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EXHIBIT 99.2
SECURITIES PURCHASE AGREEMENT
AMONG
AMERICA SERVICE GROUP INC.,
HEALTH CARE CAPITAL PARTNERS L.P.
AND
HEALTH CARE EXECUTIVE PARTNERS L.P.
Dated as of January 26, 1999
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TABLE OF CONTENTS
Page
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1. Issuance and Sale of Notes, Warrants and Preferred Stock.........................................1
1.1. Issuance, Purchase and Sale of Notes, Warrants and Preferred Stock......................1
1.2. Closing.................................................................................2
1.3. Conditions to Closing...................................................................2
1.4. Deliveries at Closing...................................................................4
1.5. Mergers and Acquisition Advisory Fee....................................................5
2. Representations and Warranties of the Company....................................................5
2.1. Organization and Qualification..........................................................5
2.2. Due Authorization.......................................................................5
2.3. Subsidiaries............................................................................6
2.4. SEC Reports.............................................................................6
2.5. Financial Statements....................................................................6
2.6. Actions Pending; Compliance with Laws...................................................7
2.7. Title to Properties; Insurance..........................................................8
2.8. Governmental Consents, etc..............................................................8
2.9. Holding Company Act and Investment Company Act..........................................8
2.10. Acquisition Agreement...................................................................9
2.11. Conflicting Agreements and Charter Provisions...........................................9
2.12. Capitalization..........................................................................9
2.13. Disclosure.............................................................................10
2.14. Status of Securities...................................................................11
2.15. Registration Under Exchange Act........................................................11
2.16. ERISA..................................................................................11
2.17. Possession of Franchises, Licenses, etc................................................12
2.18. Environmental Matters..................................................................12
2.19. Certain Agreements.....................................................................13
2.20. Offering of Notes, Preferred Stock and Warrants........................................14
2.21. Use of Proceeds........................................................................15
2.22. Unlawful Use of Proceeds...............................................................15
2.23. Intellectual Property Rights...........................................................15
2.24. Related Transactions...................................................................16
2.25. No Brokerage or Finder's Fees..........................................................16
2.26. "Year 2000"............................................................................16
2.27. Taxes..................................................................................17
2.28. Vote Required..........................................................................17
2.29. Medicare and Medicaid..................................................................17
2.30. Property...............................................................................17
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3. Representations and Warranties of the Purchasers................................................17
3.1. Organization and Qualification.........................................................17
3.2. Due Authorization......................................................................18
3.3. Conflicting Agreements and Other Matters...............................................18
3.4. Acquisition for Investment.............................................................18
3.5. Brokers or Finders.....................................................................19
3.6. Accredited Investor....................................................................19
3.7. HSR Notification.......................................................................19
4. Registration, Exchange and Transfer of Notes....................................................19
4.1. Authorized Denominations of Notes......................................................19
4.2. The Note Register; Persons Deemed Owners...............................................19
4.3. Issuance of New Notes Upon Exchange or Transfer........................................19
4.4. Lost, Stolen, Damaged and Destroyed Notes..............................................20
5. Payment of Notes................................................................................20
5.1. Home Office Payment....................................................................20
5.2. Limitation on Interest.................................................................20
5.3. Interest...............................................................................21
5.4. Business Day...........................................................................21
6. Covenants of the Company........................................................................21
6.1. Financial Covenants....................................................................21
6.2. Limitation on Convertible Securities and Equity Securities.............................21
6.3. Merger; Purchase and Sale of Assets....................................................22
6.4. Dividends and Distributions............................................................22
6.5. Compliance with Laws...................................................................22
6.6. Limitation on Agreements...............................................................23
6.7. Preservation of Franchises and Existence...............................................23
6.8. Insurance..............................................................................23
6.9. Payment of Taxes and Other Charges.....................................................24
6.10. Financial Statements and Other Reports.................................................24
6.11. Inspection of Property.................................................................25
6.12. Board Membership.......................................................................25
6.13. Lost, Stolen, Damaged and Destroyed Stock Certificates.................................27
6.14. HSR....................................................................................27
6.15. Certain Tax Matters....................................................................28
6.16. [Intentionally Omitted]................................................................29
6.17. Notice of Breach.......................................................................29
6.18. Limitation on Transactions with Affiliates.............................................29
6.19. Stockholders Meeting...................................................................29
6.20. Proxy Statement........................................................................30
6.21. Financial Covenants....................................................................30
6.22. Limitation on Indebtedness.............................................................30
6.23. Limitation on Other Senior Subordinated Indebtedness...................................30
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6.24. Limitation on Guarantees of Indebtedness by Subsidiaries...............................30
6.25. Limitation on Issuances and Sales of Subsidiary Stock..................................30
6.26. Limitation on Liens Securing Pari Passu Indebtedness or Subordinated Indebtedness......31
6.27. Limitation on Dividends and other Payment Restrictions Affecting Subsidiaries..........31
6.28. Limitation on Investments..............................................................32
6.29. Mergers, Consolidations and Certain Sales of Assets....................................32
6.30. NASDAQ Approval........................................................................32
6.31. Redemption of Redeemable Common Stock..................................................32
7. Nondisclosure of Confidential Information.......................................................33
8. Events of Default and Remedies..................................................................34
8.1. Events of Default......................................................................34
8.2. Acceleration of Maturity...............................................................36
8.3. Other Remedies.........................................................................37
8.4. Conduct No Waiver; Collection Expenses.................................................38
8.5. Annulment of Acceleration..............................................................39
8.6. Remedies Cumulative....................................................................39
8.7. Limitations............................................................................39
9. Redemption......................................................................................39
9.1. Optional Redemption....................................................................39
9.2. Change of Control......................................................................40
10. Conversion......................................................................................41
10.1. Holder's Option to Convert into Preferred Stock........................................41
10.2. Company's Option to Convert............................................................41
10.3. Exercise of Conversion Privilege.......................................................41
10.4. Fractions of Shares; Interest..........................................................42
10.5. Reservation of Stock...................................................................43
11. Subordination of Notes..........................................................................43
11.1. Subordination of Notes to Senior Indebtedness..........................................43
11.2. Proofs of Claim of Holders of Senior Indebtedness; Voting..............................46
11.3. Rights of Holders of Senior Indebtedness Unimpaired....................................46
11.4. Effects of Event of Default............................................................47
11.5. Company's Obligations Unimpaired.......................................................47
11.6. Subrogation............................................................................47
11.7. Avoided Payments in Respect of Senior Indebtedness of the Company......................48
11.8. Independence of Provisions.............................................................48
11.9. Reliance by Certain Holders of Senior Indebtedness of the Company; Amendments and
Modifications..........................................................................48
12. Interpretation..................................................................................48
12.1. Definitions............................................................................48
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12.2. Accounting Principles..................................................................66
13. Miscellaneous...................................................................................66
13.1. Payments...............................................................................66
13.2. Severability...........................................................................66
13.3. Specific Enforcement...................................................................67
13.4. Entire Agreement.......................................................................67
13.5. Counterparts...........................................................................67
13.6. Notices and Other Communications.......................................................67
13.7. Amendments.............................................................................68
13.8. Cooperation............................................................................68
13.9. Successors and Assigns.................................................................68
13.10. Expenses and Remedies..................................................................69
13.11. Survival of Representations and Warranties.............................................70
13.12. Transfer of Securities.................................................................70
13.13. Governing Law..........................................................................71
13.14. Publicity..............................................................................71
13.15. Signatures.............................................................................71
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SCHEDULES
Schedule 2.3 Subsidiaries of the Company
Schedule 2.7 Insurance Policies
Schedule 2.12(a) Options Outstanding
Schedule 2.12(b) Capitalization of the Company
Schedule 2.18 Environmental Matters
Schedule 2.19(a) Certain Agreements
Schedule 2.19(b) Related Agreements
Schedule 2.23 Intellectual Property Rights Matters
Schedule 2.24 Related Transactions
EXHIBITS
Exhibit A-1 Form of Notes issuable by the Company to HCCP
Exhibit A-2 Form of Notes issuable by the Company to HCEP
Exhibit B-1 Form of Warrants issuable by the Company to HCCP
Exhibit B-2 Form of Warrants issuable by the Company to HCEP
Exhibit C Opinion Matters of King & Spalding
Exhibit D Certificate of Designation of Preferred Stock
Exhibit E Registration Rights Agreement among the Company,
HCCP and HCEP
Exhibit F Letter Agreement
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THIS SECURITIES PURCHASE AGREEMENT, dated as of January 26,
1999 (this "Agreement"), among America Service Group Inc., a Delaware
corporation (the "Company"), Health Care Capital Partners L.P., a Delaware
limited partnership ("HCCP"), and Health Care Executive Partners L.P., a
Delaware limited partnership ("HCEP," and together with HCCP, the "Purchasers").
WHEREAS, the Company has agreed to acquire (the "Acquisition")
all of the outstanding shares of capital stock of EMSA Government Services, Inc.
("EMSA") from InPhyNet Administrative Services, Inc. (the "Seller") pursuant to
a Stock Purchase Agreement, dated as of December 18, 1998 (the "Acquisition
Agreement"), between the Company and the Seller.
WHEREAS, in connection with the financing of the Acquisition
the Purchasers wish to purchase from the Company, and the Company wishes to sell
to the Purchasers, Subordinated Convertible Bridge Notes due January 26, 2000
(the "Notes") in the aggregate principal amount set forth herein with detachable
warrants (the "Warrants") to purchase shares of the Company's Common Stock, par
value $0.01 per share (the "Common Stock"), upon the terms set forth herein, and
Series A Convertible Preferred Stock, par value $0.01 per share (the "Preferred
Stock"), in the amount and upon the terms set forth herein;
WHEREAS, the Notes shall be convertible (under the
circumstances described herein) into shares of the Preferred Stock and the
Preferred Stock shall be convertible into shares of Common Stock; the Notes, the
Warrants and the Preferred Stock are referred to collectively as the "Purchased
Securities" or "Convertible Securities"; and the Convertible Securities and the
Common Stock are referred to collectively as the "Securities" (for the
definition of certain other capitalized terms, please refer to Section 12
hereof); and
WHEREAS, the Purchasers and the Company desire to provide for
such purchase and sale and to establish various rights and obligations in
connection therewith.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein set forth, the parties hereto agree as
follows:
1. Issuance and Sale of Notes, Warrants and Preferred Stock
1.1. Issuance, Purchase and Sale of Notes, Warrants and
Preferred Stock. Upon the terms set forth herein, the Company will sell to the
Purchasers, and the Purchasers will purchase from the Company, Notes in the
aggregate principal amount of $15,000,000 (the "Initial Principal Balance") with
the associated Warrants to purchase 135,000 shares of Common Stock and 50,000
shares of Preferred Stock at an aggregate price of $5,000,000 (the "Preferred
Stock Consideration," together with the Initial Principal Balance, the "Purchase
Price"). Each Note shall be in the form of Exhibits A-1
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and A-2 hereto and the Warrants shall be in the form set forth in Exhibits B-1
and B-2 hereto.
1.2. Closing. The closing of the transactions contemplated
hereby (the "Closing") will take place at the offices of King & Spalding,
Atlanta, Georgia, at 9:00 a.m. on January 26, 1999 or on such other date as
shall be mutually agreed by the Company and the Purchasers (the "Closing Date").
1.3. Conditions to Closing. (a) The obligations of the Company
and the Purchasers to consummate the transactions contemplated hereby at the
Closing are subject to the satisfaction of the following conditions: no
temporary restraining order, preliminary or permanent injunction or other order
or decree which prevents the consummation of the transactions contemplated
hereby shall have been issued and remain in effect, and no statutes, rules or
regulations shall have been enacted by any governmental authority (of the United
States or otherwise) which prevents the consummation of the transactions
contemplated hereby.
(b) The obligations of the Purchasers to
consummate the transactions contemplated hereby at the Closing are subject to
the satisfaction or waiver of the following conditions:
(i) the representations and warranties of
the Company set forth in Section 2 of this Agreement shall be true and
correct in all material respects as of the date when made and (unless
made as of a specified date) as of the Closing Date; and the Company
shall have performed in all material respects its covenants set forth
in this Agreement to be performed prior to the Closing Date and shall
not have taken any action which (if any shares of Preferred Stock or
the Notes were outstanding) would violate any provision of the
Certificate of Designation or this Agreement, as the case may be;
(ii) King & Spalding, counsel to the
Company, shall have delivered to the Purchasers an opinion (the
"Opinion of Counsel") dated the Closing Date with respect to the
matters set forth in Exhibit C hereto;
(iii) the Company shall have received and
delivered to the Purchasers a copy of the opinion from SunTrust
Equitable Securities Corporation ("SESC"), in form and substance
satisfactory to the Purchasers dated as of December 18, 1998, to the
effect that the terms of the Acquisition Agreement, this Agreement,
each document contemplated by this Agreement (the "Transaction
Documents") and the Revolving Credit Agreement (the "Revolving Credit
Facility") to be entered among the Company, the lenders identified
therein (the "Lenders") and NationsBank, N.A. ("NationsBank"), as
administrative agent and as issuing bank (the "Revolving Credit
Agreement"), taken as a whole, are fair, from a financial point of
view, to the Company (the "Fairness Opinion");
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(iv) the Company and the Purchasers shall
have entered into a warrant agreement in the form of Exhibit B hereto
(the "Warrant Agreement");
(v) simultaneously with the Closing, the
Company shall have duly authorized and executed a certificate of
designation substantially in the form of Exhibit D hereto, setting
forth the rights and preferences of the Preferred Stock (the
"Certificate of Designation"), and the Certificate of Designation shall
have been filed with the Secretary of State of the State of Delaware in
accordance with the General Corporation Law of the State of Delaware
(the "DGCL"), which Certificate of Designation shall amend and
supplement the Amended and Restated Certificate of Incorporation, as
amended, of the Company (the Amended and Restated Certificate of
Incorporation, as amended, including such Certificate of Designation,
the "Certificate of Incorporation");
(vi) the Company shall have paid (X) to
FFT the Advisory Fee and (Y) to the Purchasers the expenses, both as
provided in Section 1.5;
(vii) the Common Stock to be issued upon
conversion of the 50,000 shares of Preferred Stock to be issued on the
Closing Date or upon exercise of the Warrants shall have been approved
for quotation on the National Association of Securities Dealers, Inc.
Automated Quotation System ("Nasdaq") National Market, subject to
official notice of issuance;
(viii) the Purchasers shall have received
true, complete and correct copies of such agreements, schedules,
exhibits, certificates, documents, financial information and filings as
it may reasonably request in connection with the Transaction Documents,
all in form and substance reasonably satisfactory to the Purchasers;
(ix) the Purchasers shall have received
true copies of all consents, licenses and approvals required in
connection with the execution, delivery, performance, validity and
enforceability of this Agreement and the Transaction Documents, and
such consents, licenses and approvals shall be in full force and effect
and shall be reasonably satisfactory in form and substance to the
Purchasers;
(x) there shall not have occurred prior
to the Closing Date (x) any Material Adverse Change as determined by
Xxxxxx Xxxxxxx Xxxxxxxx & Co. ("FFT"), the general partner of the
Purchasers, in its reasonable judgment or (y) the legal inability of
the Company to issue and deliver to the Purchasers the Purchased
Securities;
(xi) all proceedings taken in connection
with the issuance and sale of the Securities and the transactions
contemplated hereby and all documents and papers relating thereto shall
be reasonably satisfactory in form and
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substance to FFT. The Purchasers shall have received copies of such
documents and papers as FFT may reasonably request in connection with
this Agreement;
(xii) at Closing, the Company shall have
executed a registration rights agreement in the form of Exhibit E
hereto (the "Registration Rights Agreement");
(xiii) (a) the Purchasers shall have
received executed or conformed copies of any amendments to the
Acquisition Agreement on or prior to the Closing Date, the terms and
conditions of which shall be in all respects reasonably satisfactory to
FFT, (b) the Acquisition Agreement and the Revolving Credit Facility
shall be in full force and effect and no material term or condition
thereof shall have been amended, modified or waived after the execution
thereof without the prior written approval of FFT, (c) none of the
applicable parties shall have failed in any respect to perform any
material obligation or covenant required by the Acquisition Agreement
or the Revolving Credit Agreement to be performed or complied with by
it on or before the Closing Date, in each case as materiality shall be
determined by FFT in its sole judgment and (d) all material conditions
to the transactions contemplated by the Acquisition Agreement and the
Revolving Credit Agreement set forth therein shall have been satisfied
or the fulfillment of such conditions shall have been waived, in each
case as materiality shall be determined by FFT in its sole judgment;
(xiv) the Company shall have delivered an
Officer's Certificate detailing the sources and uses of all funds for
the transactions occurring on the Closing Date, with proper wire
instructions for the Purchasers for the application of the proceeds
from the issuances of the Purchased Securities on the Closing Date, all
in form and substance satisfactory to FFT;
(xv) the Company shall have delivered a
letter agreement in the form of Exhibit F hereto executed by Xxxxx X.
Mercy; and
(xvi) the Purchasers shall have received an
Officer's Certificate in form and substance satisfactory to the
Purchasers from the Company confirming the foregoing matters and any
other evidence requested by the Purchasers in support thereof.
1.4. Deliveries at Closing. At the Closing, the Company shall
deliver to the Purchasers, against payment in full of the Purchase Price, (a)
Notes in the form of Exhibit A in such denominations as the Purchasers have
requested, dated the Closing Date hereof and registered in the names requested
by the Purchasers, in an aggregate principal amount corresponding to the Initial
Principal Balance, (b) Warrants in the form of Exhibit B and (c) stock
certificates registered in the names requested by the Purchasers representing
50,000 shares of Preferred Stock.
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The Closing of the purchase and sale of the Purchased
Securities shall be deemed to have taken place in the State of New York.
1.5. Mergers and Acquisition Advisory Fee. The Company shall
pay FFT on the date hereof a fee related to mergers and acquisition advice
provided to the Company by FFT ("Advisory Fee") of $1,000,000 and shall, subject
to the limitations set forth in Section 13.10(a), reimburse all of the
Purchasers' reasonable out-of-pocket expenses (including, without limitation,
reasonable fees, charges, disbursements of counsel and travel expenses) incurred
in connection with (i) the negotiation, execution and delivery of this Agreement
and the Transaction Documents and the Purchasers' due diligence investigation
and (ii) the transactions contemplated by this Agreement and the other
Transaction Documents, which payments shall be made by wire transfer to an
account specified by the Purchasers.
2. Representations and Warranties of the Company
The Company represents and warrants as of the date hereof as
follows:
2.1. Organization and Qualification. Each of the Company and
its Subsidiaries is a corporation or other entity duly organized and existing in
good standing under the laws of its jurisdiction of organization and has the
power to own its respective property and to carry on its respective business as
now being conducted. Each of the Company and its Subsidiaries is duly qualified
to do business and in good standing in every jurisdiction in which the nature of
the respective business conducted or property owned by it makes such
qualification necessary and where the failure so to qualify would have a
Material Adverse Effect.
2.2. Due Authorization. The execution and delivery of this
Agreement, the Registration Rights Agreement, the Warrant Agreement and the
Notes and the issuance, sale and delivery of the Purchased Securities and the
Common Stock issuable upon conversion of the Preferred Stock, upon conversion of
the Preferred Stock issuable upon conversion of the Notes and upon exercise of
the Warrants and compliance by the Company with all the provisions of this
Agreement, the Registration Rights Agreement, the Warrant Agreement, the
Certificate of Designation and the Convertible Securities (i) are within the
corporate power and authority of the Company; (ii) except for the Stockholder
Approval (as defined below), do not or will not require the approval or consent
of the stockholders of the Company; and (iii) have been authorized by all
requisite corporate proceedings on the part of the Company. This Agreement, the
Notes, the Registration Rights Agreement and the Warrant Agreement have been
duly executed and delivered by the Company and constitute valid and binding
agreements of the Company, enforceable in accordance with their respective
terms, except that (x) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights, and (y) the remedy of specific performance
and injunctive and other forms of equitable relief may be
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subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. The Company has furnished to the
Purchasers true and correct copies of the Company's Amended and Restated
Certificate of Incorporation and its Amended and Restated By-Laws ("By-Laws") as
in effect on the date of this Agreement.
2.3. Subsidiaries. The Subsidiaries of the Company, all of
which are (or upon closing of the Acquisition will be) wholly owned by the
Company, directly or indirectly, together with their jurisdiction of
incorporation or formation, are as set forth on Schedule 2.3 hereto.
2.4. SEC Reports. The Company has filed all registration
statements, proxy statements, reports and other documents required to be filed
by it under the Securities Act and the Exchange Act since December 31, 1995; and
the Company has furnished the Purchasers copies of its Annual Report on Form
10-K for the fiscal year ended December 31, 1997 (the "1997 Form 10-K"),
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, June 30
and September 30, 1998 and all proxy statements, registration statements and
reports under the Securities Act and the Exchange Act filed by the Company after
such date, each as filed with the Commission (collectively, the "SEC Reports").
