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EXHIBIT 4.3
EXECUTION COPY
AMENDED AND RESTATED
NOTE, WARRANT AND PREFERRED STOCK PURCHASE AGREEMENT
by and among
MCE COMPANIES, INC.,
XXXXXXX XXXXXX MEZZANINE FUND, L.P.
and
NATIONAL CITY CAPITAL CORPORATION
---------------------------
Dated as of July 21, 2000
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TABLE OF CONTENTS
Page
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ARTICLE 1
Definitions....................................................................... 2
ARTICLE 2
Purchase and Sale of Notes, Warrants and Preferred Stock.......................... 18
ARTICLE 3
Conditions to the Obligation of the Purchasers to Close........................... 19
ARTICLE 4
Conditions to the Obligation of the Company to Close.............................. 23
ARTICLE 5
Representations and Warranties of the Company as of Closing Date.................. 24
ARTICLE 6
Representations and Warranties of the Purchasers as of Closing Date............... 32
ARTICLE 7
Fees, Expenses and Indemnities; General Provisions Relating to Payments........... 33
ARTICLE 8
Affirmative Covenants............................................................. 35
ARTICLE 9
Negative Covenants................................................................ 44
ARTICLE 10
Defaults.......................................................................... 49
ARTICLE 11
Subordination..................................................................... 52
ARTICLE 12
Prepayment........................................................................ 58
ARTICLE 13
Miscellaneous..................................................................... 58
ARTICLE 14
Representations and Warranties as of Date Hereof.................................. 63
ARTICLE 15
Termination of Investors Subscription Agreements.................................. 65
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SCHEDULES
Schedules to 1996 Agreement:
Schedule 3.19 - Permitted Acquisition Documents Waiver
Schedule 5.06 - Ownership of Property, Liens [see REVISED SCHEDULE
5.06]
Schedule 5.07 - Defaults
Schedule 5.13 - Brokers
Schedule 5.18 - Capitalization [see REVISED SCHEDULE 5.18]
Schedule 5.22 - Environmental Matters
Schedule 9.01 - Outstanding Debt
Schedule 9.07 - Permitted Acquisitions
EXHIBITS
Exhibits to 1996 Agreement:
Exhibit A - NCCC Note
Exhibit B - Hanifen Note
Exhibit C - Warrant
Exhibit D - Preferred Stock
Exhibit E - Charter Amendment
Exhibit F - Collateral Assignment of Life Insurance
SCHEDULES
Schedules to this Agreement:
REVISED SCHEDULE 5.06 Ownership of Property
REVISED SCHEDULE 5.09 Subsidiaries
REVISED SCHEDULE 5.18 Capitalization
REVISED SCHEDULE 5.22 Environmental Matters
REVISED SCHEDULE 9.04 Existing Indebtedness
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AMENDED AND RESTATED
NOTE, WARRANT AND PREFERRED STOCK PURCHASE AGREEMENT
This AMENDED AND RESTATED NOTE, WARRANT AND PREFERRED STOCK
PURCHASE AGREEMENT (the "Agreement"), dated as of July 21, 2000, by and among
MCE COMPANIES, INC., a Michigan corporation formerly known as Microwave
Components Enterprises, Inc. (the "Company"), and NATIONAL CITY CAPITAL
CORPORATION ("NCCC") and XXXXXXX XXXXXX MEZZANINE FUND, L.P. ("Hanifen")
(collectively, with their respective successors and the permitted assignees and
transferees of its Notes, Warrants and Preferred Stock, the "Purchasers").
RECITALS
A. The Company and the Purchasers previously entered into a
the Note, Warrant and Preferred Stock Purchase Agreement, dated as of July 23,
1996 (the "1996 Agreement"), pursuant to which the Company issued and sold to
the Purchasers (1) its 12% Promissory Notes due July 23, 2001 in the aggregate
principal amount of $3,500,000 dated as of July 23, 1996, as the same may be
amended, modified or supplemented from time to time (the "Notes"), (2) a warrant
or warrants to purchase 28,723 shares of its Common Stock, which Common Stock is
without par value, as the same may be amended, modified or supplemented from
time to time (the "Warrants"), and (3) an aggregate of 4,000 shares of its
redeemable Series A Preferred Stock, which Preferred Stock has a liquidation
value of $1,000 per share, as the same may be amended, modified or supplemented
from time to time (the "Preferred Stock"), in each case, pursuant to the terms
and subject to the conditions of the 1996 Agreement, the proceeds of which were
used by the Company to acquire substantially all of the assets of KDI/triangle
Electronics, Inc., a Delaware corporation, as described in the Acquisition
Documents, and to refinance the outstanding subordinated indebtedness of
Weinschel, as described in the Refinancing Documents. It is the intention of all
of the parties hereto that the Preferred Stock be characterized as equity for
purposes of the Code.
B. The 1996 Agreement has been amended, modified and
supplemented several times since July 23, 1996, including, without limitation,
the amendments effected pursuant to the First Amendment thereto, dated December
31, 1997, the Second Amendment thereto, dated June 30, 1998, and the Third
Amendment thereto, dated November 1, 1998.
C. The Company, NCCC, Great Lakes Capital Investments I, LLC,
a Delaware limited liability company ("GLCI"), and Rocky Mountain Mezzanine Fund
II, L.P., a Colorado limited partnership ("RMMF") entered into a Senior
Subordinated Note and Warrant Purchase Agreement, dated July 28, 1999 (the "1999
Purchase Agreement") pursuant to which the Company issued and sold to NCCC, GLCI
and RMMF (a) its 8% Promissory Notes due July
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28, 2004 in the aggregate principal amount of $4,000,000, dated as of July 28,
1999, as the same may be amended, modified or supplemented from time to time
(the "1999 Subordinated Notes"), and (b) a warrant or warrants to purchase
13,130 shares of its Common Stock, which Common Stock is without par value, as
the same may be amended, modified or supplemented from time to time (the "1999
Warrants"), in each case, pursuant to the terms and subject to the conditions of
the 1999 Purchase Agreement, the proceeds of which were used by the Company for
the payment of certain indebtedness to facilitate the continued growth of the
Company and for working capital.
D. The Purchasers, pursuant to that certain letter and
consent, dated July 28, 1999, agreed to amend, as appropriate, the 1996
Agreement so as to make it generally consistent with the terms, conditions and
covenants (affirmative and negative) as articulated in the 1999 Purchase
Agreement.
E. The Company and the Banks signatory thereto, Comerica Bank,
as agent for such Banks and the Company entered into a Credit Agreement, dated
July 29, 1999 (the "Credit Agreement") which replaced the Credit Agreement,
dated December 31, 1997, as amended, between the Company and Comerica Bank.
F. The Company and the Purchasers desire to further amend the
1996 Agreement in an effort to incorporate certain terms and conditions set
forth in the 1999 Purchase Agreement and in the Credit Agreement. In addition,
the Company and the Purchasers desire to amend and restated the 1996 Agreement,
as amended, modified and supplement through the date hereof, into a single
document.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto amend and
restate the 1996 Agreement in its entirety as follows:
ARTICLE 1
Definitions
1.01. Definitions. As used in this Agreement the following
terms have the meanings indicated:
"Accredited Investors" has the meaning assigned to that term
under Rule 501 of the rules and regulations promulgated by the Commission under
the Securities Act.
"Acquisition" means all of the transactions contemplated by
the Acquisition Documents to be consummated on or before the Closing Date.
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"Acquisition Documents" means the Asset Purchase Agreement,
including the exhibits and schedules thereto, and all agreements, documents and
instruments executed and delivered pursuant thereto or in connection therewith,
as any of the foregoing agreements, documents and instruments may from time to
time be amended, modified or supplemented in accordance with the terms thereof
and hereof.
"Affiliate" means (i) any Person that, directly or indirectly
through one or more intermediaries, controls the Company (a "Controlling
Person") or (ii) any Person (other than the Company or any of its Subsidiaries)
which is controlled by or is under common control with a Controlling Person. As
used herein, except in the definition of "Investor Affiliate", the term
"control" of a Person means the possession, directly or indirectly, of the power
to vote 10% or more of any class of voting securities of such Person or to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Asset Purchase Agreement" means the Asset Purchase Agreement,
dated as of May 31, 1996, as amended by Amendment Nos. 1, 2 and 3 thereto dated
June 23, 1996, July 12, 1996 and July 19, 1996, respectively, among KDI, KDI D/H
Corporation, a Delaware corporation, and the Seller, and as the same may be
further amended, supplemented or modified.
"Benefit Arrangement" means at any time an employee benefit
plan within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan.
"Breakeven Adjustment" shall mean (i) if the date of
determination is December 31, 1999, $1,000,000, (ii) if the date of
determination is March 31, 2000, $1,000,000, (iii) if the date of determination
is June 30, 2000, $1,000,000, (iv) if the date of determination is September 30,
2000, $500,000, and (v) if the date of determination is after September 30,
2000, $0.
"Business Day" shall mean any day other than a Saturday,
Sunday, public holiday under the laws of the State of Ohio, or other day on
which banking institutions generally are authorized or obligated to close in
Cleveland, Ohio.
"Capital Expenditure" means, without duplication, any payment
made directly or indirectly for the purpose of acquiring or constructing fixed
assets, real property or equipment which in accordance with GAAP would be added
as a debit to the fixed asset account of the Person making such expenditure,
including, without limitation, amounts paid or payable under any conditional
sale or other title retention agreement or under any lease or other periodic
payment arrangement which is of such a nature that payment obligations of the
lessee or obligor thereunder would be required by GAAP to be capitalized and
shown as liabilities on the balance sheet of such lessee or obligor.
"Capital Lease" shall mean for any Person any lease of any
property (whether
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real, personal or mixed) by such Person as lessee which, in conformity with
GAAP, is, or is required to be accounted for as a capital lease on the balance
sheet of such Person, together with any renewals of such leases (or entry into
new leases) on substantially similar terms.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as
amended from time to time, and regulations promulgated thereunder.
"Change in Control" has the meaning assigned to that term in
Section 10.01(l).
"Charter Amendment" means the certificate of amendment (in the
form of a certificate of powers, designations, preferences and rights of Series
A Preferred Stock) of the Company's articles of incorporation to be filed with
the Department of Consumer and Industrial Services of the State of Michigan on
or before the Closing Date, substantially in the form of Exhibit E, to establish
and designate and provide for the issuance of a series of preferred stock,
designated "Series A Preferred Stock", consisting of 4,000 shares with a
liquidation value of $1,000 per share.
"Closing" has the meaning assigned to that term in Section
2.05.
"Closing Date" means July 23, 1996.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute of similar import, and regulations thereunder, in each
case as in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
"Collateral Agency Agreement" means the Collateral Agency
Agreement, dated as of the Closing Date among Hanifen and NCCC, for itself and
as Collateral Agent, as the same may be amended, modified and supplemented from
time to time.
"Collateral Agent" means NCCC in its capacity as collateral
agent under the terms of the Collateral Agency Agreement and any successor and
assign thereof as provided for in the Collateral Agency Agreement.
"Collateral Assignment of Life Insurance" means the Assignment
of Life Insurance Policy as Collateral, in the form of Exhibit F hereto with the
blanks appropriately completed, from the Company, and signed by Xxxx Xxxxxxx, to
the Collateral Agent, for the benefit of the Purchasers, as the same may from
time to time be supplemented, amended, restated or otherwise modified, relating
to the collateral assignment by the Company of the key-man life insurance policy
that the Company is required to purchase and maintain in accordance with Section
8.03.
"Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the Common Stock without par value of the
Company
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and any other capital stock into which such Common Stock is reclassified
or reconstituted.
"Company" means MCE Companies, Inc., a Michigan corporation
formerly known as Microwave Components Enterprises, Inc., together with its
successors.
"Company Account" means the account specified on the signature
pages hereof into which the Loans to the Company shall be made available, or
such other account as the Company shall from time to time specify by notice to
the Purchasers.
"Consolidated" or "Consolidating" shall mean, when used with
reference to any financial term in this Agreement, the aggregate for two or more
Persons of the amounts signified by such term for all such Persons determined on
a consolidated basis in accordance with GAAP. Unless otherwise specified herein,
references to Consolidated financial statements or data of the Company includes
consolidation with its Subsidiaries in accordance with GAAP.
"Consolidated Adjusted Net Worth" shall mean as of any date of
determination, stockholders' equity in the Company as of such date, plus, to the
extent not included in stockholders' equity, preferred stock and convertible and
redeemable warrants issued and outstanding as of such date, plus the outstanding
principal amount of the Subordinated Debt as of such date, all as determined in
accordance with GAAP.
"Consolidated EBITDA" shall mean for any period of
determination, Consolidated Net Income for such period, less the aggregate
amounts included in determining Consolidated Net Income for extraordinary gains
during such period, plus the aggregate amounts deducted in determining
Consolidated Net Income in respect of (a) income taxes for such period, (b)
interest expense for such period, (c) depreciation and amortization expense and
other non-cash charges for such period, and (d) extraordinary losses for such
period, in each case determined on a Consolidated basis in accordance with GAAP,
plus the EBITDA Adjustment, plus the Breakeven Adjustment.
"Consolidated Net Income" shall mean, for any period of
determination, the net income (but not loss) of the Company and its Consolidated
Subsidiaries for such period determined in accordance with GAAP including any
extraordinary gains during such period; provided, however, for purposes of
determining Consolidated Net Income for any period, if under GAAP any Subsidiary
is treated as a Consolidated Subsidiary for part of such period, such Subsidiary
shall be deemed to be a Consolidated Subsidiary for such entire period.
"Contractual Obligations" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such Person is a party or by which it or any of its property (now or
hereafter acquired) is bound.
"Credit Agreement" has the meaning set forth in the Recitals
to this Agreement, as the same may be amended, modified and supplemented from
time to time in accordance with the terms thereof.
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"Debt" means, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP, including without limitation, any items so classified on a
balance sheet and any reimbursement obligations in respect of letters of credit,
obligations in respect of bankers acceptances, provided, however that for
purposes of calculating the aggregate Debt of such Person and its Subsidiaries
(if any), the direct and indirect and absolute and contingent obligations of
such Person (whether direct or contingent) shall be determined without
duplication.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Dollar," "Dollars" and the symbol "$" shall mean lawful money
of the United States of America.
"EBITDA Adjustment" shall mean (i) if the date of
determination is September 30, 1999, that portion of actual Consolidated EBITDA
attributable to MCE Europe divided by 2 then multiplied by 10; (ii) if the date
of determination is December 31, 1999, that portion of actual Consolidated
EBITDA attributable to MCE Europe divided by 5 then multiplied by 7; (iii) if
the date of determination is March 31, 2000, that portion of actual Consolidated
EBITDA attributable to MCE Europe divided by 8 then multiplied by 4; (iv) if the
date of determination is June 30, 2000 that portion of actual Consolidated
EBITDA attributable to MCE Europe divided by 11 then multiplied by 1; and (v) if
the date of determination is after June 30, 2000, $0.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions, whether
now or hereafter in effect, relating to human health, the environment or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Materials or wastes into the environment, including ambient air, surface water,
groundwater or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Materials or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor statute.
"ERISA Group" means the Company and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company, are treated
as a single employer under Section 414 of the Code.
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"Event of Default" has the meaning assigned to such term in
Section 10.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Financing Documents" means this Agreement, the Credit
Agreement, the Collateral Agency Agreement, the Senior Notes, the Notes, the
Security Documents and the Senior Security Documents.
"Fiscal Year" means a fiscal year of the Company, or of the
Company and its Subsidiaries, or of any Subsidiary of the Company, as the case
may be.
"Fixed Charge Coverage Ratio" shall mean as of any date of
determination a ratio the numerator of which shall equal Consolidated Net Income
for the four preceding fiscal quarters ending on such date, plus to the extent
deducted in determining Consolidated Net Income, (a) extraordinary losses during
such period, (b) depreciation, amortization and other non-cash charges for such
period, and (c) the EBITDA Adjustment, less the aggregate Capital Expenditures
by the Company and its Consolidated Subsidiaries during such period, less
dividends and distributions paid or declared by the Company during such period
and less, to the extent added in determining Consolidated Net Income,
extraordinary gains during such period, and the denominator of which shall equal
Fixed Charge Principal Payments.
"Fixed Charge Principal Payments" shall mean (i) if the date
of determination is September 30, 1999 or December 31, 1999, $3,000,000, (ii) if
the date of determination is March 31, 2000, June 30, 2000 or September 30,
2000, $3,500,000 and (iii) if the date of determination is after September 30,
2000, the sum of all principal payments which become due and payable by the
Company and its Consolidated Subsidiaries during the four quarter period ending
on such date on indebtedness for borrowed money.
"GAAP" shall have the meaning set forth in Section 1.02.
"Governmental Authority" shall mean any government or
political subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality of either, or any court, tribunal,
grand jury or public or private mediator or arbitrator, in each case whether
foreign or domestic.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in
whole or in part),
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provided that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Hazardous Materials" means (i) any "hazardous substance" as
defined in CERCLA; (ii) asbestos; (iii) polychlorinated biphenyls; (iv)
petroleum, its derivatives, by-products and other hydrocarbons; and (v) any
other toxic, radioactive, caustic or otherwise hazardous substance regulated
under Environmental Laws.
"Hazardous Materials Contamination" means contamination
(whether now existing or hereafter occurring) of the improvements, buildings,
facilities, personalty, soil, groundwater, air or other elements on or of the
relevant property by Hazardous Materials, or any derivatives thereof, or on or
of any other property as a result of Hazardous Materials, or any derivatives
thereof, generated on, emanating from or disposed of in connection with the
relevant property at levels or in amounts that could cause a violation of
Environmental Laws.
