Exhibit 10.18
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SENIOR SUBORDINATED NOTE AND
SECURITIES PURCHASE AGREEMENT
between
LAW OFFICE INFORMATION SYSTEMS, INC.
and
CAPITAL RESOURCE LENDERS III, L.P.
Dated as of November 24, 1997
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LAW OFFICE INFORMATION SYSTEMS, INC.
Senior Subordinated Note and
Securities Purchase Agreement
Dated as of November 24, 1997
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
1.01. Definitions.................................................................................. 1
1.02. Accounting Terms............................................................................. 8
ARTICLE II
PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS
2.01. The Notes.................................................................................... 8
2.02. Purchase and Sale of Notes................................................................... 8
2.03. Issue Price; Original Issue Discount......................................................... 9
2.04. Use of Proceeds.............................................................................. 9
2.05. Payments and Endorsements.................................................................... 9
2.06. Redemptions.................................................................................. 10
(a) Required Periodic Redemptions................................................................ 10
(b) Required Liquidity Redemptions............................................................... 10
(c) Optional Redemptions......................................................................... 10
(d) Notice of Redemptions; Pro Rata Redemptions.................................................. 10
2.07. Default Rate of Interest..................................................................... 10
2.08. Maximum Legal Rate of Interest............................................................... 10
2.09. Payment on Non-Business Days................................................................. 11
2.10. Transfer and Exchange of Notes............................................................... 11
2.11. Replacement of Notes......................................................................... 11
2.12. Subordination................................................................................ 11
ARTICLE III
PURCHASE AND SALE OF EQUITY SECURITIES
3.01. The Equity Securities........................................................................ 11
3.02. Purchase and Sale of Preferred Shares and Warrants........................................... 12
3.03. Right to Purchase New Mezzanine Securities................................................... 12
3.04 Right to Purchase New Equity Securities...................................................... 12
3.05. Termination Upon Qualified IPO............................................................... 13
ARTICLE IV
CONDITIONS TO PURCHASER'S OBLIGATION
4.01. Representations and Warranties............................................................... 13
4.02A. Documentation at the Initial Closing......................................................... 14
4.02B. Documentation at Takedown Closings........................................................... 15
4.03. Board Matters................................................................................ 15
4.04. No Default................................................................................... 15
4.05. Key Person Life Insurance.................................................................... 16
4.06. ▇▇▇▇▇▇ Family Debt........................................................................... 16
4.08. Payment of Certain Indebtedness.............................................................. 16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.01. Representations and Warranties of the Purchaser.............................................. 16
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
6.01. Organization and Standing of the Company and Subsidiaries; Ownership......................... 17
6.02. Corporate Action............................................................................. 18
6.03. Governmental Approvals....................................................................... 18
6.04. Litigation................................................................................... 18
6.05. Compliance with Law.......................................................................... 18
6.06. Federal Reserve Regulations.................................................................. 19
6.07. Title to Assets, Patents..................................................................... 19
6.08. Financial Information........................................................................ 19
6.09. Taxes........................................................................................ 20
6.10. ERISA........................................................................................ 20
6.11. Transactions with Affiliates................................................................. 20
6.12. Assumptions or Guaranties of Indebtedness of Other Persons................................... 20
6.13. Investments in Other Persons................................................................. 20
6.14. Securities Act............................................................................... 20
6.15. Disclosure................................................................................... 21
6.16. No Brokers or Finders........................................................................ 21
6.17. Other Agreements of Officers................................................................. 21
6.18. Capitalization of the Company; Status of Capital Stock....................................... 21
6.19. Capital Stock of Subsidiaries................................................................ 22
6.20. Insurance.................................................................................... 22
6.21. Books and Records............................................................................ 22
6.22. Registration Rights.......................................................................... 22
6.23. Other Agreements............................................................................. 22
6.24. Hazardous and Toxic Materials................................................................ 24
6.25. Customers, Vendors and Suppliers............................................................. 24
6.26. No Violations................................................................................ 24
ARTICLE VII
COVENANTS OF THE COMPANY
7.01. Affirmative Covenants of the Company Other Than Reporting Requirements........................ 25
(a) Punctual Payment............................................................................. 25
(b) Payment of Taxes and Trade Debt.............................................................. 25
(c) Maintenance of Insurance..................................................................... 25
(d) Preservation of Corporate Existence.......................................................... 25
(e) Compliance with Laws......................................................................... 25
(f) Inspection Rights............................................................................ 26
(g) Keeping of Records and Books of Account...................................................... 26
(h) Maintenance of Properties, Etc............................................................... 26
(i) Compliance with ERISA........................................................................ 26
(j) Attendance at Board Meetings................................................................. 26
(k) Payment of Senior Debt by the Purchaser...................................................... 26
(l) Board of Directors and Committees............................................................ 27
(m) Interest Coverage Ratio...................................................................... 27
(n) Fixed Charge Coverage Ratio.................................................................. 27
(o) Maximum Total Funded Debt to EBITDA Ratio.................................................... 27
(p) Minimum Tangible Capital Base................................................................ 28
(q) Database Expenditures........................................................................ 28
(r) Minimum EBITDA............................................................................... 28
7.02. Negative Covenants of the Company............................................................ 29
(a) Liens........................................................................................ 29
(b) Indebtedness................................................................................. 30
(c) Lease Obligations............................................................................ 30
(d) Assumptions or Guaranties of Indebtedness of Other Persons................................... 30
(e) Mergers, Sale of Assets, Etc................................................................. 30
(f) Investments in Other Persons................................................................. 30
(g) Distributions................................................................................ 31
(h) Dealings with Affiliates..................................................................... 32
(i) Maintenance of Ownership of Subsidiaries..................................................... 32
(j) Change in Nature of Business................................................................. 32
(k) No Amendment or Waiver of Charter Documents.................................................. 32
(l) Capital Expenditures......................................................................... 32
(m) Compensation................................................................................. 32
(n) Preferred Stock.............................................................................. 32
7.03. Reporting Requirements........................................................................ 32
ARTICLE VIII
EVENTS OF DEFAULT
8.01. Events of Default............................................................................. 34
8.02. Annulment of Defaults......................................................................... 36
ARTICLE IX
MISCELLANEOUS
9.01. No Waiver; Cumulative Remedies................................................................ 36
9.02. Amendments, Waivers and Consents.............................................................. 36
9.03. Addresses for Notices, Etc.................................................................... 37
9.04. Costs, Expenses and Taxes..................................................................... 38
9.05. Binding Effect; Assignment.................................................................... 38
9.06. Payments in Respect of Notes.................................................................. 39
9.07. Payments in Respect of the Preferred Shares and Warrants...................................... 39
9.08. Indemnification............................................................................... 39
9.09. Survival of Representations and Warranties.................................................... 39
9.10. Prior Agreements.............................................................................. 39
9.11. Severability.................................................................................. 39
9.12. Governing Law................................................................................. 39
9.13. Waiver of Right to Jury Trial................................................................. 40
9.14. Headings...................................................................................... 40
9.15. Sealed Instrument............................................................................. 40
9.16. Counterparts.................................................................................. 40
9.17. Further Assurances............................................................................ 40
9.18. Consent to Jurisdiction....................................................................... 40
9.19. Effect of Judgment............................................................................ 40
9.20. Service of Process............................................................................ 40
9.21. No Limitation................................................................................. 40
9.22. Specific Performance.......................................................................... 41
9.23. Actions by Purchaser.......................................................................... 41
9.24. Confidentiality............................................................................... 41
EXHIBITS
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2.01 Form of Senior Subordinated Notes
2.04 Schedule of Use of Proceeds
2.12 Form of Subordination and Intercreditor Agreement
3.01A Rights, Designations and Preferences of Series A Preferred
Stock
3.01B Form of Common Stock Purchase Warrants
4.02A(e) Form of Stockholders' Agreement
4.02A(g) Form of Registration Rights Agreement
4.02A(i) Form of Non-Competition Agreement
4.02A(j) Form of Certificate to The Rockefeller Foundation
4.02A(k) Form of Preferred Stock Subordination Agreement
6.01 Schedule of Subsidiaries
6.04 Schedule of Litigation
6.07 Schedule of Title Exceptions
6.08A Financial Statements
6.08B Schedule of Indebtedness
6.11 Schedule of Affiliate Transactions
6.18 Schedule of Capital Stock, Options and Other Rights
6.23 Schedule of Other Agreements
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law office information systems, inc.
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▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dated as of November 24, 1997
Capital Resource Lenders III, L.P.
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Re: Senior Subordinated Notes due 2004, Preferred Stock and
Common Stock Purchase Warrants
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Ladies and Gentlemen:
Law Office Information Systems, Inc., an Arkansas corporation, hereby
agrees with Capital Resource Lenders III, L.P., a Delaware limited partnership,
as follows:
ARTICLE I
DEFINITIONS
1.01. Definitions. As used herein, the following terms shall have the
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following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Affiliate" means, as to any specified Person, any other Person
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controlling, controlled by or under common control with such specified Person.
"Agreement" means this Senior Subordinated Note and Securities Purchase
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Agreement as from time to time amended and in effect between the parties.
"Applicable Laws" shall have the meaning assigned to that term in Section
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6.05.
"Audited Financial Statements" shall have the meaning assigned to that term
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in Section 6.08.
"Board" shall have the meaning assigned to that term in Section 4.03.
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"Budget" shall have the meaning assigned to that term in Section 7.03(d).
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"Business Day" means any day other than a Saturday, Sunday or public
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holiday or the equivalent for banks under the laws of The Commonwealth of
Massachusetts.
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"Business Partner" shall have the meaning assigned to that term in Section
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6.25.
"Capital Expenditure" means, for any period, any payment made directly or
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indirectly for the purpose of acquiring or constructing fixed assets, real
property or equipment which in accordance with GAAP would be added as a debit to
the fixed asset account of the Person making such expenditure, including without
limitation, amounts paid or payable under any conditional sale or other title
retention agreement or under any lease or other periodic payment arrangement
which is of such a nature that payment obligations of the lessee or obligor
thereunder would be required by GAAP to be capitalized and shown as liabilities
on the balance sheet of such lessee or obligor.
"Capital Lease" means any lease of property (real, personal or mixed)
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which, in accordance with GAAP, should be capitalized on the lessee's balance
sheet or for which the amount of the asset and liability thereunder as if so
capitalized should be disclosed in a note to such balance sheet.
"Change in Control" means any transaction or any event as a result of which
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(i) any one or more Persons (other than (a) the Purchaser and its Affiliates and
its direct or indirect assigns or (b) ▇▇▇▇ ▇. ▇▇▇▇▇▇, individually, or through
The ▇▇▇▇▇▇ Trust dated March 15, 1989, together with members of his immediate
family or trusts for their benefit, provided ▇▇▇▇ ▇. ▇▇▇▇▇▇ continues to have
all voting rights with respect to all shares of Common Stock beneficially owned
or held by such family members and such trusts) acquires or for the first time
controls or is able to vote (directly or through nominees or beneficial
ownership) after the Initial Closing Date (other than as the direct result of a
transfer by descent or distribution of a decedent's estate) fifty percent (50%)
or more of the outstanding Common Stock; or (ii) ▇▇▇▇ ▇. ▇▇▇▇▇▇ is no longer
chief executive officer or president of the Company, unless his position as
chief executive officer and president is terminated by the Board without Cause
(as such term is defined in the Non-Competition Agreement) and the Purchaser's
representatives on the Board vote for such termination.
"Code" shall have the meaning assigned to that term in Section 2.03.
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"Commission" means the United States Securities and Exchange Commission (or
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any other federal agency at that time administering the Securities Act).
"Common Stock" includes (a) the Company's common stock, par value $0.001
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per share, as authorized on the date of this Agreement, (b) any other capital
stock of any class or classes (however designated) of the Company, authorized on
or after the date hereof, the holders of which shall have the right, without
limitation as to amount per share, either to all or to a share of the balance of
current dividends and liquidating distributions after the payment of dividends
and distributions on any shares entitled to preference in the payment thereof,
and the holders of which shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors of the Company
(even though the right so to vote may have been suspended by the happening of
such a contingency), and (c) any other securities into which or for which any of
the securities described in (a) or (b) above may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
"Company" means and shall include Law Office Information Systems, Inc., an
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Arkansas corporation, and its successors and assigns.
"CRL III" means Capital Resource Lenders III, L.P., a Delaware limited
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partnership, and its successors and assigns.
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"Database Assets" means the book value of the Company's databases for
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electronic legal libraries determined in accordance with GAAP.
"Database Expenditure" means, for any period, any payment made directly or
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indirectly for the purpose of acquiring or developing databases for electronic
legal libraries.
"Distribution" shall have the meaning assigned to that term in Section
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7.02(g).
"Dublind Warrants" shall have the meaning assigned to that term in Section
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6.16.
"EBITDA" means, for any period, the Net Income (or Net Loss) of the Company
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and its Subsidiaries on a consolidated basis for such period, plus each of the
following items, without duplication: (i) all interest on any Indebtedness paid
or accrued during such period and actually deducted on the books of the Company
and its Subsidiaries on a consolidated basis for the purposes of the computation
of such Net Income (or Net Loss) for the period involved, (ii) all federal,
state and foreign income taxes (but not ad valorem property taxes, sales taxes
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or taxes in the nature of an excise tax) paid or accrued by the Company and its
Subsidiaries on a consolidated basis with respect to such period and deducted on
the books of the Company and its Subsidiaries on a consolidated basis for the
purposes of the computation of such Net Income (or Net Loss) for the period
involved and (iii) the amount of the provision for depreciation and/or
amortization actually deducted on the books of the Company and its Subsidiaries
on a consolidated basis for the purposes of the computation of Net Income (or
Net Loss) for the period involved.
"EFT Financing" means a financing of the Company by an institutional lender
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where such financing is secured solely by the accounts receivable of the Company
relating to electronic funds transfer arrangements between the Company and its
customers and/or subscribers.
"Equity Securities" shall have the meaning assigned to that term in Section
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3.04.
"ERISA" shall have the meaning assigned to that term in Section 6.10.
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"Events of Default" shall have the meaning assigned to that term in Section
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8.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
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any similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Financial Statements" shall have the meaning assigned to that term in
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Section 6.08.
"First Takedown Closing" shall have the meaning assigned to that term in
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Section 2.02(b).
"First Takedown Closing Date" shall have the meaning assigned to that term
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in Section 202(b).
"First Takedown Notice" shall have the meaning assigned to that term in
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Section 2.02(b).
"First Takedown Principal" shall have the meaning assigned to that term in
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Section 2.02(b).
"Fixed Charges" means, for any period, the aggregate of (i) Total Funded
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Debt, plus (ii) Interest Expense, plus (iii) Capital Expenditures, plus (iv)
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state and federal income taxes for the period being tested
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determined in accordance with GAAP during such period.
"GAAP" means generally accepted accounting principles recognized as such by
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the American Institute of Certified Public Accountants. Unless otherwise
specifically stated herein, use of the term "GAAP" means that such principles
are applied and maintained on a consistent basis for the Company and its
Subsidiaries throughout the period indicated and consistent with the prior
financial practices of the Company and its Subsidiaries as reflected on the
Financial Statements so as to properly reflect the financial condition, and the
results of operations and cash flows of the Company and its Subsidiaries.
"Hazardous Discharge" shall have the meaning assigned to that term in
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Section 6.24.
"Hazardous Substances" shall have the meaning assigned to that term in
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Section 6.24.
"Indebtedness" means all obligations, contingent and otherwise, which
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should, in accordance with GAAP, be classified upon the obligor's balance sheet
as liabilities, but in any event including, without limitation, liabilities
secured by any mortgage on property owned or acquired subject to such mortgage,
whether or not the liability secured thereby shall have been assumed, and also
including, without limitation, (i) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be so reflected in said balance sheet, except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, and (ii) the present value of
any Capital Leases.
"Indebtedness for Money Borrowed" of a Person means at any time the sum at
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such time of (a) Indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, (b) any obligations of such
Person in respect of letters of credit, banker's or other acceptances or similar
obligations issued or created for the account of such Person, (c) obligations of
such Person with respect to Capital Leases, (d) all liabilities secured by any
Lien on any property owned by such Person, to the extent attached to such
Person's interest in such property, even though such Person has not assumed or
become personally liable for the payment thereof, (e) obligations of third
parties which are being guaranteed or indemnified against by such Person or
which are secured by the property of such Person, and (f) any obligation of such
Person under an employee stock ownership plan or other similar employee benefit
plan; but excluding trade and other accounts payable in the ordinary course of
business in accordance with customary trade terms and which are not overdue (as
determined in accordance with past practices) or which are being disputed in
good faith by such Person and for which adequate reserves are being provided on
the books of such Person in accordance with GAAP.
"Initial Closing" shall have the meaning assigned to that term in Section
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2.02(a).
"Initial Closing Date" shall have the meaning assigned to that term in
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Section 2.02(a).
"Interest Expense" means the aggregate interest expense of the Company and
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its Subsidiaries on a consolidated basis (including, without limitation,
interest expense attributable to Capital Leases) determined in accordance with
GAAP for the relevant period.
"Liquidity Disposition" means (i) any merger or consolidation with any
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Person, (ii) any sale, assignment, lease or other disposition of or voluntary
parting with the control of (whether in one transaction or in a series of
transactions) all or substantially all of the consolidated assets (whether now
owned or hereafter acquired) of the Company and its Subsidiaries and (iii) any
issuance of equity securities of the Company which, when aggregated with all
issuances of equity securities of the Company subsequent to the
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Initial Closing, exceeds fifty percent (50%) of the aggregate of all outstanding
equity securities of the Company immediately after the Initial Closing on a
fully diluted basis, except for (1) mergers, consolidations or asset transfers
with or between two or more Subsidiaries, (2) mergers or asset transfers by any
Subsidiary with or to the Company and (3) the merger of any Person into the
Company or other issuance of securities by the Company in connection with the
acquisition of a Person as long as the Company is the surviving entity, such
merger or acquisition does not result in the violation of any of the provisions
of this Agreement and no such violation exists at the time of such merger or
acquisition, and the consideration paid by the Company in connection with such
merger or acquisition has a fair market value of less than one million dollars
($1,000,000) at the date of the closing of such transaction.
"Liquidity IPO" means a firm commitment underwritten public offering of
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shares of the Company's Common Stock in which (i) the aggregate proceeds to the
Company and/or any shareholders participating in the offering, if any, are at
least $20 million and (ii) the aggregate market valuation of the Company's
Common Stock is then not less than $40 million.
"Material Adverse Effect" shall have the meaning assigned to that term in
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Section 6.01.
"Mezzanine Securities" shall have the meaning assigned to that term in
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Section 3.03.
"Net Income" (or "Net Loss") means the consolidated net income (or
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consolidated net loss, expressed as a negative number) of the Company for any
period, after deductions for all taxes actually paid or accrued and all expenses
and other charges (not including (i) any extraordinary or non-recurring non-cash
expenses and other non-cash charges, or (ii) extraordinary or non-recurring cash
or non-cash gains), determined in accordance with GAAP consistently applied.
"Net Worth" shall mean the total of all assets appearing on the
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consolidated balance sheet of the Company, after deducting therefrom all
liabilities appearing on such balance sheet, determined in accordance with GAAP.
"Notes" shall have the meaning assigned to that term in Section 2.01.
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"Non-Competition Agreement" shall have the meaning assigned to that term in
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Section 4.02A(i).
"Offer" shall have the meaning assigned to that term in Section 3.03.
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"Operative Documents" shall mean each of the Notes, the Warrants, the
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Stockholders' Agreement, the Registration Rights Agreement, the Non-Competition
Agreement and the Preferred Stock Subordination Agreement.
"Outstanding Common Stock" shall mean the aggregate of all outstanding
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Common Stock, including the Preferred Conversion Shares, the Warrant Shares and
all shares of Common Stock which could be acquired from the Company upon
exercise or conversion of any outstanding options or other securities then
exercisable or convertible into Common Stock.
"Permitted Liens" shall have the meaning assigned to that term in Section
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7.02(a).
"Person" means and includes an individual, a corporation, a partnership, a
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joint venture, a trust, an unincorporated organization, a limited liability
company or partnership, or a government or any agency or political subdivision
thereof.
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"Preferred Conversion Shares" shall have the meaning assigned to that term
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in Section 3.01.
"Preferred Shares" shall have the meaning assigned to that term in Section
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3.01.
"Preferred Stock" means the Preferred Stock, $0.001 par value per share, of
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the Company as authorized on the date of this Agreement.
"Preferred Stock Subordination Agreement" shall have the meaning assigned
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to that term in Section 4.02A(k).
"Proposal" shall have the meaning assigned to that term in Section 3.03.
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"Purchaser" means and shall include CRL III and any other holder or holders
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from time to time of any of the Securities.
"Qualified IPO" means a firm commitment underwritten public offering of
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shares of the Company's Common Stock in which (i) the aggregate proceeds to the
Company and/or any shareholders participating in the offering, if any, are at
least $20 million and (ii) the aggregate market valuation of the Company's
Common Stock is then not less than $40 million.
"Qualifying Liquidity Event" means each of (i) a Change in Control, (ii) a
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Liquidity Disposition and (iii) a Liquidity IPO.
