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Exhibit 10
EXCHANGE AGREEMENT
Between
ARGOSY INVESTMENT PARTNERS, L.P,
And
XXXXXX HOLDINGS, LTD.
Dated as of January 12, 2001
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TABLE OF CONTENTS
ARTICLE I - EXCHANGE ................................................................... -2-
Section 1.1 Items to be Exchanged ....................................... -2-
Section 1.2 Registration Rights ......................................... -2-
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............................. -5-
Section 2.1 Corporate Status ............................................ -5-
Section 2.2 Authorization, Absence of Conflicts ......................... -5-
Section 2.3 Validity and Binding Effect ................................. -6-
Section 2.4 SEC Reports ................................................ -6-
Section 2.5 Capitalization ............................................. -6-
Section 2.6 Disclosure ................................................. -7-
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE INVESTOR .......................... -7-
Section 3.1 Corporate Status; Residence ................................. -7-
Section 3.2 Authorization ............................................... -7-
Section 3.3 Validity and Binding Effect ................................. -8-
Section 3.4 Accredited Investor; Investment Intent ...................... -8-
ARTICLE IV - PRIOR AGREEMENTS .......................................................... -8-
Section 4.1 Prior Agreements ............................................ -8-
Section 4.2 Corporate Existence, Etc. ................................... -8-
Section 4.3 Maintenance, Etc. ........................................... -8-
Section 4.4 Insurance ................................................... -9-
Section 4.5 Taxes, Claims for Labor and Materials ....................... -9-
Section 4.6 Compliance with Laws, Agreements, etc. ...................... -9-
Section 4.7 ERISA Matters ............................................... -9-
Section 4.8 Books and Records; Rights of Inspection ..................... -10-
Section 4.9 Reports ..................................................... -10-
Section 4.10 Board of Directors; Observer Rights ......................... -11-
Section 4.11 No Dividends or Repurchases ................................. -11-
Section 4.12 Limitation on Activities .................................... -12-
Section 4.13 Nature of Business .......................................... -12-
Section 4.14 Further Assurances .......................................... -12-
ARTICLE V - SUBORDINATION OF NEW DEBENTURE ............................................. -13-
Section 5.1 Subordination ............................................... -13-
Section 5.2 Liquidation, etc ............................................ -13-
Section 5.3 Default on Senior Indebtedness .............................. -14-
Section 5.4 Subrogation ................................................. -14-
Section 5.5 Company's Obligations Not Impaired .......................... -00-
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XXXXXXX XX - XXXXXXXXXXXX XX TRANSFER .................................................. -15-
Section 6.1 Legends, Restrictions on Transfer ........................... -15-
Section 6.2 Notice of Intention to Transfer; Opinions of Counsel ........ -15-
Section 6.3 Notices Regarding Proposed Sales of Shares .................. -16-
ARTICLE VII - EVENTS OF DEFAULT; REMEDIES .............................................. -16-
Section 7.1 Events of Default ........................................... -16-
Section 7.2 Acceleration of Maturities .................................. -17-
ARTICLE VIII - AMENDMENTS, WAIVERS AND CONSENTS ........................................ -18-
Section 8.1 Consent Required ............................................ -18-
Section 8.2 Effect of Amendment or Waiver ............................... -18-
ARTICLE IX - INTERPRETATION OF AGREEMENT; DEFINITIONS .................................. -18-
Section 9.1 Definitions ................................................. -18-
Section 9.2 Accounting Principles ....................................... -21-
ARTICLE X - MISCELLANEOUS .............................................................. -21-
Section 10.1 Powers and Rights Not Waived; Remedies Cumulative ........... -21-
Section 10.2 Notices ..................................................... -21-
Section 10.3 Successors and Assigns ...................................... -22-
Section 10.4 Survival of Covenants and Representation .................... -23-
Section 10.5 Severability ................................................ -23-
Section 10.6 Governing Law ............................................... -23-
Section 10.7 Captions, Counterparts ...................................... -23-
Section 10.8 Continuing Obligations ...................................... -23-
Section 10.9 Entire Agreement ............................................ -23-
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EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (the "Agreement") entered into as of the 12th
day of January, 2001, is by and between ARGOSY INVESTMENT PARTNERS, L.P., a
Pennsylvania limited partnership (the "Investor") and XXXXXX HOLDINGS, LTD., a
Pennsylvania corporation (the "Company").
WITNESSETH:
WHEREAS, the Company and the Investor are parties to that certain
Preferred Stock Purchase Agreement dated as of December 17, 1997 (the "Preferred
Stock Purchase Agreement") pursuant to which the Company issued and sold to the
Investor 15,000 shares of the Company's Series A Convertible Preferred Stock
(the "Preferred Stock");
WHEREAS, the Company and the Investor are parties to that certain
Debenture Purchase Agreement dated as of December 17, 1997 (the "Debenture
Purchase Agreement") pursuant to which the Company issued and sold to the
Investor a debenture in the aggregate principal amount of $500,000 of the
Company's 12.25% Subordinated Debentures due 2003 (the "Initial Debenture"), and
a stock purchase warrant for the purchase of 60,000 shares of the Company's
common stock (the "Warrant");
WHEREAS, the Company and the Investor are parties to that certain
Exchange Agreement dated as of January 1, 1999 (the "Prior Exchange Agreement")
pursuant to which the Investor exchanged 15,000 shares of the Series A
Convertible Preferred Stock for the One Million Five Hundred Thousand and
no/100ths Dollars ($1,500,000.00) aggregate principal amount of the Company's
Subordinated Convertible Debentures due December 31, 2003 (the "Outstanding
Debenture"), and contemporaneously with such exchange the Warrant was amended
and restated solely to extend the exercise date thereof from January 2, 2003 to
December 31, 2003 and (ii) the Investor surrendered the Initial Debenture in
exchange for an amended and restated debenture which (x) extended the maturity
date thereof from January 2, 2003 to December 31, 2003 and (y) provided for the
interest rate to change in accordance with Section 1.2(d) of the Prior Exchange
Agreement (the "Restated Debenture"); and
WHEREAS, the Company and the Investor have agreed to exchange the
Outstanding Debenture, the Restated Debenture and the Warrant for: (i) an
amended and restated debenture substantially in the form of Exhibit A attached
hereto containing substantially the same terms as the Outstanding Debenture,
except that the conversion provisions have been deleted (the "New Debenture"),
and (ii) 250,000 shares of common stock of the Company, par value $.01 per share
(the "Shares").
NOW, THEREFORE, in mutual consideration of the premises and the
respective representations, warranties, covenants and agreements contained
herein, the parties agree as follows:
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ARTICLE I EXCHANGE
Section 1.1 Items to be Exchanged.
Effective immediately upon execution of this Agreement, the Company is
contemporaneously herewith issuing and delivering to the Investor, and the
Investor is hereby accepting from the Company (x) the New Debenture and the
Shares, in exchange for (y) the Outstanding Debenture, the Restated Debenture
and the Warrant. The Outstanding Debenture, the Restated Debenture and the
Warrant are hereby canceled.
