, and you, together with such
advisors, have such knowledge, sophistication and experience in financial
and business matters as to be capable of evaluating the merits and risks
of the prospective investment, and are able to bear the economic risk of
such investment and, at the present time, are able to afford a complete
loss of such investment.
You have had the opportunity to ask questions of and
receive answers from the Company concerning the terms and conditions of
the Notes and other related matters. You further acknowledge that the
Company has made available to you or your representatives all documents
and information relating to an investment in the Notes requested by or on
behalf of you.
C. POWER AND AUTHORITY.
You confirm that you have the legal right and power and
all authority required to execute and deliver and to carry out the terms
of this Agreement and all other documents or instruments required hereby
to which you are a party.
VI. PREPAYMENTS AND REDEMPTIONS OF THE NOTES.
A. OPTIONAL PREPAYMENTS OF THE NOTES.
The Company may, at their option, upon not less than
five Business Days' prior written notice to the holders of the Notes,
prepay all or any part of the Notes, in an aggregate principal amount of
$100,000 (or, if less, the remaining aggregate principal amount of all
Notes outstanding at such time), at a purchase price in cash equal to
100% of the aggregate principal amount of the Notes so prepaid, plus all
accrued and unpaid interest thereon, if any, to the date of such
prepayment. Each notice of an optional prepayment of the Notes pursuant
to this Section VI(A) shall specify the date fixed for such prepayment,
the aggregate principal amount of the Notes to be prepaid on such date,
the principal amount of each Note held by such holder to be prepaid
(determined in accordance with Section VI(D)) and the interest to be paid
on the prepayment date with respect to such principal amount being
prepaid, and shall state that such prepayment is to be made pursuant to
this Section VI(A).
B. OFFER TO REPURCHASE NOTES AND REDUCE COMMITMENTS IN RESPECT OF A
CHANGE OF CONTROL.
1. Upon the occurrence of a Change of Control,
each holder of the Notes will have the right to require the
Company to repurchase all or any portion of the Notes of such
holder pursuant to an offer made in the manner described below
(each, a "Change of Control Offer"), at a purchase price in cash
equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the date of such
repurchase (the "Change of Control Payment"). Within three
Business Days following any Change of Control, the Company shall
deliver a notice, by facsimile confirmed the same day by
overnight courier service, to each holder of the Notes stating:
a. that the Change of Control
Offer is being made pursuant to this Section VI(B)
and that all Notes tendered shall be accepted
for repurchase;
b. the parties, and the events or
circumstances giving rise, to the Change of
Control for which such Change of Control Offer
is being made, in reasonable detail;
c. the repurchase price for the
Note or Notes of such holder and the Change of
Control Repurchase Date therefor;
d. that any Note not tendered for
repurchase shall continue to accrue interest
in accordance with the terms thereof;
e. that, unless the Company defaults
in the payment of the Change of Control Payment, all
Notes accepted for repurchase pursuant to the Change of
Control Offer shall cease to accrue interest after the
Change of Control Repurchase Date; and
f. that holders whose Notes are being
tendered for repurchase only in part shall be issued
new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with
the repurchase of the Notes as a result of a Change of Control. Any
holder of the Notes that elects to have all or a portion of its Notes
repurchased as part of the Change of Control Offer shall deliver notice
to the Company of its election at least five Business Days prior to the
scheduled Change of Control Repurchase Date. Any holder of a Note that
does not deliver to the Company notice accepting the Change of Control
Offer at least three Business Days prior to the Change of Control
Repurchase Date shall be deemed to have rejected such Change of Control
Offer. Notwithstanding the foregoing provisions of this Section VI(B)(1),
the failure of the Company to deliver the notice referred to in the third
sentence of this Section VI(B)(1) to any holder of the Notes shall not
affect or impair the obligation of the Company to purchase any Note from
such holder on the applicable Change of Control Repurchase Date.
2. On a date that is no earlier than 30 days
nor later than 60 days from the date that the Company deliver or
cause to be delivered notice of the Change of Control to the
holders or, if the Company fail to deliver such notice or cause
such notice to be delivered, on the date that is 30 days after
the occurrence of such Change of Control (the "Change of Control
Repurchase Date"), the Company (i) shall, to the extent lawful,
accept for repurchase all Notes or portions thereof properly
tendered in response to the Change of Control Offer, (ii) shall
pay to each of the holders of the Notes so accepted the Change
of Control Payment for its Notes and (iii) shall deliver to each
holder of Notes that only tendered a portion of its Notes new
Notes equal in aggregate principal amount to the unpurchased
portion of the Notes surrendered, if any, by such holder.
C. MANDATORY REDEMPTIONS OF THE NOTES.
1. Upon receipt by any of the Company or any
of its Subsidiaries of the Net Cash Proceeds from (i) the
issuance or incurrence by the Company or any of its Subsidiaries
of any Indebtedness (other than Indebtedness issued or incurred
pursuant to any of Sections VIII(C)(3) through VIII(C)(8) and
(ii) the sale or issuance by such Company or any of its
Subsidiaries of any shares of its capital stock (or other
ownership or profit interests therein) (other than any such sale
or issuance arising pursuant to those option and incentive
plans as in effect on the Investment Date and set forth on Part
2 of Schedule IV(A) attached hereto), any securities convertible
into or exchangeable for shares of its capital stock (or other
ownership or profit interests therein) or any warrants,
options or other rights for the purchase or acquisition of any
shares of its capital stock (or other ownership or profit
interests therein), the Company shall redeem outstanding Notes
in an amount equal to the lesser of (1) 100% of the aggregate
principal amount of all Notes outstanding on the date of such
redemption and (2) the amount of such Net Cash Proceeds, in
either case plus all accrued and unpaid interest on the
principal amount of the Notes so redeemed to the date of such
redemption and all fees, expenses and other payments due and
payable to the holders of the Notes under the Note Documents on
such date, provided, however, that the obligation pursuant to
subsection (ii) of this paragraph shall not arise from the sale
or issuance by the Company of capital stock pursuant to the
exercise of stock options or warrants (the "Existing Rights
Securities") issued under the warrant agreements and stock
option plans (the "Existing Rights Agreements") disclosed in the
SEC Reports for so long as the aggregate Net Cash Proceeds
received by the Company as a result of such issuances is less
than $500,000 and provided, further, that the terms of the
Existing Rights Securities, including the exercise or conversion
prices thereof, and the Existing Rights Agreements have not been
amended since the date on which they were issued.
2. Upon receipt by the Company or any of its
Subsidiaries of Net Cash Proceeds from any Asset Sale (other
than Asset Sales effected in the ordinary course of the
Company's or the applicable Subsidiary's business consistent
with past practice), the Company shall redeem outstanding Notes
in an amount equal to the lesser of (i) 100% of the aggregate
principal amount of all Notes outstanding on the date of such
redemption and (ii) the amount of such Net Cash Proceeds, in
either case plus all accrued and unpaid interest on the
principal amount of the Notes so redeemed to the date of such
redemption and all fees, expenses and other payments due and
payable to the holders of the Notes under the Note Documents on
such date.
D. ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment, repurchase or
redemption of the Notes pursuant to Section VI(A), VI(B), or VI(C), the
principal amount of the Notes to be prepaid, repurchased or redeemed
shall be allocated (in integral multiples of $1,000) among all of the
Notes at the time outstanding in proportion, as nearly as practicable, to
the respective unpaid principal amounts thereof not theretofore called
for prepayment, repurchase or redemption, with adjustments to the extent
practicable to compensate for any prior prepayments, repurchases or
redemptions not made exactly in such proportion.
E. MATURITY; SURRENDER, ETC.
In the case of each prepayment, repurchase or
redemption of the Notes pursuant to Section VI(A), VI(B) or VI(C), the
principal amount of each Note to be pre-paid, repurchased or redeemed
shall mature and become due and payable on the date fixed for such
prepayment, repurchase or redemption, together with accrued and unpaid
interest on such principal amount to such date. From and after such date,
unless the Company shall fail to pay such principal amount when so due
and payable, together with the accrued and unpaid interest thereon as
aforesaid, interest on such principal amount shall cease to accrue. Any
Note prepaid, redeemed or repurchased in full shall be surrendered to an
authorized representative of the Company and canceled and shall not be
reissued, and no Note shall be issued in lieu of any prepaid, repurchased
or redeemed principal amount of any Note.
F. CANCELLATION OF NOTES.
The Company will promptly cancel all Notes acquired by
it pursuant to any payment, prepayment or purchase of Notes in accordance
with the terms of this Agreement and the Notes, and no Notes may be
issued in substitution or exchange for any such Notes.
G. PAYMENT OF TRANSACTION FEE.
Simultaneously with the repayment or prepayment in full
of the Notes, the Company will pay to Imprimis a transaction fee of
$25,000.
VII. AFFIRMATIVE COVENANTS.
From the date of this Agreement and, thereafter, so
long as any of the Notes shall be outstanding, the Company will at all
times perform and comply, and will cause each of its Subsidiaries to
perform and comply, with each of the following covenants:
A. SHAREHOLDER APPROVAL.
1. The Company shall, as soon as possible, but no later
than 30 days after the Investment Date and in accordance with its
certificate of incorporation, by-laws, the applicable rules of the
National Association of Securities Dealers, Inc. and the Nasdaq Stock
Market ("NASDAQ"), and any Requirements of Law, seek to obtain any and
all requisite shareholder approvals of the issuance of Common Stock of
the Company pursuant to the Warrants and provide evidence reasonably
satisfactory to the Investors that such approvals have been obtained. The
Company shall submit to the Investors for their prior approval copies of
the resolutions or written consents under which shareholders pursuant to
which the shareholders will evidence such approval and any and all other
documents to be sent to shareholders in connection with seeking such
approval.
2. In the event that the Company shall fail to receive
the shareholder approvals or to provide to the Investors satisfactory
evidence thereof as contemplated by Section VII(A)(1), in either case on
or prior to January 31, 1998, in addition to Imprimis' right to demand
immediate repayment of the principal amount of the Notes, together with
accrued but unpaid interest, as provided in Article IX, and in addition
to the Preferred Stock and the Warrants to be acquired pursuant to
Article II, the Company shall issue on January 31, 1998 to Imprimis
pursuant to documentation reasonably acceptable to Imprimis five year
nonredeemable warrants to purchase 250,000 shares of Common Stock with
(A) an exercise price per share equal to $1 and 11/16 (the closing price
for the Common Stock on NASDAQ on December 18, 1997), subject to
customary antidilution adjustment for economic or other dilution, and (B)
immediate demand registration rights relating to the Common Stock
issuable pursuant to such warrants.
B. INFORMATION COVENANTS.
The Company will furnish to each holder of the Notes:
1. Copies of each SEC Report filed by the
Company within three days of such a filing including, if
applicable, the consolidated financial statements of the Company
and its Subsidiaries filed with any such SEC Report and an
opinion of Ernst & Young LLP or such other accountants, as the
case may be, (i) to the effect that such consolidated xxxxx-
cial statements have been prepared in accordance with generally
accepted accounting principles in effect for the Fiscal Year
covered thereby and consistently applied and (ii) that is not
limited as to the scope of the audit; and
2. Compliance Certificate. At the time of
delivery of the consolidated financial statements of the Company
and its Subsidiaries provided for in Sections VII(B)(1), a
compliance certificate of the Company, in substantially the form
of Exhibit E hereto, duly certified by a Senior Financial
Officer thereof, (i) stating that, to the best of such Senior
Financial Officer's knowledge after due inquiry, no Default or
Event of Default has occurred and is continuing or, if a Default
or an Event of Default has occurred and is continuing, a
statement as to the nature thereof and the action that the
Company have taken and propose to take with respect thereto, and
(ii) setting forth a description in reasonable detail of all of
the changes, if any, from GAAP in the generally accepted
accounting principles applied in the preparation of such
financial statements.
3. Auditor's Reports. Promptly upon receipt
thereof, copies of all "management letters" or other written
reports submitted to the Company or any of its Subsidiaries by
Ernst & Young LLP or any other independent accountants of the
Company or any of its Subsidiaries in connection with each
annual, interim or special audit of its financial statements
made by such accountants (including, without limitation, any
comment letter submitted by such accountants to management of
the Company or any such Subsidiary in connection with their
annual audit and any reports addressing internal accounting
controls of the Company or any such Subsidiary submitted by such
accountants), and all responses of the management of the
Company or such Subsidiary thereto.
4. SEC and Other Reports. Promptly upon
transmission or receipt thereof, (a) copies of any filings and
registrations with, and any reports or notices to or from, the
Securities and Exchange Commission or any successor agency
thereto, and copies of all financial statements, proxy
statements, notices and reports that the Company or any of its
Subsidiaries shall send to any holder of Indebtedness owed by
the Company or any of its Subsidiaries pursuant to the terms of
the documentation governing such Indebtedness or to any trustee,
agent or other representative therefor and (b) copies of all
press releases and other statements made available by the
Company or any of its Subsidiaries to the public.