"Registration Rights Agreement" shall have the meaning assigned to that
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term in Section 4.02A(g).
"Revised Proposal" shall have the meaning assigned to that term in Section
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3.03.
"Second Takedown Closing" shall have the meaning assigned to that term in
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Section 2.02(c).
"Second Takedown Closing Date" shall have the meaning assigned to that term
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in Section 2.02(c).
"Second Takedown Notice" shall have the meaning assigned to that term in
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Section 2.02(c).
"Second Takedown Principal" shall have the meaning assigned to that term in
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Section 2.02(c).
"Securities" means collectively the Notes, the Preferred Shares, the
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Preferred Conversion Shares, the Warrants and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended, or any
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similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Senior Debt" means (i) all Indebtedness for Money Borrowed of the Company
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and any of its Subsidiaries from banks or institutional lenders, including any
extensions or renewals thereof, whether outstanding on the date hereof or
hereafter created or incurred, which is not by its terms subordinate and junior
to the Notes and which is disclosed on the Financial Statements or is permitted
by this Agreement at the time it is created or incurred, (ii) all Indebtedness
for Money Borrowed of the Company and any of its Subsidiaries incurred to
refinance any of the Indebtedness for Money Borrowed referred to in item (i)
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above, where the security securing such Indebtedness is substantially the same
security as that securing the Indebtedness for Money Borrowed being refinanced,
(iii) all obligations of the Company and any of its Subsidiaries under Capital
Leases which are permitted by this Agreement at the time they are incurred and
(iv) all guarantees by the Company and any of its Subsidiaries which are not by
their terms subordinate and junior to the Notes and which are permitted hereby
at the time they are made of Indebtedness of any Subsidiary if such Indebtedness
would have been Senior Debt pursuant to the provisions of clause (i), (ii) or
(iii) of this sentence had it been Indebtedness of the Company.
"Series A Preferred Stock" means the Company's Preferred Stock designated
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as Series A Convertible Preferred Stock, $0.001 par value per share, as
authorized on the date of this Agreement.
"Series B Preferred Stock" means the Company's Preferred Stock designated
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as Series B Redeemable Preferred Stock, $0.001 par value per share, as
authorized on the date of this Agreement.
"Stockholders' Agreement" shall have the meaning assigned to that term in
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Section 4.02A(e).
"Subordinated Debt" means all Indebtedness for Money Borrowed of the
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Company and any of its Subsidiaries from any Person, including any extensions or
renewals thereof, whether outstanding on the date hereof or hereafter created or
incurred, which is by its terms subordinate and junior to Senior Debt on terms
acceptable to the holders of Senior Debt and which is permitted by this
Agreement at the time it is created or incurred, including, without limitation,
the Notes.
"Subordination Agreement" shall have the meaning assigned to that term in
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Section 2.12.
"Subsidiary" or "Subsidiaries" means (i) any corporation more than fifty
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percent (50%) of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned directly or indirectly by the
Company and/or any one or more of its Subsidiaries, and (ii) any partnership,
association, joint venture or other entity in which the Company and/or one or
more of its Subsidiaries has more than a fifty percent (50%) equity interest at
the time.
"Takedown Closing" shall have the meaning assigned to that term in Section
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2.02(c).
"Tangible Capital Base" means (i) the Company's Net Worth less (ii) the
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Company's intangible assets (which include, but are not limited to, the Database
Assets), determined in accordance with GAAP.
"Total Funded Debt" means all Indebtedness for Money Borrowed of the
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Company (other than in connection with Capital Leases) which bear interest,
including, without limitation, the Senior Debt and the Subordinated Debt;
provided, however, that the amount of Subordinated Debt to be included in the
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calculation of Total Funded Debt shall include the face amount of all
Subordinated Debt without any deduction for any original issue discount required
by GAAP.
"Unaudited Financial Statements" shall have the meaning assigned to that
------------------------------
term in Section 6.08.
"Warrant Shares" shall have the meaning assigned to that term in Section
--------------
3.01.
"Warrants" shall have the meaning assigned to that term in Section 3.01.
--------
-14-
1.02. Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in accordance with GAAP, and all financial data
submitted pursuant to this Agreement and all financial tests to be calculated in
accordance with this Agreement shall be prepared and calculated in accordance
with GAAP.
ARTICLE II
PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS
2.01. The Notes. The Company has authorized the issuance and sale to
---------
the Purchaser of the Company's 12.5% Senior Subordinated Notes, due 2004, in the
original aggregate principal amount of $10,000,000. The 12.5% Senior
Subordinated Notes shall be substantially in the form set forth as Exhibit 2.01
------------
attached hereto and are herein referred to individually as a "Note" and
collectively as the "Notes", which terms shall also include any notes delivered
in exchange or replacement therefor. The Notes shall (a) be payable on
September 30, 2004 and (b) bear interest (based on a 360-day year counting
actual days elapsed) on the unpaid principal amount thereof until due and
payable at the rate of twelve and one-half percent (12.5%) per annum, which
interest shall be payable quarterly in arrears on the last Business Day of
March, June, September and December in each year, commencing December 31, 1997,
and at maturity or prior prepayment of the Notes in full.
2.02. Purchase and Sale of Notes. The Company agrees to issue and sell to
--------------------------
the Purchaser, and, subject to and in reliance upon the representations,
warranties, terms and conditions of this Agreement, the Purchaser agrees to
purchase the Notes.
(a) At the initial closing (the "Initial Closing") to be held at
the offices of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, High Street Tower, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m. local time on the date on which
this Agreement is executed and delivered (the "Initial Closing Date"), the
Company will issue and sell to the Purchaser a single Note, dated the Initial
Closing Date, in the principal amount of $4,000,000, the Preferred Shares and
the Warrants (as provided in Section 3.02), against receipt of funds by wire
transfer to an account or accounts designated by the Company prior to the
Initial Closing in the amount of $7,000,000, in payment of the purchase price
for the Note, the Preferred Shares and the Warrants.
(b) The purchase and sale of up to an additional $3,000,000
aggregate principal amount of Notes shall take place at a closing (the "First
Takedown Closing") to be held at the offices of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP,
High Street Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m. local
time on March 31, 1998 (the "First Takedown Closing Date"), upon written notice
(the "First Takedown Notice") given by the Company to the Purchaser at least
twenty (20) days prior to the First Takedown Closing Date. Such First Takedown
Notice shall specify the aggregate principal amount (the "First Takedown
Principal") of the Notes to be issued and sold at such First Takedown Closing,
which First Takedown Principal shall not exceed $3,000,000. At the First
Takedown Closing, the Company will issue and sell to the Purchaser a single
Note, dated the First Takedown Closing Date and in the principal amount equal to
the First Takedown Principal, against receipt of funds by wire transfer to an
account or accounts designated by the Company prior to such First Takedown
Closing in the amount of the First Takedown Principal, in payment of the
purchase price for such Note.
(c) The purchase and sale of up to an additional $3,000,000
aggregate principal amount of Notes shall take place at a closing (the "Second
Takedown Closing") to be held at the offices of
-▇▇-
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, High Street Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m. local time on June 30, 1998 (the "Second Takedown
Closing Date"), upon written notice (the "Second Takedown Notice") given by the
Company to the Purchaser at least twenty (20) days prior to the Second Takedown
Closing Date. Such Second Takedown Notice shall specify the aggregate principal
amount (the "Second Takedown Principal") of the Notes to be issued and sold at
such Second Takedown Closing, which Second Takedown Principal shall not exceed
$3,000,000. At the Second Takedown Closing, the Company will issue and sell to
the Purchaser a single Note, dated the Second Takedown Closing Date and in the
principal amount equal to the Second Takedown Principal, against receipt of
funds by wire transfer to an account or accounts designated by the Company prior
to such Second Takedown Closing in the amount of the Second Takedown Principal,
in payment of the purchase price for such Note. The First Takedown Closing and
the Second Takedown Closing are sometimes herein referred to individually as a
"Takedown Closing" and collectively as the "Takedown Closings").
(d) Except as otherwise set forth herein, no amendment of this
Agreement shall be required for any Takedown Closing. Notwithstanding the
foregoing, the Purchaser's obligation to purchase any Notes from the Company at
the Initial Closing and any Takedown Closing shall be in each case subject to
the satisfaction of all of the conditions specified in Article IV of this
Agreement.
2.03. Issue Price; Original Issue Discount. Having considered all facts
------------------------------------
relevant to a determination of the value of the Notes, the Warrants and the
Preferred Shares being acquired by the Purchaser, including among other things
the leveraged nature of the Company's capitalization and the nature of its
business and prospects, the Company and the Purchaser have concluded and do
hereby agree that, within the meaning of Section 1273 of the Internal Revenue
Code of 1986, as amended (the "Code"), the issue price for the Note issued at
the Initial Closing is $3,425,000; and the issue price for the remaining portion
of the Notes shall equal the principal amount of the Note issued at each
Takedown Closing. The Company and the Purchaser recognize that this Agreement
creates original issue discount of $575,000 as the amount to be taken into
account by the Company and the Purchaser for federal income tax purposes on the
Note issued at the Initial Closing, and they agree to adhere to this Agreement
for such purposes and not to take any action inconsistent herewith.
2.04. Use of Proceeds. The Company agrees to use the full proceeds from the
---------------
sale of the Notes for the purposes set forth on Exhibit 2.04 attached hereto.
------------
2.05. Payments and Endorsements. Payments of principal, interest and
-------------------------
premium, if any, on the Notes shall be made without setoff or counterclaim
directly by check duly mailed or delivered to the Purchaser at its address
referred to in Section 9.03 hereof, without any presentment or notation of
payment, except that prior to any transfer of any Note, the holder thereof shall
endorse on such Note a record of the date to which interest has been paid and
all payments made on account of principal of such Note. All payments and
prepayments of principal of and interest on the Notes shall be applied (to the
extent thereof) to all of the Notes pro rata based on the principal amount
--- ----
outstanding and held by each holder thereof.
2.06. Redemptions.
-----------
(a) Required Periodic Redemptions. Beginning on and with the last
-----------------------------
Business Day of December 2000, on the last Business Day of March, June,
September and December of each year through and including the last Business Day
of September 2004, the Company will redeem, without penalty or premium,
principal amount of the Notes equal to 6.25% of the aggregate principal amount
of the Notes outstanding on the last Business Day of December 2000, together
with all accrued and unpaid interest then due on the amount so redeemed. (By
way of example and without limiting the foregoing, if $10,000,000 in
-16-
aggregate principal amount of the Notes is outstanding as of the last Business
Day of December 2000, $625,000 in aggregate principal amount of Notes shall be
redeemed on such date and on the last Business Day of each subsequent quarter).
On the stated or accelerated maturity of the Notes, the Company will pay the
principal amount of the Notes then outstanding together with all accrued and
unpaid interest then due thereon. Except as set forth in subsection 2.06(c), no
optional redemption of less than all of the Notes shall affect the obligation of
the Company to make the redemptions required by this subsection.
(b) Required Liquidity Redemptions. In the event and upon the
------------------------------
closing of a Qualifying Liquidity Event, the Company shall redeem, without
premium, all of the outstanding Notes, together with all accrued and unpaid
interest then due thereon.
(c) Optional Redemptions. In addition to the redemptions of the
--------------------
Notes required under subsection 2.06(a) and (b), the Company may, at any time
and from time to time, redeem, without premium, the Notes, in whole or in part
(in integral multiples of $1,000), together with interest due on the amount so
redeemed through the date of redemption. Partial redemptions made as provided in
this subsection 2.06(c) shall, to the extent thereof, be applied first to reduce
the principal due at maturity of the Notes and next to reduce the payments
required by subsection 2.06(a) in inverse order of maturity thereof.
(d) Notice of Redemptions; Pro Rata Redemptions. Notice of any
-------------------------------------------
optional redemption pursuant to subsection 2.06(c) shall be given to all holders
of the Notes at least ten (10) Business Days prior to the date of such
redemption and notice of any required redemption pursuant to Section 2.06(b)
shall be given to all holders of the Notes at least ten (10) Business Days prior
to the closing of a Qualifying Liquidity Event. Each redemption of Notes
pursuant to subsections 2.06(a) or (c) shall be made so that the Notes then held
by each holder shall be redeemed in a principal amount which shall bear the same
ratio to the total unpaid principal amount being redeemed on all Notes as the
unpaid principal amount of Notes then held by such holder bears to the aggregate
unpaid principal amount of the Notes then outstanding.
2.07. Default Rate of Interest. If an Event of Default has occurred and is
------------------------
continuing, from and after the date such Event of Default occurred the entire
outstanding unpaid principal balance of the Notes and any unpaid interest from
time to time due thereon shall bear interest, payable on demand, at the rate of
fifteen and one-half percent (15.5%) per annum, or such lower rate as then may
be the maximum rate permitted by applicable law; provided, however, that upon
-------- -------
the cessation or cure of such Event of Default, if no other Event of Default is
then continuing, the Notes shall again bear interest at the rate of 12.5% per
annum as set forth in Section 2.01.
2.08. Maximum Legal Rate of Interest. Nothing in this Agreement or in the
------------------------------
Notes shall require the Company to pay interest at a rate in excess of the
maximum rate permitted by applicable law.
2.09. Payment on Non-Business Days. Whenever any payment to be made shall
----------------------------
be due on a day which is not a Business Day, such payment may be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest due.
2.10. Transfer and Exchange of Notes. The holder of any Note or Notes may,
------------------------------
prior to maturity or prepayment thereof, surrender such Note or Notes at the
principal office of the Company for transfer or exchange. Any holder desiring to
transfer or exchange any Note shall first notify the Company in writing at least
five (5) days in advance of such transfer or exchange. Within a reasonable time
after such notice to the Company from a holder of its intention to make such
exchange and without expense (other than transfer taxes, if any) to such holder,
the Company shall issue in exchange therefor another Note or Notes, in such
-17-
denominations as requested by the holder, for the same aggregate principal
amount, as of the date of such issuance, as the unpaid principal amount of the
Note or Notes so surrendered and having the same maturity and rate of interest,
containing the same provisions and subject to the same terms and conditions as
the Note or Notes so surrendered. Each new Note shall be made payable to such
Person or Persons, or assigns, as the holder of such surrendered Note or Notes
may designate, and such transfer or exchange shall be made in such a manner that
no gain or loss of principal or interest shall result therefrom. Notwithstanding
anything to the contrary in this Section 2.10, the transfer or exchange of any
Note, other than to the registered holder of such Note, is subject to the prior
consent of the Company and such consent shall not be unreasonably withheld.
2.11. Replacement of Notes. Upon receipt of evidence satisfactory to the
--------------------
Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note, the Company will issue a new Note, of like tenor and amount and
dated the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note; provided, however, if any Note of which a
Purchaser, its nominee, or any of its partners is the holder is lost, stolen or
destroyed, the affidavit of an authorized partner or officer of the holder
setting forth the circumstances with respect to such loss, theft or destruction
shall be accepted as satisfactory evidence thereof, and no indemnification bond
or other security shall be required as a condition to the execution and delivery
by the Company of a new Note in replacement of such lost, stolen or destroyed
Note other than the holder's written agreement to indemnify the Company.
2.12. Subordination. In the event the Company consummates the EFT Financing
-------------
on terms reasonably satisfactory to the Purchaser, the Purchaser agrees to enter
into a Subordination and Intercreditor Agreement with the lender and the Company
in substantially the form attached hereto as Exhibit 2.12 (the "Subordination
------------
Agreement").
ARTICLE III
PURCHASE AND SALE OF EQUITY SECURITIES
3.01. The Equity Securities. The Company has authorized the issuance and
---------------------
sale to the Purchaser of (i) an aggregate of 931,044 shares (the "Preferred
Shares") of the Company's Series A Preferred Stock where the rights,
designations and preferences and other terms and conditions relating to the
Series A Preferred Stock shall be as set forth on Exhibit 3.01A attached hereto
-------------
and (ii) the Company's Common Stock Purchase Warrants for the purchase (subject
to adjustment as provided therein) of an aggregate of 972,293 shares of the
Company's Common Stock. The Common Stock Purchase Warrants shall be
substantially in the form set forth as Exhibit 3.01B attached hereto and are
-------------
herein referred to individually as a "Warrant" and collectively as the
"Warrants", which terms shall also include any warrants delivered in exchange or
replacement therefor. The Warrants shall be exercisable at a purchase price,
subject to adjustment, of $0.01 per Warrant Share. The shares of Common Stock
issuable upon conversion of the Preferred Shares are referred to herein as the
"Preferred Conversion Shares." The shares of Common Stock issuable upon
exercise of the Warrants are referred to herein as the "Warrant Shares."
3.02. Purchase and Sale of Preferred Shares and Warrants. The Company
--------------------------------------------------
agrees to issue and sell to the Purchaser and, subject to and in reliance upon
the representations, warranties, terms and conditions of this Agreement, the
Purchaser agrees to purchase the Preferred Shares and the Warrants. Such
purchase and sale shall take place at the Initial Closing and at the Initial
Closing the Company will
-18-
issue to the Purchaser the Preferred Shares and the Warrants.
3.03. Right to Purchase New Mezzanine Securities. Prior to issuing any
------------------------------------------
Subordinated Debt, whether or not in combination with warrants or other equity
securities (such Subordinated Debt and/or warrants or other equity securities
herein referred to collectively as "Mezzanine Securities") of the Company or any
of its Subsidiaries to any Person, the Company will first offer, or cause such
Subsidiary to offer (the "Offer"), to the Purchaser an opportunity to submit a
proposal providing for the Purchaser or any Affiliate of the Purchaser to
purchase such Mezzanine Securities (the "Proposal"). The Proposal shall be made
by the Purchaser within thirty (30) days of their receipt of the Offer and shall
include the material terms upon which the Purchaser (or its Affiliate) will
purchase the Mezzanine Securities. The Purchaser and the Company may negotiate
the material terms of the Proposal, in which case the material revised terms of
the Proposal shall be set forth by the Purchaser in a revised proposal as soon
as reasonably practicable thereafter (the "Revised Proposal").
If the Company accepts the Proposal or a Revised Proposal, as applicable,
within fifteen (15) days of its receipt of the Proposal or a Revised Proposal,
as applicable, the Purchaser (or its Affiliate) shall be entitled to purchase
such Mezzanine Securities and the Company and the Purchaser shall each negotiate
in good faith to finalize the terms of the Mezzanine Securities and the
Purchaser's (or its Affiliate's) purchase thereof. The obligation to negotiate
in good faith shall not impose an obligation to remove or materially alter any
material term or provision in, or to add any material term or provision to,
those set forth in the Proposal or Revised Proposal, as applicable.
If the Company fails to accept (within the fifteen (15) day consideration
period) or rejects the Proposal or Revised Proposal, as applicable, neither the
Company nor any Subsidiary shall issue such Mezzanine Securities unless (i) the
material financial terms and conditions of such Mezzanine Securities to be
issued are materially more favorable in the aggregate to the Company or such
Subsidiary than those set forth in the Proposal or Revised Proposal, as
applicable, (ii) promptly upon its decision to reject the Proposal or the
Revised Proposal or upon the expiration of the fifteen (15) day consideration
period, as applicable, the Company has provided the Purchaser with a written
notice of rejection providing an explanation of its conclusion that the material
financial terms and conditions of such Mezzanine Securities are materially more
favorable than those set forth in the Proposal or the Revised Proposal and (iii)
such issuance of Mezzanine Securities occurs within six (6) months of the date
of the Proposal or the date of the Revised Proposal, whichever is later.
3.04 Right to Purchase New Equity Securities. Prior to issuing any
---------------------------------------
equity securities or any options or convertible securities exercisable for or
convertible into such equity securities (collectively, "Equity Securities") of
the Company or any Subsidiary to any Person, the Company will first give or
cause such Subsidiary to give to each of the holders of the Preferred Shares,
the Preferred Conversion Shares, the Warrants and the Warrant Shares the right
to purchase, on the same terms, the same proportion of the securities proposed
to be sold by the Company or such Subsidiary as the number of Preferred Shares,
Preferred Conversion Shares, Warrants and Warrant Shares owned by such holder
bears to the total number of shares of Outstanding Common Stock at that time.
Persons electing to purchase Equity Securities pursuant to this Section shall
also be entitled to purchase (pro rata according to their holdings of Preferred
Shares, Preferred Conversion Shares, Warrants and Warrant Shares) offered Equity
Securities that other holders decline to purchase. Any such right of purchase
shall be exercisable for a period of thirty (30) days after the holders receive
written notice of a proposed issuance of Equity Securities (and any such notice
by the Company or a Subsidiary shall be given not less than thirty (30) nor more
than ninety (90) days prior to any such issuance). The Company shall be
entitled to sell any Equity Securities not purchased by the holders of Preferred
Shares, Preferred Conversion Shares, Warrants and Warrant Shares
-19-
pursuant to this Section 3.04 (i) during the period ending six (6) months after
the date of the Company's notice to such holders and (ii) at not less than the
same price and upon terms not materially less favorable to the Company than
those offered to the holders of Preferred Shares, Preferred Conversion Shares,
Warrants and Warrant Shares, but may not otherwise sell such Equity Securities
without renewed compliance with this Section 3.04. Notwithstanding anything to
the contrary contained in this Agreement, for purposes of this Agreement the
definition of "Equity Securities" shall not include: (a) up to 500,000 shares of
Common Stock (and/or options, warrants or other Common Stock purchase rights
issued pursuant to such options, warrants or other rights) issued or to be
issued to employees, officers or directors of, or consultants or advisors to the
Company or any Subsidiary, pursuant to stock option plans or other arrangements
that are approved by the Board; (b) stock issued pursuant to any rights or
agreements outstanding as of the date of this Agreement or pursuant to options,
warrants or convertible securities (including without limitation the Preferred
Shares, Warrants and the Dublind Warrants) outstanding as of the date of this
Agreement; (c) any equity securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination; or (d) shares of Common Stock issued in connection with any split,
stock dividend or recapitalization by the Company.
