EXHIBIT 2.3
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LITIGATION RESOURCES OF AMERICA, INC.
$10,000,000
12% Senior Subordinated Notes due 2004
and
Series A Convertible Preferred Stock
_____________________________
SECURITIES PURCHASE AGREEMENT
_____________________________
Dated as of January 17, 1997
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TABLE OF CONTENTS
Page No.
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1. AUTHORIZATION OF ISSUE OF SECURITIES....................................................... 1
1A. Senior Subordinated Notes........................................................... 1
1B. Convertible Preferred Stock......................................................... 2
2. PURCHASE AND SALE OF SECURITIES............................................................ 2
2A. Purchase and Sale................................................................... 2
2B. Closing............................................................................. 2
3. CONDITIONS OF CLOSING...................................................................... 3
3A. Opinion of Counsel to the Company................................................... 3
3B. Representations and Warranties...................................................... 3
3C. Articles of Incorporation and By-laws............................................... 3
3D. Purchase Permitted by Applicable Laws............................................... 4
3E. Securityholders Agreement........................................................... 4
3F. Registration Rights Agreement....................................................... 4
3G. Subsidiary Guarantee................................................................ 4
3H. Compliance with Securities Laws..................................................... 4
3I. Proceedings......................................................................... 4
3J. No Adverse U.S. Legislation, Action or Decision..................................... 4
3K. Approval and Consents............................................................... 5
3L. Material Changes.................................................................... 5
3M. Board Nominees...................................................................... 5
3N. Use of Proceeds..................................................................... 6
3O. Bank Debt Agreement................................................................. 6
3P. Seller Subordinated Promissory Note................................................. 6
3Q. Certificate of Designation.......................................................... 6
3R. Structuring Fee..................................................................... 6
4. PAYMENTS AND PREPAYMENTS OF THE SENIOR SUBORDINATED NOTES.................................. 6
4A. General............................................................................. 6
4B. Mandatory Payments and Prepayments of the Senior
Subordinated Notes............................................................... 6
4C. Prepayments of the Senior Subordinated Notes upon
a Change of Control.............................................................. 7
4D. Optional Prepayments of the Senior Subordinated
Notes............................................................................ 8
4E. Notice of Prepayments............................................................... 8
4F. Mandatory Payments and Partial Prepayments Pro Rata................................. 8
5. REQUIRED REDEMPTION AND OPTIONAL REDEMPTION OF THE
CONVERTIBLE PREFERRED STOCK................................................................ 8
5A. Option of Holders to Put Convertible Preferred
Stock upon a Change of Control................................................... 8
5B. Exercise of the Change of Control Put Option........................................ 9
5C. Put Option of Holders of Shares of Convertible
Preferred Stock upon the Absence of a Liquid
Secondary Market................................................................. 9
(i)
5D. Exercise of the Put Option......................................................... 10
5E. Fair Market Value.................................................................. 10
5F. Market Price....................................................................... 11
5G. Optional Redemption of the Convertible Preferred Stock............................. 11
5H. Notice of Redemption............................................................... 11
6. AFFIRMATIVE COVENANTS..................................................................... 12
6A. Financial Statements............................................................... 12
6B. Use of Proceeds.................................................................... 15
6C. Books and Records; Inspection of Property.......................................... 15
6D. Covenant to Secure Senior Subordinated Notes Equally............................... 15
6E. Additional Covenants Pending the Closing........................................... 15
6F. Stock to be Reserved............................................................... 16
6G. Compliance With Laws, etc.......................................................... 16
6H. ERISA.............................................................................. 16
6I. Corporate Existence; Maintenance of Properties..................................... 17
6J. Insurance.......................................................................... 17
6K. Further Assurances................................................................. 18
6L. Filing of Reports Under the Exchange Act........................................... 18
6M. Securities Act Registration Statements............................................. 18
6N. Notices of Certain Events.......................................................... 19
6O. Board Nominees..................................................................... 20
6P. Listing of Common Stock............................................................ 20
6Q. Environmental Laws................................................................. 21
6R. Guarantee By Subsidiary............................................................ 22
6S. Issuance of Convertible Preferred Stock with Interest Notes........................ 22
6T. Management Composition and Compensation............................................ 22
6U. Conduct of Business................................................................ 23
7. NEGATIVE COVENANTS........................................................................ 23
7A. Financial Covenants................................................................ 23
7B. Restrictions on Indebtedness and Repayment of Indebtedness......................... 24
7C. Restrictions on Liens.............................................................. 24
7D. Restricted Payments................................................................ 25
7E. Loans, Advances and ▇▇▇▇▇▇▇▇▇▇▇.................................................... ▇▇
▇▇. Leases............................................................................. 26
7G. Transactions With Affiliates....................................................... 26
7H. Merger............................................................................. 26
7I. Disposition of Substantial Assets.................................................. 27
7J. Sale of Stock and Debt of Subsidiaries............................................. 27
7K. Certain Contracts.................................................................. 27
7L. Conduct of Business................................................................ 28
7M. No Amendments...................................................................... 28
7N. Registration Rights................................................................ 28
7O. Offering of Securities............................................................. 28
7P. Issuance of Securities............................................................. 28
(ii)
8. SUBORDINATION............................................................................. 29
8A. Subordinated Debt Subordinate to Senior Debt....................................... 29
8B. Suspension of Right to Receive Payments of
Subordinated Debt............................................................... 29
8B(1). Failure to Pay Principal of or Interest on
Senior Debt.............................................................. 29
8B(2). Bankruptcy or Insolvency.................................................. 31
8C. Rights of Holders of Senior Debt Not to Be Impaired................................ 31
8D. Company's Obligation Unconditional................................................. 32
8E. Payments Held in Trust............................................................. 32
8F. Subrogation........................................................................ 32
8G. Reliance by Holders on Final Order or Decree....................................... 33
8H. Legend............................................................................. 33
8I. Remedies........................................................................... 33
8J. Senior Debt Not Affected........................................................... 33
8K. Reinstatement...................................................................... 34
8L. Representations and Warranties..................................................... 34
8M. Expenses........................................................................... 34
8N. No Waiver, Remedies................................................................ 35
8O. Subordination of Liens............................................................. 35
8P. Provisions Specific to Section 8................................................... 35
9. EVENTS OF DEFAULT......................................................................... 37
9A. General............................................................................ 37
9B. Other Remedies..................................................................... 41
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................. 41
10A. Organization, Qualification and Authority.......................................... 41
10B. Financial Statements............................................................... 42
10C. Capital Stock and Related Matters.................................................. 42
10D. Actions Pending.................................................................... 43
10E. Outstanding Debt; Defaults......................................................... 43
10F. Title to Properties................................................................ 44
10G. Taxes.............................................................................. 44
10H. Conflicting Agreements............................................................. 44
10I. Offering of Securities............................................................. 45
10J. Broker's or Finder's Commissions................................................... 45
10K. Regulation G, etc.................................................................. 45
10L. Environmental Matters.............................................................. 45
10M. ERISA.............................................................................. 46
10N. Possession of Franchises, Licenses, etc............................................ 47
10O. Patents, etc....................................................................... 47
10P. Holding Company and Investment Company Status...................................... 47
10Q. Governmental Consents.............................................................. 47
10R. Insurance Coverage................................................................. 48
10S. Subsidiaries....................................................................... 48
10T. Disclosure......................................................................... 48
10U. Related Party Transactions......................................................... 48
10V. Registration Rights................................................................ 49
10W. Absence of Foreign or Enemy Status................................................. 49
10X. Agreements with Affiliates......................................................... 49
10Y. Convertible Preferred Stock and Equity of the Company.............................. 49
(iii)
10Z. Consummation of Related Transactions.............................................. 49
10AA. Conduct of Business............................................................... 49
11. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.......................................... 50
12. DEFINITIONS.............................................................................. 50
13. MISCELLANEOUS............................................................................ 62
13A. Home Office Payment............................................................... 62
13B. Indemnification................................................................... 63
13C. Consent to Amendments............................................................. 64
13D. Form, Registration, Transfer and Exchange of
Senior Subordinated Notes; Lost Senior
Subordinated Notes.............................................................. 64
13E. Provisions Applicable if any of the Securities are Sold........................... 65
13F. Restrictive Legends............................................................... 66
13G. Persons Deemed Owners............................................................. 66
13H. Survival of Representations and Warranties........................................ 66
13I. Successors and Assigns............................................................ 66
13J. Notices........................................................................... 66
13K. Descriptive Headings.............................................................. 67
13L. Governing Law; Consent To Jurisdiction............................................ 67
13M. Delay Fees........................................................................ 67
13N. Remedies.......................................................................... 68
13O. Entire Agreement.................................................................. 68
13P. Severability...................................................................... 68
13Q. Amendments........................................................................ 69
13R. Payment Date...................................................................... 69
13S. Waiver of Trial By Jury........................................................... 69
13T. Counterparts...................................................................... 69
EXHIBITS
Exhibit A Form of Senior Subordinated Note and Interest Note
Exhibit B Form of Guarantee
Exhibit C Form of Certificate of Designation
Exhibit D Form of Opinion of Counsel to the Company
Exhibit E Form of Registration Rights Agreement
Exhibit F Form of Securityholders Agreement
(iv)
LITIGATION RESOURCES OF AMERICA, INC.
SECURITIES PURCHASE AGREEMENT
___________________
Dated as of
January 17, 1997
___________________
To the Investors named on the signature pages hereto:
The undersigned, Litigation Resources of America, Inc. (the
"Company"), a Texas corporation, each of the other undersigned Subsidiaries (as
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defined below) of the Company (each a "Guarantor" and collectively, the
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"Guarantor"), and each of the investors named on the signature pages hereto
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(the "Investors"), hereby agree as follows:
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1. AUTHORIZATION OF ISSUE OF SECURITIES.
1A. Senior Subordinated Notes. The Company will authorize the
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issuance, sale and delivery to the Investors of its senior subordinated notes
("Senior Subordinated Notes" and individually called a "Senior Subordinated
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Note") in the aggregate principal amount of $9,000,000, to be dated the date of
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issue thereof, to mature (subject to Section 4 hereof) on the seventh
anniversary of such date of issue and to bear interest on the unpaid balances
thereof from the date thereof at the rate of 12% per annum until the principal
thereof shall become due and payable. Such Senior Subordinated Notes shall be
substantially in the form of Exhibit A attached hereto. Interest will be payable
quarterly in arrears in cash on the last day of March, June, September and
December, in each year, commencing on March 31, 1997; provided, however, that
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the Company may, at the sole option of the holders of the Senior Subordinated
Notes, issue interest notes ("Interest Notes" and individually called an
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"Interest Note"), together with additional shares of Convertible Preferred Stock
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(as defined below) to the extent provided in paragraph 6S hereof, in lieu of a
cash payment of any or all interest due during such period. Such Interest Notes
shall be substantially in the form of Exhibit A attached hereto. For purposes of
this Agreement, all references to the Senior Subordinated Notes shall be deemed
to include any and all Interest Notes. The Senior Subordinated Notes will be
jointly and severally unconditionally guaranteed, on a subordinated basis, by
Looney & Company, Inc. ("Looney") and ▇▇▇▇▇, Bury and Associates, Inc.
("▇▇▇▇▇"), and each other Person that becomes a Subsidiary of the Company,
pursuant to a guarantee substantially in the form of Exhibit B attached hereto
(the "Subsidiary Guarantee"). The Senior Subordinated Notes shall bear a legend
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on their face, indicating that the Senior Subordinated Notes have been issued
with original issue discount and the name and address of the Company's
representative who, upon the request of a
holder, can supply information about such original issue discount.
1B. Convertible Preferred Stock. The Company will also authorize the
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issuance, sale and delivery to the Investors of 1,000,000 shares representing
52.27% (such percentage shall be reduced to 52% in the event a transaction with
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is consummated) of fully diluted Common Stock shares of its
Series A Convertible Preferred Stock, par value $1.00 per share (herein called
the "Convertible Preferred Stock", and the Senior Subordinated Notes and the
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Convertible Preferred Stock shall be referred to herein collectively as the
"Securities"). The powers, designations, preferences and relative participating,
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optional or other special rights, and the qualifications, limitations or
restrictions thereof, of the Convertible Preferred Stock are set forth in the
Certificate of Designation of the Convertible Preferred Stock in the form of
Exhibit C attached hereto (the "Certificate of Designation").
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2. PURCHASE AND SALE OF SECURITIES.
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2A. Purchase and Sale. The Company hereby agrees to sell to the
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Investors and, subject to the terms and conditions herein set forth, the
Investors severally agree to purchase from the Company, the Securities set forth
opposite the name of each of the Investors on the signature pages hereof. The
parties hereby agree that the aggregate purchase price for the Securities is
$10,000,000.
2B. Closing. The purchase and delivery of the Securities to be
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purchased by the Investors shall take place at a closing (the "Closing") at the
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offices of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, One Citicorp Center, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, at 10:00 a.m., local time, on January 17, 1997 (or at
such other time and place or on such other Business Day thereafter as the
parties hereto shall agree) (herein called the "Closing Date"). On the Closing
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Date, the Company will deliver the Securities to be purchased by the Investors
payable to or registered in the names of the Investors and/or the Investors'
nominees or other designees specified on the signature pages hereof in the
amounts set forth opposite the name of the Investors on the signature pages
hereof, against receipt of the purchase price therefor by wire transfer to the
account of: Litigation Resources of America, Inc., Texas Commerce Bank National
Association, Account No. 30801023704, ABA Routing No. ▇▇▇▇▇▇▇▇▇, Notification:
▇▇▇▇ ▇▇▇▇▇, (▇▇▇) ▇▇▇-▇▇▇▇. If at the Closing, the Company shall, in breach of
this Agreement, fail to tender to the Investors any of the Securities to be
purchased by them or if any of the conditions specified in Section 3 hereof
shall not have been satisfied or waived by the Investors, the Investors shall,
at their election, be relieved of all further obligations under this Agreement
without thereby waiving any other rights they may have by reason of such failure
or such non-fulfillment. Notwithstanding anything to the contrary, the
2
obligation of the Company to deliver any Securities to any Investor at the
Closing shall be conditioned on its concurrent receipt of the purchase price of
all of the Securities from the Investors.
3. CONDITIONS OF CLOSING. The Investors' obligation to purchase and pay
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for the Securities to be purchased by them hereunder is subject to the
satisfaction, on or before the Closing Date, of the following conditions:
3A. Opinion of Counsel to the Company. The Investors shall have received
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from ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Company and the Guarantors, a legal
opinion addressed to the Investors and dated the Closing Date, substantially in
the form of Exhibit D attached hereto. Such opinion shall also cover such other
matters incident to the matters herein contemplated as the Investors may
reasonably request, including the form of all papers and the validity of all
proceedings.
3B. Representations and Warranties. Each of the representations and
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warranties contained in Section 10 hereof and those otherwise made in writing by
or on behalf of the Company or any Guarantor and contained in any document,
certificate or other written statement provided to the Investors, in connection
with the transactions contemplated by this Agreement shall be true and correct
in all material respects when made and on and as of the Closing Date, without
giving effect to any qualification as to materiality contained therein and
except to the extent of changes caused by the transactions herein contemplated;
all of the covenants and obligations of the Company hereunder to be performed
or observed on or prior to the Closing shall have been duly performed or
observed; there shall exist on the Closing Date and after giving effect to such
transactions no Default or Event of Default; and the Company and each Guarantor
shall have delivered to the Investors an Officer's Certificate, dated the
Closing Date, to the foregoing effects.
3C. Articles of Incorporation and By-laws. The Investors shall have
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received certificates, dated the Closing Date, of the Secretary of the Company
and its Subsidiaries attaching (i) true and complete copies of the Articles of
Incorporation of the Company and its Subsidiaries as filed with the appropriate
state officials of its jurisdiction of incorporation with all amendments
thereto, (ii) true and complete copies of the By-laws of the Company and its
Subsidiaries in effect as of such date, (iii) certificates of good standing of
the appropriate officials of the jurisdiction of incorporation of the Company
and its Subsidiaries and of each state in which each of the Company and its
Subsidiaries is required to be qualified to do business as a foreign
corporation, (iv) resolutions of the Board of Directors of the Company
authorizing (a) the execution, delivery and performance of the Related
Documents, (b) the issuance and delivery of the Securities and (c) the
reservation for issuance of a sufficient number of shares of Common Stock
3
into which the Convertible Preferred Stock may be converted to permit such
conversion, (v) resolutions of the Board of Directors of each Guarantor
authorizing the execution, delivery and performance of the Related Documents to
which it is a party, and (vi) certificates as to the incumbency of the officers
of the Company and each Guarantor executing this Agreement or any other
Related Document.
3D. Purchase Permitted by Applicable Laws. The purchase of and
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payment for the Securities shall not be prohibited by any applicable law or
governmental regulation (including, without limitation, Regulation G, T and X of
the Board of Governors of the Federal Reserve System) and shall not subject the
Investors to any tax, penalty, liability or other onerous condition under or
pursuant to any applicable law or governmental regulation, and the Investors
shall have received such certificates or other evidence as they may request to
establish compliance with this condition.
3E. Securityholders Agreement. The Investors shall have received a
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fully executed counterpart of the Securityholders Agreement and such
Securityholders Agreement shall be in full force and effect and no term or
condition thereof shall have been amended, modified or waived.
3F. Registration Rights Agreement. The Investors shall have received
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a fully executed counterpart of the Registration Rights Agreement and such
Registration Rights Agreement shall be in full force and effect and no term or
condition thereof shall have been amended, modified or waived.
3G. Subsidiary Guarantee. The Investors shall have received a fully
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executed counterpart of the Subsidiary Guarantee and such Subsidiary Guarantee
shall be in full force and effect and no term or condition thereof shall have
been amended, modified or waived.
3H. Compliance with Securities Laws. The offering and sale of the
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Securities under this Agreement shall have complied with all applicable
requirements of federal and state securities laws, and the Investors shall have
received evidence of such compliance in form and substance satisfactory to them.
3I. Proceedings. All required corporate and other proceedings taken
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or required to be taken in connection with the transactions contemplated hereby
and all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investors and their counsel, and the Investors and their
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
3J. No Adverse U.S. Legislation, Action or Decision. No legislation,
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order, rule, ruling or regulation shall have been
4
enacted or made by or on behalf of any governmental body, department or agency
of the United States, nor shall any legislation have been introduced and
favorably reported for passage to either House of Congress by any committee of
either such House to which such legislation has been referred for consideration,
nor shall any decision of any court of competent jurisdiction within the United
States have been rendered which, in the Investors' reasonable judgment, would
materially and adversely affect their investment in the Securities. There shall
be no action, suit, investigation or proceeding, pending or threatened, against
or affecting the Company, its Subsidiaries or any of their respective properties
or rights, or any of their respective affiliates, associates, officers or
directors, before any court, arbitrator or administrative or governmental body
which (i) seeks to restrain, enjoin, prevent the consummation of or otherwise
affect the transactions contemplated by any of the Related Documents or (ii)
questions the validity or legality of any such transaction or seeks to recover
damages or to obtain other relief in connection with any such transaction, and
there shall be no valid basis for any such action, proceeding or investigation.
3K. Approval and Consents. The Company and each Guarantor shall have
---------------------
duly received all authorizations, consents, approvals, licenses, franchises,
permits and certificates by or of all federal, state and local governmental
authorities necessary or advisable for the issuance of the Securities and the
consummation of the transactions contemplated hereby and by the Related
Documents, and all thereof shall be in full force and effect at the time of the
Closing. The Company and each Guarantor shall have delivered to the Investors an
Officer's Certificate, dated the Closing Date, to such effect.
3L. Material Changes. Since September 30, 1995, with respect to
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▇▇▇▇▇, and December 31, 1995, with respect to Looney, there shall not have been
any changes in the business of the Company, Looney and ▇▇▇▇▇ or any of their
respective Subsidiaries which have or could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect, nor shall
there have been any development or discovery or any material contingency or
other liability which could have such effect. There shall exist no defaults
under the provisions of any instrument evidencing Indebtedness of the Company or
any of its Subsidiaries and the Company and each Guarantor shall have delivered
to the Investors an Officer's Certificate, dated the Closing Date, to such
effect.
3M. Board Nominees. The Board of Directors of the Company shall be
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constituted as contemplated by Section 3.1 of the Securityholders Agreement and
the nominees designated by the Investors shall have been appointed to the Board
of Directors effective upon the Closing.
5
[_]3N. Use of Proceeds. The Investors shall have received evidence
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in form and substance reasonably satisfactory to them with respect to the use
of proceeds by the Company in accordance with ▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇. Bank Debt Agreement. The Company shall have simultaneously
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received the funding pursuant to the Bank Debt Agreement and the Bank Debt
Agreement shall be in full force and effect; and the Investors shall have
received an Officer's Certificate, dated the Closing Date, to the foregoing
effect and to the effect that no default or event of default exists under the
Bank Debt Agreement.