Each SEC Report was in substantial compliance with the requirements of its
respective report form and did not on the date of filing contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and as of the date
hereof there is no fact not disclosed in the SEC Reports which is peculiar to
the Company and which would have a Material Adverse Effect.
2.5. Financial Statements. The audited consolidated balance
sheet and statements of operations, stockholders' equity and cash flows of the
Company for the year ended December 31, 1997 (including the related notes
thereto), together with the unqualified report of Ernst & Young LLP ("E&Y") (the
"1997 Financial Statements") and the financial statements included in the SEC
Reports (including any related schedules and/or notes) have been prepared in
accordance with generally accepted accounting principles consistently followed
(except as indicated in the notes thereto) throughout the periods involved and
fairly present the consolidated financial condition, results of operations and
changes in stockholders' equity of the Company and its Subsidiaries as of the
dates thereof and for the periods ended on such dates (in each case subject, as
to interim statements, to changes resulting from year-end adjustments, none of
which will be material in amount or effect), and the Company has no material
liabilities or obligations, contingent or otherwise, not reserved against or
otherwise disclosed in the latest quarterly financial statements included in the
SEC Reports, other than any such liabilities contemplated hereby or which were
incurred in the ordinary course of business since September 30, 1998. Since
September 30, 1998, the Company and its Subsidiaries have operated their
respective businesses only in the ordinary course and no event has occurred
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which has or is reasonably likely to have a Material Adverse Effect, other than
changes disclosed or referred to in the SEC Reports or the 1997 Financial
Statements. The projections and other financial analyses of the Company provided
to the Purchasers were prepared on the basis set forth therein, and there are no
statements or conclusions in any such projections or financial analyses which
are based upon or include information known to the Company to be misleading or
which fail to take into account information regarding the matters reported
therein. The Company believes that the projections are reasonable, although it
is recognized that actual results may differ therefrom. Such projections and
other financial analyses constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. The projections and financial analyses are not guarantees of future
performance and involve risks and uncertainties, and actual results may differ
materially from those contemplated by such forward-looking statements. Important
factors currently known to the Company that could cause actual results to differ
materially from those in such forward-looking statements are set forth in the
1997 Form 10-K under the caption "Cautionary Statements."
2.6. Actions Pending; Compliance with Laws. There is no
action, suit, investigation or proceeding pending or, to the knowledge of the
Company, threatened by any public official or governmental authority, against
the Company or any of its Subsidiaries or any of their respective properties or
assets by or before any court, arbitrator or governmental body, department,
commission, board, bureau, agency or instrumentality (collectively,
"Litigation"), which questions the validity or enforceability of, or seeks to
enjoin or invalidate this Agreement, the Registration Rights Agreement, the
Warrant Agreement, the Certificate of Designation or the Convertible Securities
or any action taken or to be taken pursuant hereto or thereto, which, if
adversely determined, would result in any Material Adverse Effect, except for
any Litigation set forth in the SEC Reports or the 1997 Financial Statements,
and neither the Company nor any of its Subsidiaries is in default in any
material respect with respect to any judgment, order, writ, injunction, decree
or award. The Company and each Subsidiary is in compliance with all applicable
federal, state, local and foreign laws, statutes, orders, rules, regulations,
policies or guidelines promulgated, or judgments, decisions or orders entered by
any governmental authority (collectively, "Applicable Laws") relating to the
Company or any Subsidiary or their respective business or properties, including,
without limitation, social security laws, workers' protection laws, laws
regarding the provision of insurance, health maintenance organization, corporate
practice of medicine, third party administration and primary health care
services, the Occupational Safety and Health Act and the regulations promulgated
thereunder ("OSHA"), and all rules of professional conduct applicable to the
Company or any Subsidiary by which any of its properties are bound or subject,
except where the failure to be in compliance therewith would not have a Material
Adverse Effect.
2.7. Title to Properties; Insurance. Except for Permitted
Liens (as defined in the Revolving Credit Agreement as in effect on the date
hereof), the Company
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and its Subsidiaries have good and valid title to, or, in the case of property
leased by any of them as lessee, a valid and subsisting leasehold interest in,
their respective properties and assets, free of all liens and encumbrances other
than those referred to in the 1997 Financial Statements, except in each case for
such defects in title and such other liens and encumbrances which are disclosed
in the SEC Reports or the 1997 Financial Statements or which do not in the
aggregate materially detract from the value to the Company of the properties and
assets of the Company and its Subsidiaries taken as a whole. The Company and its
Subsidiaries maintain insurance in such amounts, including self-insurance,
retainage and deductible arrangements, and of such a character as is reasonable
for companies engaged in the same or similar business, including directors' and
officers' liability and medical professional liability insurance. Schedule 2.7
sets forth a complete and correct list of all such policies, including the
amount of all policy limits and deductibles.
2.8. Governmental Consents, etc. The Company is not required
to obtain any consent, approval or authorization of, or to make any declaration
or filing with, any governmental authority as a condition to or in connection
with the valid execution, delivery and performance of this Agreement, the
Warrant Agreement, the Registration Rights Agreement and the Notes and the valid
offer, issue, sale or delivery of the Securities, or the performance by the
Company of its obligations in respect thereof, except for (a) the filing with
the Secretary of State of the State of Delaware of the Certificate of
Designation which will be made simultaneously with the Closing; (b) any filings
required to effect any registration of the Common Stock pursuant to the
Registration Rights Agreement; (c) approval by the Company's stockholders
representing a majority of the shares of Common Stock (excluding shares
Beneficially Owned by the Purchasers) present and voting at a meeting duly
called and convened by the Company (the "Stockholder Approval") of the issuance
of the shares of Preferred Stock, the shares of Preferred Stock issuable upon
conversion of the Notes and the shares of Common Stock issuable upon conversion
or exercise of the Convertible Securities contemplated by this Agreement (the
"Stock Issuance"), of which the number of shares of Common Stock to be issued
will be in excess of 20% of the number of shares of Common Stock outstanding
without regard to the shares of Common Stock issuable upon conversion of the
Convertible Securities, as required by Rule 4310 of the NASD Manual; (d) the
receipt of notice of early termination, or the expiration of, the applicable
waiting period pursuant to the HSR Act (the "HSR Approval"); and (e) any filings
required pursuant to state and federal securities laws which will be timely made
after the Closing hereunder.
2.9. Holding Company Act and Investment Company Act. Neither
the Company nor any Subsidiary is: (i) a "public utility company" or a "holding
company," or an "affiliate" or a "subsidiary company" of a "holding company," or
an "affiliate" of such a "subsidiary company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, or (ii) a "public
utility," as defined in the Federal Power Act, as amended, or (iii) an
"investment company" or an "affiliated person"
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15
thereof or an "affiliated person" of any such "affiliated person," as such terms
are defined in the Investment Company Act of 1940, as amended.
2.10. Acquisition Agreement. The copy of the Acquisition
Agreement provided by the Company to the Purchasers (a) is a true and correct
copy thereof, (b) has not been amended or modified and (c) is in full force and
effect and will be in full force and effect as of the Closing Date. On the
Closing Date, each of the representations and warranties made by the Company
and, to the knowledge of the Company, the Seller in the Acquisition Agreement
will be true and correct in all material respects, (without regard to any waiver
thereof). All consents, approvals and authorizations of, and filings,
registrations and qualifications (collectively, "Consents") with, any
governmental authority on the part of the Company and, to the knowledge of the
Company, EMSA and the Seller required in connection with the consummation of the
Acquisition will have been obtained or made and remain in full force and effect
as of the Closing Date, except for Consents the failure to obtain which will not
(i) have a Material Adverse Effect, (2) impair the ability of the Company to
perform its obligations under the Transaction Documents or (3) delay or prevent
the consummation of the Acquisition or the transactions contemplated hereunder.
2.11. Conflicting Agreements and Charter Provisions. None of
(i) the execution and delivery of this Agreement, the Warrant Agreement, the
Registration Rights Agreement and the Notes and the issuance of the Securities;
(ii) the fulfillment of and compliance with the terms and provisions hereof and
thereof and of the Securities; (iii) the payment of dividends on shares of
Preferred Stock and the redemption of the Notes and Preferred Stock as
contemplated by the Governing Instruments out of funds legally available
therefor; and (iv) except with respect to the Stockholder Approval and the HSR
Approval, the conversion or exercise, as the case may be, of the Convertible
Securities as contemplated by the Governing Instruments will conflict with or
result in a breach of the terms, conditions or provisions of, or give rise to a
right of termination under, or constitute a default under, or result in any
violation of, the Certificate of Incorporation or By-laws of the Company or any
mortgage, agreement, instrument, order, judgment, decree, statute, law, rule or
regulation to which the Company or any of its Subsidiaries or any of their
respective property is subject, except that the payment of cash dividends on
shares of Preferred Stock and the redemption of the Notes may conflict with
certain covenants in the Revolving Credit Agreement. Neither the Company nor any
of its Subsidiaries is in default under any outstanding indenture or other debt
instrument or with respect to the payment of principal of or interest on any
outstanding obligation for borrowed money, is in default under any of their
respective contracts or agreements, or under any instrument by which the Company
or any of its Subsidiaries is bound, in each case which default would have a
Material Adverse Effect.
2.12. Capitalization. (a) Immediately prior to the Closing and
the consummation of the Acquisition, the Company has no outstanding Senior or
Subordinated Indebtedness and the authorized capital stock of the Company
consists
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16
solely of (i) 10,000,000 shares of the Common Stock of which (x) 3,574,077
shares are issued and outstanding as of December 31, 1998 and (y) 1,474,408
shares were reserved for issuance upon the exercise of options granted or
issuable by the Company or pursuant to the Company's Employee Incentive Stock
Plan or pursuant to the Company's Employee Stock Purchase Plan; and (ii)
2,000,000 shares of preferred stock, par value $.01 per share, of which none are
outstanding. All of the outstanding shares of Common Stock have been validly
issued and are fully paid and nonassessable. No class of capital stock of the
Company is entitled to preemptive or similar rights. Except for the securities
referred to in the first sentence of this Section 2.12 and the options listed on
Schedule 2.12(a) hereto, there are no outstanding subscriptions, options,
warrants, puts, calls, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into,
shares of any class of capital stock of the Company, or contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of its capital stock or options, warrants or rights to
purchase or acquire any shares of its capital stock. Since September 30, 1998,
the Company has not issued any additional shares of capital stock, other than
pursuant to the exercise of outstanding stock options pursuant to the Company's
Employee Incentive Stock Plan or pursuant to the Company's Employee Stock
Purchase Plan or as contemplated by Schedule 2.12(a), nor has the Company
changed the amount of its authorized capital stock or subdivided or otherwise
changed any shares of any class of its capital stock, whether by way of
reclassification, recapitalization, stock split or otherwise, or issued or
reissued, or agreed to issue or reissue, any of its capital stock. Except as
contemplated by this Agreement, the Company has not agreed to register any
securities under the Securities Act or under any state securities law or granted
registration rights to any person or entity. There are no voting trusts,
stockholders agreements, proxies or other similar agreements or understandings
in effect to which the Company is a party or of which it has knowledge with
respect to the voting or transfer of any of the shares of Common Stock. To the
extent that any rights, options or warrants to acquire any securities of the
Company are outstanding, none of (i) the issuance and sale of the Purchased
Securities pursuant to this Agreement, (ii) the conversion of the Notes into
Preferred Stock or (iii) the issuance of the Common Stock upon conversion of the
Preferred Stock, upon conversion of the Preferred Stock issuable upon conversion
of the Notes or upon exercise of the Warrants will result in an adjustment of
the exercise price or number of shares issuable upon the exercise in respect of
any such rights, options or warrants.
(b) After the Closing and the consummation of
the Acquisition, the capitalization of the Company will be as set forth in
Schedule 2.12(b) hereto.
2.13. Disclosure. Neither this Agreement nor any certificate,
instrument or written statement furnished or made to the Purchasers by or on
behalf of the Company in connection with this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein misleading. There is
no fact which the Company has not disclosed to the
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17
Purchasers or their counsel in writing and of which the Company is aware which
materially and adversely affects or which could reasonably be expected to have a
Material Adverse Effect or materially and adversely affect the ability of the
Company to perform its obligations under this Agreement.
2.14. Status of Securities. The Securities have been duly
authorized by all necessary corporate action on the part of the Company (other
than the Stockholder Approval and HSR Approval, no consent or approval of
stockholders being required by law, the Certificate of Incorporation or the
By-Laws of the Company or otherwise), and, assuming receipt of Stockholder
Approval, the Preferred Stock issuable upon conversion of the Notes, and the
Common Stock issuable upon conversion of the Preferred Stock, upon conversion of
the Preferred Stock issuable upon conversion of the Notes or upon the exercise
of the Warrants, as the case may be, will be validly issued and outstanding,
fully paid and nonassessable, and the issuance of such Preferred Stock or Common
Stock is not and will not be subject to preemptive rights of any other
stockholder of the Company. Such shares of Preferred Stock and such shares of
Common Stock have been validly reserved for issuance.
2.15. Registration Under Exchange Act. The Company has not
registered the Notes, the Warrants or the Preferred Stock as a class pursuant to
Section 12 of the Exchange Act. Neither the Notes, the Warrants nor the
Preferred Stock will be registered as such class and such registration is not
required except as otherwise required by the provisions of the Registration
Rights Agreement.
2.16. ERISA. No accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any Pension Plan and each Pension Plan has been maintained in
compliance with minimum funding standards of ERISA and the Code (other than a
Multiemployer Plan). No liability to the PBGC or any other entity has been, or
is reasonably likely to be, incurred with respect to any Pension Plan or
Employee Benefit Plan (other than a Multiemployer Plan) by the Company, any of
its Subsidiaries or any ERISA Affiliate which would have a Material Adverse
Effect on the Company, its Subsidiaries and any ERISA Affiliate. Neither the
Company nor any of its Subsidiaries and any ERISA Affiliate has incurred, or is
reasonably likely to incur, any withdrawal liability (including contingent
withdrawal liability) under Title IV of ERISA with respect to any Multiemployer
Plan which would have a Material Adverse Effect on the Company, its Subsidiaries
or its ERISA Affiliates and if the Company, its Subsidiaries and ERISA
Affiliates were to completely withdraw as of the date hereof from each
Multiemployer Plan in which they participate, the Company, its Subsidiaries and
its ERISA Affiliates would not incur any material withdrawal liability under
Title IV of ERISA. Neither the Company nor any of its Subsidiaries has any
obligation to provide post-retirement health benefits to any employee or former
employee. No fiduciary of any Employee Benefit Plan maintained or contributed to
by the Company or any of its Subsidiaries, for the benefit of their respective
employees has engaged or caused any Employee Benefit Plan
-11-
18
to engage in any transaction prohibited by Section 4975 of the Code or Section
406 of ERISA which is reasonably likely to subject the Company or any Subsidiary
or any entity the Company or any Subsidiary has an obligation to indemnify to
any tax or penalty imposed under Section 4975 of the Code or Section 406 of
ERISA. Each Employee Benefit Plan has been maintained and administered in
compliance with all applicable law including ERISA and the Code in all material
respects. Each Employee Benefit Plan and Pension Plan (and each related trust,
if any) which is intended to be qualified under Section 401(a) of the Code is so
qualified and has received a determination letter from the Internal Revenue
Service to such effect, and no circumstances exist which could reasonably be
expected to affect such qualification.
2.17. Possession of Franchises, Licenses, etc. The Company and
its Subsidiaries possess all franchises, certificates, licenses, permits and
other authorizations from governmental or political subdivisions or regulatory
authorities and all patents, trademarks, service marks, trade names, copyrights,
licenses and other rights that are necessary in any material respect to the
Company and its Subsidiaries taken as a whole for the ownership, maintenance and
operation of their respective properties and assets, and neither the Company nor
any of its Subsidiaries is in violation of any thereof in any material respect.
2.18. Environmental Matters. Except as listed in Schedule
2.18:
(a) There are, with respect to the Company and each
Subsidiary, or any predecessor of the foregoing, no past or present material
violations of Environmental Law, nor any actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may give rise to
any liability pursuant to any Environmental Law and neither the Company nor any
of its Subsidiaries has received any notice with respect to any of the
foregoing, nor is any Litigation pending or threatened in connection with any of
the foregoing.
(b) No Hazardous Materials are present on or about
any real property currently leased or used by the Company or any of its
Subsidiaries and no Hazardous Materials were present on or about any real
property previously owned, leased or used by the Company or any its Subsidiaries
during the period the property was owned, leased or used by the Company or any
of its Subsidiaries, except in the normal course of the Company's or any such
Subsidiary's business; provided, however, that no representation or warranty is
made regarding the presence or absence of Hazardous Materials at prison
facilities used by the Company or its Subsidiaries if (i) (A) the Company has no
knowledge of such Hazardous Materials, and (B) such Hazardous Materials were not
produced by or used in the business of the Company or any of its Subsidiaries,
or (ii) the presence of such Hazardous Materials would not, individually or in
the aggregate, have a Material Adverse Effect.
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19
(c) No Hazardous Materials have been released on or
about, or where they may pose a threat of migration to, any real property
currently leased or used by the Company or any of its Subsidiaries and no
Hazardous Materials were released on or about any real property previously
owned, leased or used by the Company or any of its Subsidiaries during the
period the property was owned, leased or used by the Company or any of its
Subsidiaries, except as may be required in the normal course of business and in
material compliance with applicable Environmental Law; provided, however, that
no representation or warranty is made regarding the presence or absence of a
release of Hazardous Materials at prison facilities used by the Company or its
Subsidiaries if (i) (A) the Company has no knowledge of such Hazardous Material
release, and (B) such Hazardous Materials were not released by the Company or
any of its Subsidiaries, or (ii) where such release would not, individually or
in the aggregate, have a Material Adverse Effect.
(d) No asbestos-containing materials or PCBs are
present on or about any property currently leased or used by the Company or any
of its Subsidiaries; provided, however, that no representation or warranty is
made regarding the presence or absence of such materials at prison facilities
used by the Company or its Subsidiaries if (i) (A) the Company has no knowledge
of such materials, and (B) such materials were not produced by or used in the
business of the Company or any of its Subsidiaries, or (ii) the presence of such
materials would not, individually or in the aggregate, have a Material Adverse
Effect.
(e) There are not now, nor have there ever been,
any underground storage tanks or similar facilities ("Storage Facilities") of
any kind on or under any real property currently or previously owned, leased or
used by the Company or any of its Subsidiaries; provided, however, that no
representation or warranty is made regarding the presence or absence of Storage
Facilities at prison facilities used by the Company or its Subsidiaries if (i)
(A) the Company has no knowledge of such Storage Facilities, and (B) such
Storage Facilities were not used in the Company's business or (ii) where the
presence of such Storage Facilities would not, individually or in the aggregate,
have Material Adverse Effect.
2.19. Certain Agreements. (a) Except as described in the SEC
Reports or as set forth in Schedule 2.19(a) hereto, neither the Company nor any
Subsidiary is a party to any written or oral contract, agreement, Guarantee,
lease or executory commitment (each a "Contract") falling within any of the
following categories: (i) Contracts which are service contracts or equipment
leases involving payments by the Company or any Subsidiary of more than $50,000
per year, (ii) Contracts containing covenants purporting to limit the freedom of
the Company or any Subsidiary to compete in any line of business in any
geographic area or to hire any individual or group of individuals, (iii)
Contracts relating to any outstanding commitment for capital expenditures in
excess of $100,000, (iv) Contracts relating to the lease or sublease of or sale
or purchase of real or personal property involving any annual expense or price
in excess of $50,000 and not cancelable
-13-
20
by the Company or any Subsidiary (without premium or penalty) within one month,
(v) indentures, mortgages, promissory notes, loan agreements, Guarantees of
amounts in excess of $100,000, letters of credit or other agreements or
instruments of the Company or any Subsidiary or commitments for the borrowing or
the lending of amounts in excess of $100,000 or by the Company or any Subsidiary
or providing for any right of first refusal or the creation of any charge,
security interest, encumbrance or lien upon any of the assets of the Company or
any Subsidiary, and (vi) Contracts involving annual revenues or expenditures to
the business of the Company or any Subsidiary, in excess of 5.0% of the
Company's annual revenues. All such contracts are valid and binding obligations
of the Company and each Subsidiary, as the case may be, and, to the knowledge of
the Company and each Subsidiary, are the valid and binding obligation of each
other party thereto except such Contracts which if not so valid and binding
would not, individually or in the aggregate, have a Material Adverse Effect.