3.05. Termination Upon Qualified IPO. The Purchaser's right to purchase
------------------------------
new Mezzanine Securities set forth in Section 3.03 and the Purchaser's right to
purchase new Equity Securities set forth in Section 3.04, shall terminate
immediately prior to the closing of a Qualified IPO.
ARTICLE IV
CONDITIONS TO PURCHASER'S OBLIGATION'
The obligation of the Purchaser (i) to purchase and pay for the Notes, the
Preferred Shares and the Warrants at the Initial Closing and to purchase and pay
for the Notes at the Takedown Closings, if any, is subject to the following
conditions, all or any of which may be waived in writing by the Purchaser:
4.01. Representations and Warranties. At the Initial Closing and each
------------------------------
Takedown Closing, each of the representations and warranties of the Company set
forth in Article VI hereof shall be true and correct in all respects at the time
of, and immediately after giving effect to, the sale of the Notes, the Preferred
Shares and the Warrants.
4.02A. Documentation at the Initial Closing. The Purchaser shall have
------------------------------------
received prior to or at the Initial Closing all of the following, each in form
and substance satisfactory to the Purchaser and its special counsel:
(a) A certified copy of all charter documents of the Company and
each of its Subsidiaries; a certified copy of the resolutions of the board of
directors and, to the extent required, the stockholders of the Company
evidencing approval, as applicable, of this Agreement, the Operative Documents
and all other matters contemplated hereby and thereby; a certified copy of the
By-laws of the Company and each of its Subsidiaries; and certified copies of all
documents evidencing other necessary corporate or other action and governmental
approvals, if any, with respect to this Agreement, the Operative Documents and
all other matters contemplated hereby or thereby.
(b) A favorable opinion of ▇▇▇▇▇▇▇▇ & Worcester LLP, counsel for
the Company, in form and substance reasonably satisfactory to the Purchaser and
its special counsel.
-20-
(c) A certificate of the Secretary or an Assistant Secretary of the
Company which shall certify the names of the officers of the Company authorized
to sign this Agreement, the Operative Documents and any other documents or
certificates to be delivered pursuant hereto or thereto by the Company or any of
its officers, together with the true signatures of such officers. The Purchaser
may conclusively rely on such certificate until they shall receive a further
certificate of the Secretary or an Assistant Secretary of the Company cancelling
or amending the prior certificate and submitting the signatures of the officers
named in such further certificate.
(d) A certificate from a duly authorized officer of the Company
stating that the representations and warranties contained in Article VI hereof
and otherwise made by the Company in writing in connection with the transactions
contemplated hereby are true and correct and that no condition or event has
occurred or is continuing or will result from the execution and delivery of this
Agreement or the Operative Documents which constitutes an Event of Default or
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
(e) A Stockholders' Agreement (the "Stockholders' Agreement")
executed by the Company and its stockholders substantially in the form of
Exhibit 4.02A(e).
----------------
(f) Payment for the costs, expenses, taxes and filing fees
identified in Section 9.04 as to which the Purchaser gives the Company notice
prior to the Initial Closing.
(g) A Registration Rights Agreement (the "Registration Rights
Agreement") executed by the Company substantially in the form of Exhibit
-------
4.02A(g).
--------
(h) A certificate from a duly authorized officer of the Company
stating that all the conditions set forth in this Article IV have been
satisfied, other than those, if any, waived by the Purchasers in writing.
(i) A Non-Competition Agreement (the "Non-Competition Agreement")
executed by the Company and ▇▇▇▇ ▇. ▇▇▇▇▇▇ substantially in form of Exhibit
4.02A(i).
(j) A representation letter executed by the president and chief
executive officer of the Company and issued to The Rockefeller Foundation in the
form attached hereto as Exhibit 4.02A(j).
----------------
(k) A Preferred Stock Subordination Agreement (the "Preferred Stock
Subordination Agreement") executed by the Purchaser, all holders of the
Company's Series B Preferred Stock and the Company, substantially in the form of
Exhibit 4.02A(k).
----------------
(l) Such other documents referenced in any Exhibit hereto or
relating to the transactions contemplated by this Agreement as the Purchaser or
its special counsel may reasonably request.
4.02B. Documentation at Takedown Closings. The Purchaser shall have
----------------------------------
received prior to each Takedown Closing all of the following, each in form and
substance satisfactory to the Purchaser and its special counsel:
(a) A certificate from a duly authorized officer of the Company
stating on behalf of the Company that (i) the representations and warranties
contained in Article VI hereof and otherwise made by the Company in writing in
connection with the transactions contemplated hereby are true and correct in
-21-
all material respects as of such Takedown Closing; (ii) no condition or event
has occurred or is continuing or will result from the execution and delivery of
this Agreement or the Operative Documents which constitutes an Event of Default
or would constitute an Event of Default but for the requirement that notice be
given or time elapse or both; (iii) all of the conditions set forth in this
Article IV have been satisfied, other than those, if any, waived by the
Purchaser in writing; (iv) there have been no changes in the names of the
officers of the Company authorized to sign this Agreement, the Operative
Documents and any other documents or certificates to be delivered pursuant
hereto or thereto; (v) there have been no amendments, restatements or other
changes to the charter documents or By-laws of the Company or any of its
Subsidiaries, except for any amendments, restatements or changes provided to the
Purchaser prior to such Takedown Closing; and (vi) the approval of the board of
directors and, to the extent required, the stockholders of the Company, of this
Agreement, the Operative Documents and all other matters contemplated hereby and
thereby remains in full force and effect.
(b) Certified copies of all amendments, restatements or other
changes to the charter documents or By-laws of the Company or any of its
Subsidiaries.
(c) All documents evidencing necessary corporate or other action
and governmental approvals, if any, with respect to this Agreement, the
Operative Documents and all other matters contemplated hereby or thereby with
respect to such Takedown Closing.
(d) Payment for the costs, expenses, taxes and filing fees
identified in Section 9.04 as to which the Purchaser gives the Company notice
prior to the Takedown Closing.
4.03. Board Matters. In accordance with the Stockholders' Agreement,
-------------
the number of persons constituting the Board of Directors of the Company (the
"Board") shall be fixed at no more than seven (7), with the Purchasers having
the right to appoint three (3) representatives to the Board and ▇▇▇▇ ▇. ▇▇▇▇▇▇
having the right to appoint four (4) representatives to the Board. As of the
Initial Closing Date, the Board shall consist of five (5) members who shall
initially be ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
4.04. No Default. At the time of and immediately following the Initial
----------
Closing and each Takedown Closing, there shall exist no Event of Default and no
condition, event or act that, with the giving of notice or lapse of time, or
both, would constitute such an Event of Default.
4.05. Key Person Life Insurance. Within ninety (90) days of the Initial
-------------------------
Closing Date, the Company shall obtain with a financially sound and reputable
insurance company term life insurance on the life of ▇▇▇▇ ▇. ▇▇▇▇▇▇ in the face
amount of at least $3.0 million, the proceeds of which shall be payable to the
order of the Company.
4.06. ▇▇▇▇▇▇ Family Debt. The indebtedness of the Company to ▇▇▇▇▇▇▇ ▇▇▇
------------------
▇▇▇▇▇▇ in the aggregate amount of $4,395,891.01 shall have been, or
simultaneously with the Initial Closing shall be, exchanged for 439,589 shares
of Series B Preferred Stock.
4.07 Payment of Certain Indebtedness. The indebtedness of the Company (i)
-------------------------------
to Deposit Guaranty National Bank in the aggregate amount of $1,869,210.30, (ii)
to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ in the aggregate amount of $307,429.75 and
(iii) to the Arkansas Science and Technology Authority in the aggregate amount
of $62,660.20, shall have been, or simultaneously with the Initial Closing shall
be, paid in full by the Company.
-22-
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.01. Representations and Warranties of the Purchaser. The Purchaser
-----------------------------------------------
hereby represents and warrants that:
(a) The Purchaser has duly authorized, executed and delivered this
Agreement and such of the Operative Documents as require execution by the
Purchaser.
(b) It is the Purchaser's present intention to acquire the
Securities for its own account.
(c) The Securities are being and will be acquired for the purpose of
investment and not with a view to distribution or resale thereof; subject,
nevertheless, to the condition that, except as otherwise provided herein or in
the Stockholders' Agreement, the disposition of the property of the Purchaser
shall at all times be within its control.
(d) The Purchaser acknowledges that it has reviewed and discussed
the Company's business, affairs and current prospects with such officers of the
Company and others as it has deemed appropriate or desirable in connection with
the transactions contemplated by this Agreement. The Purchaser further
acknowledges that it has requested, received and reviewed such information,
undertaken such investigation and made such further inquiries of officers of the
Company and others as it has deemed appropriate or desirable in connection with
such transactions, provided, however, no investigation made heretofore or
hereafter by or on behalf of the Purchaser shall have any effect whatsoever on
the representations and warranties of the Company hereunder, each of which will
survive any such investigation.
(e) The Purchaser understands that it must bear the economic risk of
its investment for an indefinite period of time because the Securities are not,
and will not be, registered under the Securities Act or any applicable state
securities laws, except as may be provided in this Agreement and the
Registration Rights Agreement, and may not be resold unless subsequently
registered under the Securities Act and such other laws or unless an exemption
from such registration is available. The Purchaser also understands that except
as may be provided in this Agreement and the Registration Rights Agreement, it
is not contemplated that any registration will be made under the Securities Act
or any state securities laws, or that the Company will take steps which will
make the provisions of Rule 144 under the Securities Act available to permit
resale of the Securities.
(f) The Purchaser represents that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of its investment in the Securities. The Purchaser further
represents that it is (i) an "accredited investor" as such term is defined in
Rule 501 of Regulation D of the Commission under the Securities Act and (ii) an
"institutional investor" as such term is defined in Section 402(b)(8) of
Massachusetts General Laws Chapter 110A, with respect to the purchase of the
Securities.
(g) No Person has or will have, as a result of the transactions
contemplated by this Agreement, any rights, interest or valid claim against or
upon the Company or any of its Subsidiaries for any commission, fee or other
compensation as a finder or broker because of any act or omission by the
Purchaser or any agent of the Purchaser.
-23-
(h) The Purchaser hereby acknowledges that the Notes, the Warrants
and each certificate representing the Preferred Shares, the Preferred Conversion
Shares, the Warrant Shares and any other securities issued in respect of such
shares upon any stock split, stock dividend, recapitalization, merger or similar
event (unless no longer required in the opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to the Company, it being agreed that
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP shall be satisfactory) shall bear a legend
substantially in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL
AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
The acquisition by the Purchaser of the Securities shall constitute a
confirmation by it of the foregoing representations.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows:
6.01. Organization and Standing of the Company and Subsidiaries;
----------------------------------------------------------
Ownership. 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 has all requisite corporate power and
authority for the ownership and operation of its properties and for the carrying
on of its business as now conducted and as now proposed to be conducted. The
Company and each of its Subsidiaries is duly licensed or qualified and in good
standing as a foreign corporation authorized to do business in all jurisdictions
wherein the character of the property owned or leased, or the nature of the
activities conducted, by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified, either individually or
in the aggregate, would not have a material adverse effect on the business,
assets, liabilities, financial condition, or on the results of operations or
prospects of the Company and its Subsidiaries taken as a whole (a "Material
Adverse Effect"). Except as set forth on Exhibit 6.01 attached hereto, neither
------------
the Company nor any of its Subsidiaries owns, directly or indirectly, any
capital stock or other equity or ownership or proprietary interest in any
Person.
6.02. Corporate Action. The Company has all necessary corporate power
----------------
and has taken all corporate action required to make all the provisions of this
Agreement, the Operative Documents and any other agreements and instruments
executed by it in connection herewith and therewith valid and enforceable
obligations of the Company. The Company has duly executed and delivered this
Agreement, each of the Operative Documents and each other agreement and
instrument executed by it in connection herewith and therewith and each is a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally and by general
principles of equity. Sufficient shares of authorized but unissued Common Stock
of the Company have been reserved by appropriate corporate action in connection
with the prospective conversion of the Preferred Shares and exercise of the
Warrants. Neither the issuance of the Notes, the
-24-
Preferred Shares or Warrants, nor the issuance of shares of Common Stock upon
the conversion of the Preferred Shares or the exercise of the Warrants, is
subject to preemptive or other similar statutory or contractual rights.
6.03. Governmental Approvals. No authorization, consent, approval,
----------------------
license, exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary for, or in connection with, the offer,
issuance, sale, execution or delivery by the Company of, or for the performance
by the Company of its obligations under, this Agreement, any of the Operative
Documents, the Warrants, the Preferred Shares, the Preferred Conversion Shares
or the Warrant Shares, except as may be necessary for registration under the
Securities Act of any of the Preferred Conversion Shares or Warrant Shares
pursuant to the Registration Rights Agreement.
6.04. Litigation. Except as set forth on Exhibit 6.04 attached
---------- ------------
hereto, there is no litigation, action or governmental proceeding or
investigation pending or, to the best knowledge of the Company, threatened
against the Company or any of its Subsidiaries, affecting any of their
respective properties or assets, or against any officer, key employee or
principal stockholder of the Company or any of its Subsidiaries where such
litigation, proceeding or investigation (i) either individually or in the
aggregate would have a Material Adverse Effect, (ii) might call into question
the validity of this Agreement, any Operative Document or any action taken or to
be taken pursuant hereto or thereto or (iii) seeks to prevent the consummation
of the transactions contemplated by this Agreement, nor, to the best knowledge
of the Company, has there occurred any event on the basis of which any
litigation, proceeding or investigation meeting the criteria of (i), (ii) or
(iii) above might properly be instituted. Except as set forth on Exhibit 6.04,
------------
neither the Company nor any of its Subsidiaries is in default with respect to
any order, writ, injunction, decree, ruling or decision of any court,
commission, board or other government agency affecting the Company or any of its
Subsidiaries.
6.05. Compliance with Law. The Company and each of its Subsidiaries
-------------------
is in compliance in all respects with the terms and provisions of this Agreement
and of its Articles of Incorporation (or comparable charter documents) and by-
laws and in all material respects with the terms and provisions of all
judgments, decrees, governmental orders, statutes, rules and regulations to
which it and its properties and assets are subject (collectively, the
"Applicable Laws").
6.06. Federal Reserve Regulations. Neither the Company nor any of
---------------------------
its Subsidiaries is engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation G of
the Board of Governors of the Federal Reserve System), and no part of the
proceeds of the Notes, the Preferred Shares or the Warrants will be used to
purchase or carry any margin security or to extend credit to others for the
purpose of purchasing or carrying any margin security or in any other manner
which would involve a violation of any of the regulations of the Board of
Governors of the Federal Reserve System.
6.07. Title to Assets, Patents. Except as set forth on Exhibit 6.07
------------------------ ------------
attached hereto, the Company and each of its Subsidiaries has good and
marketable title in fee to such of its fixed assets as are real property, and
good and merchantable title to all of its other assets, now carried on its books
including those reflected in the most recent balance sheet of the Company
included in the Financial Statements, or acquired since the date of such balance
sheet (except personal property disposed of since said date in the ordinary
course of business), free of any mortgages, pledges, charges, liens, security
interests or other encumbrances. The Company and each of its Subsidiaries enjoys
peaceful and undisturbed possession under all leases under which it is
operating, and all of said leases are valid and subsisting and in full force
-25-
and effect. The Company and each of its Subsidiaries owns or has a valid right
to use the patents, patent rights, licenses, permits, trade secrets, trademarks,
trademark rights, trade names or trade name rights or franchises, copyrights,
inventions and intellectual property rights being used to conduct its business
as now operated and as now proposed to be operated; and the conduct of its
business as now operated and as now proposed to be operated does not and will
not to the best knowledge of the Company conflict with valid patents, patent
rights, licenses, permits, trade secrets, trademarks, trademark rights, trade
names or trade name rights or franchises, copyrights, inventions and
intellectual property rights of others. Neither the Company nor any of its
Subsidiaries has any obligation to compensate any Person for the use of any such
patents or such rights nor has the Company or any of its Subsidiaries granted to
any Person any license or other rights to use in any manner any of such patents
or such rights.
6.08. Financial Information. (a) Attached hereto as Exhibit 6.08A
--------------------- -------------
are the following financial statements: (i) the audited balance sheets of the
Company and its Subsidiaries as of December 31, 1996 and 1995 and the related
statements of income and stockholders' equity and of cash flows for the fiscal
years then ended (the "Audited Financial Statements"), certified by KPMG Peat
Marwick LLP, the Company's independent public accountants, and (ii) the
unaudited balance sheet of the Company and its Subsidiaries as of August 31,
1997 and the related unaudited statements of income and stockholders' equity and
of cash flows for the eight (8) months then ended (the "Unaudited Financial
Statements" and together with the Audited Financial Statements, including the
notes thereto, are collectively referred to as the "Financial Statements"). The
Audited Financial Statements have been prepared in accordance with GAAP and
consistent with prudent business management practices, the Financial Statements
are complete in all material respects and fairly present the financial position
of the Company and its Subsidiaries as of the respective dates thereof and
results of operations and changes in financial position of the Company and its
Subsidiaries for each of the periods then ended.
(b) Since December 31, 1996, there has been no material adverse
change in the business, assets, liabilities, condition (financial or other), or
in the results of operations or prospects of the Company and its Subsidiaries
taken as a whole.
(c) Neither the Company nor any of its Subsidiaries has any
liability, contingent or otherwise, not disclosed in the Financial Statements or
in the notes thereto that could, together with all such other liabilities, have
a Material Adverse Effect, nor does the Company have any reasonable grounds to
know of any such liability.
(d) A schedule of Indebtedness of the Company and its Subsidiaries as
of the Initial Closing Date (including Capital Leases) is attached hereto as
Exhibit 6.08B.
-------------
6.09. Taxes. Except as set forth on Exhibit 6.09, the Company and
----- ------------
each of its Subsidiaries has accurately prepared and timely filed all federal,
state and other tax returns required by law to be filed by it, and all taxes
shown to be due and all additional assessments have been paid or provision made
therefor. The Company does not know of any additional assessments or adjustments
pending or threatened against the Company or any of its Subsidiaries for any
period, nor of any basis for any such assessment or adjustment. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of taxes or other governmental charges are, in the opinion of the
Company, adequate.
6.10. ERISA. The Company and each of its Subsidiaries is in compliance
-----
in all material respects with the currently applicable provisions of The
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
applicable provisions of Section 401(a) of the Code. No employee benefit plan
established or maintained, or to which contributions have been made, by the
Company or any
-26-
of its Subsidiaries, which is subject to part 3 of Subtitle B of Title I of
ERISA, had an accumulated funding deficiency (as such term is defined in Section
302 of ERISA) as of the last day of the most recent fiscal year of such plan
ended prior to the date hereof, and no material liability to the Pension Benefit
Guaranty Corporation has been incurred with respect to any such plan by the
Company or any of its Subsidiaries.
6.11. Transactions with Affiliates. Except as set forth on Exhibit
---------------------------- -------
6.11 attached hereto and as specifically contemplated by this Agreement, there
----
are no loans, leases, royalty agreements or other continuing transactions
between the Company or any of its Subsidiaries, on the one hand, and any officer
or director of the Company, or any Person (including any Person who is an
equitable owner of any Common Stock held by ▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee for The
▇▇▇▇▇▇ Trust dated March 15, 1989) owning, or who did own at any time within the
two-year period preceding the date of this Agreement, any class of capital stock
of the Company or any of its Subsidiaries or other entity controlled by such
stockholder or a member of such stockholder's family, on the other hand.
6.12. Assumptions or Guaranties of Indebtedness of Other Persons. Neither
----------------------------------------------------------
the Company nor any of its Subsidiaries has assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on (including, without
limitation, liability by way of agreement, contingent or otherwise, to purchase,
to provide funds for payment, to supply funds to or otherwise invest in the
debtor or otherwise to assure the creditor against loss) any Indebtedness of any
other Person.
6.13. Investments in Other Persons. Neither the Company nor any of its
----------------------------
Subsidiaries has made any loan or advance to any Person which is outstanding on
the date of this Agreement, nor is the Company or any of its Subsidiaries
obligated or committed to make any such loan or advance.
6.14. Securities Act. Neither the Company nor anyone acting on its behalf
--------------
has offered or will offer to sell the Notes, the Preferred Shares, the Warrants
or similar securities to, or solicit offers with respect thereto from any
Person, so as to bring the issuance and sale of the Notes, the Preferred Shares
and the Warrants under the registration provisions of the Securities Act. The
issuance and the sale of the Notes, the Preferred Shares and the Warrants
pursuant to this Agreement is not required to be registered under the Securities
Act or applicable state securities or "Blue Sky" laws.