"Hedging Transaction" means each interest rate swap
transaction, basis swap transaction, forward rate transaction, commodity swap
transaction, equity transaction, equity index transaction, foreign exchange
transaction, cap transaction, floor transaction (including any option with
respect to any of these transactions and any combination of any of the
foregoing) entered into by the Borrowers from time to time; provided that such
transaction is entered into for risk management purposes and not for speculative
purposes.
"Indemnified Party" has the meaning set forth in Section 7.04.
"Inmet" means Inmet Corporation, a Michigan corporation and a
wholly-owned subsidiary of the Company, together with its successors.
"Inmet Cap Ex" shall mean Capital Expenditures during 1999 and
2000 incurred for the acquisition of land and the making of building
improvements for the addition to Inmet's plant located in Ann Arbor, Michigan
and the construction of a headquarters building for the Company to the extent
not exceeding $2,500,000 in the aggregate.
"Interest Rate Protection Agreement" means any Hedging
Transaction entered into between Company and any bank or an Affiliate of a bank;
provided that such transaction is entered into for risk management purpose and
not for speculative purposes.
"Investment" means any investment in any Person, whether by
means of share purchase, capital contribution, loan, time deposit or otherwise.
"Investor Affiliate" means any Person that directly, or
indirectly, through one or more intermediaries, controls an Investor or is
controlled by or is under common control with any such Person. As used in this
definition, the term "control" of a Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
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"Investors" means Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxx
X. Xxxxx and Xxxx X. Xxxxxxx.
"Investors Subscription Agreement" means collectively, each of
the four Subscription Agreements, each dated as of the date hereof, between one
of the Investors and the Company, as the same may be amended, modified and
supplemented from time to time in accordance with the provisions hereof and
thereof.
"KDI" means KDI/Triangle Corporation, a Michigan corporation,
and a wholly- owned subsidiary of the Company, together with its successors.
"KDI Plan" has the meaning assigned to that term in Section
9.12.
"Law" shall mean any law (including common law), constitution,
statute, treaty, convention, regulation, rule, ordinance, order, injunction,
writ, decree or award of any Governmental Authority.
"Lenders" means Comerica Bank, National City Bank of
Michigan/Illinois and each other Person that becomes a holder of a Senior Note
in accordance with the terms of the Credit Agreement and their respective
successors.
"Letters of Credit" means any standby or documentary letters
of credit issued by the Lender at the request of or for the account of the
Company, individually, and/or a Subsidiary (jointly and severally with the
Company) pursuant to Article 3 of the Credit Agreement and those existing
letters of credit issued by the Lender on behalf of the Company or any
Subsidiary, as identified on Schedule 2 of the Credit Agreement.
"Liabilities" has the meaning set forth in Section 7.04.
"Lien" means, any pledge, assignment, hypothecation, mortgage,
security interest, trust receipt, conditional sale or title retaining contract,
sale and leaseback transaction, financing statement or comparable notice or
other filing or recording, Capital Lease, subordination or any claim or right,
or any other type of lien, charge, encumbrance, preferential or priority
arrangement or other claim or right, whether based on common law or statute.
"Loans" means the loans to the Company evidenced by the Notes.
"Material Adverse Effect" means a material adverse effect on
(a) the business or financial condition of the Company and its Subsidiaries
taken as a whole, (b) the ability of the Company to perform its obligations
under any of the Transaction Documents, or (c) the validity or enforceability of
any of the Transaction Documents or the rights or remedies of the Purchasers
hereunder or thereunder.
"Material Plan" means at any time a Plan having unfunded
liabilities, which means the amount (if any) by which (i) the value of all
benefit liabilities under such Plan,
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determined on a plan termination basis using the assumptions prescribed by the
PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value
of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"Material Subsidiary" shall mean each Subsidiary which has
assets having a fair market value of $100,000 or more or which has annual gross
income of $250,000 or more.
"MCE Europe" means MCE Europe, Inc., a Michigan corporation
and a wholly- owned subsidiary of the Company. As of the date of this Agreement,
MCE Europe is the sole shareholder of MCE Microwave Limited UK which, in turn,
is the sole shareholder of DML Microwave Limited; see REVISED SCHEDULE 5.09
attached hereto.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA.
"Net Income" shall mean the net income (or loss) of the
Company and its Consolidated Subsidiaries for any period determined in
accordance with GAAP but excluding in any event any extraordinary gains or
losses and any taxes on the excluded gains and any tax deductions or credits on
account of any excluded losses.
"Notes" has the meaning assigned to that term in the recitals
of this Agreement.
"Officers' Certificate" means a certificate executed on behalf
of a Person by its chairman of the board (if an officer), chief executive
officer or president or one of its vice presidents or a senior financial officer
or treasurer.
"Operative Documents" means the Financing Documents, the
Acquisition Documents, the Senior Loan Documents, the Warrants, the Stockholder
Agreement, the Preferred Stock, the Security Agreement, the Collateral
Assignment of Life Insurance, and the Registration Rights Agreement and all
other Transaction Documents, as the same may be amended, modified, supplemented
from time to time in accordance with the terms thereof and hereof.
"Payment Account" means with respect to the Purchasers, the
account specified on the signature pages hereof into which all payments from the
Company, shall be made, or such other account as the Purchasers shall from time
to time specify by notice to the Company.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Pension Plan(s)" shall mean all employee pension benefit
plans of Company or its Subsidiaries, as defined in Section 3(2) of ERISA.
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"Permitted Acquisitions" shall mean the Acquisition and any
acquisition by the Company or any of its Subsidiaries of assets, businesses or
business interests or shares of stock or other ownership interests of or in any
Person ("target") which operates in the United States in substantially the same
line of business as Company or the Subsidiary which is a party to the
acquisition and which is conducted in accordance with the following
requirements:
(a) not more than five days after the signing of any
letter of intent for such proposed acquisition, the Company shall have
provided a copy of such letter of intent to the Purchasers and promptly
upon signing the definitive acquisition documents, the Company shall
have provided copies thereof to the Purchasers;
(b) on the date of any such acquisition, all
necessary or appropriate governmental, quasi-governmental, agency,
regulatory or similar approvals of applicable jurisdictions (or the
respective agencies, instrumentalities or political subdivisions, as
applicable, of such jurisdictions) and all necessary or appropriate
non-governmental and other third-party approvals which, in each case,
are material to such acquisition have been obtained and are in effect,
and the Company and its Subsidiaries are in full compliance therewith,
and all necessary or appropriate declarations, registrations or other
filings with any court, governmental or regulatory authority,
securities exchange or any other person have been made;
(c) the total cash consideration of each such
acquisition conducted while this Agreement remains in effect as
Permitted Acquisitions (but excluding any acquisition conducted with
the specific written approval of the Purchasers, and not as a Permitted
Acquisition hereunder), computed on the basis of total acquisition
consideration paid or incurred, or to be paid or incurred, by the
Company or its Subsidiaries with respect thereto, including all
indebtedness which is assumed or to which such assets, businesses or
business or ownership interests or shares, or any Person so acquired,
is subject, shall not exceed $5,000,000;
(d) within 30 days after any such acquisition has
been completed Company shall deliver to the Purchasers executed copies
of all material documents pertaining to such acquisition, and the
Company, its Subsidiaries and any of the corporate entities involved in
such acquisition shall execute or cause to be executed, and provide or
cause to be provided to the Purchasers, such documents and instruments
(including without limitation, the joinder agreement, security
agreements and mortgages required by the Credit Agreement and mortgages
of all real property acquired by the Company or any existing Domestic
Subsidiary as a result of such acquisition, and opinions of counsel,
amendments, acknowledgments, consents and evidence of approvals or
filings) as reasonably requested by the Purchasers, if any;
(e) within 60 days prior to the effective date of the
acquisition, the Company shall deliver to target, (i) a pro forma
financial statement for the target, as of the effective date of the
acquisition, (ii) a pro forma financial statement of the Company and
its Consolidated Subsidiaries for the 12 month period ending on the
effective date of
15
the acquisition prepared as if the acquisition became effective on the
first day of such period; and (iii) financial projections for the three
year period commencing on the effective date of the acquisition,
including financial covenant compliance projections; and
(f) both immediately before and after such
acquisition, no Potential Default or Event of Default (whether or not
related to such acquisition), has occurred and is continuing and on the
date of consummation of such acquisition, the Company shall have
provided to the Purchasers a certificate of a Responsible Officer as to
such effect.
"Permitted Contest" means a contest maintained in good faith
by appropriate proceedings promptly instituted and diligently conducted and with
respect to which such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made; provided that
compliance with the obligation that is the subject of such contest is
effectively stayed during such challenge.
"Permitted Liens" means with respect to any Person:
(a) the Liens granted under or established by the
Credit Agreement or the Loan Documents (as defined in the Credit
Agreement) and described on REVISED SCHEDULE 5.06 attached to this
Agreement
(b) Liens for taxes not yet delinquent or which are
being contested in good faith by appropriate proceedings diligently
pursued, provided that provision for the payment of all such taxes has
been made on the books of such Person as may be required by GAAP;
(c) Mechanics', materialmen's, banker's, carriers',
warehousemen's and similar Liens arising in the ordinary course of
business and securing obligations of such Person that are not overdue
for a period of more than 60 days or are being contested in good
faith by appropriate proceedings diligently pursued, provided that in
the case of any such contest (i) any proceedings commenced for the
enforcement of such Liens shall have been duly suspended; and (ii) such
provision for the payment of such Liens has been made on the books of
such Person as may be required by GAAP;
(d) Liens arising in connection with worker's
compensation, unemployment insurance, old age pensions and social
security benefits and similar statutory obligations which are not
overdue or are being contested in good faith by appropriate proceedings
diligently pursued, provided that in the case of any such contest (i)
any proceedings commenced for the enforcement of such Liens shall have
been duly suspended; and (ii) such provision for the payment of such
Liens has been made on the books of such Person as may be required by
GAAP;
(e)(i) Liens incurred in the ordinary course of
business to secure the performance of statutory obligations arising in
connection with progress payments or advance payments due under
contracts with the United States government or any agency
16
thereof entered into in the ordinary course of business and (ii) Liens
incurred or deposits made in the ordinary course of business to secure
the performance of statutory obligations, bids, leases, fee and
expense arrangements with trustees and fiscal agents and other similar
obligations (exclusive of obligations incurred in connection with the
borrowing of money, any lease-purchase arrangements or the payment of
the deferred purchase price of property), provided that full provision
for the payment of all such obligations set forth in clauses (i) and
(ii) has been made on the books of such Person as may be required by
GAAP;
(f) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for rights-of-way,
utilities and other similar purposes, or zoning or other restrictions
as to the use of real properties, which do not materially interfere
with the business of such Person, including, without limitation the
matters disclosed in the surveys and title policies relating to the
real property mortgaged to the Lenders; and
(g) interests of lessors in leased equipment,
including filings for notification purposes.
"Person" means any natural person, corporation, limited
partnership, general partnership, joint stock company, joint venture,
association, company, trust, bank, trust company, land trust, business trust or
other organization, whether or not a legal entity, and any government agency or
political subdivision thereof.
"Plan" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code.
"Potential Default" shall mean any event or condition which
with notice, passage of time, or both, would constitute an Event of Default.
"Preferred Stock" has the meaning ascribed to such term in the
recitals of this Agreement.
"Pro Forma Combined Projected Financial Information" shall
mean, as to any acquisition, pro forma combined projected financial information
for the Company and the acquisition candidate, consisting of projected
consolidated balance sheets as at the end of at least the next succeeding two
fiscal years of the Company following the acquisition and projected consolidated
statements of income for each of those years, including sufficient detail to
permit calculation of the amounts and ratios described in Sections 8.16 through
8.19, inclusive, as projected for those years and accompanied by (i) a statement
setting forth a calculation of the ratios described in Sections 8.16 through
8.19, inclusive, and (ii) a statement in reasonable detail specifying all
material assumptions underlying the projections.
"RCRA" means the Resource Conservation and Recovery Act of
1976 (42 U.S.C.
17
Sections 6901 et seq.) as amended from time to time and the rules and
regulations promulgated thereunder.
"Refinancing" means the refinancing concurrently with the
purchase of the Securities of the subordinated indebtedness of Weinschel in the
principal amount of $1,000,000.
"Refinancing Documents" means all agreements, documents and
instruments executed and delivered pursuant to or in connection with the
Refinancing, as any of the foregoing may from time to time be amended, modified
or supplemented in accordance with the terms thereof and hereof.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company and the other
parties thereto, as the same may be amended, modified and supplemented from time
to time in accordance with the terms thereof.
"Requirements of Law" means as to any Person, the certificate
or articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any Law, right, privilege, qualification, license
or franchise or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable or binding upon such Person or any of its
property (now owned or hereafter acquired) or to which such Person or any of its
property is subject.
"Responsible Officer" means the chief executive officer or the
president of the Company, or any other officer having substantially the same
authority and responsibility; or with respect to compliance with financial
covenants, the chief financial officer or the treasurer of the Company, or any
other officer having substantially the same authority and responsibility.
"Restricted Payment" means (i) any dividend or other
distribution on any shares of the Company's capital stock (except dividends
payable solely in shares of its capital stock of the same class) or (ii) any
payment on account of the purchase, redemption, retirement or acquisition of (A)
any shares of the Company's capital stock or (B) any option, warrant or other
right to acquire shares of the Company's capital stock.
"Securities" means, collectively, the Notes, the Warrants and
the Preferred Stock.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Security Agreement" means the Security Agreement, Pledge and
Assignment dated as of the date hereof between the Company and the Purchasers,
as the same may be amended, modified and supplemented from time to time in
accordance with the terms thereof.
"Security Documents" means the Security Agreement and any
other agreement pursuant to which the Company or any of its Subsidiaries or
Affiliates provides a Lien on its assets in favor of the Purchasers, and all
supplementary assignments, security agreements, pledge
18
agreements, acknowledgments or other documents delivered or to be delivered
pursuant to the terms hereof or of any other Security Document, including the
Collateral Assignment of Life Insurance when executed and delivered, and all
amendments, modifications and supplements made from time to time to any of the
foregoing.
"Seller" means KDI\triangle Electronics, Inc., a Delaware
corporation.
"Senior Debt" means as of any date of determination all Total
Debt as of such date less all Subordinated Debt as of such date.
"Senior Debt to EBITDA Ratio" shall mean, as of any date of
determination, a ratio, the numerator of which shall equal Senior Debt as of
such date and the denominator of which shall equal Consolidated EBITDA for the
four quarter period ending on such date.
"Senior Loan Documents" means, collectively, the Credit
Agreement, the Senior Notes and the Senior Security Documents.
"Senior Loans" means the revolving and term loans made by the
Lenders to the Company pursuant to the Credit Agreement, subject to the terms
hereof.
"Senior Notes" means the Revolving Credit Note and the Term
Note, each dated July 29, 1999, issued by the Company and payable to the order
of the Lenders (as those terms are defined in the Credit Agreement) issued by
the Company and payable to the order of the Lenders, as the same may be amended,
modified and supplemented from time to time in accordance with the terms thereof
and hereof.
"Senior Security Documents" means any agreement pursuant to
which the Company or any of its Subsidiaries or Affiliates provides a Lien on
its assets in favor of the Lenders, and all supplementary assignments, security
agreements, pledge agreements, guarantees, acknowledgments or other documents
delivered or to be delivered pursuant to the terms of the Credit Agreement or
any Senior Security Document, including, without limitation, the guarantee
provided to the Lenders by the Subsidiaries, and all amendments, modifications
and supplements made from time to time to any of the foregoing, in accordance
with the terms hereof and thereof.
"State Regulatory Laws" means the Laws of any Governmental
Authority of any state, including "blue sky" laws, for which any consent,
approval or expiration of any waiting period is necessary in connection with the
proposed purchase and sale of Securities contemplated hereby.
"Stockholder Agreement" means the Stockholder Agreement, dated
as of the date hereof, among the Company, the Purchasers, the other parties
thereto and any other Person who becomes a party thereto pursuant to the terms
thereof, as the same may be amended, modified or supplemented from time to time
in accordance with the terms thereof.
19
"Subordinated Debt" means Debt of the Company or any of its
Subsidiaries that has been subordinated in right of payment and priority to such
Person's indebtedness to the Lenders, all on terms and conditions satisfactory
to the Lenders in the exercise of their sole discretion, including the Debt of
the Company evidenced by the Notes.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by the Company. Unless otherwise
specified to the contrary herein, Subsidiary or Subsidiaries shall refer to the
Company's Subsidiary or Subsidiaries.
"Total Debt" means as of any date of determination, the sum,
without duplication, of (a) all indebtedness of the Company and its Consolidated
Subsidiaries for borrowed money or for the deferred purchase price of property
or services as of such date (other than trade liabilities incurred in the
ordinary course of business and payable in accordance with customary practices)
or which is evidenced by a note, bond, debenture or similar instrument, (b) all
obligations of the Company and its Consolidated Subsidiaries under Capital
Leases as of such date, (c) without duplication, all obligations of the Company
and its Consolidated Subsidiaries in respect of Letters of Credit, acceptances
or similar obligations issued or created for the account of the Company or any
of its Consolidated Subsidiaries as of such date, (d) all liabilities secured by
any lien on any property owned by the Company and its Consolidated Subsidiaries
as of such date even though the Company or its Subsidiaries, as applicable, have
not assumed or otherwise become liable for the payment thereof, and (e) without
duplication, all guarantee obligations of the Company and its Consolidated
Subsidiaries as of such date. For purposes of determining Total Debt, the
Company's guaranty obligation to Densitron International Limited shall be
disregarded to the extent such obligation is secured by the Densitron Letter of
Credit (as defined in the Credit Agreement on the date that it is entered into
by the parties thereto).