Neither the Company or any Subsidiary nor, to the knowledge of the Company or
any Subsidiary, any other party thereto is in violation of or in default in
respect of, nor has there occurred an event or condition which with the passage
of time or giving of notice (or both) would constitute a default under any such
Contract which in the judgment of the management of the Company would adversely
affect the Company's ability to retain, renew or otherwise continue the
Company's contractual relationship with the parties thereto, except for the loss
of contractual relationships which would not have a Material Adverse Effect.
(b) Except for Non-Disclosable Contracts and as
described in the SEC Reports, Schedule 2.19(b) lists all Contracts to which the
Company or any Subsidiary is a party with or for the benefit of any officer,
director or Affiliate of the Company or any Subsidiary or Associate thereof, and
the Company has provided to the Purchasers true and correct copies of each such
Contract as currently in effect.
2.20. Offering of Notes, Preferred Stock and Warrants. Neither
the Company nor any Person acting on its behalf has offered the Notes, the
Preferred Stock or the Warrants or any similar securities of the Company for
sale to, solicited any offers to buy the Notes, the Preferred Stock or the
Warrants or any similar securities of the Company from or otherwise approached
or negotiated with respect to the Company with any Person other than the
Purchasers. Neither the Company nor any Person acting on its behalf has taken or
will take any action (including, without limitation, any offering of any
securities of the Company under circumstances which would require the
integration of such offering with the offering of the Notes, Preferred Stock and
Warrants under the Securities Act and the rules and regulations of the
Commission thereunder) which could reasonably be expected to subject the
offering, issuance or sale of the Notes, Preferred Stock and Warrants to the
registration requirements of Section 5 of the Securities Act.
2.21. Use of Proceeds. The proceeds of the sale of the
Purchased Securities will be used by the Company only (i) for the payment of
fees and expenses in connection with the transactions contemplated hereunder and
in the other Transaction
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21
Documents and (ii) to fund the payment of the purchase price of the Acquisition
pursuant to the Acquisition Agreement.
2.22. Unlawful Use of Proceeds. (a) The Company does not own,
directly or indirectly, any "margin security", as defined in Regulation G issued
by the Board of Governors of the Federal Reserve System (12 CFR Part 207); and
the Company will not use any proceeds from the sale of the Purchased Securities
for any purpose which would result in any transaction contemplated by this
Agreement constituting a "purpose credit" within the meaning of said Regulation
G, or which would involve a violation of Section 7 of the Exchange Act or
Regulation T, U or X of said Board of Governors (12 CFR Parts 220, 221 and 224,
respectively).
(b) The Company does not intend to apply and will not
apply any part of the proceeds of the sale of the Purchased Securities in any
manner which is unlawful or which would involve a violation of Executive Orders
12775 and 12779 (56 Fed. Reg. 50645 and 55976) Prohibiting Certain Transactions
with respect to Haiti or any of the following regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended): the Foreign
Assets Control Regulations, the Transactions Control Regulations, the Cuban
Assets Control Regulations, the Foreign Funds Control Regulations, the Iranian
Assets Control Regulations, the Iraqi Transactions Regulations, the Nicaraguan
Trade Control Regulations, the South African Transactions Regulations and the
Libyan Sanctions Regulations.
2.23. Intellectual Property Rights. To the Company's
knowledge, except as described in the SEC Reports or as set forth in Schedule
2.23:
(a) Each of the Company or its Subsidiaries owns or
has a license to use all patents and patent applications, trademark
registrations and applications and copyright registrations and applications, and
all other material intangible property and technology ("Intellectual Property")
which are used by the Company or any Subsidiary free and clear of all Liens,
other than Permitted Liens (as defined in the Revolving Credit Agreement as in
effect on the date hereof) and Liens which arise in the ordinary course of
business and do not materially impair such ownership or use of such Intellectual
Property or materially detract from the value thereof. With respect to such
Intellectual Property licensed by the Company or any Subsidiary, such licenses
are in full force and effect, the Company or such Subsidiary is in compliance
with the terms and provisions thereof, and no event has occurred which, with
notice or lapse of time or both, would constitute a breach or violation thereof
which could have a Material Adverse Effect, and the Company or such Subsidiary
holds a valid license to use such Intellectual Property, free of any liens,
claims or encumbrances except those liens, claims or encumbrances which do not
and will not, individually or in the aggregate, have a Material Adverse Effect.
(b) The Company and the Subsidiaries (i) have the
right and authority to use such Intellectual Property in connection with the
conduct of the business
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22
of the Company and the Subsidiaries in the manner and to the extent such
business is presently conducted, and (ii) have not been notified of any claim
that such use conflicts with, infringes upon or violates any rights of any other
person or entity, except in each case, as such would not, individually or in the
aggregate, have a Material Adverse Effect.
2.24. Related Transactions. Except as disclosed in the SEC
Reports or on Schedule 2.24, no current stockholder, director, officer or
employee of the Company, or any "Affiliate" or "associate" (as such term is
defined in Rule 12b-2 under the Exchange Act) of any of the foregoing persons or
the Company or any Subsidiary is presently, or during the past three years has
been, directly or indirectly, a party to any agreement, transaction or series of
similar transactions with the Company or any Subsidiary which are or will be
required to be disclosed under the provisions of the 1934 Act, other than in
connection with any such person's duties as a director, officer or employee of
the Company.
2.25. No Brokerage or Finder's Fees. Except for the Company's
obligations to SESC under an engagement letter dated September 28, 1998 and to
FFT under a commitment letter dated November 13, 1998, neither the Company, any
Subsidiary of the Company, nor any stockholder, director, officer or employee of
the Company or any Subsidiary has incurred or will incur any brokerage, finder's
or similar fee in connection with the transactions contemplated by this
Agreement or the Acquisition Agreement (other than fees related to Senior
Indebtedness).
2.26. "Year 2000". The Company and each of its Subsidiaries
have analyzed and are continuing to analyze the operations thereof that could be
affected adversely by a failure to be Year 2000 Compliant in a timely manner and
have developed plans and procedures for assuring that they are or will be Year
2000 Compliant in a timely manner, the implementation of which is on schedule in
all material respects. The Company reasonably believes that it, and its
Subsidiaries and the operations thereof, and all suppliers, vendors and other
Persons whose performance is material to such operations, will be Year 2000
Compliant in a timely manner, except to the extent that a failure to be
compliant will not have a Material Adverse Effect. "Year 2000 Compliant" means a
condition or state of affairs such that computers, computer systems, computer
programs and software, computer applications, imbedded microchips and other
systems are and will be able to perform and process date-sensitive functions and
operations (including input, output, comparisons and arithmetic calculations)
accurately prior to, on and after December 31, 1999, or, to the extent that the
same are unable or fail to perform and process such functions and operations
accurately, there are in place alternative or back-up systems or procedures such
that any such inability or failure will not have a Material Adverse Effect.
2.27. Taxes. The Company and its Subsidiaries have filed or
caused to be filed all income tax returns which are required to be filed and
have paid or caused to be paid all taxes as shown on said returns and on all
assessments for income taxes received
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23
by them to the extent that such taxes have become due, except taxes the validity
or amount of which is being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been set aside, and except for
such returns for which the failure to file would not have a Material Adverse
Effect. With respect to prior fiscal years, for which the federal income tax
returns of the Company and its Subsidiaries have been examined and reported on
by the Internal Revenue Service, all tax liabilities including additional
assessments have been satisfied for all such fiscal years prior to and including
the fiscal year ended December 31, 1994. The Company and its Subsidiaries have
paid or caused to be paid, or have established reserves that the Company
reasonably believes to be adequate in all material respects, for all federal
income tax liabilities and state income tax liabilities applicable to the
Company and its Subsidiaries for all fiscal years which have not been examined
and reported on by the taxing authorities (or closed by applicable statutes).
2.28. Vote Required. The Stockholder Approval is the only vote
of the holders of any class or series of the Company's capital stock necessary
for the Company to approve the Stock Issuance.
2.29. Medicare and Medicaid. Neither the Company nor any of
its Affiliates participates in either the Medicare or Medicaid programs as those
programs are defined in the Medicare Act and the Medicaid Act, respectively, and
do not receive any payments or funds therefrom.
2.30. Property. Neither the Company nor any of its
Subsidiaries owns any real property.
3. Representations and Warranties of the Purchasers. The Purchasers
represent and warrant as of the date hereof as follows:
3.1. Organization and Qualification. Each of the Purchasers is
a limited partnership duly organized and existing in good standing under the
laws of the jurisdiction of its formation and has the power to own its
respective property and to carry on its respective business as now being
conducted. Each of the Purchasers is duly qualified to do business and in good
standing in every jurisdiction in which the nature of the respective business
conducted or property owned by it makes such qualification necessary, except
where the failure to so qualify would not prevent consummation of the
transactions contemplated hereby or have a material adverse effect on the
Purchasers' ability to perform their obligations hereunder.
3.2. Due Authorization. Each of the Purchasers has all right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by each of the Purchasers and the consummation by the Purchasers of the
transactions contemplated hereby have been duly authorized by all necessary
action on behalf of each of the Purchasers. This Agreement has been duly
executed and delivered by the Purchasers and constitutes a valid and
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binding agreement of the Purchasers enforceable in accordance with its terms,
except that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
3.3. Conflicting Agreements and Other Matters. Neither the
execution and delivery of this Agreement nor the performance by the Purchasers
of their obligations hereunder will conflict with, result in a breach of the
terms, conditions or provisions of, constitute a default under, or require any
consent, approval or other action by or any notice to or filing with any court
or administrative or governmental body pursuant to, the organizational documents
or agreements of each of the Purchasers or any mortgage, agreement, instrument,
order, judgment, decree, statute, law, rule or regulation to which either
Purchaser or any of their respective properties are subject, except for filings
after the Closing under Section 13(d) of the Exchange Act and compliance with
the HSR Act.
3.4. Acquisition for Investment. Each of the Purchasers is
acquiring the Purchased Securities being purchased by it for its own account for
the purpose of investment and not with a view to or for sale in connection with
any distribution thereof, and none of the Purchasers have any present intention
or plan to effect any distribution thereof. Each of the Purchasers acknowledges
that the Securities, including the Securities issuable upon conversion or
exercise, as the case may be, of the Convertible Securities, have not been
registered under the Securities Act, and may be sold or disposed of in the
absence of such registration only pursuant to an exemption from such
registration and in accordance with this Agreement. At the date hereof none of
the Purchasers beneficially own, directly or, to the knowledge of such
Purchasers, indirectly (or have any option or right to acquire), any securities
of the Company other than the Securities being purchased by it hereunder.
3.5. Brokers or Finders. Except as set forth in Section 1.5,
no agent, broker, investment banker or other firm or Person, including any of
the foregoing that is an Affiliate of the Purchasers, is or will be entitled to
any broker's fee or any other commission or similar fee from the Purchasers in
connection with any of the transactions contemplated by this Agreement that the
Company will be responsible for pursuant to Section 13.10.
3.6. Accredited Investor. Each of the Purchasers is an
"accredited investor" within the meaning of Rule 501 promulgated under the
Securities Act.
3.7. HSR Notification. The Purchasers will file their
notification ("HSR Notification") of the transaction contemplated by this
Agreement pursuant to the HSR Act at the same time as the Company files its HSR
Notification pursuant to Section 6.14.
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4. Registration, Exchange and Transfer of Notes
4.1. Authorized Denominations of Notes. The Notes are issuable
only as fully registered Notes in denominations of at least $100,000.
4.2. The Note Register; Persons Deemed Owners. The Company
shall maintain, at its office designated for notices in accordance with Section
13.6, a register for the Notes (the "Note Register"), in which the Company shall
record the name and address of the person in whose name each Note has been
issued and the name and address of each transferee and prior owner of each Note.
The Company may deem and treat the person in whose name a Note is so registered
as the holder and owner thereof for all purposes and shall not be affected by
any notice to the contrary, until due presentment of such Note for registration
of transfer as provided in this Article 4.
4.3. Issuance of New Notes Upon Exchange or Transfer. Upon
surrender for exchange or registration of transfer of any Note at the office of
the Company designated for notices in accordance with Section 13.6, the Company
shall execute and deliver, at its expense, one or more new Notes of any
authorized denominations requested by the holder of the surrendered Note, each
dated the date to which interest, if any, has been paid on the Note so
surrendered (or, if no interest has been paid, the date of such surrendered
Note), but in the same aggregate unpaid principal amount as such surrendered
Note, and registered in the name of such person or persons as shall be
designated in writing by such holder. Every Note surrendered for registration of
transfer shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the holder of such Note or by his attorney duly
authorized in writing. The Company may also condition the issuance of any new
Note or Notes in connection with a transfer by any person on the payment of a
sum sufficient to cover any stamp tax or other governmental charge imposed in
respect of such transfer.
4.4. Lost, Stolen, Damaged and Destroyed Notes. Upon receipt
by the Company of evidence reasonably satisfactory to it of the ownership of and
the loss, theft, destruction or mutilation of any Note (which evidence shall be,
in the case of any of the Purchasers or any Affiliate of the Purchasers or FFT,
an affidavit from FFT of such ownership and such loss, theft, destruction or
mutilation), and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it; provided that if the holder of
such Note is, or is a nominee for, any of the Purchasers, an Affiliate
of the Purchasers or FFT or another holder of a Note with a minimum net
worth of at least $5,000,000, such Person's own unsecured agreement of
indemnity shall be deemed to be satisfactory, or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
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the Company at its 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.
5. Payment of Notes
5.1. Home Office Payment. The Company will pay to the
Purchasers or any transferee thereof all sums becoming due on the Notes
(including all sums which become due on the Notes at the maturity thereof) at
the address specified in Section 13.6 or at the address specified by such
transferee, by wire transfer of immediately available funds, or at such other
address or by such other method as the Purchasers or transferee shall have
designated by notice to the Company, without presentment for notation of payment
and without surrender. Before selling or otherwise transferring any Note, the
Purchasers or transferee will make a notation thereon of the aggregate amount of
all payments of principal, if any, therefore made, and of the date to which
interest has been paid.
5.2. Limitation on Interest. No provision of this Agreement or
of any Note shall require the payment or permit the collection of interest, if
payable, in excess of the maximum rate which is permitted by law. If any such
excess interest is provided for herein or in any Note, or shall be adjudicated
to be so provided for, then the Company shall not be obligated to pay such
interest in excess of the maximum rate permitted by law, and the right to demand
payment of any such excess interest is hereby waived, any other provisions in
this Agreement or in any Note to the contrary notwithstanding.
5.3. Interest. (a) Subject to Section 8.3, interest on the
unpaid principal balance of each Note shall be payable at a rate per annum
(computed on the basis of a 360-day year of twelve 30-day months) of 12.0%, due
and payable monthly in arrears at the rate of 1.0% per month on the last day of
each month (each, a "Payment Date") after the issuance of the Notes, until such
Notes have been paid in full.
(b) Accrued interest on each Note is required to
be paid in cash (in accordance with Section 5.1 herein) on each Payment Date.
5.4. Business Day. Any payments in respect of any Note which
are required under this Agreement to be made on a day that is not a Business Day
shall be made on the next succeeding Business Day.
6. Covenants of the Company
A. The Company covenants that so long as any
principal amount of the Notes or one-third (unless a greater percentage is
required below) of the shares of the Preferred Stock issued or issuable
hereunder shall remain outstanding:
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6.1. Financial Covenants. (a) The Company will not permit its
Consolidated Net Worth on the last day of each quarter to be less than the
Required Net Worth Amount (it being understood that, for the purposes of this
paragraph (a), the Notes and any other Subordinated Indebtedness of the Company
shall be treated as debt and any other equity interests of the Company (other
than Disqualified Stock) shall be treated as equity).
(b) The Company will not permit its ratio of Consolidated
Funded Debt to Consolidated Total Capital (i) as of the end of any fiscal
quarter ending on or after June 30, 1999 but on or before December 31, 1999 to
be greater than 0.85 to 1.00, or (ii) as of the end of any fiscal quarter ending
on or after March 31, 2000 but on or before December 31, 2000 to be greater than
0.70 to 1.00, or (iii) as of the end of any fiscal quarter ending on or after
March 31, 2001 to be greater than 0.60 to 1.00.
6.2. Limitation on Convertible Securities and Equity
Securities. (a) The Company will not issue, and will not permit any Subsidiary
to issue, (i) any convertible debt securities or debt securities exchangeable at
the option of the holder for Common Stock of the Company, or (ii) any equity
securities ranking senior to or on a parity with the Preferred Stock with
respect to dividends or as to distribution of assets upon liquidation,
dissolution or winding up of the Company.
(b) For purposes of this Section 6.2, the issuance of
units comprising debt (including financial leases) or preferred stock and
warrants shall be deemed to be an issuance of convertible securities.
6.3. Merger; Purchase and Sale of Assets. So long as the
Purchasers hold Issuable Preferred Stock, without the Purchasers' consent:
(a) The Company will not merge with or into or
consolidate with any other Person unless (i) the Company is the continuing or
surviving entity and the shares of Common Stock then outstanding remain
unchanged and outstanding and represent at least a majority of the Voting
Securities of the surviving entity, (ii) the surviving entity expressly assumes
the then outstanding principal amount of the Notes and the Face Value of the
Preferred Stock and (iii) immediately after the consummation of such merger or
consolidation the surviving entity would not be in violation of any covenant set
forth in Section 6.1.
(b) The Company will not, and will not permit any
Subsidiary to, in any transaction or series of transactions, sell, lease or
exchange all or substantially all of the assets of the Company or any of its
Subsidiaries except sale(s) of assets not otherwise permitted by this Section
6.3 in an aggregate amount not to exceed, in any fiscal year, an amount equal to
five percent (5%) of the consolidated assets of the Company and its
Subsidiaries, determined in conformity with generally accepted accounting
principles, as of the end of the most recently completed fiscal year of the
Company.
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(c) The Company will not, and will not permit any
Subsidiary to, in any transaction or series of transactions, acquire (including
pursuant to a merger or consolidation) all or any substantial portion of the
business or assets of any Person unless (i) such transaction or series of
transactions has been approved by the Board of Directors of the Company and (ii)
after giving effect to such transactions or series of transactions, the Company
would be in compliance with the covenants set forth in Section 6.1 hereof.
6.4. Dividends and Distributions. The Company will not, and
will not permit any Subsidiary to, declare or pay any dividend on, or make any
other distribution in respect of, or redeem, purchase or otherwise acquire any
shares of Common Stock or any other shares of capital stock of the Company
ranking junior to or on a parity with the Preferred Stock.
6.5. Compliance with Laws. The Company will, and will cause
each Subsidiary to, comply with all Applicable Laws with respect to the conduct
of its business and the ownership of its properties, including, without
limitation, social security laws, workers' protection laws, environmental laws,
human health and equal employment opportunity laws, laws regarding the provision
of insurance, corporate practice of medicine, health maintenance organization,
OSHA and all rules of professional conduct applicable to the Company or any
Subsidiary by which any of its properties are bound or subject; provided that,
the Company shall not be deemed to be in violation of this Section 6.5 as a
result of any failure to comply with any provisions of such statutes, rules,
regulations, and orders, the noncompliance with which would not result in fines,
penalties, injunctive relief or other civil liabilities which, individually or
in the aggregate, would have a Material Adverse Effect.
6.6. Limitation on Agreements. The Company will not, and will
not permit any Subsidiary to, enter into any agreement, or any amendment,
modification, extension or supplement to any existing agreement, which
contractually prohibits the Company from paying interest, if any, payable on the
Notes or dividends on the Preferred Stock, or redeeming the Notes or the
Preferred Stock other than the Revolving Credit Agreement as in effect on the
date hereof.
6.7. Preservation of Franchises and Existence. Except as
otherwise permitted by this Agreement, the Company will (i) maintain its
corporate existence, rights and franchises in full force and effect and (ii)
cause the Subsidiaries to maintain their respective corporate existences, rights
and franchises in full force and effect; provided that nothing in this Section
6.7 shall prevent the Company or any Subsidiary from discontinuing its
operations in any particular state or at any particular location or locations
within the state, or prevent the corporate existence, rights and franchises of
any Subsidiary from being terminated if, in the opinion of the Board of
Directors of the Company, the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries taken as a whole.
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6.8. Insurance. (a) The Company will, and will cause each of
the Subsidiaries to, maintain with insurers believed by the Company to be
responsible such insurance, in such amounts and of such types as are carried on
the date hereof or customarily carried under similar circumstances by companies
engaged in the same or a similar business or having similar properties similarly
situated.