5. Notice of Default, Etc. Promptly, and in
any event within three Business Days after a Responsible Officer
obtains actual knowledge thereof, notice of the occurrence of
(a) each Default or Event of Default, or any event, development
or occurrence that, either individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect,
setting forth in reasonable detail the nature of such Default or
Event of Default or event, development or occurrence and the
action that the Company have taken and propose to take with
respect thereto, (b) any actual or threatened revocation,
termination, cancellation, denial or impairment of, or refusal
to renew or extend, or modification or other change to, any
Governmental Authorization necessary or desirable for the
Company or any of its Subsidiaries to own or lease and operate
their respective property and assets or to conduct their
respective businesses as conducted or as proposed to be
conducted and (c) a Change of Control or any change in the
members of the board of directors of, or any material change in
the management of, the Company or any of its Subsidiaries.
6. Litigation. Promptly after the commencement
thereof, notice of all actions, suits, investigations,
litigations and proceedings of the types described in Section
IV(I) in any court or before any arbitrator or by or before any
Governmental Authority of any kind binding upon or affecting the
Company or any of the Subsidiaries or any of their respective
property or assets.
7. Environmental Matters. Promptly and in any
event within three Business Days after a Responsible Officer of
the Company obtains knowledge thereof, notice of the occurrence
of one or more of the following:
a. any pending or threatened Envi-
ronmental Action against the Company or any of
its Subsidiaries or any of the property owned
or operated by the Company or any such Subsid-
iary;
b. any condition or occurrence on or
arising from any property owned or operated by the
Company or any of its Subsidiaries that (i) results or
is alleged to have resulted in noncompliance by the
Company or any such Subsidiary with any applicable
Environmental Law or (ii) could reasonably be expected
to form the basis of an Environmental Action against
the Company or any such Subsidiary or any of their
respective property; and
c. the taking of any removal or
remedial action in response to the actual or alleged
presence of any Hazardous Material on any property
owned or operated by the Company or any of its
Subsidiaries as required by any Environmental Law, any
Environmental Permit or any Governmental Authority.
All such notices shall describe in reasonable detail
the nature of the claim, investigation, condition, occurrence, removal or
remedial action and the Company's or such Subsidiary's response thereto.
In addition, the Company will provide you with copies of all reports,
notices and written information to and from the United States
Environmental Protection Agency or any state or local agency responsible
for environmental matters, all communications with any Person (other than
its attorneys) relating to any Environmental Action of which notice is
required to be given pursuant to this subsection (k), and such detailed
reports of any such Environmental Action as the Required Holders may from
time to time reasonably request.
8. Insurance Compliance Certificate. Within 20
days after the end of each Fiscal Year, the Company shall
furnish a compliance certificate by the Company, duly certified
by a Senior Financial Officer thereof, stating that the Company
and its Subsidiaries have in full force and effect insurance
coverage with reputable insurers which, in respect of, amounts,
premiums, types and risks insured, constitutes adequate coverage
against all risks customarily insured against by companies
comparable to the Company and its Subsidiaries.
9. Indebtedness Documents. Promptly after the
occurrence thereof or the request therefor, copies of any
amendment, waiver or other modification of the terms of any of
the Indebtedness of the Company or any of its Subsidiaries and
outstanding in an aggregate amount of at least $100,000, or any
notice of default delivered thereunder.
10. Acquisitions. Promptly after the
occurrence thereof in the case of material acquisitions, or upon
request therefor in the case of non-material acquisitions,
copies of all documents executed in connection with any such
acquisition by the Company or any of its Subsidiaries or
prepared by the Company in connection with such acquisition.
11. Requested Information. With reasonable
promptness, such other information and documents relating to the
condition (financial or otherwise), business, operations,
results of operations, performance, property, assets or
liabilities of the Company or any of its Subsidiaries as may
from time to time be reasonably requested by the Required
Holders.
C. COMPLIANCE WITH LAW.
1. The Company will and will use its best
efforts to cause each of its Subsidiaries to (a) comply with all
Requirements of Law to which each of them and their respective
property and assets are subject and all applicable restrictions
imposed on each of them and their property and assets by any
Governmental Authority (including, without limitation, ERISA and
all Environmental Laws), and (b) except as provided in Section
VII(G), obtain and maintain in effect all Governmental
Authorizations that are necessary (i) to own or lease and
operate their respective property and assets and to conduct
their respective businesses as presently conducted, except where
and to the extent that the failure to obtain or maintain in
effect any such Governmental Authorization, either individually
or in the aggregate, could not reasonably be expected to have
a Material Adverse Effect, or (ii) for the due execution,
delivery, recordation, filing or performance by any of the
Obligors of this Agreement or any of the other Note Documents to
which it is or is to be a party, or for the consummation of the
sale and purchase of the Notes or any of the other transactions
contemplated hereby and thereby, including the Acquisition,
except for such Governmental Authorizations as are described
on Schedule IV(H) attached hereto, all of which will be obtained
or made in accordance with the terms of the Note Documents and,
thereafter, will be in full force and effect.
2. Neither the Company nor any of its
Subsidiaries will generate, use, treat, store, release or
dispose of, or permit the generation, use, treatment, storage,
release or disposal of Hazardous Materials on any property now
or hereafter owned or operated by the Company or any such
Subsidiary, or transport or permit the transportation of
Hazardous Materials to or from any such property, except for
Hazardous Materials used or stored at any such property in
compliance with all applicable Environmental Laws and
Environmental Permits and reasonably required in connection with
the operation, use and maintenance of any such property in the
ordinary course of the Company's or any such Subsidiary's
business.
D. MAINTENANCE OF INSURANCE.
The Company will and will cause each of its
Subsidiaries to maintain insurance with respect to their respective
properties, assets and businesses with insurers that have, or that have
directly reinsured such insurance with insurers that have, an A.M. Best
Company claims paying ability rating of "A-" (or the then equivalent
rating) and against such casualties and contingencies, of such types, on
such terms and in such amounts (including deductibles, co-insurance and
self-insurance, if adequate reserves are maintained with respect thereto)
as is customary in the case of companies of established reputations
engaged in the same or a similar business and similarly situated, as may
otherwise be required by applicable Requirements of Law or by the
Collateral Documents or as may otherwise be reasonably required by the
Required Holders, including, without limitation, workers' compensation
insurance, liability insurance, casualty insurance and business
interruption insurance.
E. MAINTENANCE OF PROPERTIES.
The Company will and will use its best efforts to cause
each of its Subsidiaries to maintain and keep their respective properties
and assets in good repair, working order and condition (other than as a
result of ordinary wear and tear or casualty and condemnation).
F. PAYMENT OF TAXES AND CLAIMS; PERFORMANCE OF MATERIAL OBLIGATIONS.
1. The Company will and will cause each of its
Subsidiaries to pay and discharge all taxes, assessments,
levies, fees and other governmental charges imposed upon them or
any of their properties, assets, income or franchises, to the
extent such taxes, assessments, levies, fees and other
governmental charges have become due and payable and before they
have become delinquent, and all claims for which sums have
become due and payable that have resulted or could result in a
Lien upon any of the property or assets of the Company or any of
its Subsidiaries; provided, however, that neither the Company
nor any of its Subsidiaries shall be required to pay or to
discharge any such tax, assessment, levy, fee, other charge or
claim the amount, applicability or validity of which is being
contested in good faith and by appropriate proceedings
diligently conducted and with respect to which the Company or
such Subsidiary, as the case may be, has established reserves in
accordance with generally accepted accounting principles in
effect from time to time, unless and until any Lien resulting
therefrom attaches to its property and assets and becomes
enforceable by its other creditors, and only for so long as the
failure to pay or to discharge any such tax, assessment, levy,
fee, other charge or claim, either individually or in the
aggregate, could not reasonably be expected to have a Material
Adverse Effect.
2. The Company will and will cause each of its
Subsidiaries to perform all of its obligations under the terms
of each loan or purchase agreement, indenture, mortgage, deed of
trust, lease, instrument, contract and other agreement binding
on or affecting it, except where the failure to so perform,
either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
G. PRESERVATION OF CORPORATE EXISTENCE, ETC.
1. The Company will preserve and keep in full
force and effect its corporate existence, good standing and
rights in the state of Delaware. The Company will preserve and
keep in full force and effect the corporate existence and good
standing of each of its Subsidiaries and all permits, licenses,
approvals, rights, privileges and franchises of the Company and
its Subsidiaries; provided, however, that the Company or any of
its Subsidiaries may consummate any merger, consolidation,
liquidation, dissolution or winding up otherwise permitted under
Section VIII(F); and provided further, however, that nothing in
Section VII(C) or in this sentence of Section VII(G)(1) shall
prevent the Company or any of its Subsidiaries from terminating
or failing to preserve and keep in full force and effect any
such permit, license, approval, right, privilege or franchise if
such applicable company has determined in its good faith
judgment that such termination or failure to preserve, either
individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
2. The Company will and will cause each of its
Subsidiaries to duly qualify and to remain duly qualified as a
foreign corporation or other entity, and to be and remain in
good standing, in each jurisdiction in which the ownership,
lease or operation of its property and assets or the conduct of
its businesses requires such qualification, except in any such
jurisdiction in which the failure to be so qualified or in good
standing, either individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
H. MAINTENANCE OF BOOKS AND RECORDS; INSPECTION; CONFIDENTIALITY.
1. The Company will and will cause each of its
Subsidiaries to keep proper records and books of account in
which complete, correct and reasonably detailed entries shall be
made of all financial transactions and of all of the property,
assets and businesses of the Company and each such Subsidiary
(including, without limitation, the establishment and
maintenance of adequate and appropriate reserves) in
conformity with generally accepted accounting principles in
effect from time to time and all Requirements of Law. The
Company will xxxx all of its books and records relating to the
Collateral (including, without limitation, its share register)
in such a manner as to properly evidence the Collateral
Documents and the Liens and security interests created
thereunder.
2. The Company shall and shall cause each of
its Subsidiaries to permit the Investors and any of the agents
or representatives thereof, upon reasonable notice, during
normal business hours and at the expense of the Company, at any
time and from time to time to visit and inspect any of the
offices or properties of, and to examine and make copies of and
abstracts from the records and books of account of, the Company
and/or any of its Subsidiaries, and to discuss the affairs,
finances and accounts of the Company and/or any such Subsidiary,
as the case may be, with, and be advised as to the same by,
their officers, directors and independent accountants (and, by
this Subsection (2), the Company authorizes each such officer,
director and independent accountant to discuss the affairs,
finances and accounts of the Company and its Subsidiaries with
such Person).
3. Except to the extent required by law, the
Investors will keep secret and confidential
all non-public information concerning the Company and its
Subsidiaries and will not, based upon such non-public
information, purchase or otherwise acquire (or enter into any
agreement or make any proposal to purchase or otherwise acquire)
any securities of the Company, any warrant or option to purchase
such securities, any security convertible into any such
securities or any other right to acquire such securities, or
sell or otherwise deal in any such securities (or facilitate or
encourage the trading of any such securities by any other
person), for so long as such purchase, sale or other dealing
would be prohibited under the applicable securities laws.
I. USE OF PROCEEDS.
The Company will use the proceeds of the sale and
purchase of the Notes solely for the purposes set forth in Section
IV(P)(1).
J. SEARCH REPORTS.
The Company will, as promptly as practicable after the
Investment Date but not later than 30 days after the Investment Date,
deliver to the Investors completed requests for information listing the
financing statements referred to in Section III(A)(3)(a) and all other
effective financing statements filed in the jurisdictions referred to in
Section III(A)(3)(a) that name the Company or any of its Subsidiaries as
debtor, together with copies of such other financing statements.
VIII. NEGATIVE COVENANTS.
From the date of this Agreement and, thereafter, so
long as any of the Notes shall be outstanding, the Company will perform
and comply, and will cause each of its Subsidiaries to perform and
comply, at all times with each of the following covenants:
A. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any of its
Subsidiaries to directly or indirectly enter into, renew, extend or
engage in any transaction or series of related transactions (including,
without limitation, the purchase, sale, lease, transfer or exchange of
property or assets of any kind or the rendering of services of any kind)
with any of its Affiliates, except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate
thereof; provided that the foregoing restrictions of this Section VIII(A)
shall not apply to:
1. any transaction or series of related
transactions solely between the Company and one or more of its
Subsidiaries or between or among Subsidiaries of the Company, to
the extent such transactions or series of related transactions
are otherwise permitted under the terms of the Note Documents;
2. transactions otherwise permitted
under Section VIII(E); and
3. the payment of reasonable and custom-
ary director fees to directors of the Company that
are not employees thereof.