6.15. Disclosure. None of this Agreement, the Operative Documents, and
----------
any other agreement, document, certificate or written statement furnished to the
Purchaser or the Purchaser's special counsel by or on behalf of the Company or
any of its Subsidiaries in connection with the transactions contemplated hereby
or thereby contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact within the knowledge of the Company
which has not been disclosed herein or in writing by them to the Purchaser and
which has a Material Adverse Effect, or in the future in its opinion could
reasonably be expected to have a Material Adverse Effect.
6.16. No Brokers or Finders. Except for a fee of $650,000 paid to Dublind
---------------------
Partners Inc. and the issuance to Dublind Investments LLC of warrants (the
"Dublind Warrants") to purchase up to an aggregate of 365,340 shares of Common
Stock, which fee and warrants will be paid in full and issued, as the case may
be, by the Company as of the Initial Closing, no Person had, has or will have,
as a result of the transactions contemplated by this Agreement, any right,
interest or valid claim against or upon the Purchaser, the Company or any of its
Subsidiaries for any commission, fee or other compensation as a finder or broker
because of any act or omission by the Company, any of its Subsidiaries or any of
its or their agents.
-27-
6.17. Other Agreements of Officers. To the best knowledge of the Company,
----------------------------
no officer or key employee of the Company or any of its Subsidiaries is a party
to or bound by any agreement, contract or commitment, or subject to any
restrictions, particularly but without limitation in connection with any
previous employment of any such person, which has a Material Adverse Effect, or
in the future may (so far as the Company can reasonably foresee) have a Material
Adverse Effect. To the best knowledge of the Company, no officer or key employee
of the Company or any of its Subsidiaries has any present intention of
terminating his employment with the Company or any of its Subsidiaries and
neither the Company nor any of its Subsidiaries has any present intention of
terminating any such employment.
6.18. Capitalization of the Company; Status of Capital Stock.
------------------------------------------------------
Immediately prior to the Initial Closing Date, the Company has a total
authorized capitalization consisting of 10,000,000 shares of Common Stock, of
which 3,590,000 shares are issued and outstanding, and 2,000,000 shares of
Preferred Stock. Of the authorized shares of Preferred Stock, 931,044 shares
are designated Series A Preferred Stock, none of which are issued and
outstanding, and 439,589 shares are designated Series B Preferred Stock, all of
which are issued and outstanding. A complete list of the outstanding capital
stock of the Company and the names in which such capital stock of the Company is
registered is set forth on Exhibit 6.18 hereto. All the outstanding shares of
------------
capital stock of the Company have been duly authorized, are validly issued and
are fully paid and nonassessable. The shares of Common Stock issuable upon
conversion of the Preferred Shares and upon exercise of the Warrants, when so
issued against payment of the purchase price for such Common Stock, will be duly
authorized, validly issued and fully paid and nonassessable. Except as
otherwise set forth on Exhibit 6.18 and except for the Preferred Shares, the
------------
Warrants and the Dublind Warrants, there are no options, warrants or rights to
purchase shares of capital stock or other securities of the Company authorized,
issued or outstanding, nor is the Company obligated in any other manner to issue
shares of its capital stock or other securities. Except as otherwise set forth
on Exhibit 6.18 or as set forth in the Stockholders' Agreement, there are no
------------
restrictions on the transfer of shares of capital stock of the Company other
than those imposed by relevant state and federal securities laws. Except as set
forth in this Agreement, in the Stockholders' Agreement or as otherwise set
forth on Exhibit 6.18, no holder of any security of the Company is entitled to
------------
preemptive or similar statutory or contractual rights, either arising pursuant
to any agreement or instrument to which the Company is a party, or which are
otherwise binding upon the Company. The offer and sale of all shares of capital
stock and other securities of the Company issued before the Initial Closing
complied with or were exempt from all federal and state securities laws.
6.19. Capital Stock of Subsidiaries. The Company owns all of the
-----------------------------
outstanding capital stock of each of the Subsidiaries, beneficially and of
record, free and clear of all liens, encumbrances, restrictions and claims of
every kind. All the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized, are validly issued and are fully paid
and nonassessable. There are no options, warrants or rights to purchase shares
of capital stock or other securities of any of the Subsidiaries authorized,
issued or outstanding, nor is any Subsidiary obligated in any other manner to
issue shares of its capital stock or other securities.
6.20. Insurance. The Company and each of its Subsidiaries has insurance
---------
covering its properties and business adequate and customary for the type and
scope of its properties and business, and in any event in amounts sufficient to
prevent the Company and its Subsidiaries from becoming co-insurers.
6.21. Books and Records. The books of account, ledgers, order books and
-----------------
records of the Company and its Subsidiaries accurately and completely reflect
all material information relating to the business of the Company and its
Subsidiaries, the nature, acquisition, maintenance, location and collection
-28-
of the assets of the Company and its Subsidiaries, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company and its Subsidiaries.
6.22. Registration Rights. Other than pursuant to the terms of the
-------------------
Registration Rights Agreement, no Person has demand or other rights to cause the
Company or any of its Subsidiaries to file any registration statement under the
Securities Act relating to any securities of the Company or any of its
Subsidiaries or any right to participate in any such registration statement.
6.23. Other Agreements. Except as explicitly disclosed and described
----------------
in the Financial Statements or as set forth on Exhibit 6.23 attached hereto,
------------
neither the Company nor any of its Subsidiaries is a party to any written or
oral contract or instrument or other corporate restriction the due performance
of which individually or in the aggregate could have a Material Adverse Effect.
Except as specifically contemplated by this Agreement or as set forth on Exhibit
-------
6.23 attached hereto neither the Company nor any of its Subsidiaries is a party
----
to or otherwise bound or affected by any written or oral:
(a) agreement, contract or commitment with any present or former
shareholder, director, officer, employee or consultant or for the employment of
any Person;
(b) agreement, contract, commitment or arrangement with any labor
union or other representative of employees;
(c) agreement, contract or commitment for the purchase of, or payment
for, supplies or products, or for the performance of services by a third party,
involving in any one case $25,000 or more, other than purchase orders for the
acquisition of raw materials inventory incurred in the ordinary course of
business;
(d) agreement, contract or commitment to sell or supply products or
to perform services, involving in any one case $25,000 or more, other than for
the sale of its inventory goods by the Company and its Subsidiaries incurred in
the ordinary course of business;
(e) agreement, contract or commitment continuing over a period of
more than six months from the date hereof or exceeding $25,000 in value;
(f) representative or sales agency agreement, contract or
commitment;
(g) lease under which it is either lessor or lessee;
(h) note, debenture, bond, conditional sale agreement, equipment
trust agreement, letter of credit agreement, loan agreement or other agreement
or contract, commitment or arrangement for the borrowing or lending of money
(including without limitation loans to or from officers, directors, any
shareholder or any member of any of their immediate families), agreement,
contract, commitment or arrangement for a line of credit or guarantee, pledge or
undertaking of the indebtedness of any other Person;
(i) agreement, contract or commitment for any charitable or political
contribution;
(j) agreement, contract or commitment for any capital expenditure
in excess of $25,000;
-29-
(k) agreement, contract or commitment limiting or restraining it from
engaging or competing in any lines of business with any Person, nor is any
officer or employee of the Company or any Subsidiary subject to any such
agreement except where such limitation runs to the benefit of the Company;
(l) license, franchise, distributorship or other similar agreement,
contract or commitment, including without limitation (i) those which relate to
the compilation, conversion, publication, joint-publication and/or marketing of
state and federal law libraries and legal treatises and other legal publications
into electronic formats, and/or (ii) those which relate in whole or in part to
any patent, trademark, trade name, service ▇▇▇▇ or copyright or to any ideas,
technical assistance or other know-how of or used by the Company or any
Subsidiary; or
(m) agreement, contract or commitment not made in the ordinary course
of business exceeding the sum of $25,000 in value or liability.
The Company and each of its Subsidiaries and, to the best of the Company's
knowledge, each other party thereto have in all material respects performed all
the obligations required to be performed by them to date, have received no
notice of default and are not in material default under any lease, agreement or
contract now in effect to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or its respective
property may be bound. Neither the Company nor any of its Subsidiaries has any
present expectation or intention of not fully performing all its obligations
under each such lease, contract or other agreement, and the Company has no
knowledge of any material breach by the other party to any contract or
commitment to which the Company or any of its Subsidiaries is a party.
6.24. Hazardous and Toxic Materials. (a) None of the properties owned,
-----------------------------
leased or operated by the Company or any of its Subsidiaries is in material
violation of any federal, state or local laws, ordinances or regulations
existing or enacted relating to the environment, health and safety, any
Hazardous Discharges (as hereinafter defined) or to industrial hygiene or the
environmental conditions on, under or about any of the property owned, leased or
operated by the Company or any of its Subsidiaries, including, without
limitation, soil and ground water conditions; (b) neither the Company nor any of
its Subsidiaries has received any complaint, order, citation or notice with
regard to air emissions, Hazardous Discharges or other environmental, health or
safety matters affecting any of the properties at any time owned, leased or
operated by the Company or any of its Subsidiaries or the businesses therein
conducted, and (c) there has been no spill, discharge, release or cleanup of any
hazardous or toxic waste or substance or any oil or pesticide which would result
in a Material Adverse Effect ("Hazardous Substances") at any of the properties
at any time owned, leased or operated by the Company or any of its Subsidiaries,
including, without limitation, into or upon any of its soils, surface water,
ground water or the improvements located thereon (a "Hazardous Discharge"). To
the extent that any of the properties owned, leased or operated by the Company
or any of its Subsidiaries are used for the handling, storage, transportation or
disposal of hazardous or toxic materials, such use is in accordance with all
federal, state and local environmental laws, rules, and regulations which apply
to the handling, storage, transportation or disposal of hazardous or toxic
materials and the Company and each of its Subsidiaries has obtained any and all
necessary permits, licenses and approvals with respect to such use, including
without limitation, United States Environmental Protection Agency identification
numbers, hazardous waste manifests and hazardous waste permits required under
the Federal Resource Conversation and Recovery Act.
6.25. Customers, Vendors and Suppliers. None of the fifteen (15)
--------------------------------
largest customers or subscribers of the Company's and its Subsidiaries' products
(based on total sales volume for the latest full fiscal year) or any party (a
"Business Partner") with which the Company and its Subsidiaries maintains any
publishing, joint-publishing, marketing, and/or royalty relationship involving
the Company's business
-30-
and/or its products has cancelled or otherwise terminated or made any threat to
cancel or otherwise terminate its relationship with the Company or such
Subsidiary, nor has any such customer, subscriber or Business Partner indicated
an intent or desire to materially decrease its purchase volume, change its
subscription, or change its relationship, as the case may be, with the Company
or such Subsidiary.
6.26. No Violations. Neither the execution and delivery of this
-------------
Agreement and the Operative Documents, nor the consummation of any of the
transactions contemplated hereby or thereby, by the Company, will (a) violate,
conflict with, or result in a breach or default under any provision of the
Articles of Incorporation or By-Laws of the Company or any of its Subsidiaries,
(b) violate any provision of any Applicable Laws, or (c) result in a material
violation or breach by the Company or any of its Subsidiaries of, conflict with,
constitute (with or without due notice or lapse of time or both) a default by
the Company or any of its Subsidiaries (or give rise to any right of
termination, cancellation, payment or acceleration) under, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement, lease,
franchise agreement or other instrument or obligation to which the Company or
any of its Subsidiaries is a party, or by which it or any of its respective
properties or assets may be bound.
ARTICLE VII
COVENANTS OF THE COMPANY
7.01. Affirmative Covenants of the Company Other Than Reporting
---------------------------------------------------------
Requirements. Without limiting any other covenants and provisions hereof, the
------------
Company covenants and agrees that, as long as any of the Notes or at least fifty
percent (50%) of the Preferred Shares are outstanding, it will perform and
observe the following covenants and provisions and will cause each Subsidiary to
perform and observe such of the following covenants and provisions as are
applicable to such Subsidiary:
(a) Punctual Payment. Pay the principal of, premium, if any, and
----------------
interest on each of the Notes at the times and place and in the manner provided
in the Notes and herein.
(b) Payment of Taxes and Trade Debt. Pay and discharge, and cause
-------------------------------
each Subsidiary to pay and discharge, all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or business, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a lien or charge
upon any properties of the Company or any Subsidiary, provided that neither the
Company nor any Subsidiary shall be required to pay any such tax, assessment,
charge, levy or claim which is being contested in good faith and by appropriate
proceedings if the Company or the Subsidiary concerned shall have set aside on
its books adequate reserves with respect thereto. Pay and cause each Subsidiary
to pay, when due, or in conformity with customary trade terms, all lease
obligations, all trade debt, and all other Indebtedness incident to the
operations of the Company or the Subsidiaries, except such as are being
contested in good faith and by appropriate proceedings if the Company or the
Subsidiary concerned shall have set aside on its books adequate reserves with
respect thereto.
(c) Maintenance of Insurance. Maintain, and cause each Subsidiary
------------------------
to maintain, insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company or such Subsidiary operates, and in any
event in
-31-
amounts sufficient to prevent the Company or such Subsidiary from becoming a co-
insurer.
(d) Preservation of Corporate Existence. Preserve and maintain,
-----------------------------------
and cause each Subsidiary to preserve and maintain, its corporate existence,
rights, franchises and privileges in the jurisdiction of its incorporation, and
qualify and remain qualified, and cause each Subsidiary to qualify and remain
qualified, as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in view of its business and operations
or the ownership of its properties, except where the failure to remain so
qualified would not, either individually or in the aggregate, have a Material
Adverse Effect; provided, however, that nothing herein contained shall prevent
any merger, consolidation or transfer of assets permitted by subsection 7.02(e).
Preserve and maintain, and cause each Subsidiary to preserve and maintain, all
licenses and other rights to use patents, processes, licenses, trademarks, trade
names, inventions, intellectual property rights or copyrights owned or possessed
by it and necessary to the conduct of its business.
(e) Compliance with Laws. Comply, and cause each Subsidiary to
--------------------
comply, with all applicable laws, rules, regulations and orders of any
governmental authority, the noncompliance with which could have a Material
Adverse Effect.
(f) Inspection Rights. At any reasonable time and from time to time
-----------------
and upon prior written notice, permit the Purchaser or any of its agents or
representatives to examine and make copies of and extracts from the records and
books of account of, and visit and inspect the properties of, the Company and
any Subsidiary, and to discuss the affairs, finances and accounts of the Company
and any Subsidiary with any of their officers or directors and independent
accountants. If an Event of Default then exists, all reasonable out-of-pocket
expenses of the Purchaser (or its agents or representatives), the Company or any
Subsidiary incurred in connection with such inspection rights shall be borne by
the Company.
(g) Keeping of Records and Books of Account. Keep, and cause each
---------------------------------------
Subsidiary to keep, adequate records and books of account, in which complete
entries will be made in accordance with GAAP, reflecting all financial
transactions of the Company and each Subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
(h) Maintenance of Properties, Etc. Maintain and preserve, and
------------------------------
preserve, and cause each Subsidiary to maintain and preserve, all of its
properties, necessary or useful in the proper conduct of its business, in good
repair, working order and condition, ordinary wear and tear excepted.
(i) Compliance with ERISA. Comply, and cause each Subsidiary to
---------------------
comply, with all minimum funding requirements applicable to any pension or other
employee benefit or employee contribution plans which are subject to ERISA or to
the Code, and comply, and cause each Subsidiary to comply, in all other material
respects with the provisions of ERISA and the Code, and the rules and
regulations thereunder, which are applicable to any such plan. Neither the
Company nor any Subsidiary will permit any event or condition to exist which
could permit any such plan to be terminated under circumstances which would
cause the lien provided for in Section 4068 of ERISA to attach to the assets of
the Company or any Subsidiary.
(j) Attendance at Board Meetings. At any time at which a nominee of
----------------------------
the Purchaser is not a member of the Board or any committee of the Board as
provided in this Agreement and the Stockholders' Agreement, so long as the Notes
remain outstanding or, if no Notes are then outstanding, the Purchaser holds
either (i) at least twenty five percent (25%) of the Common Stock issued or
issuable upon
-32-
the conversion of the Preferred Shares then outstanding or (ii) at least twenty
five percent (25%) of the Common Stock issued and issuable upon the exercise of
the Warrants then outstanding, permit the Purchaser or its designee to have one
observer attend each meeting of the Board and any committee thereof. The Company
will send to the Purchaser and its designee the notice of the time and place of
any such meeting in the same manner and at the same time as notice is sent to
the directors or committee members, as the case may be. The Company shall also
provide to such Purchaser copies of all notices, reports, minutes, consents and
other documents at the time and in the manner as they are provided to the Board
or committees. The Company shall reimburse the Purchaser for all reasonable
costs incurred by the Purchaser or its designee in connection with traveling to
and from and attending meetings of the Board and committees.
(k) Payment of Senior Debt by the Purchaser. In the event that any
---------------------------------------
default occurs in the payment of the principal of or any interest on any Senior
Debt and such default shall continue for a period of thirty (30) days (or such
shorter period as is necessary in order to permit the Purchaser to act pursuant
to this subsection prior to any acceleration of such Senior Debt) without waiver
or forbearance by the lender of such Senior Debt, permit the Purchaser, on
behalf of the Company, to cure such default, to prepay in full any such Senior
Debt or to purchase such Senior Debt, upon terms and conditions set forth in the
Subordination Agreement.
(l) Board of Directors and Committees. The Company shall use its
---------------------------------
best efforts to fix the Board at not more than seven (7) members and cause three
(3) representatives of the Purchaser to be recommended to the stockholders for
election as a director at all meetings for such purpose. The Board shall meet at
least four (4) times per calendar year. The Company shall at all times maintain
a Compensation Committee and an Audit Committee of the Board and each such
committee shall consist of three (3) members. The Purchaser shall at all times
be entitled to appoint one representative to each of the Compensation Committee
and the Audit Committee. The Purchaser shall at all times have a representative
on each other committee of the Board unless and only for so long as they waive
such right with respect to a specific committee. The Company shall reimburse the
Purchaser and its appointees for all reasonable costs incurred by them in
connection with traveling to and from and attending meetings of the Board and
committees of the Board, in addition to any directors fees regularly paid to all
members of the Board.
(m) Interest Coverage Ratio. As of the dates set forth below, the
-----------------------
Company will maintain a ratio of EBITDA to Interest Expense for the twelve (12)
month period ending on such dates of at least the ratio set forth opposite such
dates:
Twelve Month Period Ending Interest Coverage Ratio
-------------------------- -----------------------
December 31, 1998 1 to 1
March 31, 1999 2 to 1
June 30, 1999 and the last day of 3 to 1
each fiscal quarter of the
Company thereafter
(n) Fixed Charge Coverage Ratio . As of the dates set forth below,
the Company will maintain a ratio of EBITDA to Fixed Charges for the twelve (12)
month period ending on such dates of at least the ratio set forth opposite such
dates:
Twelve Month Period Ending Fixed Charge Coverage Ratio
-------------------------- ---------------------------
-33-
December 31, 1998 .40 to 1
March 31, 1999 1 to 1
June 30, 1999 1 to 1.5
September 30, 1999 and the
last day of each fiscal quarter 2 to 1
of the Company thereafter
(o) Maximum Total Funded Debt to EBITDA Ratio. As of the dates set
-----------------------------------------
forth below, the Company will not permit the ratio of Total Funded Debt to
EBITDA for the twelve (12) month period ending on such dates to be more than the
ratio set forth opposite such date:
Twelve Month Period Ending Total Funded Debt to EBITDA Ratio
-------------------------- ---------------------------------
December 31, 1998 10 to 1
March 31, 1999 3.5 to 1
June 30, 1999 and the last day 2.5 to 1
of each fiscal quarter of the
Company thereafter
(p) Minimum Tangible Capital Base. The Company shall maintain a
-----------------------------
Tangible Capital Base, measured as at each of the dates set forth below, equal
to or greater than the amount set forth opposite such date:
Minimum
Fiscal Quarter End Tangible Capital Base
------------------
March 31, 1998 $ (5,500,000)
June 30, 1998 (8,000,000)
September 30, 1998 (11,000,000)
December 31, 1998 (12,000,000)
March 31, 1999 (10,000,000)
June 30, 1999 (7,500,000)
September 30, 1999 (2,500,000)
December 31, 1999 2,500,000
March 31, 2000 and the last day $2,500,000 plus 80% of the
of each fiscal quarter of the cumulative amount of Net
Company thereafter Income earned by the Company
for each fiscal quarter
subsequent to December 31,
1999.
(q) Database Expenditures. The Company shall not make any Database
---------------------
Expenditure during any fiscal year of the Company which, when aggregated with
all other Database Expenditures in such fiscal year, exceeds, in the case of the
Company's fiscal year ended December 31, 1998, $10,000,000, and in the case of
each fiscal year thereafter $750,000.