3P. Seller Subordinated Promissory Note. The Investors shall
-----------------------------------
have received a fully executed copy of the Company's 10% Subordinated Promissory
Note due February 1, 2002 in the aggregate principal amount of $1,486,846.00
(the "Seller Notes") which shall provide (i) that such Note shall be subject and
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subordinate to the prior payment in full of the obligations of the Guarantors
under the Subsidiary Guarantee Agreement in accordance with the terms and
conditions of that certain Subordination Agreement dated the date hereof by and
among the Company, the Guarantors, the Investors and ▇▇▇▇▇▇▇ ▇▇▇▇▇, and (ii)
that the interest rate on such Notes shall not exceed 10%.
3Q. Certificate of Designation. The Certificate of Designation
--------------------------
shall have been filed with the Secretary of State of the State of Texas and the
Investors shall have received a certificate, dated the Closing Date, of the
Secretary of the Company attaching a true and complete copy of the Certificate
of Designation as filed with the Secretary of State of the State of Texas.
3R. Structuring Fee. The Company shall have paid to Pecks
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Management Partners Ltd. a structuring and due diligence fee of $35,000.
4. PAYMENTS AND REPAYMENTS OF THE SENIOR SUBORDINATED NOTES
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4A. General. The Senior Subordinated Notes shall be subject to
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mandatory payments as specified in paragraph 4B and to the optional prepayments
under the circumstances set forth in paragraphs 4C and 4D. No partial
prepayment of the Senior Subordinated Notes pursuant to paragraph 4F shall
relieve the Company of its obligations to make any of the required prepayments
pursuant to paragraph 4B.
4B Mandatory Payments and Prepayments of the Senior Subordinated
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Notes. (a) On or prior to the fifth anniversary of the Closing Date, 33 1/3% of
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the principal amount of the Senior Subordinated Notes then outstanding, together
with all accrued and unpaid interest thereon to and including such date, shall
become immediately due and payable and shall be paid by the
6
Company to the holders of the Senior Subordinated Notes. On or prior to the
sixth anniversary of the Closing Date, 33 1/3% of the principal amount of the
Senior Subordinated Notes then outstanding, together with all accrued and unpaid
interest thereon to and including such date, shall become immediately due and
payable by the Company and shall be paid by the Company to the holders of the
Senior Subordinated Notes. On the seventh anniversary of the Closing Date, the
principal amount of all Senior Subordinated Notes then outstanding, together
with all accrued and unpaid interest thereon to and including such date, shall
become immediately due and payable and shall be paid by the Company to the
holders of the Senior Subordinated Notes.
(b) Two (2) days after the Company's closing of any Qualifying Public
Offering, the principal amount of the Senior Subordinated Notes outstanding,
together with all accrued and unpaid interest thereon to and including such
date, shall become due and payable and shall be paid by the Company to the
holders of the Senior Subordinated Notes. No later than 30 days prior to any
Public Offering, the Company shall provide written notice to the holders of
Senior Subordinated Notes setting forth estimates of the proceeds to the
Company from such Public Offering.
4C. Prepayments of the Senior Subordinated Notes upon a Change of
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Control. Upon a Change of Control the principal amount of the Senior
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Subordinated Notes outstanding, together with all accrued and unpaid interest
thereon to the Repayment Date shall become due and payable on the Repayment Date
and shall be paid by the Company to the holders of the Senior Subordinated
Notes. Upon the occurrence of a Change of Control Event, the notice furnished to
each holder of Senior Subordinated Notes under paragraph 6N shall (i) refer
specifically to ▇▇▇▇▇▇▇▇▇ ▇▇, (▇▇) state that the Company will prepay the
principal amount of all of the Senior Subordinated Notes outstanding held by
each holder of Senior Subordinated Notes, together with all accrued and unpaid
interest to the date of prepayment and (iii) indicate that the Company will
prepay the Senior Subordinated Notes as provided in clause (ii) above
simultaneously with such Change of Control (the "Repayment Date"). If a proposed
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Change of Control shall not occur, (i) the Company shall have no obligation
under this paragraph 4C to prepay any Senior Subordinated Notes notwithstanding
the fact that the notice required pursuant to paragraph 6N had previously been
delivered in connection with such proposed Change of Control, (ii) the
obligations of the Company under this paragraph 4C shall not be affected with
respect to any subsequent Change of Control, and (iii) if any holder of
Convertible Preferred Stock shall have converted all or any shares of
Convertible Preferred Stock after receiving the notice referred to in this
paragraph 4C, the Company shall be required, at the election of such holder, to
issue new shares of Convertible Preferred Stock in exchange for the Common Stock
issued upon conversion of such shares of Convertible Preferred Stock.
7
4D. Optional Prepayments of the Senior Subordinated Notes. The Senior
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Subordinated notes shall be subject to prepayment, in whole or in part, at the
option of the Company at any time and from time to time at a price equal to (x)
the outstanding principal amount of the Senior Subordinated Notes to be prepaid
plus (y) all accrued and unpaid interest thereon up to and including the date
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of prepayment.
4E. Notice of Prepayments. In the event of prepayment pursuant to
---------------------
paragraph 4D, written notice of such prepayment shall be given by the Company by
first-class, certified mail, return receipt requested, postage prepaid to the
holders of the Senior Subordinated Notes at their respective addresses as the
same appear on the records of the Company, 30 days prior to the prepayment date,
specifying the prepayment date, the principal amount of the Senior Subordinated
Notes to be prepaid on such date and that such prepayment is to be made pursuant
to paragraph 4D. Notice of prepayment having been given as foresaid, the
principal amount of the Senior Subordinated Notes specified in such notice,
together with interest thereon to the prepayment date, shall become due and
payable on such prepayment date.
4F. Mandatory Payments and Partial Prepayments Pro Rata. If there is
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more than one holder of the Senior Subordinated Notes, the aggregate principal
amount of each partial prepayment of the Senior Subordinated Notes shall be
allocated among the holders of the Senior Subordinated Notes at the time
outstanding in proportion to the unpaid principal amounts of the Senior
Subordinated Notes respectively held by each such holder. For purposes of
allocation pursuant to this paragraph 4F only, each Senior Subordinated Note (to
the extent possible) shall be rounded to the nearest $1,000.
5. REQUIRED REDEMPTION AND OPTIONAL REDEMPTION OF THE CONVERTIBLE
--------------------------------------------------------------
PREFERRED STOCK.
---------------
5A. Option of Holders to Put Convertible Preferred Stock upon a Change
------------------------------------------------------------------
of Control. Upon the occurrence of a Change of Control, any holder of shares of
----------
Convertible Preferred Stock shall have the right upon written notice as
hereinafter provided in paragraph 5B to require the Company to redeem at the
Option Closing (as hereinafter defined), and the Company agrees to so purchase
out of funds legally available therefor, all or any of the shares of Convertible
Preferred Stock. The redemption price for such shares of Convertible Preferred
Stock shall be paid by certified check at the Option Closing or by wire transfer
of immediately available funds denominated in U.S. dollars to one or more
accounts designated by the holders of such shares of Convertible Preferred Stock
to the Company prior to the Option Closing in an amount equal to the greater of
(i) the Market Price, if any (as calculated in accordance with paragraph 5F
below) at the time of the Change of Control Notice of the Common Stock into
which such shares of Convertible Preferred Stock are convertible, and (ii) the
Premium Amount.
8
5B. Exercise of the Change of Control Put Option. Upon the occurrence
---------------------------------------------
of a Change of Control Event, the notice furnished to each holder of Securities
under clause (iv) of paragraph 6N (the "Change of Control Notice") shall (i)
------------------------
refer specifically to this paragraph 5B, (ii) state that the Company may be
required to redeem all of the outstanding shares of Convertible Preferred Stock,
(iii) contain the Company's calculation of the redemption price for the shares
of Convertible Preferred Stock to be redeemed (including a detail of the Fair
Market Value of the Common Stock at the time of the Change of Control Notice),
(iv) indicate that the Company will redeem the shares of Convertible Preferred
Stock as provided in clause (ii) above at the Option Closing upon written notice
of the exercise of an option by a holder of shares of Convertible Preferred
Stock, (v) indicate that a closing (the "Option Closing") for such purchase and
--------------
sale shall take place on a date specified in the notice, which date shall be a
date occurring not earlier than 30 days nor more than 60 days after the date on
which the notice is delivered, (vi) indicate where the Option Closing shall take
place and (vii) be delivered by certificate mail return receipt requested. A
holder of shares of Convertible Preferred Stock shall furnish written notice to
the Company of the exercise of an option pursuant to paragraph 5B within at
least 10 days prior to the Option Closing. At the Option Closing, the Company
shall pay the redemption price for the securities being redeemed determined as
described above against delivery of the securities being purchased. No waiver by
a holder of any shares of Convertible Preferred Stock of its right under this
paragraph 5B to required the redemption of any or all of the shares of
Convertible Preferred Stock held by such holder in respect of a Change of
Control shall affect the rights of such holder under this paragraph 5B in
respect of any subsequent Change of Control.
5C. Put Option of Holders of Shares of Convertible Preferred Stock
--------------------------------------------------------------
upon the Absence of a Liquid Secondary Market. If at any time after the sixth
---------------------------------------------
anniversary of the Closing Date, there is no Liquid Secondary Market, any holder
of shares of Convertible Preferred Stock shall have the right (the "Put Right")
upon delivery of a Put Notice (as hereinafter defined in paragraph 5D), to
require the Company to redeem at the Put Option Closing (as hereinafter defined
in paragraph 5D), and the Company agrees to so purchase out of funds legally
available therefor, all or any of the shares of Convertible Preferred Stock. The
redemption price for the shares of Convertible Preferred Stock shall be paid in
three (3) equal annual installments commencing with the Put Option Closing (each
such payment, an "Installment") by certified check or by wire transfer of
-----------
immediately available funds denominated in U.S. dollars to one or more accounts
designated by the holders of the shares of Convertible Preferred Stock to the
Company prior to the Put Option Closing in an amount equal to the Fair Market
Value at the time of the Put Notice relating to the Common Stock into which the
shares of Convertible Preferred Stock subject to the Put Right are convertible.
The redemption price for the Convertible Preferred Stock shall bear
9
interest on the unpaid balances thereof at the rate of 12% per annum from and
after the Put Option Closing until the balance thereof shall have been paid in
full.
5D. Exercise of the Put Option. To exercise its Put Right, any holder
--------------------------
of shares of Convertible Preferred Stock shall deliver to the Company a written
notice (the "Put Notice") which shall (i) refer specifically to this paragraph
----------
5D, (ii) state the number of shares of Convertible Preferred Stock held by such
holder that the Company is required to redeem, (iii) contain such holder's
request that the Company determine the Fair Market Value at the time of the Put
Notice of the Common Stock into which the shares of Convertible Preferred Stock
are convertible, (iv) indicate that a closing (the "Put Option Closing") for
------------------
such redemption shall take place on a date specified in the notice, which date
shall be a date occurring not earlier than 45 days nor more than 60 days after
the date on which the notice is delivered, (v) indicate where the Put Option
Closing shall take place and (vi) be delivered by certified mail return receipt
requested. The Company covenants that it will promptly (and in any event no
later than 25 days after receipt of the Put Notice) determine, and notify in
writing the holders of shares of Convertible Preferred Stock who have delivered
a Put Notice of the Fair Market Value at the time of the Put Notice of the
Common Stock in accordance with paragraph 5E below; provided, however, that in
-------- -------
the event that any holder of shares of Convertible Preferred Stock exercises its
right to refer the question of valuation to an investment banking firm, the Put
Option Closing shall take place on the later of (1) the date specified in the
Put Notice and (2) 5 Business Days after the determination of the Fair Market
Value has been completed in accordance with paragraph 5E below. At the Put
Option Closing, the Company shall pay the first installment of the redemption
price for the securities being purchased determined as described in paragraph 5E
below against delivery of the securities being redeemed.
5E. Fair Market Value. The term "Fair Market Value" means either (i)
----------------- -----------------
the Market Price, if any (as calculated in accordance with paragraph 5F below),
of the Common Stock, or (ii) if no Market Price exits, the value (which shall
not take into effect any minority discounts) of the Common Stock as determined
by a nationally recognized investment banking firm designated by the Investors
and reasonably acceptable to the Company; and provided, further, that if the
-------- -------
parties cannot agree on such a firm each party shall choose a nationally
recognized investment banking firm, which shall choose a third firm which shall
be nationally recognized and that third firm shall determine the Fair Market
Value, which determination shall be final and binding. The cost relating to
retaining any investment banking firm(s) pursuant to this paragraph 5E shall be
borne by the Company.
10
5F. Market Price. As used in this Section 5, the term "Market Price"
------------ ------------
of any security shall mean the value determined in accordance with the following
provisions:
(i) if such security is listed on a national securities exchange
registered under the Exchange Act, a price equal to the average of the
closing sales prices for such security on such exchange for each day during
the 20 trading days preceding the day of the Change of Control Notice; and
(ii) if not so listed under clause (i) above and such security is
quoted on the NASDAQ system, a price equal to the average of the average of
the closing bid and asked prices for such security quoted on such system
each day during the 20 trading days preceding the day of the Change of
Control Notice.
5G. Optional Redemption of the Convertible Preferred Stock. (a)
------------------------------------------------------
Subject to the rights of holders of shares of Convertible Preferred Stock to
convert such shares of Convertible Preferred Stock pursuant to the provisions of
the Certificate of Designation and the rights of holders of shares of
Convertible Preferred Stock pursuant to paragraphs 5A or 5C hereof, the shares
of Convertible Preferred Stock shall be subject to redemption at the Company's
option, in whole but not in part, at any time on or after a Qualifying Public
Offering of Common Stock; provided, however, that the Company shall not have the
-------- -------
right to redeem the Convertible Preferred Stock in any event pursuant to this
section 5G as long as any Senior Subordinated Notes are outstanding.
(b) The redemption price for the Shares of Convertible Preferred
Stock shall be payable immediately upon redemption, by certified or bank
cashier's check, and shall be $.001 (subject to appropriate adjustments for
stock splits, combinations, recapitalizations, stock dividends and similar
events) multiplied by the number of shares of Common Stock issuable upon
conversion of the shares of Convertible Preferred Stock so redeemed.
5H. Notice of Redemption. The Company shall give each holder of
--------------------
shares of Convertible Preferred Stock written notice of the redemption pursuant
to paragraph 5G not less than 60 days prior to the redemption date, specifying
such redemption date, that all of the outstanding shares of Convertible
Preferred Stock are to be redeemed on such date and that such redemption is to
be made pursuant to paragraph 5G. Such notice shall be accompanied by an
Officer's Certificate stating that the applicable conditions set forth in
paragraph 5G have been fulfilled. Notice of redemption having been given as
aforesaid, the redemption amount due in respect of all of the shares of
Convertible Preferred Stock and as calculated in paragraph 5G(b), shall become
due and payable on such redemption date unless the holder of such shares of
Convertible Preferred Stock (i) shall have
11
converted such shares of Convertible Preferred Stock, in whole or in part, prior
to such redemption date pursuant to the terms of the Certificate of Designation,
(ii) shall have put such shares of the Convertible Preferred Stock, in whole or
in part, pursuant to paragraph 5A or 5C or (iii) unless the filing by the
Company of a registration statement under the Securities Act relating to the
Common Stock obtainable upon conversion of the shares of Convertible Preferred
Stock shall have been requested by a holder thereof (either before or after
receipt of such notice) pursuant to the Registration Rights Agreement, in which
case the redemption shall be effected 30 days after the declaration of
effectiveness of such registration statement by the Commission. Should the
shares of Convertible Preferred Stock not be redeemed on such redemption date
due to the Company's failure to perform its obligations under this paragraph 5H,
such redemption may be effected only after compliance with the provisions of
this Section 5 from and after such redemption date.
6. AFFIRMATIVE COVENANTS. All covenants contained herein shall be
---------------------
given independent effect so that if a particular action or condition is not
permitted by any such covenant, the fact that such action or condition would be
permitted by an exception to, or otherwise be within the limitations of, another
covenant shall not avoid the occurrence of a Default if such action is taken or
condition exists. The provisions of this Section 6 are for the benefit of the
Investors so long as they hold any of the Securities and, to the extent set
forth herein, for the benefit of each other holder of the Securities; provided,
--------
however, that upon the later to occur of (x) the consummation of a Qualifying
-------
Public Offering and (y) repayment in full of any and all amounts (including,
without limitation, principal and interest) due under the Senior Subordinated
Notes outstanding, the Company and its Subsidiaries shall no longer be bound by
the covenants set forth in paragraphs 6A (other than 6A (ii) and (iii), (v) and
(vi) and (vi)), 6B, 6D, 6E, 6H, 6N, and 6R.
6A. Financial Statements. The Company will deliver to each holder of
--------------------
Securities (excluding any holder that is a direct competitor of the Company and
its Subsidiaries in the region in which the Company then conducts its business):
(i) as soon as practicable and in any event within 30 days after the
end of each month in each fiscal year commencing with January, 1997,
unaudited management reports of the Company and its Subsidiaries setting
forth the financial, operational and other performance data of the Company
and its Subsidiaries in reasonable detail and reasonably satisfactory to
the Investors, which shall include at least a consolidated statement of
operations, a consolidated statement of cash flows and a consolidated
balance sheet for or as at end of such month, in each case setting forth,
in comparative form, comparable information from the same month in the
preceding fiscal year and management's budget, all as such reports are then
12
prepared by management of the Company in the conduct of its business;
(ii) as soon as practicable and in any event within 45 days after
the end of each quarterly period in each fiscal year, consolidated and
consolidating statements of income, changes in stockholders' equity and
cash flow of the Company and its Subsidiaries for such quarterly period and
for the period from the beginning of the current fiscal year to the end of
such quarterly period and a consolidated and consolidating balance sheet of
the Company and its Subsidiaries as at the end of the most recent year and
at the end of such quarterly period, setting forth in each case in
comparative form figures for the corresponding period in the preceding
fiscal year, all in reasonable detail and reasonably satisfactory in scope
to the holders of Securities and prepared in accordance with GAAP (except
for footnote disclosure) on a basis consistent with past practice and
certified by the chief financial officer or chief executive officer of the
Company as fairly presenting the financial condition of the Company and its
Subsidiaries, subject to the changes resulting from audit and year-end
adjustments;
(iii) as soon as practicable and in any event within 120 days
after the end of each fiscal year, consolidated and consolidating
statements of income, changes in stockholders' equity and cash flow of the
Company and its Subsidiaries for such year, and a consolidated and
consolidating balance sheet of the Company and its Subsidiaries as at the
end of such year, setting forth in each case in comparative form
corresponding figures from the preceding annual audit, all in reasonable
detail and reasonably satisfactory in scope to the holders of Securities,
and in each case audited by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. or such other independent
public accountants of recognized national standing selected by the Company,
and reasonably satisfactory to the holders of Securities, whose report in
each case shall state that such consolidated financial statements present
fairly the results of operations and cash flows of the Company and its
Subsidiaries, in accordance with GAAP on a basis consistent with prior
years and that the examination by such accountants has been made in
accordance with generally accepted auditing standards then in effect in the
United States;
(iv) as soon as practicable and in any event by the end of each
fiscal year beginning with fiscal year 1996, a budget for the Company and
its Subsidiaries, as approved by the Board of Directors of the Company and
each Subsidiary, for the following fiscal year setting forth in comparative
form corresponding figures from the preceding fiscal year, in reasonable
detail and certified as to its good-faith
13
preparation by the chief financial officer or chief executive officer of
the Company and each Subsidiary;
(v) promptly upon transmission thereof, copies of all financial
statements, information circulars, proxy statements and reports as the
Company or any Subsidiary shall send to its stockholders that are material
to the business of the Company and its Subsidiaries, taken as a whole, and
copies of all registration statements and prospectuses and all reports
which it or any of its officers or directors file with the Commission (or
any governmental body or agency succeeding to the functions of the
Commission) or with any securities exchange on which any of its securities
are listed or with NASDAQ, and copies of all press releases and other
statements made available generally by the Company or its Subsidiaries to
the public concerning material developments in the business of the Company
and its Subsidiaries;
(vi) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any of its Subsidiaries by independent
accountants in connection with any annual, interim or special audit made by
them of the books of the Company or any of its Subsidiaries; and
(vii) with reasonable promptness, such other financial and/or
operating data as the holders of Securities may reasonably request.
Together with each delivery of the financial statements required by clauses (ii)
and (iii) above, the Company, on behalf of itself and each Guarantor, will
deliver to each holder of Securities an Officer's Certificate (a) demonstrating
(with computations in reasonable detail) compliance by the Company and its
Subsidiaries with the provisions of ▇▇▇▇▇▇▇▇▇ ▇▇, (▇) stating that the Company
and its Subsidiaries are in compliance with the provisions of paragraphs 7B, 7C,
7D and 7E, and (c) stating that there exists no Default or Event of Default or,
if any Default or Event of Default exists, specifying the nature thereof, the
period of existence thereof and what action the Company proposes to take with
respect thereto. Together with each delivery of financial statements required by
clause (iii) above, the Company will deliver to each holder of Securities a
certificate of the accountants referred to in such clause (iii) stating that, in
making the audit necessary to the certification of such financial statements,
they have obtained no knowledge of any Default or Event of Default or, if, to
their knowledge any such Default or Event of Default exists, specifying the
nature and period of existence thereof; provided, however, that such accountants
-------- -------
shall not be liable to anyone by reason of their failure to obtain knowledge of
any such Default or Event of Default which would not be disclosed in the course
of an audit conducted in accordance with generally accepted auditing standards
then in effect in the United States. Each holder of Securities is hereby
authorized to
14
deliver a copy of any financial statement or certificate delivered pursuant to
this paragraph 6A to any regulatory body having jurisdiction over such holder
that requests or requires delivery of such information.