The terms which are capitalized herein shall have the meanings set
forth in Section 9.1 hereof unless the context shall otherwise require.
Section 1.2 Registration Rights.
(a) The Company shall, at its sole expense, prepare promptly and, as
soon as practicable after April 30, 2001, file with the SEC a Registration
Statement on Form S-3 covering the resale of any Shares then held by the
Investor, and use its best efforts to cause such Registration Statement to
become effective as soon as practicable after such filing, and keep the
Registration Statement effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the Shares have been sold
and (ii) the date on which all of the Shares (in the reasonable opinion of
counsel to the Company) may be immediately sold to the public without
registration or restriction pursuant to Rule 144(k) under the Securities Act
(the "Registration Period"). The Company shall prepare and file with the SEC
such amendments and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of the
Shares.
(b) The Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein and all documents incorporated by
reference therein) (i) shall comply in all material respects with the
requirements of the Securities Act and the rules and regulations of the SEC
promulgated thereunder and (ii) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein not misleading. The Company shall
notify each seller of the Shares, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in the Registration Statement
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances, and prepare and furnish to
such seller a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances.
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(c) The Company shall use its best efforts to (i) register and qualify
the Shares under such other securities or "blue sky" laws of such jurisdictions
in the United States the Investor reasonably requests, (ii) prepare and file in
those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the Shares
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 1.2, (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
(d) Notwithstanding the foregoing, the Company may delay filing the
Registration Statement otherwise required pursuant to this Agreement, and may
withhold efforts to cause the Registration Statement to become effective, if
Company determines in good faith that the Registration Statement will (1)
interfere with or affect the negotiation or completion of any transaction that
is being contemplated by Company (whether or not a final decision has been made
to undertake such transaction) at the time the right to delay is exercised, or
(2) involve initial or continuing disclosure obligations that might not be in
the best interest of the Company's shareholders. If, after the Registration
Statement becomes effective, the Company notifies the Investor that the Company
considers it appropriate for the Registration Statement to be amended or
supplemented, the Investor and any holder of the Shares shall suspend any
further sales of their Shares pursuant to such Registration Statement until the
Company advises them that the Registration Statement has been amended or
supplemented. The Company may give such advice if there exists at any time
material non-public information relating to the Company that, in the reasonable
opinion of the Company's Board of Directors, would be prejudicial to the Company
or its shareholders to be disclosed at that time.
(e) The Company shall use its best efforts (i) to prevent the issuance
of any stop order or other suspension of effectiveness of the Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest practicable moment (including in each case by amending or
supplementing the Registration Statement) and (ii) to notify the Investor of the
issuance of such order and the resolution thereof.
(f) The Company will indemnify the Investor, each of its officers,
directors and partners, and each person controlling the Investor within the
meaning of Section 15 of the Securities Act, with respect to the Registration
Statement, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in the Registration Statement, or based on any omission (or alleged
omission) to state therein a material
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fact required to be stated therein or necessary to make the statements therein
not misleading, or any violation by the Company of the Securities Act or any
rule or regulation thereunder applicable to the Company and relating to action
or inaction required of the Company in connection with the Registration
Statement, and will reimburse the Investor, each of its officers, directors,
partners, and each person controlling the Investor, for any legal and any other
expenses reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability, or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company by
the Investor and stated to be specifically for use therein. It is agreed that
the indemnity agreement contained in this Section 1.2 shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld).
(g) In connection with the registration or sale of the Shares, the
Investor will indemnify the Company, each of its directors, officers, partners,
and each person who controls the Company within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in the Registration Statement, or
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and such directors, officers, partners, or
control person for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in the Registration Statement in reliance upon and in
conformity with written information furnished to the Company by the Investor,
and stated to be specifically for use therein; provided, however, that the
obligations of the Investor hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities if such
settlement is effected without the consent of the Investor, which consent shall
not be unreasonably withheld; and provided that in no event shall any indemnity
under this Section 1.2(g) exceed the net amount of proceeds received by the
Investor from the sale of securities under the Registration Statement.
(h) Each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party or parties required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
1.2, to the extent such failure is not prejudicial. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not
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include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(i) If the indemnification provided for in this Section 1.2 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor as follows:
Section 2.1 Corporate Status.
The Company is a corporation duly organized, validly existing and
subsisting under the laws of the Commonwealth of Pennsylvania and has the
corporate power to own and operate its properties, to carry on its business as
now conducted and to enter into and to perform its obligations under this
Agreement and the New Debenture (together, the "Operative Documents"). The
Company is qualified to do business and is in good standing in each state or
other jurisdiction in which such qualification is necessary under applicable
provisions of law, except where the failure to so qualify would not have a
Materially Adverse Effect on the financial condition or results of operations of
the Company.
Section 2.2 Authorization, Absence of Conflicts.
The Company has full legal right, power and authority to enter into and
perform its obligations under this Agreement and the New Debenture without the
consent or approval of any other person, firm, governmental agency or other
legal entity. The execution and delivery of this Agreement, the issuance of the
New Debenture and the Shares hereunder, the execution and delivery of each other
document in connection herewith or therewith to which the Company is a party,
and the performance by the Company of its obligations hereunder and/or
thereunder: are
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within the corporate powers of the Company and have been duly authorized by all
necessary corporate action properly taken, have received all necessary
governmental approvals, if any were required, and do not and will not contravene
or conflict with (a) the Articles of Incorporation or Bylaws of the Company, as
amended, (b) any material agreement to which the Company or any of its
subsidiaries is a party or by which any of them or their properties is bound, or
constitute a default thereunder, or result in the creation or imposition of any
lien, charge, security interest, or encumbrance of any nature upon any of the
property or assets of the Company or any of its subsidiaries pursuant to the
terms of any such agreement or instrument, or (c) violate any provision of law
or any applicable judgment, ordinance, regulation or order of any court or
governmental agency. The officer(s) executing this Agreement, the New Debenture,
and the certificates representing the Shares, is duly authorized to act on
behalf of the Company.
Section 2.3 Validity and Binding Effect.
Each of the Operative Documents is the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by the effect of
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
by general principles of equity.
Section 2.4 SEC Reports.
The Company's Common Stock is listed on the NASDAQ Small Cap Market and
has been duly registered with the SEC under the Exchange Act. Since January 1,
1999, the Company has timely filed all reports, registrations, proxy or
information statements and all other documents, together with any amendments
required to be made thereto, required to be filed with the SEC under the
Securities Act and the Exchange Act (collectively, the "SEC Reports"). The
financial statements contained in the SEC Reports fairly presented the financial
position of the Company as of the dates mentioned and the results of operations,
changes in stockholders' equity and changes in financial position or cash flows
for the periods then ended in conformity with GAAP applied on a consistent basis
throughout the periods involved. As of their respective dates, the SEC Reports
complied in all material respects with all rules and regulations promulgated by
the SEC and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
Section 2.5 Capitalization.