(b) The Company shall (i) provide, maintain and perform
in the same manner as prior to the date hereof the Company's existing
indemnification provisions with respect to present and future directors and
officers of the Company for all losses, claims, damages, expenses or liabilities
arising out of actions or omissions or alleged actions or omissions occurring
after the Closing Date to the extent permitted or required under all Applicable
Laws and the Company's Certificate of Incorporation and By-Laws in effect at the
date hereof (to the extent consistent with the Applicable Laws); and (ii)
maintain directors and officers liability coverage, with limits, terms and
conditions no less advantageous than in effect on the date hereof. Such coverage
will be maintained with the current insurance carriers or insurance carriers of
financial strength equal to or greater than the financial strength of the
current insurance carriers. Evidence of such coverage will be provided to the
individual officers and directors upon request. Any new directors or officers of
the Company will be added to such policies.
6.9. Payment of Taxes and Other Charges. The Company will pay
or discharge, and will cause each of the Subsidiaries to pay or discharge,
before the same shall become delinquent, (i) all taxes, assessments and other
governmental charges or levies imposed upon it or any of its properties or
income (including, without limitation, such as may arise under Section 4062,
4063, or 4064 of ERISA or any similar provision of law) and (ii) all claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords and other
like persons which, in the case of either clause (i) or clause (ii), if unpaid,
might result in the creation of a material lien upon any of its properties;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith pursuant to
appropriate proceedings.
6.10. Financial Statements and Other Reports. (a) The Company
will, as soon as available and in any event within 30 days after the end of each
month, furnish to the Purchasers an unaudited consolidated balance sheet of the
Company and its Subsidiaries as of the end of such month, the statements of
consolidated net income and cash flows and a statement of changes in
consolidated Common Stock, Additional Paid-In Capital, Retained Earnings
(Deficit) and Treasury Stock of the Company and its Subsidiaries for such month,
setting forth in each case in comparative form figures for the corresponding
period or date in the preceding fiscal year, all in reasonable detail and
certified by an authorized financial officer of the Company, subject to changes
resulting from year-end adjustments.
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(b) The Company will, as soon as practicable and in any
event within 45 days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, furnish to the Purchasers statements of
consolidated net income and cash flows and a statement of changes in
consolidated Common Stock, Additional Paid-In Capital, Retained Earnings
(Deficit) and Treasury Stock of the Company and its Subsidiaries for the period
from the beginning of the then current fiscal year to the end of such quarterly
period, and consolidated balance sheets of the Company and its Subsidiaries as
of the end of such quarterly period, setting forth in each case in comparative
form figures for the corresponding period or date in the preceding fiscal year,
all in reasonable detail and certified by an authorized financial officer of the
Company, subject to changes resulting from year-end adjustments; provided,
however, that delivery pursuant to paragraph (d) below of a copy of the
Quarterly Report on Form 10-Q of the Company for such quarterly period filed
with the Commission shall be deemed to satisfy the requirements of this
paragraph (b).
(c) The Company will, as soon as practicable and in any
event within 90 days after the end of each fiscal year, furnish to the
Purchasers statements of consolidated net income and cash flows and a statement
of changes in consolidated Common Stock, Additional Paid-In Capital, Retained
Earnings (Deficit) and Treasury Stock of the Company and its Subsidiaries for
such year, and consolidated balance sheets of the Company and its Subsidiaries
as of the end of such year, setting forth in each case in comparative form the
corresponding figures from the preceding fiscal year, all in reasonable detail
and examined and reported on by independent public accountants of recognized
national standing selected by the Company; provided, however, that delivery
pursuant to paragraph (d) below of a copy of the Annual Report on Form 10-K of
the Company for such fiscal year filed with the Commission shall be deemed to
satisfy the requirements of this paragraph (c).
(d) The Company will, promptly upon transmission thereof,
furnish to the Purchasers copies of all such press releases, financial
statements, proxy statements, notices and reports as it shall send to its
stockholders and copies of all such registration statements (without exhibits),
other than registration statements relating to employee benefit or dividend
reinvestment plans, and all such regular and periodic reports as it shall file
with the Commission.
(e) The Company will promptly furnish to the Purchasers
(i) copies of (x) any compliance certificates furnished to lenders in respect of
Indebtedness of the Company and its Subsidiaries and (y) any notices of default
from lenders in respect of any such Indebtedness and (ii) notice of (x) the
commencement of any Litigation which, if determined adversely to the Company,
would have a Material Adverse Effect and (y) the issuance by any governmental
authority of any injunction, order, restraint or other decision which has
resulted in, or which is likely to have, in the reasonable judgment of the
Company or any such Subsidiary, a Material Adverse Effect.
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(f) Together with each delivery of financial statements
required by paragraph (c) above, the Company will deliver to the Purchasers a
certificate of the Chief Financial Officer, Treasurer or other financial officer
of the Company regarding compliance by the Company with the covenants set forth
in Sections 6.1 and 6.4.
6.11. Inspection of Property. The Company will permit
representatives of the Purchasers to visit and inspect, at the Purchasers'
expense, any of the properties of the Company and its Subsidiaries, to examine
the corporate books and make copies or extracts therefrom and to discuss the
affairs, finances and accounts of the Company and its Subsidiaries with the
officers, consultants, directors, employees, attorneys or independent
accountants of the Company, all at such reasonable times, upon reasonable notice
and as often as the Purchasers may reasonably request.
6.12. Board Membership. In connection with the issuance of
shares of Preferred Stock issued hereunder, on the Closing Date, the Board will
take all necessary action to fix and maintain the number of directors at eight
members and cause the appointment of one nominee of the Purchasers as a member
of the Board. Upon conversion of all of the outstanding aggregate principal
amount of Notes into shares of the Preferred Stock and for as long as the
Purchasers and their Affiliates and Affiliates of the general partner of the
Purchasers own the percentage of the aggregate Face Value of Preferred Stock
issued hereunder or Common Stock issuable upon conversion of such Preferred
Stock specified in the table below, the Company shall fix and maintain the
number of directors as specified in such table and shall take all necessary
action to cause the appointment of the number of nominees of the Purchasers
specified in such table as members of the Board.
---------------------------------------------------------------------------
Number of
Percentage Size of Purchasers'
of Stock Board Directors
---------------------------------------------------------------------------
>66 2/3% 9 3
-
---------------------------------------------------------------------------
<66 2/3%, but 8 2
>33 1/3%
---------------------------------------------------------------------------
<33 1/3%, but 7 1
-
>25%
---------------------------------------------------------------------------
So long as the Purchasers are entitled to designate at least
one director, the Company shall cause the Board to appoint at least one Director
designated by
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the Purchasers to the executive, audit and compensation committees of the Board
and each other committee established by the Board. At each subsequent annual
meeting for the election of directors the Purchasers will be entitled to propose
(and the Company will nominate and recommend) such person or persons, as the
case may be, nominated by the Purchasers as a member of the Board. In the event
of any vacancy arising by reason of the resignation, death, removal or inability
to serve as the Purchasers' nominee, the Purchasers shall be entitled to
designate a successor to fill such vacancy until the next annual meeting for the
election of directors. The Company agrees that if such nominee or nominees is
not elected, (i) the Purchasers will be entitled to have observational rights at
all meetings of the Board of Directors and the Purchasers shall have the same
access to information concerning the business and operations of the Company and
its Subsidiaries at the same time as directors of the Company and shall be
entitled to participate in discussions and consult with the Board, without
voting, and (ii) the Company will nominate and recommend such person or persons,
as the case may be, proposed by the Purchasers at each subsequent annual meeting
until the nominee or nominees proposed by the Purchasers has been elected to the
Board. If at any time the number of Purchasers' designees exceeds the number to
which the Purchasers are entitled based on the table set forth above, then at
the Board's request the Purchasers shall submit resignations for a sufficient
number of designees to reduce the number of remaining designees to the number to
which the Purchasers are then entitled.
6.13. Lost, Stolen, Damaged and Destroyed Stock Certificates.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation of any certificate
for shares of Preferred Stock (which evidence shall be, in the case of the
Purchasers or any Affiliate of the Purchasers or FFT, an affidavit from FFT,
from the Purchasers or such Affiliate of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it; provided that if the holder of
such shares of Preferred Stock is, or is a nominee for, the Purchasers,
an Affiliate of the Purchasers or FFT or another holder of the shares
of Preferred Stock with a minimum net worth of at least $5,000,000,
such Person's own unsecured agreement of indemnity shall be deemed to
be satisfactory, or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
certificate, dated and paying dividends from the date to which dividends shall
have been paid on such lost, stolen, destroyed or mutilated certificate or dated
the date of such lost, stolen, destroyed or mutilated certificate if no dividend
shall have been paid thereon.
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6.14. HSR. The Company shall file its HSR Notification as soon
as practicable after the Closing Date but in no event later than February 15,
1999. Notwithstanding any other provision of this Agreement or the Notes, the
Company shall not deliver any notice of conversion pursuant to Article 10 unless
(a) the Company shall have filed its HSR Notification, (b) the applicable
waiting period shall have expired or been terminated, (c) the date fixed for
conversion in accordance with Article 10 shall be a date upon which the
Purchasers shall not be prohibited from owning Voting Securities under the HSR
Act, (d) the Stockholder Approval with respect to the Stock Issuance shall have
been obtained, (e) the Common Stock issuable upon conversion of the Preferred
Stock issuable upon conversion of the Notes shall be approved for quotation on
Nasdaq National Market and (f) each of the representations and warranties of the
Company contained in this Agreement on the date of such notice of conversion and
on the conversion date as set forth in the notice of conversion shall be true
and correct in all material respects.
6.15. Certain Tax Matters. (a) In the event (i) of a Final
Determination (as defined below) that the Purchasers are required to include in
income for any taxable year amounts ("OID") determined pursuant to the
principles of Sections 1271-75 of the Code and the regulations thereunder,
including by application of Section 305(c) of the Code, or any successor
provisions thereto (collectively, the "OID Rules") with respect to the Notes,
the Warrants or the Preferred Stock (an "OID Inclusion") or (ii) the OID Rules
or any similar or corresponding state or local law is amended to require an OID
Inclusion for any taxable year, the Company shall pay to such Purchasers with
respect to each such OID Inclusion no later than the Payment Due Time (as
defined below), an additional payment (the "Gross-Up Payment") such that the
amount of such Gross-Up Payment shall equal the sum of (i) (A) the product of
(x) the amount of the OID Inclusion for such taxable year plus penalties, if
any, actually payable by any direct or indirect partner or member of the
Purchasers with respect to the OID Inclusion to the Internal Revenue Service or
any other applicable taxing authority by reason of such events ("Applicable
Penalties"), and (y) the maximum combined federal, state and local income tax
rate for an individual resident in New York City, after giving due allowance for
the deductibility of state and local income taxes (the "Applicable Tax Rate")
divided by (B) 1 minus the Applicable Tax Rate, plus (ii) interest, on the
amount of OID Inclusion multiplied by the Applicable Tax Rate, at the rates in
effect from time to time for individual taxpayers resident in New York City with
respect to income tax deficiencies for all periods from the date with respect to
which the deficiency arose until the payment of tax on the amount of the OID
Inclusion, plus (iii) Applicable Penalties.
(b) A "Final Determination" with respect to a
federal tax liability shall mean (i) a decision, judgment, decree or other order
by any court of competent jurisdiction, which decision, judgment, decree or
other order has become final, or (ii) a closing agreement entered into under
Section 7121 (or any successor to such Section) of the Code or any other
settlement agreement entered into a connection with an administrative or
judicial proceeding and consented to by the Purchasers or any member
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of their consolidated group. The "Payment Due Time" shall mean 5:00 p.m. Eastern
time, of the day two banking days before the date on which expires the period
allowed by applicable law for timely payment of the tax liability imposed on the
related OID Inclusion pursuant to an applicable Final Determination.
(c) In the event that the Purchasers are notified
formally or informally of any audit, examination or proceeding by the Internal
Revenue Service or other taxing authority with respect to the includability in
income of OID with respect to the Notes, Warrants or Preferred Stock, the
Purchasers will promptly notify the Company of such audit, examination or
proceeding; provided, however, that the Purchasers' failure to give such notice
or to keep the Company fully informed concerning a Contest (as defined below)
shall not affect the Company's obligation to make Gross-Up Payments in
accordance with this Section 6.15. Subject to the requirement that the
Purchasers shall proceed in good faith and shall pursue the issue diligently,
the Purchasers shall have exclusive control and responsibility to conduct any
audit, examination, proceeding or litigation (a "Contest") with respect to such
treatment. The Purchasers shall bear all costs and expenses in connection with
such Contest.
(d) The Company expressly acknowledges that
Affiliates of the Purchasers that acquire Notes, Warrants or Preferred Stock as
permitted by this Agreement shall be entitled to the benefits of this Section
6.15. No other subsequent holder shall be entitled to the benefits of this
Section 6.15.
6.16. [Intentionally Omitted]
6.17. Notice of Breach. As promptly as practicable, and in any
event not later than (i) thirty days after such breach in the case of a breach
of Section 6.1(a) or 6.21 and (ii) five Business Days after executive officers
of the Company become aware of any other breach by the Company of any provision
of this Agreement, including, without limitation, any other provision of this
Article 6, the Company shall provide the Purchasers with written notice
specifying the nature of such breach and any actions proposed to be taken by the
Company to cure such breach.
6.18. Limitation on Transactions with Affiliates. The Company
will not, and will not permit any of its Subsidiaries to, directly or indirectly
enter into any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with or for the benefit of any Affiliate of the Company (other than
the Company or a wholly-owned Subsidiary) unless such transaction or series of
related transactions is entered into in good faith and (a) such transaction or
series of related transactions is on terms that are no less favorable to the
Company or such Subsidiary, as the case may be, than those that would be
available in a comparable transaction in arm's-length dealings with an unrelated
third party and (b) with respect to any transaction or series of related
transactions involving aggregate value in excess of $100,000, such transaction
or series of related transactions has been approved
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by a majority of Disinterested Directors of the Company, or in the event there
is only one Disinterested Director, by such Disinterested Director; provided,
however, that this provision shall not apply to any transaction (x) with an
officer or director of the Company entered into in the ordinary course of
business (including compensation and employee benefit arrangements with any
officer, director or employee of the Company, including under any stock option
or stock incentive plans) or (y) agreed to in writing prior to the date hereof.
6.19. Stockholders Meeting. The Company shall, as soon as
practicable, take all action necessary in accordance with applicable law and its
Certificate of Incorporation and By-Laws to convene a meeting of its
stockholders to consider and vote upon the approval of the Stock Issuance by
stockholders (the "Stockholders Meeting") and shall convene such Stockholders
Meeting no later than six months from the Closing Date.
6.20. Proxy Statement. (a) The Company shall prepare and file
with the Commission as soon as practicable, but in no event later than 60 days
following the Closing Date, a proxy statement (the "Proxy Statement") under the
Exchange Act with respect to the Stockholders Meeting. The Company shall cause
the Proxy Statement to comply as to form in all material respects with the
applicable provisions of the Exchange Act. At the Stockholders Meeting and in
the Proxy Statement, the Company shall recommend that holders of the Common
Stock approve the Stock Issuance.
B. The Company covenants that so long as any principal
amount of the Notes shall remain outstanding:
6.21. Financial Covenants. The Company will not permit its
Consolidated Fixed Charge Coverage Ratio to be less than 1.15 to 1.
6.22. Limitation on Indebtedness. (a) The Company will not
permit any Subsidiary to incur any Indebtedness (other than (i) guarantees of
the Senior Indebtedness and (ii) Indebtedness owed to the Company).
6.23. Limitation on Other Senior Subordinated Indebtedness.
Except for Redemption Indebtedness, the Company will not, and will not permit
any Subsidiary to, incur, create, assume, Guarantee or in any other manner
become directly or indirectly liable with respect to or responsible for, or
permit to remain outstanding, any Indebtedness that is subordinate or junior in
right of payment to any Senior Indebtedness unless such Indebtedness is also
pari passu with, or subordinate in right of payment to, the Notes pursuant to
subordination provisions substantially similar to those contained in Section 11
of this Agreement.
6.24. Limitation on Guarantees of Indebtedness by
Subsidiaries. The Company will not permit any Subsidiary to Guarantee the
payment of any Indebtedness
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(other than the Senior Indebtedness or the Notes) of the Company or any
Indebtedness of any other Person.
6.25. Limitation on Issuances and Sales of Subsidiary
Stock. The Company will not permit:
(a) any Subsidiary to issue any Capital
Stock (other than to the Company or a wholly-owned Subsidiary) and
(b) any Person (other than the Company
or a wholly-owned Subsidiary) to own any Capital Stock of any
Subsidiary; provided, however, that this subsection shall not prohibit
(i) the issuance and sale of all, but not less than all, of the issued
and outstanding Capital Stock of any Subsidiary owned by the Company or
any of its Subsidiaries in compliance with the other provisions of this
Agreement, (ii) the ownership by directors of director's qualifying
shares, or (iii) the ownership by any Person of any Capital Stock of a
Subsidiary, if, in each case, the Company has made, or is making, a
Permitted Investment in such Subsidiary that is less than wholly-owned.
In connection with any assets or property contributed or transferred to
any Person as an Investment, such property and assets shall be equal to
the Fair Market Value at the time of Investment.
6.26. Limitation on Liens Securing Pari Passu Indebtedness or
Subordinated Indebtedness. (a) The Company will not, directly or indirectly,
create, incur, assume or suffer to exist any Lien (other than Permitted Liens)
securing Pari Passu Indebtedness or Subordinated Indebtedness of the Company on
or with respect to any of its property or assets, including any shares of stock
or indebtedness of any Subsidiary, whether owned at the date of this Agreement
or thereafter acquired, or any income, profits or proceeds therefrom, or assign
or otherwise convey any right to receive income thereon, unless (i) in the case
of any Lien securing Pari Passu Indebtedness of the Company, the Notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to or pari passu with such Lien and (ii) in the case of any Lien
securing Subordinated Indebtedness of the Company, the Notes are secured by a
Lien on such property, assets or proceeds that is senior in priority to such
Lien.
(b) The Company will not permit any Subsidiary
to, directly or indirectly, create, incur, assume or suffer to exist
any Lien (other than Permitted Liens) securing Indebtedness of such
Subsidiary or any other Person.
6.27. Limitation on Dividends and other Payment Restrictions
Affecting Subsidiaries. The Company will not, and will not permit any Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Subsidiary
of the Company to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock or any other interest or
participation in, or measured by, its profits, (b) pay
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any Indebtedness owed to the Company or any other Subsidiary of the
Company, (c) make loans or advances to the Company or any other
Subsidiary of the Company, (d) transfer any of its properties or assets
to the Company or any other Subsidiary of the Company or (e) Guarantee
any Indebtedness of the Company or any other Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by
reason of:
(i) Applicable Law;
(ii) customary non-assignment provisions of
any lease governing a leasehold interest of the Company or any
Subsidiary of the Company;
(iii) any agreement or other instrument of a
Person acquired by the Company or any Subsidiary of the Company in
existence at the time of such acquisition (but not created in
contemplation thereof), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person so
acquired; and
(iv) any agreement in existence on the
Closing Date including the Revolving Credit Agreement (to the extent of
any encumbrances or restrictions in existence thereunder on the Closing
Date).
6.28. Limitation on Investments. (a) The Company will not, and
will not permit any Subsidiary to, directly or indirectly, make any Investment
(other than any Permitted Investment) in any Person.
6.29. Mergers, Consolidations and Certain Sales of Assets. The
Company shall not, in a single transaction or a series of related transactions,
(a) consolidate with or merge into any other Person or permit any other Person
to consolidate with or merge into the Company and (b) directly or indirectly,
transfer, sell, lease or otherwise dispose of all or substantially all of its
assets unless: (1) in a transaction in which the Company does not survive or in
which the Company sells, leases or otherwise disposes of all or substantially
all of its assets, the successor entity to the Company is organized under the
laws of the United States of America or any State thereof or the District of
Columbia and shall expressly assume, by a written instrument executed and
delivered to FFT in the form satisfactory to FFT, all of the Company's
obligations under the Notes; (2) immediately before and after giving effect to
such transaction and treating any Indebtedness which becomes an obligation of
the Company or any of its Subsidiaries as a result of such transaction as having
been incurred by the Company or such Subsidiaries at the time of the
transaction, no Event of Default or event that with the passing of time or the
giving of notice, or both, would constitute an Event of Default shall have
occurred and by continuing; (3) immediately after giving effect to such
transaction, the Consolidated Net Worth of the Company (or other successor
entity to the Company) is equal to or greater than that of the Company
immediately prior to the transaction;
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(4) immediately after giving effect to such transaction and treating any
Indebtedness which becomes an obligation of the Company or any of its
Subsidiaries as a result of such transaction as having been incurred by the
Company or such Subsidiaries at the time of the transaction, the Company
(including any successor entity to the Company) could incur at least $1.00 of
additional Indebtedness pursuant to the provisions of Sections 6.1(b) and 6.21
hereof; and (5) the Company has delivered to the FFT an Officer's Certificate
and an opinion of counsel (which opinion of counsel may rely, as to factual
matters, on such Officer's Certificate), each stating that such consolidation,
merger, conveyance, transfer, lease or acquisition complies with this Section
6.29 and that all conditions precedent herein provided for relating to such
transaction have been complied with, and, with respect to such Officer's
Certificate, setting forth the manner of determination of the Consolidated Net
Worth and the ability to incur Indebtedness in accordance with clause (4) above
of the Company or, if applicable, of the successor Company as required pursuant
to the foregoing.