"Total Debt to EBITDA Ratio" shall mean, as of any date of
determination, a ratio, the numerator of which shall equal Total Debt as of such
date and the denominator of which shall equal Consolidated EBITDA for the four
quarter period ending on such date.
"Transaction Documents" means collectively, this Agreement,
the Notes, the Warrants, the Preferred Stock, the Security Agreement, the
Collateral Agency Agreement, the Registration Rights Agreement, the Collateral
Assignment of Life Insurance, and the Stockholder Agreement, and all other
agreements, instruments, certificates and documents executed by the Company with
or in favor of or for the benefit of any of the Purchasers or the Collateral
Agent, as the same may be amended, modified, supplemented from time to time in
accordance with the terms thereof and hereof.
"Warrants" has the meaning ascribed to such term in the
recitals of this Agreement.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
20
"Weinschel" means Weinschel Corporation, a Michigan
corporation and a wholly- owned subsidiary of the Company, together with its
successors.
1.02. Accounting Terms; Financial Statements. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time
("GAAP"), applied on a basis consistent (except for changes concurred in by the
Company's independent public accountants) with the most recent audited
consolidated financial statements of the Company and its Subsidiaries delivered
to the Purchasers; provided that, if the Company notifies the Purchasers that
the Company wishes to amend any covenant in Article 8 or any related definition
to eliminate the effect of any change in GAAP on the operation of such covenant
(or if the Purchasers notify the Company that the Purchasers wish to amend
Article 8 or any related definition for such purpose), then the Company's
compliance with such covenant, shall be determined on the basis of GAAP in
effect immediately before the relevant change in GAAP became effective, until
either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Company and the Purchasers.
1.03. Other Definitional Provisions. References in this
Agreement to "Articles" and "Sections" shall be to Articles and Sections of or
to this Agreement unless otherwise specifically provided and references in this
Agreement to "Schedules" and "Exhibits" shall be to Schedules and Exhibits of or
to the 1996 Agreement unless otherwise specifically provided. Any of the terms
defined in Section 1.01 may, unless the context otherwise requires, be used in
the singular or plural depending on the reference. "Include", "includes" and
"including" shall be deemed to be followed by "without limitation" whether or
not they are in fact followed by such words or words of like import. "Writing",
"written" and comparable terms refer to printing, typing and other means of
reproducing words in a visible form. References to any agreement or contract are
to such agreement or contract as amended, modified or supplemented from time to
time in accordance with the terms hereof and thereof. References to any Person
include the successors and assigns of such Person. References "from" or
"through" any date mean, unless otherwise specified, "from and including" or
"through and including", respectively.
ARTICLE 2
Purchase and Sale of Notes and Warrants
2.01. Purchase and Sale of Notes. Subject to the terms and
conditions herein set forth, the Company agrees that it will issue, on the
Closing Date, to: (a) NCCC, and NCCC agrees that it will acquire from the
Company, on the Closing Date, Notes in the original principal amount of
$2,240,000, with such Notes being substantially in the form attached hereto as
Exhibit A, appropriately completed in conformity herewith; and (b) Xxxxxxx, and
Xxxxxxx agrees that it will acquire from the Company, on the Closing Date, Notes
in the original principal amount of $1,260,000, with such Notes being
substantially in the form attached hereto as Exhibit B, appropriately completed
in conformity herewith. At the Closing, the Company shall execute and
21
deliver to each of the Purchasers a single Note in each such principal amount.
The obligations of the Company under the Notes shall be pari passu with the
obligations of the Company under the notes issued pursuant to the 1999 Purchase
Agreement.
2.02. Purchase and Sale of Warrants. Subject to the terms and
conditions herein set forth, the Company agrees that it will issue to each of
the Purchasers, and each of the Purchasers agrees that it will acquire from the
Company, on the Closing Date, simultaneously with the purchase by the Purchasers
of the Notes, the number of Warrants set forth opposite such Purchaser's name on
the signature page hereof to purchase 28,723 shares of Common Stock, with each
Warrant being substantially in the form attached hereto as Exhibit C,
appropriately completed in conformity herewith. The Warrants shall be duly
executed and registered in the name or names of the Purchasers or one or more
Affiliates of the Purchasers and in such denominations as the Purchasers shall
have notified the Company.
2.03. Purchase and Sale of Preferred Stock. Subject to the
terms and conditions herein set forth, the Company agrees that it will issue to
each of the Purchasers, and each of the Purchasers agrees that it will acquire
from the Company, on the Closing Date, simultaneously with the purchase by the
Purchasers of the Notes and the Warrants, the number of shares of Preferred
Stock set forth opposite such Purchaser's name on the signature page hereof, for
an aggregate purchase price of $4,000,000 with each share of Preferred Stock
being substantially in the form attached hereto as Exhibit D, appropriately
completed in conformity herewith. The Preferred Stock shall be duly executed and
registered in the name or names of the Purchasers or one or more Affiliates of
the Purchasers and in such denominations as the Purchasers shall have notified
the Company.
2.04. Purchase Price Allocation. The Company and the
Purchasers hereby agree that for each $1,000.00 of the $3,500,000 paid by the
Purchasers to acquire the Notes and the Warrants hereunder, $37.91185714 shall
be allocated to the Company for the purchase of Warrants and that for each
$1,000.00 of the $4,000,000 paid by the Purchasers to acquire the Preferred
Stock and the Warrants hereunder, $187.979625 shall be allocated to the Company
for the purchase of Warrants. Consequently, of the aggregate total $7,500,000
purchase price for the Securities, $884,610 shall be allocated to the Warrants.
2.05. Closing. The closing (the "Closing") of this Agreement
shall be held at the offices of Xxxxx & Xxxxxxxxx, at 10:00 a.m., Cleveland,
Ohio Time, on July 23, 1996, or at such other time and place as the Company and
the Purchasers may agree in writing (the "Closing Date").
2.06 Several Obligations. The failure of any Purchaser to
purchase the Securities to be purchased by it on the Closing Date shall not
relieve the other Purchaser of its obligation to purchase Securities on the
Closing Date. No Purchaser shall be responsible for the failure of the other
Purchaser to purchase the Securities to be purchased by such other Purchaser,
and no Purchaser shall have any obligation to the other Purchaser for the
failure by such Purchaser to purchase the Securities required to be purchased by
such Purchaser.
22
ARTICLE 3
Conditions to the Obligation of the Purchasers to Close
The obligation of each Purchaser to purchase the Securities,
to pay the purchase price therefor and to perform any obligations hereunder
shall be subject to the satisfaction as determined by, or waiver by, that
Purchaser of the following conditions on or before the Closing Date. No
Purchaser shall be obligated to purchase any Security unless the purchase and
sale of all the other Securities occurs simultaneously therewith.
3.01. Representations and Warranties. The representations and
warranties of the Company contained in this Agreement or made by the Company or
any Subsidiary in each other Operative Document shall be true and correct at and
as of the Closing Date as if made at and as of such date.
3.02. Corporate Proceedings. The Purchasers shall have
received certificates of the Secretary of the Company and each Subsidiary of the
Company dated as of the Closing Date as to (i) true copies of the certificate or
articles of incorporation and by-laws (or other constituent documents) of the
Company and each Subsidiary of the Company, as the case may be, in effect on
such date (which, in the case of certificates or articles of incorporation or
other constituent documents filed or required to be filed with the Secretary of
State or other Governmental Authorityin its jurisdiction of incorporation, shall
be certified to be true, correct and complete by such Secretary of State or
other Governmental Authority not more than 10 days before the Closing Date),
which, in each case, shall be in form and substance reasonably satisfactory to
the Purchasers, (ii) true copies of all corporate action taken by the Company,
and each Subsidiary, as the case may be, approving and otherwise relating to
this Agreement and the other Operative Documents, and (iii) the incumbency and
signature of the respective officers of the Company, and each Subsidiary, as the
case may be, executing this Agreement and the other Transaction Documents,
together with the satisfactory evidence of the incumbency of such Secretary or
Assistant Secretary. The Purchasers shall have received certificates from the
appropriate Secretaries of State or other applicable Governmental Authorities
dated not more than 10 days before the Closing Date showing the good standing of
the Company and each Subsidiary in its state of incorporation and each state in
which it does business.
3.03. No Defaults. No Event of Default or Potential Default
shall have occurred and be continuing on the Closing Date or after giving effect
to the purchases and transactions required to be made on the Closing Date.
3.04. Legal Opinions. The Purchasers shall have received the
opinion, addressed to the Purchasers dated the Closing Date, of Xxxxxx Xxxxxxx
PLLC, counsel to the Company and its Subsidiaries, as to such matters as may be
requested by the Purchasers and in form and substance satisfactory to the
Purchasers. In addition, the Purchasers shall have received all opinions of
counsel for the Company and its Subsidiaries required under or in connection
with the Acquisition Documents, the Refinancing Documents and the Credit
Agreements, which opinions must be in form and content reasonably acceptable to
the Purchasers and their counsel
23
and permit the Purchasers to rely on the opinions expressed therein.
3.05. Fees, Expenses, etc. All fees and other compensation
required to be paid to the Purchasers or their counsel pursuant to this
Agreement and any other written agreement on or prior to the Closing Date shall
have been paid or received.
3.06. Material Adverse Change. The Purchasers shall be
satisfied in their sole good faith discretion as to the absence of any material
adverse change in any aspect of the business, operations, properties, prospects
or condition (financial or otherwise) of the Company or any of its Subsidiaries,
or any event or condition which is reasonably likely to result in such a
material adverse change.
3.07. Capitalization, etc. The corporate and capital structure
of each of the Company and its Subsidiaries, the certificates or articles of
incorporation and bylaws (or other constituent documents) of each of them, and
the terms, conditions, amounts and holders of all equity, debt and other
indebtedness, obligations and liabilities of each of them, shall be satisfactory
to the Purchasers. In addition, the Purchasers shall have received evidence
satisfactory to them in their sole good faith discretion that on the Closing
Date the Company has cash in an amount at least equal Three Hundred Thousand
Dollars ($300,000).
3.08. Documents. The Purchasers shall have received true,
complete and correct copies of such documents as they may reasonably request in
connection with or relating to the purchase and sale of the Securities and the
transactions contemplated hereby, all in form and substance satisfactory to the
Purchasers, and the Purchasers shall have received all documents they may
reasonably request relating to the existence of the Company and its
Subsidiaries, the corporate authority for and the validity of the Financing
Documents and the other Operative Documents, and any other matters relevant
hereto, all in form and substance satisfactory to the Purchasers in their sole
good faith discretion.
3.09. Purchase Permitted by Applicable Laws. The acquisition
of and payment for the Securities to be acquired by the Purchasers hereunder and
the consummation of the transactions contemplated hereby and by the Transaction
Documents (i) shall not be prohibited by any Requirement of Law and (ii) shall
not subject any Purchaser to any penalty or, in its reasonable judgment, other
onerous condition under or pursuant to any Requirement of Law.
3.10. Consents and Approvals. All consents, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons in respect of all Requirements of
Law, including without limitation with respect to those Contractual Obligations
of the Company and with respect to State Regulatory Laws, necessary or required
in connection with the execution, delivery or performance (including, without
limitation, the payment of interest on the Notes and the issuance of the
Preferred Stock and Common Stock upon exercise of the Warrants) by the Company
or enforcement against the Company of the Transaction Documents to which they
are parties shall have been obtained and be in full force and effect, and the
Purchasers shall have been furnished with appropriate evidence thereof, and all
waiting periods shall have lapsed without extension or the imposition of any
conditions or restrictions.
24
3.11. Execution and Delivery of this Agreement. The Company
shall have duly executed and delivered to the Purchasers this Agreement.
3.12. Registration Rights Agreement. The Company and the
other parties thereto shall have duly executed and delivered to the Purchasers
the Registration Rights Agreement.
3.13. Stockholder Agreement. The Company and the other
parties thereto shall have duly executed and delivered to the Purchasers the
Stockholder Agreement.
3.14. Notes, Warrants and Preferred Stock. The Company shall
have duly executed and delivered to the Purchasers the Notes in the form
provided for herein and the Warrants and Preferred Stock, all duly executed and
registered in such name or names and in such denominations as the Purchasers
shall have requested in accordance with the terms of the Transaction Documents
and the Financing Documents.
3.15. SBIC Certificates. The Company shall have executed and
delivered to the Purchasers forms and information required by the rules and
regulations of the United States Small Business Administration and as reasonably
requested by the Purchasers, including, without limitation, a Size Status
Declaration on SBA Form 652, a certificate with respect to use of proceeds as
contemplated by 13 C.F.R. ss.107.305 and information necessary for the
preparation of a Portfolio Financing Report on SBA Form 1031.
3.16. Investors Subscription Agreement. Each of the
Investors shall have duly executed and delivered to the Company and the
Purchasers the Investors Subscription Agreement to which it is a party in a form
satisfactory to the Purchasers.
3.17. Disbursement Instructions. The Purchasers shall have
received written instructions from the Company to the Purchasers directing the
payment of the purchase price for the Notes, the Warrants and the Preferred
Stock that is to be paid on the Closing Date.
3.18. Refinancing. The Purchasers shall have received evidence
satisfactory to them in their sole good faith discretion of the satisfaction
(without waiver) of all other conditions to the closing of the Refinancing on
the Closing Date, and that all transactions contemplated by the Operative
Documents to be consummated on the Closing Date of the Refinancing will take
place prior to or simultaneously with the transactions hereunder contemplated to
take place on the Closing Date, and satisfaction of the Purchasers in their sole
good faith discretion with the terms and conditions of the Refinancing
Documents.
3.19. Acquisition. The Purchasers shall have received evidence
satisfactory to them in their sole good faith discretion of the satisfaction
(without waiver, except as described on Schedule 3.19) of all other conditions
to the closing of the Acquisition on the Closing Date, and that all transactions
contemplated by the Operative Documents to be consummated on the Closing Date of
the Acquisition will take place prior to or simultaneously with the transactions
hereunder contemplated to take place on the Closing Date, and satisfaction of
the Purchasers in
25
their sole good faith discretion with the terms and conditions of the
Acquisition Documents.
3.20. Officer's Certificate. The Purchasers shall have
received a certificate signed by a senior financial officer or treasurer of the
Company to the effect that, both before and immediately after the making of the
Loans, the purchase of the Warrants and the Preferred Stock and the consummation
of the Acquisition and the Refinancing and the other transactions contemplated
to take place on the Closing Date, (i) no Default shall have occurred and be
continuing and (ii) the representations and warranties of the Company and the
Subsidiaries made in or pursuant to the Operative Documents are true, correct
and complete.
3.21. Financial Statements. The Purchasers shall have received
(i) the financial statements and pro forma balance sheet referred to in Sections
5.04(a), (b) and (c), (ii) a statement of sources and uses of funds covering all
payments reasonably expected to be made by the Company and the Subsidiaries in
connection with the transactions contemplated by the Operative Documents to be
consummated on the Closing Date, including an itemized estimate of all fees,
expenses and other closing costs, and (iii) payment instructions with respect to
each wire transfer to be made by the Purchasers or the Company on the Closing
Date setting forth the amount of such transfer, the purpose of such transfer,
the name and number of the account to which such transfer is to be made, the
name and ABA number of the bank or other financial institution where such
account is located and the name and telephone number of an individual that can
be contacted to confirm receipt of such transfer.
3.22. Charter Amendment. The Purchasers shall have received
evidence satisfactory to them that the Charter Amendment shall have been
approved by the requisite corporate action of the Company and shall have been
filed with the Department of Commerce and Industry Services of the State of
Michigan and shall have become effective.
3.23. Security Agreement. The Company shall have been duly
executed and delivered the Security Agreement to the Purchasers.
3.24. Financing Statements. The Company and all other
necessary parties shall have duly executed and delivered to the Purchasers UCC
financing statements in such form as is required to perfect the security
interest in the collateral subject to the Security Agreement.
3.25. Subordinated Notes and Purchase Agreements. KDI and
Weinschel shall have duly executed and delivered to the Company the Subordinated
Notes and the Purchase Agreements, and the Company shall have delivered the
Subordinated Notes, duly endorsed in blank, and executed copies of the Purchase
Agreements to the Collateral Agent in accordance with the provisions of the
Security Agreement.
3.26. Collateral Agency Agreement. The Collateral Agency
Agreement shall have been duly executed and delivered by the Company.
ARTICLE 4
26
Conditions to the Obligation of the Company to Close
The obligations of the Company to issue and sell the
Securities and to perform any other obligations hereunder shall be subject to
the satisfaction as determined by, or waiver by, the Company of the following
conditions on or before the Closing Date:
4.01. Representations and Warranties True. The
representations and warranties of the Purchasers contained in Article 6 shall be
true and correct at and as of the Closing Date as if made at and as of
such date.
4.02. Compliance with This Agreement. The Purchasers shall
have performed and complied with all of their agreements and conditions set
forth or contemplated herein that are required to be performed or complied with
by the Purchasers on or before the Closing Date.
4.03. Issuance Permitted by Applicable Laws. The issuance of
the Securities to be issued by the Company hereunder and the consummation of the
transactions contemplated hereby (i) shall not be prohibited by any Requirement
of Law, and (ii) shall not subject the Company to any penalty or, in its
reasonable judgment, other onerous condition under or pursuant to any
Requirement of Law.
4.04. Consents and Approvals. All consents, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons in respect of all Requirements of Law
necessary or required in connection with the execution, delivery or performance
by the Purchasers or enforcement against the Purchasers of this Agreement shall
have been obtained and be in full force and effect, and the Company shall have
been furnished with appropriate evidence thereof.