B. LIMITATIONS ON LIENS.
1. The Company will not and will not permit
any of its Subsidiaries to create, incur, assume or suffer to
exist any Lien on or with respect to any of its property or
assets of any character, whether now owned or hereafter
acquired, to file or suffer to exist under the Uniform
Commercial Code or any similar law or statute of any
jurisdiction, a financing statement (or the equivalent thereof)
that names the Company or any of its Subsidiaries as debtor, to
sign or suffer to exist any security agreement authorizing any
secured party thereunder to file such financing statement (or
the equivalent thereof), to sell any of its property or assets
subject to an understanding or agreement, contingent or
otherwise, to repurchase such property or assets (including
sales of accounts receivable with recourse to the Company or any
of its Subsidiaries), or to assign any accounts or other right
to receive income; excluding, however, from the operation of the
foregoing restrictions of this Section VIII(B) the following:
a. Permitted Liens;
b. Liens in favor of Imprimis cre-
ated under the Collateral Documents;
c. Liens existing on the date of
this Agreement and described in Schedule
VIII(B) attached hereto;
d. purchase money Liens upon or in
property or assets acquired or held by the Company or
any of its Subsidiaries in the ordinary course of
business to secure the purchase price of any such
property or asset or to secure Indebtedness incurred
solely for the purpose of financing the acquisition,
construction or improvement of such property or asset
to be subject to such Liens, or Liens existing on any
such property or asset at the time of or within 90 days
after the date of its acquisition (other than any
such Liens created in contemplation of such acquisition
that do not secure the purchase price of such property
or asset); provided, however, that no such Lien shall
extend to or cover any property or assets other than
the property or asset being so acquired, constructed or
improved; and provided, however, that the aggregate
principal amount of Indebtedness secured by Liens
permitted under this clause (d) shall not exceed the
lesser of (i) the cost to the applicable Company or the
applicable Subsidiary of the property or asset to be
subject to any such Lien and (ii) the amount otherwise
permitted to be incurred therefor under the terms of
this Agreement;
e. Liens arising in connection with
Capitalized Leases otherwise permitted under Section
VIII(C)(4); provided that no such Lien shall extend to
or cover any property or assets other than the property
and assets subject to such Capitalized Leases;
f. Liens upon any property and assets
(other than any shares of capital stock of, or other
ownership or profit interests in, any Person) existing
at the time such property or asset is purchased or
otherwise acquired by the Company or any of its
Subsidiaries; provided that, in each case, any such
Lien was not created in contemplation of such purchase
or other acquisition and does not extend to or cover
any property or assets other than the property or asset
being so purchased or otherwise acquired; and provided
further that any Indebtedness or other obligations
secured by such Liens shall otherwise be permitted
under the terms of the Note Documents;
g. deposits to secure the performance
of leases of property (whether real, personal or mixed)
of the Company and its Subsidiaries (excluding
Capitalized Leases) in the ordinary course of business;
and
h. the replacement, extension or
renewal of any Lien permitted under clause (d) or (e)
of this Section VIII(B)(1) solely upon or in the same
property and assets theretofore subject thereto;
provided that any Indebtedness secured by such Liens
shall otherwise be permitted under the terms of the
Note Documents.
2. The Company will not and will not permit
any of its Subsidiaries to enter into, assume or suffer to exist
any agreement prohibiting, conditioning or otherwise
restricting the creation or assumption of any Lien upon any of
its property or assets, whether now owned or hereafter acquired,
or requiring the grant of any assignment or security for any
Obligation if an assignment or security is given for any other
Obligation, other than:
a. any such agreement with the
Investors;
b. any such agreement evidencing
or setting forth the terms of any Indebtedness
described in Schedule IV(V) attached hereto,
to the extent such agreement is in effect on the
date hereof;
c. any such agreement prohibiting
other encumbrances on specific property and assets of
the Company or of its Subsidiaries, which agreement
secures the payment of Indebtedness incurred solely to
acquire, construct or improve such property or assets
or to finance the purchase price therefor and which
Indebtedness is otherwise permitted to be incurred
under the terms of this Agreement;
d. any agreement setting forth
customary restrictions on the subletting, assignment or
transfer of any property or asset that is a lease,
license, conveyance or contract of similar property or
assets; and
e. any restriction or encumbrance
imposed pursuant to an agreement that has been entered
into by the Company or any of its Subsidiaries for any
Asset Sale so long as such Asset Sale is otherwise
permitted under the terms of the Note Documents.
C. LIMITATIONS ON INDEBTEDNESS.
The Company will not and will not permit any of its
Subsidiaries to directly or indirectly create, incur, assume, guarantee
or suffer to exist, or otherwise become or remain directly or indirectly
liable with respect to, any Indebtedness other than:
1. Indebtedness arising under the Note
Documents;
2. Indebtedness existing on the date of this
Agreement and described in Schedule IV(V) attached hereto;
3. Indebtedness secured by Liens expressly
permitted under Section VIII(B) in an aggregate principal amount
that, when aggregate with the principal amount of all
Indebtedness incurred under this clause (3) and clause (4) of
this Section VIII(C), does not exceed $25,000 at any time
outstanding;
4. Indebtedness evidence by Capitalized Lease
Obligations entered into in order to finance Capital
Expenditures made by the Company or any of its Subsidiaries in
accordance with the provisions of Section VIII(M), which
Indebtedness, when aggregated with the principal amount of all
Indebtedness incurred under this clause (4) and clause (3) of
this Section VIII(C) does not exceed $25,000 at any time
outstanding;
5. to the extent that is customary and
consistent with past practice, advances by the Company to its
Subsidiaries, or guaranties by the Company in respect of
Indebtedness of the Subsidiaries, which, in the aggregate, do
not exceed $200,000 at any time outstanding; and
6. endorsement of negotiable
instruments for deposit or collection or similar transactions
in the ordinary course of business.
D. LIMITATIONS ON SALE-LEASEBACK TRANSACTIONS.
The Company will not and will not permit any of its
Subsidiaries to directly or indirectly become or remain liable as lessee
or as a guarantor or surety with respect to any lease (including, without
limitation, any Capitalized Lease) of any property (whether real,
personal or mixed), whether now owned or hereafter acquired, that the
Company or such Subsidiary, as the case may be, (a) has sold or
transferred or is to sell or transfer in a transaction with such
assumption of liability to any other Person other than the Company or (b)
intends to use for substantially the same purpose as any other property
that has been sold or transferred or is to be sold or transferred by such
Person to any other Person in connection with such lease.
E. LIMITATIONS ON RESTRICTED PAYMENTS.
The Company will not and will not permit any of its
Subsidiaries to directly or indirectly declare, order, make or set apart
any sum for or to pay any Restricted Payment, except for:
1. Restricted Payments to the Company;
2. the payment of dividends or the
making of other distributions by any Subsidiary of
the Company to the Company; and
3. the payment of management fees or other
fees and expenses pursuant to the management, consulting and
other services agreements set forth on Schedule VIII(E).
F. LIMITATIONS ON FUNDAMENTAL CHANGES, ASSET SALES, ACQUISITIONS, ETC.
The Company will not and will not permit any of its
Subsidiaries to alter the corporate, capital or legal structure of the
Company or any such Subsidiary, to wind up, liquidate or dissolve itself
(or suffer any liquidation or dissolution), to enter into any
transaction of merger or consolidation, or to convey, sell, lease or
sublease (as lessor or sublessor), transfer or otherwise dispose of,
whether in one transaction or a series of related transactions, all or
any part of its business, property or assets, whether now owned or
hereafter acquired (or agree to do any of the foregoing at any future
time), or to purchase or otherwise acquire, whether in one transaction or
a series of related transactions, any part of the property, assets or
business of any Person (or agree to do any of the foregoing at any future
time), except that:
1. the Company may merge or consolidate
with or into any of its Subsidiaries so long as the
Company is the surviving corporation;
2. any wholly owned Subsidiary of the Company
may merge or consolidate with or into any other Subsidiary of
the Company so long as such wholly owned Subsidiary is the
surviving corporation;
3. the Company and its Subsidiaries may make
Restricted Payments otherwise permitted to be made under Section
VIII(E), may make Investments otherwise permitted to be made
under Section VIII(G), may sell shares of its capital stock
otherwise permitted to be sold under Section VIII(H) and may
make Capital Expenditures otherwise permitted to be made under
Section VIII(M);
4. the Company and its Subsidiaries may sell,
lease, sublease, transfer or otherwise dispose of any obsolete,
worn out or surplus property and assets thereof or any other
property and assets thereof that are no longer useful in the
conduct of the Company's or the applicable Subsidiary's business
so long as the aggregate book value of all of the property and
assets of the Company and its Subsidiaries that are sold,
leased, subleased, transferred or otherwise disposed of pursuant
to this subsection (4) does not exceed $50,000 at any time;
5. the Company and its Subsidiaries may sell,
lease, sublease, transfer or otherwise dispose of any of its
property and assets, to the extent not otherwise permitted under
this Section VIII(F), at the fair market value thereof (as
determined in good faith by such Company) and for cash; provided
that the gross proceeds thereof do not exceed $500,000 in the
aggregate in any Fiscal Year; and provided further that the Net
Cash Proceeds from each such sale, lease, sublease, transfer or
other disposition are applied to the redemption of the
outstanding Notes pursuant to this Agreement and in accordance
with the terms of Section VI(C);
6. the Company and its Subsidiaries may
purchase or otherwise acquire inventory, materials, equipment
and intangible assets in the ordinary course of business; and
7. the Company may acquire all (but not less
than all) of the capital stock of (or other ownership or profit
interests in) any Person and may purchase or otherwise acquire
any other property and assets from any Person so long as the
aggregate cash and noncash purchase price of all such purchases
and acquisitions (including, without limitation, all indemnities
to the sellers thereof, all write-downs of property and assets
and reserves for liabilities with respect thereto and all
assumptions of debt, liabilities and other obligations in
connection therewith), combined with Investments permitted under
Section VIII(G)(6) do not exceed $100,000 at any time; provided
that in the case of any purchase or acquisition made pursuant to
this subsection (7):
a. any Subsidiary of the Company
or any of its Subsidiaries acquired or created
as a result thereof or in connection therewith
shall be a wholly owned Subsidiary thereof;
b. any Subsidiary of the Company or
any of its Subsidiaries acquired or created as a result
thereof or in connection therewith shall not have any
material contingent liabilities other than liabilities
acceptable to the Investors in their sole discretion;
c. any business acquired or invested
in shall be substantially the same line of business as
that of the Company and its Subsidiaries conducted at
the time of such purchase or acquisition in the
ordinary course, or a line of business directly related
thereto, thereof or in connection therewith;
d. immediately before and after
giving pro forma effect to such purchase or
acquisition, no Default or Event of Default
shall have occurred and be continuing; and
e. any Indebtedness of the Company
or its Subsidiaries incurred in connection
therewith shall be permitted pursuant to Sec-
tion VIII(C)(6); and
8. the Company may consummate the Acqui-
sition.
G. LIMITATIONS ON INVESTMENTS, ETC.
The Company will not and will not permit any of its
Subsidiaries to directly or indirectly make or commit or agree to make
any advance, loan, guarantee of Obligations, other extension of credit
or capital contributions to, or hold or invest in or commit or agree to
hold or invest in, or purchase or otherwise acquire or commit or agree to
purchase or otherwise acquire any shares of capital stock (or other
ownership or profit interests), bonds, notes, debentures or other
securities of, or make or commit or agree to make any other investment
in, any other Person, or purchase or own any futures contract or
otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract
(collectively, "Investments"), except that the following shall be
permitted:
1. the Company and its Subsidiaries may
acquire and hold accounts receivable owing to any
of them;
2. the Company and its Subsidiaries may
acquire and hold cash and Cash Equivalents;
3. the Company and its Subsidiaries may
maintain and continue to own the Investments thereof existing on
the date of this Agreement and described on Schedule VIII(G)
attached hereto;
4. the Company and its Subsidiaries may make
Restricted Payments otherwise permitted to be made under Section
VIII(E);
5. the Company and its Subsidiaries may
acquire all (but not less than all) of the capital stock of (or
other ownership or profit interests in) any Person and,
thereafter, may make capital contributions therein; provided
that, in each case, such acquisition or capital contribution is
otherwise permitted under the terms of the Note Documents;
6. Investments not otherwise permitted under
this Section VIII(G) in an aggregate amount, combined with
amounts paid in connection with acquisitions under Section
VIII(F)(7), not to exceed $100,000 at any time; and
7. Indebtedness of the Company or its
Subsidiaries permitted under Section VIII(C)(6).