6.30. NASDAQ Approval. The Company shall obtain, within 30
days after the Stockholder Approval, approval for quotation on the NASDAQ
National Market of the Common Stock to be issued upon conversion of the
Preferred Stock issuable upon conversion of the Notes, subject to official
notice of issuance ("NASDAQ Approval").
C. The Company covenants that so long as the Purchasers
(and/or any of their Affiliates and Affiliates of the general partner of the
Purchasers) own any of the Notes or at least 25% of the aggregate Face Value of
Preferred Stock issued pursuant to this Agreement:
6.31. Redemption of Redeemable Common Stock. The Company shall
not, and shall not permit any Subsidiary to, redeem, repurchase or otherwise
acquire for value the Redeemable Common Stock or declare or pay any dividend or
distribution in respect thereof.
7. Nondisclosure of Confidential Information. (a) Without the
prior written consent of the Company, any information relating to the Company
provided to the Purchasers in connection with this Agreement, or to the persons
nominated by the Purchasers to be elected to the Board, which is either
confidential, proprietary, or otherwise not generally available to the public
(but excluding information the Purchasers have obtained independently from
third-party sources without the Purchasers' knowledge that the source has
violated any fiduciary or other duty not to disclose such information) (the
"Confidential Information") will be kept confidential by the Purchasers and
their directors, officers, employees, and representatives (collectively,
"Representatives"), using the same standard of care in safeguarding the
Confidential Information as the Purchasers employ in protecting their own
proprietary information which the Purchasers desire not to disseminate or
publish, and will not be disclosed to any Person, except for Representatives of
the Purchasers who need to know such Confidential Information. It is understood
(i) that such Representatives shall be informed by the Purchasers of the
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confidential nature of the Confidential Information, (ii) that such
Representatives shall be bound by the provisions of this Section 7 as a
condition of receiving the Confidential Information and (iii) that, in any
event, the Purchasers shall be responsible for any breach of this Agreement by
any of their Representatives.
(b) Without the prior consent of the Company, other
than as required by Applicable Law, the Purchasers will not, and will direct
their Representatives not to, disclose to any Person either the fact that the
Confidential Information has been made available to the Purchasers or that the
Purchasers have inspected any portion of the Confidential Information.
(c) If the Purchasers or their Representatives are
requested or required (by oral question, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any Confidential Information, the Purchasers will, as soon
as practicable, notify the Company of such request or requirement so that the
Company may seek an appropriate protective order. If, in the absence of a
protective order, the Purchasers or their Representatives are, in the opinion of
such Purchasers' counsel, compelled to disclose the Confidential Information or
else stand liable for contempt or suffer other censure or significant penalty,
the Purchasers may disclose only such of the Confidential Information to the
party compelling disclosure as is required by law. The Purchasers shall not be
liable for the disclosure of Confidential Information pursuant to the preceding
sentence. The Purchasers will, at the Company's expense, cooperate with the
Company's reasonable efforts to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information.
8. Events of Default and Remedies
8.1. Events of Default. Each of the following shall constitute
an Event of Default with respect to the Notes under this Agreement:
(a) Nonpayment of Principal of the Notes. If the
Company fails to pay the principal of or interest on or any other sum, if any,
due on any Note, when and as the same becomes due and payable, whether at the
maturity thereof, on a dated fixed for a redemption, or otherwise and fails to
cure such failure within five days; or
(b) Cross-Default. If the Company or any Subsidiary (i)
fails to make any payment in respect of any Indebtedness having an aggregate
principal amount (including undrawn committed or available amounts and including
amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $1,000,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) and such failure
continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure; or (ii) fails to perform or
observe any other condition or covenant, or any other event shall occur or
condition exist, under any agreement or instrument relating to any such
Indebtedness, and such failure
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continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure if the effect of such failure,
event or condition is to cause such Indebtedness to be declared to be due and
payable prior to its stated maturity, or collateral in respect thereof to be
demanded; or (iii) there occurs under any Swap Contract an early Termination
Date (as defined in and provided for in any such Swap Contract that is in the
form of an ISDA Master Agreement) or equivalent termination event (as provided
in any other Swap Contract) resulting from (x) any event of default under such
Swap Contract as to which the Company or any Subsidiary is the Defaulting Party
(as defined in such Swap Contract) or (y) any Termination Event (as so defined
in such Swap Contract) as to which the Company or any Subsidiary is an Affected
Party (as so defined in such Swap Contract), and, in either event, the Swap
Termination Value owned by the Company or such Subsidiary as a result thereof is
greater than $1,000,000; or
(c) Voluntary Bankruptcy and Insolvency Proceedings.
If the Company or any Subsidiary (i) shall file a petition in bankruptcy or for
reorganization or for an arrangement or any composition, readjustment,
liquidation, dissolution or similar relief pursuant to the Federal Bankruptcy
Code of 1978, as amended, or under any similar present or future federal law or
the law of any other jurisdiction; or (ii) shall be adjudicated a bankrupt or
become insolvent; or (iii) shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of the Company or such Subsidiary or for all or any
substantial part of its respective property; or (iv) shall make an assignment
for the benefit of its creditors; or (v) shall admit in writing its inability to
pay its debts generally as they become due; or (vi) shall take any corporate
action, as the case may be, in furtherance of any of the foregoing; or
(d) Adjudication of Bankruptcy. If (i) a petition
or answer shall be filed proposing the adjudication of the Company or any
Subsidiary as a bankrupt or its reorganization or arrangement, or any
composition, readjustment, liquidation, dissolution or similar relief with
respect to it pursuant to the Federal Bankruptcy Code of 1978, as amended, or
under any similar present or future federal law or the law of any other
jurisdiction applicable to the Company or such Subsidiary; and (ii) the Company
or any Subsidiary shall consent to or acquiesce in the filing thereof, or such
petition or answer shall not be discharged or denied within 60 days after the
filing thereof; or
(e) Receivership or Sequestration. If a decree or
order is rendered by a court having jurisdiction (i) for the appointment of a
receiver or custodian or liquidator or trustee or sequestrator or assignee (or
similar official) in bankruptcy or insolvency of the Company or any Subsidiary
or of all or a substantial part of its property; or (ii) for the winding-up or
liquidation of its affairs, and such decree or order shall have remained in
force undischarged and unstayed for a period of 60 days; or (iii) for the
sequestration or attachment of any property of the Company or any
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Subsidiary without its return to the possession of the Company or such
Subsidiary or its release from such sequestration or attachment within 60 days
thereafter; or
(f) Covenant Defaults. (i) If the Company shall
have breached any of the covenants set forth in Section 6.19, 6.20 or 6.21
hereof; or (ii) if the Company shall have breached in any material respect any
of the covenants set forth herein other than Sections 6.19, 6.20 and 6.21 and
such breach shall continue for 30 days following (x) the date notice is required
to be given under Section 6.17(i) or (ii) with respect to breaches under 6.1(a)
and (y) otherwise from the date of the breach; or
(g) Judgment Default. A judgment or order for the
payment of money in excess of $1,000,000 shall be entered against the Company or
any of its Subsidiaries by any court, and such judgment or order shall continue
undischarged and unstayed for a period of 60 days or until five days after
enforcement proceedings shall have been commenced upon such judgment or order,
whichever comes first; or
(h) Untrue or Incorrect Representation or Warranty.
Any of the representations and warranties of or with respect to the Company or
any of its Subsidiaries contained herein shall be untrue in any material respect
on or as of the date made and the facts or circumstances to which such
representation or warranty relates shall not have been subsequently corrected to
make such representation or warranty no longer incorrect within 30 days after
notice in writing by a holder to the Company; or
(i) Nonmonetary Judgment. A nonmonetary judgment or
order shall be rendered against the Company or any of its Subsidiaries that,
either individually or in the aggregate, has 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.
8.2. Acceleration of Maturity. If any Event of Default shall
have occurred and be continuing, the holders of 66 2/3% of the outstanding
principal amount of Notes may, by notice to the Company, declare the entire
outstanding principal balance of the Notes, and all accrued and unpaid interest,
if any, thereon, to be due and payable immediately, and upon any such
declaration the entire outstanding principal balance of the Notes, and said
accrued and unpaid interest, if any, shall become and be immediately due and
payable, without presentment, demand, protest or other notice whatsoever, all of
which are hereby expressly waived, anything in the Notes or in this Agreement to
the contrary notwithstanding; provided, that if an Event of Default under clause
(c), (d), or (e) of Section 8.1 with respect to the Company shall have occurred,
the outstanding principal amount of all of the Notes, and all accrued and unpaid
interest, if any, thereon, shall immediately become due and payable, without any
declaration and without presentment, demand, protest or other notice whatsoever,
all of which are hereby expressly waived, anything in the Notes or this
Agreement to the contrary notwithstanding; and provided, further, that if an
Event of Default under clause (a) of
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Section 8.1 shall have occurred and be continuing with respect to any Note, any
of the Purchasers or Affiliate of the Purchasers (but not any transferee thereof
other than an Affiliate of such Purchasers) holding one or more Notes in an
aggregate outstanding principal amount of at least $1,000,000 may, by notice to
the Company, declare the entire outstanding principal of such Notes and all
accrued and unpaid interest, if any, thereon, to be due and payable immediately,
and upon any such declaration the entire outstanding principal of such Notes and
said accrued and unpaid interest, if any, shall become and be immediately due
and payable, without presentment, demand, protest or other notice whatsoever,
all of which are hereby expressly waived, anything in such Notes or in this
Agreement to the contrary notwithstanding; provided, further that so long as any
Senior Indebtedness shall be outstanding pursuant to the Revolving Credit
Agreement or the administrative agent, the issuing bank or the lenders thereto
have any further obligation to extend credit thereunder, if an Event of Default
shall have occurred and be continuing (other than an Event of Default under
clause (c), (d) or (e) of Section 8.1), any such acceleration shall not be
effective until the first to occur of:
(i) the day that is five (5) days after
the date that such holder of Notes shall have given written notice
(including notice by telegram, telex or facsimile) to the
Administrative Agent under the Revolving Credit Facility,
(ii) the acceleration of the maturity of
the Revolving Credit Facility or the institution of a civil action to
collect any Indebtedness in respect of the Revolving Credit Facility,
(iii) the institution of any case or
proceeding described in subsection 11.1(a) by or against the Company,
and
(iv) full and final payment in cash of all
Senior Indebtedness.
8.3. Other Remedies. (a) If any Event of Default shall have
occurred and be continuing, from and including the date of such Event of Default
to but not including the date such Event of Default is cured or waived, any
holder may enforce its rights by suit in equity, by action at law, or by any
other appropriate proceedings, whether for the specific performance (to the
extent permitted by law) of any covenant or agreement contained in this
Agreement or the Notes or in aid of the exercise of any power granted in this
Agreement or the Notes, and any holder may enforce the payment of any Note held
by such holder and any of its other legal or equitable rights. Except with
respect to Default or Event of Default described in clause (b) of this Section
8.3, from the date that a Default or Event of Default shall have occurred and
during the continuance of any Default or Event of Default, the Company shall pay
interest on the outstanding principal amount of the Notes and (to the extent
legally enforceable) on any overdue installment of interest, if any, at the rate
of 15% per annum until such overdue amount is paid or until such Default or
Event of Default is cured or waived.
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(b) In the event the Company shall (i) fail to
pay the principal of and accrued and unpaid interest due on the Notes at
maturity, (ii) fail to obtain the Stockholder Approval with respect to the Stock
Issuance on or before July 26, 1999, (iii) fail to convene the Stockholders
Meeting on or before July 26, 1999), (iv) withdraw or modify in any manner
adverse to the Purchasers the approval or recommendation of the Board of
Directors of the Company of the Stock Issuance, (v) fail to reaffirm such
approval or recommendation within 5 days following receipt of written request
for such reaffirmation from the Purchasers, (vi) fail to obtain the
reaffirmation of the Fairness Opinion in connection with the mailing of the
Proxy Statement, (vii) fail to obtain NASDAQ Approval within 30 days after the
Stockholder Approval, or (viii) resolve to take any of the actions specified in
clauses (i) through (vii), from the date that such Default or Event of Default
shall have occurred and during the Continuance of such Default or Event of
Default, the monthly rate of interest on the outstanding principal amount of the
Notes and (to the extent legally enforceable) on any overdue installment of
interest, if any, shall immediately increase 0.05% and shall further increase by
0.05% on the first day of each succeeding month during which such Default or
Event of Default shall be continuing, but in no event shall the monthly rate at
which the interest accrues in respect of indebtedness evidenced by the Notes
exceed 1.5% per month, provided, however, such increase in interest shall not
commence until the maturity of the Notes if the Company's failure to obtain the
Stockholder Approval with respect to the Stock Issuance is caused solely by the
failure of the holders of Common Stock representing a majority of the shares of
Common Stock (excluding shares Beneficially Owned by the Purchasers) present and
voting at a meeting duly called and convened in accordance with Section 6.19
hereof to approve the Stock Issuance and none of the conditions described in
clauses (iii) through (viii) of this Section 8.3(b) shall have occurred and SESC
shall not have withdrawn its Fairness Opinion.
(c) In the event that (i) any dividend payable on the
Preferred Stock pursuant to Section 2 of the Certificate of Designation shall
not have been paid in full, (ii) the Company shall have breached in any material
respect any of the covenants contained in Section 6 hereof (provided the
applicable covenant shall then be in effect pursuant to the terms of this
Agreement) or (iii) the Company shall have failed to redeem in full the shares
of Preferred Stock pursuant to Section 5(a) of the Certificate of Designation
whether or not by reason of the absence of legally available funds, then, in any
such case, the size of the Board of Directors shall be increased by one and the
Purchasers shall be entitled to elect an additional member to the Board (such
director, the "Default Director"). The Default Director shall be appointed and
shall serve in accordance with Section 6.12 hereof.
8.4. Conduct No Waiver; Collection Expenses. No course of
dealing on the part of any holder, nor any delay or failure on the part of any
holder to exercise any of its rights, shall operate as a waiver of such right or
otherwise prejudice such holder's rights, powers and remedies. If the Company
fails to pay, when due, the principal or the premium, if any, or the interest,
if any, on any Note, the Company will pay to each
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holder, to the extent permitted by law, on demand, all costs and expenses
incurred by such holder in the collection of any amount due in respect of any
Note hereunder, including reasonable legal fees incurred by such holder in
enforcing its rights hereunder.
8.5. Annulment of Acceleration. If a declaration is made in
accordance with Section 8.2, then and in every such case, the holders of at
least 66 2/3% of the outstanding principal amount of the Notes may, by an
instrument delivered to the Company, annul such declaration and the consequences
thereof, provided that, at the time such declaration is annulled:
(a) no judgment or decree has been entered for the
payment of any monies due on the Notes or pursuant to this Agreement;
(b) all arrears of interest on the Notes and all other
sums payable on the Notes and pursuant to this Agreement (except any principal
of or interest or premium on the Notes which has become due and payable by
reason of such declaration) shall have been duly paid; and
(c) every other Event of Default shall have been duly
waived or otherwise made good or cured;
provided, however, that only the Purchasers or Affiliate of the Purchasers (but
not any transferee thereof other than an Affiliate of such Purchasers) of the
Note or Notes making the declaration permitted by the last proviso of Section
8.2 may annul such declaration; and provided, further, that no such annulment
shall extend to or affect any subsequent Event of Default or impair any right
consequent thereon.
8.6. Remedies Cumulative. No right or remedy conferred upon or
reserved to the holders of Notes under this Agreement is intended to be
exclusive of any other right or remedy, and every right and remedy shall be
cumulative and in addition to every other right and remedy given hereunder or
now and hereafter existing under applicable law. Every right and remedy given by
this Agreement or by applicable law to the holders of Notes may be exercised
from time to time and as often as may be deemed expedient by the holders.
8.7. Limitations. Notwithstanding the foregoing provisions of
this Article 8, the exercise of remedies by the holders of the Notes is subject
to the provisions of Article 11 hereof.
9. Redemption
9.1. Optional Redemption. (a) Prior to the occurrence of the
Stockholders Meeting and (b) thereafter, if and so long as either (i) the Notes
are then convertible at the option of the Company in accordance with Section
10.2 into shares of Series A Preferred Stock or (ii) the Company is entitled to
defer the payment of penalty
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interest pursuant to the proviso to Section 8.3(b), the Company shall have the
right, at its sole option and election made in accordance with Section 9.3, to
redeem the Notes at any time following the Closing Date, in whole but not in
part, subject to the final paragraph of this Section 9.1, at a redemption price
equal to the Liquidation Value plus an amount equal to all accrued and unpaid
interest, if any, to the date of redemption, in cash (the "Redemption Price").
In the event that at any time a Change of Control has occurred
prior to a redemption pursuant to this Section 9.1, the Redemption Price of each
Note until the expiration of the 90-day period referred to in Section 9.3(b)
shall equal the Change of Control Price (as defined in Section 9.2 below).
9.2. Change of Control. In the event that there occurs a
Change of Control, any record holder of Notes, in accordance with the procedures
set forth in Section 9.3(b), may require the Company to redeem any or all of the
Notes held by such holder for, at such holder's option, an amount ("Change of
Control Price") equal to the greater of (i) 100% of the Liquidation Value of the
Notes or (ii) the form and amount of consideration that such holder would have
received had such holder converted such Notes into Preferred Stock and converted
such Preferred Stock into Common Stock, plus, all accrued and unpaid interest,
on the Notes being redeemed to and including the date of redemption, in cash.
9.3. Redemption Procedures. (a) Notice of any redemption of
Notes pursuant to Section 9.1 shall be mailed at least 20 but not more than 30
days prior to the date fixed for redemption to each holder of Notes to be
redeemed, at such holder's address as it appears in the Note Register. In order
to facilitate the redemption of Notes, the Board of Directors may fix a record
date for the determination of Notes to be redeemed.
(b) Promptly following a Change of Control (but in no
event more than five Business Days thereafter), the Company shall mail to each
holder of Notes, at such holder's address as it appears on the transfer books of
the Company, notice of such Change of Control, which notice shall set forth each
holder's right to require the Company to redeem any or all Notes held by it. The
Company shall thereafter during a period of 90 days from the date of such notice
(or the date the Company was required to give such notice) redeem any Notes, in
whole or in part, at the option of the holder, upon at least five days' written
notice to the Company by such holder specifying (i) the principal amount of
Notes to be redeemed and (ii) the redemption date; provided, however, if payment
of the Change of Control Price is restricted by the terms of any instrument or
agreement to which any of the Company's Senior Indebtedness was created or
incurred, such 90-day period shall not commence until the date on which payment
of the Change of Control Price is no longer so restricted.
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(c) On the date of any redemption being made
pursuant to Section 9.1 or 9.2 which is specified in a notice given pursuant to
this Section 9.3, the Company shall wire transfer to such holder the Redemption
Price or Change of Control Price, as the case may be, for the principal amount
of notes so redeemed, together with an amount equal to all accrued and unpaid
interest, if any, thereon to the date of redemption.
10. Conversion
10.1. Holder's Option to Convert into Preferred Stock. The
Notes shall be converted, in whole but not in part, at the direction of the
holders of not less than 66-2/3% of all outstanding Notes at any time after the
Closing into shares of Preferred Stock, at a conversion ratio of one share of
Preferred Stock for each $100 of outstanding principal amount of Notes (the
"Preferred Ratio"), provided the Stockholder Approval and the HSR Approval shall
have been obtained.
10.2. Company's Option to Convert. The Notes shall be
convertible at the option of the Company, in whole but not in part, at any time
into shares of Preferred Stock at the Preferred Ratio; provided that (a) no
Default or Event of Default shall have occurred and be continuing, (b) the
Company has paid in full all accrued and unpaid interest on the Notes to and
including the date of conversion of the Notes pursuant to this Section 10.2 (the
"Company Conversion Date"), (c) the Company has complied in all material
respects with all of the covenants set forth in this Agreement and in any
instruments or agreements relating to Senior Indebtedness of the Company, (d)
each of the representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects on the Company
Conversion Date, (e) the HSR Approval and the Stockholder Approval shall have
been obtained, (f) the NASDAQ Approval shall have been obtained, and (g) the
Current Market Price of the Common Stock shall have exceeded the Minimum
Conversion Price during the 30 consecutive Trading Days immediately preceding
the Stockholders Meeting.