4.05. Execution and Delivery of this Agreement. The
Purchasers shall have executed and delivered to the Company this Agreement.
ARTICLE 5
Representations and Warranties of the Company as of Closing Date
The Company represents and warrants to the Purchasers as of
the Closing Date (including, in the case of any such representation and warranty
made or deemed made before the consummation of the Acquisition or the
Refinancing, at the time such representation and warranty is made or deemed made
and immediately after giving effect to the consummation of the Acquisition and
the Refinancing) that:
5.01. Existence and Power. The Company and its Subsidiaries
are corporations duly incorporated, validly existing and in good standing, under
the laws of the State of Michigan. The Company and its Subsidiaries are
qualified to do business as foreign corporations or other business entities, as
the case may be, in each jurisdiction in which they are required to be so
qualified, except where failure to be qualified would not have a Material
Adverse Effect.
27
5.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Company and its
Subsidiaries of the Operative Documents to which each is a party are within the
Company's and its Subsidiaries' corporate powers, have been duly authorized by
all necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official other than the filing of the
Charter Amendment and the filing of UCC-1 financing statements (all of which
have been made and are in full force and effect), and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the articles of incorporation or bylaws of the Company and its Subsidiaries or
of any judgment, injunction, order or decree or of any material agreement or
other material instrument binding upon the Company and its Subsidiaries or
result in the creation or imposition of any Lien (other than the Permitted
Liens) on any asset of the Company and any of its Subsidiaries.
5.03. Binding Effect. Each of the Operative Documents to which
the Company or any of its Subsidiaries is a party constitutes a valid and
binding agreement of the Company or that Subsidiary, as the case may be, and
each of the Transaction Documents, when executed and delivered in accordance
with this Agreement, will constitute valid and binding obligations of the
Company and its Subsidiaries that are parties thereto, in each case enforceable
in accordance with its respective terms except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general principles of equity.
The Company has reserved and will keep available for issuance upon exercise of
the Warrants the total number of Warrant Shares deliverable upon exercise of all
Warrants from time to time outstanding. The issuance of the Warrant Shares has
been duly and validly authorized and, when issued and sold in accordance with
the Warrants, the Warrant Shares will be duly and validly issued, fully paid and
nonassessable and free of preemptive rights.
5.04. Financial Information.
(a) The audited consolidated balance sheet of the
Company and its Subsidiaries as of December 31, 1995, the audited
balance sheet of Inmet as of December 31, 1995, and the audited balance
sheet of Weinschel as of December 31, 1995, and the related statement
of income for the Fiscal Year then ended, copies of which have been
delivered to the Purchasers, fairly present, in conformity with GAAP
the financial position of the Company and its Subsidiaries as of such
date and its results of operations, for such period.
(b) The unaudited consolidated and consolidating
balance sheet of the Company and its Subsidiaries as of May 31, 1996,
and the related unaudited statement of income for the month and the
portion of the Fiscal Year then ended, copies of which have been
delivered to the Purchasers, fairly present, in conformity with GAAP
(subject to (i) the absence of footnotes and (ii) year-end audit
adjustments) applied on a basis consistent with the financial
statements referred to in Section 5.04(a), the financial position of
the Company and its Subsidiaries as of such date and its results of
operations for the month and the five months then ended (subject to
normal year-end adjustments).
28
(c) The pro forma balance sheet of the Company and
its Subsidiaries as of the June 30, 1996, copies of which have been
delivered to the Purchasers, fairly presents in conformity with GAAP
applied on a basis consistent with the financial statements referred to
in Section 5.04(a), the consolidated financial position of the Company
and its Subsidiaries as of such date, adjusted to give effect (as if
such events had occurred on such date) to (i) the transactions
contemplated by the Acquisition Documents and the Refinancing
Documents, (ii) the making of the Loans and the issuance of the
Warrants and the Preferred Stock, (iii) the application of the proceeds
therefrom as contemplated by the Acquisition Documents, the Refinancing
Documents and the Financing Documents, and (iv) the payment of all
legal, accounting and other fees related thereto to the extent known at
the time of the preparation of such balance sheet. As of the date of
such balance sheet and the date hereof, the Company and its
Subsidiaries had and have no material liabilities, contingent or
otherwise, including liabilities for taxes, long-term leases or
forward or long-term commitments, which are not properly reflected on
such balance sheet.
(d) Since December 31, 1995, there has been no
material adverse change in the business, operations, properties,
prospects or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, except as reflected in the financial
statements described in Section 5.04(b).
5.05. Litigation. There is no action, suit or proceeding
pending against, or to the knowledge of the Company, threatened against or
affecting, the Company or any of its Subsidiaries before any court or arbitrator
or any governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could have a Material Adverse Effect.
There is no action, suit or proceeding pending against, or to the knowledge of
the Company threatened against or affecting, any party to any of the Operative
Documents (other than the Company) before any court or arbitrator or any
governmental body, agency or official which in any manner draws into question
the validity of any of the Operative Documents.
5.06. Ownership of Property. Except as set forth on Schedule
5.06, on and as of the Closing Date, the Company owns no property or assets
other than the Subordinated Notes and the common stock of its Subsidiaries, and
none of its properties and assets is subject to any Liens, except Permitted
Liens.
5.07. No Default. Except as set forth on Schedule 5.07, no
Default or Event of Default has occurred and is continuing. Neither the Company
nor any of its Subsidiaries is in default under or with respect to any contract,
agreement, lease or other instrument to which it is a party or by which its
property is bound or affected except for such defaults that in the aggregate
would not have a Material Adverse Effect.
5.08. No Burdensome Restrictions. No contract, lease,
agreement or other instrument to which the Company or any of its Subsidiaries is
a party or by which any of its property is bound or affected, no charge,
corporate restriction, judgment, decree or order and no
29
provision of applicable law or governmental regulation materially adversely
affects the business, operations, properties, prospects or condition (financial
or otherwise) of the Company or any of its Subsidiaries.
5.09. Subsidiaries; Other Equity Investments. The Company has
no Subsidiaries on the date hereof other than Inmet, KDI and Weinschel. Neither
the Company nor any of its Subsidiaries is engaged in any joint venture or
partnership with any other Person, except for joint ventures or partnerships of
any Subsidiary of the Company related to the manufacture of products that are in
the same line of business as that Subsidiary so long as that Subsidiary's
investment in any such joint ventures or partnerships is not in excess of
$100,000 individually and not in excess of $500,000 in aggregate.
5.10. Investment Company Act. Neither the Company nor its
Subsidiaries is an "investment company" as defined in the Investment Company Act
of 1940, as amended. The consummation of the transactions contemplated by the
Operative Documents does not and will not violate any provision of such Act or
any rule, regulation or order issued by the Commission thereunder. Immediately
following the Closing and each purchase of Securities hereunder, after giving
effect to the transactions contemplated by the Transaction Documents, neither
the Company nor any Person controlling, controlled by or under common control
with the Company or the Company will be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. Neither the Company
nor any of its Subsidiaries is subject to regulation under the Public Utility
Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate
Commerce Act, or any federal or state statute or regulation limiting its ability
to incur Indebtedness.
5.11. Margin Regulations. None of the proceeds from the Loans
have been or will be used, directly or indirectly, for the purpose of purchasing
or carrying any Margin Stock, for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any Margin
Stock, or for any other purpose which might cause any of the loans under this
Agreement to be considered a "purpose credit" within the meaning of Regulations
G, U or X of the Board of Governors of the Federal Reserve Board.
5.12. Taxes. The Company's federal tax identification number
is 00-0000000. Weinschel's federal tax identification number is 00-0000000.
KDI's federal tax identification number is 00-0000000. Inmet's federal tax
identification number is 00-0000000. All federal, state and local tax returns,
reports and statements required to be filed by or on behalf of the Company and
its Subsidiaries have been filed with the appropriate governmental agencies in
all jurisdictions in which such returns, reports and statements are required to
be filed, and all taxes (including real property taxes) and other charges shown
to be due and payable have been timely paid prior to the date on which any fine,
penalty, interest, late charge or loss may be added thereto for nonpayment
thereof, except to the extent such taxes are the subject of a Permitted Contest.
All state and local sales and use taxes required to be paid by the Company or
any of its Subsidiaries have been paid, except to the extent such taxes are the
subject of a Permitted Contest. All federal and state returns have been filed by
the Company and its Subsidiaries for all periods for which returns were due with
respect to employee income tax withholding, social
30
security and unemployment taxes, and the amounts shown thereon to be due and
payable have been paid in full or adequate provisions therefor have been made,
except to the extent such taxes are the subject of a Permitted Contest.
5.13. Brokers. Except as set forth in Schedule 5.13, no
broker, finder or other intermediary engaged by the Company or any of its
Subsidiaries has brought about the obtaining, making or closing of the
transactions contemplated by the Operative Documents, and neither the Company,
its Subsidiaries nor the Purchasers has or will have any obligation to any
Person (other than Persons engaged by the Purchasers) in respect of any finders'
or brokerage fees in connection herewith or therewith.
5.14. Related Transactions. The closing of the Acquisition and
the Refinancing will occur simultaneously with the issuance of the Notes and
purchase of the Warrants and Preferred Stock hereunder and, except as disclosed
in Schedule 3.19, neither the Company nor any of its Subsidiaries has waived,
without the consent of the Purchasers, any condition precedent to their
respective obligations to close as set forth in the Acquisition Documents or the
Refinancing Documents. True and complete copies of all of the Acquisition
Documents or the Refinancing Documents have been delivered to the Purchasers,
together with a true and complete copy of each document to be delivered at the
closing of the Acquisition and the Refinancing. Neither the Company nor any of
its Subsidiaries is in default under any Acquisition Document or Refinancing
Document.
5.15. Full Disclosure. None of the information (financial or
otherwise) furnished by or on behalf of the Company or its Subsidiaries to the
Lender or the Purchasers in connection with the consummation of the transactions
contemplated by any of the Operative Documents, when taken as a whole, contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading in
the light of the circumstances under which such statements were made. All
financial projections delivered to the Lender and the Purchasers have been
prepared on the basis of the assumptions stated therein. The most recent
projections delivered to the Purchasers represent the Company's best estimate
(as of their date) of the Company's and its Subsidiaries future financial
performance and such assumptions are believed by the Company to be fair in light
of current business conditions.
5.16. Representations and Warranties Incorporated from Other
Operative Documents. Each of the representations and warranties made in the
Operative Documents by the Company or any of its Subsidiaries and each of the
parties thereto is true and correct in all material respects as of the Closing
Date, and such representations and warranties are hereby incorporated herein by
reference with the same effect as though set forth in their entirety herein, as
qualified therein.
5.17. Private Offering. The Company, with the assistance of
Banc One Capital Corporation, prepared a Confidential Memorandum, dated February
1995, describing the Company (including the proposed acquisition of the Seller)
and inviting interested parties to contact the Company for purposes of
conducting due diligence activities and discussing relevant
31
financing proposals, and distributed such Confidential Memorandum to
approximately twenty-seven (27) Accredited Investors, including each of the
Purchasers. Subject to the forgoing, neither the Company nor any Person acting
on its behalf has offered the Notes, the Warrants, the Preferred Stock or any
similar securities for sale to, or solicited any offer to buy any of the same
from, or otherwise approached or negotiated in respect thereof with, any Person
other than the Purchasers and Lincoln Investment Management, Inc. Neither the
Company nor any Person acting on its behalf has taken, or will take, any action
which would subject the issuance or sale of the Notes or the Warrants or Warrant
Shares or Preferred Stock to Section 5 of the Securities Act, other than as
provided in the Warrants. No form of general solicitation or general advertising
was used by the Company or any of its representatives in connection with the
offer or sale of the Securities. No registration of the ecurities pursuant to
the provisions of the Securities Act or any State Regulatory Law will be
required by the offer, sale or issuance of the Securities pursuant to this
Agreement.
5.18. Capitalization. Set forth on Schedule 5.18 is a schedule
of the capitalization of the Company as of the Closing Date, after giving effect
to the transactions contemplated to take place on the Closing Date and the
issuance of the Warrant Shares upon exercise of the Warrants, specifying each
class of interest held and the amount and holder thereof. The Warrant Shares are
equal in value to thirteen percent (13.0%) of the Common Stock (on a fully
diluted basis) as of the Closing Date. As of the Closing Date, all outstanding
shares of capital stock of the Company will be duly authorized and validly
issued, fully paid, nonassessable and free and clear of any Lien created by the
Company. Except as described in Schedule 5.18, (a) no other class of capital
stock or other ownership interests of the Company are authorized or outstanding
and (b) the Company has no outstanding rights (either preemptive or other) or
options to subscribe for or purchase from the Company, or any warrants or other
agreements providing for or requiring the issuance by the Company of, any of its
capital stock or any securities convertible into or exchangeable for its capital
stock.
5.19. Senior Loan Documents. The Company has delivered to the
Purchasers true, complete and correct copies of the Senior Loan Documents
together with all amendments, modifications and supplements thereto. Such
documents (including the schedules and exhibits thereto) comprise full and
complete copies of all material agreements between the parties thereto with
respect to the subject matter thereof and all transactions related thereto, and
there are no material agreements or understandings, oral or written, or material
side agreements not contained therein that relate to or modify the substance
thereof.
5.20. Operative Documents. The Company has delivered to the
Purchasers true, complete and correct copies of the Operative Documents together
with all amendments, modifications and supplements thereto.
5.21. Small Business Matters. The Company, together with its
"affiliates" (as that term is defined in Title 13, Code of Federal Regulations,
ss.121.103), is a "small business concern" within the meaning of Section
121.301(c)(1), Title 13, Code of Federal Regulations, and as otherwise required
by the applicable provisions of Part 121 thereof. The information regarding the
Company and its affiliates set forth in the Small Business Administration Form
32
480, Form 652 and Part A of Form 1031 delivered at the Closing (or promptly
thereafter) is accurate and complete. Copies of such forms shall have been
completed and executed by the Company and delivered to the Purchasers at the
Closing together with a written statement of the Company regarding their planned
use of the proceeds from the sale of the Notes, the Preferred Stock and the
Warrants. Neither the Company nor any Subsidiary presently engages in, and it
shall not hereafter engage in, any activities, nor shall the Company or any
Subsidiary use directly or indirectly the proceeds from the sale of the Notes,
the Preferred Stock and the Warrants hereunder for any purpose, for which a
"small business investment company" is prohibited from providing funds by the
Small Business Investment Act of 1958 and the regulations thereunder (including
Title 13, Code of Federal Regulations, ss.107.720).
5.22. Compliance with Environmental Requirements; No
Hazardous Materials. After giving effect to the Acquisition and except as
provided on Schedule 5.22:
(a) Other than in compliance in all material respects
with all applicable Environmental Laws, no Hazardous Materials have
been released into the environment, or deposited, discharged, placed or
disposed of at, on, or under any properties now or previously owned,
leased or operated by the Company or any of its Subsidiaries. No
portion of any such property is being used, or has been used at any
previous time, for the disposal, storage, treatment, processing or
other handling of "hazardous wastes" as defined in RCRA (other than
processing or handling incidental to the generation of such hazardous
wastes or the storage of such wastes for a period of less than 180
days, in each case in compliance in all material respects with all
applicable Environmental Laws), nor is any such property affected by
any Hazardous Materials Contamination.
(b) No asbestos or asbestos-containing materials are
present on any of the properties now or previously owned, leased or
operated by the Company or any of its Subsidiaries in a condition that
would reasonably be expected to result in a material liability to the
Company or its Subsidiaries.
(c) No polychlorinated biphenyls are located on or in
any properties now or previously owned, leased or operated by the
Company or any of its Subsidiaries, in the form of electrical
transformers, fluorescent light fixtures with ballasts, cooling oils or
any other device or form other than any polychlorinated biphenyls that
would not reasonably be expected to result in a material liability to
the Company or its Subsidiaries.
(d) No underground storage tanks are located on any
properties now or previously owned, leased or operated by the Company
or any of its Subsidiaries, or were located on any such property and
subsequently removed or filled, other than any such tanks that would
not reasonably be expected to result in a material liability to the
Company or its Subsidiaries.
(e) No notice, notification, demand, request for
information, complaint, citation, summons, investigation,
administrative order, consent order and agreement, litigation or
settlement with respect to Hazardous Materials or Hazardous
33
Materials Contamination (each, an "Environmental Claim") has been
received by the Company, nor to the Company's knowledge, is any such
Environmental Claim proposed, threatened or anticipated with respect
to or in connection with the operation of any properties now or
previously owned, leased or operated by the Company or any of its
Subsidiaries. All such properties and their existing and prior uses
comply and at all times have complied in all material respects with
any applicable governmental requirements relating to environmental
matters or Hazardous Materials. There is no condition on any of such
properties which is in violation in any material respect of any
applicable governmental requirements relating to Hazardous Materials,
and neither the Company nor any of its Subsidiaries has received any
communication from or on behalf of any governmental authority that any
such condition exists. None of such properties nor any property to
which the Company and or any of its Subsidiaries has, directly or
indirectly, transported or arranged for the transportation of any
material is listed or, to the Company's knowledge, proposed for listing
on the National Priorities List promulgated pursuant to CERCLA, on
CERCLIS (as defined in CERCLA) or on any similar federal, state or
foreign list of sites requiring investigation or cleanup, nor, to the
knowledge of the Company, is any such property anticipated or
threatened to be placed on any such list.
(f) There has been no environmental investigation,
study, audit, test, review or other analysis conducted of which the
Company has knowledge in relation to the current or prior business of
the Company or any of the Company's Subsidiaries or any property or
facility now or previously owned, leased or operated by the Company or
any of its Subsidiaries which has not been delivered to the Purchaser
at least five days prior to the date hereof.