H. LIMITATION ON ISSUANCE OF CAPITAL STOCK.
The Company will not issue or sell or enter into any
agreement or arrangement for the issuance and sale of any shares of its
capital stock (or other ownership or profit interests therein), any
securities convertible into or exchangeable for shares of its capital
stock (or other ownership or profit interests therein) or any warrants,
options or other rights for the purchase or acquisition of any shares of
its capital stock (or other ownership or profit interests therein),
except for:
1. transfers and replacements of out-
standing shares of capital stock of the Company;
2. issuances of shares of the Preferred Stock
and issuances of Common Stock pursuant to the Warrants and those
stock option and incentive plans as in effect on the Investment
Date set forth on Part II of Schedule IV(A) attached hereto; and
3. the issuance and sale of shares of capital
stock of the Company (i) so long as the Net Cash Proceeds
thereof will be applied to repay or redeem the aggregate
outstanding principal amount of the Notes, all accrued and
unpaid interest thereon, if any, and all fees, expenses and
other amounts owing under or in respect of the Note Documents at
such time pursuant to Section VI(C), (ii) or as otherwise
permitted pursuant to Section VI(C).
I. LIMITATION ON MODIFICATIONS OF INDEBTEDNESS; MODIFI-
CATIONS OF CERTIFICATE OF INCORPORATION, BYLAWS AND
CERTAIN OTHER AGREEMENTS; ETC.
The Company will not and will not permit any of its
Subsidiaries (a) without the prior written consent of the Investors, to
amend, modify or otherwise change (or permit the amendment, modification
or other change in any manner of) any of the provisions of any
Indebtedness of the Company or any of its Subsidiaries or of any instru-
ment or agreement (including, without limitation, any purchase agreement,
indenture, loan agreement or security agreement) relating to any such
Indebtedness if such amendment, modification or change would shorten the
final maturity or average life to maturity of, or require any payment to
be made earlier than the date originally scheduled on, such Indebtedness,
would increase the interest rate applicable to such Indebtedness, or
would change the subordination provision, if any, of such Indebtedness,
or would otherwise be adverse to the issuer of such Indebtedness in any
respect, (b) except for the Notes and the other Obligations of the
Company and its Subsidiaries under or in respect of the Note Documents,
to make any voluntary or optional payment, prepayment, redemption or
other acquisition for value of any Indebtedness of the Company or any of
its Subsidiaries (including, without limitation, by way of depositing
money or securities with the trustee therefor before the date required
for the purpose of paying any portion of such Indebtedness when due), or
to refund, refinance, replace or exchange any other Indebtedness for any
such Indebtedness, or to make any prepayment, redemption or repurchase of
any outstanding Indebtedness as a result of any asset sale, change of
control, issuance and sale of debt or equity securities or similar event,
or give any notice with respect to any of the foregoing, or (c) to amend,
modify or otherwise change its certificate of incorporation or bylaws (or
other similar organizational documents), including, without limitation,
by the filing or modification of any certificate of designation, or any
agreement or arrangement entered into by it, with respect to any shares
of its capital stock (or other ownership or profit interest therein)
(including any shareholders' agreement), or enter into any new agreement
with respect to any of its shares of capital stock (or other ownership or
profit interest therein).
J. LIMITATIONS ON CONDUCT OF BUSINESS.
The Company will not and will not permit any of its
Subsidiaries to engage in any business or activities other than its
current activities and businesses as described in the Company's
registration statement on form SB-2 dated February 19, 1997, as expanded
by the Acquisition.
K. LIMITATIONS ON ACCOUNTING CHANGES AND CHANGES IN
FISCAL YEAR.
The Company will not and will not permit any of its
Subsidiaries to make or permit any change in (1) its accounting policies
and reporting practices, except as required by generally accepted
accounting principles in effect from time to time, or (2) its Fiscal
Year.
L. LIMITATIONS ON SPECULATIVE TRANSACTIONS.
The Company will not and will not permit any of its
Subsidiaries to engage in any transaction involving commodity options or
futures contracts or any similar speculative transactions (including,
without limitation, take-or-pay contracts).
M. LIMITATIONS ON CAPITAL EXPENDITURES.
Except for the Acquisition, the Company will not and
will not permit any of its Subsidiaries to make any Capital Expenditures
(including, without limitation, installment purchases or Capitalized
Leases) that would cause the aggregate amount of all such Capital
Expenditures made by the Company and its Subsidiaries in any month,
commencing with January 1998, to exceed $50,000.
IX. EVENTS OF DEFAULT.
A. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the
following conditions or events shall occur and be continuing (each, an
"Event of Default"):
1. the Company defaults in the payment of any
principal of, premium, if any, on or interest on any Note when
the same becomes due and payable, whether by scheduled maturity
or at a date fixed for prepayment, redemption or repurchase or
by declaration, demand or otherwise; or
2. the Company shall fail to receive the
shareholder approvals or to provide to the Investors
satisfactory evidence thereof as contemplated by Section
VII(A)(1), in either case on or prior to January 31, 1998; or
3. the Company defaults in the performance of
or compliance with any term, covenant or agreement contained in
any of the Note Documents on its part to be performed or
complied with and, other than as provided in Sections IX(A)(1)
and IX(A)(2), such failure shall continue for ten Business Days;
provided, that, such ten Business Day period shall not apply in
the case of any failure to observe any such covenant which is
not capable of being cured at all or within such ten Business
Day period or which has been the subject of a prior failure; or
4. any representation or warranty made or
deemed made on the Investment Date by or on behalf of any
Obligor or by any officer of any Obligor under or pursuant to
the terms of this Agreement or any of the other Note Documents
or in any writing furnished to any of the Investors pursuant to
the terms of this Agreement or any of the other Note Documents
proves to have been false or incorrect in any material respect
on the date as of which it was made or deemed to have been made;
or
5. (a) the Company or any of its Subsidiaries
shall fail to pay (i) any principal of, or premium or interest
on, Indebtedness that is outstanding in a principal or notional
amount of at least $100,000 (or the equivalent thereof in one or
more other currencies), either individually or in the aggregate
(but excluding Indebtedness outstanding hereunder), of the
Company and its Subsidiaries, taken as a whole, when the same
becomes due and payable (whether by scheduled maturity,
required pre-payment, redemption or repurchase, acceleration,
demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in any agreement or
instrument relating to such Indebtedness, or (ii) any other
amount of Indebtedness greater than $100,000 (or the equivalent
thereof in one or more other currencies), either individually or
in the aggregate (but excluding Indebtedness outstanding
hereunder), of the Company and its Subsidiaries when the same
becomes due and payable (whether by scheduled maturity, required
prepayment, redemption or repurchase, acceleration, demand or
otherwise), and such failure shall continue after the applicable
grace period, if any, specified in any agreement or instrument
relating to such Indebtedness; or (b) any other event shall
occur or condition shall exist under any agreement or instrument
evidencing, securing or otherwise relating to any Indebtedness
referred to in clause (a) of this Section IX(A)(5) and shall
continue after the applicable grace period, if any, specified in
such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of,
the maturity of such Indebtedness or otherwise to cause, or to
permit the holder or holders thereof (or a trustee or agent on
behalf of such holders) to cause such Indebtedness to mature; or
(c) any Indebtedness referred to in clause (a) of this Section
IX(A)(5) shall be declared to be due and payable or required to
be prepaid, redeemed or repurchased (other than by a regularly
scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, repurchase, purchase or
defease any such Indebtedness shall be required to be made, in
each case prior to the stated maturity thereof or any date fixed
for pre-payment, redemption or repurchase thereunder; or
6. the Company or any of its Subsidiaries
shall generally not pay its debts as such debts become due, or
shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors;
or any proceeding shall be instituted by or against the Company
or any of its Subsidiaries seeking to adjudicate it a bankrupt
or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment
of a receiver, trustee or other similar official for it or for
any substantial part of its property and assets and, in the case
of any such proceeding instituted against it (but not instituted
by it) that is being diligently contested by it in good faith,
either such proceeding shall remain undismissed or unstayed for
a period of 30 consecutive days or any of the actions sought
in such proceeding (including, without limitation, the entry of
an order for relief against, or the appointment of a receiver,
trustee, custodian or other similar official for, it or any
substantial part of its property and assets) shall occur; or the
Company or any of its Subsidiaries shall take any action to
authorize any of the actions set forth above in this subsection
(6); or
7. one or more judgments or orders for the
payment of money aggregating $100,000 (or the equivalent thereof
in one or more other currencies) or more are rendered against
the Company or any of its Subsidiaries and remain unsatisfied
and either (a) enforcement proceedings shall have been commenced
by any creditor upon any such judgment or order or (b) there
shall be a period of at least 10 consecutive days after entry
thereof during which a stay of enforcement of any such judgment
or order, by reason of a pending appeal or otherwise, shall not
be in effect; provided, however, that any such judgment or order
shall not give rise to an Event of Default under this subsection
(6) if and for so long as (i) the amount of such judgment or
order is covered by a valid and binding policy of insurance
between the defendant and the insurer covering full payment
thereof and (ii) such insurer has been notified, and has not
disputed the claim made for payment, of the amount of such
judgment or order; or
8. one or more writs or warrants of
attachment, garnishment, execution, distraint or similar process
with respect to Obligations of the Company or any of its
Subsidiaries aggregating $100,000 (or the equivalent thereof in
one or more other currencies) or more have been issued against
the Company or such Subsidiary or any of its property or assets
and remain unsatisfied and there shall be a period of at least
10 consecutive days after the issuance thereof during which a
stay of enforcement of any such writ or warrant, by reason of a
pending appeal or otherwise, shall not be in effect; or
9. any nonmonetary judgment or order shall be
rendered against the Company or any of its Subsidiaries that,
either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect and there shall be
any period of 10 consecutive days after entry thereof during
which a stay of enforcement of any such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect;
or
10. any provision of any of the Note Documents
after delivery thereof shall for any reason (other than pursuant
to the express terms thereof) cease to be valid and binding on
or enforceable against any of the Obligors intended to be a
party to it or shall cease to give the Investors any of the
rights, powers or privileges purported to be created thereunder,
or any such Obligor shall so state any of the foregoing in
writing; or
` 11. any Collateral Document after delivery thereof
shall for any reason (other than pursuant to the express terms
thereof) cease to create a valid and perfected Lien on and
security interest in the Collateral purported to be covered
thereby (with the intended priority thereof pursuant to the
terms of the Note Documents).
B. ACCELERATION.
1. If an Event of Default described in Section
IX(A)(5) shall occur with respect to the Company, all of the
Notes then outstanding shall become automatically and
immediately due and payable.
2. If any other Event of Default shall occur
and be continuing (after giving effect to any applicable grace
period), the Required Holders may at any time, at their option,
by notice or notices to the Company, declare all of the Notes
then outstanding to be immediately due and payable.
3. Upon any Note becoming due and payable
under this Section IX(B), whether automatically or by
declaration, such Note will forthwith mature and the entire
unpaid principal amount of such Note, plus all accrued and
unpaid interest thereon and all other amounts due and payable to
the holder thereof under the Note Documents, shall be
immediately due and payable, in each and every case without
presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Company.
C. OTHER REMEDIES.
If one or more Defaults or Events of Default shall
occur and be continuing (after giving effect to any applicable grace
period), and irrespective of whether any of the Notes have become or have
been declared immediately due and payable under Section IX(B), the
Required Holders may proceed to protect and enforce the rights of the
holders of the Notes by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any
agreement contained herein or in any of the other Note Documents, or for
an injunction against a violation of any of the terms hereof or there-
of, or in aid of the exercise of any power granted hereby or thereby or
by applicable law or otherwise.
D. RESCISSION.
At any time after any Notes have been declared due and
payable pursuant to Section IX(B)(1) or IX(B)(2), as the case may be, the
Required Holders, by notice to the Company, may rescind and annul any
such declaration and its consequences if (a) the Company have paid all
overdue interest on the Notes, all principal of and premium, if any, on
the Notes that are due and payable and are unpaid other than by reason of
such declaration, and all interest on such overdue principal and (to the
fullest extent permitted by applicable law) any overdue interest in
respect of the Notes, at the Default Rate, (b) all Defaults and Events of
Default, other than non-payment of amounts that have become due solely by
reason of such declaration, have been remedied or have been waived
pursuant to Section XIV and (c) no judgment or decree has been entered
for the payment of any monies due pursuant to the Notes or any of the
other Note Documents. No rescission and annulment under this Section
IX(D) will extend to or affect any subsequent Default or Event of Default
or impair any right, power or remedy consequent thereon.