-34-
(r) Minimum EBITDA. EBITDA for the each of the periods set forth below
--------------
shall not be less than the amount set forth opposite such period:
Period Minimum EBITDA
------ --------------
Three (3) month period ended March 31,
1998 $(600,000)
Six (6) month period ended June 30, 1998 (800,000)
Nine (9) month period ended September 30,
1998 (600,000)
Twelve (12) month period ended December 31,
1998 1,000,000
7.02. Negative Covenants of the Company. Without limiting any other
---------------------------------
covenants and provisions hereof, the Company covenants and agrees that, as long
as any of the Notes or fifty percent (50%) of the Preferred Shares are
outstanding, it will comply with and observe the following covenants and
provisions, and will cause each Subsidiary to comply with and observe such of
the following covenants and provisions as are applicable to such Subsidiary, and
will not:
(a) Liens. Create, incur, assume or suffer to exist, or permit
-----
any Subsidiary to create, incur, assume or suffer to exist, any mortgage, deed
of trust, pledge, lien, security interest or other charge or encumbrance
(including the lien or retained security title of a conditional vendor) of any
nature, upon or with respect to any of its properties, now owned or hereafter
acquired, or assign or otherwise convey any right to receive income, except that
the foregoing restrictions shall not apply to mortgages, deeds of trust,
pledges, liens, security interests or other charges or encumbrances
(collectively, "Permitted Liens"):
(i) for taxes, assessments or governmental charges or levies on
property of the Company or any Subsidiary if the same shall not at the time
be delinquent or thereafter can be paid without penalty, or are being
contested in good faith and by appropriate proceedings;
(ii) imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business;
(iii) arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation;
(iv) securing the performance of bids, tenders, contracts (other
than for the repayment of borrowed money), statutory obligations and surety
bonds;
(v) in the nature of zoning restrictions, easements and rights or
restrictions of record on the use of real property which do not materially
detract from its value or impair its use;
(vi) arising by operation of law in favor of the owner or
sublessor of leased premises and confined to the property rented;
-35-
(vii) arising from any litigation or proceeding which is being
contested in good faith by appropriate proceedings, provided, however, that
no execution or levy has been made;
(viii) described on Exhibit 6.07 which secure the Indebtedness set
------------
forth on Exhibit 6.08B, provided that no such lien is extended to cover
-------------
other or different property of the Company or any Subsidiary; and
(ix) liens on the accounts receivable of the Company which secure
Indebtedness permitted by Section 7.02(b).
(b) Indebtedness . Without the prior written consent of the
------------
Purchaser, create, incur, assume or suffer to exist, or permit any Subsidiary to
create, incur, assume or suffer to exist, any liability with respect to
Indebtedness except for (1) up to $10,000,000 in principal amount of
Indebtedness for Money Borrowed incurred pursuant to the EFT Financing, (2)
current liabilities, other than for Indebtedness for Money Borrowed, which are
incurred in the ordinary course of business, (3) purchase money security
interests securing the purchase of equipment to be used in connection with the
business of the Company and its Subsidiaries, and (5) the Notes, provided that
the incurrence and maintenance of all such Indebtedness does not result in the
Company's or any Subsidiary's failure to comply with any of the provisions of
Article VII hereof.
(c) Lease Obligations. Become obligated to pay rent under any
-----------------
leases or other rental arrangements (including Capital Leases) under which the
amount of the aggregate lease or other payments under all such agreements or
arrangements exceeds $150,000 on a consolidated basis for any twelve-month
period.
(d) Assumptions or Guaranties of Indebtedness of Other Persons.
----------------------------------------------------------
Assume, guarantee, endorse or otherwise become directly or contingently liable
on, or permit any Subsidiary to assume, guarantee, endorse or otherwise become
directly or contingently liable on (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss) any Indebtedness of any other Person, except
for guarantees by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business and except by the Company with
respect to any Indebtedness of any Subsidiary which is permitted by this
Agreement.
(e) Mergers, Sale of Assets, Etc. Without the prior written
----------------------------
consent of the Purchaser, merge or consolidate with any Person, or sell, assign,
lease or otherwise dispose of or voluntarily part with the control of (whether
in one transaction or in a series of transactions) any of its assets (whether
now owned or hereinafter acquired) or permit any Subsidiary to do so, except
that (1) any Subsidiary may merge into or consolidate with or transfer assets to
any other Subsidiary, (2) any Subsidiary may merge into or transfer assets to
the Company and (3) the Company or any Subsidiary may sell, assign, lease or
otherwise dispose of (i) electronic legal library information in the ordinary
course of business, (ii) equipment that is no longer used or useful in the
Company's or any of its Subsidiaries' business or that is physically obsolete,
provided that the proceeds thereof are used first to reduce outstanding Senior
Debt and then to reduce other outstanding Indebtedness, (iii) sales of equipment
the net proceeds of which are applied within thirty (30) days of such sale to
the purchase of replacement equipment with like value and function and (iv)
other sales of assets in any given year which have a fair market value of less
than one million dollars ($1,000,000) in the aggregate provided that at least
fifty percent (50%) of the net proceeds from such dispositions are applied first
to reduce outstanding Senior Debt and then to reduce other
-36-
outstanding Indebtedness.
(f) Investments in Other Persons. Without the prior written
----------------------------
consent of the Purchaser, make or permit any Subsidiary to make, any loan or
advance to any Person, or purchase, otherwise acquire, or permit any Subsidiary
to purchase or otherwise acquire, any capital stock, assets or other property
of, obligations of, or any interest in, any Person, except:
(i) investments by the Company or a Subsidiary in evidences of
indebtedness issued or fully guaranteed by the United States of America and
having a maturity of not more than one year from the date of acquisition;
(ii) investments by the Company or a Subsidiary in certificates of
deposit, notes, acceptances and repurchase agreements having a maturity of
not more than one year from the date of acquisition issued by a bank
organized in the United States having capital, surplus and undivided
profits of at least $100,000,000 and whose parent holding company has long-
term debt rated Aa1 or higher, and whose commercial paper (if rated) is
rated Prime 1 by ▇▇▇▇▇'▇ Investors Service, Inc.;
(iii) loans or advances from a Subsidiary to the Company or from
the Company to a Subsidiary;
(iv) investments by the Company or a Subsidiary in the highest-
rated commercial paper having a maturity of not more than one year from the
date of acquisition;
(v) advances to employees for travel or relocation in accordance
with the ordinary course of business; and
(vi) acquisitions or assets, capital stock or other property which
individually and in the aggregate are not material to the Company or such
Subsidiary (assets, capital stock and other property with a fair market
value of less than $250,000 acquired in any one-year period in the
aggregate shall not be deemed "material"); provided, however, that each
such acquisition can be made in compliance with the other terms of this
Agreement, including, without limitation, Section 7.02(l).
(g) Distributions. Without the prior written consent of the
-------------
Purchaser, declare or pay any dividends, purchase, redeem, retire, or otherwise
acquire for value any of its capital stock (or rights, options or warrants to
purchase such shares) now or hereafter outstanding, return any capital to its
stockholders as such, or make any distribution of assets to its stockholders as
such, or permit any Subsidiary to do any of the foregoing (such transactions
being hereinafter referred to as "Distributions"); provided, however, that
nothing herein contained shall prevent:
(i) the Company from effecting a stock split or declaring or
paying any dividend consisting of shares of any class of Common Stock to
the holders of shares of such class of Common Stock, provided that such
stock split or dividend is effected equally across all classes of Common
Stock, or
(ii) the Company from repurchasing or redeeming the Warrants and
the Preferred Shares and the shares of Common Stock issued or issuable upon
exercise or conversion thereof in accordance with the terms of Section 3.10
of the Stockholders' Agreement; or
(iii) the Company from redeeming the Series B Preferred Stock issued
and outstanding on the date of this Agreement;
(iv) any Subsidiary from declaring or making payment of cash and
stock dividends, returns of capital or distributions of assets to the
Company;
if in the case of any such transaction the Distribution can be made in
compliance with the other terms of this Agreement.
(h) Dealings with Affiliates. Without the prior written consent of
------------------------
the Purchaser, enter or permit any Subsidiary to enter into any transaction with
any holder of any class of capital stock of the Company, or any member of their
families or any corporation or other entity in which any one or more of such
stockholders or members of their immediate families directly or indirectly holds
any class of capital stock; provided, however, that this Section 7.02(h) shall
not apply to any transaction which is governed by Section 7.02(m).
(i) Maintenance of Ownership of Subsidiaries. Sell or otherwise
----------------------------------------
dispose of any shares of capital stock of any Subsidiary, except to the Company
or another Subsidiary, or permit any Subsidiary to issue, sell or otherwise
dispose of any shares of its capital stock or the capital stock of any
Subsidiary, except to the Company or another Subsidiary, provided, however, that
nothing herein contained shall prevent any merger, consolidation or transfer of
assets permitted by subsection 7.02(e).
(j) Change in Nature of Business. Without the prior written consent
----------------------------
of the Purchaser, make, or permit any Subsidiary to make, any change in the
nature of its business as carried on at the date hereof.
(k) No Amendment or Waiver of Charter Documents. Amend, alter,
-------------------------------------------
repeal or terminate its Articles of Incorporation (or comparable charter
documents) without the prior written consent of the Purchaser.
(l) Capital Expenditures. Make, or permit any Subsidiary to make,
--------------------
any Capital Expenditure during (i) during the period from the Initial Closing
Date through the fiscal year of the Company ended December 31, 1998 which
exceeds $1,500,000 and (ii) any fiscal year of the Company thereafter which
exceeds $500,000 in the aggregate.
(m) Compensation. Pay, directly or indirectly, as salary, bonuses,
------------
fringe benefits, expenses, stock option grants, drawing accounts or otherwise
any compensation to any executive officer (or any relative of any executive
officer) of the Company or any Subsidiary not approved by the Compensation
Committee of the Board other than such compensation arrangements as are in place
as of the Initial Closing Date.
(n) Preferred Stock. Without the prior written consent of the
---------------
Purchaser, issue any shares of, or rights to acquire any shares of, Preferred
Stock as authorized in the Company's Articles of Incorporation as in effect on
the date hereof (except the 931,044 shares of Series A Preferred Stock and the
439,589 shares of Series B Preferred Stock issued and outstanding as of the date
hereof).
7.03. Reporting Requirements. The Company will furnish to each holder of any
----------------------
Note, any Preferred Share, any Preferred Conversion Share, any Warrant or any
Warrant Shares (except that the
provisions of Sections 7.03 (d), (e), (f) and (g) shall terminate upon payment
in full of the aggregate outstanding principal balance of the Notes together
with all interest and premium, if any, due thereon and when less than fifty
percent (50%) of the Preferred Shares remain outstanding):
(a) as soon as possible and in any event within five (5) days after
the occurrence of each Event of Default or each event which, with the giving of
notice or lapse of time or both, would constitute an Event of Default, the
statement of the chief financial officer of the Company setting forth details of
such Event of Default or event and the action which the Company proposes to take
with respect thereto;
(b) as soon as available and in any event within thirty (30) days
after the end of each month, consolidated and consolidating balance sheets of
the Company and its Subsidiaries as of the end of such month and consolidated
and consolidating statements of income and retained earnings and of cash flows
of the Company and its Subsidiaries for such month and for the periods
commencing at the end of the previous fiscal year and ending with the end of
such month, setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year and the Budget
for the current year, all in reasonable detail, in a format reasonably
satisfactory to the Purchaser, and duly certified (subject to normal year-end
adjustments) by the chief financial officer of the Company as having been
prepared in accordance with GAAP and including a discussion by the Company's
management of any variance from the Budget for such fiscal year;
(c) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Company (except that with respect to
the Company's fiscal year ended December 31, 1997, the Company will have to
furnish the information required by this Section 7.03(c) within 120 days after
the end of such fiscal year), a copy of the annual audit report for such year
for the Company and its Subsidiaries, including therein consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of the end
of such fiscal year and consolidated and consolidating statements of income and
retained earnings and of cash flows of the Company and its Subsidiaries for such
fiscal year, setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, all duly certified by independent public
accountants of recognized national standing acceptable to the Purchasers and
including a discussion by the Company's management of any variance from the
Budget for the fiscal year just ended;
(d) at least thirty (30) days prior to the end of each fiscal year
of the Company, (x) an operating budget (the "Budget") of the Company and its
Subsidiaries for the next fiscal year in the form customarily prepared by
management for internal use, which Budget shall be reasonably satisfactory in
form to the Purchaser but which shall in any case include a detailed balance
sheet and detailed monthly statements of income and cash flows, and (y) three to
five year financial plans for the Company and the Subsidiaries in the form
customarily prepared by management for internal use, which shall be reasonably
satisfactory in form to the Purchaser;
(e) at the time of delivery of each monthly and annual statement, a
certificate, executed by the chief financial officer of the Company, stating
that such officer has caused this Agreement, the Notes, and the Warrants to be
reviewed and has no knowledge of any default by the Company or any Subsidiary in
the performance or observance of any of the provisions of this Agreement, the
Notes or the Warrants or, if such officer has such knowledge, specifying such
default and the nature thereof, and setting forth computations in reasonable
detail demonstrating compliance with the provisions of subsections 7.01(m), (n),
(o) and (p) and subsections 7.02(b) and (d);
(f) at the time of delivery of each annual statement, a certificate
executed by the Company's independent public accountants, setting forth
computations in reasonable detail demonstrating compliance with the provisions
of subsections 7.01(m), (n), (o) and (p) and subsections 7.02(b) and (d);
(g) promptly upon receipt thereof, any written report submitted to
the Company or any Subsidiary by independent public accountants in connection
with an annual or interim audit of the books of the Company and the Subsidiaries
made by such accountants;
(h) promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, affecting the
Company or any Subsidiary of the type described in Section 6.04;
(i) promptly after sending, making available, or filing the same,
such reports and financial statements as the Company or any Subsidiary shall
send or make available to the stockholders of the Company or the Commission; and
(j) such other information respecting the business, assets,
liabilities, financial condition, results of operations or prospects of the
Company or any of its Subsidiaries as the Purchaser may from time to time
reasonably request, and to make available to the Purchaser and its
representatives, members of management and employees with significant
responsibilities (such as department heads) for the purposes of updating the
Purchaser as to the condition of the Company and its Subsidiaries.
ARTICLE VIII
EVENTS OF DEFAULT
8.01. Events of Default. If any of the following events ("Events of
-----------------
Default") shall occur and be continuing :
(a) The Company shall fail to pay any installment of principal of
any of the Notes when due; or
(b) The Company shall fail to pay any interest or premium, if any,
on any of the Notes when due; or
(c) The Company shall default in the performance of any covenant
contained in subsections 7.01(m), (n), (o) and (p) or shall default in the
performance of any covenant contained in Section 7.02 for ten (10) consecutive
Business days; or
(d) Any representation or warranty made by the Company in this
Agreement or by the Company (or any of its officers) in any certificate,
instrument or written statement made or delivered pursuant to or in connection
with this Agreement, shall prove to have been incorrect when made in any
material respect; or
(e) The Company or any Subsidiary shall fail to perform or observe
any other term, covenant or agreement contained in this Agreement, the Notes or
the Warrants on its part to be performed or observed and any such failure
remains unremedied for fifteen (15) Business Days after written notice
thereof shall have been given to the Company by any registered holder of the
Notes; or
(f) The Company or any Subsidiary shall fail to pay any
Indebtedness for Money Borrowed exceeding $100,000 owing by the Company or such
Subsidiary (as the case may be), or any interest or premium thereon, when due
(or, if permitted by the terms of the relevant document, within any applicable
grace period), whether such Indebtedness for Money Borrowed shall become due by
scheduled maturity, by required prepayment, by acceleration, by demand or
otherwise, or shall fail to perform any term, covenant or agreement on its part
to be performed under any agreement or instrument evidencing or securing or
relating to any such Indebtedness for Money Borrowed owing by the Company or any
Subsidiary, as the case may be, when required to be performed (or, if permitted
by the terms of the relevant document, within any applicable grace period), if
the effect of such failure to pay or perform is to accelerate, or to permit the
holder or holders of such Indebtedness for Money Borrowed, or the trustee or
trustees under any such agreement or instrument to accelerate the maturity of
such Indebtedness for Money Borrowed, unless such failure to pay or perform
shall be waived by the holder or holders of such Indebtedness for Money Borrowed
or such trustee or trustees; or
(g) The Company or any Subsidiary shall be involved in financial
difficulties evidenced (i) by its admitting in writing its inability to pay its
debts generally as they become due; (ii) by its commencement of a voluntary case
under Title 11 of the United States Code as from time to time in effect, or by
its authorizing, by appropriate proceedings of its board of directors or other
governing body, the commencement of such a voluntary case; (iii) by its filing
an answer or other pleading admitting or failing to deny the material
allegations of a petition filed against it commencing an involuntary case under
said Title 11, or seeking, consenting to or acquiescing in the relief therein
provided, or by its failing to controvert timely the material allegations of any
such petition; (iv) by the entry of an order for relief in any involuntary case
commenced under said Title 11; (v) by its seeking relief as a debtor under any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors, or by its consenting to or acquiescing in such relief;
(vi) by the entry of an order by a court of competent jurisdiction (a) finding
it to be bankrupt or insolvent, (b) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its creditors,
or (c) assuming custody of, or appointing a receiver or other custodian for, all
or a substantial part of its property; or (vii) by its making an assignment for
the benefit of, or entering into a composition with, its creditors, or
appointing or consenting to the appointment of a receiver or other custodian for
all or a substantial part of its property; or
(h) A Change in Control occurs, which Change in Control is not
consented to specifically with reference to this Section 8.01(h) by the
Purchaser; or
(i) Any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against a substantial part of the
property of the Company or any Subsidiary and such judgment, writ, or similar
process shall not be released, vacated or fully bonded within sixty (60) days
after its issue or levy;
then, and in any such event,
(1) the Purchaser may, by notice to the Company, declare the entire
unpaid principal amount of the Notes, all interest accrued and unpaid
thereon and all other amounts payable under this Agreement to be forthwith
due and payable, whereupon the Notes, all such accrued interest and all
such amounts shall become and be forthwith due and payable (unless there
shall have occurred an Event of Default under subsection 8.01(g) in which
case all such amounts shall
automatically become due and payable), without presentment, demand, protest
or further notice of any kind, all of which are hereby expressly waived by
the Company, and
(2) the Purchaser may proceed to protect and enforce their
rights by suit in equity (including without limitation a suit for
rescission), action at law and/or other appropriate proceeding either for
specific performance of any covenant, provision or condition contained or
incorporated by reference in this Agreement or any term of the Articles of
Incorporation of the Company, or in aid of the exercise of any power
granted in this Agreement or in the Articles of Incorporation of the
Company, and, immediately, in the case of Section 8.01(g) hereof, and at
any time after the giving of the Put Notice (as such term is defined in the
Stockholders' Agreement) to the Company pursuant to Section 3.10 of the
Stockholders' Agreement, the theretofore unexercised "put" rights set forth
in Section 3.10 of the Stockholders' Agreement, to the extent not already
exercisable, be deemed to have become immediately exercisable and
thereafter the Purchaser may in such Put Notice to the Company declare all
or part of such theretofore unexercised "put" rights to be forthwith
exercised and due and payable (unless there shall have occurred an Event of
Default under Section 8.01(g) hereof, in which case such "put" rights shall
be automatically exercised and due and payable), whereupon the Repurchase
Price (as such term is defined in the Stockholders' Agreement) for the
Preferred Shares, the Warrants, the Preferred Conversion Shares and the
Warrant Shares subject thereto shall become so due and payable without
presentation, presentment, protest or further demand or notice of any kind,
all of which are expressly waived), and any such holder or holders may
proceed to enforce payment of such amount or part thereof in such manner as
it or they may elect.
Without in any way limiting the rights of the holders of the
Notes, the Company hereby agrees that the holders of the Preferred Shares, the
Warrants, the Preferred Conversion Shares and the Warrant Shares would have no
adequate remedy at law, for monetary compensation or otherwise, for the damages
that would be suffered if the Company were to fail to comply with its
obligations under Article III hereof and Section 3.10 of the Stockholders'
Agreement, and that the Company therefore agrees that the holders of the
Warrants and the Warrant Shares shall be entitled to obtain specific performance
of the Company's obligations under Article III of this Agreement and Section
3.10 of the Stockholders' Agreement.
8.02. Annulment of Defaults. Section 8.01 is subject to the
---------------------
condition that, if at any time after the principal of any of the Notes shall
have become due and payable, and before any judgment or decree for the payment
of the moneys so due, or any portion thereof, shall have been entered, then and
in every such case the holders of sixty-six and two-thirds percent (662/3%) or
more in principal amount of all Notes then outstanding may, by written
instrument filed with the Company, rescind and annul such declaration and its
consequences; but no such rescission or annulment shall extend to or affect any
subsequent default or Event of Default or impair any right consequent thereon.