6B. Use of Proceeds. The proceeds of the sale of the Securities shall
---------------
be used for the cash portion of the acquisition of Looney and ▇▇▇▇▇, pursuant to
the Looney Purchase Agreement and the ▇▇▇▇▇ Purchase Agreement, respectively
(such agreements, together with any related agreements (including but not
limited to Notes, Management and Pledge Agreements, shall collectively be
referred to as the "Purchase Agreements"), and for the acquisition of other
-------------------
court reporting companies the ownership of which is consistent with the
Company's strategic development and business plans.
6C. Books and Records; Inspection of Property. 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 in conformity in all material
respects with GAAP shall be made of all material dealings and transactions in
relation to their business and activities. The Company will, upon reasonable
advance notice, permit any Person representing any Investor and designated in
writing by such holder, at such holder's expense, to visit and inspect any of
the properties of the Company and its Subsidiaries during normal business hours
in a manner which does not unduly interrupt the normal course of business, to
examine the corporate, financial and operating records of the Company or any of
its Subsidiaries and make copies thereof or extracts therefrom and to discuss
the affairs, finances and accounts of any of such corporations with the
directors, officers and independent accountants of the Company and its
Sudsidiaries, all at such reasonable times and as often as the holders may
reasonably request.
6D. Covenant to Secure Senior Subordinated Notes Equally. If the
----------------------------------------------------
Company or any of its Subsidiaries shall create or assume any Lien upon any of
its property or assets, whether now owned or hereafter acquired, other than
Liens permitted by the provisions of paragraph 7C hereof, it will make or cause
to be made effective provisions whereby the Senior Subordinated Notes will be
secured by such Lien senior to any and all other Indebtedness (other than Senior
Debt) thereby secured as long as any such other Indebtedness shall be so
secured.
6E. Additional Covenant Pending the Closing. Pending the Closing,
---------------------------------------
neither the Company nor any Guarantor will, without the prior written consent of
the Investors, take any action which would result (i) in any of the
representations or warranties contained in this Agreement not being true and
correct in all material respects (without giving effect to any qualification as
to materiality contained therein) at and as of the time immediately after such
action or (ii) in any of the covenants contained in this Agreement becoming
incapable of performance.
15
Pending the Closing, the Company and each Guarantor will promptly advise the
Investors of any action or event of which either becomes aware which has the
effect of making incorrect, in any material respect, any of such representations
or warranties or which has the effect of rendering any of such covenants
incapable of performance. The Company and each Guarantor will duly perform, in
all material respects, all of its respective obligations required to be
performed under each of the Related Documents to which it is a party.
6F. Stock to be Reserved. The Company covenants that all shares of
--------------------
Common Stock that may be issued upon conversion of the Convertible Preferred
Stock will, upon issuance, be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof. The
Company further covenants that during the period within which the Convertible
Preferred Stock may be converted, the Company will at all times have authorized
and reserved a sufficient number of shares of Common Stock to permit the
conversion of all of the outstanding shares of Convertible Preferred Stock.
6G. Compliance With Laws, etc. The Company will, and will cause each
-------------------------
of its Subsidiaries to, comply with the requirements of all applicable laws,
rules, regulations and orders of any Governmental Authority, and obtain and
maintain in good standing all licenses, permits and approvals from any and all
governments, governmental commissions, boards or agencies of jurisdictions in
which they carry on business required in respect of the operations of the
Company and its Subsidiaries, except for those with which the failure to comply
or maintain would not have a Material Adverse Effect.
6H. ERISA. Promptly (and in any event within 30 days) after the
-----
Company or any of its Subsidiaries knows that a Reportable Event with respect to
any Pension Plan has occurred, that any Pension Plan is or may be terminated,
reorganized, partitioned or declared insolvent under Title IV of ERISA or that
the Company or any of its Subsidiaries will or may incur any liability under
Section 4062, 4063, 4064, 4201 or 4204 of ERISA or promptly upon becoming aware
of the occurrence of any (i) event requiring the Company or any of its
Subsidiaries to provide security to a Pension Plan under Section 401 (a) (29) of
the Code, (ii) "prohibited transaction", as such term is defined in Section 4975
of the Code or in Section 406 of ERISA, in connection with any employee benefit
plan maintained or contributed to by the Company or any of its Subsidiaries or
any trust created thereunder for which a statutory or administrative exemption
is not available, (iii) notice of intent to terminate a Pension Plan or Pension
Plans having been filed under Title IV of ERISA by the Company, any Subsidiary
or any ERISA Affiliate, any Pension Plan administrator or any combination of the
foregoing, (iv) institution of proceedings by the PBGC to terminate or to cause
a trustee to be appointed to administer any Pension Plan, (v) partial or
complete withdrawal by the Company, any Subsidiary
16
or any ERISA Affiliate from any Multiemployer Pension Plan, (vi) institution of
proceedings by a fiduciary of any Multiemployer Pension Plan against the Company
or any of its Subsidiaries to enforce Section 515 of ERISA and such proceeding
shall not have been dismissed within 30 days thereafter, (vii) failure of the
Company, any Subsidiary or any ERISA Affiliate to make a required installment
under Section 412(m) of the Code or any other payment required under Section 412
of the Code or to pay any amount which it shall have become liable to pay to the
PBGC or to a Pension Plan under Title IV of ERISA on or before the due date,
(viii) application by the Company, any Subsidiary or any ERISA Affiliate for a
waiver of the minimum funding standard under Section 412 of the Code or Section
302 of ERISA, or (ix) "reorganization" (as defined in Section 418 of the Code or
Title IV of ERISA) of any Multiemployer Pension Plan, the Company will deliver
to each holder of Securities, a certificate of the chief financial officer of
the Company, setting forth information as to such occurrence and what action, if
any, the Company is required or proposes to take with respect thereto. The
Company shall also deliver to each holder of Securities any notices concerning
such occurrences which are (a) required to be filed by the Company or the plan
administrator of any such Pension Plan controlled by the Company or any of its
Subsidiaries with the PBGC, or (b) received by the Company or any of its
Subsidiaries from any plan administrator of a Multiemployer Pension Plan not
under their control. The Company shall furnish to each holder of Securities a
copy of each annual report (Form 5500 Series, excluding Schedule SSA) of any
Pension Plan received or prepared by it or any of its Subsidiaries. Each annual
report and any notice required to be delivered hereunder shall be delivered no
later than 30 days after the later of the date such report or notice is filed
with the Internal Revenue Service or the PBGC or the date such report or notice
is received by the Company or any of its Subsidiaries, as the case may be.
6I. Corporate Existence; Maintenance of Properties. The Company
-----------------------------------------------
(i) will do or cause to be done all things reasonably necessary to preserve and
keep in full force and effect its corporate existence, rights and franchises and
the corporate existence, rights and franchises of its Subsidiaries (except as
specifically permitted by paragraphs 7H and 7I hereof), (ii) will cause its
material properties and the material properties of its Subsidiaries to be
maintained and kept in good condition, repair and working order (ordinary wear
and tear excepted) and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereto, and (iii) will, and will
cause each of its Subsidiaries to, qualify and remain qualified to conduct
business in each jurisdiction where the nature of the business of or ownership
of property by the Company or such Subsidiary may require such qualification.
6J. Insurance. The Company will maintain, and will cause each of its
---------
Subsidiaries to maintain, with financially sound and reputable insurance
companies, funds or underwriters,
17
insurance for itself and its Subsidiaries of the kinds, covering the risks and
in the relative proportionate amounts usually carried by companies conducting
business activities similar to those of the Company and its Subsidiaries. From
and after a Public Offering, the Company will use its best efforts to obtain and
maintain directors and officers liability insurance similar to the insurance
usually carried by companies conducting business activities similar to those of
the Company and its Subsidiaries.
6K. Further Assurances. The Company and each Guarantor shall
------------------
cooperate with any of the Investors and execute such further instruments and
documents as the Investors shall reasonably request to carry out to the
satisfaction of such Investors the transactions contemplated by this Agreement.
6L. Filing of Reports Under the Exchange Act. The Company shall, and
----------------------------------------
shall cause each of its Subsidiaries to, give prompt notice to each Investor of
the filing of any registration statement (an "Exchange Act Registration
-------------------------
Statement") pursuant to the Exchange Act relating to any class of securities of
---------
the Company or any of its Subsidiaries and the effectiveness of such Exchange
Act Registration Statement and, with respect to equity securities, the number of
shares of such class of equity security outstanding as reported in such Exchange
Act Registration Statement. If and for so long as the Company or any of its
Subsidiaries has a class of equity securities required to be registered under
the Exchange Act, the Company and such Subsidiaries shall (i) comply in all
material respects with the reporting requirements of the Exchange Act, and (ii)
comply in all material respects with all other public information reporting
requirements of the Commission that are a condition to the availability of an
exemption from the Securities Act (under Rule 144 thereof, as amended from time
to time, or successor rule thereto or otherwise) for the sale of shares of
Common Stock by any Investor. The Company shall, and shall cause each of its
Subsidiaries to, cooperate with each Investor in supplying such information as
may be reasonably necessary for such Investor to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to there availability of an exemption from the Securities Act (under
Rule 144 thereunder or otherwise) for the sale of shares of Common Stock by any
Investor.
6M. Securities Act Registration Statements. The Company covenants
--------------------------------------
that it shall not, and shall cause each of its Subsidiaries not to, file any
registration statement under the Securities Act covering any securities unless
it shall first have given to each Investor 20 days written notice thereof. The
Company further covenants that each Investor shall have the right, at any time
when it may reasonably be deemed by such Investor or the Company or any of its
Subsidiaries to be a controlling person of the Company or any of its
Subsidiaries, to participate in the preparation of such registration statement
(regardless of whether or not an Investor will be a selling
18
security holder in connection with such registration statement) and to request
the insertion therein of material furnished to the Company or any of its
Subsidiaries in writing which in such Investor's reasonable judgment should be
included. In connection with any registration statement referred to in this
paragraph 6M, the Company will indemnify each Investor, its partners, officers
and directors and each person, if any, who controls such Investor within the
meaning of Section 15 of the Securities Act (collectively, the "Investor
--------
Parties"), against all losses, claims, damages, liabilities and expenses caused
-------
by any untrue statement or alleged untrue statement of a material fact contained
in any registration statement or prospectus or any preliminary prospectus or any
amendment thereof or supplement thereto or caused by 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, except insofar as such
losses, claims, damages, liabilities or expenses are caused by any untrue
statement or alleged untrue statement or omission or alleged omission contained
in written information furnished to the Company or any of its Subsidiaries by
such Investor Parties expressly for use in such registration statement. If, in
connection with any such registration statement, such Investor Parties shall
furnish written information to the Company or any of its Subsidiaries expressly
for use in the registration statement, such Investor will indemnify the Company,
its directors, each of its officers who signs such registration statement and
each person, if any, who controls the Company within the meaning of the
Securities Act against all losses, claims, damages, liabilities and expenses
caused by any untrue statement or alleged omission of a material fact required
to be stated in the registration statement or prospectus or any preliminary
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or such omission or alleged omission is
contained in information so furnished in writing by such Investor for use
therein. The provisions of this paragraph 6M are in addition to, and not in
limitation of, the provision of the registration Rights Agreement.
6N. Notices of Certain Events. The Company shall promptly give
-------------------------
notice to each holder of Securities (i) of the occurrence of any Default or
Event of Default, (ii) of any default or event of default under any contractual
obligation of the Company or any of its Subsidiaries if such default or event of
default, individually or in the aggregate, relates to a contractual obligation
equal to or in excess of $100,000, (iii) of any pending or threatened
litigation, investigation or proceeding to which the Company or any of its
Subsidiaries is or is threatened to be a party which, if such pending or
threatened litigation, investigation or proceeding were adversely determined,
would create a liability of the Company or its Subsidiaries equal to or in
excess of $100,000 that is not fully
19
covered by insurance held by the Company or its Subsidiaries, or (iv) of a
Change of Control Event. Any notice delivered pursuant to this paragraph 6N
shall accompanied by an Officer's Certificate specifying the details of the
occurrence referred to therein and stating what action the Company proposes to
take with respect thereto. In addition to the foregoing, in the case
contemplated by clause (iv) of the first sentence of this paragraph 6N, the
Company will also comply with the provisions of paragraphs 4C hereof.
6O. Board Nominees. As long as (x) any Senior Subordinated Notes are
--------------
outstanding or (y) the Investors hold at least 10% of the Convertible Preferred
Stock or Common Stock obtained through conversion of the Convertible Preferred
Stock held by them on the date hereof, the Company will use its best efforts to
(i) have that number of nominees designated by the Investors elected to the
Board of Directors of the Company that would constitute a majority of the Board
of Directors of the Company, (ii) cause the number and composition of directors
of the Board of Directors of any Subsidiary to be identical to the number of
directors of the Board of Directors of the Company; provided, however, that if
-------- -------
the number of directors or the composition of the Board of Directors of any
Subsidiary differs from the number of directors or the composition of the Board
of Directors of the Company, then and in addition to the requirement of clause
(i) above, the Company will, and will cause such Subsidiary to, use its best
efforts to, have that number of nominees designated by the Investors elected to
the Board of Directors of such Subsidiary as the Investors request. Any director
designated by the Investors shall receive (A) all materials distributed to the
Board of Directors of the Company or any Subsidiary, as the case may be, whether
provided to directors in advance of, during or after, any meeting of the
applicable Board of Directors, regardless of whether such director shall be in
attendance at any such meeting, (B) the same compensation other outside members
of the Board of Directors of the Company or any Subsidiary, as the case may be,
shall receive in his or her capacity as a director and (C) reimbursement of the
reasonable out-of-pocket expenses of such director incurred in attending the
meetings of the Board of Directors of the Company or any Subsidiary, as the case
may be.
6P. Listing of Common Stock. The Company covenants and agrees for
-----------------------
the benefit of the Investors and each holder of any Common Stock issued upon
conversion of the Convertible Preferred Stock, that at the time of and in
connection with the listing of Common Stock or any other equity securities of
the Company on any national securities exchange, it will, at its expense, use
its best efforts to cause the shares of Common Stock issuable from time to time
upon conversion of the Convertible Preferred Stock to be approved for listing,
subject to notice of issuance, and will provide prompt notice to each such
exchange of the issuance thereof from time to time.
20
6Q. Environmental Laws. (i) The Company will comply with, and will
------------------
cause each of its Subsidiaries to comply with, and use its best efforts to
ensure compliance by all tenants and subtenants and with respect to all of its
assets with, all licenses, permits and other authorizations required under all
applicable laws, regulations, orders, notices and other requirements of
Governmental Authorities relating to public health and safety, pollution or to
the protection of the environment (the "Environmental Laws") and obtain and
------------------
comply with and maintain, and use its best efforts to ensure that all tenants
and subtenants obtain and comply with and maintain, any and all licenses,
approvals, registrations or permits required by Environmental Laws, except to
the extent that failure to so comply or to obtain and comply with and maintain
such licenses, approvals, registrations and permits does not have, and could not
reasonably be expected to result in, a Material Adverse Effect.
(ii) The Company will, and will cause each of its Subsidiaries to,
conduct and complete all investigations, studies, sampling and testing, and all
remedial, removal and other actions, required under Environmental Laws and
promptly comply with all lawful orders and directives of all Governmental
Authorities with respect to Environmental Laws, except to the extent that the
same are being contested in good faith by appropriate proceedings or the
pendency of such proceedings would not have a Material Adverse Effect.
(iii) The Company will, and will cause each of its Subsidiaries to,
notify the holders of the Securities of any of the following that is reasonably
likely to have a Material Adverse Effect.
(a) any claim with respect to any Environmental Law that the Company
or any of its Subsidiaries receives, including one to take or pay for any
remedial, removal, response or cleanup or other action with respect to any
hazardous substance, hazardous waste, contaminant, pollutant or toxic
substance (as such terms are defined in any applicable Environmental Law)
(collectively, "Hazardous Substances") contained on or generated from any
--------------------
property owned or leased by the Company or any of its Subsidiaries;
(b) any notice of any alleged violation of or knowledge by the
Company or any of its Subsidiaries of a condition that might reasonably
result in a violation of any Environmental Law; and
(c) any commencement of or receipt of written intent to commence any
judicial or administrative proceeding or investigation alleging a violation or
potential violation of any requirement of any Environmental Law by the Company
or any of its Subsidiaries.
21
(iv) Without limiting the generality of paragraph 13B, the Company
will, and will cause each of its Subsidiaries to, indemnify the Investors and
each holder from time to time of the Securities and each of their respective
directors, officers, employees, agents, partners and Affiliates (each such
person being called an "Indemnitee" and collectively the "Indemnitees") against,
---------- -----------
and hold each Indemnitee harmless from, any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses (including reasonable
counsel fees, charges and disbursements) of whatever kind or nature arising out
of, or in any way relating to, the violation of, noncompliance with or liability
under any Environmental Laws applicable to the operations of the Company, any
orders, requirements or demands of Governmental Authorities related thereto
including, without limitation, attorneys' and consultants' fees, investigation
and laboratory fees, Response Costs (as such term is defined in CERCLA), court
costs and litigation expenses, except to the extent that any of the foregoing
are found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
the Indemnitee seeking indemnification therefor. The obligation of the Company
under this paragraph 6Q shall survive the payment of the Senior Subordinated
Notes and the conversion of the Convertible Preferred Stock.
(v) Neither the Company's nor any of its Subsidiaries' plants and
facilities will use, manage, treat, store or dispose of any Hazardous Substances
in violation of any Environmental Laws.
6R. Guarantee By Subsidiary. Promptly upon any Person becoming a
-----------------------
Subsidiary of the Company, the Company covenants that it will cause such
Subsidiary to execute and deliver to the Investors such appropriate documents,
including this Agreement and the Subsidiary Guarantee, to become a guarantor
under this Agreement and the Subsidiary Guarantee.
6S. Issuance of Convertible Preferred Stock with Interest Notes.
-----------------------------------------------------------
The Company agrees to issue, together with any Interest Notes, that number of
shares of Convertible Preferred Stock equal to 100 shares per $1,000 principal
amount of Interest Notes (as adjusted for stock splits, recombinations,
dividends and other similar events). All such shares shall be registered in the
name of the recipient of the Interest Notes or its designee and shall be, upon
issuance, duly and validly issued, fully paid, nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof.
6T. Management Composition and Compensation. As soon as possible
---------------------------------------
and in any event within 120 days after the Closing Date, the Company shall fill
key management positions. The composition and compensation of the management of
the Company will be mutually agreed upon between the Company and the
22
Investors, to be determined based upon what is customary for the Company's
industry and size.
6U. Conduct of Business. To the Company agrees (i) to cause all
-------------------
court reporters that are hired (directly or indirectly through court reporting
services, including independent contractors) by the Company to be duly
certified to perform the jobs that they are hired to perform, (ii) to cause all
documents that the Company is required to maintain, store or handle in
connection with conducting its business to be maintained, stored or handled in
the manner agreed to between the Company and its respective clients or in
conformity with standards regarding such matters that prevail in the Company's
industry, and (iii) to perform all aspects and operations of its business at or
above the prevailing standards for the Company's industry.
7. NEGATIVE COVENANTS. All covenants contained herein shall be
------------------
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that such action or condition would
be permitted by an exception to, or otherwise be within the limitations of,
another covenant shall not avoid the occurrence of a Default if such action is
taken or condition exists. The provisions of this Section 7 are for the benefit
of the Investors so long as they hold any of the Securities and for the benefit
of each other holder of Securities; provided, however, that upon repayment in
-------- -------
full of any and all amounts (including, without limitation, principal and
interest) due under the Senior Subordinated Notes, the Company or any of its
Subsidiaries, as the case may be, shall no longer be bound by the covenants
contained in paragraphs 7A through 7F, 7H through 7M and 7P.
7A. Financial Covenants.
-------------------
The Company and its Subsidiaries, on a consolidated basis, shall maintain
the following covenants:
(i) Funded Debt Ratio. As of the date hereof, the Company and its
-----------------
Subsidiaries, on a consolidated basis, shall have and thereafter maintain, for
each quarter annual period ending March 31, 1997, June 30, 1997, September 30,
1997, and December 31, 1997, a Funded Debt Ratio not exceeding 5.50:1.00. As of
January 1, 1998, and for each quarter-annual period ending March 31, 1998 and
June 30, 1998, the Company and its Subsidiaries, on a consolidated basis, shall
have and maintain a Funded Debt Ratio not exceeding 5.00:1.00.