E. RESTORATION OF RIGHTS AND REMEDIES.
If any holder of the Notes has instituted any
proceeding to enforce any right or remedy under this Agreement or any of
the other Note Documents and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to such
holder, then, and in each such case, the Obligors and the holders of
Notes shall, subject to any determination in such proceeding, be restored
severally to its former positions hereunder and under the other Note
Documents and, thereafter, all rights and remedies of the holders of the
Notes shall continue as though no such proceeding had been instituted.
F. NO WAIVERS OR ELECTION OF REMEDIES, ETC.
No course of dealing and no delay on the part of any
holder of the Notes in exercising any right, power or remedy shall
operate as a waiver thereof or otherwise prejudice such holder's rights,
powers or remedies. No right, power or remedy conferred by this Agreement
or any of the other Note Documents upon any holder of the Notes shall be
exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise.
X. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
A. REGISTRATION OF NOTES.
The Company shall maintain, or cause to be maintained,
a register (the "Register") on which it enters the name of each Investor
as the registered owner of each Note held by such Investor. A Registered
Note may be assigned or sold in whole or in part only by registration
of such assignment or sale on the Register (and each Registered Note
shall expressly so provide). Any assignment or sale of all or part of
such Registered Note may be effected only by registration of such
assignment or sale on the Register, together with the surrender of the
Registered Note evidencing the same duly endorsed by (or accompanied by a
written instrument of assignment or sale duly executed by) the holder of
such Registered Note, whereupon, at the request of the designated
assignee(s) or transferee(s), one or more new Registered Notes in the
same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the registration of assignment or
sale of any Registered Note, the Company shall treat the Person in whose
name such Registered Note is registered as the owner thereof for the
purpose of receiving all payments thereon and for all other purposes,
notwithstanding notice to the contrary. Any foreign Person who
purchases or is assigned or participates in any portion of the Notes
shall provide the Company with a completed Internal Revenue Service Form
W-8 (Certificate of Foreign Status) or a substantially similar form for
such purchaser or any other affiliate who is a holder of beneficial
interests in the Notes.
B. TRANSFER AND EXCHANGE OF NOTES.
1. Upon surrender of any Note at the principal
executive office of the Company for registration of transfer or
exchange (and, in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered holder of such Note
or its attorney duly authorized in writing and accompanied by
the address for notices of each transferee of such Note or part
thereof), the Company shall execute and deliver, at the
Company's expense (except as provided below), one or more new
Notes (as requested by the holder thereof) in exchange therefor,
in an aggregate principal amount equal to the unpaid principal
amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and, subject
to subsection (1) of this Section X(B), shall be in
substantially the form of Exhibit A attached hereto. Each such
new Note shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered Note or dated
the date of the surrendered Note if no interest shall have been
paid thereon. The Company may require payment of a sum
sufficient to cover any stamp tax or other governmental charge
imposed in respect of any such transfer of Notes. Notes shall
not be transferred in denominations of less than $50,000,
provided that, if necessary to enable the registration of
transfer by a holder of its entire holding of Notes, one Note
may be in a denomination of less than $50,000.
2. Any transferee, by its acceptance of a Note
registered in its name (or the name of its nominee), shall be
deemed (a) to have made the representations set forth in
Sections V(A), V(B) and V(C) and (b) to confirm to and agree
with the trans-feror and the other parties hereto as follows:
(1) other than as provided in any
written instrument of transfer executed by the
transferor and such transferee, such transferor makes
no representation or warranty and assumes no
responsibility with respect to any statements,
warranties or representations made in or in connection
with this Agreement or any of the other Note Documents,
or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of, or the perfection
or priority of any Lien or security interest created
or purported to be created under or in connection with
this Agreement or any of the other Note Documents or
any other instrument or document furnished pursuant
hereto or thereto; and
(2) such transferor makes no
representation or warranty and assumes no
responsibility with respect to the financial condition
of the Company or any other Obligor or the performance
or observance by any Obligor of any of its obligations
under this Agreement or any of the other Note Documents
or any other instrument or document furnished pursuant
thereto;
(3) such transferee confirms that it
has received a copy of this Agreement, together with
copies of the SEC Reports and financial statements
referred to in Section VII(A) and such other documents
and information as it has deemed appropriate to make
its own credit analysis and decision to purchase the
Note or Notes being purchased thereby;
(4) such transferee will,
independently and without reliance upon the transferor
or any other holder of the Notes and based on such
documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement;
and
(5) such transferee agrees that it
will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are
required to be performed by it as a holder of the
Notes.
C. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership and the loss, theft, destruction or
mutilation of any Note, and
1. in the case of loss, theft or destruction,
of indemnity reasonably satisfactory to it; provided that, if
the holder of such Note is an original purchaser of any of the
Notes, such Person's own unsecured agreement of indemnity shall
be deemed to be satisfactory, or
2. in the case of mutilation, upon surrender
and cancellation thereof, the Company, at their own expense,
shall execute and deliver, in lieu thereof, a new Note, dated
and bearing interest from the date to which interest shall have
been paid on such lost, stolen, destroyed or mutilated Note or
dated the date of such lost, stolen, destroyed or mutilated Note
if no interest shall have been paid thereon.
XI. PAYMENTS ON NOTES.
The Company will pay all sums becoming due on each Note
for principal, premium, if any, and interest by the method and at the
address specified for such purpose below the name of each respective
Investor on Schedule IA or by such other method or at such other address
located in the United States of America as each such Investor or any
subsequent registered owner of a Note shall have from time to time
specified to the Company for such purpose, without the presentation or
surrender of such Note or the making of any notation thereon, except that
upon the request of the Company made concurrently with or reasonably
promptly after payment or prepayment in full of any Note, the holder of
such Note shall surrender such Note for cancellation, reasonably promptly
after any such request, to the Company at their principal executive
office or at the place of payment most recently designated by the
Company in writing to the holder of such Note. Prior to any permitted
sale, transfer or other disposition of any Note held by a Investor or
its nominee, such Investor will, at its election, either endorse thereon
the amount of principal paid thereon and the last date to which interest
has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section X(B).
XII. EXPENSES, INCREASED COSTS AND INDEMNIFICATION, ETC.
A. TRANSACTION EXPENSES.
Whether or not any of the transactions contemplated
hereby are consummated, the Company will pay, within 5 days of each
demand therefor (such demand to be accompanied by supporting
documentation in reasonable detail), (1) all of the reasonable costs and
expenses incurred by the Investors (including, without limitation,
reasonable attorneys' fees of a special counsel for the Investors) in
connection with the preparation, execution, delivery and administration
of this Agreement, the Notes and the other Note Documents, (2) all of the
reasonable costs and expenses incurred by the Investors (including,
without limitation, reasonable attorneys' fees of a special counsel for
the Investors) in connection with all of the amendments, waivers or
consents under or in respect of this Agreement, the Notes or any of the
other Note Documents (whether or not such amendment, waiver or consent
becomes effective), and (3) all of the reasonable costs and expenses
incurred by the Investors and each other holder of a Note (including,
without, limitation, reasonable attorneys' fees of a special counsel for
the Investors) in connection with the enforcement of this Agreement, the
Notes and the other Note Documents, and the custody and preservation of,
or the sale or collection from, or other realization upon, any of the
Collateral, including, without limitation: (1) the reasonable costs and
expenses incurred in enforcing or defending (or determining whether or
how to enforce or defend) any rights under this Agreement, the Notes or
any of the other Note Documents or in responding to any subpoena or other
legal process or informal investigative demand issued in connection with
this Agreement, the Notes or any of the other Note Documents, or by
reason of being a holder of the Notes, and (2) the reasonable costs and
expenses (including, without limitation, financial advisors' fees)
incurred in connection with the insolvency or bankruptcy of any Obligor
or any of its Subsidiaries or in connection with any work-out,
renegotiation or restructuring of any of the transactions contemplated
hereby, by the Notes or by the other Note Documents. The Company will
pay, and will hold the Investors and each holder of the Notes harmless
from, any claim, demand or liability in respect of any fees, costs or
expenses, if any, alleged to have been incurred by brokers, placement
agents and finders in connection with the transactions contemplated by
this Agreement or the Note Documents. The Company and the Investors
represent and warrant to each other that each has not retained any
broker, placement agent or finder with regard to this Agreement, the
Notes and the Note Documents other than Credit Research & Trading LLC
retained by the Company, whose fees, costs and expenses shall be paid
from the proceeds of the sale and purchase of the Notes. The amounts
payable by the Company pursuant to this Section XII(A) shall not exceed
$75,000.
B. INDEMNITY.
1. In addition to the payment of costs and
expenses pursuant to Section XII(A), whether or not the
transactions contemplated by this Agreement and the Note
Documents shall be consummated, the Company agrees to indemnify,
pay and hold each Investor, each holder of the Notes and each
other Person in whose name or for whose benefit such Person
holds or at any time held Notes, and their affiliates and its
officers, directors, employees, attorneys, agents and other
advisors (each, an "Indemnified Party"), harmless from and
against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits and claims, and all
reasonable costs, expenses and disbursements, of any kind or
nature whatsoever (including, without limitation, reasonable
fees and disbursements of counsel for such Indemnified Parties)
that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection
with or by reason of, or in connection with the preparation for
a defense of, any investigation, litigation or proceeding
arising out of, related to, or in connection with (i) this
Agreement, the Notes, the other Note Documents or any of the
transactions contemplated hereby or thereby and in connection
with any amendments or waivers (whether or not the same become
effective), (ii) any use or intended use of the proceeds of any
of the Notes, (iii) any sale or collection from or other
realization upon, or any other remedies expressed in re-
spect of, any or all of the Collateral, (iv) all taxes (other
than taxes determined with respect to income), including any
recording fees and filing fees and documentary stamp and similar
taxes at any time payable in respect of this Agreement, any
other Note Document or the issuance of any of the Notes, or (v)
the actual or alleged presence of Hazardous Materials on any
property of any of the Company or any of its Subsidiaries or any
Environmental Action relating in any way to any of the Company
or any of its Subsidiaries, in each case whether or not such
investigation, litigation or proceeding is brought by the
Company, any of its Subsidiaries, its directors, shareholders or
creditors or an Indemnified Party or any Indemnified Party is
otherwise a party thereto and whether or not any sale and
purchase of the Notes pursuant to this Agreement is effected
(collectively, the "Indemnified Liabilities"); provided that the
Company shall not have any obligation to any Indemnified Party
hereunder with respect to any Indemnified Liabilities arising
from the gross negligence, willful misconduct or bad faith of
such Indemnified Party as determined in a final, nonappealable
judgment by a court of competent jurisdiction.
2. The Company hereby further agrees to
indemnify, exonerate and hold each Indemnified Party free and
harmless from and against any and all actions, causes of action,
suits, losses, liabilities, damages and expenses, including,
without limitation, reasonable attorneys' fees and
disbursements, incurred in any capacity by any of the
Indemnified Parties as a result of or relating to (i) any trans-
action financed or to be financed in whole or in part directly
or indirectly with proceeds from the sale of any of the Notes,
or (ii) the execution, delivery, performance or enforcement of
this Agreement (including, without limitation, any failure by
either Company to comply with any of its covenants hereunder),
the Note Documents, or any instrument contemplated hereby or
thereby, except for any such indemnified liabilities arising
from any Indemnified Party's gross negligence, willful
misconduct or bad faith.
3. The Company will not, without the prior
written consent of the applicable Indemnified Party, settle,
compromise, consent to the entry of any judgment in or otherwise
seek to terminate any action, claim, suit or proceeding in
respect of which indemnification of such Indemnified Party may
be sought under subsections (1) or (2) of this Section XII(B)
(whether or not such Indemnified Party is a party thereto)
unless such settlement, compromise, consent or termination
includes a full and unconditional release of such Indemnified
Party from any and all claims against such Indemnified Party and
any and all liabilities thereof arising out of or relating to
such action, claim, suit or proceeding.
4. The Company also agrees not to assert any
claim against any Investor or any other holder of the Notes or
any other Person in whose name or for whose benefit such Person
holds or at any time held any Notes, or any of their Affiliates,
or any of its officers, directors, employees, attorneys, agents
and other advisors, on any theory of liability, for special,
indirect, consequential or punitive damages arising out of or
otherwise relating to (a) this Agreement, the Notes or any of
the other Note Documents, or any of the transactions
contemplated hereby or thereby, (b) any sale or collection from
or other realization upon, or any other remedies exercised in
respect of any or all of the Collateral or (c) any use or
intended use of the proceeds of any of the Notes.