10.3. Exercise of Conversion Privilege. (a) Any conversion by
the holders of Notes into Preferred Stock shall be in an aggregate outstanding
principal amount equal to at least $100,000, unless the amount so converted
shall be such holder's entire outstanding principal amount of Notes. Conversion
of the Notes may be effected by any holder thereof upon the surrender to the
Company at the office of the Company designated for notices in accordance with
Section 13.6 or at the office of any agent or agents of the Company, as may be
designated by the Board of Directors (the "Transfer Agent"), of the Notes to be
converted, accompanied by a written notice stating that such holder elects to
convert all or a specified portion of the outstanding principal amount of such
Notes in accordance with the provisions of this Article 10 and specifying the
name or names in which such holder wishes the certificate or certificates for
shares of Preferred Stock to be issued; provided that, in the case of the
conversion of the Notes into Preferred Stock in accordance with Section 10.2,
the Company shall provide each holder written notice stating that such holder's
Notes have been converted pursuant to Section 10.2, and
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each holder shall thereupon promptly surrender to the Company or the Transfer
Agent, as the case may be, the Notes so converted, specifying the name or names
in which such holder wishes the certificates for shares of Preferred Stock to be
issued. In case any holder's notice shall specify a name or names other than
that of such holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Preferred Stock in such name or
names and the opinion of counsel required by the legend set forth in Section
13.12. Other than such taxes, the Company will pay any and all issue and other
taxes (other than taxes based on income) that may be payable in respect of any
issue or delivery of shares of Preferred Stock on conversion of Notes pursuant
hereto. As promptly as practicable, and in any event within five Business Days
after the surrender of such Notes and the receipt of such notice relating
thereto and, if applicable, payment of all transfer taxes (or the demonstration
to the satisfaction of the Company that such taxes have been paid), the Company
shall deliver or cause to be delivered (i) certificates representing the number
of validly issued, fully paid and nonassessable full shares of Preferred Stock
to which the holder of the Notes being converted shall be entitled and (ii) if
less than the entire outstanding principal amount of any Note surrendered is
being converted, a new Note in the principal amount which remains outstanding
upon such partial conversion. Such conversion shall be deemed to have been made
at the close of business on the date of giving such notice so that the rights of
the holder thereof as to the Note or Notes (or portion thereof) being converted
shall cease except for the right to receive shares of Preferred Stock in
accordance herewith, and the person entitled to receive the shares of Preferred
Stock shall be treated for all purposes as having become the record holder of
such shares of Preferred Stock at such time, so long as such holder's Notes are
delivered to the Company within two Business Days after the date of the giving
of notice. In any other case of conversion at the holder's option, the date of
delivery of the Notes shall be deemed to be the date of conversion.
(b) In case any Notes are to be redeemed pursuant to
Section 9.1, such right of conversion shall cease and terminate as to the Notes
to be redeemed at the close of business on the Business Day preceding the date
fixed for redemption unless the Company shall default in the payment of the
Redemption Price or the Change of Control Price, as the case may be.
10.4. Fractions of Shares; Interest. In connection with the
conversion of any Note into Preferred Stock, no fractions of shares shall be
issued, but in lieu thereof the Company shall pay a cash adjustment in respect
of such fractional interest in an amount equal to such fractional interest
multiplied by the Face Value of the Preferred Stock. If more than one Note shall
be surrendered for conversion by the same holder at the same time, the number of
full shares of Preferred Stock issuable on conversion thereof shall be computed
on the basis of the aggregate outstanding principal amount of Notes so
surrendered. Promptly upon conversion, the Company shall pay to holders of Notes
so converted an amount equal to any accrued and unpaid interest on the Notes
surrendered
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for conversion to the date of such conversion, together with cash in lieu of any
fractional share of Preferred Stock.
10.5. Reservation of Stock. The Company shall at all times
reserve and keep available for issuance upon the conversion of the Notes,
conversion of the Preferred Stock, conversion of the Preferred Stock issuable
upon conversion of the Notes and exercise of the Warrants, free from any
preemptive rights, such number of its authorized but unissued shares of
Preferred Stock or Common Stock, as the case may be, as will from time to time
be sufficient to permit (a) the conversion of the entire outstanding principal
amount of the Notes into Preferred Stock, (b) the conversion of the Preferred
Stock issued hereunder into Common Stock, (c) the conversion of all of the
Preferred Stock issuable upon conversion of the Notes into Common Stock and (d)
the exercise of all of the Warrants issued pursuant to the Warrant Agreement,
and shall take all action required to increase the authorized number of shares
of Preferred Stock or Common Stock, if necessary, to permit (a) the conversion
of the entire outstanding principal amount of the Notes, (b) the conversion of
the Preferred Stock issued hereunder into Common Stock, (c) the conversion of
all of the Preferred Stock issuable upon conversion of the Notes into Common
Stock and (d) the exercise of all of the Warrants issued pursuant to the Warrant
Agreement.
11. Subordination of Notes
11.1. Subordination of Notes to Senior Indebtedness. The
Indebtedness evidenced by the Notes and all modifications, renewals and
extensions thereof, all obligations of the Company under this Agreement, the
Certificate of Designation, the Warrant Agreement and all other instruments and
agreements arising out of or relating to any or all of the foregoing and all
modifications, renewals and extensions thereof (collectively called the "Junior
Indebtedness") shall at all times be wholly subordinate and junior in right of
payment to any and all Senior Indebtedness of the Company (including any claims
by the holders of such Senior Indebtedness for interest accruing after any
assignment for the benefit of creditors by the Company or the institution by or
against the Company of any proceedings under the Bankruptcy Code or any law for
the relief of or relating to debtors, or any other claim by such holders for any
such interest which would have accrued in the absence of such assignment or the
institution of such proceedings) in the manner and with the force and effect
hereafter set forth:
(a) In the event of any liquidation, dissolution or
winding up of the Company, or of any execution, sale, receivership, insolvency,
bankruptcy, liquidation, readjustment, reorganization or other similar
proceeding relative to the Company or its property (including any Subsidiary of
the Company), all sums owing in respect of all Senior Indebtedness of the
Company (including cash collateral and amounts not yet due and payable) shall
first be paid in full before any payment (other than distributions of Permitted
Junior Securities) is made in respect of the Junior Indebtedness; and in any
such event any payment or distribution of any kind or character, whether in
cash,
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property, or securities (excluding Permitted Junior Securities), which
shall be made upon or in respect of the Junior Indebtedness shall be paid over
to the holders of the Senior Indebtedness of the Company, pro rata, for
application in payment thereof unless and until such Senior Indebtedness shall
have been paid or satisfied in full. In case of any assignment for the benefit
of creditors by the Company or in case any proceedings under the Bankruptcy Code
or any other law for the relief of or relating to debtors are instituted by or
against the Company, or in case of the appointment of any receiver for the
Company's business or assets (including any Subsidiary of the Company), or in
case of any liquidation, dissolution or winding up of the affairs of the
Company, the Company and any assignee, trustee in bankruptcy, receiver, debtor
in possession or other person or persons in charge are hereby directed to pay to
the holders of the Senior Indebtedness of the Company the full amount of such
holders' claims against the Company (including interest to the date of payment)
before making any payments (excluding distributions of Permitted Junior
Securities) to the holders of Junior Indebtedness, and insofar as may be
necessary for that purpose, the Purchasers hereby assign and transfer to the
holders of Senior Indebtedness of the Company all rights to any payments,
dividends or other distributions.
(b) In the event that all or any part of the Junior
Indebtedness is declared or becomes due and payable because of the occurrence of
any Event of Default or otherwise than at the option of the Company or pursuant
to its terms at its final maturity, under circumstances when the foregoing
subsection (a) shall not be applicable, the holders of the Junior Indebtedness
shall be entitled to payments (excluding distributions of Permitted Junior
Securities) only after there shall first have been paid in full all Senior
Indebtedness of the Company or payment shall have been provided therefor in a
manner satisfactory to the holders of such Senior Indebtedness.
(c) Upon the occurrence for any reason of any
payment default in respect of any Senior Indebtedness of the Company (including
any payment default arising or existing because of the acceleration of the
maturity of all or any part of such Senior Indebtedness), regardless of whether
nonpayment results from or is authorized, permitted or excused by any stay or
other similar event, no payment (excluding distributions of Permitted Junior
Securities) may be made on any Junior Indebtedness unless and until such default
shall have been cured or waived in writing or shall have ceased to exist.
(d) Without limiting the foregoing subsection
11.1(c), no payment (excluding distributions of Permitted Junior Securities) may
be made on any Junior Indebtedness if any event (other than (i) a payment
default described in subsection 11.1(c) or (ii) a cross-default under the
Revolving Credit Facility arising solely from the Company's failure to perform
any of its covenants in Section 6 hereof) that is, or with the lapse of time or
notice or both would be, an event that gives any holder of Senior Indebtedness
of the Company the right to demand payment or cash collateral, accelerate the
maturity of such Senior Indebtedness or terminate any commitment to extend
credit
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and if such holder gives notice of such default in writing (including
notices by telegram, telex or facsimile) to the Company and to FFT (a "Blockage
Notice"). A Blockage Notice shall be effective as follows:
(i) A Blockage Notice issued prior to
January 26, 2000 shall be effective for a period commencing on the date
of issuance and ending on the earlier to occur of (A) the day that is
one hundred eighty (180) days after the date of issuance, or (B) the
date on which the Indebtedness evidenced by the Note matures, or (C)
the date on which any holder of Senior Indebtedness commences the
institution of a civil action to collect such Senior Indebtedness or
(D) the date on which such event of default or potential event of
default shall have been waived or cured; provided, however that in all
events a Blockage Notice shall be effective for a period of not less
than five (5) days after the date of issuance; and
(ii) A Blockage Notice issued on or after
January 26, 2000 shall be effective for a period commencing on the date
of issuance and ending on the day that is five (5) days after the date
of issuance.
No holder of Senior Indebtedness of the Company shall be entitled to give notice
pursuant to this subsection (d) more than once with respect to any default which
was specified in such notice and which has continued without interruption since
the date such notice was given, nor shall such holder be entitled to give a
separate notice with respect to any default not so specified which (to the
knowledge of the holder giving notice) was existing on the date such notice was
given pursuant to this subsection (d) and which has continued without
interruption from the date such notice was given. Upon receipt of any notice
from any holder of any Senior Indebtedness of the Company pursuant to this
subsection (d), the Company shall forthwith send a copy thereof to each holder
of Junior Indebtedness and each holder of its Senior Indebtedness at the time
outstanding.
(e) All payments, or other distributions (whether in
cash or other property, but excluding distributions of Permitted Junior
Securities) made to the holders of Junior Indebtedness which are made at any
time that such payments or other distributions were not permitted under the
Revolving Credit Agreement or hereunder or which should have been made to the
holders of Senior Indebtedness of the Company shall be received and held by the
former in trust for the benefit of the latter, and the holders of Junior
Indebtedness shall forthwith remit such payments or distributions to the holders
of the Senior Indebtedness of the Company, pro rata, in the form in which
received, together with such endorsements or documents as may be necessary to
effectively negotiate or transfer the same to the holders of the Senior
Indebtedness of the Company.
(f) Each holder of Senior Indebtedness of the Company
is hereby authorized by the Purchasers to:
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(i) renew, compromise, extend, accelerate
or otherwise change the time of payment, or any other terms or
conditions, of any Senior Indebtedness of the Company held by such
holder;
(ii) increase or decrease the rate of
interest payable thereon or any part thereof;
(iii) obtain, accept, exchange, enforce,
waive or release any security therefor;
(iv) direct the order or manner of sale of
any such security and the application of the proceeds thereof in such
manner as such holder may at its discretion determine; and/or
(v) release the Company or any guarantor
of any Senior Indebtedness of the Company from liability.
If any such action is taken, the Company shall promptly notify the Purchasers
and any holder of Junior Indebtedness. Notwithstanding anything set forth in
this Section 11.1, nothing set forth herein shall restrict holders of the Notes
and Preferred Stock from exercising their rights of conversion hereunder.
11.2. Proofs of Claim of Holders of Senior Indebtedness;
Voting. The Purchasers and any subsequent holders of the Junior Indebtedness
undertake and agree for the benefit of each holder of Senior Indebtedness of the
Company to execute, verify, deliver and file any proofs of claim relating to the
Junior Indebtedness which any holder of such Senior Indebtedness may at any time
require in order to prove and realize upon any rights or claims pertaining to
the Junior Indebtedness and to effectuate the full benefit of the subordination
contained herein. Upon failure of the Purchasers to file the required proof or
proofs of claim prior to 30 days before the expiration of the time to file
claims in such proceeding, each holder of Senior Indebtedness of the Company is
hereby irrevocably appointed by the Purchasers to be such Purchasers' agent to
file the appropriate claim or claims and if such holder of Senior Indebtedness
elects at its sole discretion to file such claim or claims (i) to accept or
reject any plan of reorganization or arrangement on behalf of the Purchasers,
and (ii) to otherwise vote the Purchasers' claim in respect of the Junior
Indebtedness in any manner deemed appropriate for the benefit and protection of
the holders of the Senior Indebtedness of the Company.
11.3. Rights of Holders of Senior Indebtedness Unimpaired. No
right of any holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time or in any way be affected or impaired by any
failure to act on the part of the Company or any of its Subsidiaries or the
holders of Senior Indebtedness, or by any noncompliance by the Company with any
of the terms, provisions and covenants of this Agreement, regardless of any
knowledge thereof that any such holder of Senior Indebtedness may have or be
otherwise charged with.
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11.4. Effects of Event of Default. The Company agrees, for the
benefit of the holders of Senior Indebtedness, that in the event that a Note is
declared due and payable before its maturity because of the occurrence of an
Event of Default, (i) the Company will give prompt notice in writing of such
happening to the holders of Senior Indebtedness and (ii) all Senior Indebtedness
shall forthwith become immediately due and payable in full at the option of the
holder(s) thereof (or otherwise as provided by the terms thereof), regardless of
the expressed maturity thereof.
11.5. Company's Obligations Unimpaired. The provisions of this
Article 11 are solely for the purpose of defining the relative rights of the
holders of Senior Indebtedness on the one hand, and the Purchasers on the other
hand, and nothing herein shall impair, as among the Company and the Purchasers,
the obligation of the Company which is unconditional and absolute, to pay the
principal, premium, if any, and interest, if payable, on the Notes in accordance
with the terms of this Agreement (including this Article 11) and the Notes, nor
shall anything herein prevent the Purchasers from exercising all remedies
otherwise permitted by applicable law or under this Agreement or the Notes upon
the occurrence of an Event of Default, subject to the conditions and limitations
set forth herein and the rights of the holders of Senior Indebtedness as herein
provided for.
11.6. Subrogation. Subject to the prior payment in full of all
Senior Indebtedness of the Company, holders of the Notes shall be subrogated to
the rights of the holders of such Senior Indebtedness to receive payments or
distributions of cash, property or securities made in respect of such Senior
Indebtedness until the Senior Indebtedness shall be paid in full; and, for the
purposes of such subrogation, payments or distributions to the holders of Senior
Indebtedness of the Company of any cash, property or securities to which any
holder of Notes would be entitled except for the provisions of this Agreement
shall, as between the Company and its creditors other than the holders of Senior
Indebtedness of the Company and holders of the Notes, be deemed to be a payment
by the Company to or on account of the Notes, it being understood that the
provisions of this Article 11 are and are intended solely for the purpose of
defining the relative rights of the holders of the Notes on the one hand, and
the holders of Senior Indebtedness of the Company, on the other hand. The
purpose of this Section 11.6 is to grant to holders of the Notes the same rights
against the Company with respect to the aggregate amount of such payments or
distributions as the holders of Senior Indebtedness of the Company would have
against the Company if such aggregate amount were considered overdue Senior
Indebtedness of the Company.
11.7. Avoided Payments in Respect of Senior Indebtedness of
the Company. The Purchasers acknowledge and agree that if and to the extent that
any obligation, payment or distribution in respect of Senior Indebtedness of the
Company (whether consisting of a payment or proceeds of security or the exercise
of a right of setoff or otherwise) is declared invalid, fraudulent or
preferential or otherwise is set aside or required to be returned or repaid, any
Senior Indebtedness of the Company purportedly
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satisfied thereby shall be deemed reinstated and outstanding as if the same had
not occurred and the provisions of this Article 11 shall continue to be
applicable to such Senior Indebtedness.
11.8. Independence of Provisions. All provisions of this
Article 11 shall be given independent effect so that if a particular payment,
distribution, action or condition is not permitted by any of such provisions,
the fact that it would be permitted by an exception to, or otherwise would be
within the limitations of, another provision shall not be deemed to permit such
payment, distribution, action or condition.
11.9. References to "Payments". As used herein with reference
to the Junior Indebtedness, "payment" shall include not only payments made in
respect of such Junior Indebtedness but also any purchase or redemption of such
Junior Indebtedness and/or any instrument evidencing same (excluding any
purchase or redemption in exchange for Permitted Junior Securities).
11.10. Reliance by Certain Holders of Senior Indebtedness of
the Company; Amendments and Modifications. The Purchasers acknowledge and agree
that the Administrative Agent, the Lenders and the Issuing Bank (all as defined
in the Revolving Credit Agreement), and their respective successors and assigns
(including participants) have relied and will continue to rely upon the
provisions of this Article 11 in determining to extend credit and in extending
credit to the Company. Until the Senior Indebtedness of the Company outstanding
pursuant to or in connection with the Revolving Credit Agreement has been fully
and finally repaid and the Administrative Agent, the Issuing Bank and the
Lenders have no further obligation to extend credit thereunder, this Article 11
may not be rescinded, amended or modified without the prior express written
consent of the Administrative Agent and Requisite Lenders (as defined in the
Revolving Credit Agreement).
12. Interpretation
12.1. Definitions.
"Acquired Indebtedness" shall mean Indebtedness of a Person
(a) assumed in connection with an Asset Acquisition from such Person or (b)
existing at the time such Person becomes a subsidiary of any other Person (other
than any Indebtedness incurred in connection with, or in contemplation of, such
Asset Acquisition or such Person becoming such a subsidiary).
"Adjustment Period" shall mean the period of five consecutive
Trading Days preceding the date as of which the Fair Market Value of a security
is to be determined.
"Advisory Fee" shall have the meaning set forth in Section
1.5.
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"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
"Applicable Laws" shall have the meanings set forth in Section
2.6.
"Applicable Tax Rate" shall have the meaning set forth in
Section 6.15(a).
"Asset Acquisition" shall mean (a) an Investment by the
Company or any Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Subsidiary of the Company or any Subsidiary of the
Company shall be merged with or into the Company or any Subsidiary of the
Company or (b) the acquisition by the Company or any Subsidiary of the Company
of the assets of any Person which constitute all or substantially all of the
assets of such Person or any division or line of business of such Person.
"Average Life" shall mean, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (a) the sum
of the products of (i) the number of years from such date to the date or dates
of each successive scheduled principal payment (including, without limitation,
any sinking fund requirements) of such Indebtedness multiplied by (ii) the
amount of such principal payment by (b) the sum of all such principal payments.
"Beneficially Own" or "Beneficial Owners" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing.
"Board of Directors" or "Board" shall mean the board of
directors of the Company.
"Budgeted Maintenance Capital Expenditure" shall mean, as to
the Company and its Subsidiaries on a consolidated basis for any fiscal year,
the aggregate of all Maintenance Capital Expenditures included in the budget for
such fiscal year delivered to NationsBank as administrative agent under, and
pursuant to, the Revolving Credit Agreement, with a copy delivered to FFT.
"Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the States of New York and
Tennessee are authorized or obligated by law or executive order to close.
"By-Laws" shall have the meaning set forth in Section 2.2.
"Capital Stock" shall mean, with respect to any Person, any
and all shares, interests, participation, rights in or other equivalents
(however designated) of such
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Person's capital stock, and any rights (other than debt securities convertible
into capital stock), warrants or options exchangeable for or convertible into
such capital stock.
"Capital Expenditures" shall mean, as to any Person for any
period, the aggregate capital expenditures recorded by such Person and its
Subsidiaries on a consolidated basis in conformity with generally accepted
accounting principles, including charges in respect of Capitalized Lease
Obligations exclusive of imputed interest on such Capitalized Lease Obligations;
provided, however, that for purposes of determining Capital Expenditures for the
Company and its Subsidiaries on a consolidated basis, there shall be excluded
therefrom any Capital Expenditure attributable solely to the making of Permitted
Acquisitions (as defined in the Revolving Credit Agreement in effect as of the
date hereof)].
"Capitalized Lease" shall mean, with respect to any person,
any lease or any other agreement for the use of property which, in accordance
with generally accepted accounting principles, should be capitalized on the
lessee's or user's balance sheet.