(ii) Fixed Charge Coverage Ratio. As of the date hereof, and for each
---------------------------
quarter-annual period ending March 31, 1997, June 30, 1997, September 30, 1997
and December 31, 1997, the Company and its Subsidiaries, on a consolidated
basis, will have a Fixed Charge Coverage Ratio of at least 1.00:1.00. For the
first two quarter-annual periods ending March 31, 1997, and June 30, 1997, the
Company and its Subsidiaries, on a consolidated
23
basis, will not permit the Fixed Charge Coverage Ratio to be less than
1.10:1.00. For the quarter-annual periods ending March 31, 1998, and June 30,
1998, the Company and its Subsidiaries, on a consolidated basis, will not permit
the Fixed Charge Coverage consolidated basis, will not permit the Fixed Charge
Coverage Ratio to be less than 1.15:1.00.
(ii) Certificate of Compliance. As of the date hereof, the Company
-------------------------
and its Subsidiaries, on a consolidated basis, and within forty-five (45) days
after the end of each month during the period ending March 31, 1997 and
thereafter within thirty (30) days after the end of each month, the Company will
provide to the Investors a Certificate of Compliance in the same form as
provided to the Bank, signed by a financial officer of the Company (i)
calculating or stating the financial covenants set out in this Section 7A, (ii)
certifying that no Events of Default have occurred, and (iii) that the Company
is, and its Subsidiaries are, in compliance with the covenants set out in this
Section.
7B. Restrictions on Indebtedness and Repayment of Indebtedness. The
----------------------------------------------------------
Company covenants that it will not incur, create, assume or suffer to exist any
Indebtedness or permit any of its Subsidiaries to do any of the foregoing,
other than the following:
(i) Senior Debt in an amount not to exceed $10,000,000;
(ii) Indebtedness represented by the Senior Subordinated Notes
and this Agreement;
(iii) Indebtedness of the Company which by its terms is
subordinated (to the same extent as the Senior Subordinated Notes are
subordinated to any Senior Debt) to the Senior Subordinated Notes,
provided that no such Indebtedness is guaranteed or incurred by any
Subsidiary of the Company; and
(iv) Indebtedness secured by Liens permitted pursuant to
paragraph 7C.
In addition, the Company covenants that it will not, and will not
permit any Subsidiary to, prepay any Indebtedness junior to the Senior
Subordinated Notes.
7C. Restrictions on Liens. The Company covenants that it will not
---------------------
and will not permit any Subsidiary to create, assume or suffer to exist any Lien
upon any of its property or assets, whether now owned or hereafter acquired,
except:
(i) Liens for taxes not yet due which are being contested in
good faith by appropriate proceedings and for which adequate reserves
have been established in accordance with GAAP;
24
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Persons and
other Liens imposed by law incurred in the ordinary course of business
for sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made therefor;
(iii) Liens made to secure Senior Debt;
(iv) Liens incurred through Purchase Money Security Interests
in amounts which do not exceed the fair market value of the asset
securing such Liens; and
(v) Liens or deposits made to secure payment of workers'
compensation, or in connection with the participation in any fund in
connection with workers' compensation, unemployment insurance,
pensions or other social security programs.
7D. Restricted Payments. The Company covenants that it will not make,
-------------------
and will not permit any Subsidiary to make, any Restricted Payments.
7E. Loans, Advances and Investments. The Company covenants that it
-------------------------------
will not, and will not permit any of its Subsidiaries to, make or permit to
remain outstanding any loan or advance to, or guarantee, endorse or otherwise be
or become contingently liable, directly or indirectly, in connection with the
obligations, stock or dividends of, or own, purchase or acquire any stock,
obligations or securities of, or make any Investment in, any Person except that
the Company or any of its Subsidiaries may:
(i) own, purchase or acquire Permitted Investments;
(ii) endorse negotiable instruments for collection in the
ordinary course of business, make or permit to remain outstanding
travel, moving and other like advances to officers, employees and
consultants in the ordinary course of business or make or permit to
remain outstanding lease, utility and other similar deposits in the
ordinary course of business;
(iii) make an Investment in a Person not otherwise permitted
pursuant to this paragraph 7E, provided the amount of such Investment
(including the amount of any guarantee, endorsement or other liability
with respect thereto) shall not exceed $25,000 individually or $50,000
in the aggregate;
25
(iv) make an Investment in a Person that becomes a Subsidiary
as a result of such Investment or in assets of a Person that become
assets of the Company or any Subsidiary; provided that such
Investment: (a) relate to the acquisition of court reporting
companies; (b) the Company shall deliver to the Investors pro forma
financial statements reflecting the proposed acquisition and related
calculations demonstrating compliance with all covenants contained
herein, relating to financial and accounting matters, together with a
description in reasonable detail of the nature and reasons for the
proposed transaction; (c) immediately after giving effect to such
transaction, no Default or Event of Default shall exist and be
continuing; (d) does not exceed $6,000,000 in purchase price for the
Company and its Subsidiaries in any one fiscal year; and (c) such
Person executes a quarantee in Substantially the form of Exhibit B
hereto; and
(v) make or permit to remain outstanding loans or advances to
any wholly owned Subsidiary (now existing or hereafter created) or, as
to a Subsidiary, any such loan or advance to the Company.
7F. Leases. The Company covenants that it will not enter into, or
------
permit any of its Subsidiaries to enter into, any leases of real or personal
property (except in the normal course of business at reasonable rents comparable
to those paid for similar leasehold interests in the area, or at comparable
amounts payable by companies in the same business as the Company or such
Subsidiary which are similarly situated) as lessee or sublessee, with initial
terms (excluding options to renew or extend any term, whether or not exercised)
of more than 12 years.
7G. Transactions with Affiliates. The Company covenants that it will
----------------------------
not, and will not permit any of its Subsidiaries to, directly or indirectly,
enter into or permit to exist any transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service), with any holder of 5% or more of any class of equity securities of the
Company or of any such holder on terms that are less favorable to such
Subsidiary or the Company than those that would be obtainable at the time in an
arms-length transaction from any Person who is not such a holder or Affiliate.
7H. Merger. The Company covenants that it will not, and will not
------
permit any of its Subsidiaries to, enter into any transaction of merger or
consolidation (which does not constitute a Change of Control) or liquidate, wind
up or dissolve itself (or suffer any liquidation or dissolution) (other than any
sales or transfers by a Subsidiary to the Company or to another Subsidiary or
by the Company to a Subsidiary), except that the Company or a
26
wholly owned Subsidiary may (i) enter into or permit a transaction of purchase,
merger or consolidation if the merger or consolidation is between two or more
wholly owned Subsidiaries of the Company or between the Company and one or more
wholly owned Subsidiaries of the Company and (ii) enter into a merger in
connection with an investment permitted by paragraph 7E.
7I. Disposition of Substantial Assets. The Company covenants that it
---------------------------------
will not, and will not permit any of its Subsidiaries to, sell, dispose of or
otherwise convey (by merger, consolidation, sale of stock or otherwise)
(collectively, a "Transfer"), in any single or related series of sales,
--------
dispositions or conveyances, any assets of the Company or any Subsidiary except:
(i) if such Transfer is made in the ordinary course of business consistent with
past practice; (ii) if the net proceeds of such Transfer is applied to the
prepayment of the Senior Subordinated Notes pursuant to paragraph 4D; (iii) if
the net proceeds of such Transfer are reinvested in the business of the Company
or are otherwise invested pursuant to paragraph 7E(iv); or (iv) if in the
aggregate all of the Transfers made since the Closing Date and not otherwise
permitted by clause (i), (ii) or (iii) above amounts to less than $200,000.
Notwithstanding this paragraph 7I, no assets of the Company or its Subsidiaries
shall be sold, disposed of or otherwise conveyed (i) at less than fair market
value (determined in good faith by the Board of Directors of the Company) nor
(ii) if any Default or Event of Default shall have occurred and then be
continuing or shall result from such sale or disposition.
7J. Sale of Stock and Debt of Subsidiaries. Except with respect to
--------------------------------------
the Senior Debt, the Company covenants that it will not, and will not permit any
of its Subsidiaries to sell or otherwise dispose of, or part with control of,
any shares of stock or Indebtedness of any Subsidiary, except to the Company or
another wholly owned Subsidiary.
7K. Certain Contracts. Except as otherwise specifically permitted by
-----------------
any other provision of this Section 7, the Company covenants that it will not,
and will not permit any of its Subsidiaries to, enter into or be a party to (i)
any contract for the purchase of materials, supplies or other property or
services if such contract (or any related document) requires that payment for
such materials, supplies or other property or services shall be made regardless
of whether or not delivery of such materials, supplies or other property or
services is ever made or tendered, (ii) any contract to rent or lease (as
lessee) any real or personal property if such contract (or any related document)
requires that the lessee purchase or otherwise acquire securities or obligations
of the lessor (unrelated to the lease in question), (iii) any contract for the
sale or use of materials, supplies or other property, or the rendering of
services, if such contract (or any related document) provides that payment for
such materials, supplies or other property, or the use thereof, or payment for
such services, shall
27
be subordinated to any indebtedness (of the purchaser or user of such materials,
supplies or other property or the Person entitled to the benefit of such
services) owed or to be owed to any Person, (iv) any other contract which is,
or, in economic effect, is substantially equivalent to, a guarantee or (v) any
contract providing for the making of loans, advances or capital contributions to
any Person other than a Subsidiary, or for the purchase of any property from any
Person, in each case primarily in order to enable such Person to maintain
working capital, net worth or any other balance sheet condition or to pay debts,
dividends or expenses.
7L. Conduct of Business. The Company covenants that it will not, and
-------------------
will not permit any of its Subsidiaries to, engage in any business other than
the business engaged in by the Company and its Subsidiaries on the date hereof
(or as previously engaged in by Looney and ▇▇▇▇▇).
7M. No Amendments. The Company covenants that it will not, and will
-------------
not permit any of its Subsidiaries to, amend (i) the Company's or any of its
Subsidiaries' Articles of Incorporation or By-laws in a manner which impairs the
rights, privileges or preferences of the Securities, (ii) the Related Documents
in any manner that impairs any right or privilege of the holders of the Senior
Subordinated Notes (including, without limitation, enlarging the rights or
privileges of any other Persons at the expense of the holders of the Senior
Subordinated Notes), (iii) the Bank Debt Agreement (or any other Senior Debt
Agreement) in any manner that impairs any right of the Senior Subordinated
Notes, including without limitation, the right to payments of principal and
interest when due in accordance with paragraph 4B.
7N. Registration Rights. The Company covenants that it will not
-------------------
hereafter enter into any agreement with respect to its securities any provision
of which is inconsistent with or as favorable as the rights granted to the
Investors in the Registration Rights Agreement.
7O. Offering of Securities. The Company will not take any action
----------------------
which would subject the issuance or sale of any of the Securities to the
provisions of Section 5 of the Securities Act or violate the provisions of any
securities or Blue Sky Law of any applicable jurisdiction.
7P. Issuance of Securities. (a) The Company covenants that it will
----------------------
not issue, sell or otherwise dispose of or part with any shares of capital
stock, Indebtedness or other securities of the Company which by its terms is
senior to the Senior Subordinated Notes, other than, subject to paragraph 7B(i),
Senior Debt.
(b) The Company covenants that it will not permit any of its
Subsidiaries to issue, sell or otherwise dispose of or
28
part with any shares of capital stock, Indebtedness or other securities of the
Company which by its terms is senior to the Senior Subordinated Notes, or which
results, directly or indirectly, in such capital stock, Indebtedness or other
securities being senior to the Senior Subordinated Notes, other than Senior
Debt.
(c) The Company covenants that it will not, and will not permit any
of its Subsidiaries to, issue, sell or otherwise dispose of or part with any
shares of capital stock, Indebtedness or other Securities of the Company or any
of its Subsidiaries which by its terms is pari-passu to the Senior Subordinated
Notes.
8. SUBORDINATION.
-------------
8A. Subordinated Debt Subordinate to Senior Debt. The Senior
--------------------------------------------
Subordinated Notes and any and all Subsidiary Guarantees shall be junior and
subordinate to all Senior Debt to the extent and in the manner provided in this
Section 8 and each holder of a Senior Subordinated Note and a Subsidiary
Guarantee, by its acceptance thereof, agrees to be bound by the provisions of
this Section 8. The Company, the Subsidiaries and each holder of Subordinated
Debt agree that the payment of the principal of, and interest on, and all other
amounts owing in respect of the Subordinated Debt is and shall be expressly
subordinated, to the extent and in the manner hereinafter set forth, to the
prior payment in full of all Senior Debt. The Senior Subordinated Notes shall
not be junior or subordinate to any Indebtedness of the Company other than the
Senior Debt. For purposes hereof, all Indebtedness evidenced by the Senior
Subordinated Notes, including any refinancing, extension or modification
thereof, and the Company's obligation to pay the redemption price in respect of
an exercise of the Put Right, the Subsidiary Guarantees, and any and all other
obligations of the Company and/or any of the Subsidiaries owing to any of the
holders of Subordinated Debt howsoever created or arising shall constitute
"Subordinated Debt".
-----------------
The Senior Creditor is the holder of the Senior Debt, a third party
beneficiary of Section 8 of this Agreement, and is entitled to rely on the terms
and provisions hereof, limited however, to the provisions of this Section 8, and
to enforce the terms and provisions of this Section 8 in respect of the Senior
Debt and the Subordinated Debt against the Company, the Subsidiaries and the
holders of any of the Subordinated Debt.
8B. Suspension of Right to Receive Payments of Subordinated Debt.
------------------------------------------------------------
8B(1). Failure to Pay Principal of or Interest on Senior Debt. (a)
------------------------------------------------------
Upon (i) the maturity of Senior Debt by lapse of time, acceleration or
otherwise, (ii) any failure by the Company to make any payment of principal or
interest when due
29
with respect to Senior Debt or (iii) any default in the payment by the Company
of any interest or other amounts due with respect to Subordinated Debt, all
principal of the Senior Debt and all interest thereon and other amounts due in
connection therewith, shall first be paid in full, or such payment duly provided
for in cash or in a manner satisfactory to the holders of such Senior Debt,
before any payment or distribution of any kind or character, whether in cash,
property or securities, shall be paid or delivered with respect to Subordinated
Debt. Any payment or distribution of any kind or character, whether in cash,
property or securities, which may be payable or deliverable with respect to the
Subordinated Debt shall be paid or delivered directly to the holders of Senior
Debt, ratably, for application in payment thereof, unless and until all Senior
Debt shall have been paid in full and in cash.
(b) Upon the occurrence of any event of default under any Senior Debt
(excluding any event of default arising as a result of a breach of any covenant
contained in Section 7.1 of the Bank Debt Agreement except for Section 7.1.G.
thereof) which would, with the giving of notice or the passage of time, or both,
permit the holders of such Senior Debt to accelerate the maturity thereof upon
written notice thereof given to the Company and to the Investment Advisor for
the Investors by the holder of such Senior Debt or their representatives (a
"Default Notice"), then, unless and until such event of default with respect to
--------------
Senior Debt shall have been cured or waived in writing by the holders of such
Senior Debt, no payment shall be made by the Company or any Subsidiary with
respect to the principal of or interest or other amounts due with respect to
Subordinated Debt; provided, however, this paragraph shall not prevent the
-------- -------
making of any payment for longer than 180 days after the giving of a Default
Notice unless a default shall be declared by the holder of the Senior Debt, in
which event no payment of Subordinated Debt shall be made by the Company or any
Subsidiary with respect to the principal of or interest or other amounts due, in
which event the provisions of Section 8B(1) (a) shall control. Amounts of the
Subordinated Debt which become due during any period during which Senior Debt in
respect of which a Default Notice has been given will be deferred and payable
only after all Senior Debt shall have been paid in full.
(c) Upon the occurrence of (i) any default as set out in paragraph
8B(1)(a), or (ii) the giving of any Default Notice as set out in paragraph
8B(1)(b), the Company shall not make any payments, and the holders of the
Subordinated Debt shall not receive, ask, demand, ▇▇▇ for any payment or take
any action to enforce, take or receive, directly or indirectly, in cash or other
property, by sale, setoff or in any other manner whatsoever, or otherwise
exercise remedies against the Company or any Subsidiary with respect to the
principal of, interest on, premium on, or otherwise owing in respect of, the
Subordinated Debt or this Agreement, unless and until such default with respect
to Senior Debt has been cured or waived in writing by the
30
holder of the Senior Debt or this Agreement, unless and until such default with
respect to Senior Debt has been cured or waived in writing by the holder of the
Senior Debt.
8B(2). Bankruptcy or Insolvency. In the event of (a) any insolvency,
------------------------
bankruptcy, liquidation, reorganization or other similar proceedings, or any
receivership proceedings in connection therewith, relative to the Company or any
Subsidiary, or (b) any proceedings for voluntary liquidation, dissolution or
other winding-up of the Company or any Subsidiary, whether or not involving
insolvency or bankruptcy proceedings (collectively, the foregoing being
"Proceedings", or individually, a "Proceeding"), then all Senior Debt, including
the principal thereof, premium, if any, and interest, including post-petition
interest due thereon, shall first be paid in full, or such payment shall have
been duly provided for, before any further payment is made with respect to
Subordinated Debt. In any Proceedings, any payment or distribution of any kind
or character, whether in cash, property or securities, which may be payable or
deliverable with respect to Subordinated Debt shall be paid or delivered
directly to the holders of Senior Debt, ratably, for application in payment
thereof, unless and until all Senior Debt shall have been paid in full. In any
Proceeding, the holders of Subordinated Debt shall not have any right to setoff
against the Subordinated Debt any Indebtedness owed by any of the holders of
Subordinated Debt to the Company or any of the Subsidiaries (including, without
limitation, any right of setoff under (S)553 of the Bankruptcy Code). Anything
in this Section 8 to the contrary notwithstanding, no payment or delivery shall
be made to holders of Senior Debt of securities that are issued and delivered to
holders of Subordinated Debt pursuant to liquidation or dissolution of the
Company or in a Proceeding, or upon any merger, consolidation, sale, lease,
transfer or other disposal not prohibited by the provisions of this Agreement,
by the Company, as reorganized, or by the corporation succeeding to the Company
or acquiring its property and assets, if (i) such securities are subordinated
and junior at least to the extent provided in this Section 8 to the payment of
all Senior Debt then outstanding and to the payment of any securities that are
issued in exchange or substitution for any Senior Debt then outstanding and (ii)
such securities mature no earlier than six (6) months after the scheduled
maturity of the indebtedness under the Bank Debt Agreement.
8C. Rights of Holders of Senior Debt Not to Be Impaired. No right
---------------------------------------------------
of any present or future holder of any Senior Debt to enforce subordination as
herein provided shall at any time be in any way prejudiced or impaired by any
act or failure to act by any such holder, or by any noncompliance by the Company
with the terms and provisions and covenants herein contained, regardless of any
knowledge thereof any such holder may have or otherwise be charged with. The
provisions of this Section 8 are intended to be for the benefit of, and shall be
enforceable
31
directly by, any one or more of the holders from time to time of the Senior
Debt. Each of the holders of the Subordinated Debt waives notice of or proof of
reliance on this Agreement and (except as set out in Section 8B(1) (b)) protest,
demand for payment and notice of default by the holders of Senior Debt.
8D. Company's Obligation Unconditional. The provisions of this
----------------------------------
Section 8 are solely for the purpose of defining the relative rights of the
holders of Senior Debt, on the one hand, and the holders of Subordinated Debt,
on the other hand, against the Company, the Subsidiaries and their property.
Nothing herein shall impair, as between the Company and the holders of
Subordinated Debt, the obligation of the Company, which is unconditional and
absolute, to pay to the holders thereof the full amount of Subordinated Debt in
accordance with the terms thereof and the provisions hereof and, except as
expressly provided in paragraph 8B, nothing herein shall prevent the holder of
any Subordinated Debt from exercising all remedies otherwise permitted by
applicable law or hereunder upon Default hereunder or under any Subordinated
Debt (including, without limitation, the right to demand and ▇▇▇ for payment and
performance hereof of the Subordinated Debt and to accelerate the maturity
hereof as provided in Section 9 hereof), subject to the rights under this
Section 8 of holders of Senior Debt to receive cash, property or securities
otherwise payable or deliverable to the holders of Subordinated Debt. The
failure to make any payment with respect to Subordinated Debt by reason of any
provision of this Section 8 shall not be construed as preventing the occurrence
of an Event of Default under Section 9.
8E. Payments Held in Trust. If the holder of any Subordinated Debt
----------------------
shall receive any payment or delivery of cash, property or securities in respect
of such Subordinated Debt which such holder is not entitled to receive under the
provisions of this Section 8, such holder will hold any amount so received in
trust for the holders of Senior Debt and will forthwith turn over to the holders
of Senior Debt such payment or delivery in the form received to be applied in
payment or prepayment of Senior Debt; provided, however, that no holder of
-------- -------
Subordinated Debt shall be obligated to determine whether a payment received by
it was appropriately made by the Company.