5. If and to the extent that the undertaking
to indemnify, pay and hold harmless the Indemnified Parties set
forth in this Section XII(B) is judicially determined to be
unavailable to an Indemnified Party in respect of, or is
insufficient with respect to, any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits or claims
referred to herein, then, in lieu of indemnifying such
Indemnified Party hereunder, the Company shall contribute to the
amount paid or payable by such Indemnified Party as a result of
such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits or claims (and reasonable costs,
expenses and disbursements relating thereto) (a) in such
proportion as is appropriate to reflect the relative benefits
to the Company and its Subsidiaries, on the one hand, and such
Indemnified Party, on the other hand, from this Agreement and
the sale and purchase of the Notes or (b) if the allocation
provided by clause (a) of this subsection (5) is not available,
in such proportion as is appropriate to reflect not only the
relative benefits referred to in such clause (a) but also the
relative fault of each of the Company and its Subsidiaries, on
the one hand, and such Indemnified Party, on the other hand, in
connection with such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits or claims, as well as any
other relevant equitable considerations.
C. SURVIVAL.
The Obligations of the Company under this Section XII
shall survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement, the Notes or any
of the other Note Documents, and the termination of this Agreement and
any commitment to purchase Notes hereunder and, in respect of any Person
who was at any time a Investor or a holder of a Note or in whose name or
for whose benefit such Person held any Note, the date on which such
Person no longer holds, or no longer holds in the name of or for the
benefit of any other Person, any Note.
XIII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
ENTIRE AGREEMENT.
All representations and warranties contained herein and
in the other Note Documents, and in any certificate or other instrument
delivered by or on behalf of any Obligor pursuant to this Agreement or
any of the other Note Documents, shall survive the execution and delivery
of this Agreement and the Notes, the purchase or transfer by each of
Imprimis of any Notes or portion thereof or interest therein and the
payment of any Notes, and may be relied upon by any subsequent holder of
the Notes as of the date made or deemed made, regardless of any
investigation made at any time by or on behalf of any Investor or any
other holder of the Notes. This Agreement, the Notes and the other Note
Documents embody the entire agreement and understanding between the
Investor and the Obligors and supersede all prior agreements and
understandings relating to the subject matter hereof.
XIV. AMENDMENT AND WAIVER.
A. REQUIREMENTS.
This Agreement and the Notes may be amended, and the
observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with and only with the written consent
of the Company and the Required Holders, except that no such amendment or
waiver shall, without the written consent of the holder of each Note at
the time outstanding (1) change the percentage of the aggregate principal
amount of the Notes the holders of which constitute the Required Holders
or (2) amend this Section XIV.
B. SOLICITATION OF HOLDERS OF NOTES.
The Company will provide the Required Holders with
sufficient information, reasonably far in advance of the date a decision
is required, to enable such holders to make an informed and considered
decision with respect to any proposed amendment, waiver or consent in
respect of any of the provisions of this Agreement or any of the other
Note Documents. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the
provisions of this Section XIV to each holder of outstanding Notes
promptly following the date on which it is executed and delivered by, or
receives the consent or approval of, the Required Holders.
C. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in
this Section XIV applies equally to all holders of Notes and is binding
upon them, upon each future holder of any Note and upon each Obligor
without regard to whether such Note has been marked to indicate such
amendment or waiver. No such amendment or waiver will extend to or affect
any obligation, covenant, agreement, Default or Event of Default not
expressly amended or waived or impair any right, power or remedy
consequent thereon. No course of dealing nor any delay on the part of any
holder of any Note in exercising any right, power or remedy hereunder or
under any of the other Note Documents shall operate as a waiver of any
right, power or remedy of any holder of such Note; nor shall any single
or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided under this Agreement and the other Note
Documents are cumulative and not exclusive of any rights, powers or
remedies provided by applicable law.
D. NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the
holders of the requisite percentage of the aggregate principal amount of
Notes then outstanding approved or consented to any amendment, waiver or
consent to be given under this Agreement or any of the other Note
Documents, or have directed the taking of any action provided for herein
or in any of the other Note Documents to be taken upon the direction of
the holders of a specified percentage of the aggregate principal amount
of Notes then outstanding, Notes directly or indirectly owned by any of
the Company or any of their Affiliates shall be deemed not to be
outstanding.
XV. NOTICES.
A. GENERAL.
All notices and other communications provided for
hereunder shall be in writing and delivered by telecopier or (if
expressly permitted under the applicable provisions hereof) by telephone,
if the sender on the same day sends a confirming copy of such notice by a
recognized overnight delivery service (charges prepaid), by registered or
certified mail with return receipt requested (postage prepaid) or by a
recognized overnight delivery service (with charges prepaid). Any such
notice must be sent:
1. if to a Investor or its nominee, to it at
the address specified for such communications in Schedule IA
attached hereto, or at such other address as it shall have
specified to the Company in writing;
2. if to any other holder of any Note, to such
holder at such address as such other holder shall have specified
to the Company in writing; or
3. if to the Company, to them at the address
set forth on the first page of this Agreement (Telecopier No.
(000) 000-0000) to the attention of C. Xxxxxx XxXxxxxx,
President and Chief Executive Officer, with a copy to Xxxxx
Xxxxxxx, Esq., Xxxxxxx Xxxxxx & Green, P.C.,250 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx, Xxx Xxxx 00000 (Telecopier No. (000) 000-0000)
or at such other address as the Company shall have specified to
the holder of each Note in writing. All notices and other
communications provided for under this Section XV will be deemed
given and effective only when actually received.
4. If any notice required under this Agreement
or any of the other Note Documents is permitted to be made, and
is made, by telephone, actions taken or omitted to be taken in
reliance thereon by a Investor or any other holder of any Note
shall be binding upon the Company notwithstanding any
inconsistency between the notice provided by telephone and any
subsequent writing in confirmation thereof provided to a
Investor or any other holder of any Note; provided that any such
action taken or omitted to be taken by a Investor or any other
holder of any Note shall have been in good faith and in
accordance with the terms of this Agreement.
XVI. REPRODUCTION OF DOCUMENTS.
This Agreement, each of the other Note Documents and
all other agreements, certificates and other documents relating thereto,
including, without limitation, (a) amendments, waivers and consents of or
to this Agreement or any other Note Document that may hereafter be
executed, (b) documents received on the Investment Date (except the Notes
themselves) and (c) financial statements, certificates and other
information previously or hereafter furnished to you, may be reproduced
by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process. The Company agrees and stipulates
that, to the extent permitted by applicable law, any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence
and whether or not such reproduction was made in the regular course of
business) and any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence. This Section XVI
shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest
the original or from introducing evidence to demonstrate the inaccuracy
of any such reproduction.
XVII. MISCELLANEOUS.
A. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this
Agreement or any of the other Note Documents by or on behalf of any of
the parties hereto bind and inure to the benefit of its successors and
assigns (including, without limitation, any subsequent holder of a Note),
whether or not so expressed.
B. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of, or premium, if any, or
interest on, any Note that is due on a date other than a Business Day
shall be made on the next succeeding Business Day without including the
additional days elapsed in the computation of the items payable on such
next succeeding Business Day.
C. SATISFACTION REQUIREMENT.
Except as otherwise provided herein or in any of the
other Note Documents, if any agreement, certificate or other writing, or
any action taken or to be taken, is by the terms of this Agreement or any
of the other Note Documents required to be satisfactory to the Required
Holders, the determination of such satisfaction shall be made by the
Required Holders, in the sole and exclusive judgment (exercised
reasonably and in good faith) of the Person or Persons making such
determination.
D. SEVERABILITY.
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted
by applicable law) not invalidate or render unenforceable such provision
in any other jurisdiction.
E. CONSTRUCTION; ACCOUNTING TERMS, ETC.
1. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being
independent of each other covenant contained herein, so that
compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with
any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such
action is taken directly or indirectly by such Person.
2. Except as otherwise expressly provided in
this Agreement or any of the other Note Documents, all
accounting terms used herein or therein shall be interpreted,
and all financial statements and certificates and reports as to
financial matters required to be delivered hereunder shall be
prepared, in accordance with GAAP.
F. COMPUTATION OF TIME PERIODS.
In this Agreement, in the computation of periods of
time from a specific date to a later specified date, the word "from"
means "from and including", the word "through" means "through and
including", and the words "to" and "until" each mean "to but not
excluding".
G. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all
of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement
by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
H. GOVERNING LAW; SUBMISSION TO JURISDICTION, ETC.
1. This Agreement shall be governed by, and
construed in accordance with, the law of the State of Delaware.
2. The Company hereby irrevocably and
unconditionally submits, for itself and its property and assets,
to the nonexclusive jurisdiction of any New York state court or
federal court of the United States of America sitting in New
York City, New York, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this
Agreement, the Notes or the other Note Documents, or for
recognition or enforcement of any judgment in respect thereof,
and the Company hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may
be heard and determined in any such New York state court or, to
the fullest extent permitted by applicable law, in such federal
court. The Company hereby irrevocably consents to the service of
copies of any summons and complaint and any other process which
may be served in any such action or proceeding by certified
mail, return receipt requested, or by delivering a copy of such
process to the Company, at their address specified in Section
XV, or by any other method permitted by law. The Company hereby
agrees that a final judgment in any such action or proceeding
shall be conclusive and forced in other jurisdictions by suit on
the judgment or in any other manner provided by applicable law.
Nothing in this Agreement shall affect any right that any holder
of Notes may otherwise have to bring any action or proceeding
relating to this Agreement, the Notes or the other Note
Documents in the courts of any jurisdiction.
3. The Company hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection that it may now or hereafter
have to the laying of venue of any action or proceeding arising
out of or relating to this Agreement, the Notes or the other
Note Documents in any New York state or federal court. The
Company hereby irrevocably waives, to the fullest extent
permitted by applicable law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any
such court.
I. WAIVER OF JURY TRIAL.
THE COMPANY AND THE HOLDERS OF THE NOTES HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER NOTE
DOCUMENTS, ANY DOCUMENT DELIVERED UNDER THE NOTE DOCUMENTS, THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF ANY HOLDER
OF THE NOTES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT THEREOF.
Very truly yours,
COMPLETE WELLNESS CENTERS, INC.
By /s/ E. Xxxxxx Xxxxxx
Name: E. Xxxxxx Xxxxxx
Title: President
If you are in agreement with the foregoing, please sign
in the appropriate space provided below and return it to the Company,
whereupon the foregoing shall become a binding agreement between you and
the Company.
IMPRIMIS INVESTORS LLC
By: Wexford Management LLC
By /s/ Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: VP
WEXFORD SPECTRUM INVESTORS LLC
By: Wexford Management LLC
By /s/ Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: VP
SCHEDULE IA
INFORMATION RELATING TO THE INVESTORS
NAME OF INVESTOR: COMMITMENT
NAME(S) FOR REGISTRATION OF NOTES PURCHASED:
MAILING ADDRESS:
TELEPHONE NO.:
TELEPHONE NO.:
WIRE INSTRUCTIONS (INCLUDING ABA NO. AND ACCOUNT NO.)
FOR PAYMENT OF PRINCIPAL AND INTEREST:
To:
In favor of:
Account #:
UNITED STATES TAX IDENTIFICATION NO. (IF ANY):
PHYSICAL DELIVERY INSTRUCTIONS:
SCHEDULE IB
DEFINED TERMS
As used in this Agreement, the following terms shall
have the respective meanings set forth below (such meanings to be equally
applicable to both the singular and plural forms of the term defined):
"ACQUISITION" shall mean the pending acquisition by the
Company of the assets of Nutri/System, L.P.
through the Acquisition Subsidiary.
"ACQUISITION SUBSIDIARY" shall mean Complete Weight
Management, Inc., a Delaware corporation and a wholly-owned Subsidiary of
the Company.
"AFFILIATE" means, with respect to any Person, any
other Person that, directly or indirectly, controls, is controlled by or
is under common control with such Person, or is a director or officer of
such Person or, with respect to any individual, has a relationship with
such individual by blood, marriage or adoption not more remote than first
cousin. For purposes of this definition, the term "control" (including
the terms "controlling" "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
vote 5% or more of the Voting Interest of such Person or to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Interest, by contract or
otherwise.
"AGREEMENT" means this Note Investment Agreement, as
such agreement may be amended, supplemented or otherwise modified from
time to time in accordance with the terms of Section XIV.
"ASSET SALE" means the conveyance, sale, lease,
sublease, transfer or other disposition (other than solely for security
purposes) by the Company or any of its Subsidiaries to any Person other
than the Company of (a) any of the shares of capital stock of the Company
or any of its Subsidiaries, (b) all or substantially all of the property
and assets of any division or line of business of the Company or any of
its Subsidiaries or (c) any other property or assets (whether tangible or
intangible) of the Company or any of its Subsidiaries.
"BUSINESS DAY" means any day other than a Saturday, a
Sunday or any other day on which commercial banks are required or
authorized by law to be closed in New York, New York.
"CAPITAL ASSETS" means, with respect to any Person, all
equipment, fixed assets and real property or improvements of such Person,
or replacements or substitutions therefor or additions thereto, that have
been or should be, in accordance with GAAP, reflected as additions to
property, plant or equipment on the balance sheet of such Person or that
have a useful life of more than one year.