(g) For purposes of this Section 5.22, the terms
"Company" and "Subsidiary" shall include any business or business
entity (including a corporation) which is, in whole or in part, a
predecessor of the Company or any Subsidiary.
(h) For purposes of this Section 5.22, any
representation or warranty made with respect to properties not
presently owned, leased or operated by the Company or any of its
Subsidiaries (other than the representations and warranties made in the
first sentence of clause (e) of this Section 5.22 and in clause (f) of
this Section 5.22) shall be limited to conditions existing, activities
occurring or compliance with governmental requirements during the
period of such ownership, leasing or operation.
5.23. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Code in respect of any Plan, (ii)
failed to make any contribution or payment to any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Code, or
(iii) incurred any liability under Title IV of ERISA other
34
than a liability to the PBGC for premiums under Section 4007 of ERISA.
35
ARTICLE 6
Representations and Warranties of the Purchasers as of Closing Date
Hanifen represents and warrants that it was not formed for the
specific purpose of acquiring the Securities pursuant to this Agreement. In
addition, each Purchaser hereby severally, and not jointly, represents and
warrants as of the Closing Date with respect to itself as follows:
6.01. Existence; Authorization; No Contravention. Such
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization. The execution, delivery
and performance by such Purchaser of this Agreement and the transactions
contemplated hereby: (i) is within such Purchaser's power and authority and has
been duly authorized by all necessary action of such Purchaser; (ii) does not
contravene the terms of such Purchaser's organizational documents (if any) or
any amendment thereof; (iii) will not violate, conflict with or result in any
breach or contravention of or the creation of any Lien under, any Contractual
Obligation of such Purchaser, or any order or decree directly relating to such
Purchaser; and (iv) will not violate any Requirement of Law or any Contractual
Obligation of such Purchaser.
6.02. Binding Effect. This Agreement has been duly executed
and delivered by such Purchaser, and this Agreement constitutes the legal, valid
and binding obligation of such Purchaser enforceable against it in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
6.03. Investment Representation.
(a) Such Purchaser represents and warrants to the
Company that such Purchaser is acquiring the Securities for investment,
and not with a view to selling or otherwise distributing the
Securities; provided, however, that the disposition of such Purchaser's
property shall at all times be and remain in such Purchaser's control.
(b) Such Purchaser understands that the Securities
have not been registered under the Securities Act, on the grounds that
the offer and sale of the Securities to the Purchasers are exempt from
the registration requirements of the Securities Act under Section 4(2)
thereof as a transaction not involving any public offering of the
Securities or under any State Regulatory Law. Such Purchaser
understands that the Company's reliance on such exemption is predicated
in part on the representations of such Purchaser which are contained
herein.
(c) Such Purchaser understands that such Purchaser
must bear the economic risk of its investment in the Securities for an
indefinite period of time because the Securities have not been
registered under the Securities Act and, therefore, cannot be sold
unless they are subsequently registered under the Securities Act or an
exemption from such registration is available.
36
6.04. Accredited Investor. Such Purchaser represents and
warrants to the Company that it is an Accredited Investor.
ARTICLE 7
Fees, Expenses and Indemnities; General Provisions Relating to Payments
7.01. Closing Fees. On the Closing Date, the Company shall
pay to the Purchasers a fee in an aggregate amount equal to $150,000 less the
amount of the deposit fee previously paid by the Company to the Purchaser
($20,000).
7.02. Computation of Interest. All interest hereunder and
under the Notes shall be calculated on the basis of a 360-day year for the
actual number of days elapsed.
7.03. General Provisions Regarding Payments. All payments
(including prepayments) to be made by the Company under any Transaction
Document, including payments of principal of and premium (if any) and interest
on the Notes, fees, expenses and indemnities, shall be made without set-off or
counterclaim and in immediately available funds. If any payment hereunder
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day and, with respect to payments of
principal, the interest thereon shall be payable at the then applicable rate
during such extension. The Company shall make all payments in immediately
available funds to each of the Purchaser's Payment Account before 2:00 p.m.
(Cleveland, Ohio Time) on the date when due.
7.04. Indemnification.
(a) General. In addition to all other sums due
hereunder or provided for in this Agreement, the Company agrees to
indemnify and hold harmless each of the Purchasers and their affiliates
and their respective officers, directors, agents, employees,
subsidiaries, partners and controlling persons (each, an "Indemnified
Party") to the fullest extent permitted by law from and against any and
all losses, claims, damages, expenses (including reasonable fees,
disbursements and other charges of counsel, including the reasonable
allocation of the compensation, costs and expenses of in-house counsel,
based upon time spent) or other liabilities (collectively,
"Liabilities") resulting from or arising out of any breach of any
representation or warranty, covenant or agreement of the Company in
this Agreement, the Notes, the Warrants or the Preferred Stock,
including, without limitation, the failure to make payment when due of
amounts owing pursuant to the Notes on the due date thereof (whether at
the scheduled maturity, by acceleration or otherwise) or any legal,
administrative or other actions (including actions brought by the
Purchasers or the Company or any equity holders of the Company or
derivative actions brought by any Person claiming through or in the
Company's name), proceedings or investigations (whether formal or
informal), or written threats thereof, based upon, relating to or
arising out of the Transaction Documents, the transactions contemplated
thereby, or Indemnified Party's role therein or in the transactions
contemplated thereby; provided, however, that the Company shall not be
liable under this Section 7.04 to an
37
Indemnified Party: (a) for any amount paid in settlement of claims
without the Company's consent (which consent shall not be unreasonably
withheld), (b) to the extent that it is finally judicially determined
that such Liabilities resulted from the willful misconduct or gross
negligence of such Indemnified Party, or (c) to the extent that it is
finally judicially determined that such Liabilities resulted from the
material breach by such Indemnified Party of any representation,
warranty, covenant or other agreement of such Indemnified Party
contained in this Agreement; provided, further, 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. In connection with the obligation of the Company
to indemnify for expenses as set forth above, the Company further
agrees, upon presentation of appropriate invoices containing reasonable
detail, to reimburse each Indemnified Party for all such expenses
(including reasonable fees, disbursements and other charges of counsel)
as they are incurred by such Indemnified Party; provided, however, that
if an Indemnified Party is reimbursed hereunder for any expenses, such
reimbursement of expenses shall be refunded to the extent it is finally
judicially determined that the Liabilities in question resulted
primarily from (i) the willful misconduct or gross negligence of such
Indemnified Party or (ii) the material breach by such Indemnified Party
of any representation, warranty, covenant or other agreement of such
Indemnified Party contained in this Agreement.
(b) Notification. Each Indemnified Party under this
Section 7.04 will, promptly after the receipt of notice of the
commencement of any action, investigation, claim, or other proceeding
against such Indemnified Party in respect of which indemnity may be
sought from the Company under this Section 7.04, 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
(a) other than pursuant to this Section 7.04 or (b) under this Section
7.04 unless, and only to the extent that, such omission actually
prejudices the Company's substantive rights or defenses. In case any
such action, claim or other proceeding shall be brought against any
Indemnified Party and it shall notify the Company of the commencement
thereof, the Company shall be entitled to assume the defense thereof at
its own expense, with counsel satisfactory to such Indemnified Party in
its reasonable judgment; provided, however, that any Indemnified Party
may, at its own expense, retain separate counsel to participate in such
defense. Notwithstanding the foregoing, in any action, claim or
proceeding in which the Company, on the one hand, and an Indemnified
Party, on the other hand, is, or is reasonably likely to become, a
party, such Indemnified Party shall have the right to employ separate
counsel at the Company's expense and to control its own defense of such
action, claim or proceeding if, in the reasonable opinion of counsel to
such Indemnified Party, a conflict or potential conflict exists between
the Company, on the one hand, and such Indemnified Party, on the other
hand, that would make such separate representation advisable. The
Company agrees that it will not, without the prior written consent
(which consent shall not unreasonably be withheld) of any Indemnified
Party, settle, compromise or consent to the entry of any judgment in
any pending or threatened claim, action or proceeding relating to the
matters
38
contemplated hereby (if such Indemnified Party is a party thereto or
has been actually threatened to be made a party thereto) unless such
settlement, compromise or consent includes an unconditional release of
such Indemnified Party from all liability arising or that may arise out
of such claim, action or proceeding. The Company shall not be liable
for any settlement of any claim, action or proceeding effected against
an Indemnified Party without its written consent, which consent shall
not be unreasonably withheld. The rights accorded to Indemnified
Parties hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or
otherwise.
7.05. Registration Rights Agreement. Notwithstanding anything
to the contrary in Section 7.04, the indemnification and contribution provisions
of the Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or sales made thereunder.
ARTICLE 8
Affirmative Covenants
Until the payment by the Company of all principal of and
interest on the Notes and all other amounts due at the time of payment of such
principal and interest to the Purchasers under this Agreement or the Notes,
including, without limitation, all fees, expenses and amounts due at such time
in respect of indemnity obligations under Article 7, and for so long as any of
the Warrants or the Preferred Stock remain outstanding, the Company hereby
covenants and agrees with the Purchasers as follows:
8.01. Financial Statements and Other Reports. The Company
will furnish to the Purchasers:
(a) as soon as available, but in any event within 90
days after the end of each fiscal year of the Company a copy of the
audited Consolidated and unaudited Consolidating financial statements
of the Company as at the end of such year and the related audited
statements of income, accumulated earnings, and cash flows for such
year, setting forth in each case in comparative form the figures for
the previous year, certified as being fairly stated in all material
respects by one of the "Big Five" certified public accounting firms or
by another nationally recognized certified public accountant reasonably
satisfactory to the Purchasers; such financial statements shall be
complete and correct in all material respects and shall be prepared in
reasonable detail and in accordance with GAAP throughout the periods
reflected therein and with prior periods;
(b) as soon as available, but in any event not later
than 30 days after the end of each month, the unaudited Consolidated
and Consolidating financial statements of the Company as at the end of
such month and the related unaudited statements of income, accumulated
earnings and cash flows of the Company for the portion of the fiscal
year through the end of such month, setting forth in each case in
comparative form the figures for the previous year, and certified by a
Responsible Officer
39
as being fairly stated in all material respects. Such financial
statements shall be complete and correct in all material respects and
shall be prepared in reasonable detail and in accordance with GAAP
throughout the periods reflected therein and with prior periods
(except as approved by such officer and disclosed therein), provided
however that such financial statements will not be required to include
footnotes and will be subject to year-end adjustments;
(c) not later than January 31 of each year, financial
projections on a month by month basis for the then current calendar
year in form reasonably acceptable to the Purchasers;
(d) such information as required by the terms
and conditions of any Senior Security Documents;
(e) together with each delivery of financial
statements pursuant to (a) above, a written statement by the
independent public accountants giving the report thereon (i) stating
that their audit examination has included a review of the terms of this
Agreement as it relates to accounting matters, (ii) stating whether, in
connection with their audit examination, any Default has come to their
attention, and if such a condition or event has come to their
attention, specifying the nature and period of existence thereof,
provided that the failure to deliver the certificate described in this
clause (ii) as to Defaults shall not be a default if the Company has
used its best commercially reasonable efforts to obtain such a
certification, and (iii) stating that based on their audit examination
nothing has come to their attention which causes them to believe that
the information contained in the certificates delivered therewith
pursuant to Section 8.08 is not correct and that the matters set forth
in the compliance certificate delivered therewith pursuant to clause
(a) of Section 8.08 for the applicable Fiscal Year are not stated in
accordance with the terms of this Agreement;
(f) promptly upon receipt thereof, copies of all
reports submitted to the Company and any of its Subsidiaries by
independent public accountants in connection with each annual, interim
or special audit of the financial statements of the Company or any of
its Subsidiaries made by such accountants, including the comment letter
submitted by such accountants to management in connection with their
annual audit;
(g) promptly upon their becoming available, copies of
(i) all financial statements, reports, notices and proxy statements
sent or made available generally by the Company or its Subsidiaries to
all holders of any class of securities, (ii) all regular and periodic
reports and all registration statements and prospectuses filed by the
Company or any of its Subsidiaries with any securities exchange or with
the Commission or any governmental authority succeeding to any of its
functions, and (iii) all press releases and other statements made
available generally by the Company or any of its Subsidiaries to the
public concerning material developments in the business of the Company
or any of its Subsidiaries;
40
(h) within 30 days after the conclusion of each
Fiscal Year, the Company's and each of its Subsidiaries' annual
operating and Capital Expenditure budgets and cash flow forecast for
the following Fiscal Year presented on a monthly basis, which shall be
in a format reasonably consistent with projections, budgets and
forecasts theretofore provided to the Purchasers;
(i) promptly after the Company's receipt of the same,
a copy of each bona fide offer to purchase or sell any securities of
the Company or any securities of any of the Company's Subsidiaries for
an aggregate consideration greater than $100,000 or, in the case of
securities of the Company, for a consideration per share less than the
Exercise Price then in effect or less than the Fair Market Value of the
Company per share of outstanding Common Stock on a Fully Diluted Basis
(as the foregoing terms are defined in the Warrants), or the material
assets of the Company or the material assets of any of the Company's
Subsidiaries (which has assets having a fair market value of $100,000
or more, or which has annual gross income of $250,000 or more) with
respect to which the Company's management gives serious consideration;
and
(j) promptly, and in form to be reasonably
satisfactory to the Purchasers, such other information as the
Purchasers may reasonably request from time to time.
8.02. Payment of Obligations. The Company shall pay, discharge
or otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all of its material obligations, excluding taxes, of whatever
nature, except where the amount or validity thereof is subject to a Permitted
Contest and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Company.
8.03. Insurance. The Company shall maintain, and cause the
Subsidiaries to maintain, insurance coverage on their physical assets and
against other business risks in such amounts and of such types as are
customarily carried by companies similar in size and nature, and in the event of
acquisition of additional property, real or personal, or of incurrence of
additional risks of any nature, increase such insurance coverage in such manner
and to such extent as prudent business judgment and present practice would
dictate. The Company shall also furnish to the Purchasers from time to time upon
reasonable request the policies under which such insurance is issued,
certificates of insurance and such other information relating to such insurance
as the Purchasers may reasonably request. The Company shall maintain in effect
at all times a keyman life insurance policy naming the Company as the
beneficiary, insuring the life of Xxxx X. Xxxxxxx in an amount not less than
$3,000,000 in form and substance, and with an insurer, satisfactory to the
Purchasers.
8.04. Inspection of Property, Books and Records. The Company
shall permit, and cause the Subsidiaries to permit, the Purchasers at the
Purchaser's expense and through their respective authorized attorneys,
accountants and representatives, to examine the Company's and the Subsidiaries'
books, accounts, records, ledgers and assets of every kind and description at
all reasonable times upon reasonable prior oral or written request of a
Purchaser, and to discuss their respective affairs, finances and accounts with
their respective officers, employees and
41
independent public accountants, all at such reasonable times and as often as
may reasonably be desired, provided that following the occurrence and during the
continuance of an Event of Default, such examinations shall be at the Company's
cost and expense. The Company will keep, and will cause each of its Subsidiaries
to keep, proper books of record and account in which full, true and correct
entries shall be made of all material dealings and transactions in relation to
its business and activities.
8.05. Notice. The Company shall promptly give notice to the
Purchasers of:
(a) the occurrence of any Potential Default or
Event of Default of which the Company or any Subsidiary has knowledge;
(b) any (i) default or event of default under any
Contractual Obligation of the Company or any Subsidiary or (ii)
litigation, investigation or proceeding which may exist at any time
between the Company or any Subsidiary and any governmental authority or
any other third party, which in the case of either (i) or (ii), if not
cured or if it is reasonably likely to be adversely determined, as the
case may be, would have a Material Adverse Effect;
(c) the following events, as soon as possible and in
any event within thirty (30) days after the Company knows thereof and
to the extent the same would have a Material Adverse Effect: (i) the
occurrence of any "reportable event" as defined in ERISA with respect
to any Pension Plan, or any withdrawal from or the termination,
reorganization or insolvency of any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the
Pension Benefit Guaranty Corporation or Borrowers or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from or the terminating, reorganization or insolvency of any
Pension Plan;
(d) any event which is reasonably likely to have
Material Adverse Effect;
(e) promptly after becoming aware of the taking by
the Internal Revenue Service or any foreign taxing jurisdiction of a
written tax position which could reasonably be expected to have a
material adverse effect on the business or financial condition of the
Company and its Subsidiaries (taken as a whole) (or any such tax
position taken by the Company) setting forth the details of such
position and the financial impact thereof; and
(f) not less than ten (10) days prior to the proposed
effective date thereof, copies of any proposed material amendments,
restatements or other modification to the Acquisition Documents.
Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer setting forth details of the occurrence
referred to therein and stating what
42
action the Company proposes to take with respect thereto.
8.06. Conduct of Business and Maintenance of Licenses. The
Company will continue, and will cause each of the Subsidiaries to continue, to:
(a) preserve, renew and keep in full force and effect
its existence.
(b) take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct
of its business.
8.07. Compliance with Laws. The Company will comply, and cause
each of its Subsidiaries to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including Environmental Laws and ERISA and the rules and
regulations thereunder), except where the necessity of compliance therewith is
the subject of a Permitted Contest.
8.08. Certificates. The Company shall furnish to the
Purchasers concurrently with the delivery of each of the financial statements
required by Section 8.01(a) and (b) (and with respect to (b) for the months of
March, June, September and December) hereof, a statement prepared and certified
by the chief financial officer of the Company (or in such officer's absence, a
responsible senior officer of the Company) (a) setting forth all computations
necessary to show compliance by the Company with the financial covenants set
forth in Sections 8.16, 8.17, 8.18 and 8.19 as of the date of such financial
statements, (b) stating that as of the date thereof, no condition or event which
constitutes an Event of Default hereunder or which with the running of time
and/or the giving of notice would constitute an Event of Default hereunder has
occurred and is continuing, or if any such event or condition has occurred and
is continuing or exists, specifying in detail the nature and period of existence
thereof and any action taken with respect thereto taken or contemplated to be
taken by the Company and (c) stating that the signer has personally reviewed
this Agreement and that such certificate is based on an examination reasonably
sufficient to assure that such certificate is accurate.