8F. Subrogation. Upon the payment in full of all Senior Debt and
-----------
termination of any Senior Debt Agreement, the holders of Subordinated Debt shall
be subrogated to the rights of the holders of Senior Debt to receive payments or
distributions of assets of the Company applicable to Senior Debt, until all
Subordinated Debt shall have been paid in full. For the purpose of subrogation,
no payments to the holders of Senior Debt of any cash, property or securities
that the holders of Subordinated Debt would be entitled to receive and retain
but for the provisions of this Section 8, and no payment over pursuant to the
provisions of this Section 8 to holders of Senior Debt by holders of
Subordinated Debt, shall, as between the Company and its
32
creditors (other than the holders of Senior Debt), on the one hand, and the
holders of Subordinated Debt, on the other, be deemed to be a payment by the
Company with respect to the Senior Debt.
8G. Reliance by Holders on Final Order or Decree. In the event that
--------------------------------------------
delivery of any securities to any holders of Subordinated Debt is authorized by
a final non-appealable order or decree giving effect to the subordination of the
Indebtedness represented by Subordinated Debt to Senior Debt, and made by a
court of competent jurisdiction in a liquidation of dissolution of the Company
or in a bankruptcy, reorganization, insolvency, receivership or similar
proceedings under any applicable law, securities deliverable with respect to the
Indebtedness represented by Subordinated Debt may be made by the Company, as
reorganized, or by the corporation succeeding to the Company or acquiring its
properties and assets, to the holders of Subordinated Debt, if (i) such
securities are subordinate and junior at least to the extent provided in this
Section 8 to the payment of all Senior Debt then outstanding and to the payment
of any securities that are issued in exchange or substitution for any Senior
Debt then outstanding and (ii) such securities mature no earlier than the
scheduled maturity of the Indebtedness under the Bank Debt Agreement.
8H. Legend. The Senior Subordinated Notes shall be conspicuously
------
legended indicating that their payment is subordinated to Senior Debt pursuant
to the terms of this Agreement with the following:
"THE INDEBTEDNESS EVIDENCED BY THIS SENIOR SUBORDINATED NOTE IS SUBORDINATED TO
THE SENIOR DEBT, AS DEFINED IN SECTION 8 OF THAT CERTAIN SECURITIES PURCHASE
AGREEMENT DATED JANUARY 17, 1997, WHICH SENIOR DEBT IS HELD BY TEXAS COMMERCE
BANK NATIONAL ASSOCIATION, PURSUANT TO, AND TO THE EXTENT PROVIDED IN SECTION 8
OF THE SECURITIES PURCHASE AGREEMENT (AS AMENDED, SUPPLEMENTED OR OTHERWISE
MODIFIED FROM TIME TO TIME PURSUANT TO THE TERMS THEREOF), AMONG LITIGATION
RESOURCES OF AMERICA, INC., LOONEY & COMPANY, AND ▇▇▇▇▇, BURY & ASSOCIATES,
INC. AND THE INVESTORS NAMED ON THE SIGNATURE PAGES THEREOF."
8I. Remedies. The Senior Creditor is authorized to demand specific
--------
performance of Section 8 of this Agreement, whether or not the Company or any of
the Subsidiaries shall have complied with any of the provisions hereof
applicable to them, respectively, at any time when any of the holders of
Subordinated Debt shall have failed to comply with any of the provisions of this
Agreement applicable to them. Each of the holders of Subordinated Debt
irrevocably waives any defense based on the adequacy of a remedy at law, which
might be asserted as a bar to such remedy of specific performance.
8J. Senior Debt Not Affected. All rights and interests of the Senior
------------------------
Creditor hereunder, and all agreements
33
and obligations of the Company, the Subsidiaries and the holders of Subordinated
Debt under this Agreement, shall remain in full force and effect irrespective
of, (i) any lack of validity or enforceability of all or any portion of this
Agreement, (ii) any change in the amount of interest rate accruing on, time,
manner or place of payment of, or in any other term of, all or any of the Senior
Debt, or any other amendment or waiver of any consent to departure from any of
loan documents, including, without limitation, changes in the terms of
disbursement of the loan proceeds under the Bank Debt Agreement or repayment
thereof, modifications, extensions or renewals of payment dates, changes in
interest rate or the advancement of additional funds by the Senior Creditor in
the Senior Creditor's discretion, (iii) any exchange, release or non-perfection
of any collateral or any release or amendment or waiver of or consent to
departure from any guaranty for all or any of the Senior Debt, or (iv) any other
circumstance in respect of this Agreement which might otherwise constitute a
defense available to, or a discharge of, the Company or any of the Subsidiaries
of or in respect of the Senior Debt or the holders of Subordinated Debt.
8K. Reinstatement. The provisions of this Section 8 shall continue to
-------------
be effective or be reinstated, as the case may be, if at any time any payment of
any of the Senior Debt is rescinded or must otherwise be returned by the Senior
Creditor upon the insolvency, bankruptcy or reorganization of the Company or any
of the Subsidiaries or otherwise, all as though such payment had not been made.
8L. Representations and Warranties. Each of the holders of
------------------------------
Subordinated Debt represents and warrants that (i) it owns the Subordinated Debt
now outstanding free and clear of any lien, security interest, charge or
encumbrance or any rights of others, (ii) the execution, delivery and
performance by the holders of Subordinated Debt of this Agreement do not and
will not contravene any law or governmental regulation or any contractual
restriction binding on or affecting any of the holders of Subordinated Debt or
the properties of any of the holders of Subordinated Debt, (iii) this Agreement
is a legal, valid and binding obligation of the holders of Subordinated Debt,
enforceable against each of the holders of Subordinated Debt in accordance with
its terms, and (iv) to the knowledge of the holders of Subordinated Debt, there
exists no default in respect of any Subordinated Debt.
8M. Expenses. If any of the holders of Subordinated Debt shall fail
--------
to comply with the provisions of this Section 8 applicable to it, such holder
of the Subordinated Debt agrees to pay, upon demand, to the Senior Creditor the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of the Senior Creditor's counsel, which may be incurred in connection
with the exercise or enforcement against such holder of Subordinated Debt of any
of the rights or interests of the holders of the Senior Debt hereunder.
34
8N. No Waiver, Remedies. No failure on the part of the Senior
-------------------
Creditor to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof, or shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ of Liens. Each of the holders of Subordinated Debt
----------------------
agrees that none of the holders of Subordinated Debt will hold any lien or
security interest in any real or personal property as security for any of the
Subordinated Debt unless the Senior Creditor has given prior written consent to
the creation thereof. All such liens and security interest and, in the event
any of the holders of Subordinated Debt shall acquire any lien or security
interest in the future as security for the Subordinated Debt, the Subordinated
Creditor will hold such lien or security interest in accordance with the terms
of this Agreement for the benefit of the Senior Creditor. Any cash or other
property received in violation of this Agreement on account of any lien or
security interest securing the Subordinated Debt shall be delivered to the
Senior Creditor and, in the case of cash, applied to, or, in the case of other
property, held as collateral for, the Senior Debt. To the extent that any
Subordinated Debt is now or hereafter secured by a lien or security interest (a
"Subordinate Lien") against any real or personal property that is also subject
----------------
to a lien or security interest securing the Senior Debt (a "Senior Lien"), each
-----------
of the holders of Subordinated Debt agrees that such Subordinate Lien shall be
second, junior and subordinate to such Senior Lien and such Senior Lien shall be
first and prior to such Subordinate Lien. It is agreed that the priorities
specified in the preceding sentence are applicable irrespective of the time or
order of attachment or perfection of liens and security interests, or the time
or order of filing of liens and security interests, or the time or order of
filing of financing statements, or the giving or failure to give notice of the
acquisition or expected acquisition of purchase money or other security
interests.
8P. Provisions Specific to Section 8. The following provisions are
--------------------------------
applicable only to the provisions of this Section 8.
(1) THIS AGREEMENT, AS TO THE SUBORDINATION PROVISIONS HEREOF, IS BEING
EXECUTED AND DELIVERED, AND IS INTENDED TO BE PERFORMED IN THE STATE OF
TEXAS, AND THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING
EFFECT TO THE CONFLICTS-OF-LAW RULES AND PRINCIPLES OF THE STATE OF TEXAS,
AND THE APPLICABLE LAWS OF THE UNITED STATES SHALL GOVERN THE VALIDITY,
CONSTRUCTION, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT.
35
(2) Any suit, action or proceeding with respect to the interpretation or
enforcement of this Agreement, or the enforcement of any judgment entered
by any court in respect thereof, shall be brought in the courts of the
State of Texas, ▇▇▇▇▇▇ County, Texas, or in the U.S. courts located in
Southern District of Texas as the Senior Creditor, in the Senior Creditor's
sole discretion, may elect. The parties submit to the nonexclusive
jurisdiction of such courts for the purpose of any such suit, action or
proceeding.
(a) The parties waive, in connection with any such suit, action or
proceeding, any objection, including, without limitation, any objection to
the laying of venue or based on the grounds of forum non conveniens, which
it may now or hereafter have to the bringing of any such action or
proceeding in such respective jurisdictions.
(b) The parties consent to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to each
such Person, as the case may be, at its address set forth below.
(c) Nothing herein shall affect the right of any party to serve process in
any other manner permitted by law.
(3) Each party hereto waives any right it may have to a trial by jury in
respect of any legal proceeding directly or indirectly arising out of,
under or in connection with or relating to this Agreement. Except as
prohibited by law, each party hereto waives any right it may have to claim
or recover in any litigation referred to in this Section any special,
exemplary, punitive or consequential damages or any damages other than, or
in addition to, actual damages. Each party hereto (i) certifies that no
representative, agent or attorney of the Senior Creditor has represented,
expressly or otherwise, that the Senior Creditor would not, in the event
of litigation, seek to enforce the foregoing waivers, and (ii) acknowledges
that it has been induced to enter into this Agreement and the other Loan
Documents, as applicable, by, among other things, the mutual waivers and
certifications herein.
(4) Any notice required or permitted to be given under this Section 8 shall be
in writing, shall be addressed to the parties hereto at the respective
addresses set out below, which may be changed by the giving of written
notice to that effect pursuant hereto, and shall be deemed effectively
given if (i) delivered personally, or (ii) upon being deposited with the
United States Postal Service, postage prepaid, certified mail, return
receipt requested.
36
If to the Company: LITIGATION RESOURCES OF
AMERICA, INC.
3850 Nationsbank Center
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to any holder of
Subordinated Debt: c/o PECKS MANAGEMENT
PARTNERS LTD.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Senior Creditor: TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
9. EVENTS OF DEFAULT.
-----------------
9A. General. So long as any Senior Subordinated Notes remain
-------
outstanding, if any of the following events shall occur and be continuing for
any reason whatsoever (and whether such occurrence shall be voluntary of
involuntary or come about or be effected by operation of law or otherwise):
(i) the Company defaults in the payment of any principal of or
interest or premium (if any) on any Senior Subordinated Notes when the
same shall become due, either by the terms thereof or otherwise as
herein provided;
(ii) the Company defaults in the payment when due, either by
the terms thereof or otherwise as herein provided, of any other
amounts on any Senior Subordinated Notes and such default shall
continue unremedied for five or more days;
(iii) the Company or any of its Subsidiaries (x) defaults in any
payment of principal of or interest on the Seller Note or any other
obligation for money borrowed (or any Capitalized Lease Obligation,
any obligation under a conditional sale or other title retention
agreement, any obligation issued or assumed as full or partial payment
for property whether or not secured by a Purchase Money Security
Interest or any obligation under notes payable or drafts accepted
representing extensions of credit) and such default shall continue
beyond any applicable grace period or (y) fails to perform or observe
any other agreement, term or condition contained in any agreement
under which any such obligation is created (or if any other event
thereunder or under any such agreement shall
37
occur and be continuing), and in the case of (y) above, the effect of
such default, failure or other event is to cause, or, with respect to
any Indebtedness other than the Bank Debt Agreement, to permit the
holder or holders such obligation (or a trustee on behalf of such
holder or holders) to cause an obligation of more than $100,000 to
become due prior to any stated maturity;
(iv) any representation or warranty made by the Company or
any Guarantor herein or in any writing furnished in connection with or
pursuant to this Agreement or any other Related Agreement shall be
false in any material respect on the date as of which made;
(v) the Company defaults, or any Subsidiary thereof shall
cause the Company to default, in the performance or observance of any
of its agreements contained in paragraph 6D;
(vi) the Company defaults, or any Subsidiary thereof shall
cause the Company to default, in the performance or observance of any
of its agreements contained in paragraph 7A;
(vii) the Company defaults, or any Subsidiary thereof shall
cause the Company to default, in the performance or observance of any
of the agreements contained in Section 6 or 7 in the performance or
observance of any other agreement, term or condition contained herein
or in the Related Documents and any such default shall not have been
remedied within 20 days after such default shall first become known to
any officer of the Company, or such Subsidiary;
(viii) the Company or any of its Subsidiaries makes an
assignment for the benefit of creditors generally or is generally not
paying its debts as such debts become due;
(ix) any decree or order for relief in respect of the
Company or any of its Subsidiaries is entered under any bankruptcy Law
of any jurisdiction;
(x) the Company or any of its Subsidiaries petitions or
applies to any tribunal for, or consents to, the appointment of, or
taking possession by, a trustee, receiver, custodian, liquidator or
similar official of the Company or any of its Subsidiaries, of any
substantial part of the assets of the Company or any of its
Subsidiaries, or commences a voluntary case under the bankruptcy Law
of the United States or any proceedings (other than proceedings for
the voluntary liquidation and dissolution of a Subsidiary) relating
38
to the Company or any of its Subsidiaries under the bankruptcy Law of any other
jurisdiction;
(xi) any such petition or application is filed, or any such proceedings
are commenced, against the Company or any its Subsidiaries and the Company or
such Subsidiary by any act indicates its approval thereof, consent thereto or
acquiescence therein, or an order, judgment or decree is entered appointing any
such trustee, receiver, custodian, liquidator or similar official, or approving
the petition in any such proceedings, and such order, judgment or decree remains
unstayed and in effect for more than 45 days;
(xii) any order, judgment or decree is entered in any proceedings against
the Company or any of its Subsidiaries decreeing the dissolution of the Company
and such Subsidiary and such order, judgment or decree remains unstayed and in
effect for more than 60 days;
(xiii) any order, judgment or decree is entered in any proceedings against
the Company or any of its Subsidiaries decreeing a split-up of the Company or
such Subsidiary which requires the divestiture of substantial assets of the
Company and its Subsidiaries, taken as a whole, and such order, judgment or
decree remains unstayed and in effect for more than 60 days;
(xiv) a final judgment in an amount in excess of $250,000; is rendered
against the Company or any of its Subsidiaries and, within 30 days after entry
thereof, such judgment is not discharged or execution thereof stayed pending
appeal, or within 60 days after expiration of any such stay, judgment is not
discharged; or
(xv) the Company, any Subsidiary or any ERISA Affiliate fails to meet its
obligations under the minimum funding standard provided for in Section 412 of
the Code for any plan year or in the case of a single employer-plan a waiver of
such standard is sought or granted under Section 412(d) of the Code, or any
Pension Plan subject to Title IV of ERISA is, has been or is likely to be
terminated or the subject or termination proceedings under ERISA, or the
Company, any Subsidiary or an ERISA Affiliate has incurred or is likely to incur
a liability under Section 4062, 4063, 4064,4201 or 4204 of ERISA, and there
results from any such event or events a liability or a material risk of
incurring a liability to the PBGC, any Multiemployer Pension Plan or any Pension
Plan which, if incurred would have a Material Adverse Effect, or the Company or
any of its Subsidiaries has engaged in a prohibited transaction that would
result in a liability, penalty
39
or tax under ERISA or Section 4975 of the Code, as the case may be,
which would have a Material Adverse Effect.
then (a) upon the occurrence of any Event of Default described in the foregoing
clause (vii), solely as such clause relates to a breach of clause (i), (ii) or
(iii) or the Officer's Certificate delivery requirements of paragraph 6A, or
clauses (viii), (ix), (x), (xi) or (xii), the unpaid principal amount of and
accrued interest on the Senior Subordinated Notes outstanding shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by the Company, and (b) upon the occurrence and during the continuation
of any other Event of Default, the holders of a majority of the aggregate unpaid
principal amount of the Senior Subordinated Notes may, at their option and in
addition to any right, power or remedy permitted by law or equity, by notice in
writing to the Company, declare all of the Senior Subordinated Notes to be, and
all of the Senior Subordinated Notes shall thereupon be and become, forthwith
due and payable together with interest accrued thereon.
At any time after any declaration of acceleration is made as provided
above, the holders of at least a majority of the aggregate unpaid principal
amount of the Senior Subordinated Notes may, by written instrument filed with
the Company, rescind and annul such declaration and the consequences thereof,
provided, however, that at the time any such declaration is annulled and
-------- -------
rescinded:
(i) no judgment or decree shall have been entered for the
payment of any monies due pursuant to the Senior Subordinated Notes
and the other Related Documents;
(ii) all arrears of interest upon all the Senior Subordinated
Notes and all other sums payable under the Senior Subordinated Notes
and the other Related Documents (except any principal, interest or
premium on the Senior Subordinated Notes which has become due and
payable solely by reason of such declaration under this paragraph 9A)
shall have been duly paid or waived;
(iii) the Company shall not have paid any amounts which have
become due solely by reason of such declaration; and
(iv) each and every other Event of Default shall have been
waived or otherwise made good or cured;
and provided, further, that no such rescission and annulment shall extend to or
-------- -------
after any subsequent Default or Event of Default or impair any right consequent
thereon.
40
9B. Other Remedies. If any Event of Default shall occur and be
--------------
continuing, the holder of any Security may proceed to protect and enforce its
rights under this Agreement and such Security by exercising such remedies as are
available to such holder in respect thereof under applicable law, either by suit
in equity or by action at law, or both, whether for specific performance of any
covenant or other agreement contained in this Agreement or in aid of the
exercise of any power granted in this Agreement. No remedy conferred in this
Agreement upon the Investors or any other holder of any Security is intended to
be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in equity or by statute or otherwise.
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company and
---------------------------------------------
each Guarantor represents and warrants to each Investor that:
10A. Organization, Qualification and Authority. The Company and each
-----------------------------------------
of its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and is
duly qualified to do business as a foreign corporation and in good standing in
each jurisdiction in which the character of its properties or the nature of its
business makes such qualification necessary, except where the failure to so
qualify would not have a Material Adverse Effect. The Company and each of its
Subsidiaries has the corporate power to own its properties and to carry on its
business as now being conducted. The Company has all requisite corporate power
and authority to enter into each of the Related Documents and the Purchase
Agreements, to issue and sell the Securities hereunder, and to issue the shares
of Common Stock upon conversion of the Convertible Preferred Stock, and has the
requisite corporate power and authority to carry out the transactions
contemplated hereby and thereby to be performed by it, and the execution,
delivery and performance hereof and thereof have been duly authorized by all
necessary corporate action. Each Guarantor has all requisite corporate power and
authority to enter into each of the Related Documents to which it is a party and
has the requisite corporate power and authority to carry out the transactions
contemplated hereby and thereby to be performed by it, and the execution,
delivery and performance hereof and thereof have been duly authorized by all
necessary corporate action. This Agreement constitutes, and each other agreement
(including the Related Documents and the Purchase Agreements) or instrument
(including the Securities) executed and delivered by the Company, Looney and
▇▇▇▇▇ and each Guarantor pursuant hereto or thereto or in connection herewith or
therewith will constitute, legal, valid and binding obligations of the Company,
Looney and ▇▇▇▇▇ and each Guarantor enforceable against the Company, Looney and
▇▇▇▇▇ and each Guarantor in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
arrangement,
41
moratorium or other similar laws or by the application of principles of equity.
10B. Financial Statements. With respect to the Guarantors, the Company
--------------------
has furnished the Investors with (a) a combined audited balance sheet as of
September 30, 1995 with respect to ▇▇▇▇▇ and December 31, 1995 with respect to
Looney, together with the related statements of income, changes in stockholders'
equity and cash flow for the Guarantors' for each of the periods then ended,
respectively, and (b) an unaudited balance sheet as of (i) September 30, 1996
and October 31, 1996 with respect to ▇▇▇▇▇, together with an unaudited statement
of income for the 12-month and 1-month periods then ended, respectively and (ii)
November 30, 1996, with respect to Looney, together with an unaudited statement
of income for the 11-month period then ended (collectively, the "Interim
-------
Financials"). Such financial statements (including any related schedules and
----------
notes) have been prepared in accordance with GAAP consistently applied
throughout the period or periods in question and show all material liabilities,
direct or contingent, required to be shown in accordance with GAAP consistently
applied throughout the period or periods in question and fairly present, in all
material respects, the financial condition of the Company for the periods
indicated therein, except for normal audit adjustments in the case of the
Interim Financials. There has been no material adverse change in the business,
condition (financial or other), assets, properties, rights, operations or
prospects of ▇▇▇▇▇ or ▇▇▇▇▇▇ and their Subsidiaries since September 30, 1995 and
December 31, 1995, respectively.