(a) The authorized capital stock of the Company consists of (i)
20,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), of which 5,135,936 shares are issued and outstanding as of December 31,
2000, and (ii) 5,000,000 shares of preferred stock, with rights and preferences
fixed by the Board of Directors in accordance with the corporate laws of the
Commonwealth of Pennsylvania and the Company's Articles of Incorporation, as
amended, none of which are issued and outstanding. All shares of Common Stock
outstanding have been validly issued and are fully paid and nonassessable.
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(b) The Company has not granted, or agreed to grant or issue, any
options, warrants or rights to purchase or acquire from the Company any shares
of capital stock of the Company, there are no securities outstanding or
committed to be issued by the Company or any subsidiary which are convertible
into or exchangeable for any shares of capital stock or other securities of the
Company, and there are no contracts, commitments, agreements, understandings,
arrangements or restrictions as to which the Company is a party, or by which it
is bound, relating to any shares of capital stock or other securities of the
Company, whether or not outstanding except as set forth in the Company's SEC
Reports and options to purchase additional shares of Common Stock pursuant to
the Company's stock option plan.
(c) The Shares, when issued, sold, and delivered in accordance with the
terms of this Agreement for the consideration expressed herein, will be duly and
validly issued, fully paid, and nonassessable, and will be free of restrictions
on transfer other than restrictions on transfer under this Agreement and under
applicable state and federal securities laws.
Section 2.6 Disclosure.
No representation or warranty given as of the date hereof by the
Company contained in this Agreement, taken as a whole, contains any untrue
statement of a material fact, or omits to state any material fact which is
necessary in order to make the statements contained herein or therein not
misleading.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents to the Company as follows:
Section 3.1 Corporate Status; Residence.
The Investor is a limited partnership duly organized and validly
existing under the laws of the Commonwealth of Pennsylvania and has the
requisite power to own and operate its properties, to carry on its business as
now conducted and to enter into and to perform its obligations under this
Agreement and any other document executed or delivered by the Investor in
connection herewith.
Section 3.2 Authorization.
The Investor has full legal right, power and authority to enter into
and perform its obligations under this Agreement and any other document executed
and delivered by the Investor in connection herewith, without the consent or
approval of any other person, firm, governmental agency or other legal entity.
The execution and delivery of this Agreement and any other document executed and
delivered by the Investor in connection herewith, and the performance by the
Investor of its obligations hereunder and/or thereunder: are within the powers
of the Investor, have received all necessary governmental approvals, if any were
required, and do not and will not contravene or conflict with (a) the
organizational documents of the Investor, (b) any material
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agreement to which the Investor is a party or by which it or any of its
properties is bound, or constitute a default thereunder, or result in the
creation or imposition of any lien, charge, security interest or encumbrance of
any nature upon any of the property or assets of the Investor pursuant to the
terms of any such agreement or instrument, or (c) violate any provision of law
or any applicable judgment, ordinance, regulation or order of any court or
governmental agency. The partner(s) executing this Agreement and any other
document executed and delivered by the Investor in connection herewith, is duly
authorized to act on behalf of the Investor.
Section 3.3 Validity and Binding Effect.
This Agreement and any other document executed and delivered by the
Investor in connection herewith are the legal, valid and binding obligations of
the Investor, enforceable against it in accordance with their respective terms.
Section 3.4 Accredited Investor; Investment Intent.
The Investor is an "accredited investor" under Rule 501(a) under the
Securities Act. The Investor is acquiring the New Debenture and the Shares for
its own account, for investment, and not with a view to the distribution or
resale thereof, in whole or in part, in violation of the Securities Act or any
applicable state securities law, and the Investor has no present intention of
selling, negotiating or otherwise disposing of the New Debenture or the Shares.
ARTICLE IV PRIOR AGREEMENTS; COVENANTS OF THE COMPANY
Section 4.1 Prior Agreements.
As between the Company and the Investor, the following agreements,
including, without limitation, all of the covenants set forth therein, are
hereby terminated: (a) the Preferred Stock Purchase Agreement; (b) the
Registration Rights Agreement; (c) the Prior Exchange Agreement; and (d) the
Debenture Purchase Agreement.
Section 4.2 Corporate Existence, Etc.
The Company will preserve and keep in force and effect, and will cause
each subsidiary to preserve and keep in force and effect, its corporate
existence and good standing in the state of incorporation thereof, its
qualification and good standing as a foreign corporation in each jurisdiction
where such qualification is required by applicable law except where the failure
to so qualify would not have a Materially Adverse Effect and all licenses and
permits necessary to the proper conduct of its business.
Section 4.3 Maintenance, Etc.
The Company will, in all material respects, maintain, preserve and
keep, and will cause each subsidiary to maintain, preserve and keep, its
properties and assets which are used in the conduct of its business (whether
owned in fee or pursuant to a leasehold interest) in good repair
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and working order and from time to time will make all necessary repairs,
replacements, renewals and additions so that at all times the efficiency thereof
shall be maintained.
Section 4.4 Insurance.
The Company will maintain, and will cause each subsidiary to maintain,
insurance coverage by financially sound and reputable insurers with respect to
their respective properties and business in such forms and amounts and against
such risks, casualties and contingencies as are reasonable.
Section 4.5 Taxes, Claims for Labor and Materials.
The Company will promptly pay and discharge, and will cause each
subsidiary promptly to pay and discharge, (i) all lawful taxes, assessments and
governmental charges or levies imposed upon the property or business of the
Company or such subsidiary, respectively, (ii) all trade accounts payable in
accordance with usual and customary business terms, and (iii) all claims for
work, labor or materials, which if unpaid might become a lien or charge upon any
property of the Company or such subsidiary; provided the Company or such
subsidiary shall not be required to pay any such tax, assessment, charge, levy,
account payable or claim if (a) the validity, applicability or amount thereof is
being contested in good faith by appropriate actions or proceedings which will
prevent the forfeiture or sale of any property of the Company or such subsidiary
or any material interference with the use thereof by the Company or such
subsidiary, and (b) the Company or such subsidiary shall set aside on its books,
reserves deemed by it to be adequate with respect thereto.
Section 4.6 Compliance with Laws, Agreements, etc.
Except where failure to do so does not and would not have a Materially
Adverse Effect, the Company shall maintain its business operations and property
owned or used in connection therewith in compliance with (i) all applicable
federal, state and local laws, regulations and ordinances, and such laws,
regulations and ordinances of foreign jurisdictions, governing such business
operations and the use and ownership of such property, and (ii) all agreements,
licenses, franchises, indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound. Without limiting the
foregoing, the Company shall pay all of its indebtedness promptly and
substantially in accordance with the terms thereof.
Section 4.7 ERISA Matters.