8.09. Use of Proceeds. The Company will use the proceeds of
the Loans borrowed on the Closing Date solely to satisfy its existing Debt, for
payment of transaction fees and expenses incurred in connection with the
Transaction Documents and for working capital purposes.
8.10. Further Assurances. The Company will, at its own cost
and expense, cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances as may from time to
time be necessary or as the Purchasers may from time to time reasonably request
in order to carry out the intent and purposes of the Transaction Documents and
the transactions contemplated thereby.
8.11. Board Meetings. The Company will hold at least four
regular meetings of the Board of Directors during each calendar year at such
times and at such places (or via telephone conference) as shall be determined by
the Board of Directors from time to time. The
43
Company will notify the Purchasers of all meetings and actions by written
consent of its board of directors at the same time and in the same manner as
notice of any meetings of such board is required to be given to its directors
who do not waive such notice (or, if such action requires no notice, then (if
practicable) 10 days written notice thereof describing the matters upon which
action is to be taken). The Purchasers shall have the right to send two
representatives selected by them to each such meeting, who shall be permitted to
attend, at the expense of the Company, such meeting and any adjournments
thereof, provided that in no event shall the holders of the Securities be
entitled to send more than two representatives in the aggregate (in addition to
the number of Directors to which the Purchasers are entitled) pursuant to the
terms of this Agreement, the Warrants or the Stockholder Agreement.
8.12. SBIC Regulatory Provisions.
(a) The Company hereby acknowledges that each
Purchaser has informed it that such Purchaser is a "small business
investment company" under the Small Business Investment Act of 1958, as
amended, and the regulations thereunder, including Title 13, Code of
Federal Regulations, Part 107.
(b) At the same time the Company delivers its annual
audited financial statements under Section 8.01(b) hereof and at any
time an SBIC Holder (as defined below) may reasonably request, the
Company shall deliver to such Purchaser and each other holder of Notes
or underlying Common Stock which informs the Company in writing it is
an SBIC (an "SBIC Holder") a written statement certified by its
president or chief financial officer describing in reasonable detail
the use of the proceeds of the financing hereunder by the Company and
its Subsidiaries. In addition to any other rights granted hereunder,
the Company shall grant each SBIC Holder and the United States Small
Business Administration (the "SBA") access to its and its Subsidiaries'
records for the purpose of verifying the use of such proceeds and the
Company's status as a "small concern."
(c) Promptly after the end of each Fiscal Year (but
in any event prior to 20 days thereafter), the Company shall deliver to
each SBIC Holder, specifying the full-time equivalent jobs created or
retained in connection with the investment, the impact of the
investment on the businesses of the Company in terms of expanded
revenue and taxes and other economic benefits resulting from the
investment (including, but not limited to, technology development or
commercialization, minority business development, urban or rural
business development and expansion of exports).
8.13. Reservation of Shares. The Company shall at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issue or delivery upon exercise of the Warrants as provided therein,
the maximum number of shares of Common Stock that may be issuable or deliverable
upon such exercise. Such shares of Common Stock shall, when issued and delivered
in accordance with the Warrants, be duly and validly issued and fully paid and
non-assessable. The Company shall issue such Common Stock in accordance with the
provisions of the Warrants and shall otherwise comply with the terms thereof.
44
8.14. Compliance with Agreements. The Company shall comply,
and shall cause each of its Subsidiaries to comply, in all material
respects with each Operative Document to which it is a party.
8.15. Environmental Provisions.
(a) The Company shall comply, and cause its
Subsidiaries to comply, in all material respects with all applicable
Environmental Laws, except where the failure to so comply would not
have a Material Adverse Effect.
(b) The Company shall provide to the Purchasers,
promptly after receipt, copies of any correspondence, notice, pleading,
citation, indictment, complaint, order, decree, or other document from
any source asserting or alleging a circumstance or condition which
requires or may require a financial contribution by the Company or any
Subsidiary or a cleanup, removal, remedial action, or other response by
or on the part of the Company or any Subsidiary under applicable
Environmental Laws or which seeks damages or civil, criminal or
punitive penalties from the Company for an alleged violation of
Environmental Laws.
(c) The Company shall promptly notify the Purchasers
in writing as soon as the Company becomes aware of any condition or
circumstance which makes the environmental warranties contained in this
Agreement incomplete or inaccurate in any material respect as of any
date.
(d) In the event of any condition or circumstance
that makes any environmental warranty, representation and/or agreement
contained herein incomplete or inaccurate in any material respect as of
any date regarding any real property owned or operated by the Company
or any Subsidiary, the Company shall, at the reasonable request of the
Purchasers, at the Company's sole expense, retain an environmental
professional consultant, reasonably acceptable to the Purchasers, to
conduct an environmental audit regarding the changed condition and/or
circumstance and any environmental concerns arising from that changed
condition and/or circumstance in form and scope recommended by such
consultant in light of the relevant facts and circumstances. A copy of
the environmental consultant's report will be promptly delivered to the
Purchasers and the Company upon completion.
(e) If at any time the Company or any Subsidiary,
directly or indirectly through any professional consultant or other
representative, determines to undertake an environmental audit,
assessment or investigation, then the Company shall promptly provide
the Purchasers with written notice of the initiation of the
environmental audit, fully describing the purpose and intended scope of
the environmental audit. Upon receipt, the Company will promptly
provide to the Purchasers copies of all final written findings and
conclusions of any such environmental investigation. Preliminary
written findings and conclusions shall be provided if final reports
have not been completed and
45
delivered to the Purchasers within 60 days following completion of the
preliminary findings and conclusions.
(f) The Company will promptly comply with any
governmental requirements requiring the removal, treatment or disposal
of any Hazardous Materials or Hazardous Materials Contamination and
provide evidence satisfactory to the Purchasers of such compliance,
except where such compliance is the subject of a Permitted Contest."
8.16. Maintain Consolidated Adjusted Net Worth. Maintain as
of the end of each fiscal quarter a Consolidated Adjusted Net Worth of not less
than the following amounts during the periods specified below:
from the Closing Date through December 30, 1999....... $17,000,000
from December 31, 1999 through December 30, 2000...... $17,000,000
from December 31, 2000 through December 30, 2001...... $17,850,000
from December 31, 2001 through December 30, 2002...... $19,550,000
from December 31, 2002 through December 30, 2003...... $22,100,000
from December 31, 2003 and thereafter................. $25,075,000
8.17. Maintain Total Debt to EBITDA Ratio. Maintain as of the
end of each fiscal quarter a Total Debt to EBITDA Ratio of not more than the
following amounts during the periods specified below:
from the Closing Date through December 30, 1999....... 4.6 to 1.0
from December 31, 1999 through December 30, 2000...... 4.6 to 1.0
from December 31, 2000 through December 30, 2001...... 4.31 to 1.0
from December 31, 2001 through December 30, 2002...... 4.03 to 1.0
from December 31, 2002 through December 30, 2003...... 4.03 to 1.0
from December 31, 2003 and thereafter................. 4.03 to 1.0
8.18. Maintain Fixed Charge Coverage Ratio. Maintain as of
the end of each fiscal quarter of Company a Fixed Charge Coverage Ratio of not
less than the following amounts during the periods specified below:
from the Closing Date through December 30, 1999....... .89 to 1.0
from December 31, 1999 through December 30, 2000...... .89 to 1.0
from December 31, 2000 through December 30, 2001...... .89 to 1.0
from December 31, 2001 through December 30, 2002...... .89 to 1.0
from December 31, 2002 through December 30, 2003...... .94 to 1.0
from December 31, 2003 and thereafter................. .98 to 1.0
8.19. Maintain Senior Debt to EBITDA Ratio. Maintain as of
the end of each fiscal quarter a Senior Debt to EBITDA Ratio of not more than
the following during the periods specified below:
46
from the Closing Date through December 30, 1999....... 3.74 to 1.0
from December 31, 1999 through December 30, 2000...... 3.74 to 1.0
from December 31, 2000 through December 30, 2001...... 3.45 to 1.0
from December 31, 2001 through December 30, 2002...... 3.16 to 1.0
from December 31, 2002 through December 30, 2003...... 3.16 to 1.0
from December 31, 2003 and thereafter................. 3.16 to 1.0
8.20. [INTENTIONALLY OMITTED.]
8.21 Taxes. The Company shall pay and discharge, and cause
each of its Subsidiaries to pay and discharge, all taxes and other governmental
charges, before the same shall become overdue, unless and to the extent only
that such payment is the subject of a Permitted Contest.
8.22 ERISA Notices. The Company shall promptly notify the
Purchasers after the occurrence thereof in writing of any of the following
events:
(a) the termination of a Pension Plan pursuant
to Subtitle C of Title IV of ERISA or otherwise;
(b) the appointment of a trustee by a United
States District Court to administer a Pension Plan;
(c) the commencement by the Pension Benefit
Guaranty Corporation, or any successor thereto of any proceeding to
terminate a Pension Plan;
(d) the failure of a Pension Plan to satisfy the
minimum funding requirements for any plan year as established in
Section 412 of the Internal Revenue Code of 1954, as amended or any
similar provision under the Internal Revenue Code of 1986, as amended;
(e) the withdrawal of Company or any Subsidiary
from a Pension Plan; or
(f) a reportable event, within the meaning of
Title IV of ERISA.
ARTICLE 9
Negative Covenants
Until the payment by the Company of all principal of and
interest on the Notes and all other amounts due at the time of payment of such
principal and interest to the Purchasers under this Agreement or the Notes,
including, without limitation, all fees, expenses and amounts due at such time
in respect of indemnity obligations under Article 7, and for so long as any of
the Warrants or the Preferred Stock remain outstanding, the Company hereby
covenants and agrees
47
with the Purchasers as follows:
9.01. Capital Stock. The Company shall not purchase, acquire,
issue or redeem any of its capital stock or make any material change in its
capital structure, except for redemptions of stock if at the time of such
redemption or after giving effect thereto no Potential Default or Event of
Default shall exist and be continuing. Other than the Preferred Stock currently
issued and outstanding, the Company shall not issue any capital stock that under
its articles of incorporation is entitled to a preference over the Common Stock
as to payment of dividends or distributions.
9.02. Consolidations, Mergers and Sales of Assets. Except as
permitted under Section 9.05, the Company shall not, and shall not permit any
Subsidiary to, enter into any merger or consolidation or sell, lease, transfer,
or dispose of all, substantially all, or any material part of its assets, except
in the ordinary course of business and except mergers of which the Company is
the surviving entity.
9.03. Guarantees. The Company shall not, and shall not permit
any Subsidiary to, guarantee, endorse, or otherwise become secondarily liable
for or upon the obligations of others, except (a) by endorsement for deposit in
the ordinary course of business, (b) guarantees to the Lenders or the
Purchasers, (c) unsecured Guarantees by the Company of the obligations of its
Subsidiaries to the extent the underlying obligations are permitted under this
Agreement, and (d) the corporate guaranty of the Company relative to the
obligations of its wholly owned Subsidiary, Inmet, under the Bank of Xxx Arbor
credit facility (as described in REVISED SCHEDULE 9.04 attached to this
Agreement) provided that in no event shall such obligations under the Bank of
Xxx Arbor credit facility exceed $2,830,000.
9.04. Debt. The Company shall not, and shall not permit any
Subsidiary to, become or remain obligated for any indebtedness for borrowed
money, or for any indebtedness incurred in connection with the acquisition of
any property, real or personal, tangible or intangible, except:
(a) indebtedness to the Purchasers;
(b) indebtedness to the Lenders under the Credit
Agreement in the aggregate principal amount not to exceed the sum of
(i) the product of (A) $25,000,000 of term Debt minus the sum of all
scheduled principal payments (scheduled as of the date the Credit
Agreement is entered into by the parties thereto) multiplied by (B)
1.30, plus (ii) the product of (A) $12,000,000 of revolving Debt
multiplied by (B) 1.30;
(c) current unsecured trade payables and accrued
liabilities arising in the ordinary course of the Company's or any
Subsidiary's business, deferred income tax and purchase accounting
reserves;
(d) purchase money indebtedness for the acquisition
of fixed assets in an amount not to exceed $500,000 in the aggregate
during any fiscal year of the Company
48
(determined on a combined basis for the Company and its Subsidiaries).
(e) existing indebtedness listed in attached
REVISED SCHEDULE 9.04 attached to this Agreement.
(f) unsecured indebtedness of the Company to its
wholly owned Material Subsidiaries or a wholly owned Material Subsidiary
to another wholly owned Material Subsidiary or a wholly owned Material
Subsidiary to the Company.
(g) other unsecured indebtedness not exceeding
$100,000 in the aggregate at any time outstanding.
(h) indebtedness under any Interest Rate
Protection Agreements.
(i) unsecured indebtedness of Densitron
Microwave Limited or DML Microwave Limited under an overdraft line of
credit in an amount not exceeding 500,000 Pounds Sterling in the
aggregate at any time outstanding.
(j) unsecured indebtedness of DML Microwave
Limited to MCE Europe, Inc. in an amount not exceeding 3,000,000 Pounds
Sterling incurred to consummate the Acquisition and until June 30, 2000
unsecured indebtedness of Densitron Microwave Limited to MCE Europe,
Inc. in an amount not to exceed 2,000,000 Pounds Sterling incurred for
working capital purposes.
9.05. Purchase of Assets. The Company shall not, and shall not
permit any Subsidiary to, purchase or otherwise acquire or become obligated for
the purchase of all or substantially all of the assets or business interests of
any person, firm or corporation or any shares of stock of any corporation,
trusteeship or association or in any other manner effectuate or attempt to
effectuate an expansion of present business by acquisition, other than Permitted
Acquisitions.
9.06. Investments. The Company shall not, and shall not permit
any Subsidiary to, make or allow to remain outstanding any investment (whether
such investment shall be of the character of investment in shares of stock,
evidences of indebtedness or other securities or otherwise) in, or any loans or
advances or extensions of credit to, any person, firm, corporation or other
entity or association, except:
(a) the Company's investment in its wholly owned
Material Subsidiaries;
(b) loans and advances permitted under Section
9.04(f) and 9.04(j) hereof;
(c) investments (other than loans or advances)
by a wholly owned Material Subsidiary in another wholly owned
49
Material Subsidiary or a wholly owned Material Subsidiary in the
Company;
(d) investments of surplus cash in cash equivalents;
(e) loans and advances to management employees made
to enable them to purchase an equity interest in the Company not to
exceed $150,000 in aggregate amount at any time outstanding;
(f) sales on open account or in the ordinary course
of business;
(g) other loans, advances and investments not
exceeding $500,000 in the aggregate at any time outstanding;
(h) deposits made in the ordinary course of business
in order to obtain goods and services; and
(i) investments which constitute or are part of a
Permitted Acquisition, including the equity investment by MCE Europe,
Inc. in DML Microwave Limited in an amount not exceeding 2,000,000
Pounds Sterling incurred in connection with the Acquisition.
9.07. Negative Pledge. The Company shall not, and shall not
permit any Subsidiary to, affirmatively pledge or mortgage any of their assets,
whether now owned or hereafter acquired, or create, suffer or permit to exist
any Lien thereon, except:
(a) for the indebtedness for borrowed money
permitted by Section 9.04(b);
(b) the Permitted Liens;
(c) the Liens described in REVISED SCHEDULE 5.06 to
this Agreement; and
(d) Liens upon fixed assets acquired by Company or a
Subsidiary after the date of this Agreement (including by virtue of a
Capital Lease) provided that (i) any such Lien is created solely for
the purpose of securing indebtedness representing, or incurred to
finance, the cost of the item of property subject thereto; (ii) the
principal amount of the indebtedness secured by such Lien is initially
at least 70% and does not exceed 100% of the fair value of the property
at the time it was acquired, (iii) the Lien does not cover any other
property other than such item of property, and (iv) the incurrence of
the indebtedness secured by such Lien is permitted by Section 9.04(d)
hereof.
9.08. Security Interest. The Company shall not, and shall not
permit any Subsidiary to, sell, assign, transfer or confer a security interest
in any account, contract, note, trade acceptance or other receivable, except to
the Lenders as permitted in Section 9.07(a).
50
9.09. Business Purposes. The Company shall not, and shall
not permit any Subsidiary to, materially alter the character of its businesses
from that conducted as of the date of this Agreement.
9.10. Extensions of Credit. The Company shall not, and shall
not permit any Subsidiary to, make loans, advances of credit or extensions of
credit to any of its officers, directors or shareholders or any member of their
immediate families or entity controlled by any of the foregoing or to any other
person, except for sales on open account or in the ordinary course of business
and except for loans and advances permitted pursuant to the provisions of
Section 9.06.
9.11. Distributions. The Company shall not, and shall not
permit any Subsidiary to, declare or pay any Restricted Payments (whether by
reduction of capital or otherwise) with respect to any shares of its stock,
except for (a) dividends by Subsidiaries to the Company, (b) dividends paid
during any fiscal year of the Company to the extent not exceeding five percent
(5%) of Consolidated Net Income for such fiscal year if at the time such
dividends are declared and paid and after giving effect thereto, no Event of
Default or Potential Default shall exist and be continuing, and (c) dividends or
redemptions with respect to the Preferred Stock, and purchases or redemptions of
the Warrants.