"CAPITAL EXPENDITURES" means, with respect to any
Person for any period, (a) all expenditures made directly or indirectly
by such Person (whether paid in cash or other consideration or accrued as
a liability and including, without limitation, all expenditures for
maintenance and repairs which are required, in accordance with GAAP, to
be capitalized on the books of such Person) during such period for
Capital Assets and (b) solely to the extent not otherwise included in
clause (a) of this definition, the aggregate principal amount of all
Indebtedness (including, without limitation, Capitalized Lease
Obligations) assumed or incurred during such period in connection with
any such expenditures for Capital Assets (other than Indebtedness
permitted by Section VIII(B)(6) of this Agreement).
"CAPITALIZED LEASE" means any lease with respect to
which the lessee is required to recognize concurrently the acquisition of
property or an asset and the incurrence of a liability in accordance with
GAAP.
"CAPITALIZED LEASE OBLIGATIONS" means, with respect to
any Person, all lease obligations of such Person which, in accordance
with GAAP, are or will be required to be capitalized on the books of such
Person, in each case valued at the amount thereof accounted for as debt
in accordance with GAAP.
"CAPITAL STOCK" means and includes (i) any and all
shares, interests, participations or other equivalents of or interests in
(however designated) the capital of a Person, including, without
limitation, shares of preferred or preference stock, (ii) all partnership
interests (whether general or limited) in any Person which is a
partnership, (iii) all membership interests or limited liability company
interests in any limited liability company, and (iv) all equity or
ownership interests in any Person of any other type.
"CASH EQUIVALENTS" means any of the following types of
Investments, to the extent owned by the Company or any of its
Subsidiaries free and clear of all Liens (other than Liens created under
the Collateral Documents):
(a) readily marketable obligations issued or
directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof having
maturities of not more than 360 days from the date of
acquisition thereof; provided that the full faith and credit of
the United States of America is pledged in support thereof;
(b) time deposits with, or insured
certificates of deposit or bankers' acceptances of, any
commercial bank that (i) is organized under the laws of the
United States of America, any state thereof or the District of
Columbia or is the principal banking subsidiary of a bank
holding company organized under the laws of the United States
of America, any state thereof or the District of Columbia and
is a member of the Federal Reserve System, (ii) issues (or the
parent of which issues) commercial paper rated as described in
clause (c) of this definition and (iii) has combined capital and
surplus of at least $1,000,000,000, in each case with
maturities of not more than 180 days from the date of
acquisition thereof;
(c) commercial paper issued by any Person
organized under the laws of any state of the United States of
America and rated at least "Prime-1" (or the then equivalent
grade) by Xxxxx'x Investors Service, Inc. or at least "A-1" (or
the then equivalent grade) by Standard & Poor's Ratings
Services, a Division of The XxXxxx-Xxxx Company, Inc., in each
case with maturities of not more than 270 days from the date of
acquisition thereof;
(d) Investments, classified in accordance with
GAAP as current assets of the Company or any of its
Subsidiaries, in money market investment programs registered
under the Investment Company Act of 1940, as amended, which are
administered by financial institutions that have the highest
rating obtainable from either Xxxxx'x Investors Service, Inc. or
Standard & Poor's Ratings Services, a Division of The
XxXxxx-Xxxx Company, Inc., and the portfolios of which are
limited solely to Investments of the character and quality
described in clauses (a), (b) and (c) of this definition; and
(e) repurchase agreements entered into by the
Company or any such Subsidiary with a bank or trust company or
recognized securities dealer having combined capital and surplus
of at least $500,000,000 for direct obligations issued by or
fully guaranteed by the United States of America in which the
Company or such Subsidiary shall have a valid and perfected
first priority security interest (subject to no other Liens);
provided that each such repurchase agreement shall have a fair
market value of at least 100% of the amount of the repurchase
obligations thereunder on the date of purchase thereof.
"CHANGE OF CONTROL" means at any time any "person" or
"group" (within the meaning of Section 13d-3 or 14(d)(2) of the Exchange
Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of more than 50% of the total
Voting Interests of the Company.
"CHANGE OF CONTROL OFFER" has the meaning specified in
Section VI(B)(1).
"CHANGE OF CONTROL PAYMENT" has the meaning specified
in Section VI(B)(1).
"CHANGE OF CONTROL REPURCHASE DATE" has the meaning
specified in Section VI(B)(2).
"COLLATERAL" means all of the "Collateral" referred to
in the Collateral Documents and all other property and assets of the
Obligors and its Subsidiaries that are or are intended under the terms of
the Collateral Documents to be subject to Liens in favor of Imprimis and
the other holders of the Notes.
"COLLATERAL DOCUMENTS" means, collectively, the
security agreements, mortgages, charges and other similar documents
entered into by any of the Company or any of its Subsidiaries pursuant to
this Agreement and all other agreements that create or purport to create
Liens in favor of Imprimis and the other holders of the Notes.
"COMMON STOCK" has the meaning specified on page 1 of
this Agreement.
"COMPANY" has the meaning specified on page 1 of this
Agreement.
"CONTINGENT OBLIGATION" means, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, (a) the
direct or indirect guaranty, endorsement (other than for collection or
deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of a
primary obligor, (b) the obligation to make take-or-pay or similar
payments, if required, regardless of nonperformance by any other party or
parties to an agreement, (c) any obligation of such Person, whether or
not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to
advance or supply funds (A) for the purchase or payment of any such
primary obligation or (B) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solven-
cy of the primary obligor, (iii) to purchase property, assets, securities
or services primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make payment
of such primary obligation or (iv) otherwise to assure or hold harmless
the holder of such primary obligation against loss in respect thereof;
provided, however, that the term "Contingent Obligation" shall not
include any products warranties extended in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be
an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made (or, if
less, the maximum amount of such primary obligation for which such Person
may be liable pursuant to the terms of the instrument evidencing such
Contingent Obligation) or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person
is required to perform thereunder), as determined by such Person in good
faith.
"CURRENT VALUE" has the meaning specified in Section 3
of ERISA.
"DEFAULT" means any Event of Default or any event or
condition that would constitute an Event of Default but for the
requirement that notice be given or time elapse or both.
"DEFAULT RATE" means 19% per annum.
"EMPLOYEE BENEFIT PLAN" means an "employee benefit
plan", within the meaning of Section 3(3) of ERISA, that is subject to
the provisions of Title I, Subtitle B, Part 4 of ERISA or to Section 4975
of the Internal Revenue Code.
"ENVIRONMENTAL ACTION" means any action, suit, demand,
demand letter, claim, notice of noncompliance or violation, notice of
liability or potential liability, investigation, proceeding, consent
order or consent agreement, abatement order or other order or directive
(conditional or otherwise) relating in any way to any Environmental Law,
any Environmental Permit or any Hazardous Materials or arising from
alleged injury or threat to health, safety, natural resources or the
environment, including, without limitation, (a) by any Governmental
Authority for enforcement, cleanup, removal, response, remedial or other
actions or damages and (b) by any Governmental Authority or other third
party for damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.
"ENVIRONMENTAL LAW" means any Requirement of Law, or
any judicial or agency interpretation or other requirement of any
Governmental Authority, relating to (a) the generation, use, handling,
transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials, (b) pollution or protection of the environment,
health, safety or natural resources or (c) occupational safety and
health, industrial hygiene, land use or the protection of human, plant or
animal health or welfare, including the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section
6901 et seq.), the Federal Water Pollution Control Act (33 U. S. C.
Section 1251 et seq.) , the Clean Air Act (42 U.S.C. Section 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.),
the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Section
136 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section
651 et seq.), the Oil Pollution Act (33 U.S.C. Section 2701 et seq.) and
the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section
11001 et seq.), in each case as amended from time to time, and including
the regulations promulgated and the rulings issued from time to time
thereunder.
"ENVIRONMENTAL PERMIT" means any permit, approval,
license, identification number or other authorization required under any
Environmental Law.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations
promulgated and the rulings issued from time to time thereunder.
"ERISA PLAN" means an "employee benefit plan" (as
defined in Section 3(3) of ERISA) that is or, within the preceding five
years, has been established or maintained, or to which contributions are
or, within the preceding five years, have been made or required to be
made, by the Company or any ERISA Affiliate or with respect to which the
Company or any ERISA Affiliate may have any liability.
"EVENT OF DEFAULT" has the meaning specified in Section
IX(A).
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended from time to time, and the regulations promulgated and
the rulings issued from time to time thereunder.
"FISCAL YEAR" means, with respect to the Company or any
of its Subsidiaries, the period commencing on January 1 in any calendar
year and ending on the next succeeding December 31.
"GAAP" means generally accepted accounting principles
in effect in the United States of America, consistently applied.
"GOVERNMENTAL AUTHORITY" means any nation or
government, any state, province, city, municipal entity or other
political subdivision thereof, and any governmental, executive,
legislative, judicial, administrative or regulatory agency, department,
authority, instrumentality, commission, board or similar body, whether
xxxxxxx, xxxxx, xxxxxxxxxx, xxxxxxxxxxx, local or foreign.
"GOVERNMENTAL AUTHORIZATION" means any authorization,
approval, consent, franchise, license, covenant, order, ruling, permit,
certification, exemption, notice, declaration or similar right,
undertaking or other action of, to or by, or any filing, qualification or
registration with, any Governmental Authority.
"HAZARDOUS MATERIALS" means: (a) any chemical, material
or substance at any time defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous waste", "acutely hazardous waste", "radioactive
waste", "biohazardous waste", "pollutant", "toxic pollutant",
"contaminant", "restricted hazardous waste", "infectious waste", "toxic
substances", or any other term or expression intended to define, list or
classify substances by reason of properties harmful to health, safety or
the indoor or outdoor environment (including, without limitation, harmful
properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental
Laws); (b) any oil, petroleum, petroleum fraction or petroleum derived
substance; (c) any drilling fluids, produced waters and other wastes
associated with the exploration, development or production of crude oil,
natural gas or geothermal resources; (d) any flammable substances or
explosives; (e) any radioactive materials; (f) any asbestos-containing
materials; (g) any urea formaldehyde foam insulation; (h) any electrical
equipment which contains any oil or dielectric fluid containing
polychlorinated biphenyls; (i) any pesticides; (j) any radon gas; and (k)
any other chemical, material or substance designated, classified or
regulated as hazardous or toxic or as a pollutant or contaminant under
any Environmental Law or which could pose a hazard to health, safety or
the environment.
"HOLDER" means, with respect to any Note, the Person in
whose name such Note is registered in the register maintained by the
Company pursuant to Section X(A).
"INDEBTEDNESS" means, with respect to any Person
(without duplication):
(a) all indebtedness of such Person for borrowed money;
(b) all Obligations of such Person for the deferred
purchase price of property and assets or services (other than trade
payables or other accounts payable incurred in the ordinary course of
such Person's business and not past due for more than 180 days after the
date on which each such trade payable or account payable was created);
(c) all Obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, or upon which interest
payments are customarily made;
(d) all Obligations of such Person created or arising
under any conditional sale or other title retention agreement with
respect to property or assets acquired by such Person, even though the
rights and remedies of the seller or the lender under such agreement in
the event of default are limited to repossession or sale of such property
or assets;
(e) all Capitalized Lease Obligations of such Person;
(f) all Obligations, contingent or otherwise, of such
Person under acceptance, standby letter of credit or similar facilities;
(g) all Obligations of such Person to purchase, redeem,
retire, defease or otherwise make any payment in respect of any shares of
capital stock of (or other ownership or profit interest in) such Person
or in any other Person, or any warrants, rights or options to acquire
such shares (or such other ownership or profit interests);
(h) all Obligations of such Person in respect of hedge
agreements, take-or-pay agreements or other similar arrangements;
(i) all Contingent Obligations; and
(j) all Obligations referred to in clauses (a) through
(i) of this definition of another Person secured by or for which the
holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property or assets (including,
without limitation, accounts and contract rights) owned by such Person,
even though such Person has not assumed or become liable for the payment
of such Indebtedness. The Indebtedness of any Person shall include (i)
all Obligations of the types described in clauses (a) through (j) above
of any partnership in which such Person is a general partner and (ii) all
Obligations of the types described in clauses (a) through (j) above of
such Person to the extent such Person remains legally liable in respect
thereof notwithstanding that any such Obligation is deemed to be
extinguished under generally accepted accounting principles in effect
at any date of determination.
"INDEMNIFIED LIABILITIES" has the meaning specified in
Section XII(B)(1).
"INDEMNIFIED PARTY" has the meaning specified in
Section XII(B)(1).
"INFORMATION STATEMENT" has the meaning specified in
Section VII(A).