If the Company has in effect, or hereafter institutes, a pension plan
that is subject to the requirements of Title IV of ERISA (a "Plan"), then the
following covenant shall be applicable during such period as any such Plan shall
be in effect throughout the existence of the Plan, the Company's contributions
under the Plan will meet the minimum funding standards required by ERISA and the
Company will not institute a distress termination of the Plan.
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Section 4.8 Books and Records; Rights of Inspection.
The Company will keep, and will cause each subsidiary to keep, proper
books of record and account in which full and correct entries will be made of
all dealings or transactions of or in relation to the business and affairs of
the Company or such subsidiary, in accordance with GAAP consistently maintained.
The Company shall permit a representative of the Investor to visit any of its
properties and inspect its corporate books and financial records, and will
discuss its accounts, affairs and finances with a representative of the
Investor, during reasonable business hours, at all such times as the Investor
may reasonably request.
Section 4.9 Reports.
So long as the New Debenture is outstanding, the Company will furnish
to Investor the following (to the extent not reasonably available from the SEC's
computerized filing system or the Company's website); provided that, so long as
the Company's securities are publicly traded, the Investor hereby agrees that,
to the extent that the Investor receives from the Company in any manner,
including, without limitation, pursuant to this Section 4.9, attendance at Board
meetings pursuant to Section 4.10 or otherwise, any material non-public
information, the Investor: (i) shall maintain the confidentiality of such
information, (ii) shall not disclose such information to any third party and
(iii) shall not trade in the Company's securities until, as to all of clauses
(i), (ii) and (iii), there has been "public disclosure" of such information
within the meaning of Regulation FD promulgated pursuant to the Exchange Act:
(a) Quarterly Statements. As soon as available and in any
event within forty-five (45) days after the end of each quarterly fiscal period
(except the last) of each fiscal year, copies of:
(i) consolidated balance sheets of the Company and
its subsidiaries as of the close of the three-month period then ended,
setting forth in comparative form the consolidated figures at the end
of the preceding fiscal year,
(ii) consolidated statements of income and retained
earnings of the Company and its subsidiaries for the three-month period
then ended, setting forth in comparative form the consolidated figures
for the corresponding period of the preceding fiscal year, and
(iii) consolidated statements of cash flows of the
Company and its subsidiaries for the portion of the fiscal year ending
with such three-month period, setting forth in comparative form the
consolidated figures for the corresponding period of the preceding
fiscal year,
all in reasonable detail and certified as complete and correct by an authorized
financial officer of the Company;
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(c) Annual Statements. As soon as available and in any event
within ninety (90) days after the close of each fiscal year of the Company,
copies of:
(i) consolidated balance sheets of the Company and
its subsidiaries as of the close of such fiscal year, and
(ii) consolidated statements of income and retained
earnings and cash flows of the Company and its subsidiaries for such
fiscal year,
in each case setting forth in comparative form the consolidated figures for the
preceding fiscal year, all in reasonable detail and accompanied by an
unqualified report thereon of KPMG LLP, or if such firm is no longer auditor to
the Company, a firm of independent public accountants of recognized national
standing;
(d) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the books of
the Company or any subsidiary;
(e) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Company to stockholders generally and of each periodic or
current report, and any registration statement or prospectus filed by the
Company or any subsidiary with any securities exchange or the SEC or any
successor agency, and copies of any orders in any proceedings to which the
Company or any of its subsidiaries is a party, issued by any governmental
agency, federal or state, having jurisdiction over the Company or any of its
subsidiaries.
(f) Press Releases. Promptly upon its release, a copy of each
press release issued by the Company; and
(g) Requested Information. With reasonable promptness, such
financial data and other information relating to the business of the Company as
Investor may from time to time reasonably request.
Section 4.10 Board of Directors; Observer Rights.
For so long as any portion of the New Debenture shall remain
outstanding, if a representative of the Investor is not then a member of the
Company's Board of Directors, upon request of the Investor, the Company shall
invite a representative of the Investor to attend all meetings of the Company's
Board of Directors in a nonvoting capacity.
Section 4.11 No Dividends or Repurchases.
For so long as any amount remains unpaid on the New Debenture, no
dividends (other than dividends or distributions paid in shares of or options,
warrants or rights to subscribe for or purchase shares of Common Stock) shall be
declared or paid or set apart for payment by the
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Company or other distribution of cash or other property declared or made
directly or indirectly by the Company or any affiliate or any Person acting on
behalf of the Company or any of its affiliates with respect to any shares of
capital stock of the Company unless in each case (x) all interest payments on
the New Debenture have been paid in full as of the date of each such proposed
distribution and (y) sufficient funds shall have been paid or set apart for the
payment of the full interest payment for the current quarter with respect to the
New Debenture. For so long as any interest then due remains unpaid on the New
Debenture, the Company shall not repurchase, or otherwise acquire for value, any
share or shares of the Common Stock.
Section 4.12 Limitation on Activities.
In addition to any other vote or consent of shareholders required by
law or the Articles of Incorporation of the Company, for so long as any portion
of the New Debenture remains outstanding, the Company will not take any of the
following actions without the written consent of the Investor:
(a) redeem, purchase or otherwise acquire for value (or pay into or set
aside for a sinking fund for such purpose) the New Debenture other than by
redemption in accordance with its terms;
(b) redeem, purchase or otherwise acquire for value (or pay into or set
aside for a sinking fund for such purpose) the Finova Debenture other than on a
pari passu basis with the New Debenture;
(c) authorize or issue, or obligate itself to issue, any other
security senior to the New Debenture;
(d) effect any sale, lease, assignment, transfer, or other conveyance
of all or substantially all of the assets of the Company or any of its
subsidiaries, or any consolidation or merger involving the Company or any of its
subsidiaries, except (A) a merger with a Wholly-owned subsidiary of the Company,
(B) a mere reincorporation transaction, or (C) a merger pursuant to which the
Company is the surviving entity and the capitalization of the Company remains
unchanged.
Section 4.13 Nature of Business.
Neither the Company nor any subsidiary will engage in any business if,
as a result, the general nature of the business, taken on a consolidated basis,
which would then be engaged in by the Company and its subsidiaries would be
substantially changed from the general nature of the business engaged in by the
Company and its subsidiaries on the date of this Agreement.
Section 4.14 Further Assurances.
The Company will take all actions reasonably requested by Investor to
effect the transactions contemplated by this Agreement and the New Debenture.
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ARTICLE V SUBORDINATION OF NEW DEBENTURE
Section 5.1 Subordination.