"Capitalized Lease Obligation" of any person shall mean and
include, as of any date as of which the amount thereof is to be determined, the
amount of the liability capitalized or disclosed (or which should be disclosed)
in a balance sheet of such person in respect of a Capitalized Lease of such
person.
"Cash Equivalents" shall mean, at any time,
(a) Government Obligations having a maturity not
exceeding one hundred eighty (180) days;
(b) commercial paper rated at least A-1 by S&P or P-1
by Moody's, having a maturity not
exceeding one hundred eighty (180) days;
(c) certificates of deposit or time deposits of (i)
the Lenders or (ii) other commercial banks having capital and undivided surplus
of at least $500 million and issuing commercial paper rated as described in the
preceding clause (b) and organized and existing under, or chartered or otherwise
qualified to do business under, the laws of the United States of America or any
State thereof or the District of Columbia, having a maturity not exceeding
ninety (90) days;
(d) repurchase agreements or investment contracts
having a maturity not exceeding ninety (90) days with a financial institution
insured by the Federal Deposit Insurance Corporation, or any broker or dealer
(as defined in the Securities Exchange Act of 1934) that is a dealer in
government bonds and that is recognized by trades with and reports to, a Federal
Reserve Bank as a primary dealer in government securities; provided that in any
case (i) collateral is pledged for the repurchase agreement or investment
contract, which collateral consists of (A) Government Obligations or evidences
or ownership of proportionate interests in future interest and principal
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payments on Government Obligations held by a bank or trust company as custodian,
under which the owner of the investment is the real party in interest and has
the right to proceed directly and individually against the obligor on such
obligations, and which underlying obligations are held in a segregated account
and not available to satisfy any claim of the custodian or any person claiming
through the custodian or to whom the custodian may be obligated or (B) evidences
of indebtedness issued by any of the following: Bank of Cooperatives,
Export-Import Bank of the United States, Farmers Home Administration, Federal
Financing Bank, Federal Loan Bank System, Federal Home Loan Mortgage Corporation
(including participation certificates), Federal Housing Administration, Federal
Farm Credit Banks, Federal National Mortgage Association, Government National
Mortgage Association, Inter-American Development Bank, International Bank for
Reconstruction and Development, Small Business Administration or any other
agency or instrumentality of the United States of America created by an act of
Congress that is substantially similar to the foregoing in its legal
relationship to the United States of America, (ii) the current market value of
the collateral securing the repurchase agreement or investment agreement or
investment contract is at least equal to the amount of the repurchase agreement
or investment contract and (iii) the current market value of the collateral is
determined not less frequently than monthly;
(e) investments in money market funds substantially
all of whose assets consist of securities of the types described in the
foregoing clauses (a) through (d);
(f) investments in obligations the return with
respect to which is excludable from gross income under Section 103 of the Code,
having a maturity of not more than six (6) months or providing the holder the
right to put such obligations for purchase at par upon not more than twenty
eight days' notice, and which are rated at least A-1 by S&P or P-1 by Moody's;
(g) investments in tax free money market funds all of
whose assets consist of securities of the types described in the foregoing
clause (f); and
(h) investments, redeemable upon not more than seven
(7) days' notice, in money market
preferred municipal bond funds that are rated at least AAA by S&P or Aaa by
Moody's.
"Certificate of Designation" shall have the meaning set forth
in Section 1.3(b)(v).
"Certificate of Incorporation" has the meaning set forth in
Section 1.3(b)(v).
"Change of Control" shall mean:
(a) a "person" or "Group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act) becoming, in a transaction or series of
related transactions, the Beneficial Owner of Voting Securities entitled to
exercise 50% or more of the total
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voting power of all outstanding Voting Securities of the Company (including any
Voting Securities that are not then outstanding of which such person or Group is
deemed the Beneficial Owner) (the "Control Party"); or
(b) the acquisition of Beneficial Ownership of 20% or more of
the Voting Securities of the Company by any Person or Group, together with
contractual rights, which would enable such Person or Group to prevent a merger,
consolidation, sale of all or substantially all of the assets or other sale of
the Company; or
(c) individuals who at the beginning of any period of two
consecutive calendar years constituted the Board of Directors (together with any
new directors whose election by such Board of Directors or whose nomination for
election by the Company's stockholders occurred pursuant to an express provision
of the Agreement or was approved by a vote of at least two-thirds of the members
of the Board of Directors then still in office who either were members of the
Board of Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board of Directors then in office;
or
(d) sale of all or substantially all of the assets of the
Company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the Securities and Exchange
Commission.
"Company Conversion Date" shall have the meaning set forth in
Section 10.2.
"Confidential Information" shall have the meaning set forth in
Section 7(a).
"Consolidated" or "consolidated", when used with reference to
any financial term in this Agreement (but not when used with respect to any tax
return or tax liability), shall mean the aggregate for two or more persons of
the amounts signified by such term for all such persons, with inter-company
items eliminated and, with respect to earnings, after eliminating the portion of
earnings properly attributable to minority interests, if any, in the capital
stock of any such person or attributable to shares of preferred stock of any
such person not owned by any other such person.
"Consolidated Fixed Charge Coverage Ratio" of any Person shall
mean, for the most recent fiscal quarter after giving pro forma effect to any
Asset Acquisitions made during the most recent 12 month period ending on and
including the date of determination] the ratio of (a) the sum of Consolidated
Net Income, Consolidated Interest Expense, Consolidated Rental Expense and
Consolidated Noncash Charges, less Restricted Payments and less the lesser of
25% of Budgeted Maintenance Capital Expenditures for the corresponding fiscal
year or 100% actual Maintenance Capital Expenditures during such fiscal quarter,
in each case, for such period, of such Person and
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its Subsidiaries on a consolidated basis, all determined in accordance with
generally accepted accounting principles, to (b) the sum of (i) such
Consolidated Interest Expense for such period (provided that (A) in making such
computation, the Consolidated Interest Expense of such Person attributable to
interest on any Indebtedness computed on a pro forma basis and bearing a
floating interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period; (B) in making
such computation, the Consolidated Interest Expense of such Person attributable
to interest on any Indebtedness under a revolving credit facility computed on a
pro forma basis shall be computed based upon the average daily balance of such
Indebtedness during the applicable period; and (C) notwithstanding clauses (A)
and (B) above, interest on Indebtedness determined on a fluctuating basis, to
the extent such interest is covered by agreements relating to Interest Rate
Protection Obligations, shall be deemed to have accrued at the rate per annum
resulting after giving effect to the operation of such agreements), plus (ii)
25% of Current Maturities of Long-Term Debt, plus (iii) Consolidated Rental
Expense. If such Person or any of its Subsidiaries directly or indirectly
Guarantees Indebtedness of a third Person, the above clause shall give effect to
the incurrence of such Guaranteed Indebtedness as if such Person or such
Subsidiary had directly incurred or otherwise assumed such Guaranteed
Indebtedness.
"Consolidated Funded Debt" shall mean consolidated
Indebtedness of the Company and its Subsidiaries, determined in accordance with
generally accepted accounting principles consistently applied; provided,
however, that Consolidated Funded Debt shall not include any unsecured current
liabilities incurred in the ordinary course of business and not represented by
any note, bond, debenture or other instrument.
"Consolidated Interest Expense" shall mean, as to any Person
for any period, the aggregate interest expense and amortization of deferred loan
costs of such Person and its Subsidiaries on a consolidated basis for such
period (calculated without regard to any limitations on the payment thereof),
imputed interest on Capitalized Lease Obligations, commissions, discounts and
other fees and charges owed with respect to letters of credit and unused
commitments and net costs under interest rate protection agreements, all as
determined in conformity with generally accepted accounting principles.
"Consolidated Net Income (Loss)" of any Person shall mean, for
any period, the consolidated net income (or loss) of such Person and its
Subsidiaries for such period on a consolidated basis as determined in accordance
with generally accepted accounting principles, adjusted, to the extent included
in calculating such net income (or loss), by excluding, without duplication, (i)
all extraordinary gains (less all fees and expenses relating thereto), (ii) the
portion of net income (or loss) of such Person and its Subsidiaries on a
Consolidated basis allocable to minority interests in unconsolidated Persons to
the extent that cash dividends or distributions have not actually been received
by such Person or one of its Consolidated Subsidiaries, (iii) any gain or loss,
net of taxes, realized upon the termination of any employee pension benefit
plan, (iv) net gains (or
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losses) (less all fees and expenses relating thereto) in respect of dispositions
of assets other than in the ordinary course of business, (v) the net income of
any Subsidiary to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (vi) any
restoration to income of any contingency reserve, except to the extent provision
for such reserve was made out of income accrued at any time following the date
of this Agreement, or (vii) any gain arising from the acquisition of any
securities, or the extinguishment, under generally accepted accounting
principles, of any Indebtedness of such Person.
"Consolidated Net Worth" shall mean the consolidated
stockholders' equity of the Company and its Subsidiaries, less the amount of
Disqualified Stock, determined in accordance with generally accepted accounting
principles consistently applied.
"Consolidated Noncash Charges" shall mean, with respect to any
Person for any period, the aggregate depreciation, amortization and other
non-cash expenses of such Person and its Subsidiaries reducing Consolidated Net
Income of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Consolidated Rental Expense" shall mean, as to any Person for
any period, the aggregate rent and lease expenses recorded by such Person and
its Subsidiaries on a consolidated basis in conformity with generally accepted
accounting principles pursuant to any Operating Lease.
"Consolidated Total Capital" shall mean the sum of (i)
Consolidated Funded Debt plus (ii) Consolidated Net Worth.
"Conversion Price" shall mean the Conversion Price of the
Preferred Stock which is equal to the lower of (a) $9.45 per share, or (b) the
Current Market Price of a share of Common Stock during the thirty consecutive
Trading Days prior to the Stockholders Meeting; provided that the Conversion
Price shall in no event be less than $5.50 per share (subject to adjustment in
accordance with Section 8 of the Certificate of Designation). In the event the
Company shall not have duly called and convened a Stockholders Meeting to
consider and vote upon the Stockholder Approval with respect to the Stock
Issuance within one year from the Closing Date, the Conversion Price shall equal
the lower of (A) $9.45 per share or (B) the Current Market Price of a share of
Common Stock during the thirty consecutive Trading Days immediately prior to
January 26, 2000, provided that such price shall in no event be less than $5.50
per share (subject to adjustment in accordance with Section 8 of the Certificate
of Designation). Notwithstanding the foregoing, at any time prior to the
Stockholder Approval Date, the
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Conversion Price shall in no event be less than the price at which the maximum
number of shares of Common Stock issued or issuable upon conversion of the
Preferred Stock, together with shares of the Common Stock issued or issuable
upon exercise of the Warrants, would exceed the greater of (i) 711,241 shares of
Common Stock (19.9% of the outstanding shares of Common Stock of the Company as
of the Closing Date) and (ii) 19.9% of the outstanding shares of Common Stock of
the Company at the time of determination; provided, however, that if the
Conversion Price is greater than the price that would be in effect but for this
sentence and, subsequently, the Company shall have obtained the Stockholder
Approval, the Conversion Price shall be retroactively recalculated in accordance
with the first sentence of this definition of the "Conversion Price.".
"Current Market Price", when used with reference to shares of
Common Stock or other securities on any date, shall mean the closing sale price
per share of Common Stock or such other securities on such date and, when used
with reference to shares of Common Stock or other securities for any period
shall mean the average of the daily closing sale prices per share of Common
Stock or such other securities for such period. The closing price for each day
shall be the closing sale price in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotation System
or such other system then in use, or, if on any such date the Common Stock or
such other securities are not quoted by any such organization, the closing sale
price as furnished by a professional market maker making a market in the Common
Stock or such other securities selected by the Board of Directors of the
Company. If the Common Stock is listed or admitted to trading on a national
securities exchange, the closing price shall be the closing sale price, regular
way, as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Common Stock or such other securities are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock or such
other securities are listed or admitted to trading. If the Common Stock or such
other securities are not publicly held or so listed or publicly traded, "Current
Market Price" shall mean the Fair Market Value per share of Common Stock or of
such other securities as determined in good faith by the Board of Directors of
the Company based on an opinion of an independent investment banking firm
acceptable to holders of a majority of the Notes, which opinion may be based on
such assumptions as such firm shall deem to be necessary and appropriate.
"Current Maturities of Long-Term Debt" shall mean (a) as of
any date of determination occurring on or before December 31, 1999, $5,000,000
and (b) as of any date of determination subsequent to December 31, 1999, that
portion of Consolidated Funded Debt that is due and payable within the twelve
(12) month period immediately following the date of determination, calculated in
conformity with generally accepted accounting principles.
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"Default" shall mean any event which, with or without notice
or the passage of time, would be an Event of Default.
"Disinterested Director" shall mean, with respect to any
transaction or series of related transactions, a member of the Board of
Directors who does not have any material direct or indirect financial interest
in or with respect to such transaction or series of related transactions.
"Disqualified Stock" shall mean any capital stock of the
Company which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable, except to the extent such capital
stock is exchangeable into Indebtedness at the option of the Company and only
subject to the terms of any debt instrument to which the Company is a party), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder thereof, in whole or in part, or convertible or exchangeable into
Indebtedness on or prior to date that is 91 days after the date on which the
Notes mature; provided, however, that notwithstanding the foregoing, Redeemable
Common Stock shall not be deemed to be Disqualified Stock.
"Employee Benefit Plan" shall mean each plan, program, policy,
payroll practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits of any kind,
whether formal or informal, funded or unfunded, written or oral and whether or
not legally binding, including, without limitation, each "employee benefit
plan," within the meaning of Section 3(3) of ERISA and each "multiemployer plan"
within the meaning of Sections 3(37) or 4001(a)(3) of ERISA, pursuant to which
the Company, any Subsidiary or any ERISA Affiliate has or may have any
liability, contingent or otherwise.
"Environmental Laws" shall mean, at any date, all provisions
of federal, state, local or foreign law (including applicable principles of
common and civil law), statutes, ordinances, rules, regulations, published
standards and directives that have the force and effect of Laws, permits,
licenses, judgments, writs, injunctions, decrees and orders enacted, promulgated
or issued by any Public Authority, and all indemnity agreements and other
contractual obligations, as in effect at such date, relating to (i) the
protection of the environment, including the air, surface and subsurface soils,
surface waters, groundwaters and natural resources, and (ii) occupational health
and safety and exposure of persons to Hazardous Materials. Environmental Laws
shall include the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss.ss.9601 et seq., and any other Laws imposing or
creating liability with respect to Hazardous Materials.
"Environmental Liability" shall mean any liabilities,
obligations, costs, losses, payments or damages, including compensatory and
punitive damages, incurred
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(i) to contain, remove, clean up, assess, xxxxx or otherwise remedy any actual
or alleged release or threatened release of Hazardous Materials, any actual or
alleged contamination (by Hazardous Materials) of air, surface or subsurface
soil, groundwater or surface water, or any personal injury or damage to natural
resources or property resulting from any such release or contamination, pursuant
to the requirements of any Environmental Law or in response to any claim by any
Public Authority or other Third Party under any Environmental Law; (ii) to
modify facilities or processes or take any other remedial action in response to
any claim by any Public Authority of non-compliance with any Environmental Law;
(iii) as a result of the imposition of any civil or criminal fine or penalty by
any Public Authority for the violation or alleged violation of any Environmental
Law; or (iv) as a result of any action, suit, proceeding or claim by any Third
Party under any Environmental Law. The term "Environmental Liability" shall
include: (i) reasonable fees of counsel and consultants (but not any corporate
allocation for management time or for the use of similar in-house services or
facilities) and (ii) the costs and expenses of any investigation undertaken to
ascertain the existence or extent of any potential or actual Environmental
Liability.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean each business or entity which is
a member of a "controlled group of corporations," under "common control" or an
"affiliated service group" with the Company or its Subsidiaries within the
meaning of Sections 414(b), (c) or (m) of the Code, or required to be aggregated
with the Company or its Subsidiaries under Section 414(o) of the Code, or is
under "common control" with the Company or its Subsidiaries, within the meaning
of Section 4001(a)(14) of ERISA.
"Event of Default" shall mean each of the happenings or
circumstances enumerated in Section 8.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor Federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include reference to the comparable section, if any, of any such
successor Federal statute.
"Face Value" with respect to a share of Preferred Stock shall
mean $100.00 per share.
"Fair Market Value" shall mean, as to shares of Common Stock
or any other class of capital stock or securities of the Company or any other
issuer which are publicly traded, the average of the Current Market Prices of
such shares of securities for each day of the Adjustment Period. The "Fair
Market Value" of any security which is not publicly traded or of any other
property shall mean the fair value thereof as determined by an independent
investment banking or appraisal firm experienced in the valuation
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of such securities or property selected in good faith by the Board of Directors
of the Company or a committee thereof.
"Fairness Opinion" shall have the meaning set forth in Section
1.3(b)(iii).
"Governing Instruments" shall mean, collectively, this
Agreement, the Notes, the Warrant Agreement and the Certificate of Designation.
"Government Obligations" shall mean direct obligations of the
United States of America or obligations for the full and prompt payment of which
the full faith and credit of the United States of America are pledged.
"Guarantee" by any Person shall mean all obligations (other
than endorsements in the ordinary course of business of negotiable instruments
for deposit or collection) of any Person guaranteeing, or in effect
guaranteeing, any Indebtedness, dividend or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, all obligations incurred through an agreement,
contingent or otherwise, by such Person: (i) to purchase such Indebtedness or
obligation or any property or assets constituting security therefor; (ii) to
advance or supply funds (x) for the purchase or payment of such Indebtedness or
obligation, (y) to maintain working capital or other balance sheet condition or
otherwise to advance or make available funds for the purchase or payment of such
Indebtedness or obligation; (iii) to lease property or to purchase securities or
other property or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to make
payment of such Indebtedness or obligation; or (iv) otherwise to assure the
owner of the Indebtedness or obligation of the primary obligor against loss in
respect thereof. For the purposes of any computations made under this Agreement,
a Guarantee in respect of any Indebtedness for borrowed money shall be deemed to
be Indebtedness equal to the principal amount of the Indebtedness for borrowed
money which has been guaranteed, and a Guarantee in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Hazardous Material" shall mean any substance regulated by any
Environmental Law or which may now or in the future form the basis for any
Environmental Liability.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder.
"HSR Approval" shall have the meaning set forth in Section
2.8.
"HSR Notification" shall have the meaning set forth in Section
3.7.
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"Indebtedness" shall mean, with respect to any person, (i) all
obligations of such person for borrowed money, or with respect to deposits or
advances of any kind (other than deposits or advances incurred in the ordinary
course of business), (ii) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments (other than performance bonds incurred
in the ordinary course of business), (iii) all obligations of such person under
conditional sale or other title retention agreements relating to property
purchased by such person, (iv) all obligations of such person issued or assumed
as the deferred purchase price of property or services (other than accounts
payable to suppliers and similar accrued liabilities incurred in the ordinary
course of business and paid in a manner consistent with industry practice), (v)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien or security interest on property owned or acquired by such person
whether or not the obligations secured thereby have been assumed, (vi) all
Capitalized Lease Obligations of such person, (vii) all Guarantees of such
person, (viii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the account of
such person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all Swap Contracts.
"Initial Principal Balance" shall have the meaning set forth
in Section 1.1.
"Intellectual Property" shall have the meaning set forth in
Section 2.23(a).
"Interest Rate Protection Obligations" shall mean the
obligations of any Person pursuant to any arrangement with any other Person
whereby, directly or indirectly, such person is entitled to receive from time to
time periodic payments calculated by applying either a floating or a fixed rate
of interest on a stated notional amount in exchange for periodic payments made
by such Person calculated by applying a fixed or floating rate of interest on
the same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.
"Investment" shall mean, with respect to any Person, any
direct or indirect loan or other extension of credit or capital contribution to
(by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition by such Person of any Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by, any other Person.
"Investments" shall exclude extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices.
"Issuable Preferred Stock" shall mean ownership or possession
of the right to acquire through conversion of the Notes all (100%) of the Series
A Preferred Stock issued or issuable hereunder or of the Common Stock issuable
upon conversion of the Series A Preferred Stock.
"Junior Indebtedness" shall have the meaning set forth in
Section 11.1.
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"Lenders" shall mean the lenders identified in the Revolving
Credit Agreement.
"Lien" shall mean any mortgage, charge, pledge, lien
(statutory or other), security interest, hypothecation, assignment for security,
claim, or preference or priority or other encumbrance upon or with respect to
any property of any kind. A person shall be deemed to own subject to a Lien any
property which such Person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Liquidation Value" shall mean the outstanding principal
amount of any Note.
"Litigation" shall have the meaning set forth in Section 2.6.