"INTERNAL REVENUE CODE" means the Internal Revenue Code
of 1986, as amended from time to time, and the regulations promulgated
and the rulings issued from time to time thereunder.
"INVESTMENT DATE" has the meaning specified in Section
II(B).
"INVESTORS" has the meaning specified on page 1 of this
Agreement.
"LIEN" means, with respect to any Person, any mortgage,
lien (statutory or other), pledge, hypotheca-tion, security interest,
charge or other preference or encumbrance of any kind (including, without
limitation, any agreement to give any of the foregoing), or any sale of
accounts receivable or chattel paper, or any assignment, deposit
arrangement or lease intended as, or having the effect of, security, or
any other interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or other
title retention agreement or any Capitalized Lease or upon or with
respect to any property or asset of such Person (including, in the case
of shares of capital stock, stockholder agreements, voting trust
agreements and other similar arrangements).
"MATERIAL ADVERSE EFFECT" means a material adverse
effect on (a) the business, condition (financial or otherwise),
operations, results of operations, assets, property, liabilities or
prospects of the Company or any Subsidiary of a Company, (b) the ability
of any of the Obligors to perform its Obligations under this Agreement or
any of the other Note Documents to which it is or is to be a party or (c)
the rights and remedies afforded to or any of the other holders of the
Notes under this Agreement or any of the other Note Documents.
"MULTIEMPLOYER PLAN" means a multiemployer plan (as
defined in Section 4001(a)(3) of ERISA) to which the Company or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"MULTIPLE EMPLOYER PLAN" means a single employer plan
(as defined in Section 4001(a)(15) of ERISA) that (a) is maintained for
employees of the Company or any ERISA Affiliate and at least one Person
other than the Company and the ERISA Affiliates or (b) was so maintained
and in respect of which the Company or any ERISA Affiliate could have
liability under Section 4064 or 4069 of ERISA in the event such plan has
been or were to be terminated.
"NET CASH PROCEEDS" means, with respect to the issuance
or incurrence of any Indebtedness by any Person, or the sale or issuance
by any Person of any shares of its capital stock (or other ownership or
profit interests therein), any securities convertible into or
exchangeable for shares of its capital stock (or other ownership or
profit interests therein) or any warrants, options or other rights for
the purchase or acquisition of any shares of its capital stock (or other
ownership or profit interests therein), or any Asset Sale, as the case
may be, the aggregate amount of cash received from time to time (whether
as initial consideration or through payment or disposition of deferred
consideration) by or on behalf of such Person for its own account in
connection with any such transaction, after deducting therefrom only:
(a) any reasonable brokerage commissions, underwriting
fees and discounts, legal fees, finder's fees and other similar fees and
commissions incurred as a result of such transaction;
(b) the amount of taxes payable in connection with or
as a result of such transaction;
(c) in the case of any Asset Sale, the outstanding
principal amount of, and the premium, if any, and any accrued and unpaid
interest on, any Indebtedness (other than the Notes) that is secured by a
Lien on the property and assets subject to such Asset Sale and is
required to be repaid under the terms thereof as a result of such Asset
Sale; and
(d) in the case of any Asset Sale, the amount required
to be reserved, in accordance with generally accepted accounting
principles in effect on the date on which the Net Cash Proceeds from such
Asset Sale are calculated, and so reserved against liabilities under
indemnification obligations, liabilities related to environmental matters
or other similar contingent liabilities associated with the property and
assets subject to such Asset Sale that are required to be so provided for
under the terms of the documentation for such Asset Sale; in each case to
the extent, but only to the extent, that the amounts so deducted are, at
the time of receipt of such cash, actually paid to a Person that is not
an Affiliate of such Person receiving such Net Cash Proceeds and are
properly attributable to such transaction or to the property or asset
that is the subject thereof.
"NOTE DOCUMENTS" means, collectively, this Agreement,
the Notes and the Collateral Documents and all other agreements and
instruments evidencing any Obligation of the Company or any of the other
Obligors secured by the Collateral Documents, in each case as such
agreement, instrument or other document may be amended, supplemented or
otherwise modified hereafter from time to time in accordance with the
terms thereof and Section XIV.
"NOTES" has the meaning specified in Section I.
"OBLIGATION" means, with respect to any Person, any
payment, performance or other obligation of such Person of any kind,
including, without limitation, any liability of such Person on any claim,
whether or not the right of any creditor to payment in respect of such
claim is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, disputed, undisputed, legal, equitable, secured or
unsecured, and whether or not such claim is discharged, stayed or
otherwise affected by any proceeding referred to in Section IX(A)(5).
Without limiting the generality of the foregoing, the Obligations of the
Obligors under the Note Documents include the obligation to pay
principal, interest, premiums, charges, expenses, fees, attorneys' fees
and disbursements, indemnities and other amounts payable by any of the
Obligors under any of the Note Documents.
"OBLIGORS" means, collectively, the Company, the
Acquisition Subsidiary and each of the Other Obligors.
"OFFICER'S CERTIFICATE" means,with respect to any
Person, a certificate executed on behalf of such Person by its chairman
of the board (if an officer), its president or one of its vice presidents
or a Senior Financial Officer thereof (or persons performing similar
functions to the foregoing); provided that each Officer's Certificate
shall include (a) a statement that the officer making or giving such
Officer's Certificate has read the provisions of this Agreement or the
other Note Document requiring the delivery thereof and any definitions or
other provisions contained in this Agreement relating thereto, (b) a
statement that, in the opinion of the signer, he has made or has caused
to be made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such term or
condition has been satisfied or complied with or the certifications
required to be made therein are complete and accurate, (c) a statement as
to whether, in the opinion of the signer, such term or condition has been
satisfied or complied with, and (d) all other statements and
determinations required by the related terms and conditions giving rise
to the delivery of such Officer's Certificate.
"OTHER OBLIGORS" shall mean the wholly owned
Subsidiaries of the Company set forth on Schedule IC hereto.
"PERMITTED LIENS" means the following types of Liens
(excluding any such Lien imposed pursuant to Section 401(a)(29) or ) of
the Internal Revenue Code or by ERISA, any such Lien relating to or
imposed in connection with any Environmental Action and any such Lien
expressly prohibited by the applicable terms of any of the Collateral
Documents), in each case as to which no enforcement, collection,
execution, levy or foreclosure proceeding shall have been commenced:
(a) Liens for taxes, assessments and governmental
charges or levies the payment of which is not, at the time, required
under Section VII(E)(1);
(b) Liens imposed by law, such as materialmen's,
mechanics', carriers', workmen's, storage and repairmen's Liens and other
similar Liens arising in the ordinary course of business and securing
obligations (other than Indebtedness for borrowed money) (i) that are not
overdue for a period of more than 30 days or (ii) the amount,
applicability or validity of which are being contested in good faith and
by appropriate proceedings diligently conducted and with respect to which
the Company or any of its Subsidiaries, as the case may be, has
established reserves in accordance with generally accepted accounting
principles in effect from time to time;
(c) pledges or deposits to secure obligations incurred
in the ordinary course of business under workers' compensation laws,
unemployment insurance laws or other similar social security legislation
(other than in respect of Employee Benefit Plans) or to secure public or
statutory obligations;
(d) Liens securing the performance of, or payment in
respect of, bids, tenders, government contracts (other than for the
repayment of borrowed money), surety and appeal bonds and other
obligations of a similar nature incurred in the ordinary course of
business;
(e) Liens arising solely from precautionary filings of
financing statements (or the equivalent thereof) under the Uniform
Commercial Code (or any similar law or statute) of the applicable
jurisdictions relating to operating leases otherwise permitted under the
terms of the Note Documents; and
(f) easements, rights of way, zoning restrictions and
other encumbrances and similar restrictions on title to, or the use of,
real property that do not, either individually or in the aggregate,
materially and adversely affect either the use of such real property for
its intended purposes or the conduct of the business of any of the
Company or its Subsidiaries in the ordinary course.
"PERSON" means an individual, partnership, corporation
(including a business trust or professional corporation), limited
liability company, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any
political subdivision or agency thereof.
"PREFERRED STOCK" has the meaning specified on page 1
of this Agreement.
"PROPERTY" or "PROPERTIES" means, unless otherwise
expressly stated in this Agreement, real or personal property of any
kind, tangible or intangible, xxxxxx or inchoate.
"REQUIRED HOLDERS" means, at any time, the holders of
at least 75% of the aggregate principal amount of all of the Notes
outstanding at such time (excluding from any calculation thereof any
Notes then owned or held by any of the Company or its Subsidiaries or
other Affiliates).
"REQUIREMENTS OF LAW" means, with respect to any
Person, all laws, constitutions, statutes, treaties, ordinances, rules
and regulations, all orders, writs, decrees, injunctions, judgments,
determinations or awards of an arbitrator, a court or any other
Governmental Authority, and all Governmental Authorizations, binding upon
or applicable to such Person or to any of its properties, assets or
businesses.
"RESPONSIBLE OFFICER" means, with respect to the
Company or Subsidiary of it, any Senior Financial Officer of the Company
or any other officer of the Company or any of its Subsidiaries
responsible for overseeing the administration of, or reviewing compliance
with, all or any portion of this Agreement or any of the other Note
Documents.
"RESTRICTED PAYMENT" means (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of capital stock of (or other ownership or profit interests in) the
Company or any of its Subsidiaries, now or hereafter outstanding, (b) any
repurchase, redemption, retirement, defeasance, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of
any shares of any class of capital stock of (or other ownership or profit
interests in) the Company or any direct or indirect parent of the
Company, now or hereafter outstanding, (c) any payment made to retire, or
to obtain the surrender of, any outstanding warrants, options or other
rights for the purchase or acquisition of shares of any class of capital
stock of (or other ownership or profit interests in) the Company or any
direct or indirect parent of the Company, now or hereafter outstanding,
(d) any return of capital to any shareholders or other equity holders of
the Company or any of its Subsidiaries, or any other distribution of
property, assets, shares of capital stock (or other ownership or profit
interests), warrants, rights, options, obligations or securities thereto
as such or (e) the payment of any management fees or any other fees or
expenses (including the reimbursement thereof by the Company or any of
its Subsidiaries) pursuant to any management, consulting or other
services agreement to any Subsidiary of the Company or any Affiliates.
"SEC" means the Securities and Exchange Commis sion.
"SEC REPORTS" has the meaning specified in section
(IV)(E).
"SECURITIES ACT" means the Securities Act of 1933, as
amended from time to time.
"SENIOR FINANCIAL OFFICER" means, with respect to any
Person, the chief financial officer, the principal accounting officer,
the treasurer or the controller of such Person.
"SEPARATE ACCOUNT" has the meaning specified in Section
3 of ERISA.
"SINGLE EMPLOYER PLAN" means a single employer plan (as
defined in Section 4001(a)(15) of ERISA) that (a) is maintained for
employees of the Company or any ERISA Affiliate and no Person other than
the Company and the ERISA Affiliates or (b) was so maintained and in
respect of which the Company or any ERISA Affiliate could have liability
under Section 4069 of ERISA in the event such plan has been or were to he
terminated.
"SOLVENT" and "SOLVENCY" mean, with respect to any
Person on any date of determination, that, on such date:
(a) the fair value of the property and assets of such
Person is greater than the total amount of liabilities (including,
without limitation, contingent liabilities) of such Person;
(b) the present fair salable value of the property and
assets of such Person is not less than the amount that will be required
to pay the probable liability of such Person on its debts as they become
absolute and matured;
(c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's
ability to pay such debts and liabilities as they mature; and
(d) such Person is not engaged in business or in a
transaction, and is not about to engage in business or in a transaction,
for which such Person's property and assets would constitute an
unreasonably small capital. The amount of contingent liabilities at any
time shall be computed as the amount that, in the light of all of the
facts and circumstances existing at such time, represents the amount that
could reasonably be expected to become an actual or matured liability.
"SUBSIDIARY" means, with respect to any Person at any
time, any corporation, partnership, joint venture, limited liability
company, trust or estate of which (or in which) more than 50% of:
(a) the issued and outstanding shares of capital stock
having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether at the time shares
of capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency);
(b) the interest in the capital or profits of such
corporation, professional corporation, partnership, joint venture or
limited liability company; or
(c) the beneficial interest in such trust or estate,
is, at such time, directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person's other Subsidiaries.
"VOTING INTERESTS" means shares of capital stock issued
by a corporation, or equivalent interests in any other Person, the
holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of directors (or persons performing
similar functions) of such Person, even if the right so to vote has been
suspended by the happening of such a contingency.
"WARRANTS" has the meaning specified on page 1 of this
Agreement.
"WITHDRAWAL LIABILITY" has the meaning specified in
Part I of Subtitle E of Title IV of ERISA.