Notwithstanding anything to the contrary in this Agreement or in the
New Debenture, the indebtedness evidenced by the New Debenture, including
principal and interest, shall be subordinate and junior to the prior payment of
the indebtedness of the Company for borrowed money (except such indebtedness of
the Company other than the New Debenture which is expressly stated to be
subordinate or junior in any respect to other indebtedness of the Company)
outstanding as of the date of this Agreement and set forth on the Company's SEC
Reports (including any obligations of the Company under any guaranty or
suretyship agreement relating to indebtedness for borrowed money by Subsidiaries
of the Company), constituting borrowed money from financial institutions
approved by the Board of Directors of the Company and designated as being senior
to the New Debenture (but only to the extent so designated), together with all
obligations issued in renewal, deferral, extension, refunding, amendment or
modification of any such indebtedness including, without limitation, any and all
indebtedness now or hereafter owing by the Company to Summit Bank, N.A., and its
successors and assigns (collectively, the "Senior Indebtedness").
Notwithstanding the foregoing, the indebtedness evidenced by the New
Debenture, including principal and interest, shall continue to rank pari passu
with the indebtedness evidenced by the 11% Subordinated Debenture due December
31, 2003 (the "Finova Debenture") originally issued to Finova Mezzanine Capital
Inc. f/k/a Sirrom Capital Corporation ("Finova") in January 1999 pursuant to the
Prior Exchange Agreement, and as amended and restated in September 2000 pursuant
to that certain exchange agreement dated as of September 29, 2000, by and
between the Company and Finova.
Section 5.2 Liquidation, etc.
(a) Upon any distribution of assets of the Company in connection with
any dissolution, winding up, liquidation or reorganization of the Company
(whether in bankruptcy, insolvency, or receivership proceedings or upon an
assignment for the benefit of creditors or otherwise), the holders of all Senior
Indebtedness shall first be entitled to receive payment in full of the principal
thereof, premium, if any, and interest due thereon, and all costs and expenses
(including attorneys' fees) related thereto, before the holder of the New
Debenture shall be entitled to receive any payment on account of the principal
of or interest on or any other amount owing with respect to the New Debenture
(other than payment in shares of capital stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, which stock and securities are
subordinated to the payment of all Senior Indebtedness and securities received
in lieu thereof which may at the time be outstanding). Under the circumstances
provided herein, the holders of the Senior Indebtedness shall have the right to
receive and collect any distributions made with respect to the New Debenture
until such time as the Senior Indebtedness are paid in full, and shall have the
further right to take such actions as may be deemed necessary or required to so
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receive and collect such distributions including making or filing any proofs of
claim relating thereto.
(b) Without in any way modifying the provisions of this Article V or
affecting the subordination effected hereby if such notice is not given, the
Company shall give prompt written notice to the Investor of any dissolution,
winding up, liquidation or reorganization of maker (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit of
creditors or otherwise).
Section 5.3 Default on Senior Indebtedness.
The Company shall not declare or pay any dividends or make any
distributions to the holders of capital stock of the Company, or purchase or
acquire for value, the New Debenture if any default has occurred and is
continuing with respect to the payment of principal of, premium if any or
interest on any Senior Indebtedness.
Section 5.4 Subrogation.
Upon the prior payment in full of both the Senior Indebtedness, the
Investor shall be subrogated to the rights of the holders of the Senior
Indebtedness to receive payments or distributions of assets of the Company
applicable to the Senior Indebtedness until all amounts owing on the New
Debenture shall be paid in full, and for the purpose of such subrogation, no
payments or distributions to the Investor otherwise payable or distributable to
the holders of the Senior Indebtedness shall, as between the Company, its
creditors, other than the holders of the Senior Indebtedness, and the Investor,
be deemed to be payment by the Company to or on account of the New Debenture, it
being understood that the provisions of this Article V are and are intended
solely for the purpose of defining the relative rights of the Investor, on the
one hand, and the holders of the Senior Indebtedness, on the other hand.
Section 5.5 Company's Obligations Not Impaired.
(a) Nothing contained in this Article V or in the New Debenture is
intended to or shall impair, as between the Company and the Investor, the
obligation of the Company, which is absolute and unconditional, to pay the
Investor the principal of and interest on the New Debenture as and when the same
shall become due and payable in accordance with the terms of the New Debenture,
or is intended to or shall affect the relative rights of the Investor other than
with respect to the holders of the Senior Indebtedness, nor, except as expressly
provided in this Article V, shall anything herein or therein prevent the
Investor from exercising all remedies otherwise permitted by applicable law upon
the occurrence of an Event of Default under this Agreement or under the New
Debenture.
(b) If any payment or distribution shall be received in respect of the
New Debenture in contravention of the terms of this Article V, such payment or
distribution shall be held in trust for the holders of the Senior Indebtedness
and shall be immediately delivered to such holders in the same form as received.
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ARTICLE VI RESTRICTIONS ON TRANSFER
Section 6.1 Legends, Restrictions on Transfer.
The New Debenture and the Shares have not been registered under the
Securities Act or any state securities laws. The New Debenture and the Shares
issued pursuant to this Agreement (except as permitted by this Article VI) shall
bear a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY APPLICABLE
STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (i)
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS, OR
(ii) IN THE OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY REGISTRATION UNDER THE SECURITIES ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH TRANSFER.
The provisions of this Article VI shall be binding upon all subsequent
holders of the New Debenture and the Shares unless in the opinion of counsel to
any such holder, specified in Section 6.2 below, the New Debenture and/or the
Shares are no longer subject to the restrictions described herein.
Section 6.2 Notice of Intention to Transfer; Opinions of Counsel.
The New Debenture shall not be transferable except upon the conditions
specified in this Article VI. The holder of the New Debenture, by acceptance
thereof, agrees, prior to any transfer of the New Debenture, to give written
notice to the Company of such holder's intention to effect such transfer and
briefly describe the manner of the proposed transfer. Such notice of intended
transfer shall be accompanied by, if applicable, an opinion of counsel to such
holder reasonably satisfactory to the Company, to the effect that registration
under the Securities Act of the New Debenture in connection with such proposed
transfer is not required. If in the opinion of such counsel, the proposed
transfer of the New Debenture may be effected without registration of the New
Debenture, under the Securities Act, such holder shall be entitled to transfer
the New Debenture in accordance with the terms of the notice delivered by such
holder to the Company. The Company will promptly upon such transfer deliver a
revised New Debenture not bearing a legend of the character set forth in Section
6.1, unless in the opinion of such counsel subsequent disposition by such holder
of the New Debenture to be so transferred may require registration under the
Securities Act. If the proposed transfer of the New Debenture may not be
effected without registration of the New Debenture under the Securities Act, the
holder thereof shall not be entitled to transfer the New Debenture, in the
absence of an effective registration statement.
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Section 6.3 Notices Regarding Proposed Sales of Shares.
(a) Absent exigent circumstances, the Investor shall not sell any of
the Shares without complying with this Section 6.3. If the Investor shall at any
time desire to sell any or all of the Shares, the Investor shall send written
notice to the Company of its intent to sell the applicable number of Shares (the
"Sale Notice") at least two (2) trading days prior to the Investor's intended
date of sale of such Shares. During such two-day period, the Company shall have
the right (but not the obligation) to offer to purchase such Shares directly or
to facilitate the sale of such Shares to another party designated by the Company
(the "Offer"). The Investor shall have no obligation to accept the Offer as to
all or any part of the Shares that are the subject of the Offer.