"Maintenance Capital Expenditures" shall mean, as to the
Company and its Subsidiaries on a consolidated basis for any period, the
aggregate of all Capital Expenditures for maintenance purposes.
"Material Adverse Effect" and "Material Adverse Change" shall
mean any event, change or effect, individually or in the aggregate with such
other events, changes or effects, that has occurred which has a material adverse
effect upon the properties, prospects, condition (financial or otherwise),
results of operations or business of the Company and its Subsidiaries taken as a
whole; provided, however, that a Material Adverse Effect and Material Adverse
Change shall not include any event, change in or effect upon the properties,
prospects, condition (financial or otherwise), results of operations or business
of the Company and its Subsidiaries taken as a whole, directly or indirectly,
arising out of, attributable to or as a consequence of: (a) conditions, events
or circumstances (other than proposed or pending federal, state or local
legislation, regulation or administration of any governmental authority)
affecting the health care industry generally and the overall economy or (b) the
public announcement of either the execution of this Agreement or the
transactions contemplated hereunder.
"Moody's" shall mean Xxxxx'x Investors Service, Inc. and its
successors.
"Multiemployer Plan" shall mean each Employee Benefit Plan
which is a "multiemployer plan" within the meaning of Sections 3(37) or
4001(a)(3) of ERISA.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Nasdaq" shall mean the National Association of Securities
Dealers, Inc. Automated Quotation System.
"Nasdaq Approval" shall have the meaning set forth in Section
6.30.
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"NationsBank" shall mean NationsBank, N.A., a successor by
merger to NationsBank of Tennessee, N.A.
"Non-Disclosable Contracts" shall mean Contracts to which the
Company or any Subsidiary is a party with or for the benefit of any officer,
director or Affiliate of the Company or any Subsidiary or Associate thereof
meeting none of the disclosure requirements nor any of the exhibit filing
requirements for an annual, quarterly or periodic report on Form 10-K, 10-Q or
8-K of the Company covering reporting periods that include any of the date of
this Agreement, the Closing Date, the date such Contract is entered into or the
date or dates of the Company's performance under such Contract.
"Note Register" shall have the meaning set forth in Section
4.2.
"Operating Lease" shall mean, as to any Person, any lease of
property (whether real, personal or mixed) by such Person as lessee that is not
a Capitalized Lease.
"Opinion of Counsel" shall have the meaning set forth in
Section 1.3(b)(ii).
"OSHA" shall have the meaning set forth in Section 2.6.
"Outstanding" or "outstanding" shall mean when used with
reference to the Notes at a particular time, all Notes theretofore issued as
provided in this Agreement, except (i) Notes therefore reported as lost, stolen,
damaged or destroyed, or surrendered for transfer, exchange or replacement, in
respect to which replacement Notes have been issued; (ii) Notes theretofore paid
in full; and (iii) Notes theretofore canceled by the Company except that, for
the purpose of determining whether holders of the requisite principal amount of
Notes have made or concurred in any waiver, consent, approval, notice or other
communication under this Agreement, Notes registered in the name of, or owned
beneficially by, the Company or any Subsidiary of any thereof, shall not be
deemed to be outstanding.
"Pari Passu Indebtedness" shall mean Indebtedness of the
Company which is pari passu with the Notes.
"Payment Rate" shall have the meaning set forth in Section
5.3.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or
any successor thereto.
"Pension Plan" shall mean any multiemployer plan or single
employer plan, as defined in Section 4001 of ERISA, that is subject to Title IV
of ERISA, that the Company, any Subsidiary or any ERISA Affiliate maintains or
is or ever has been obligated to contribute to for the benefit of employees or
former employees of the Company, any Subsidiary or any ERISA Affiliate.
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"Permitted Investments" means any of the following:
(i) Investments in Cash Equivalents;
(ii) Investments in the Company or wholly-owned
Subsidiaries;
(iii) Investments by the Company or any Subsidiary of the
Company in another Person, if as a result of such Investment (A) such other
Person becomes a wholly-owned Subsidiary or (B) such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all of
its assets to, the Company or a wholly-owned Subsidiary;
(iv) Investments from date of this Agreement in a
Subsidiary that is less than wholly-owned in an aggregate amount measured at the
time of Investment (less payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets, in each case to
the Company or any Subsidiary, to the extent not otherwise included in the
Company's Consolidated Net Income) not to exceed 5% of Consolidated Tangible Net
Worth of the Company. In connection with any assets or property contributed or
transferred to any Person as an Investment, such property and assets shall be
equal to the Fair Market Value at the time of Investment;
(v) accounts receivable representing trade credit
extended in the ordinary course of business; or
(vi) unsecured loans or advances by the Company or any
Subsidiary to any Subsidiary or the Company.
"Permitted Junior Securities" shall mean securities of the
Company or any successor thereto that are equity securities or are subordinated
in right of payment to all Senior Indebtedness to substantially the same extent
as, or to a greater extent than, the Notes are so subordinated as provided in
Article 11.
"Permitted Liens" shall mean the following types of Liens:
(i) Liens on any property or assets of a Subsidiary
granted in favor of the Company or any Subsidiary;
(ii) Liens securing the Notes;
(iii) Liens securing the Revolving Credit Facility;
(iv) Liens securing Acquired Indebtedness created prior to
(and not in connection with or in contemplation of) the incurrence of such
Indebtedness by the Company or any Subsidiary; provided that any such Lien does
not extend to any property or assets of the Company or any Subsidiary other than
the assets acquired in connection with the incurrence of such Acquired
Indebtedness;
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(v) any extension, renewal or replacement, in whole or in
part, of any Lien described in the foregoing clauses (i) through (iv); provided
that any such extension, renewal or replacement shall be no more restrictive in
any material respect that the Lien so extended, renewed or replaced and shall
not extend to any additional property or assets; and
(vi) Liens securing Purchase Money Debt and Capitalized Lease
Obligations; provided, however, that any such lien attaches only to the item or
items of property or asset financed with such Purchase Money Debt or Capitalized
Lease.
"Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by merger or
otherwise) of such entity.
"Preferred Ratio" shall have the meaning set forth in Section
10.1.
"Preferred Stock Consideration" shall have the meaning set
forth in Section 1.1.
"Proxy Statement" shall have the meaning set forth in Section
6.20.
"Public Authority" shall mean any supranational, national,
regional, state or local government court, governmental agency, authority,
board, bureau, instrumentality or regulatory body.
"Purchase Money Debt" shall mean (a) Indebtedness of the
Company or any of its Subsidiaries that, within thirty (30) days of the purchase
of equipment in which neither the Company nor any of its Subsidiaries at any
time prior to such purchase had any interest, is incurred to finance part or all
of (but not more than) the purchase price of such equipment, and that bears
interest at a rate per annum that is commercially reasonable at the time, and
(b) Indebtedness that constitutes a renewal, extension or refunding of, but not
an increase in the principal amount of, Purchase Money Debt that is such by
virtue of clause (a), is binding only upon the obligor or obligors under the
Purchase Money Debt being renewed, extended or refunded and bears interest at a
rate per annum that is commercially reasonable at the time.
"Purchase Price" shall have the meaning set forth in Section
1.1.
"Redeemable Common Stock" shall mean 186,000 shares of Common
Stock Beneficially Owned by Mr. and/or Xxx. Xxxxx X. Mercy, who are Affiliates
of the Company, which shares Mr. and Mrs. Mercy may require the Company to
repurchase at $9.90 per share under the circumstance set forth in Mr. Mercy's
Amended and Restated Employment Agreement, dated as of September 1, 1998, with
the Company.
"Redemption Indebtedness" shall mean Indebtedness incurred or
created concurrently with the redemption of the Notes in accordance with Section
9.
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"Registration Rights Agreement" shall have the meaning set
forth in Section 1.3(b)(xii).
"Representative" shall have the meaning set forth in Section
7(a).
"Required Net Worth Amount" shall mean the sum of (i) 50% of
Consolidated Net Income for each fiscal quarter ending after the Closing Date in
which the Company has positive Consolidated Net Income, plus (ii) the principal
amount of Notes theretofore converted into Preferred Stock, plus (iii) $10
million.
"Restricted Payment" shall have the meaning set forth in the
Revolving Credit Agreement as in effect as of the date hereof.
"Retained Earnings (Deficit)" shall have the meaning assigned
to it in the 1997 10-K.
"Revolving Credit Agreement" shall mean the Revolving Credit
Agreement, dated the date hereof, among the Company, the lenders identified
therein and NationsBank, and as administrative agent and as issuing bank and any
amendments, renewals, extensions, modifications and refundings thereof.
"Revolving Credit Facility" shall mean the lending facility
under the Revolving Credit Agreement.
"S&P" shall mean Standard & Poor's Corporation and its
successors.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Senior Indebtedness" shall mean and include, as of any date
as of which the amount thereof is to be determined, the principal of and
premium, if any, and interest due on, and any other amount from time to time
payable in respect of, (a) any Indebtedness arising under the Revolving Credit
Agreement and (b) any amendments, renewals, extensions, modifications and
refundings of any such Indebtedness.
"SESC" shall mean Sun Trust Equitable Securities Corporation.
"Stated Maturity" means, when used with respect to any Note or
any installment of interest thereon, the date specified in such Note as the
fixed date on which the principal of such Note of such installment of interest
is due and payable and, when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Stockholder Approval" shall have the meaning set forth in
Section 2.8.
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"Stockholder Approval Date" shall mean the date on which the
Stockholder Approval is obtained.
"Stockholders Meeting" shall have the meaning set forth in
Section 2.8.
"Stock Issuance" shall have the meaning set forth in Section
2.8.
"Subordinated Indebtedness" shall mean Indebtedness of the
Company which is expressly subordinated in right of payment to the Notes.
"Subsidiary" shall mean, with respect to any Person, (i) a
corporation a majority of whose voting power or voting equity securities or
equity interest is at the time, directly or indirectly, owned by such Person, by
one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or (ii) other Person (other than a corporation), including,
without limitation, a joint venture, in which such Person, one or more
Subsidiaries thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, has at least
majority ownership interest entitled to vote in the election of directors,
managers or trustees thereof (or other Person performing similar functions).
"Swap Contract" shall mean any agreement whether or not in
writing, relating to any transaction that is a rate swap, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index swap
or option, bond, note or xxxx option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other similar
transaction (including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
"Swap Termination Value" shall mean, in respect of any one or
more Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for any date
on or after the date such Swap Contracts have been closed out and termination
value(s) determined in accordance therewith, such termination value(s), and (b)
for any date prior to the date referenced in subclause (a) the amount(s)
determined as the xxxx-to-market value(s) for such Swap Contracts, as determined
by the Company based upon one or more mid-market or other readily available
quotations provided by any recognized dealer in such Swap Contracts.
"Third Party" shall mean a person who or which is neither the
Company or its Subsidiaries nor the Purchasers.
"Trading Day" shall mean a Business Day or, if the Common
Stock is listed or admitted to trading on any national securities exchange, a
day on which such exchange is open for the transaction of business.
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"Transaction Documents" shall mean the Acquisition Agreement,
this Agreement and each document contemplated by this Agreement.
"Voting Securities" shall mean at any time shares of any class
of Capital Stock of the Company which are then entitled to vote generally in the
election of directors.
"Warrant Agreement" shall have the meaning set forth in
Section 1.3(b)(iv).
"Year 2000 Compliant" shall have the meaning set forth in
Section 2.26.
"1997 Financial Statements" shall have the meaning set forth
in Section 2.5.
"1997 Form 10-K" shall have the meaning set forth in Section
2.4.
12.2. Accounting Principles. The character or amount of any
asset, liability, capital account or reserve and of any item of income or
expense required to be determined pursuant to this Agreement, and any
consolidation or other accounting computation required to be made pursuant to
this Agreement, and the construction of any definition in this Agreement
containing a financial term, shall be determined or made, as the case may be, in
accordance with United States generally accepted accounting principles, to the
extent applicable, unless such principles are inconsistent with the express
requirements of this Agreement.
13. Miscellaneous
13.1. Payments. The Company agrees that, so long as any of the
Purchasers shall hold any Convertible Securities, it will make all cash payments
thereon in immediately available funds in such manner as such Purchasers may
reasonably request in writing; provided, however, that the Company shall incur
no liability to any Purchaser by reason of its non-compliance with this Section
13.1 so long as it is in compliance with Section 5.1.
13.2. Severability. If any term, provision, covenant or
restriction of this Agreement or any exhibit hereto is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement and such
exhibits shall remain in full force and effect and shall in no way be affected,
impaired or invalidated. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
13.3. Specific Enforcement. The Purchasers, on the one hand,
and the Company, on the other, acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance
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with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
they may be entitled at law or equity.
13.4. Entire Agreement. This Agreement (including the
documents set forth in the exhibits hereto) contains the entire understanding of
the parties with respect to the transactions contemplated hereby.
13.5. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been signed
by each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
13.6. Notices and Other Communications. All notices, consents,
requests, instructions, approvals, financial statements, proxy statements,
reports and other communications provided for herein shall be rapidly given, if
in writing and delivered personally, by telecopy or sent by registered mail,
postage prepaid, if to:
THE COMPANY:
America Service Group Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, General Counsel
With a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
THE PURCHASERS:
Health Care Capital Partners L.P. and
Health Care Executive Partners L.P.
The Mill
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Member
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With a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx, Esq.
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.
13.7. Amendments. This Agreement may be amended as to the
Purchasers and their successors and assigns, and the Company may take any action
herein prohibited, or omit to perform any act required to be performed by it, if
the Company shall obtain the written consent of the Purchasers and/or such
successors and assigns who are the registered holders of not less than 66 2/3%
of the outstanding principal amount of the Notes or Face Value of the Preferred
Stock then held by the Purchasers and their successors or assigns. This
Agreement may not be waived, changed, modified, or discharged orally, but only
by an agreement in writing signed by the party or parties against whom
enforcement of any waiver, change, modification or discharge is sought or by
parties with the right to consent to such waiver, change, modification or
discharge on behalf of such party.
13.8. Cooperation. The Purchasers and the Company agree to
take, or cause to be taken, all such further or other actions as shall
reasonably be necessary to make effective and consummate the transactions
contemplated by this Agreement.
13.9. Successors and Assigns. All covenants and agreements
contained herein shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns, it being understood however that the
covenants set forth in Sections 6.12 and 13.10 shall not inure to the benefit of
any assignee of the Purchasers other than Affiliates of the Purchasers. Neither
this Agreement nor any rights hereunder may be transferred prior to the Closing
Date without the consent of the other party, except that the Purchasers may
assign any of their rights and obligations hereunder to any fund for which
Xxxxxx Xxxxxxx Xxxxxxxx & Co. LLC is the general partner.
13.10. Expenses and Remedies. (a) The Company agrees to pay
the Purchasers for all of their out-of-pocket expenses (not to exceed $300,000),
including reasonable outside legal, accounting and consulting fees of the
Purchasers, incurred in connection with this Agreement and the consummation of
all transactions contemplated hereby. The Company further agrees to pay the
Purchasers all of their reasonable out-of-pocket costs and expenses relating to
any future amendment or supplement to this Agreement or any of the Securities
(or any proposal by the Company for such amendment or supplement) whether or not
consummated or any waiver or consent with respect
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thereto (or any proposal for such waiver or consent) whether or not consummated,
and all costs and expenses of the Purchasers relating to the enforcement of this
Agreement, the Registration Rights Agreement, the Warrant Agreement or any of
the Securities.
(b) The Company further agrees to indemnify and
save harmless the Purchasers and any of their officers, directors, partners,
employees, trustees and agents, and each person who controls any of the
Purchasers within the meaning of the Securities Act or the Exchange Act, from
and against any and all costs, expenses, damages or other liabilities resulting
from any breach of this Agreement by the Company (including the breach of any
covenant or representation or warranty made by the Company and any claim
relating to Indemnified Losses (as defined in the Acquisition Agreement)) or any
legal, administrative or other proceedings arising out of the transactions
contemplated hereby (other than such costs, expenses, damages or other
liabilities resulting, directly or indirectly, (i) from the breach by such
Purchasers of any of their agreements contained herein or (ii) from the gross
negligence or willful misconduct of such Purchasers or any of their officers,
directors, partners, employees or agents, or any person who controls such
Purchasers within the meaning of the Securities Act or the Exchange Act);
provided, however, that, if and to the extent that such indemnification is
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of such indemnified liability which shall be
permissible under applicable laws.
(c) The indemnified party under this Section 13.10
will, promptly after the receipt of notice of the commencement of any action
against such indemnified party in respect of which indemnity may be sought from
the Company on account of an indemnity agreement contained in this Section
13.10, notify the Company in writing of the commencement thereof. The omission
of any indemnified party so to notify the Company of any such action shall not
relieve the Company from any liability which it may have to such indemnified
party except to the extent the Company shall have been materially prejudiced by
the omission of such indemnified party so to notify the Company, pursuant to
this Section 13.10. In case any such action shall be brought against any
indemnified party and it shall notify the Company of the commencement thereof,
the Company shall be entitled to participate therein and, to the extent that it
may wish, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after notice from the Company to such indemnified
party of its election so to assume the defense thereof, the Company will not be
liable to such indemnified party under this Section 13.10 for any legal or other
expense subsequently incurred by such indemnified party in connection with the
defense thereof nor for any settlement thereof entered into without the consent
of the Company; provided, however, that (i) if the Company shall elect not to
assume the defense of such claim or action or (ii) if the indemnified party
reasonably determines (x) that there may be a conflict between the positions of
the Company and of the indemnified party in defending such claim or action or
(y) that there may be legal defenses available to such indemnified party
different from or in addition to those available to the Company, then separate
counsel for the
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indemnified party shall be entitled to participate in and conduct the defense,
in the case of (i) and (ii)(x), or such different defenses, in the case of
(ii)(y), and the Company shall be liable for any reasonable legal or other
expenses incurred by the indemnified party in connection with the defense.
13.11. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement and the issuance and delivery of the Securities, regardless of any
investigation made by or on behalf of any party.
13.12. Transfer of Securities. The Purchasers understand and
agree that the Securities have not been registered under the Securities Act or
the securities laws of any state and that they may be sold or otherwise disposed
of only in one or more transactions registered under the Securities Act and,
where applicable, such laws or transactions as to which an exemption from the
registration requirements of the Securities Act and, where applicable, such laws
are, in the opinion of counsel reasonably satisfactory to the Company, a copy of
which opinion shall be delivered to the Company in connection with any such sale
or other disposition, available. The Purchasers acknowledge that, except as
provided in the Registration Rights Agreement, the Purchasers have no right to
require the Company to register the Securities. The Purchasers understand and
agree that each Note or certificate representing the Securities shall bear the
following legend:
"[THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE] [THIS
NOTE HAS] NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO THE COMPANY TO THE EFFECT THAT THE TRANSACTION PURSUANT TO
WHICH SUCH [SECURITIES/NOTES] WILL BE OFFERED FOR SALE OR
OTHERWISE DISPOSED OF IS SUBJECT TO AN APPLICABLE EXEMPTION TO
THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
13.13. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the principles of conflicts of law. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and of the United
States of America, in each case located in the County of New York, for any
Litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any Litigation relating thereto
except in such courts), and further agrees that service of any process,
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summons, notice or document by U.S. registered mail to its respective address
set forth in this Agreement, or such other address as may be given by one or
more parties to the other parties in accordance with the notice provisions of
Section 13.6, shall be effective service of process for any Litigation brought
against it in any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any Litigation
arising out of this Agreement or the transactions contemplated hereby in the
courts of the State of New York or the United States of America, in each case
located in the County of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such Litigation brought in any such court has been brought in an
inconvenient forum.
13.14. Publicity. Each of the parties hereto agrees that it
will make no statement regarding the transactions contemplated hereby (which for
purposes of this Section 13.14 shall not be deemed to include the Acquisition)
unless such statement has been approved by both of the parties hereto.
Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with the Commission or other regulatory bodies, make
such statements with respect to the transactions contemplated hereby as each may
be advised is legally necessary upon advice of its counsel.
13.15. Signatures. This Agreement shall be effective upon
delivery of original signature pages or facsimile copies thereof executed by
each of the parties hereto.
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IN WITNESS WHEREOF, the Company and the Purchasers have caused
this Agreement to be executed and delivered by their respective officers
thereunto duly authorized.
AMERICA SERVICE GROUP INC.
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------------------------
Name: Xxxxxxx Xxxxxxxx
Title President and Chief
Executive Officer
HEALTH CARE CAPITAL PARTNERS L.P.
By: XXXXXX XXXXXXX XXXXXXXX
& CO. LLC., its General Partner
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Member
HEALTH CARE EXECUTIVE PARTNERS L.P.
By: XXXXXX XXXXXXX XXXXXXXX
& CO. LLC., its General Partner
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Member
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