ARTICLE IX
MISCELLANEOUS
9.01. No Waiver; Cumulative Remedies. No failure or delay on the part of
------------------------------
the Purchaser, or any other holder of the Notes, Preferred Shares, Warrants,
Preferred Conversion Shares or Warrant Shares in exercising any right, power or
remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the
exercise of any other right, power or remedy hereunder. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
9.02. Amendments, Waivers and Consents. Any provision in this
--------------------------------
Agreement, the Notes, the Warrants or the other Operative Documents to the
contrary notwithstanding, changes in or additions to this Agreement may be made,
and compliance with any covenant or provision herein set forth may be omitted or
waived, if the Company shall, as long as any Notes are outstanding, obtain
consent thereto in writing from the holder or holders of at least sixty-six and
two-thirds percent (662/3%) in principal amount of all Notes then outstanding,
or, if no Notes are then outstanding, obtain consent thereto in writing from (i)
the holder or holders of at least sixty-six and two-thirds percent (662/3%) of
the Common Stock issued or issuable upon conversion of the Preferred Shares then
outstanding and (ii) the holder or holders of at least sixty-six and two-thirds
percent (662/3%) of the Common Stock issued and issuable upon exercise of the
Warrants then outstanding, and shall, in any case, deliver copies of such
consent in writing to all other holders of Notes, Preferred Shares and/or
Warrants; provided that no such consent shall be effective to reduce or to
postpone the date fixed for the payment of the principal (including any required
redemption) or interest payable on any Note without the consent of the holder
thereof, or to alter or amend the consent mechanism provided for under this
Section 9.02. Any waiver or consent may be given subject to satisfaction of
conditions stated therein and any waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. Written
notice of any waiver or consent effected under this subsection shall promptly be
delivered by the Company to any holders who did not execute the same.
9.03. Addresses for Notices, Etc. All notices, requests, demands and
--------------------------
other communications provided for hereunder shall be in writing and mailed (by
first class registered or certified mail, postage prepaid), telegraphed, sent by
express overnight courier service or electronic facsimile transmission with a
copy by mail, or delivered to the applicable party at the addresses indicated
below:
If to the Company:
Law Office Information Systems, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ & Worcester LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to CRL III:
Capital Resource Lenders III, L.P.
c/o Capital Resource Partners
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
High Street Tower
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to any other holder of the Notes, Preferred Shares or Warrants:
at such holder's address for notice as set
forth in the transfer records of the
Company
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall, when mailed, telegraphed or sent, respectively, be
effective (i) three days after being deposited in the mails or (ii) one day
after being delivered to the telegraph company, deposited with the express
overnight courier service or sent by electronic facsimile transmission (with
receipt confirmed), respectively, addressed as aforesaid.
9.04. Costs, Expenses and Taxes. The Company agrees to pay on demand all
-------------------------
costs and expenses of the Purchaser in connection with the preparation,
execution and delivery of this Agreement, the Notes, the Preferred Shares, the
Warrants, the other Operative Documents and other instruments and documents to
be delivered hereunder, and in connection with the consummation of the
transactions contemplated hereby and thereby, as well as all costs and expenses
of the Purchaser in connection with the amendment, waiver (whether or not such
amendment or waiver becomes effective) or enforcement of this Agreement, the
Notes, the Preferred Shares, the Warrants, the other Operative Documents, and
other instruments and documents to be delivered hereunder and thereunder.
Notwithstanding the preceding sentence, and in addition to the provisions of
such sentence, the Company agrees to pay on demand all fees and out-of-pocket
expenses of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, special counsel to the Purchaser,
in connection with the transactions contemplated by this Agreement, including
any amendment, waiver (whether or not such amendment or waiver becomes
effective) or enforcement of this Agreement, the Notes, the Preferred Shares,
the Warrants, the Operative Documents, and other instruments and documents to be
delivered hereunder and thereunder. In addition, the Company agrees to pay any
and all stamp and other taxes payable or determined to be payable in connection
with the execution and delivery of this Agreement, the Notes, the Preferred
Shares, the Warrants, the other Operative Documents, and the other instruments
and documents to be delivered hereunder or thereunder and the Company agrees to
save the Purchaser harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and filing fees.
9.05. Binding Effect; Assignment. This Agreement shall be binding upon
--------------------------
and inure to the benefit of the Company and the Purchaser and their respective
successors and assigns, except that the
Company shall not have the right to assign its rights hereunder or any interest
therein without the prior written consent of the Purchaser. Except as expressly
set forth herein, nothing in this Agreement shall confer any claim, right,
interest or remedy on any third party or inure to the benefit of any third
party.
9.06. Payments in Respect of Notes. The Purchaser and any successor
----------------------------
holder of the Notes, by their acceptance thereof, agree that, with respect to
all sums received by them applicable to the payment of principal of or interest
on the Notes, equitable adjustment will be made among them so that, in effect,
all such sums shall be shared ratably by all of the holders of the Notes whether
received by voluntary payment, by realization upon security, by the exercise of
the right of setoff, by counterclaim or cross-action or by the enforcement of
any or all of the Notes. If any holder of the Notes receives any payment on its
Notes in excess of its pro rata portion, then such holder receiving such excess
payment shall purchase for cash from the other holders an interest in their
Notes in such amounts as shall result in a ratable participation by all of the
holders in the aggregate unpaid amount of Notes then outstanding. The Company
shall not have any obligation to any Person under this Section 9.06.
9.07. Payments in Respect of the Preferred Shares and Warrants. The
--------------------------------------------------------
Purchaser and any successor holder of the Preferred Shares or Warrants, by their
acceptance thereof, agree that, with respect to the sale to, or repurchase by,
the Company or any Person directly or indirectly affiliated with the Company or
any of its directors, officers, or shareholders, of the Preferred Shares or the
Warrants, equitable adjustment will be made among the holders of the Preferred
Shares or the Warrants so that in effect all sums so received shall be shared
ratably in proportion to their respective holdings of the Preferred Shares or
Warrants. If any holder of the Preferred Shares or the Warrants receives any
such sum in respect of its Preferred Shares or Warrants in excess of its pro
rata portion, then such holder receiving such excess shall purchase for cash
from the other holders of the Preferred Shares or the Warrants an interest in
their Preferred Shares or Warrants in such amount as shall result in a ratable
participation of all of the holders in the aggregate of all Preferred Shares or
Warrants then outstanding. The Company shall not have any obligation to any
Person under this Section 9.07.
9.08. Indemnification. The Company agrees to indemnify and hold
---------------
harmless the Purchaser, its subsidiaries, directors, officers, partners, counsel
and employees, from and against any and all liability (including, without
limitation, reasonable legal fees incurred in defending against any such
liability) under, arising out of or relating to this Agreement, the Notes, the
Warrants and the Warrant Shares, the transactions contemplated hereby or thereby
or in connection herewith or therewith, including (to the maximum extent
permitted by law) any liability arising under federal or state securities laws,
except to the extent such liability shall result from any act or omission on the
part of such Purchaser or its employees, agents, brokers or other
representatives. The obligations of the Company under this Section 9.08 shall
survive and continue to be in full force and effect notwithstanding (a) the
repayment of the Notes and (b) the termination of this Agreement.
9.09. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made in this Agreement, the Notes, the Warrants, the Operative
Documents or any other instrument or document delivered in connection herewith
or therewith, shall survive the execution and delivery hereof and thereof,
regardless of any investigation made by the Purchaser or on behalf of the
Purchaser .
9.10. Prior Agreements. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes any prior understandings or agreements con
cerning the subject matter hereof.
9.11. Severability . The invalidity or unenforceability of any provision
------------
hereof shall in no way affect the validity or enforceability of any other
provision.
9.12. Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the internal laws of The Commonwealth of Massachusetts.
9.13. Waiver of Right to Jury Trial. The parties hereby waive all
-----------------------------
rights to a trial by jury for all legal proceedings concerning this Agreement,
the Notes or the Warrants.
9.14. Headings. Article, Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
9.15. Sealed Instrument. This Agreement is executed as an
-----------------
instrument under seal.
9.16. Counterparts. This Agreement may be executed in any number
------------
of counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Agreement by signing
any such counterpart.
9.17. Further Assurances. From and after the date of this Agreement,
------------------
upon the request of the Purchasers, the Company and each Subsidiary shall
execute and deliver such instruments, documents and other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement, the Notes and the Warrants.
9.18. Consent to Jurisdiction. The Company irrevocably submits to the
-----------------------
non-exclusive jurisdiction of any state or federal court sitting in The
Commonwealth of Massachusetts over any suit, action or proceeding arising out of
or relating to this Agreement or any of the Notes, the Preferred Shares, the
Warrants, the Preferred Conversion Shares or Warrant Shares. To the fullest
extent it may effectively do so under applicable law, the Company irrevocably
waives and agrees not to assert, by way of motion, as a defense or otherwise,
any claim that it is not subject to the jurisdiction of any such court, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
9.19. Effect of Judgment. The Company agrees, to the fullest extent
------------------
it may effectively do so under applicable law, that a judgment in any suit,
action or proceeding of the nature referred to in Section 9.18 brought in any
such court shall, subject to such rights of appeal on issues other than
jurisdiction as may be available to the Company, be conclusive and binding upon
the Company and may be enforced in the courts of the United States of America or
The Commonwealth of Massachusetts (or any other courts to the jurisdiction of
which the Company is or may be subject) by a suit upon such judgment.
9.20. Service of Process. The Company consents to service of process in
------------------
any suit, action or proceeding of the nature referred to in Section 9.18 by
actual receipt of a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to the address of the Company specified in or
designated pursuant to Section 9.03. The Company agrees that such service (i)
shall be deemed in every respect effective service of process upon the Company
in any such suit, action or proceeding and (ii) shall, to the fullest extent
permitted by law, be taken and held to be valid personal service upon and
personal delivery to the Company.
9.21. No Limitation. Nothing in Section 9.18, 9.19, 9.20 or 9.22 shall
-------------
affect the right of any Purchaser to serve process in any manner permitted by
law, or limit any right that any Purchaser may have to bring proceedings against
the Company in the courts of any jurisdiction or to enforce in any lawful
manner a judgment obtained in one jurisdiction in any other jurisdiction.
9.22. Specific Performance. Upon breach or default by the Company
--------------------
with respect to any obligation hereunder, under the Notes, the Preferred Shares,
the Warrants, the Preferred Conversion Shares or the Warrant Shares the
Purchaser shall be entitled to protect and enforce its rights at law, or in
equity or by other appropriate proceedings for specific performance of such
obligation, or for an injunction against such breach or default, or in aid of
the exercise of any power or remedy granted hereby or thereby or by law.
9.23. Actions by Purchaser. Wherever in this Agreement action is
--------------------
required or permitted to be taken by, or consent is required of, or a matter
requires the satisfaction of, the Purchaser, unless the context otherwise
requires, such action may be taken by, and/or such consent may be obtained from,
and/or such satisfaction may be expressed by, (i) for as long as any of the
Notes remain outstanding, the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the principal amount of all Notes then outstanding, or (ii)
if no Notes are then outstanding, the holders of at least sixty-six and two
thirds percent (66 2/3%) of the Common Stock issued and issuable upon conversion
of the Preferred Shares then outstanding and the holders of at least sixty-six
and two-thirds percent (66 2/3%) of the Common Stock issued and issuable upon
exercise of the Warrants then outstanding.
9.24. Confidentiality. The Company's obligations under Sections
---------------
7.02(f) and 7.03 shall at all times be contingent upon the Purchaser's
agreement, and the Purchaser hereby agrees, to take all reasonable precautions
to safeguard the confidentiality of the information received by or disclosed to
the Purchaser by the Company in the fulfillment of the Company's obligations
under such Sections and to refrain from disclosure of such information to anyone
other than a person who will assist the Purchaser in evaluating the Company or
to the Purchaser's accountants, attorneys and other professional advisors and,
in the case of Section 7.03, to its equity investors (but only to the extent
reasonably necessary to meet the Purchaser's reporting obligations).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Senior
Subordinated Note and Securities Purchase Agreement as of the date first above
written.
LAW OFFICE INFORMATION SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
CAPITAL RESOURCE LENDERS III, L.P.
By: Capital Resource Partners III, L.L.C.
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
EXHIBIT 10.18
(cont.)
AMENDMENT
This Amendment dated as of June 29, 1998 (this "Amendment") amends that
certain Senior Subordinated Note and Securities Purchase Agreement dated as of
November 24, 1997 (the "Purchase Agreement") among Law Office Information
Systems, Inc. (the "Company") and Capital Resource Lenders III, L.P. ("CRL
III").
WHEREAS, pursuant to the Purchase Agreement (i) the Company issued and sold
to CRL III (A) 12.5% Senior Subordinated Notes due 2004 of the Company dated
November 24, 1997 in the aggregate principal amount of $4,000,000 (the "Notes"),
(B) an aggregate of 931,044 shares of Series A Convertible Preferred Stock, par
value $.001 per share, of the Company (the "Preferred Shares"), and (C) Common
Stock Purchase Warrants (the "Warrants") to purchase up to an aggregate of
972,293 shares of Common Stock, par value $.001 per share, of the Company; and
(ii) CRL III agreed to purchase from the Company up to an additional $6,000,000
aggregate principal amount of 12.5% Senior Subordinated Notes due 2004 of the
Company at separate closings to be held on March 31, 1998 (the "First Takedown
Closing") and June 30, 1998 (the "Second Takedown Closing"),
WHEREAS, pursuant to an Assignment, Assumption and Consent dated as of
January 1, 1998 (the "Assignment Agreement") by and among the Company, CRL III,
CRP Investment Partners III, LLC ("CRP Investment") and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇" and, together with CRL III and CRP Investment, the "Purchasers"),
(i) CRL III assigned, transferred and set over a portion of its rights,
interests and obligations associated with the Notes, the Preferred Shares and
the Warrants to CRP Investment and ▇▇▇▇▇▇▇▇, including the right and obligation
under Article II of the Purchase Agreement for CRP Investment and ▇▇▇▇▇▇▇▇ to
purchase its Pro Rata Share (as such term is defined in the Assignment
Agreement) of the First Takedown Principal and the Second Takedown Principal at
the First Takedown Closing and the Second Takedown Closing, respectively, and
(ii) CRP Investment and ▇▇▇▇▇▇▇▇ each agreed to accept the rights and assume the
performance of the obligations transferred by CRL III under the Assignment
Agreement;
WHEREAS, the First Takedown Closing occurred on March 2, 1998 and at such
First Takedown Closing the Company issued and sold to the Purchasers Notes in
the aggregate principal amount of $3,000,000; and
WHEREAS, the Company and the Purchasers hereby desire to extend the date of
the Second Takedown Closing to December 31, 1998 and amend the Purchase
Agreement as hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the agreements herein
contained, and intending to be bound hereby, the parties hereby agree as
follows:
1. Amendment of Purchase Agreement.
-------------------------------
1
1.01. Section 1.01 of the Purchase Agreement shall be amended by adding
the following defined terms:
"Assignment Agreement" shall mean that certain Assignment,
--------------------
Assumption and Consent dated as of January 1, 1998 among the Company, CRL
III, CRP Investment Partners, a Delaware limited partnership, and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇.
"CRL III Guarantees" means any and all guarantees by CRL III in
------------------
favor of Fleet National Bank and on behalf of the Company.
"Guaranty Amount" means, at any time, the maximum amount being
---------------
guaranteed by CRL III under any and all CRL III Guarantees in effect at
such time.
"Purchasers" shall mean CRL III, CRP Investment Partners III, LLC, a
----------
Delaware limited liability company, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and their
successors and assigns.
1.02. Section 2.01(c) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(c) The purchase and sale of up to an additional $3,000,000
aggregate principal amount of Notes shall take place at a closing (the "Second
Takedown Closing") to be held at the offices of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP,
High Street Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m. local
time on December 31, 1998 (the "Second Takedown Closing Date"), upon written
notice (the "Second Takedown Notice") given by the Company to the Purchasers at
least twenty (20) days prior to the Second Takedown Closing Date. Such Second
Takedown Notice shall specify the aggregate principal amount (the "Second
Takedown Principal") of the Notes to be issued and sold at such Second Takedown
Closing, which Second Takedown Principal shall not exceed $3,000,000 less the
----
Guaranty Amount, if any. At the Second Takedown Closing, the Company will issue
and sell to each Purchaser a single Note, dated the Second Takedown Closing
Date, in the principal amount equal to such Purchaser's Pro Rata Share (as such
term is defined in the Assignment Agreement) of the Second Takedown Principal,
against receipt of funds by wire transfer to an account or accounts designated
by the Company prior to such Second Takedown Closing in the amount of such
Purchaser's Pro Rata Share of the Second Takedown Principal, in payment of the
purchase price for such Note. The First Takedown Closing and the Second Takedown
Closing are sometimes herein referred to individually as a "Takedown Closing"
and collectively as the "Takedown Closings").
2. Miscellaneous.
2.01. Effect. The Assignment Agreement shall remain in full force and
------
effect and, except as amended hereby, the Purchase Agreement shall remain in
full force and effect.
2.02. No Waiver. This Amendment is effective only in the specific
---------
instance and for the specific purpose for which it is executed and shall not be
considered a waiver or agreement to amend as to any provision of the Purchase
Agreement (as amended) in the future.
2
2.03. Defined Terms. All capitalized terms used but not specifically
-------------
defined herein shall have the same meanings given such terms in the Purchase
Agreement unless the context clearly indicates or dictates a contrary meaning.
2.04. Notices. All notices, requests, demands and other communications
-------
provided for in this Amendment shall be delivered in compliance with Section
9.03 of the Purchase Agreement.
2.05. Costs, Expenses, Taxes. The Company agrees to pay on demand all
----------------------
costs and expenses of the Purchasers in connection with the preparation,
execution and delivery of this Amendment and other instruments and documents to
be delivered hereunder, including the reasonable fees and out-of-pocket expenses
of Messrs. ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, special counsel for the Purchasers.
2.06. Governing Law. This Amendment shall be governed by, and construed
-------------
and enforced in accordance with, the internal laws of The Commonwealth of
Massachusetts.
2.07. Seal. This Amendment is executed as an instrument under seal.
----
2.08. Counterparts. This Amendment may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Amendment by signing
any of such counterparts.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment or have
caused it to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
Law Office Information Systems, Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
CAPITAL RESOURCE LENDERS III, L.P.
By: Capital Resource Partners III, L.L.C.
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
CRP INVESTMENT PARTNERS III, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
4
-1-
EXHIBIT 10.18
(cont.)
AMENDMENT NO. 2
This Amendment No. 2 dated as of August 20, 1998 (this "Amendment") by and
among the Company, Capital Resource Lenders III, L.P. ("CRL III"), CRP
Investment Partners III, L.L.C. ("CRP Investment") and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇" and together with CRL III and CRP Investment, the "Purchasers")
amends that certain Senior Subordinated Note and Securities Purchase Agreement
dated as of November 24, 1997 by and between the Company and CRL III, as amended
by that certain Amendment dated as of June 29, 1998 ("Amendment No. 1") by and
among the Company, CRL III, CRP Investment and ▇▇▇▇▇▇▇▇ (as so amended by
Amendment No. 1, the "Purchase Agreement").
WHEREAS, pursuant to the Purchase Agreement and that certain Assignment,
Assumption and Consent dated as of January 1, 1998 (the "Assignment Agreement")
by and among the Company and the Purchasers, the Company has issued and sold to
the Purchasers (i) 12.5% Senior Subordinated Notes due 2004 (the "Notes") of the
Company dated November 24, 1997 in the aggregate principal amount of $7,000,000,
(ii) an aggregate of 931,044 shares of Series A Convertible Preferred Stock, par
value $.001 per share, of the Company, and (iii) Common Stock Purchase Warrants
to purchase up to an aggregate of 972,293 shares of Common Stock, par value
$.001 per share, of the Company;
WHEREAS, pursuant to Section 2.01(c) of the Purchase Agreement, the
Purchasers remain obligated to purchase additional Notes (a) on December 31,
1998 such that the aggregate amount of outstanding Notes issued on December 31,
1998 is equal to a minimum of $3,000,000 Less the Maximum Cumulative Liability
----
(as such term is defined in the CRL III Guaranty), and (b) on May 31, 1999 such
that the aggregate amount of outstanding Notes issued on December 31, 1998 and
May 31, 1999 is equal to a minimum of $3,000,000 less the Maximum Cumulative
----
Liability (as such term is defined in the CRL III Guaranty).
WHEREAS, (i) the Company and the Bank have entered into a Credit Agreement
dated as of the date hereof (the "Loan Agreement"), pursuant to which the Bank
has agreed, subject to the terms and conditions set forth therein, to establish
a credit facility in the original aggregate principal amount of $10,000,000 in
favor of the Company, and (ii) as contemplated by the Credit Agreement, CRL III
has executed a Limited Guaranty dated the date hereof (the "CRL III Guaranty")
in favor of the Bank, pursuant to which CRL III has agreed to guarantee certain
obligations of the Company under the Loan Agreement; and
WHEREAS, as a condition to the Loan Agreement and in connection with the
consummation of the transactions contemplated thereby, the parties hereto desire
to amend the Purchase Agreement as hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the agreements herein
contained, and intending to be bound hereby, the parties hereby agree as
follows:
1. Amendment of Purchase Agreement.
-------------------------------
-2-
1.01. Section 1.01 of the Purchase Agreement shall be amended by deleting
in their entirety the following definitions: "CRL Guarantees," "EFT
Financing," "Fixed Assets," "Guaranty Amount," "Interest Expense," "Net Income,"
"Net Loss" and "Total Funded Debt."