(b) If, at the end of the two-day period in paragraph (a) above, the
Offer has not been accepted by Investor, the Investor shall be free for a period
of forty-five (45) days thereafter to sell the number of Shares designated in
the Sale Notice. If such Shares are not so sold within the aforesaid
forty-five-day period, absent exigent circumstances, the Investor shall not be
permitted to sell such Shares without again complying with this Section 6.3.
ARTICLE VII EVENTS OF DEFAULT; REMEDIES
Section 7.1 Events of Default.
The occurrence of any one of the following shall constitute an "Event
of Default" under this Agreement:
(a) Default shall occur in the payment of interest on the New Debenture
when the same shall have become due, which Default shall continue for five (5)
days after written notice is given to the Company by the Investor; or
(b) Default shall occur in the making of any payment of the principal
of the New Debenture or the premium, if any, by the Company thereon at the
expressed or any accelerated maturity date or at any date fixed by the Company
for prepayment, which Default shall continue for five (5) days after written
notice is given to the Company by the Investor; or
(c) Default or the happening of any event shall occur under any
contract, agreement, lease, indenture or other instrument under which any
Indebtedness (other than the New Debenture) of the Company or any subsidiary of
the Company may be issued and such Default or event shall (i) result in
liability of more than $250,000 and (ii) continue for a period of time
sufficient to permit the acceleration of the maturity of any such Indebtedness
of the Company or any subsidiary of the Company outstanding thereunder; or
(d) Default shall occur in the observance or performance of the
covenants contained in Article VI hereof in any material respect which is not
remedied in all material respects within thirty (30) days after the date on
which written notice thereof is given to the Company by the Investor; or
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(e) Any representation or warranty made by the Company in Article II
hereof (to the extent that such representation or warranty has survived as of
the applicable date in accordance with the terms of this Agreement) is untrue in
any material respect as of the date of the issuance or making hereof; or
(f) The Company or any subsidiary of the Company becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes an
assignment for the benefit of creditors, or the Company or any subsidiary of the
Company applies for or consents to the appointment of a custodian, trustee,
liquidator, or receiver for the Company or such subsidiary or for the major part
of the property of either; or
(g) Final judgment or judgments for the payment of money aggregating in
excess of $250,000, is or are outstanding against the Company or any subsidiary
of the Company or against any property or assets of either and any one of such
judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or
otherwise for a period of thirty (30) days from the date of its entry; or
(h) A custodian, trustee, liquidator, or receiver is appointed for the
Company or any subsidiary of the Company or for the major part of the property
of either and is not discharged within sixty (60) days after such appointment;
or
(i) Bankruptcy, reorganization, arrangement or insolvency proceedings,
or other proceedings for relief under any bankruptcy or similar law or laws for
the relief of debtors, are instituted by or against the Company or any
subsidiary of the Company and, if instituted against the Company or any
subsidiary of the Company, are consented to or are not dismissed within sixty
(60) days after such institution.
Section 7.2 Acceleration of Maturities.
When any Event of Default described in paragraphs (a) through (g) of
Section 7.1 has happened and is continuing, the holder of the New Debenture may,
by notice to the Company, declare the entire principal and all interest accrued
on the New Debenture to be, and the New Debenture shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived. When any Event of
Default described in paragraph (h) or (i) of Section 7.1 has occurred, then the
New Debenture shall immediately become due and payable without presentment,
demand or notice of any kind, all of which are hereby expressly waived. Without
limiting the foregoing, the Company shall, upon becoming aware of the occurrence
of any Event of Default, promptly notify the Investor of such occurrence. Upon
the New Debenture becoming due and payable as a result of any Event of Default
as aforesaid, the Company will forthwith pay to the holder of the New Debenture
the entire principal and interest accrued on the New Debenture. No course of
dealing on the part of the New Debenture holder nor any delay or failure on the
part of the New Debenture holder to exercise any right shall operate as a waiver
of such right or otherwise prejudice such holder's rights, powers and remedies.
The Company further agrees, to the extent permitted by law, to pay to the holder
of the New Debenture all costs and expenses, including
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reasonable attorneys' fees, incurred by them in the collection of the New
Debenture upon any Default hereunder or thereon.
ARTICLE VIII AMENDMENTS, WAIVERS AND CONSENTS
Section 8.1 Consent Required.
Any term, covenant, agreement or condition of this Agreement may, with
the consent of the Company, be amended or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), if the Company shall have obtained the consent in writing of the
holder of the New Debenture.
Section 8.2 Effect of Amendment or Waiver.
Any such amendment or waiver shall be binding upon the holder of the
New Debenture, upon each future holder of the New Debenture and upon the
Company, whether or not the New Debenture shall have been marked to indicate
such amendment or waiver. No such amendment or waiver shall extend to or affect
any obligation not expressly amended or waived or impair any right consequent
thereon.
ARTICLE IX INTERPRETATION OF AGREEMENT; DEFINITIONS
Section 9.1 Definitions.
Unless the context otherwise requires, the terms hereinafter set forth
when used herein shall have the following meanings and the following definitions
shall be equally applicable to both the singular and plural forms of any of the
terms herein defined:
"Common Stock" shall mean the common stock of the Company, par value
$.01 per share.
"Debenture Purchase Agreement" shall have the meaning set forth in the
recitals hereof.
"Default" shall mean any event or condition, the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default as defined in Section 7.1.
"Event of Default" shall have the meaning set forth in Section 7.1
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Finova" shall have the meaning set forth in Section 5.1 hereof.
"Finova Debenture" shall have the meaning set forth in Section 5.1
hereof.
"GAAP" shall mean generally accepted accounting principles.
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"Indebtedness" of any Person shall mean and include all obligations of
such Person which in accordance with GAAP shall be classified upon a balance
sheet of such Person as liabilities of such Person, and in any event shall
include all (a) obligations of such Person for borrowed money or which have been
incurred in connection with the acquisition of property or assets, (b)
obligations secured by any lien or other charge upon property or assets owned by
such Person, even though such Person has not assumed or become liable for the
payment of such obligations, (c) obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the Event of Default are
limited to repossession or sale or property, (d) capitalized rentals, and (e)
guaranties of obligations of others of the character referred to in this
definition.
"Initial Debenture" shall have the meaning set forth in the recitals
hereof.
The term "knowledge" shall mean, with respect to a particular fact or
other matter, if a director or executive officer of the Company or any
subsidiary of the Company is actually, or has been, aware of such fact or other
matter, after reasonable inquiry under the circumstances.
"Indemnified Party" shall have the meaning set forth in Section 1.2
hereof.
"Indemnifying Party" shall have the meaning set forth in Section 1.2
hereof.
"Market Price" shall have the meaning set forth in Section 6.3 hereof.