10C. Capital Stock and Related Matters. As of the Closing Date, and
---------------------------------
after giving effect to the transactions contemplated hereby and pursuant to the
Related Documents, (i) the authorized capital stock of the Company will consist
of a total of 110,000,000 shares as follows: (a) 100,000,000 shares of Common
Stock, par value $.01 per share, of which 1,164,440 shares are issued and
outstanding, the ownership and the consideration paid for such shares is as set
forth on Schedule 10C and (1) 259,960 shares of which are reserved for for the
exercise of options to purchase such shares issued or issuable to officers,
directors, consultants, independents contractors and employees of the Company
and its Subsidiaries and other providers of services to the Company and its
Subsidiaries and (2) 1,560,000 shares of which are reserved for issuance upon
conversion of the Series A Convertible Preferred Stock; (b) 10,000,000 shares of
Convertible Preferred Stock, par value $1.00 per share, of which (x) 2,000,000
shares are designated Series A Convertible Preferred Stock, of which 1,000,000
shares are issued and outstanding and (y) 2,500,000 shares are designated Series
B Convertible Preferred Stock, of which 2,000,000 shares are issued and
outstanding; (ii) all issued and outstanding shares shall have been duly and
validly issued, fully paid and non-assessable; (iii) no shares of capital stock
of the Company will be owned or held by or for the account of the Company or any
of its
42
Subsidiaries; (iv) except as set forth on Schedule 10C, neither the Company nor
any of its Subsidiaries will have outstanding any securities convertible into or
exchangeable for any shares of capital stock or any rights (either preemptive or
other) to subscribe for or to purchase, or any options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any other character relating to the issuance
of, any capital stock, or any stock or securities convertible into or
exchangeable for any capital stock; (v) except as set forth on Schedule 10C,
neither the Company nor any of its Subsidiaries will be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or warrants or options to purchase shares
of its capital stock; (vi) neither the Company nor any of its Subsidiaries is a
party to any agreement (other than this Agreement, the Securityholders Agreement
and the Shareholders Agreement) restricting the transfer of any shares of its
capital stock; and (vii) neither the Company nor any of its Subsidiaries will
have filed or be required to file, pursuant to Section 12 of the Exchange Act, a
registration statement relating to any class of debt or equity securities as of
the date hereof.
10D. Actions Pending. There is no action, suit, investigation or
---------------
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any Subsidiary or any of their properties or rights, by or before any
court, arbitrator or administrative or governmental body, which if adversely
decided, could have a Material Adverse Effect.
10E. Outstanding Debt; Defaults. Neither the Company nor its
--------------------------
Subsidiary (i) has outstanding Indebtedness, except as permitted by paragraph
7B, and there exist no material defaults under the provisions of any instrument
evidencing such Indebtedness or of any agreement relating thereto, (ii) is in
default under its Articles of Incorporation (as amended to date) or By-laws,
(iii) is in violation of or in default under or with respect to any indenture,
mortgage, lease or any other contract or agreement to which it is a party or by
which it or any of its property is bound or affected in any respect which could
have a Material Adverse Effect, (iv) has any material debts, liabilities,
obligations (whether absolute, accrued, contingent or otherwise) of any nature
whatsoever other than (A) liabilities appearing on the financial statements, (B)
liabilities incurred in the ordinary course of business since September 30,
1995; with respect to ▇▇▇▇▇, and December 31, 1995 with respect to Looney, and
(C) liabilities under contracts to which the Company is a party and which are
listed on Schedule 10E hereto or which have an obligation thereunder of less
than $10,000 and which were entered into in the ordinary course of business or
(D) liabilities described on the other schedules hereto or (v) is in material
default with respect to any order, writ, injunction or decree of any court or
any Federal, state, municipal or other domestic or foreign governmental
department, commission, board, bureau, agency or instrumentality, and there
exists no condition,
43
event or act which constitutes, or which after notice, lapse of time, or both,
would constitute, such a violation or default under any of the foregoing.
10F. Title to Properties. Each of the Company and its Subsidiaries has
-------------------
(i) indefeasible, sufficient and legal title to its real property (other than
real properties which it leases from others), subject to no Lien of any kind
except Liens permitted by paragraph 7C and (ii) good title to all of its other
properties and assets (other than properties and assets which it leases from
others), subject to no Lien of any kind except Liens permitted by paragraph 7C.
Each of the Company and its Subsidiaries enjoys peaceful and undisturbed
possession under all leases necessary in any material respect for the operation
of its properties and assets and all such leases are valid and subsisting and in
full force and effect.
10G. Taxes. Each of the Company and its Subsidiaries has filed all
-----
Federal, state and other income tax returns which are required to be filed, and
each has paid all taxes as shown on said returns and on all assessments received
by it to the extent that such taxes have become due, or except such as any of
the foregoing are being contested in good faith by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP; and no
tax lien has been filed and no claim is being asserted with respect to any tax
or other similar charge.
10H. Conflicting Agreements. Neither the execution or delivery of the
----------------------
Related Documents or the Purchase Agreements, nor the offering, issuance and
sale of the Securities or the shares of Common Stock issuable upon conversion of
the Convertible Preferred Stock, nor fulfillment of or compliance with the terms
and provisions hereof and thereof, will conflict with, or result in a breach of
the terms, conditions or provisions of, or constitute a default under, or result
in any violation of, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries pursuant to (i)
the Articles of Incorporation or By-laws of the Company or any of its
Subsidiaries, or (ii) any award of any arbitrator or any agreement (including
any agreement with stockholders), instrument, order, judgment, decree, statute,
law, rule or regulation to which the Company or any of its Subsidiaries is
subject. Except as set forth on Schedule 10H, neither the Company nor any of its
Subsidiaries is a party to, or otherwise subject to any provision contained in,
any instrument evidencing Indebtedness of the Company or any of its
Subsidiaries, any agreement relating thereto or any other contract or agreement
(including its Articles of Incorporation and By-laws) which limits the amount
of, or otherwise imposes restrictions on the incurring of, Indebtedness of the
type to be evidenced by the Senior Subordinated Notes, or contains dividend or
redemption limitations on any capital stock of the Company or any of its
44
Subsidiaries, except for the Related Documents and the Bank Debt Agreement.
10I. Offering of Securities. The offer, sale and issuance of the
----------------------
Securities pursuant to this Agreement and the issuance of the Common Stock upon
conversion of the Convertible Preferred Stock, do not require registration of
such securities under the Securities Act or registration or qualification under
any applicable state "blue sky" or securities laws (or if so required, has been
so registered or qualified). The Company has not taken any action which would
subject the issuance or sale of any of the Securities or the Common Stock to
the provisions of Section 5 of the Securities Act or violate the provisions of
any securities or Blue Sky law of any applicable jurisdiction.
10J. Broker's or Finder's Commissions. Except for The GulfStar
--------------------------------
Group, Inc., which shall receive $450,000, no broker's or finder's fee or
commission will be payable by the Company or any of its Subsidiaries with
respect to the issuance and sale of the Securities or the transactions
contemplated hereby or under the Related Documents. The fee of The GulfStar
Group, Inc. will be paid by the Company.
10K. Regulation G, etc. Neither the Company nor any of its
-----------------
Subsidiaries owns or has any present intention of acquiring, any "margin stock"
as defined in Regulation G (12 CFR Part 207) of the Board of Governors of the
Federal Reserve System (herein called a "margin Stock"). None of the proceeds
------------
resulting from the sale of the Securities will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin stock or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry margin stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of Regulation G. Neither the
Company nor any of its Subsidiaries nor any agent acting on its behalf has taken
or will take any action which might cause this Agreement or the Securities to
violate Regulation G, Regulation T, Regulation X or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the Exchange Act,
in each case as in effect now or as the same may hereafter be in effect.
10L. Environmental Matters. (i) The Company, Looney and ▇▇▇▇▇ and
---------------------
each of their Subsidiaries has obtained and is in compliance with all licenses,
permits and other authorizations required under all Environmental Laws, with the
exceptions of instances that will not in the aggregate result in any Material
Adverse Effect.
(ii) Neither the Company, Looney nor ▇▇▇▇▇, nor any of their
respective Subsidiaries has received written notice of any failure to comply
with, nor has any such notice been issued that into full compliance with, all
Environmental Laws.
45
(iii) All licenses, permits or registrations (or any extensions
thereof) required under any Environmental Law for the business of the Company,
Looney and ▇▇▇▇▇ or any of their respective Subsidiaries have been obtained and
the Company, Looney and ▇▇▇▇▇ and their respective Subsidiaries, as the case may
be, will be in compliance therewith, except in such instances as will not in the
aggregate result in a Material Adverse Effect.
(iv) Neither the Company, Looney and ▇▇▇▇▇ nor any of their
respective Subsidiaries is in noncompliance with, breach of or default under any
applicable writ, order, judgment, injunction or decree where such noncompliance,
breach or default would materially and adversely affect the ability of the
Company or any of its Subsidiaries to operate any real property owned or leased
by them and no event has occurred and is continuing that, with the passage of
time or the giving of notice or both, would constitute such noncompliance,
breach or default thereunder.
(v) No Hazardous Substance has been Released (as such term is
defined in CERCLA) (and no oral or written notification of such Release has been
filed) (whether or not in a reportable or threshold planning quantity) at, on or
under any property owned or leased by the Company, Looney and ▇▇▇▇▇ or any of
their respective Subsidiaries, or to be acquired or leased by the Company or any
of its Subsidiaries, during the period of the Company, Looney and ▇▇▇▇▇ or any
of their respective Subsidiaries' ownership or lease of such property, or at any
time previous to such ownership or lease, under conditions that require remedial
action under applicable Environmental Laws, no property now or previously owned
or leased by the Company, Looney and ▇▇▇▇▇ or any of their respective
Subsidiaries has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Substances to any site listed, or 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. Neither the Company nor any of its
Subsidiaries is aware of any event, condition or circumstance involving
environmental pollution or contamination, or employee safety or health relating
to the use or handling of, or exposure to, Hazardous Substances, that could
result in a Material Adverse Effect.
10M. ERISA. None of the Company, any Subsidiary or any ERISA
-----
Affiliate maintains or has an obligation to contribute to any Pension Plan or
any Multiemployer Pension Plan. None of the Company, any Subsidiary or any ERISA
Affiliate has incurred any liability to the PBGC (other than annual premiums due
to the PBGC), a Pension Plan under Title IV of ERISA or a Multiemployer Pension
Plan under Title IV of ERISA. The execution and delivery by the Company of this
Agreement and the purchase and delivery of the Securities will not involve any
prohibited transaction within the meaning of ERISA or Section 4975 of the Code.
The Company has delivered to the Investors a complete list and accurate
46
description of each Pension Plan and each other employee benefit plan covered by
ERISA maintained or contributed to by the Company, any Subsidiary and any ERISA
Affiliate.
10N. Possession of Franchises, Licenses etc. The Company and each
--------------------------------------
of its Subsidiaries possesses all franchises, certificates, licenses, permits
and other authorizations from governmental political subdivisions or regulatory
authorities, that are necessary for the ownership, maintenance and operation of
its properties and assets, except where the failure to be in such compliance
would not have a Material Adverse Effect, and the Company and each of its
Subsidiaries is not in violation of any thereof in any material respect.
10O. Patents, etc. The Company and each of its Subsidiaries owns or
------------
has the right to use all patents, trademarks, service marks, trade names,
copyrights, industrial designs, licenses and other rights, free from
non-customary burdensome restrictions, which are necessary for the operation of
its business substantially as presently conducted. No product, process, method,
substance, part or other material presently sold by or employed by the Company
in connection with its business infringes any patent, trademark, service ▇▇▇▇,
trade name, copyright, industrial design, license or other right owned by any
other Person. No claim or litigation is pending or, to the Company's knowledge,
threatened against or affecting the Company or any of its Subsidiaries
contesting their right to sell or use any such product, process, method,
substance, part or other material which would prevent, inhibit or render
obsolete the production or sale of any products of, or substantially reduce the
projected revenues of, the Company or any of its Subsidiaries, or otherwise have
a Material Adverse Effect.
10P. Holding Company and Investment Company Status. Neither the
---------------------------------------------
Company nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company", or a "public utility", within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or a
"public utility" within the meaning of the Federal Power Act, as amended.
Neither the Company nor any of its Subsidiaries is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or an "investment adviser" within
the meaning of the Investment Advisers Act of 1940, as amended.
10Q. Governmental Consents. Neither the nature of the Company or any
---------------------
of its Subsidiaries nor any of their businesses or properties, nor any
relationship between the Company or any of its Subsidiaries and any other
Person, nor any circumstance in connection with the offer, issue, sale or
delivery of the Securities being purchased by the Investors hereunder is such as
to require on behalf of the Company or any of its Subsidiaries any consent,
approval or other action by or any notice to or
47
filing with any court or administrative or governmental body in connection with
the execution, delivery and performance of this Agreement, the other Related
Documents, the offer, issue, sale or delivery of the Securities being purchased
hereunder, the issuance of the shares of Common Stock upon conversion of the
Convertible Preferred Stock or fulfillment of or compliance with the terms and
provisions hereof or the Securities being purchased thereunder, except for such
filings or consents all of which have been heretofore made or obtained.
10R. Insurance Coverage. The business and properties of the
------------------
Company and each of its Subsidiaries are insured for the benefit of the Company
and each of its Subsidiaries in amounts deemed adequate by the Company's
management against risks usually insured against by Persons operating businesses
similar to those of the Company and each of its Subsidiaries in the localities
where such properties are located.
10S. Subsidiaries. The Subsidiaries set forth on Schedule 10S
------------
hereto are the only Subsidiaries of the Company. All the outstanding shares of
stock of such Subsidiaries have been validly issued and are fully paid and
non-assessable and are owned by the Company free and clear of any Lien or claim.
No such Subsidiary has outstanding stock or securities convertible into or
exchangeable or exercisable for any shares of capital stock, nor does it have
outstanding any rights to subscribe for or to purchase, any options for the
purchase of, any agreements providing for the issuance (contingent or otherwise)
of, or any calls, commitments or claims of any other character relating to the
issuance of, any shares of capital stock or any securities convertible into or
exchangeable or exercisable for any shares of capital stock.
10T. Disclosure. This Agreement and the other Related Documents,
----------
and the other documents, certificates and written statements furnished to the
Investors by or on behalf of the Company in connection herewith or therewith do
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained herein and therein not
misleading.
10U. Related Party Transactions. Except as described on Schedule
--------------------------
10U, no current or former stockholder, director, officer of the Company, nor any
"Associate" (as defined in Rule 405 promulgated under the Securities Act) of any
such Person, is presently, directly or indirectly through his affiliation with
any other Person, a party to any transaction with the Company and any Subsidiary
providing for the furnishing of services by or to, or rental of real or personal
property from or to, or otherwise requiring cash payments to or by any such
Person. Except as described on Schedule 10U, in addition, there is no current
relationship or transaction, or presently contemplated relationship or
transaction, involving the Company and any Subsidiary which is described in Item
404 of Regulation S-K
48
promulgated under the Securities Act (but for purposes of this representation
not limited by any dollar amount).
10V. Registration Rights. Except as contemplated by the Registration
-------------------
Rights Agreement or as specified on Schedule 10V, no Person has the right to
cause the Company or any of its Subsidiaries to effect the registration under
the Securities Act of any shares of Common Stock or any other securities
(including debt securities) of the Company or any of its Subsidiaries.
10W. Absence of Foreign or Enemy Status. Neither the Company nor
----------------------------------
any of its Subsidiaries is (i) a "national" of a foreign country designated in
Executive Order No. 8389, as amended, or of any "designated enemy country" as
defined in Executive Order No. 9193, as amended, of the President of the United
States of America within the meaning of said Executive Orders, as amended, or of
any regulation issued thereunder, or a "national" of any "designated foreign
country" within the meaning of the Foreign Assets Control regulations, 31 CFR,
Part 500, as amended, or of the Cuban Assets Control Regulations, 31 CFR, Part
515, as amended, of the United States Treasury Department, or (ii) an "Iranian
entity" or a "person subject to the jurisdiction of the United States" in which
an "Iranian entity" has any "interest" within the meaning of the Iranian Assets
Control Regulations, 31 CFR, Part 535, as amended.
10X. Agreements with Affiliates. Except as set forth on Schedule 10X,
--------------------------
neither the Company nor any of its Subsidiaries is a party to any contract or
agreement with, or any other commitment to, an Affiliate of the Company or any
of its Subsidiaries.
10Y. Convertible Preferred Stock and Equity of the Company. As of
------------------------------------------------------
the Closing Date, upon conversion of the Convertible Preferred Stock held by
the Investors, the shares of Common Stock obtained through such exercise would
represent in the aggregate the percentage of the Fully Diluted Outstanding
Shares of the Company's Common Stock set forth on Schedule 10Y hereto.
10Z. Consummation of Related Transactions. The Company has provided
------------------------------------
the Investors with a fully executed copy of each of the Bank Debt Agreement, the
Purchase Agreements and any other related Notes, Management, and Pledge
Agreements and the transactions contemplated by each such document or agreement
has been consummated without the modification or waiver of any term thereof.
10AA. Conduct of Business. To the Company's knowledge after reasonable
-------------------
investigation (i) all court reporters that are or have been hired (directly or
indirectly through court reporting services, including independent contractors)
by the Company are duly certified to perform the jobs that they are hired to
perform, (ii) all documents that the Company is or has
49
been required to maintain, store or handle in connection with conducting its
business are or have been maintained, stored or handled in the manner agreed to
between the Company and its respective clients or in conformity with prevailing
standards regarding such matters that prevail in the Company's industry, and
(iii) the Company performs all aspects and operations of its business at or
above the prevailing standards for the Company's industry.
11. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
-----------------------------------------------
represents and warrants that it is acquiring the Securities to be purchased by
it hereunder for its own account for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof in violation of
the Securities Act; provided, however, that nothing herein contained shall
-------- -------
prevent the Investors from selling or transferring any Securities in any
transaction that, in the opinion of their special counsel, is exempt from the
registration provisions of the Securities Act and applicable state securities
laws. In addition, each Investor represents and warrants that it has full power
and authority to enter into and perform its obligations under this Agreement and
that this Agreement has been duly authorized, executed and delivered by a
Person authorized to do so. In addition, each Investor represents and warrants
that it is an "accredited investor" as defined in Rule 501 of the General Rules
and Regulations under the Securities Act.
12. DEFINITIONS. For the purpose of this Agreement and in addition
-----------
to terms defined elsewhere in this Agreement, the following terms shall have the
following meanings. In addition, all terms of an accounting character not
specifically defined herein shall have the meanings assigned thereto by
accounting principles generally accepted in the United States of America.
"Acceptable Controlling Person" shall mean any of ▇▇▇▇▇▇▇ ▇▇▇▇▇ and/or
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or any Person controlled by any of them.
"Affiliate" shall mean, with respect to any Person, a Person directly
---------
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise. The Investors
shall not be deemed to be an Affiliate of the Company or any of its
Subsidiaries.
"Bank Debt" shall mean Indebtedness incurred pursuant to the Bank Debt
---------
Agreement or any renewals, extensions, amendments or modifications thereof.
"Bank Debt Agreement" shall mean the Credit Agreement, dated the date
-------------------
hereof, by and among the Company, Looney and ▇▇▇▇▇
50
and the Company Subsidiaries and the Bank, as the same may be amended from time
to time in accordance with its terms.
"Bankruptcy Law" shall mean any bankruptcy, reorganization,
--------------
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law, whether now or hereafter in effect.
"Business Day" shall mean any day which is not a Saturday, Sunday or
------------
day on which banks are authorized by law to close in the State of New York.
"Capital Lease" shall mean any lease of any Property (whether real,
-------------
personal, or mixed) that, in conformity with GAAP, is accounted for as a capital
lease on the balance sheet of the lessee.
"Capitalized Lease Obligations" of any Person means all obligations of
-----------------------------
such Person, as lessee, under leases which should, in accordance with GAAP, be
recorded as Capital Leases.
"Cash Interest Expense" shall mean, for any period, total Interest
---------------------
Expense to the extent paid in cash (including the interest component of
Capitalized Lease Obligations) of the Company and its Subsidiaries for such
period all as determined in conformity with GAAP.
"Cash Tax Expense" shall mean, for any period, total Tax Expense paid
----------------
in cash of the Company and its Subsidiaries for such period all as determined in
conformity with GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response,
------
Compensation, and Liability Act of 1980, as amended (42 U.S.C. (S)(S) 9601 et
--
seq.), and any regulations promulgated thereunder.
---
"Certificate of Compliance" shall have the meaning set forth in
-------------------------
Section 7A (iii).
"Certificate of Designation" shall have the meaning set forth in
--------------------------
paragraph 1B.