9.12. ERISA. The Company shall not, and shall not permit any
Subsidiary to, enter into, maintain, or make contributions to, directly or
indirectly, any defined benefit pension plan that is subject to ERISA except for
the KDI/Triangle Corporation Defined Benefit Plan (the "KDI Plan"). The Company
shall not, and shall not permit any of its Subsidiaries to:
(a) engage in any transaction in connection with
which the Company or any of its Subsidiaries could reasonably be
expected to be subject to any material liability arising from either a
civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code;
(b) terminate any Plan in a manner, or take any
other action, which could result in any material liability of any
member of the ERISA Group to the PBGC;
(c) fail to make full payment when due of all amounts
which, under the provisions of any Plan, it is required to pay as
contributions thereto, or permit to exist any accumulated funding
deficiency, whether or not waived, with respect to any Plan;
(d) except for the KDI Plan, which had an unfunded
past service liability of $538,475 as of January 1, 1998, permit the
present value of all benefit liabilities under all Plans to exceed the
fair market value of the assets of such Plans; or
(e) fail to make any material payments to any
Multiemployer Plan that it may be required to make under any agreement
relating to such Multiemployer Plan or any law pertaining thereto.
51
In addition, no member of the ERISA Group shall (i) fail to pay when
due any amount that it shall have become liable to pay under Title IV of ERISA,
(ii) cause or permit to exist any event by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated, or (iii) cause or permit there to occur a complete or partial
withdrawal from, or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to one or more Multiemployer Plans which could cause one or
more members of the ERISA Group to incur a current payment obligation.
9.13. Transactions with Affiliates. The Company shall not, and
shall not permit any Subsidiary to, enter into any transaction or series of
transactions with any Affiliate other than on terms and conditions as favorable
to the Company or Subsidiary, as the case may be, as would be obtainable in a
comparable arm's-length transaction with a person other than an Affiliate,
except transactions between the Company and any wholly owned Subsidiary.
9.14. Fiscal Year. The Company shall not change, and shall
not permit any of its Subsidiaries to change, its fiscal year from a fiscal year
ending December 31.
9.15. Amendments or Waivers. Without the prior written consent
of the Purchasers, the Company will not, and will not permit any Subsidiary to,
agree to (a) any amendment to or waiver of or in respect of any of the Operative
Documents, excluding the Credit Agreement, or (b) any amendment to or waiver of
or in respect of the certificate of incorporation of the Company.
Notwithstanding the foregoing, the Company shall not, and shall not permit any
Subsidiary to, enter into any modification or amendment to the Credit Agreement
or Senior Security Documents to which it is a party (or permit the amendment or
modification thereof) that (i) makes less restrictive the advance rates and
formulae applicable to the Debt thereunder, (ii) relates to the payment of
dividends or other distributions with respect to capital stock, or (iii) adds
any new covenant, prepayment event or event of default prohibiting or limiting,
as such, changes in ownership of capital stock of the Company, the effect of
which will directly prohibit the exercise of the Warrants in whole or in part.
9.16. No Inconsistent Agreements; Amendments. Except with
respect to Article 11 of this Agreement, the Company shall not, and shall not
permit any of its Subsidiaries to, enter into any loan or other agreement, or
enter into any amendment or other modification to any currently existing
agreement, which by its terms prevents (a) the Company from paying the principal
of or premium, if any, or interest on the Notes at the times or in the amounts
as provided therein; (b) the Company from paying dividends on the Preferred
Stock or redeeming the Preferred Stock at the times or in the amounts as
provided therein; or (c) the Company or any Subsidiaries from otherwise
observing or performing any of its obligations under the Transaction Documents
to which it is a party.
9.17. Capital Expenditures. Make any Capital Expenditure
during any single fiscal year the aggregate amount of all Capital Expenditures
made by Company and its Subsidiaries during such period would exceed $2,500,000
provided, that Company and its Subsidiaries may make additional Capital
Expenditures in any annual period commencing January 1 in each case in an amount
equal to the excess of the maximum amount of Capital
52
Expenditures specified above for the immediately previous annual period over the
amount of Capital Expenditures actually made in such period; and provided,
further, in calculating the limitation for purposes of this Section 9.17, the
Inmet Cap Ex shall be excluded.
9.18. Prepayment of Debts. The Company shall not, and shall
not permit any Subsidiary to, prepay, purchase, redeem or defease any Debt for
money borrowed or any Capital Leases excluding, subject to the terms hereof, any
indebtedness or liabilities of the Company arising under this Agreement, the
1999 Purchase Agreement or the Credit Agreement.
ARTICLE 10
Defaults
10.01. Events of Default. If any one or more of the following
events (each an "Event of Default") shall occur and be continuing for any reason
whatsoever (whether voluntary or involuntary, by operation of law or otherwise):
(a) the Company shall fail to pay when due any
principal of any Note or shall fail to pay any dividend or redemption
payment on the Preferred Stock on the scheduled payment date, or shall
fail to pay within two Business Days of the due date thereof any
interest or premium on any Note, or any fees or any other amount
payable hereunder;
(b) the Company shall fail to pay when due any
principal of any Senior Note, or shall fail to pay when due any
interest or premium on any Senior Note, or any fees or any other amount
payable thereunder;
(c) the Company shall fail to observe or perform any
covenant in Sections 8.13, 8.16 through 8.20, inclusive, or in Article
9, or shall fail to observe or perform for 10 days any of the covenants
or agreements of the Company set forth in Sections 8.01(a) or (b),
8.03, 8.04, 8.05 or 8.08;
(d) the Company shall fail to observe or perform any
covenant or agreement contained in this Agreement or any other
Transaction Document to which it is a party (other than those covered
by clause (a), (b) or (c) above) for 30 days after the earlier of the
date written notice of such failure has been given to the Company by
any Purchaser and the date the Company first has knowledge of such
failure;
(e) any Subsidiary shall fail to observe or perform
any covenant or agreement contained in any Operative Agreement to which
it is a party for 30 days after the earlier of the date written notice
of such failure has been given to any Subsidiary by any Purchaser and
the date the Company first has knowledge of such failure;
(f) any representation, warranty, certification or
statement made by the Company or any Subsidiary in any Operative
Document or in any certificate, financial
53
statement or other material document delivered pursuant to the
Operative Documents shall prove to have been incorrect in any respect
(or in any material respect if such representation, warranty,
certification, or statement is not by its terms already qualified as to
materiality) when made (or deemed made);
(g) the Company or any of its Subsidiaries shall fail
to make any payment or payments in respect of any Debt (other than the
Notes and Senior Notes) arising in one or more related or unrelated
transactions, the amount of such payment or payments shall be in an
aggregate amount exceeding $100,000 and such failure shall continue
beyond any period of grace, if any, specified therein;
(h) any event or condition shall occur which (i)
results in the acceleration of the maturity of (A) Senior Notes, or (B)
any Debt (other than the Notes and the Senior Notes) of the Company or
any of its Subsidiaries arising in one or more related or unrelated
transactions, in an aggregate principal amount exceeding $100,000, or
(ii) enables (or, with the giving of notice or lapse of time or both,
would enable) the holder of such Debt (other than the Senior Notes) or
any Person or Persons acting on behalf of such holder or holders to
accelerate the maturity thereof, or (iii) results in a violation of, or
a default under, any provision of the articles of incorporation of the
Company;
(i) (i) the Company or any of its Subsidiaries shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or (ii) the Company or
any of its Subsidiaries shall take any corporate action to authorize
any of the foregoing;
(j) an involuntary case or other proceeding shall be
commenced against the Company or any of its Subsidiaries seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the Company or
any of its Subsidiaries under the federal bankruptcy laws as now or
hereafter in effect;
(k) one or more judgments or orders for the payment
of money aggregating in excess of $100,000 shall be rendered against
the Company or any of its Subsidiaries and such judgments or orders
shall continue unsatisfied and unstayed for a period of 30 consecutive
days; provided that any amounts that an insurer has
54
acknowledged an obligation to pay shall not be included in such
aggregate amount; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA
Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to
terminate, to impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or to cause a trustee to be appointed to
administer any Material Plan;
(l) any person or group of persons (within the
meaning of Rule 13d-3 promulgated by the Commission under the Exchange
Act), other than the Investors and Investor Affiliates, shall have
acquired beneficial ownership (within the meaning of such Rule 13d-3)
of 45% or more of the Common Stock; or the Investors and Investor
Affiliates shall cease to be the beneficial owner of at least 45% of
the Common Stock (each, a "Change in Control");
(m) the auditor's report or reports on the audited
statements delivered pursuant to Section 8.01 shall include any
material qualification (including with respect to the scope of audit)
or exception and shall not have been replaced within 30 days after the
delivery thereof by an auditor's report that does not include any
material qualification (including with respect to the scope of audit)
or exception;
(n) [INTENTIONALLY OMITTED];
(o) the Company shall be prohibited or otherwise
materially restrained from conducting the business theretofore
conducted by it by virtue of any determination, ruling, decision,
decree or order of any court or regulatory authority of competent
jurisdiction and such determination, ruling, decision, decree or order
remains unstayed and in effect for any period of 10 days beyond any
period for which any business interruption insurance policy; or
(p) any of the Operative Documents shall for any
reason fail to constitute the valid and binding agreement of any party
thereto, or any such party shall so assert in writing; provided that in
the case of any Operative Document which is not a Transaction Document,
such failure could reasonably be expected to have an adverse effect on
the Purchasers;
then, and in every such event and at any time thereafter during the continuance
of such event, the Purchasers by notice to the Company shall declare the Notes
(together with accrued interest thereon) to be, and the Notes shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Company;
provided that in the case of any of the Events of Default specified in clause
(i) or (j) above with respect to the Company, without any notice to the Company
or any other act by the Purchasers, all of the Notes (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Company. The exercise by the Purchasers of one or more of its
55
remedies upon the occurrence of an Event of Default shall in no way
preclude the Purchasers from exercising other remedies also available to it in
law or in equity.
ARTICLE 11
Subordination
The payment of the principal of and premium, if any, and
interest on the Subordinated Indebtedness (as defined below) shall be
subordinate and junior in right of payment to all Senior Indebtedness (as
defined below) to the extent and in the manner provided in this Article 11.
11.01. Certain Definitions. As used in this Article
11, the following terms shall have the following meanings:
"Junior Securities" means any debt or equity
securities distributed to the holders of the Notes, but only if they
are subordinated to at least the same extent as the Notes to Senior
Indebtedness and any securities issued in exchange for Senior
Indebtedness, and any such subordination shall include provisions
relating to amortization and prepayment or, if applicable, redemption
or repurchase to the effect that all payments of principal on the
Senior Indebtedness or any securities issued in exchange for the Senior
Indebtedness are to be made in full prior to any payment of principal
under or redemption or repurchase of such securities distributed to the
holders of the Notes.
"Post Petition Interest" means interest that accrues
after the commencement of a case, proceeding or other action relating
to the bankruptcy, insolvency or reorganization of the Company or any
of its Subsidiaries or Affiliates, whether or not allowed or allowable
as a claim in any such proceeding.
"Senior Default" means a Senior Payment Default or a
Senior Event of Default.
"Senior Event of Default" means any default, other
than a Senior Payment Default, that occurs and is continuing with
respect to Senior Indebtedness that permits the holders of such Senior
Indebtedness to accelerate the maturity of such Senior Indebtedness.
"Senior Indebtedness" means (i) the principal of and
interest (including Post-Petition Interest) on the Senior Loans, (ii)
any and all other costs, fees, expenses and other amounts payable by
the Company under the Credit Agreement or any of the Senior Security
Documents, and (iii) any other obligations or liabilities of the
Company to the Lenders; provided that in no event shall the aggregate
principal amount of loans or other obligations constituting Senior
Indebtedness exceed the amount permitted by Section 9.04(b).
56
"Senior Payment Default" means any default in the
payment of any Senior Indebtedness that occurs and is continuing beyond
any applicable period of grace.
"Subordinated Indebtedness" means (i) the principal
of and interest (including Post-Petition Interest) on the Notes, (ii)
all payments for the redemption of any Warrant pursuant to Article V of
such Warrant or of any Preferred Stock, and (iii) any other monetary
obligations of the Company arising out of or in connection with this
Agreement or the Notes.
11.02. General. Subject to Section 11.03, the Company may
make and the holders of the Notes may receive payment on the Subordinated
Indebtedness, including, without limitation:
(a) payments of interest on account of the Notes on
the regularly scheduled payment dates thereof in accordance with the
terms of the Notes; and
(b) payment of the principal of the Notes on the
regularly scheduled payment dates thereof, all in accordance with the
terms of the Notes.
11.03. Limitation on Payment and Remedies.
(a) If there shall be a Senior Payment Default, the
Company shall not make any payment (in cash, property, securities or by
setoff or otherwise) of or on account of the principal of or interest
on the Notes or as a sinking fund for the Notes or on account of any
other Subordinated Indebtedness or in respect of any redemption,
retirement, purchase or other acquisition of the Notes until (i) such
Senior Payment Default shall have been remedied or waived or shall have
ceased to exist or (ii) the Senior Indebtedness in respect of which
such Senior Payment Default shall have occurred shall have been paid or
provided for in full.
(b) If there shall be a Senior Event of Default and
the Lenders shall have delivered a Blockage Notice (as defined below)
to the Company and the holders of the Notes, the Company shall not make
any direct or indirect payment (in cash, property, securities or by
setoff or otherwise) of or on account of the principal of or interest
on the Notes or as a sinking fund for the Notes or on account of any
other Subordinated Indebtedness or in respect of any redemption,
retirement, purchase or other acquisition of the Notes prior to the
earlier to occur of (i) the date all such Senior Events of Default that
gave rise to the Blockage Notice shall have been remedied or waived or
shall have ceased to exist or (ii) the 180th day after the Company's
receipt of such Blockage Notice or such shorter period as determined in
accordance with paragraph (c) below.
(c) For the purposes of this Article 11, (i) a
"Blockage Notice" is a notice of a Senior Event of Default that in fact
has occurred and is continuing, given to the Company and the holders of
the Notes by the Lenders; provided, however, that (x) no such notice
shall be effective as a Blockage Notice if an effective Blockage Notice
shall
57
have been previously given within the most recent period of 360
consecutive days, and (y) no such notice shall be effective as a
Blockage Notice if such notice relates to a Senior Event of Default
which existed or is continuing on the date a Blockage Notice was
previously delivered within the most recent period of 360 consecutive
days (it being understood and agreed that a Senior Default resulting
from a breach of a covenant in one time period or at one determination
date and a Senior Default resulting from a breach of the same covenant
in the next succeeding time period or at the next succeeding
determination date shall be deemed to be the same Senior Default); and
(ii) a "Blockage Period" is the period during which the Company is
restricted from making payments of or on account of the Subordinated
Indebtedness pursuant to Section 11.03(a) or Section 11.03(b).
Notwithstanding any provision in this Agreement to the contrary, in no
event shall the Company be restricted from making payments of or on
account of the Subordinated Indebtedness pursuant to Section 11.03(b)
by reason of giving one or more Blockage Notices for a period which
exceeds, in the aggregate, 180 days in any 360-consecutive-day period.
Upon the expiration or termination of any Blockage Period, the holders
of the Notes shall be entitled to be paid all sums due and owing on the
Subordinated Indebtedness.
(d) As long as any Senior Indebtedness remains
outstanding, upon the occurrence of an Event of Default under this
Agreement, the holders of the Subordinated Indebtedness shall not
declare or join in any declaration of the Notes to be due and payable
by reason of such Event of Default or otherwise take any action against
the Company prior to the expiration of 10 days (a "Remedy Standstill
Period") after the written notice of intention to accelerate on account
of the occurrence of such Event of Default (a "Remedy Notice") shall
have been given by the holders of the Subordinated Indebtedness to the
Company and the Lenders or the holders of the Senior Indebtedness
unless the holders of any Senior Indebtedness shall have caused such
Senior Indebtedness to become due prior to its stated maturity or any
Event of Default pursuant to Section 10.01(i) or Section 10.01(j) of
this Agreement shall have occurred; provided, however, that such Remedy
Standstill Period shall be extended until the earliest of (x) the date
such Event of Default shall have been remedied or waived or shall have
ceased to exist or the date on which the holders of the Senior
Indebtedness have caused such Senior Indebtedness to become due prior
to its stated maturity, (y) the date that such Remedy Standstill Period
shall cease to be effective in accordance with Section 11.03(e), and
(z) 120 days from the date such Remedy Notice was given (if the Remedy
Notice was given in respect of an Event of Default under Section
10.01(a) or Section 10.01(b)) or 180 days from the date such Remedy
Notice was given (if the Remedy Notice was given in respect of an Event
of Default other than under Section 10.01(a) or Section 10.01(b)) if,
at the time the Remedy Standstill Period would otherwise expire, (1)
there exists any Senior Payment Default and (2) there exists any Senior
Event of Default and an effective Blockage Notice is given in
accordance with, and subject to the limitations of, this Section 11.03.
Upon the expiration or termination of any Remedy Standstill Period, the
holders of the Notes shall be entitled to exercise any of their rights
with respect to the Notes other than any right to accelerate the
maturity date of the Notes based upon the occurrence of any Event of
Default which has been cured or otherwise remedied during
58
the Remedy Standstill Period.
(e) Notwithstanding any provision in this Agreement
to the contrary (excluding the subordination provisions of Section
11.03(a)), any Blockage Period or Remedy Standstill Period shall be
inapplicable or cease to be effective if an Event of Default pursuant
to Section 10.01(i) or Section 10.01(j) shall have occurred. In
addition (subject to the subordination provisions of Section 11.03(a)),
any Blockage Period or Remedy Standstill Period shall cease to be
effective if at any time during such period: (i) all or substantially
all of the assets of the Company are sold or otherwise disposed of
outside of the ordinary course of business, or (ii) payment or any
distribution of any character, whether in cash, securities or other
property of the Company shall be made to or received by any creditor on
any indebtedness for borrowed money which is on a parity with or
subordinate in right of payment to the Notes.