"Materially Adverse Effect" shall mean a materially adverse effect upon
the business, assets, liabilities, financial condition, results of operations or
business prospects, in each case of the Company and its subsidiaries taken as a
whole, or upon the ability of the Company to perform its obligations under this
Agreement or the New Debenture.
"New Debenture" shall mean that debenture initially issued to the
Investor as of January 1, 1999 and amended and restated in accordance with this
Agreement, as more fully described in Section 1.1 herein.
"Offer" shall have the meaning set forth in Section 6.3 hereof.
"Operative Documents" shall have the meaning set forth in Section 2.1
hereof.
"Outstanding Debenture" shall have the meaning set forth in the
recitals hereof.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof.
"Plan" shall have the meaning set forth in Section 4.7 hereof.
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"Preferred Stock" shall have the meaning set forth in the recitals
hereof.
"Preferred Stock Purchase Agreement" shall have the meaning set forth
in the recitals hereof.
"Prior Exchange Agreement" shall have the meaning set forth in the
recitals hereof.
The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the SEC.
"Registration Period" shall have the meaning set forth in Section 1.2
hereof.
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement by and among the Company, the Investor and Finova.
"Registration Statement" means one or more registration statements of
the Company under the Securities Act registering all of the Shares.
"Restated Debenture" shall have the meaning set forth in the recitals
hereof.
"Sale Notice" shall have the meaning set forth in Section 6.3 hereof.
"SEC" means the United States Securities and Exchange Commission.
"SEC Reports" shall have the meaning set forth in Section 2.4 hereof.
"Securities Act" means the Securities Act of 1933, as amended.
The term "security" shall have the same meaning as in Section 2(l) of
the Securities Act.
"Senior Indebtedness" shall have the meaning set forth in Section 5.1
hereof.
"Shares" shall have the meaning set forth in the recitals hereof.
The term "subsidiary " shall mean, as to any particular parent
corporation, any corporation of which more than 50% (by number of votes) of the
Voting Stock shall be owned by such parent corporation and/or one or more
corporations which are themselves subsidiaries of such parent corporation.
"Voting Stock" shall mean Securities of any class or classes the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
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"Warrant" shall have the meaning set forth in the recitals hereof.
The term "wholly-owned" when used in connection with any subsidiary of
the Company shall mean a subsidiary of which all of the issued and outstanding
shares of stock (except shares required as directors' qualifying shares) shall
be owned by the Company and/or one or more of its wholly-owned subsidiaries.
Section 9.2 Accounting Principles.
Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, the same shall be done in accordance with GAAP, to the extent
applicable, except where such principles are inconsistent with the requirements
of this Agreement.
ARTICLE X - MISCELLANEOUS
Section 10.1 Powers and Rights Not Waived; Remedies Cumulative.
No delay or failure on the part of the holder of the New Debenture in
the exercise of any power or right shall operate as a waiver thereof; nor shall
any single or partial exercise of the same preclude any other of further
exercise thereof, or the exercise of any other power or right, and the rights
and remedies of the holder of the New Debenture are cumulative to and are not
exclusive of any rights or remedies any such holder would otherwise have, and no
waiver or consent, given or extended pursuant to Article IX hereof, shall extend
to or affect any obligation or right not expressly waived or consented to.
Section 10.2 Notices.
All communications provided for hereunder shall be in writing and shall
be delivered personally, or mailed by registered mail, or by prepaid overnight
air courier, or by facsimile communication, in each case addressed:
If to the Investor: Argosy Investment Partners, L.P.
000 Xxxx Xxxxxx Xxxx, Xxxxx 0000
Xxxxx, Xxxxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxx Xxxxxx, III, Principal
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with a copy to: XxXxxxxxxx, Keen & Xxxxxxx, P.C.
Radnor Court 000 Xxxxx Xxxxxx-Xxxxxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Xx., Esq.
If to the Company: Xxxxxx Holdings, Ltd.
000 Xxxxxxxxxxxx Xxxx.
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: President
with a copy to: Wolf, Block, Xxxxxx, and Xxxxx-Xxxxx LLP
22nd Floor
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Fax:: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
or such other address as the Investor or the subsequent holder of the New
Debenture may designate to the Company in writing, or such other address as the
Company may in writing designate to the Investor or to a subsequent holder of
the New Debenture, provided, however, that a notice sent by overnight air
courier shall only be effective if delivered at a street address designated for
such purpose by such person and a notice sent by facsimile communication shall
only be effective if made by confirmed transmission at a telephone number
designated for such purpose by such person or, in either case, as the Investor
or a subsequent holder of the New Debenture may designate to the Company in
writing or at a telephone number herein set forth in the case of the Company.
Section 10.3 Successors and Assigns.
The Investor's interests in this Agreement, the New Debenture, and the
Shares may be endorsed, assigned and/or transferred (in whole or in part) by the
Investor (subject to compliance with Section 6.2), and any such holder and/or
assignee of the same shall succeed to and be possessed of the rights and powers
of the Investor under all of the same to the extent transferred and assigned,
except that the Investor's rights under this Agreement may only be assigned to a
transferee of the entire New Debenture. The Company shall not assign any of its
rights or delegate any of its duties under this Agreement or the New Debenture
by operation of law or otherwise without the prior express written consent of
the Investor, and in the event the Company obtains such consent, this Agreement
and the New Debenture shall be binding upon such assignee.
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Section 10.4 Survival of Covenants and Representation.
All representations and warranties made by the Company and the Investor
herein shall survive until, and shall be extinguished and eliminated on the
first anniversary of the date hereof. All covenants made by the Company herein
(including those referred to in Article IV above) shall survive the closing and
delivery of the Operative Documents in accordance with their respective terms so
long as any amounts are outstanding under the New Debenture.
Section 10.5 Severability.
Should any part of this Agreement for any reason be declared invalid or
unenforceable, such decision shall not affect the validity of any remaining
portion, which remaining portion shall remain in force and effect as if this
Agreement had been executed with the invalid or unenforceable portion thereof
eliminated and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Agreement without
including therein any such part, parts or portion which may for any reason, be
hereafter declared invalid or unenforceable.
Section 10.6 Governing Law.
This Agreement and the New Debenture issued and sold hereunder shall be
governed by and construed in accordance with Pennsylvania law, without regard to
its conflict of law rules.
Section 10.7 Captions, Counterparts.
The descriptive headings of the various Sections or parts of this
Agreement are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 10.8 Continuing Obligations.
Notwithstanding anything to the contrary set forth herein, the Investor
confirms and acknowledges that the New Debenture is Company's Obligations to
Creditor within the meaning of the Subordination Agreements dated as of January
2, 1998, among Summit Bank, the Company, the Investor, and Finova, as amended,
which Subordination Agreements remain in full force and effect.
Section 10.9 Entire Agreement.
This Agreement constitutes the entire agreement of the parties
with regard to the exchange of the New Debenture and the Shares for the
Outstanding Debenture, the Restated Debenture and the Warrant.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
written above.