"Change of Control" shall mean the occurrence of any of the following:
-----------------
(a) the acquisition or holding by
(i) any person (as such term is used in section 13(d) and
section 14(d) (2) of the Exchange Act as in effect on the Closing
Date) other than an Acceptable Controlling Person or the
Investors, or
51
(ii) related Persons constituting a group (as such term is
used in Rule 13d-5 under the Exchange Act as in effect on the
Closing Date) other than related Acceptable Controlling Persons
or Investors constituting such a group,
of legal and/or beneficial ownership of more than 25% of the Common
Stock or any securities convertible into more than 25% of the Common
Stock of the Company or any Guarantor outstanding at such time if at
such time the Investors beneficially own in the aggregate less than a
majority of the Common Stock or any securities convertible into less
than a majority of the Common Stock of the Company or any Guarantor
(excluding for such purpose persons who own shares through
any employee benefit plan of the Company in connection therewith);
(b) all or substantially all of the assets of the Company or any
Guarantor are sold or otherwise transferred, in a single transaction
or in a series of related transactions, to any other Person;
(c) any merger, consolidation or other similar transaction of, or
in respect of, the Company or any Guarantor which results in the
failure by the owners of Common Stock (or Common Stock of such
Guarantor) on the Closing Date to, directly or indirectly in the
aggregate, maintain beneficial ownership and voting control of at
least fifty percent (50%) of the outstanding Common Stock of the
surviving entity in such merger, consolidation or similar transaction;
(d) any liquidation or dissolution of the Company, or action
taken by the Board of Directors of the Company to authorize any such
liquidation or dissolution; or
(e) the first day on which a majority of the members of the Board
of Directors of the Company are not the designees of the Investors as
a result of the ownership of Common Stock or securities convertible
into Common Stock by a person other than an Acceptable Controlling
Person.
Any transaction permitted under the provisions of paragraph 7H hereof
shall not constitute a "Change of Control."
"Change of Control Event" shall mean the earlier of the occurrence of
-----------------------
a Change of Control or the Company acquiring knowledge of a pending Change of
Control.
"Change of Control Notice" shall have the meaning set forth in
------------------------
paragraph 5B.
52
"Closing" shall have the meaning specified in paragraph 2B.
-------
"Closing Date" shall have the meaning specified in paragraph 2B.
------------
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Commission" shall mean the United States Securities and Exchange
----------
Commission.
"Common Stock" shall mean the shares of Common Stock, par value $0.01
------------
per share, of the Company.
"Company" shall have the meaning specified in the preamble.
-------
"Convertible Preferred Stock" shall have the meaning specified in
---------------------------
paragraph 1B.
"Default" shall mean any of the events specified in Section 9 hereof,
-------
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any of these conditions, event or act has been satisfied.
"Default Notice" shall have the meaning specified in paragraph
--------------
8B(1)(b).
"EBDIT" shall mean, for any period, the sum of net earnings (plus or
-----
minus any material recurring charges or credits) of the Company and its
Subsidiaries plus each of the following, to the extent actually deducted in
----
arriving at such net earning: (a) depreciation and amortization, (b) Interest
Expense and (c) Tax Expense.
"Environmental Laws" shall have the meaning specified in paragraph 6Q.
------------------
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" shall mean each trade or business (whether or not
---------------
incorporated) which together with the Company or a Subsidiary would be deemed
to be a "single employer" within the meaning of Section 4001 of ERISA.
"Event of Default" shall mean any of the events specified in Section
----------------
9, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act.
53
"Exchange Act" shall mean the United States Securities Exchange Act of
------------
1934, as amended.
"Exchange Act Registration Statement" shall have the meaning specified
-----------------------------------
in paragraph 6L.
"Fair Market Value" shall have the meaning specified in paragraph 5E.
-----------------
"Financing Agreements" shall mean all agreements, instruments and
--------------------
documents, including, without limitation, the Bank Debt Agreement and any other
agreement evidencing Senior Debt and all security agreements, loan agreements,
promissory notes, letter of credit applications, guarantees, mortgages, deeds of
trust, subordination agreements, pledges, powers of attorney, consents,
assignments, contracts, notices, leases, financing statements, intercreditor
agreements, and all other written matter whether heretofore, now, or hereafter
executed by or on behalf of the Company or its Subsidiaries and delivered to any
bank and between the Company and any bank; together referred to therein or
contemplated thereby.
"Fixing Charge Coverage Ratio" shall mean, for any period, the
----------------------------
quotient obtained by dividing (a) EBDIT less Cash Tax Expense by (b) Fixed
Charges.
"Fixing Charges" shall mean, without duplication, for any period, (a)
--------------
the amounts for such period of Cash Interest Expense, plus (b) the amounts of
----
scheduled principal payments on Funded Debt and, without duplication, payments
made to effect reductions in the Revolving Loan Commitment (as defined in the
Bank Debt Agreement) pursuant to Section 2.4 of the Bank Debt Agreement, plus
----------- ----
(c) Capital Expenditures (as defined in the Bank Debt Agreement) made in such
period and permitted pursuant to the Bank Debt Agreement, plus (d) cash
----
dividends paid during such period to the extent permitted by Section 9.4 of the
-----------
Bank Debt Agreement, plus (e) to the extent not otherwise included in the
----
foregoing, cash payments made on any Indebtedness other than the Senior Debt to
the extent permitted under Section 9.21 of the Bank Debt Agreement.
------------
"Fully Diluted Outstanding Shares" shall mean, when used with
--------------------------------
reference to Common Stock on any date of determination, all shares of Common
Stock or any other capital stock of the Company Outstanding at such date and all
shares of Common Stock or any other capital stock of the Company issuable in
respect of the Convertible Preferred Stock issued pursuant to this Agreement and
any other warrants, options or convertible securities.
"Funded Debt" shall mean all Indebtedness of a Person which matures
-----------
more than one year from the date of creation or matures within one year from
such date but is renewable or extendible, at the option of such Person, by its
terms or by the terms of any instrument or agreement relating thereto, to a
date
54
more than one year from such date or arises under a revolving credit or similar
agreement which obligates the Bank to extend credit during a period of more than
one year from such date, and includes, without limitation, all amounts of any
Funded Debt required to be paid or prepaid within one year from the date of
determination of the existence of any such Funded Debt. The term "Funded Debt"
also includes the present value (discounted at the implicit rate, if known, or
ten percent (10%) per annum otherwise) of all obligations in respect of
Capitalized Lease Obligations of the Company and its Subsidiaries.
"Funded Debt Ratio" shall have the meaning set forth in Section 7A(i).
-----------------
"GAAP" shall mean generally accepted accounting principles set forth
----
in the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by significant segments
of the accounting profession, which are applicable to the circumstances as of
the date of determination.
"Governmental Authority" shall mean any governmental agency,
----------------------
authority, instrumentality or regulatory body, other than a court or other
tribunal, in each case whether federal, state, local or foreign.
"Governmental Requirement" shall mean any law, statute, code,
------------------------
ordinance, order, determination, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other directive or
requirement (whether or not having the force of law), including, without
limitation, Environmental Laws, energy regulations and occupational, safety and
health standards or controls, of any Governmental Authority.
"Guaranty" shall mean, with respect to any Person, any obligation,
--------
contingent or otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness of another Person, including, without limitation, by means of an
agreement to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or to maintain financial covenants, or to assure
the payment of such Indebtedness by an agreement to make payments in respect of
goods or services regardless of whether delivered or otherwise, provided that
-------------
the term "Guaranty" shall not include endorsements for deposit or collection in
the ordinary course of business; and such term when used as a verb shall have a
correlative meaning.
"Hazardous Substances" shall have the meaning specified in paragraph
--------------------
6Q.
"Indebtedness" shall mean (without duplication), for any person, (a)
------------
indebtedness of such Person for borrowed money or
55
arising out of any extension of credit to or for the account of such Person
(including, without limitation, extensions of credit in the form of
reimbursement or payment obligations of such Person relating to letters of
credit issued for the account of such Person) or for the deferred purchase price
of property or services, except indebtedness which is owing to trade creditors
in the ordinary course of business and which is due within ninety (90) days
after the original invoice date; (b) indebtedness of the kind described in
clause (a) of this definition which is secured by (or for which the holder of
such Indebtedness has any existing right, contingent or otherwise, to be secured
by) any Lien upon or in Property (including, without limitation, accounts and
contract rights) owned by such Person, whether or not such Person has assumed or
become liable for the payment of such indebtedness or obligations; (c)
Capitalized Lease Obligations of such Person; (d) obligations under direct or
indirect Guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds referred in
clauses (a) through (c) above, including without limitation, (i) any endorsement
not for collection in the ordinary course of business or discount with recourse
or undertaking substantially equivalent to or having economic effect similar to
a guaranty in respect of any such Indebtedness; (ii) any agreement (1) to
purchase, or to advance or supply funds for the payment or purchase of, any such
Indebtedness, (2) to purchase, sell, or lease property, products, materials,
supplies, transportation, or services, in order to enable such Person to pay any
such Indebtedness or to assure the owner thereof against loss regardless of the
delivery or non-delivery of the property, products, materials, supplies,
transportation, or services or (3) to make any loan, advance, or capital
contribution to, or other investment in, or to otherwise provide funds to or
for, such other Person in order to enable such Person to satisfy any obligation
(including any liability for a dividend, stock liquidation payment or expense)
or to assure a minimum equity, working capital, or other balance sheet condition
in respect of any such obligation; and (iii) obligations under surety, appeal,
or custom bonds; and (e) liabilities in respect of unfunded vested benefits
under plans covered by Title IV of ERISA.
"Indemnitee" shall have the meaning specified in paragraph 6Q.
----------
"Intangible Assets" shall mean goodwill, business records, inventions,
-----------------
designs, patents, patent applications, trademarks, trade names, trade secrets,
registrations, copyrights, licenses, franchises, customer lists, co-op
memberships, guarantee claims, organization costs, loan costs, tax refunds, tax
refund claims, customs claims, brands, leasehold interests and easements and
contract rights and similar intangible assets which have no material realizable
value.
56
"Interest Expense" shall mean, for any period, total interest expense,
----------------
whether paid or accrued (including the interest component of Capital Leases), of
the Company and its Subsidiaries for such period, all as determined in
conformity with GAAP.
"Interest Notes" shall have the meaning set forth in paragraph 1A.
--------------
"Interim Financials" shall have the meaning set forth in paragraph
------------------
10B.
"Investment" shall mean any stock, partnership or joint venture
----------
interest or other security, any loan, Guaranty, advance, contribution to
capital, any acquisitions of real or personal property (other than real and
personal property acquired in the ordinary course of business), and any purchase
or commitment or option to purchase stock or other securities of or any interest
in another Person or any integral part of any business or the assets comprising
such business or part thereof whether existing on the date of this Agreement or
hereafter made.
"Investor Parties" shall have the meaning set forth in paragraph 6M.
----------------
"Investors" shall have the meaning set forth in the preamble.
---------
"▇▇▇▇▇ Purchase Agreement" shall mean the Stock Purchase Agreement
------------------------
dated the date hereof by and among the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Liabilities" shall mean any and all liabilities, obligations and
-----------
indebtedness of the Company to any bank of any and every kind and nature,
whether heretofore, now or hereafter owing, arising, due or payable and
howsoever evidenced, created, incurred, acquired or owing whether primary,
secondary, direct, contingent, fixed or otherwise (including obligations of
performance) and whether arising or existing under the Bank Debt Agreement or
any of the other Financing Agreements, or by operation of law.
"Lien" shall mean any mortgage, pledge, security interest,
----
encumbrance, lien or charge of any kind, including, without limitation, any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof and the filing of or
agreement to file any financing statement under the Uniform Commercial Code of
any jurisdiction.
"Liquid Secondary Market" shall occur when (i) the Common Stock is
-----------------------
traded on the NASDAQ, the American Stock Exchange, the New York Stock Exchange
or any other national securities exchange or quotation system, (ii) the sale of
any or all of the Common Stock or Convertible Preferred Stock by any
57
Investor can be traded by the Investors over a six-month period without
adversely affecting the market for the Company's securities, and (iii) the
Company has a market capitalization of at least $50,000,000 and the value of
such shares being traded on such exchange is at least $30,000,000.
"Looney Purchase Agreement" shall mean the Stock Purchase Agreement
-------------------------
dated the date hereof by and among the Company and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
"Margin stock" shall have the meaning set forth in paragraph 10K.
------------
"Material Adverse Effect" shall mean (i) a material adverse effect on
-----------------------
the business, condition or prospects (financial or other), assets, properties,
rights or operations of the Company and its Subsidiaries taken as a whole or
(ii) any effect which could materially adversely Affect the ability of the
Company or its Subsidiaries to perform their respective obligations under any of
the Related Documents.
"Multiemployer Pension Plan" shall mean any multiemployer plan, as
--------------------------
defined in Section 4001 of ERISA and subject to Title IV of ERISA, which the
Company, any Subsidiary or any ERISA Affiliate has an obligation to make
contributions (or has had an obligation to make contributions during the five
calendar years preceding the Closing) for the employees of the Company, any of
its Subsidiaries, or any ERISA Affiliates.
"NASDAQ" shall mean the National Association of Securities Dealers
------
Automated Quotations system.
"Officer's Certificate" of a Person shall mean a certificate of the
---------------------
President, one of the Vice Presidents or the Treasurer or Controller of such
Person.
"Option Closing" shall have the meaning set forth in paragraph 5B.
--------------
"Outstanding" shall mean, when used with reference to Common Stock, at
-----------
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Section 4002 of ERISA, or any successor entity thereto.
"Pension Plan" shall mean any single-employer plan, as defined in
------------
Section 4001 of ERISA and subject to Title IV of ERISA, which is maintained or
contributed to (or previously maintained or contributed to during the five
calendar years preceding the Closing) for employees of the Company, any of its
Subsidiaries or any ERISA Affiliates.
58
"Permitted Acquisitions" shall mean acquisitions of court reporting
----------------------
businesses in accordance with Section 7E.
"Permitted Investments" shall mean (i) direct obligations of the
---------------------
United States, or obligations guaranteed as to principal and interest by the
United States government, (ii) bankers' acceptances and certificates of deposit
issued by any bank or any other bank or trust company or, in the case of any
subsidiary bank of a bank holding company, a bank holding company, having
capital, surplus and undivided profits of at least $500,000,000, the short-term
deposits of which are given an A1 or P1 rating by Standard & Poor's Rating Group
or ▇▇▇▇▇'▇ Investors Service, Inc., as applicable, (iii) obligations of any bank
or trust company or bank holding company described in clause (ii) above, in
respect of the repurchase of obligations of the type described in clause (i)
hereof, provided that such repurchase obligations shall be fully secured by
obligations of the type described in said clause (i) and the possession of such
obligations shall be transferred to, and segregated from other obligations owned
by, and any such bank's trust company or bank holding company, (iv) commercial
paper given a rating of A1 or P1 by Standard & Poor's Ratings Group or ▇▇▇▇▇'▇
Investors Service, Inc., as applicable and (v) money market funds organized
under the laws of the United States or any state thereof that invest
substantially all of their assets in any of the types of investments described
in clauses (i), (ii), (iii) or (iv); provided, however, that no such investment
-------- -------
shall have a maturity longer than 270 days from the date of acquisition by the
Company or any Subsidiary.
"Person" shall mean and include an individual, partnership,
------
corporation (including a business trust), a limited liability company, joint
stock company, trust, unincorporated association, joint venture, or other
entity, or a government, or any political subdivision or agency of any of the
foregoing.
"Premium Amount" shall mean an amount equal to the product of .30
--------------
times the aggregate principal amount of Senior Subordinated Notes purchased by
the Investors at the Closing.
"Proceedings" shall have the meaning set forth in Section 8B(2).
-----------
"Property" shall mean any interest or right in any kind of property or
--------
asset, whether real, personal or mixed, owned or leased, tangible or intangible,
and whether now held or hereafter acquired.
"Public Offering" shall mean the closing of a public offering of
---------------
securities pursuant to a registration statement declared effective under the
Securities Act, except that a Public Offering shall not include an offering made
in connection with a business acquisition or an employee benefit plan.
59
"Purchase Agreements" shall have the meaning specified in paragraph
-------------------
6B.
"Purchase Money Debt" shall mean debt of the Company and any
-------------------
Subsidiary incurred to finance an acquisition of assets which is secured by a
Purchase Money Security Interest.
"Purchase Money Security Interest" shall mean a purchase money
--------------------------------
security interest within the meaning of Section 9-107 of the New York Uniform
Commercial Code, as in effect on the date hereof.
"Put Notice" shall have the meaning specified in paragraph 5D.
----------
"Put Option Closing" shall have the meaning specified in paragraph 5D.
------------------
"Put Right" shall have the meaning specified in paragraph 5C.
---------
"Qualifying Public Offering" shall mean the sale by one or more
--------------------------
Persons in an underwritten offering registered under the Securities Act of any
equity securities of the Company (or its successor) which results in aggregate
gross proceeds from such sales (before underwriters' discounts and selling
commissions) to the Company greater than or equal to $15,000,000.
"Registration Rights Agreement" shall mean the Registration Rights
-----------------------------
Agreement between the Company and the Investors in the form of Exhibit E
attached hereto.
"Related Documents" shall mean this Agreement, the Senior
------------------
Subordinated Notes, the Securityholders Agreement, the Registration Rights
Agreement, the Certificate of Designation, the Subsidiary Guarantee and the
Subordination Agreement.
"Released" shall have the meaning set forth in paragraph 10L.
--------
"Repayment Date" shall have the meaning set forth in paragraph 4C.
--------------
"Reportable Event" shall mean an event described in Section 4043(c) of
----------------
ERISA with respect to which the 30-day notice requirement has not been waived by
the PBGC.
"Restricted Payment" by any Person shall mean (i) any dividend or
------------------
other distribution on any shares of the capital stock (other than dividends or
distributions payable solely in shares of such capital stock) of such Person,
and (ii) any payment on account of the purchase, redemption, retirement or
acquisition of (a) any shares of the capital stock of such Person or (b) any
option, warrant, convertible or exchangeable security (except the
60
Convertible Preferred Stock) or other right to acquire shares of the capital
stock of such Person.
"Securities" shall mean "securities" as defined in Section 2(1) of the
----------
Securities Act and includes, with respect to any Person, such Person's capital
stock or other equity interests or any options, warrants or other securities
that are directly or indirectly convertible into, or exercisable or exchangeable
for, such Person's capital stock or other equity interests.
"Securities" shall have the meaning set forth in paragraph 1B.
----------
"Securities Act" shall mean the United States Securities Act of 1933,
--------------
as amended.
"Securityholders Agreement" shall mean the Securityholders Agreement
-------------------------
between the Company, certain shareholders thereof and the Investors in the form
of Exhibit F hereto.
"Seller Notes" shall have the meaning set forth in paragraph 3P.
------------
"Senior Creditor" shall mean Texas Commerce Bank National Association.
---------------
"Senior Debt" shall mean all obligations (whether now outstanding or
-----------
hereafter incurred) for the payment of which the Company or any Subsidiary
thereof is responsible or liable as obligor, guarantor or otherwise in respect
of the principal, premium (if any), and unpaid interest on and all other amounts
due with respect to (i) the Bank Debt and (ii) all renewals and extensions of
any such Indebtedness or obligations; provided, however, that the following
-------- -------
shall not constitute Senior Debt: (a) Indebtedness evidenced by the Senior
Subordinated Notes or any extension or refunding thereof, (b) Indebtedness which
is expressly made equal in right of payment with the Senior Subordinated Notes
or subordinate and subject in right of payment to the Senior Subordinated Notes
or (c) Indebtedness which purports to be senior to subordinated debt, including
the Senior Subordinated Notes, but subordinate to the Indebtedness described in
the first sentence hereof; and further provided that notwithstanding anything
------- --------
else contained in this definition (i) Senior Debt may not exceed $10,000,000,
and (ii) shall be incurred only for (A) Permitted Acquisitions or (B) working
capital purposes.
"Senior Debt Agreement" shall mean any agreement evidencing Senior
---------------------
Debt.
"Senior Funded Debt" shall mean Senior Debt which is Funded Debt.
------------------
61
"Senior Subordinated Notes" shall have the meaning specified in
-------------------------
paragraph 1A.
"Shareholders Agreement" shall mean the Shareholders Agreement between
----------------------
the Company, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇,
Gulfstar Investments, Ltd., and the Investors (for the purpose of being bound by
paragraph 8 of the Shareholders Agreement), dated as of the date hereof.
"Subordinated Debt" shall have the meaning specified in paragraph 8A.
-----------------
"Subordinate Lien" shall have the meaning set forth in Section 8M.
----------------
"Subordination Agreement" shall have the meaning specified in Section
-----------------------
3P.
"Subsidiary" as to any Person shall mean a corporation or other entity
----------
of which shares or similar stock having ordinary voting power to elect a
majority of the board of directors or other managers of such corporation or
entity are at the time owned, directly or indirectly, through one or more
intermediaries, by such Person. Except as otherwise expressly indicated herein,
references to Subsidiaries shall mean any Subsidiaries of the Company.