1.02. Section 1.01 of the Purchase Agreement shall be further amended by
amending the definitions of "EBITDA" and "Senior Debt" to read in their entirety
as follows and by adding the following other defined terms:
"Adjusted Current Assets" shall mean, as of any date of
-----------------------
determination, the sum of (i) cash and cash equivalents and (ii) the
Maximum Cumulative Liability (as defined under the CRL III Guaranty) plus
the amount of the CRL Subordinated Creditors' aggregate unfunded commitment
obligations under Section 2.02(c) of this Agreement and (iii) Net Accounts
Receivable.
"Adjusted Current Liabilities" shall mean, as of any date of
----------------------------
determination, (i) current liabilities (as determined in accordance GAAP
consistently applied) less (ii) Deferred Revenue.
"Adjusted EBITDA" shall mean, as of any date of determination,
---------------
EBITDA for the twelve (12) month period ending on such date minus the sum
of (i) those amounts attributable to Capital Expenditures during such
twelve (12) month period, which such amounts have not been incurred in
violation of Section 5.27 of the Loan Agreement, and (ii) all taxes due or
payable with respect to such twelve (12) month period.
"Bank" means and shall include Fleet National Bank, a national
----
banking association, and its successors and assigns.
"Capital Expenditures" shall mean expenditures which are properly
--------------------
chargeable to capital account under GAAP (including Capital Leases).
"CRL III Guaranty" shall mean that certain Limited Guaranty dated as
----------------
of August 20, 1998 executed by CRL III in favor of the Bank, pursuant to
which CRL III has agreed to guarantee certain obligations of the Company
under the Loan Agreement.
"Debt Service" shall mean, as at any date of determination, the sum
------------
of (i) consolidated interest expense of the Company and its Subsidiaries
for the twelve month period ending on such date, plus (ii) schedule
principal payments on long term debt (including, without limitation, all
Indebtedness of the Company to the Bank and the Purchasers) for the twelve
month period commencing on the date following such date of determination,
plus (iii) any amounts paid by the Company in respect of the Deferred
Facility Fee (as such term is defined in the Loan Agreement) during the
twelve month period ending on such date, all as determined in accordance
with GAAP consistently applied.
-3-
"Deferred Revenue" shall mean all liabilities of the Company under
----------------
subscription contracts, which under GAAP consistently applied are recorded
as deferred revenues.
"EBITDA" shall mean, as of any date of determination, the sum of the
------
consolidated pre-tax earnings of the Company and its Subsidiaries, plus to
----
the extent deducted in calculating pre-tax earnings, consolidated
depreciation, amortization and interest expense of the Company and its
Subsidiaries.
"Loan Agreement" shall mean that certain Credit Agreement dated as
--------------
of August 20, 1998 by and between the Company and the Bank, as from time to
time amended and in effect between the parties thereto.
"Net Accounts Receivable" shall mean, as of any date of
-----------------------
determination, the consolidated accounts receivable of the Company less all
applicable reserves (in each case, as determined in accordance with GAAP
consistently applied).
"Net Intangible Assets" shall mean the total book value of all
---------------------
assets of the Company and its Subsidiaries which would be treated as
intangible assets under GAAP, including without limitation, such items as
goodwill, trademarks, trade names, service marks, brand names, copyrights,
patents and licenses, and right with respect to the foregoing.
"Renewal Rate" shall mean as of any date of determination, the
------------
percentage of the Company's and its Subsidiaries' customers whose
subscriptions come up for renewal during the relevant fiscal year that
renew their subscriptions with the Company and/or its Subsidiaries, on
terms no less favorable than those terms generally being offered by the
Company and its Subsidiaries at the time of each such renewal.
"Senior Debt" means (i) all Indebtedness for Money Borrowed of the
-----------
Company and any of its Subsidiaries from the Bank pursuant to the Loan
Agreement or from other banks or institutional lenders, including any
extensions or renewals thereof, whether outstanding on the date hereof or
hereafter created or incurred, which is not by its terms subordinate and
junior to the Notes and which is disclosed on the Financial Statements or
is permitted by this Agreement at the time it is created or incurred, (ii)
all Indebtedness for Money Borrowed of the Company and any of its
Subsidiaries incurred to refinance any of the Indebtedness for Money
Borrowed referred to in item (i) above, where the security securing such
Indebtedness is substantially the same security as that securing the
Indebtedness for Money Borrowed being refinanced, (iii) all obligations of
the Company and any of its Subsidiaries under Capital Leases which are
permitted by this Agreement at the time they are incurred and (iv) all
guarantees by the Company and any of its Subsidiaries which are not by
their terms subordinate and junior to the Notes and which are permitted
hereby at the time they are made of Indebtedness of any Subsidiary if such
Indebtedness would have been Senior Debt pursuant to the provisions of
clause (i), (ii) or (iii) of this sentence had it been Indebtedness of the
Company.
-4-
"Tangible Capital Base" shall mean, as of any date of determination,
---------------------
the sum of (i) stockholders' equity (as determined in accordance with GAAP
consistently applied), (ii) Subordinated Debt and (iii) the Maximum
Cumulative Liability (as defined under the CRL III Guaranty) plus the
amount of the CRL Subordinated Creditors' aggregate unfunded commitment
obligations under Section 2.02(c) of the CRL Purchase Agreement less Net
Intangible Assets, provided, however, that the database assets, to the
extent under GAAP they are included as net intangible assets, shall not be
included as Net Intangible Assets.
1.03. Section 2.02(c) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(c)(i) The purchase and sale of up to an additional $3,000,000
aggregate principal amount of Notes shall take place at a closing (the
"Second Takedown Closing") to be held at the offices of ▇▇▇▇▇, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP, High Street Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇,
at 10:00 a.m. local time on December 31, 1998 (the "Second Takedown Closing
Date"), upon written notice (the "Second Takedown Notice") given by the
Company to the Purchasers at least twenty (20) days prior to the Second
Takedown Closing Date. Such Second Takedown Notice shall specify the
aggregate principal amount (the "Second Takedown Principal") of the Notes
to be issued and sold at such Second Takedown Closing, which Second
Takedown Principal shall not exceed $3,000,000 less the Maximum Cumulative
----
Liability (as such term is defined in the CRL III Guaranty) of CRL III
under the CRL III Guaranty as of the Second Takedown Closing Date. At the
Second Takedown Closing, the Company will issue and sell to each Purchaser
and each purchaser shall have the obligation to purchase a single Note,
dated the Second Takedown Closing Date, in the principal amount equal to
such Purchaser's Pro Rata Share (as such term is defined in the Assignment
Agreement) of the Second Takedown Principal, against receipt of funds by
wire transfer to an account or accounts designated by the Company prior to
such Second Takedown Closing in the amount of such Purchaser's Pro Rata
Share of the Second Takedown Principal, in payment of the purchase price
for such Note ; and (ii) the purchase and sale of up to an additional
$3,000,000 aggregate principal amount of Notes shall take place at a
closing (the "Third Takedown Closing") to be held at the offices of ▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, High Street Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m. local time on May 31, 1999 (the "Third
Takedown Closing Date"), upon written notice (the "Third Takedown Notice")
given by the Company to the Purchasers at least twenty (20) days prior to
the Third Takedown Closing Date. Such Third Takedown Notice shall specify
the aggregate principal amount (the "Third Takedown Principal") of the
Notes to be issued and sold at such Third Takedown Closing, which Third
Takedown Principal, when aggregated with the Second Takedown Principal,
shall not exceed $3,000,000 less the Maximum Cumulative Liability (as such
----
term is defined in the CRL III Guaranty) of CRL III under the CRL III
Guaranty as of the Third Takedown Closing Date. At the Third Takedown
Closing, the Company will issue and sell to each Purchaser and each
purchaser shall have the obligation to purchase a single Note, dated the
Third Takedown Closing Date, in the principal amount equal to such
Purchaser's Pro Rata Share (as such term is
-5-
defined in the Assignment Agreement) of the Third Takedown Principal,
against receipt of funds by wire transfer to an account or accounts
designated by the Company prior to such Third Takedown Closing in the
amount of such Purchaser's Pro Rata Share of the Third Takedown Principal,
in payment of the purchase price for such Note. The First Takedown Closing,
the Second Takedown Closing and the Third Takedown Closing are sometimes
herein referred to individually as a "Takedown Closing" and collectively as
the "Takedown Closings").
1.04. Section 2.12 of the Purchase Agreement is hereby amended to read in
its entirety as follows:
2.12. Subordination. The Indebtedness evidenced by the Notes and
-------------
the rights and remedies of the Purchasers under this Agreement shall be
subordinate and junior to certain Indebtedness of the Company to the Bank
in the manner and to the extent provided in the Subordination and
Intercreditor Agreement dated as of August 20, 1998 by and among the Bank,
the Company and the Purchasers (the "Subordination Agreement").
1.05. Section 7.01(m) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(m) Minimum Annual Revenue. The consolidated revenues of the
----------------------
Company and its Subsidiaries shall not be less than the amounts set forth
below as of the end of each fiscal period set forth below:
Period Minimum Annual Revenue
------ ----------------------
January 1, 1998 to December 31, 1998 $ 5,850,000
January 1, 1999 to December 31, 1999 $13,500,000
January 1, 2000 to December 31, 2000 $27,000,000
1.06. Section 7.01(n) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(n) Minimum Quick Ratio. The ratio of (a) consolidated Adjusted
-------------------
Current Assets to (b) consolidated Adjusted Current Liabilities shall not
be less than 1.50 to 1.0 as at the end of each three (3) month period
ending on each fiscal quarter commencing with the fiscal quarter ending
June 30, 1998.
1.07. Section 7.01(o) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(o) Minimum Tangible Capital Base. The Tangible Capital Base
-----------------------------
shall not be less than the amounts set forth below at the end of each three
(3) month fiscal period set forth below:
-6-
Period Minimum Tangible Capital Base
------ -----------------------------
July 1, 1998 to September 30, 1998 $4,770,000
October 1, 1998 to December 31, 1998 $4,140,000
January 1, 1999 to March 31, 1999 $2,520,000
April 1, 1999 to June 30, 1999 $1,350,000
July 1, 1999 to September 30, 1999 $ 585,000
October 1, 1999 to December 31, 1999 $ 200,000
In addition, for the three (3) month quarterly fiscal period ending
after March 31, 2000, and for each three (3) month quarterly fiscal period
ending thereafter, the Borrower and its Subsidiaries shall have a Tangible
Capital Base of not less than $495,000.
1.08. Section 7.01(p) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(p) Debt Service Coverage. The ratio of (a) consolidated
---------------------
Adjusted EBITDA to (b) consolidated Debt Service of the Company and its
Subsidiaries shall not be less than 1.10 to 1.0 at the end of each twelve
(12) month period ending on each fiscal quarter commencing with the fiscal
quarter ending December 31, 1999; provided, however, that Adjusted EBITDA
-------- -------
for the twelve (12) month period ending December 31, 1999 shall be based
upon the annualized nine (9) month period commencing April 1, 1999 and
ending December 31, 1999.
1.09. Section 7.01(q) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(q) Maximum Quarterly Net Losses; Minimum Income. The Company
--------------------------------------------
and its Subsidiaries shall not, during each three (3) month quarterly
fiscal period set forth below, have a consolidated net loss (denoted in
parentheses) (as determined in accordance with GAAP consistently applied)
in excess of the amount set forth opposite such three (3) month fiscal
period:
Period Maximum Consolidated Net Loss
------ -----------------------------
July 1, 1998 to September 30, 1998 *($1,650,000)
October 1, 1998 to December 31, 1998 *($1,100,000)
January 1, 1999 to March 31, 1999 *($2,200,000)
April 1, 1999 to June 30, 1999 *($1,925,000)
July 1, 1999 to September 30, 1999 *($1,375,000)
October 1, 1998 to December 31, 1999 * ($550,000)
* Less than or equal to
In addition, for each three (3) month quarterly fiscal period ending
after December 31, 1999, the Company and its Subsidiaries shall have
positive consolidated net income (as determined in accordance with
generally accepted accounting principles consistently
-7-
applied) of not less than $1.00.
1.10. Section 7.01(r) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(r) Renewal Rate. The consolidated Company's Renewal Rate shall
------------
not be less than eighty percent (70%) as of the end of each twelve (12)
month period ending on each fiscal year of the Company, commencing with the
fiscal year ending December 31, 1998.
1.11. Section 7.02(b) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(b) Indebtedness. Without the prior written consent of the
Purchasers, create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any liability with
respect to Indebtedness except for (1) up to $12,500,000 in the aggregate
(exclusive of interest, fees, expenses, costs, protective advances and
other amounts which may be added to principal under the Loan Agreement) in
Senior Debt, (2) current liabilities, other than for Indebtedness for Money
Borrowed, which are incurred in the ordinary course of business, (3)
purchase money security interests securing the purchase of equipment to be
used in connection with the business of the Company and its Subsidiaries,
and (5) the Notes, provided that the incurrence of all such Indebtedness
does not result in the Company's or any Subsidiary's failure to comply with
any of the provisions of Article VII hereof.
1.12. Section 7.02(l) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(l) Capital Expenditures. Make, or permit any Subsidiary to
--------------------
make or incur, Capital Expenditures in an aggregate amount in excess of
$1,650,000 in fiscal year 1998, and $1,100,000 in any fiscal year
thereafter.
1.13. Section 7.03(e) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(e) at the time of delivery of each monthly and annual statement,
a certificate, executed by the chief financial officer of the Company,
stating that such officer has caused this Agreement, the Notes, and the
Warrants to be reviewed and has no knowledge of any default by the Company
or any Subsidiary in the performance or observance of any of the provisions
of this Agreement, the Notes or the Warrants or, if such officer has such
knowledge, specifying such default and the nature thereof, and setting
forth computations in reasonable detail demonstrating compliance with the
provisions of subsections 7.01(m), (n), (o) (p), (q) and (r) and
subsections 7.02(b) and (d);
1.14. Section 7.03(f) of the Purchase Agreement is hereby amended to read
in its
-8-
entirety as follows:
(f) at the time of delivery of each annual statement, a
certificate executed by the Company's independent public accountants,
setting forth computations in reasonable detail demonstrating compliance
with the provisions of subsections 7.01(m), (n), (o), (p), (q) and (r) and
subsections 7.02(b) and (d);
1.15. Section 8.01(c) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(c) The Company shall default in the performance of any covenant
contained in subsections 7.01(m), (n), (o), (p), (q) and (r) or shall
default in the performance of any covenant contained in Section 7.02 for
ten (10) consecutive Business days; or
1.16. The Purchase Agreement is hereby amended to add a new Section
7.02(o) which shall read in its entirety as follows:
(o) Prepayments under Loan Agreement. Without the prior written
--------------------------------
consent of the Purchasers, make any prepayments of principal or interest
under the Revolving Credit or the Equipment Line of Credit (as such terms
are defined in the Loan Agreement), until such time as all outstanding SBLC
Line of Credit Advances (including all SBLC Line of Credit Advances
evidenced by the SBLC Line of Credit Term Note) (as such terms are defined
in the Loan Agreement) have been repaid to the Bank in full.
1.17. The Purchase Agreement is hereby amended to add a new Section
7.02(p) which shall read in its entirety as follows:
(p) Borrowings under the SBLC Line of Credit. Without the prior
----------------------------------------
written consent of the Purchasers, make (i) any requests for SBLC Line of
Credit Advances (as such term is defined in the Loan Agreement) pursuant to
Section 2.04(f) of the Loan Agreement or (ii) any requests of the Bank to
issue L/C's (as such term is defined in the Loan Agreement) pursuant to
Section 2.05(a) of the Loan Agreement.
2. Consent to Credit Documents.
The Purchasers hereby consent to the Company entering into the Loan
Agreement and the Credit Documents (as such term is defined in the Loan
Agreement).
3. Miscellaneous.
3.01. Effect. The Assignment Agreement shall remain in full force and
------
effect and, except as amended hereby, the Purchase Agreement shall remain in
full force and effect .
3.02. No Waiver. This Amendment is effective only in the specific
---------
instance and for the specific purpose for which it is executed and shall not be
considered a waiver or agreement to
-9-
amend as to any provision of the Purchase Agreement (as amended) in the future.
3.03. Defined Terms. All capitalized terms used but not specifically
-------------
defined herein shall have the same meanings given such terms in the Purchase
Agreement unless the context clearly indicates or dictates a contrary meaning.
3.04. Notices. All notices, requests, demands and other communications
-------
provided for in this Amendment shall be delivered in compliance with Section
9.03 of the Purchase Agreement.
3.05. Costs, Expenses, Taxes. The Company agrees to pay on demand all
----------------------
costs and expenses of the Purchasers in connection with the preparation,
execution and delivery of this Amendment and other instruments and documents to
be delivered hereunder, including the reasonable fees and out-of-pocket expenses
of Messrs. ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, special counsel for the Purchasers.
3.06. Governing Law. This Amendment shall be governed by, and construed
-------------
and enforced in accordance with, the internal laws of The Commonwealth of
Massachusetts.
3.07. Seal. This Amendment is executed as an instrument under seal.
----
3.08. Counterparts. This Amendment may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Amendment by signing
any of such counterparts.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-10-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment or
have caused it to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
LAW OFFICE INFORMATION SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
CAPITAL RESOURCE LENDERS III, L.P.
By: Capital Resource Partners III, L.L.C.
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
CRP INVESTMENT PARTNERS III, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-1-
EXHIBIT 10.18
(cont.)
1/12/98
AMENDMENT NO. 3
This Amendment No. 3 dated as of November 30, 1998 (this "Amendment") by
and among the Company, Capital Resource Lenders III, L.P. ("CRL III"), CRP
Investment Partners III, L.L.C. ("CRP Investment") and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇" and together with CRL III and CRP Investment, the "Purchasers")
amends that certain Senior Subordinated Note and Securities Purchase Agreement
dated as of November 24, 1997 by and between the Company and CRL III, as amended
by that certain Amendment dated as of June 29, 1998 by and among the Company and
the Purchasers and that certain Amendment No. 2 dated as of August 20, 1998 by
and among the Company and the Purchasers (as so amended, the "Purchase
Agreement").
WHEREAS, pursuant to the Purchase Agreement and that certain Assignment,
Assumption and Consent dated as of January 1, 1998 (the "Assignment Agreement")
by and among the Company and the Purchasers, the Company has issued and sold to
the Purchasers (i) 12.5% Senior Subordinated Notes due 2004 (the "Notes") of the
Company in the aggregate principal amount of $7,000,000, (ii) an aggregate of
931,044 shares of Series A Convertible Preferred Stock, par value $.001 per
share, of the Company, and (iii) Common Stock Purchase Warrants to purchase up
to an aggregate of 972,293 shares of Common Stock, par value $.001 per share, of
the Company;
WHEREAS, pursuant to Section 2.02(c) of the Purchase Agreement, the
Purchasers remain obligated to purchase additional Notes at separate Takedown
Closings; and
WHEREAS, the Company and the Purchasers desire to amend Sections 1.01 and
2.02(c) of the Purchase Agreement as hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the agreements herein
contained, and intending to be bound hereby, the parties hereby agree as
follows:
1. Amendment of Purchase Agreement.
-------------------------------
1.01. Section 1.01 of the Purchase Agreement shall be amended to delete in
its entirety the definition of "Second Takedown Notice" and by adding the
following definitions:
"Fourth Takedown Closing" shall have the meaning assigned to that
-----------------------
term in Section 2.02(c).
"Fourth Takedown Closing Date" shall have the meaning assigned to
----------------------------
that term in Section 2.02(c).
"Fourth Takedown Notice" shall have the meaning assigned to that
----------------------
term in Section 2.02(c).
-2-
"Fourth Takedown Principal" shall have the meaning assigned to that
-------------------------
term in Section 2.02(c).
"Third Takedown Closing" shall have the meaning assigned to that
----------------------
term in Section 2.02(c).
"Third Takedown Closing Date" shall have the meaning assigned to
---------------------------
that term in Section 2.02(c).
"Third Takedown Principal" shall have the meaning assigned to that
------------------------
term in Section 2.02(c).
1.02. Section 2.02(c) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(c)(i) The purchase and sale of up to an additional $500,000
aggregate principal amount of Notes (the "Second Takedown Principal") shall
take place at a closing (the "Second Takedown Closing") to be held at the
offices of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, High Street Tower, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m. local time on November 30,
1998 (the "Second Takedown Closing Date"). At the Second Takedown Closing,
the Company will issue and sell to each Purchaser and each Purchaser shall
have the obligation to purchase a single Note, dated the Second Takedown
Closing Date, in the principal amount equal to such Purchaser's Pro Rata
Share (as such term is defined in the Assignment Agreement) of the Second
Takedown Principal, against receipt of funds by wire transfer to an account
or accounts designated by the Company prior to such Second Takedown Closing
in the amount of such Purchaser's Pro Rata Share of the Second Takedown
Principal, in payment of the purchase price for such Note; (ii) The
purchase and sale of up to an additional $500,000 aggregate principal
amount of Notes (the "Third Takedown Principal") shall take place at a
closing (the "Third Takedown Closing") to be held at the offices of ▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, High Street Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m. local time on December 15, 1998 (the "Third
Takedown Closing Date"). At the Third Takedown Closing, the Company will
issue and sell to each Purchaser and each Purchaser shall have the
obligation to purchase a single Note, dated the Third Takedown Closing
Date, in the principal amount equal to such Purchaser's Pro Rata Share (as
such term is defined in the Assignment Agreement) of the Third Takedown
Principal, against receipt of funds by wire transfer to an account or
accounts designated by the Company prior to such Third Takedown Closing in
the amount of such Purchaser's Pro Rata Share of the Third Takedown
Principal, in payment of the purchase price for such Note; and (iii) The
purchase and sale of up to an additional $2,000,000 aggregate principal
amount of Notes shall take place at a closing (the "Fourth Takedown
Closing") to be held at the offices of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP,
High Street Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m.
local time on May 31, 1999 (the "Fourth Takedown Closing Date"), upon
written notice (the "Fourth Takedown Notice") given by the Company to the
Purchasers at least twenty (20) days prior to the Fourth Takedown Closing
Date.