COMPANY:
XXXXXX HOLDINGS, LTD.
By: /s/ Xxxxxx Xxxxxxxxx
----------------------------
Name: Xxxxxx Xxxxxxxxx
Title: President
INVESTOR:
ARGOSY INVESTMENT PARTNERS, L.P.
By: ARGOSY ASSOCIATES, L.P., its general partner
By: ARGOSY ASSOCIATES, INC., its general partner
By: /s/ Xxxx Xxxx Xxxxxx, III
-------------------------------------------
Xxxx Xxxx Xxxxxx, III
Vice President
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Exhibit A
AMENDED AND RESTATED DEBENTURE
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS, OR (II) IN THE
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY REGISTRATION UNDER THE
SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN
CONNECTION WITH SUCH TRANSFER.
XXXXXX HOLDINGS, LTD.
SUBORDINATED DEBENTURE DUE DECEMBER 31, 2003
No. S-1 Dated as of January 12, 2001
$1,500,000
For value received, Xxxxxx Holdings, Ltd., a Pennsylvania corporation
(the "Company"), hereby promises to pay to Argosy Investment Partners, L.P.
("Argosy"), 000 Xxxx Xxxxxx Xxxx, Xxxxx 0000, Xxxxx, Xxxxxxxxxxxx 00000, or
registered assigns, on the 31st day of December, 2003 (the "Regular Maturity
Date") (or before the Regular Maturity Date in the case of a redemption of this
Debenture in accordance with the terms hereof (each an "Early Termination
Date"), as the case may be), the principal amount of One Million Five Hundred
Thousand Dollars ($1,500,000) and to pay interest (computed on the basis of a
360-day year of twelve 30-day months) on the principal amount from time to time
remaining unpaid hereon at the rate of 10% per annum from January 1, 1999 (the
"Issue Date") until the Regular Maturity Date or the Early Termination Date,
payable in each case quarterly on the first day of each February, May, August,
and November in each year, commencing February 1, 1999, and on the Regular
Maturity Date or the Early Termination Date. The Company agrees to pay interest
(computed on the same basis) on overdue principal and premium, if any, and (to
the extent legally enforceable) on any overdue installment of interest, at the
stated rate plus 3% per annum (or, in each case, at the highest rate permitted
by applicable law, whichever is less) until paid.
Both the principal hereof and interest hereon are payable to the order
of the holder hereof at its address registered on the books of the Company or by
federal funds wire transfer to a bank account designated in writing by the
holder to the Company in coin or currency of the United States of America which
at the time of payment shall be legal tender for the payment of public and
private debts. If any amount of principal, premium, if any, or interest on or in
respect of this Debenture becomes due and payable on any date which is not a
Business Day, such amount shall be payable on the next preceding Business Day.
"Business Day" means any day other than a Saturday, Sunday, statutory holiday or
other day on which banks in Pennsylvania are required by law to close or are
customarily closed.
This Debenture is issued under and pursuant to the terms and provisions
of an Exchange Agreement, dated as of January 12, 2001 (the "Exchange
Agreement"), entered into by the Company and Argosy, and this Debenture and the
holder hereof are entitled to all the benefits provided for thereby
29
or referred to therein, and to which Exchange Agreement reference is hereby made
for all such terms and provisions. The terms which are capitalized herein shall
have the meanings set forth in the Exchange Agreement unless the context shall
otherwise require.
This Debenture is subordinated to certain other indebtedness of the
Company to the extent and with the effect set forth in the Exchange Agreement.
If an Event of Default (as defined in the Exchange Agreement) occurs
and is continuing, the principal of this Debenture may be declared due and
payable in the manner and with the effect provided in the Exchange Agreement.
This Debenture is registered on the books of the Company and is
transferable only by surrender thereof at the principal office of the Company at
000 Xxxxxxxxxxxx Xxxx., Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, or such other address
as the Company shall have advised the holders of the Debenture in writing, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of this Debenture or its attorney duly authorized in writing
and in accordance with the provisions of Section 6.2 of the Exchange Agreement.
Payment of or on account of principal, premium, if any, and interest on this
Debenture shall be made only to or upon the order in writing of the registered
holder.
The Debenture is redeemable on the conditions set forth herein, and the
holder thereof is entitled to certain notices, as set forth more fully below.
SECTION 1 Redemption.
(a) Redemption at the Option of the Company. At any time prior to the
Regular Maturity Date, at the option of the Company, the Company may fix a date
(the "Redemption Date") on which it shall redeem this Debenture by paying in
cash to the holder thereof the entire outstanding principal amount of this
Debenture plus an amount equal to all interest payments then due but unpaid
(including interest thereon).
(b) Procedures for Redemption of the Debenture. At least five (5) days
prior to the Redemption Date the Company shall mail a written notice, first
class postage prepaid, to the holder of this Debenture at the close of business
on the business day preceding the day on which notice is given, at the address
last shown on the records of the Company for such holder, notifying such holder
of the redemption to be effected, specifying (i) the Redemption Date, (ii) the
Redemption Price, (iii) the place at which payment may be obtained, and (iv)
calling upon such holder to surrender to the Company, in the manner and at the
place designated, this Debenture (the "Redemption Notice"). On or after the
Redemption Date, the holder of this Debenture shall surrender to the Company
this Debenture, in the manner and at the place designated in the Redemption
Notice, and thereupon the Redemption Price of this Debenture shall be payable to
the order of the person whose name appears on the Company's register of
Debentures as the owner thereof and, upon payment in full of the Redemption
Price, this surrendered Debenture shall be discharged. From and after each
Redemption Date, unless there shall have been a default in payment of the
Redemption Price, this Debenture shall not be entitled to any further rights as
a Debenture and shall not be deemed outstanding for any purpose.
SECTION 2 ENFORCEMENT. If the indebtedness represented by this
Debenture or any part thereof is placed in the hands of attorneys for collection
after an Event of Default, or the enforcement of any rights under the Exchange
Agreement, the Company agrees to pay the principal, premium if any, and interest
due
2
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and payable hereon, and an amount equal to all costs of collecting this
Debenture, including reasonable attorneys' fees and expenses.
SECTION 3 NO IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, share exchange, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Debenture set forth herein, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Debenture against impairment.
This Debenture is executed, in part, in renewal, amendment, restatement
and modification of, but not in novation or discharge of, the existing
obligations and indebtedness of the Company to holder hereof by that
Subordinated Convertible Debenture due December 31, 2003 executed and delivered
in favor of holder by the Company on January 1, 1999.
This Debenture and said Exchange Agreement are governed by and
construed in accordance with the laws of Pennsylvania.
[Corporate Seal] XXXXXX HOLDINGS, LTD.
ATTEST: By:
------------------------------ --------------------------------
Xxxxxx X. Xxxxxxxxx, Secretary Xxxxxxxx X. Xxxxxxxx
Chief Executive Officer
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