(f) Section 11.03(d) shall not apply to any action
taken by any holder of the Notes in filing lawsuits to prevent the
running of any applicable statute of limitations or other similar
restriction on claims, but in each case only to the extent reasonably
necessary to prevent such running.
11.04. Subordination upon Certain Events. Upon the
occurrence of any Event of Default under Section 10.01(i) or Section
10.01(j) or, without duplication, upon a receivership, insolvency,
liquidation or dissolution of the Company or in connection with an
assignment for the benefit of its creditors or marshaling of its assets
or liabilities:
(a) Upon any payment or distribution of assets of the
Company to creditors of the Company, holders of Senior Indebtedness
shall be entitled to receive payment of the Senior Indebtedness in full
before the holders of the Notes shall be entitled to receive any
payment in respect of the Subordinated Indebtedness, except that the
holders of the Notes may receive Junior Securities.
(b) Until all Senior Indebtedness is paid in full,
any distribution to which the holders of the Notes would be entitled
but for this Article 11 shall be made to holders of Senior
Indebtedness, as their interests may appear, except that the holders of
the Notes may receive Junior Securities.
(c) For purposes of this Article 11, a distribution
or payment may consist of cash, securities or other property, whether
by setoff or otherwise.
(d) Notwithstanding the foregoing provisions of this
Section 11.04, if payment or delivery by the Company of Junior
Securities to the holders of the Subordinated Indebtedness is
authorized by an order or decree giving effect, and stating in such
order or decree that effect is given, to the subordination of the
Subordinated Indebtedness to the Senior Indebtedness, and made by a
court of competent jurisdiction in a proceeding under any applicable
bankruptcy or reorganization law, payment or delivery by the Company of
such Junior Securities shall be made to the holders of the
59
Subordinated Indebtedness in accordance with such order or decree.
11.05. Payments and Distributions Received. If the holders of
the Subordinated Indebtedness shall have received any payment from or
distribution of assets of the Company of any kind or character in respect of the
Subordinated Indebtedness in contravention of the terms of this Article 11
before all Senior Indebtedness is paid in full, then and in such event such
payment or distribution shall be received and held in trust for and shall be
paid over or delivered to the Lenders, as the holder of the Senior Indebtedness
(or its authorized agent) to the extent necessary to pay all such Senior
Indebtedness in full.
11.06. Subrogation. After all amounts payable under or in
respect of Senior Indebtedness are paid in full, the holders of the Subordinated
Indebtedness shall be subrogated to the rights of holders of Senior Indebtedness
to receive payments or distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the holders of the Subordinated
Indebtedness have been applied to the payment of Senior Indebtedness. A
distribution made under this Section 11.06 to a holder of Senior Indebtedness
which otherwise would have been made to the holders of the Subordinated
Indebtedness is not, as between the Company and the holders of the Subordinated
Indebtedness, a payment by the Company on Senior Indebtedness.
11.07. Relative Rights. This Article defines the relative
rights of the holders of the Subordinated Indebtedness and the holders of Senior
Indebtedness. Nothing in this Article 11 shall: (i) impair, as between the
Company and the holders of the Subordinated Indebtedness, the obligation of the
Company, which is absolute and unconditional, to pay principal of and premium,
if any, and interest (including default interest) on the Notes in accordance
with their terms; or (ii) affect the relative rights of the holders of the
Subordinated Indebtedness and creditors of the Company other than holders of
Senior Indebtedness.
11.08. Subordination May Not Be Impaired by the Company. No
right of any holder of any Senior Indebtedness to enforce the subordination of
the Subordinated Indebtedness shall be impaired by any act or any failure to act
by the Company or by the failure of the Company to comply with this Agreement.
11.09. Payments. A payment with respect to principal of or
interest on the Subordinated Indebtedness shall include, without limitation,
payment of principal of and interest on the Notes and any payment on account of
mandatory prepayment or optional prepayment provisions.
11.10. Subordination Not to Prevent Events of Default. The
failure to make a payment on account of principal of or interest on or other
amounts constituting Subordinated Indebtedness by reason of any provision of
this Article 11 shall not be construed as preventing the occurrence of an Event
of Default under Article 10.
11.11. Subordination Not Impaired; Benefit of Subordination.
Each holder of Subordinated Indebtedness agrees and consents that, without
notice to or assent by such holder,
60
and without affecting the liabilities and obligations of the Company and any
holder of Subordinated Indebtedness and the rights and benefits of the holders
of the Senior Indebtedness set forth in this Article 11:
(a) The holders of Senior Indebtedness, and any
representative or representatives acting on behalf thereof, may
exercise or refrain from exercising any right, remedy or power granted
by or in connection with any agreements relating to the Senior
Indebtedness; and
(b) Any balance or balances of funds with any holder
of Senior Indebtedness at any time outstanding to the credit of the
Company or any collateral under the Senior Loan Documents may from time
to time, in whole or in part, be surrendered or released;
all as the holders of the Senior Indebtedness, and any representative or
representatives acting on behalf thereof, may deem advisable, and all without
impairing, abridging, diminishing, releasing or affecting the subordination of
the Subordinated Indebtedness to the Senior Indebtedness provided for herein.
11.12. Miscellaneous.
(a) To the extent permitted by applicable law, the
holders of the Subordinated Indebtedness and the Company hereby waive
notice of acceptance hereof by the holders of the Senior Indebtedness.
(b) The Company and the holders of the Subordinated
Indebtedness hereby expressly agree that the holders of the Senior
Indebtedness may enforce any and all rights derived herein by suit,
either in equity or law, for specific performance of any agreement
contained in this Article 11 or for judgment at law and any other
relief whatsoever appropriate to such action or procedure.
ARTICLE 12
Prepayment
The Company shall prepay outstanding principal (together with
accrued interest) on the Notes in accordance with the "Mandatory Prepayment"
provisions set forth in the Notes. The Company may prepay outstanding principal
of (together with accrued interest on) the Notes only if the Notes are prepaid
on a pro rata basis and in accordance with the "Optional Prepayment" provisions
set forth in the Notes.
ARTICLE 13
Miscellaneous
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13.01. Survival of Agreements, Representations and Warranties.
All of the agreements, representations and warranties made herein shall survive
the execution and delivery of this Agreement, any investigation by or on behalf
of the Purchasers, acceptance of the Securities and payment therefor, exercise
of the Warrants or termination of this Agreement.
13.02. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
(a) if to the Purchasers:
National City Merchant Banking
National City Capital Corporation
0000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxxxx
Managing Director
Xxxxxxx Xxxxxx Mezzanine Fund, L.P.
c/o Rocky Mountain Capital Partners
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Managing Partner
with a copy to:
Xxxxx & Xxxxxxxxx
3200 National City Center
0000 Xxxx 0xx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
Telecopier No.: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
(b) if to the Company:
MCE Companies, Inc.
000 Xxxx Xxxxx
Xxx Xxxxx, Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, President
with a copy to:
62
Xxxxxx Xxxxxxx PLLC
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Telecopier No.: (000) 000-0000
Attention: J. Xxxxxxx Xxxxxxx, Esq.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when delivered
by courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, certified mail, return
receipt requested if mailed first class; and when receipt is acknowledged, if
telecopied.
13.03. Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns and
permitted transferees of the parties hereto.
13.04. Assignments and Participations.
(a) The Company may not assign any of its rights or
obligations under this Agreement without the prior written consent of
the Purchasers.
(b) Subject to applicable securities laws and the
applicable provisions of the Warrants and the Stockholder Agreement,
the Purchasers may, at any time and from time to time assign or sell or
otherwise transfer any of their interests in any of the Transaction
Documents (i) to an Affiliate thereof, (ii) to any bank, insurance
company, investment company, savings and loan association, mezzanine
investment fund or other financial institution or any affiliate thereof
or to any other Person (excluding a competitor of the Company or its
Subsidiaries), with the prior written consent of the Company, which
consent will not be unreasonably withheld.
13.05. Amendment and Waiver.
(a) No failure or delay on the part of the Company or
the Purchasers in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive
of any remedies that may be available to the Company or the Purchasers
at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or
to any provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by the Company from the
terms of any provision of this Agreement, shall be effective (i) only
if it is made or given in writing and signed by the Company and the
Purchasers, and (ii) only in the specific instance and for the specific
purpose for which made or given.
63
Except where notice is specifically required by this Agreement, no notice to or
demand on the Company in any case shall entitle the Company to any other or
further notice or demand in similar or other circumstances.
13.06. Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
13.07. Headings; Section References. The headings in this
Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof. References in this Agreement to "Articles" and
"Sections" shall be to Articles and Sections of or to this Agreement unless
otherwise specifically provided and references in this Agreement to "Schedules"
and "Exhibits" shall be to Schedules and Exhibits of or to the 1996 Agreement
unless otherwise specifically provided.
13.08. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without reference to
principles of conflicts of law.
13.09. Jurisdiction. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
may be brought in the courts of the State of Ohio located in the City of
Cleveland or of the United States District Court for the Northern District of
Ohio and hereby expressly submits to the personal jurisdiction and venue of such
courts for the purposes thereof and expressly waives any claim of improper venue
and any claim that such courts are an inconvenient forum. Each party hereby
irrevocably consents to the service of process of any of the aforementioned
courts in any such suit, action or proceeding by the mailing (via first class
mail) of copies thereof by registered or certified mail, return receipt
requested, postage prepaid, to the address set forth in Section 13.02, such
service to become effective 10 days after such mailing.
13.10. Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
13.11. Rules of Construction. Unless the context otherwise
requires, "or" is not exclusive, and references to sections or subsections refer
to sections or subsections of this Agreement.
13.12. Entire Agreement. This Agreement, together with the
exhibits and schedules hereto and the other Transaction Documents, is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the
64
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to
herein or therein. This Agreement, together with the exhibits and schedules
hereto and the other Transaction Documents, supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
13.13. Certain Expenses. The Company will pay all reasonable
expenses of the Purchasers (including reasonable fees, charges and disbursements
of counsel) in connection with the preparation, negotiation, execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the Closing and each purchase of Securities and any amendment,
supplement, modification or waiver of or to any provision of this Agreement, the
Notes or any other Transaction Document, or any consent to any departure by the
Company from the terms of any provision of this Agreement, the Notes or any
other Transaction Document.
13.14. Further Assurances. Each of the parties shall execute
such documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations, or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.
13.15. Waiver of Jury Trial. THE COMPANY AND THE PURCHASERS
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW
WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL
DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
13.16. Required Purchasers. Whenever any action is to be taken
or consent given, such action or consent shall be effective if approved in
writing and signed by the Holders of at least 66 2/3% in principal amount of the
Notes then outstanding or, if no Notes are then outstanding, the Holders of at
least 66 2/3% of the Warrants then outstanding; provided, however, that no
modification or waiver of any provision of this Agreement shall, unless in
writing and signed by the Holders of all Notes then outstanding, do any of the
following: (a) reduce the principal of, or interest on, the Notes, (b) postpone
any date fixed for any payment of principal of, or interest on, the Notes, or
(c) change the unpaid principal amount of the Notes or the principal percentage
of Holders required to take any action hereunder.
13.17. Confidentiality. Each Purchaser agrees to keep
confidential any information relating to the Company or any of its Subsidiaries
received by it pursuant to or in connection with this Agreement which is (a)
trade information which the Purchasers reasonably expect that the Company would
want to keep confidential, (b) technical information with respect to the
equipment or operations of the Company, (c) financial or environmental
information, and (d) any written information that is clearly and conspicuously
identified in writing by the
65
Company as confidential; provided, however, that this Section 13.17 shall not be
construed to prevent any Purchaser from disclosing such information (i) to any
other Purchaser or any Purchaser's legal counsel, auditors, and accountants, or
any Affiliate that shall agree to be bound by this obligation of
confidentiality, (ii) upon the order of any court or administrative agency,
(iii) upon the request or demand or any regulatory agency or authority (whether
or not such request or demand has the force of law), (iv) that has been publicly
disclosed, other than from a breach of this provision by the Purchaser,
(v) that has been obtained from any Person that is neither a party to this
Agreement nor an Affiliate of any such party, (vi) in connection with the
exercise of any right or remedy hereunder or under any other Transaction
Documents, or (vii) to any purchaser of all or any part of the Notes or
Warrants or Preferred Stock owned by that Purchaser that agrees to be bound
by the obligation of confidentiality in this Agreement.
ARTICLE 14
Additional Representations and Warranties
14.01. Representations and Warranties of the Company.
(a) The Company hereby represents and warrants, as of
the date hereof, that all representations and warranties set forth in
the Financing Documents, as the same may be amended hereby, to which it
is a party are true and correct in all material respects, and that this
Agreement has been executed and delivered by its duly authorized
officer and constitutes a legal, valid and binding obligation of it,
enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally and general principles of equity.
(b) Without limiting the generality of the foregoing,
and notwithstanding anything herein to the contrary, the parties hereto
expressly acknowledge and agree that the representations and warranties
set forth in Article 5 hereof are revised and updated, as of the date
of this Agreement (except as otherwise expressly provided herein or in
the Revised Schedules), by the following representations and warranties
made by the Company to the Purchasers:
(i) Ownership of Property. Section 5.06
above is revised to read in its entirety as follows:
"5.06 Ownership of Property. Except as set forth on the
REVISED SCHEDULE 5.06 attached to this Agreement, except as
reflected in the financial statements provided to the
Purchasers from time to time in accordance with the terms
of the 1996 Agreement and this Agreement, and except for
items purchased in the ordinary course of business since
the date of such financial statements, on and as of the
date of this Agreement, the Company owns no property or
assets and other than the common stock of its Subsidiaries,
and none of its properties and assets is subject to any
Liens, except Permitted Liens."
66
(ii) Subsidiaries; Other Equity Investments.
Section 5.09 above is revised to read in its entirety as follows:
"5.09 Subsidiaries; Other Equity Investments. Except as
described on REVISED SCHEDULE 5.09 attached to this
Agreement, the Company has no Subsidiaries on the date of
this Agreement. Neither the Company nor any of its
Subsidiaries is engaged in any joint venture or partnership
with any other Person, except for joint ventures or
partnerships of any Subsidiary of the Company related to
the manufacture of products that are in the same line of
business as that Subsidiary so long as that Subsidiary's
investment in any such joint ventures or partnerships is
not in excess of $500,000 individually and not in excess of
$1,000,000 in aggregate.
(iii) Capitalization. The first and last sentences of
Section 5.18 above are revised to read in their entirety as set
forth in subparagraphs (A) and (B), respectively:
(A) "Set forth on REVISED SCHEDULE 5.18 attached
to this Agreement is a schedule of the capitalization
of the Company as of the date of this Agreement."
(B) "Except as described in REVISED SCHEDULE 5.18
attached to this Agreement, as of the date of this
Agreement (a) no other class of capital stock or other
ownership interests of the Company are authorized or
outstanding and (b) the Company has no outstanding
rights (either preemptive or other) or options to
subscribe for or purchase from the Company, or any
warrants or other agreements providing for or requiring
the issuance by the Company of, any of its capital
stock or any securities convertible into or
exchangeable for its capital stock."
(iv) Compliance with Environmental Requirements; No
Hazardous Materials. The references in Section 5.22 above to
Schedule 5.22 refers to the REVISED SCHEDULE 5.22 attached to
this Agreement.
(c) The Company hereby represents and warrants, as of the
date hereof, that the execution, delivery and performance by it of this
Agreement and its performance of the Financing Documents, as the same
may be amended hereby, to which it is a party (i) have been duly
authorized by all necessary corporate action, (ii) do not contravene,
or constitute a default under, any provision of applicable law or
regulation or of the articles of incorporation or bylaws of the
Company, or of any judgment, injunction, order or decree or of any
material agreement or other material instrument binding upon the
Company, and (iii) do not result in the creation or imposition of any
Lien (other than
67
the Permitted Liens) on any asset of the Company.
(d) Senior Loan Documents. The Company hereby
represents and warrants that, prior to the date hereof, the Company
delivered to the Purchasers (in the case of Hanifen, such delivery was
made care of Rocky Mountain Capital Partners LLP) true and complete
copies of the Senior Loan Documents in connection with the post-closing
deliveries relative to the 1999 Purchase Agreement.
14.02. Representations and Warranties of the Purchasers. Each
of the Purchasers hereby severally, and not jointly, represents and warrants, as
of the date hereof, that this Agreement has been executed and delivered by its
duly authorized officer and constitutes a legal, valid and binding obligation of
it, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and general principles of equity.
ARTICLE 15
Termination of Investor Subscription Agreements
Each of the Purchasers hereby agrees that the Company and the
Investors are authorized to terminate, effective as of the date hereof, each of
the Investors Subscription Agreements.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective officers hereunto
duly authorized as of the date first above written.
MCE COMPANIES, INC.
By: /s/ Xxxx X. Xxxxxxx
---------------------------------------
Xxxx X. Xxxxxxx, President
Number of
Number of Shares of
Warrant Preferred
Shares Stock
------ ---------
NATIONAL CITY CAPITAL CORPORATION
18,382.72 2,560
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxxxx, Managing Director
XXXXXXX XXXXXX MEZZANINE FUND, L.P.
10,340.28 1,440
By: Xxxxxxx Xxxxxx Capital Partners, LLP,
its General Partner
By: /s/ Xxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Attorney-in-Fact