"Tax Expense" shall mean, for any period, total federal and state
-----------
income taxes, before adjustment for extraordinary items, as shown in the
financial statements of the Company and its Subsidiaries for such period, all as
determined in conformity with GAAP.
"UCC" shall mean the Uniform Commercial Code as adopted in the State
---
of New York.
"wholly owned" shall mean with respect to any designated Person that
------------
all of the shares or similar stock having ordinary voting power to elect the
board of directors and Indebtedness in respect of borrowing of such Person is
owned by Indebtedness in respect of borrowing of such Person is owned by the
specified Person or by one or more wholly owned subsidiaries of such specified
Person, or both.
13. MISCELLANEOUS.
-------------
13A. Home Office Payment. The Company agrees that, so long as the
-------------------
Investors shall hold any Senior Subordinated Note, it will make payments of
principal of and interest on such Senior Subordinated Notes not later than 12:00
noon, New York time, on the date such payment is due, by transfer of immediately
available funds for credit to the Investors. Such payments shall be made to the
account of the Investors specified on the attachments to the signature pages
hereto or such other account in the United States as the Investors may designate
in writing,
62
notwithstanding any contrary provision contained herein or in the Senior
Subordinated Notes or in the Articles of Incorporation of the Company with
respect to the place of payment. Dividends on the shares of Common Stock
issuable upon conversion of the Convertible Preferred Stock shall be paid to
the holders thereof at the registered address of such holders as shown on the
records of the Company. The Company agrees to afford the benefits of this
paragraph 13A to any Person which is the registered transferee of any Security,
and which, in the case of the transferee of any Senior Subordinated Note, has
made the same agreement relating to such Senior Subordinated Note as the
Investors have made in this paragraph 13A.
13b. Indemnification. The Company agrees, whether or not the
---------------
transactions hereby contemplated shall be consummated, to pay, and save the
Indemnitees harmless against liability for the payment of, all reasonable
out-of-pocket expenses arising in connection with the transactions and other
agreements and instruments contemplated by this Agreement, including all taxes,
together in each case with interest and penalties, if any, and any income tax
payable by the Indemnitees in respect of any reimbursement of amounts payable
pursuant to this paragraph 13B (but not if any such income tax is payable by an
Indemnitee solely because it has deducted from income the expenses so reimbursed
to it), which may be payable in respect of the execution and delivery of this
Agreement including reasonable fees, expenses and disbursement of counsel
incurred in connection with the preparation and negotiation of this Agreement,
any other agreement or instrument to be executed and delivered in
connection with this Agreement any subsequent modification hereof or thereof or
consent hereunder or thereunder (regardless of whether any such modifications or
consent becomes effective) or the execution, delivery or acquisition of Senior
Subordinated Note or capital stock issued under or pursuant to this Agreement,
printing, reproduction and similar costs, and the reasonable cost and expenses,
including reasonable attorneys' fees, incurred by any Indemnitee in enforcing
any of its rights hereunder or thereunder, including without limitation
reasonable costs and expenses incurred in any bankruptcy case (including
reasonable fees and expenses of the Indemnitee's counsel in connection with such
bankruptcy case). The fees of counsel to the Investors incurred in connection
with the preparation and negotiation of this Agreement shall be paid at the
Closing. The Company agrees to indemnify the Indemnitees and hold them harmless
from and against any and all liabilities, losses, damages, costs and expenses of
any kind (including, without limitation, the reasonable fees and disbursements
of the Indemnitees' counsel in connection with any investigative, administrative
or judicial proceeding, whether or not the Indemnitees be designated a party
thereto) which may be incurred by the Indemnitees, relating to or arising out of
this Agreement or the Securities or any actual or proposed use of the proceeds
of the sale of Securities hereunder, provided that no Indemnitee shall have the
right to be indemnified hereunder for its own gross negligence or willful
63
misconduct as finally determined by a court of competent jurisdiction. The
obligations of the Company under this paragraph 13B shall survive the transfer
of any Security or shares of Common Stock issuable upon conversion of the
Convertible Preferred Stock and the payment of any Senior Subordinated Note.
The indemnification required by this paragraph 13B shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or expense, loss, damage or liabilities
are incurred.
13C. Consent to Amendments. This Agreement may be amended and the
---------------------
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, or take action which by the express terms of
this Agreement requires the consent of the Investors, only if the Company shall
have obtained the prior written consent to such amendment, action or omission to
act after the Closing Date of the holders of a majority of the aggregate unpaid
principal amount of the Senior Subordinated Notes and each holder of any
Security at the time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 13C, whether or not such Security shall have been
marked to indicate such consent, but any Security issued thereafter shall
contain a reference or bear a notation referring to any such consent; provided,
--------
however, that notwithstanding anything in this paragraph 13C to the contrary,
-------
without the prior written consent of the holder or holders of all Senior
Subordinated Notes at the time outstanding, no consent, amendment or waiver to
or under this Agreement shall extend or reduce the maturity of any Senior
Subordinated Note, or change the principal of, or the rate or time of payment of
interest or any premium payable with respect to any Senior Subordinated Note, or
affect the time, amount or allocation of any required or optional prepayments,
or reduce the proportion of the principal amount of the Senior Subordinated
Notes required with respect to any consent, amendment or waiver, or affect the
provisions of Section 8 or amend the provisions of this paragraph 13C. The
Company shall promptly send copies of any amendment, waiver or consent (and any
request for any such amendment, waiver or consent) relating to this Agreement or
the Securities to each holder of the Securities and shall consult with such
holders in connection with each such amendment, consent and waiver. No course of
dealing between the Company or any Subsidiary and the holder of any Security nor
any delay in exercising any rights hereunder or under any Security shall
operate as a waiver of any rights of any holder of such Security. As used herein
and in the Securities, the term "this Agreement" and references hereto shall
mean this Agreement as it may, from time to time, be amended or supplemented.
Any amendments to this Agreement shall also require the consent of the Company.
13D. Form, Registration, Transfer and Exchange of Senior Subordinated
----------------------------------------------------------------
Notes; Lost Senior Subordinated Notes. The Senior Subordinated Notes are
-------------------------------------
issuable as registered notes
64
transferable by endorsement and delivery, each without coupons in denominations
of $1,000 and any larger integral multiple of $1,000. The Company shall keep at
its principal office a register in which the Company shall provide for the
registration of the Senior Subordinated Notes. Upon surrender for registration
of transfer of any registered Senior Subordinated Note at such office, the
Company shall, at its expense, execute and deliver one or more replacing Senior
Subordinated Notes of like tenor and of a like aggregate principal amount which
replacing Senior Subordinated Notes shall be registered Senior Subordinated
Notes. At the option of the holder of any Senior Subordinated Note such Senior
Subordinated Notes may be exchanged, for other Senior Subordinated Notes of any
authorized denominations, of a like tenor and of a like aggregate principal
amount, upon surrender of the Senior Subordinated Note to be exchanged at the
office of the Company. Whenever any Senior Subordinated Notes are so surrendered
for exchange, the Company shall execute and deliver, at its expense, the Senior
Subordinated Notes which the holder thereof making the exchange is entitled to
receive. Every Senior Subordinated Note presented or surrendered for
registration of transfer shall be duly endorsed, or be accompanied by a written
instrument of transfer duly executed, by the holder of such Senior Subordinated
Note, or his attorney duly authorized in writing. Any Senior Subordinated Notes
issued in exchange for or upon transfer shall carry the rights to unpaid
interest and interest to accrue which were carried by the Senior Subordinated
Notes so exchanged or transferred, so that neither gain nor loss of interest
shall result from any such transfer or exchange. Upon receipt of written notice
from the Investors or other evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of any Senior Subordinated Note held
by the Investors and, in the case of any such loss, theft or destruction, upon
receipt of its unsecured indemnity agreement, or other indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Senior Subordinated Note, the Company will
make and deliver a replacement Senior Subordinated Note of like tenor, in lieu
of such lost, stolen, destroyed or mutilated Senior Subordinated Note.
13E. Provisions Applicable if any of the Securities are Sold. The
-------------------------------------------------------
parties acknowledge that, subject to compliance with applicable securities laws,
the Investors shall be free to transfer the Securities without restriction. In
the event that the Investors should sell or otherwise transfer any of the
Securities or any part thereof to any Person other than the Company, if any
Security shall have been transferred to another holder and such holder shall
have designated in writing the address to which communications with respect to
Security shall be mailed, all notices, certificates, requests, statements and
other documents required to be delivered to the Investors by any provision
hereof by reason of the holding of the transferred Security shall also be
delivered to such holder at such address.
65
13F. Restrictive Legends. Each Senior Subordinated Note shall bear
-------------------
the following (or substantially equivalent) legend on the face or reverse side
thereof:
"The securities represented hereby have not been registered under
the Securities Act of 1933, as amended, or applicable state
securities laws, and the securities may not be sold, transferred
or otherwise disposed of in the absence of such registration or
an exemption therefrom under said Act and such laws and the
respective rules and regulations thereunder."
In addition, the shares of Common Stock issuable upon conversion of the
Convertible Preferred Stock shall bear at the time of issuance a legend in
substantially the form set forth above and any legend required by the state
securities or "Blue Sky" laws of any state in which a registered holder thereof
is resident, unless such shares have been registered under the Securities Act.
13G. Persons Deemed Owners. Prior to due presentment for registration
---------------------
of transfer, the Company may treat the Person in whose name any Security is
registered as the owner and holder of such Security for the purpose of receiving
payment of principal of (and premium, if any) and interest on such Security and
for all other purposes whatsoever, whether or not such Security shall be
overdue, and the Company shall not be affected by notice to the contrary.
13H. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained herein or made in writing by or on behalf of any party
to this Agreement in connection herewith shall survive the execution and
delivery of this Agreement, regardless of any investigation made by the
Investors or on their behalf.
13I. Successors and Assigns. Except as otherwise provided herein, all
----------------------
covenants and agreements in this Agreement contained by or on behalf of the
parties hereto shall bind and inure to the benefit of the respective
successors, transferees and assigns of the parties hereto whether so expressed
or not and for greater certainty, a purchaser of Convertible Preferred Stock
from any holder of Convertible Preferred Stock will be entitled to the benefits
of this Agreement and the Company shall be deemed to have received express
notice in writing of any such assignment by a request for registration of the
Convertible Preferred Stock in the name of a subsequent purchaser.
13J. Notices. All communications provided for hereunder shall be sent
-------
by first class mail, overnight courier or by fax with hard copy by first class
mail or overnight courier and, if to the Investors, addressed to the Investors
in the manner (except as otherwise provided in paragraph 13A with respect to
payments of principal of (and premium, if any) and
66
interest on the Senior Subordinated Notes) in which its address appears on the
signature page hereof, with a copy to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esq., at ▇▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, One Citicorp Center, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇-▇▇▇▇, telecopy number (▇▇▇) ▇▇▇-▇▇▇▇, if to the Company or the Guarantor,
addressed to it at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, or to
such other address with respect to any party as such party shall notify the
other in writing, and (unless otherwise specified herein) shall be deemed
received 24 hours after it is sent if sent via facsimile (with receipt
confirmed) or overnight courier; provided, however, that any such communication
-------- -------
to the Company or the Guarantor may also, at the option of the Investors, be
either delivered to the Company or the Guarantor at their address set forth
above or to any executive officer of the Company or the Guarantor, as applicable
13K. Descriptive Headings. The descriptive headings of the several
--------------------
Sections and paragraphs of this Agreement are inserted for convenience only and
do not constitute a part of this Agreement.
13L. Governing Law; Consent To Jurisdiction. This Agreement Is Being
--------------------------------------
Delivered And Is Intended To Be Performed In The State Of New York, And Shall Be
Construed And Enforced In Accordance With, And The Rights Of The Parties Shall
Be Governed By, The Law Of Such State Without Giving Effect To The Choice Of Law
Or Conflicts Of Law Principles Thereof. This Agreement Is Effective Only When
Delivered And Entered Into By The Investors In New York. Any Legal Action Or
Proceeding With Respect To This Agreement May Be Brought In The Courts Of The
State Of New York Or Of The United States Of America For The Southern District
Of New York, And, By Execution And Delivery Of This Agreement, The Company
Hereby Accepts For Itself And In Respect Of Its Property, Generally And
Unconditionally, The Jurisdiction Of The Aforesaid Courts. The Company
Irrevocably Consents To The Service Of Process Out Of Any Of The Aforementioned
Courts In Any Such Action Or Proceeding By The Mailing Of Copies Thereof By
Registered Or Certified Mail, Postage Prepaid, To The Company At Its Address Set
Forth In Paragraph 13J, Such Service To Become Effective 30 Days After Such
Mailing. Nothing Herein Shall Affect The Right Of The Investors Or Any Holder Of
A Security To Serve Process In Any Other Manner Permitted By Law Or To Commence
Legal Proceedings Or Otherwise Proceed Against The Company In Any Other
Jurisdiction.
13M. Delay Fees. If the Closing shall not actually occur on any date
----------
on which the Closing is scheduled to occur, and the Company shall have failed
to notify each Investor prior to 10:00 A.M. local time, in the place in which an
Investor is located, on the day prior to such scheduled Closing that such
Closing has been postponed, the Company shall pay to each Investor (as
compensation for such Investor's loss of fund and administrative costs) an
amount equal to interest on the purchase
67
price for the Securities to have been purchased by each such Investor on such
scheduled date at such Closing, at the rate per annum on the Senior Subordinated
Notes as if the Senior Subordinated Notes had been issued on the scheduled date
of Closing, for each day from and including such scheduled date of Closing to
but not including the earlier of the date on which such Closing actually occurs
or the date on which the amount to be paid by each such Investor as said
purchase price is available to such Investor for reinvestment, but in any case
not less than one day's interest; provided, however, that the Company shall not
-------- -------
owe any Investor any amount under this paragraph 13M if the Company has
fulfilled all of its obligations under this Agreement and such Investor is not
willing or able to fulfill its obligations on the scheduled date of Closing.
13N. Remedies. In case any one or more of the covenants and/or
--------
agreements set forth in this Agreement shall have been breached by the Company
or any holder of Securities, the Company, or any holder of Securities (or any of
them), as applicable, may proceed to protect and enforce its or their rights
either by suit in equity and/or by action at law, including, but not limited to,
an action for damages as a result of any such breach and/or an action for
specific performance of any such covenant or agreement contained in this
Agreement. Without limitation of the foregoing, the Company agrees that failure
to comply with any of the covenants including, without limitation, those
included in paragraphs 6A, 6B, 6C, 6F, 6L, 6M, 6N, 6O AND 6Q and those in
respect of the Senior Subordinated Notes will cause irreparable harm and that
specific performance shall be available in the event of any breach thereof. The
Company, or an Investor acting pursuant to this paragraph 13N, shall be
indemnified against all liability, loss or damage, together with all reasonable
costs and expenses related thereto (including reasonable legal and accounting
fees and expenses) in accordance with paragraph 13B.
13O. Entire Agreement. This Agreement, the other Related Documents
----------------
and the other writings referred to herein or delivered pursuant hereto contain
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous arrangements or understandings with
respect thereto. This Agreement shall not constitute a valid and binding
agreement, enforceable in accordance with its terms, until it has been executed
and delivered by duly authorized representatives of each party hereto. No
discussions regarding or exchange of drafts of comments in connection with the
transactions contemplated herein shall constitute an agreement among the
parties.
13P. Severability. Any provision of this Agreement that is prohibited
------------
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
68
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13Q. Amendments. This Agreement may not be changed orally, but
----------
(subject to the provisions of paragraph 13C) only by an agreement in writing
signed by the party against whom enforcement of any waiver, change, modification
or discharge is sought.
13R. Payment Date. Notwithstanding any provision of this Agreement to
------------
the contrary, any payment on account of principal of (and premium, if any) or
interest on any Senior Subordinated Note which is due on a date which is not a
Business Day shall be paid on the next succeeding Business Day, and the amount
of interest included in any such payment shall be computed to the date on which
such payment is actually made.
13S. Waiver Of Trial By Jury. The Company And Each Guarantor Hereby
-----------------------
Knowingly, Voluntarily And Intentionally Waives (To The Extent Permitted By
Applicable Law) Any Right It May Have To A Trial By Jury Of Any Dispute Arising
Under Or Relating To This Agreement Or Any Other Agreement Or Document Referred
To Herein And Agrees That Any Such Dispute Shall, At The Option Of Any Investor
As The Case May Be, Be Tried Before A Judge Sitting Without A Jury.
13T. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
69
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
LITIGATION RESOURCES OF AMERICA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO
GUARANTOR:
LOONEY & COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
GUARANTOR:
▇▇▇▇▇, BURY AND ASSOCIATES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO
70
The foregoing Agreement is
hereby accepted as of the
date first above written.
DELAWARE STATE EMPLOYEES'
RETIREMENT FUND
c/o Pecks Management Partners Ltd
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: Pecks Management Partners Ltd.,
Its Investment Adviser
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Principal Amount of Senior
Managing Director Subordinated Notes: $6,030,000
670,000 shares of Convertible
Preferred Stock
Tax ID Number: 516-00-0279
Nominee: NAP & CO.
Bank: Mercantile Safe Deposit & Trust Company
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
ABA Routing Number: 052-000618
Account Number: 214380-8 for State of Delaware account.
Physical Delivery
Via Federal Express: Mercantile Safe Deposit
& Trust Company
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Incoming Securities
Attn:# 214380-8
INVESTORS:
The foregoing Agreement is
hereby accepted as of the
date first above written.
DECLARATION OF TRUST
FOR DEFINED BENEFIT PLANS
OF ICI AMERICAN HOLDINGS INC.
c/o Pecks Management Partners Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: Pecks Management Partners Ltd.,
Its Investment Adviser
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Principal Amount of Senior
Managing Director Subordinated Notes: $1,755,000
195,000 shares of
Convertible Preferred Stock
Tax ID Number: ▇▇▇-▇▇▇-▇▇▇
Nominee: NORTHMAN & CO.
Bank: State Street Bank & Trust Company
One Enterprise Drive
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA Routing Number: 0110-00028
Account Number: I510 DDA ▇▇▇▇▇▇▇▇
for Master ▇▇▇▇▇/▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BNF: ICI Americas
Physical Delivery
Via Federal Express: State Street Bank & Trust Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Incoming Securities, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇
Account Name: ICI Americas
Acct.# I510
The foregoing Agreement is
hereby accepted as of the
date first above written.
DECLARATION OF TRUST
FOR DEFINED BENEFIT PLANS
OF ZENECA HOLDINGS INC.
c/o Pecks Management Partners Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: Pecks Management Partners Ltd.,
Its Investment Adviser
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Principal Amount of Senior
Managing Director Subordinated Notes: $1,215,000
135,000 shares of
convertible Preferred Stock
Tax ID Number: ▇▇▇-▇▇▇▇▇▇
Nominee: FUELSHIP & CO.
Bank: State Street Bank & Trust Company
One Enterprise Drive
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA Routing Number: 0110-00028
Account Number: JG10 DDA ▇▇▇▇▇▇▇▇
for Master ▇▇▇▇▇/▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BNF: Zeneca Holdings
Physical Delivery
Via Federal Express: State Street Bank & Trust Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Incoming Securities, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇
Account Name: Zeneca Holdings
Acct.# JG10
AMENDMENT TO SECURITIES PURCHASE AGREEMENT
This Amendment to the Securities Purchase Agreement is made and entered
into as of the 24th day of September, 1997.
The Securities Purchase Agreement dated as of January 17, 1997 (the
"Securities Purchase Agreement"), among Litigation Resources of America, Inc., a
Texas corporation (the "Company"), the Guarantors, as defined therein, and
Delaware State Employees' Retirement Fund, Declaration of Trust for Defined
Benefit Plan of ICI American Holding Inc. and Declaration of Trust for Defined
Benefit Plan of Zeneca Holding Inc. (collectively, the "Investors") is hereby
amended as follows:
1. Section 13U of the Securities Purchase Agreement is added to read in
its entirety as follows:
13U. Termination of Agreement. This Agreement shall terminate as
follows:
(a) Upon the agreement of the Company, the Guarantors and the
Investors; or
(b) Immediately prior to the closing of a firm commitment
initial public offering of equity securities of the Company
that generates net proceeds to the Company of not less than
$15 million.
Dated as of this 24th day of September, 1997.
LITIGATION RESOURCES OF AMERICA, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
LOONEY & COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
▇▇▇▇▇, BURY AND ASSOCIATES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
DELAWARE STATE EMPLOYEES' RETIREMENT FUND
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director,
Pecks Management Partners, Ltd.,
Investment Advisor
DECLARATION OF TRUST FOR DEFINED BENEFIT
PLAN OF ICI AMERICAN HOLDINGS INC.
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director,
Pecks Management Partners, Ltd.,
Investment Advisor
DECLARATION OF TRUST FOR DEFINED BENEFIT
PLAN OF ZENECA HOLDINGS INC.
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director,
Pecks Management Partners, Ltd.,
Investment Advisor
-2-