-3-
Such Fourth Takedown Notice shall specify the aggregate principal amount
(the "Fourth Takedown Principal") of the Notes to be issued and sold at
such Fourth Takedown Closing, which Fourth Takedown Principal shall not
exceed $2,000,000 less the Maximum Cumulative Liability (as such term is
----
defined in the CRL III Guaranty) of CRL III under the CRL III Guaranty as
of the Fourth Takedown Closing Date. At the Fourth Takedown Closing, the
Company will issue and sell to each Purchaser and each Purchaser shall have
the obligation to purchase a single Note, dated the Fourth Takedown Closing
Date, in the principal amount equal to such Purchaser's Pro Rata Share (as
such term is defined in the Assignment Agreement) of the Fourth Takedown
Principal, against receipt of funds by wire transfer to an account or
accounts designated by the Company prior to such Fourth Takedown Closing in
the amount of such Purchaser's Pro Rata Share of the Fourth Takedown
Principal, in payment of the purchase price for such Note. The First
Takedown Closing, the Second Takedown Closing, the Third Takedown Closing
and the Fourth Takedown Closing are sometimes herein referred to
individually as a "Takedown Closing" and collectively as the "Takedown
Closings").
2. Miscellaneous.
2.01. Effect. The Assignment Agreement shall remain in full force and
------
effect and, except as amended hereby, the Purchase Agreement shall remain in
full force and effect.
2.02. No Waiver. This Amendment is effective only in the specific
---------
instance and for the specific purpose for which it is executed and shall not be
considered a waiver or agreement to amend as to any provision of the Purchase
Agreement (as amended) in the future.
2.03. Defined Terms. All capitalized terms used but not specifically
-------------
defined herein shall have the same meanings given such terms in the Purchase
Agreement unless the context clearly indicates or dictates a contrary meaning.
2.04. Notices. All notices, requests, demands and other communications
-------
provided for in this Amendment shall be delivered in compliance with Section
9.03 of the Purchase Agreement.
2.05. Costs, Expenses, Taxes. The Company agrees to pay on demand all
----------------------
costs and expenses of the Purchasers in connection with the preparation,
execution and delivery of this Amendment and other instruments and documents to
be delivered hereunder, including the reasonable fees and out-of-pocket expenses
of Messrs. ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, special counsel for the Purchasers.
2.06. Governing Law. This Amendment shall be governed by, and construed
-------------
and enforced in accordance with, the internal laws of The Commonwealth of
Massachusetts.
2.07. Seal. This Amendment is executed as an instrument under seal.
----
2.08. Counterparts. This Amendment may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties
-4-
hereto may execute this Amendment by signing any of such counterparts.
[Remainder of Page Intentionally Left Blank]
-5-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment or have
caused it to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
Law Office Information Systems, Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
CAPITAL RESOURCE LENDERS III, L.P.
By: Capital Resource Partners III, L.L.C.
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
CRP INVESTMENT PARTNERS III, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-1-
Exhibit 10.18
(cont.)
AMENDMENT NO. 5
This Amendment No. 5 dated as of May 25, 1999 (this "Amendment") by and
among the Company, Capital Resource Lenders III, L.P. ("CRL III"), CRP
Investment Partners III, L.L.C. ("CRP Investment") and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇" and together with CRL III and CRP Investment, the "Purchasers")
amends that certain Senior Subordinated Note and Securities Purchase Agreement
dated as of November 24, 1997 by and between the Company and CRL III, as amended
by that certain Amendment dated as of June 29, 1998, that certain Amendment No.
2 dated as of August 20, 1998, that certain Amendment No. 3 dated as of November
30, 1998 and that certain Amendment No. 4 dated as of January 29, 1999, all by
and among the Company and the Purchasers (as so amended, the "Purchase
Agreement").
WHEREAS, pursuant to the Purchase Agreement and that certain Assignment,
Assumption and Consent dated as of January 1, 1998 by and among the Company and
the Purchasers, the Company has issued and sold to the Purchasers (i) 12.5%
Senior Subordinated Notes due 2004 of the Company dated November 24, 1997 in the
aggregate principal amount of $10,000,000 (the "Notes"), (ii) an aggregate of
931,044 shares of Series A Convertible Preferred Stock, par value $.001 per
share, of the Company, and (iii) Common Stock Purchase Warrants to purchase up
to an aggregate of 972,293 shares of Common Stock, par value $.001 per share, of
the Company;
WHEREAS, the Company requested that the Purchasers amend certain provisions
of the Purchase Agreement and that the Purchasers waive the Company's obligation
to comply with certain financial covenants set forth in the Purchase Agreement;
and
WHEREAS, the Purchasers are willing to amend and waive certain provisions
of the Purchase Agreement, on the terms and conditions more fully set forth in
this Amendment.
NOW THEREFORE, in consideration of the premises and the agreements herein
contained, and intending to be bound hereby, the parties hereby agree as
follows:
1. Amendment of Purchase Agreement.
-------------------------------
1.01. Section 1.01 of the Purchase Agreement shall be amended by amending
the definitions of "Change of Control", "Qualified IPO" and "Senior Debt" to
read in their entirety as follows:
"Change of Control" means any of the following:
(i) any person other than ▇▇▇▇ ▇. ▇▇▇▇▇▇ or a Person controlled
by ▇▇▇▇ ▇. ▇▇▇▇▇▇ at any time becomes the beneficial owner, directly
or indirectly and whether as a result of issuances, redemptions or
repurchases by the Company of Common Stock or transfers of Common
Stock by stockholders of the Company, of Common Stock representing
50% or more of the combined voting power with respect to the election
of directors of the Company represented by all then outstanding
Common Stock of the Company;
-2-
(ii) the Company consolidates with, or merges with or into,
another person, sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets directly
or indirectly to any Person, or any person consolidates with, or
merges with or into, the Company, in any such event pursuant to a
transaction in which the outstanding Common Stock of the Company is
converted into or exchanged for cash, securities, equity interests or
other property and immediately after such transaction the persons who
were the beneficial owners of the outstanding Common Stock of the
Company immediately prior to such transaction are not the beneficial
owners, directly or indirectly, of more than 50% of the combined
voting power represented by all then outstanding common stock of the
surviving or transferee Person; or
(iii) the Company or any of its Subsidiaries purchase, lease or
otherwise acquire assets of any Person or Persons, in one or a series
of related transactions, for consideration consisting in whole or in
part of Common Stock, Convertible Securities or Rights and the number
of shares of Common Stock issued by the Company (including all shares
issuable or purchasable upon exercise of all such Convertible
Securities and Rights) in such transaction is equal to 50% or more of
the number of fully diluted shares of Common Stock outstanding
immediately prior to such transaction (or the first of such
transactions).
"Qualified IPO" means a firm commitment underwritten public offering
of shares of the Company's Common Stock in which (i) the aggregate proceeds
to the Company in such underwritten public offering equals or exceeds
$20,000,000, and (ii) the per share price of Common Stock offered for sale
in such offering is at least $6.4444 (as adjusted for stock splits,
dividends, recapitalizations and the like).
"Senior Debt" means (i) all Indebtedness for Money Borrowed of the
-----------
Company and any of its Subsidiaries from the Bank pursuant to the Loan
Agreement or from other banks or institutional lenders, including any
extensions or renewals thereof, whether outstanding on the date hereof or
hereafter created or incurred, which is not by its terms subordinate and
junior to the Notes at the time it is created or incurred, (ii) all
Indebtedness for Money Borrowed of the Company and any of its Subsidiaries
incurred to refinance any of the Indebtedness for Money Borrowed referred
to in item (i) above, where the security securing such Indebtedness is
substantially the same security as that securing the Indebtedness for Money
Borrowed being refinanced, (iii) all obligations of the Company and any of
its Subsidiaries under Capital Leases which are permitted by this Agreement
at the time they are incurred and (iv) all guarantees by the Company and
any of its Subsidiaries which are not by their terms subordinate and junior
to the Notes and which are permitted hereby at the time they are made of
Indebtedness of any Subsidiary if such Indebtedness would have been Senior
Debt pursuant to the provisions of clause (i), (ii) or (iii) of this
sentence had it been Indebtedness of the Company.
1.02. Section 2.01 of the Purchase Agreement is hereby amended so that all
references to the year "2004" shall read "2003" and all references to "September
30, 2004" shall read
-3-
"November 30, 2003".
1.03. Section 2.06(a) of the Purchase Agreement is hereby amended to read
in its entirety as follows:
(a) Required Redemption. On the stated or accelerated maturity of
-------------------
the Notes, the Company will pay the principal amount of the Notes then
outstanding together with all accrued and unpaid interest then due thereon.
Except as set forth in subsection 2.06(c), no optional redemption of less
than all of the Notes shall affect the obligation of the Company to make
the redemption required by this subsection.
1.04. Section 3.04 of the Purchase Agreement is hereby deleted in its
entirety.
1.05. Section 3.05 of the Purchase Agreement is hereby amended to read in
its entirety as follows:
3.05. Termination Upon Liquidity IPO. The Purchasers' right to
------------------------------
purchase new Mezzanine Securities set forth in Section 3.03 shall terminate
immediately prior to the closing of a Liquidity IPO.
1.06. Section 7.01 of the Purchase Agreement is hereby amended to read in
its entirety as follows:
7.01. Affirmative Covenants of the Company Other Than Reporting
---------------------------------------------------------
Requirements. Without limiting any other covenants and provisions
------------
hereof, the Company covenants and agrees that, as long as any of the Notes
are outstanding and, thereafter, only in the case of Section 7.01(f), as
long as at least fifty percent (50%) of the Preferred Shares are
outstanding, it will perform and observe the following covenants and
provisions and will cause each Subsidiary to perform and observe such of
the following covenants and provisions as are applicable to such
Subsidiary:
(a) Punctual Payment. Pay the principal of, premium, if any,
----------------
and interest on each of the Notes at the times and place and in the manner
provided in the Notes and herein.
(b) Payment of Taxes and Trade Debt. Pay and discharge, and
-------------------------------
cause each Subsidiary to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
profits or business, or upon any properties belonging to it, prior to the
date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become a lien or charge upon any properties of the Company or
any Subsidiary, provided that neither the Company nor any Subsidiary shall
be required to pay any such tax, assessment, charge, levy or claim which is
being contested in good faith and by appropriate proceedings if the Company
or the Subsidiary concerned shall have set aside on its books adequate
reserves with respect thereto. Pay and cause each Subsidiary to pay, when
due, or in conformity with customary trade terms, all lease obligations,
all trade debt, and all other Indebtedness incident to the operations of
the Company or the Subsidiaries, except such as are being contested in good
faith and by appropriate
-4-
proceedings if the Company or the Subsidiary concerned shall have set aside
on its books adequate reserves with respect thereto.
(c) Maintenance of Insurance. Maintain, and cause each
------------------------
Subsidiary to maintain, insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is
usually carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Company or such
Subsidiary operates, and in any event in amounts sufficient to prevent the
Company or such Subsidiary from becoming a co-insurer.
(d) Preservation of Corporate Existence. Preserve and maintain,
-----------------------------------
and cause each Subsidiary to preserve and maintain, its corporate
existence, rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified, and cause each Subsidiary
to qualify and remain qualified, as a foreign corporation in each
jurisdiction in which such qualification is necessary or desirable in view
of its business and operations or the ownership of its properties, except
where the failure to remain so qualified would not, either individually or
in the aggregate, have a Material Adverse Effect; provided, however, that
nothing herein contained shall prevent any merger, consolidation or
transfer of assets permitted by subsection 7.02(e). Preserve and maintain,
and cause each Subsidiary to preserve and maintain, all licenses and other
rights to use patents, processes, licenses, trademarks, trade names,
inventions, intellectual property rights or copyrights owned or possessed
by it and necessary to the conduct of its business.
(e) Compliance with Laws. Comply, and cause each Subsidiary to
--------------------
comply, with all applicable laws, rules, regulations and orders of any
governmental authority, the noncompliance with which could have a Material
Adverse Effect.
(f) Inspection Rights. At any reasonable time and from time to
-----------------
time and upon prior written notice, permit the Purchasers or any of their
agents or representatives to examine and make copies of and extracts from
the records and books of account of, and visit and inspect the properties
of, the Company and any Subsidiary, and to discuss the affairs, finances
and accounts of the Company and any Subsidiary with any of their officers
or directors and independent accountants. If an Event of Default then
exists, all reasonable out-of-pocket expenses of the Purchasers (or their
agents or representatives), the Company or any Subsidiary incurred in
connection with such inspection rights shall be borne by the Company.
(g) Keeping of Records and Books of Account. Keep, and cause
---------------------------------------
each Subsidiary to keep, adequate records and books of account, in which
complete entries will be made in accordance with GAAP, reflecting all
financial transactions of the Company and each Subsidiary, and in which,
for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in
connection with its business shall be made.
(h) Maintenance of Properties, Etc. Maintain and preserve, and
------------------------------
cause each Subsidiary to maintain and preserve, all of its properties,
necessary or useful in the proper conduct of its business, in good repair,
working order and condition, ordinary wear
-5-
and tear excepted.
(i) Compliance with ERISA. Comply, and cause each Subsidiary to
---------------------
comply, with all minimum funding requirements applicable to any pension or
other employee benefit or employee contribution plans which are subject to
ERISA or to the Code, and comply, and cause each Subsidiary to comply, in
all other material respects with the provisions of ERISA and the Code, and
the rules and regulations thereunder, which are applicable to any such
plan. Neither the Company nor any Subsidiary will permit any event or
condition to exist which could permit any such plan to be terminated under
circumstances which would cause the lien provided for in Section 4068 of
ERISA to attach to the assets of the Company or any Subsidiary.
(j) Attendance at Board Meetings. At any time at which a nominee
----------------------------
of the Purchasers is not a member of the Board or any committee of the
Board as provided in this Agreement and the Amended and Restated
Stockholders Agreement dated as of May ___, 1999 (as the same may be
amended, modified or supplemented from time to time, the "Amended and
Restated Stockholders Agreement") among the Company, the Purchasers and the
other parties thereto, permit the Purchasers or their designee to have one
observer attend each meeting of the Board and any committee thereof. The
Company will send to the Purchasers and their designee the notice of the
time and place of any such meeting in the same manner and at the same time
as notice is sent to the directors or committee members, as the case may
be; provided, however, that the Purchasers and their designee shall always
received at least ten (10) days prior notice of any meeting which is not an
emergency meeting and at least three (3) Business Days' notice of any
emergency meeting. The Company shall also provide to the Purchasers copies
of all notices, reports, minutes, consents and other documents at the time
and in the manner as they are provided to the Board or committees. The
Company shall reimburse the Purchasers for all reasonable costs incurred by
the Purchasers or their designee in connection with traveling to and from
and attending meetings of the Board and committees. Any observer who
attends any meetings of the Board or committees thereof, as a condition to
his or her right to attend such meetings, shall execute and comply with an
agreement with the Company containing such restrictions on the use or
disclosure of confidential information and similar matters as the Company
may reasonably request.
(k) Payment of Senior Debt by the Purchasers. In the event that
----------------------------------------
any default occurs in the payment of the principal of or any interest on
any Senior Debt and such default shall continue for a period of thirty (30)
days (or such shorter period as is necessary in order to permit the
Purchasers to act pursuant to this subsection prior to any acceleration of
such Senior Debt) without waiver or forbearance by the lender of such
Senior Debt, permit the Purchasers, on behalf of the Company, to cure such
default, to prepay in full any such Senior Debt or to purchase such Senior
Debt, upon terms and conditions set forth in the Subordination Agreement.
(l) Minimum Annual Revenue. The consolidated revenues of the
----------------------
Company and its Subsidiaries shall not be less than the amounts set forth
below as of the end of each fiscal period set forth below:
-6-
Period Minimum Annual Revenue
------ ----------------------
January 1, 1999 to December 31, 1999 $ 7,500,000
January 1, 2000 to December 31, 2000 $15,000,000
January 1, 2001 to December 31, 2001 $25,000,000
1.07. Section 7.02 of the Purchase Agreement is hereby amended to read in
its entirety as follows:
7.02. Negative Covenants of the Company. Without limiting any other
covenants and agrees that, until repayment in full of the aggregate
outstanding principal balance of the Notes together with all interest and
premium, if any, due thereon, it will comply with and observe the following
covenants and provisions, and will cause each Subsidiary to comply with and
observe such of the following covenants and provisions as are applicable to
such Subsidiary, and will not:
(a) Liens. Create, incur, assume or suffer to exist, or
-----
permit any Subsidiary to create, incur, assume or suffer to exist, any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance (including the lien or retained security title of a conditional
vendor) of any nature, upon or with respect to any of its properties, now
owned or hereafter acquired, or assign or otherwise convey any right to
receive income, except that the foregoing restrictions shall not apply to
mortgages, deeds of trust, pledges, liens, security interests or other
charges or encumbrances (collectively, "Permitted Liens"):
(i) for taxes, assessments or governmental charges or levies
on property of the Company or any Subsidiary if the same shall not at
the time be delinquent or thereafter can be paid without penalty, or
are being contested in good faith and by appropriate proceedings;
(ii) imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary
course of business;
(iii) arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation;
(iv) securing the performance of bids, tenders, contracts
(other than for the repayment of borrowed money), statutory
obligations and surety bonds;
(v) in the nature of zoning restrictions, easements and
rights or restrictions of record on the use of real property which do
not materially detract from its value or impair its use;
(vi) arising by operation of law in favor of the owner or
sublessor of leased premises and confined to the property rented;
-7-
(vii) arising from any litigation or proceeding which is being
contested in good faith by appropriate proceedings, provided, however,
that no execution or levy has been made;
(viii) described on Exhibit 6.07 which secure the Indebtedness
------------
set forth on Exhibit 6.08B, provided that no such lien is extended to
-------------
cover other or different property of the Company or any Subsidiary;
and
(ix) liens on the accounts receivable of the Company which
secure Indebtedness permitted by Section 7.02(b).
(b) Indebtedness. Without the prior written consent of the
------------
Purchasers, create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any liability with
respect to Indebtedness except for (1) up to $12,500,000 in the aggregate
(exclusive of interest, fees, expenses, costs, protective advances and
other amounts which may be added to principal under any applicable loan
agreement) in Senior Debt, (2) current liabilities, other than for
Indebtedness for Money Borrowed, which are incurred in the ordinary course
of business, (3) purchase money security interests securing the purchase of
equipment to be used in connection with the business of the Company and its
Subsidiaries, and (4) the Notes.
(c) Lease Obligations. Become obligated to pay rent under
-----------------
any leases or other rental arrangements (other than Capital Leases) under
which the amount of the aggregate lease or other payments under all such
agreements or arrangements exceeds $150,000 on a consolidated basis for any
twelve-month period.
(d) Assumptions or Guaranties of Indebtedness of Other
--------------------------------------------------
Persons. Assume, guarantee, endorse or otherwise become directly or
-------
contingently liable on, or permit any Subsidiary to assume, guarantee,
endorse or otherwise become directly or contingently liable on (including,
without limitation, liability by way of agreement, contingent or otherwise,
to purchase, to provide funds for payment, to supply funds to or otherwise
invest in the debtor or otherwise to assure the creditor against loss) any
Indebtedness of any other Person, except for guarantees by endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business and except by the Company with respect to any Indebtedness of any
Subsidiary which is permitted by this Agreement.
(e) Mergers, Sale of Assets, Etc. Without the prior written
----------------------------
consent of the Purchasers (i) merge or consolidate with any other Person,
or sell, assign, lease or otherwise dispose of or voluntarily part with the
control of (whether in one transaction or in a series of transactions) all,
or substantially all, of its assets (whether now owned or hereinafter
acquired), or dissolve, liquidate or wind-up its business or affairs or
otherwise terminate or permit the termination of its legal existence,
except that any wholly-owned Subsidiary may merge into or consolidate with
or transfer assets to the Company or any wholly-owned Subsidiary, or (ii)
sell, transfer, convey, mortgage, pledge or otherwise dispose of or
encumber any of their respective properties (including any property
-8-
consisting of an equity interest or other investment or interest in any
Subsidiary), except for (A) sales of property in the ordinary course of
business, consistent with past practices, in arm's length transactions with
non-Affiliates, (B) encumbrances of assets on customary terms and
consistent with past practices to secure Indebtedness permitted by
paragraph (b) of this Section 7.02, and (C) the sale of property not
permitted by subclause (A) or (B) of this clause if such sale is to a non-
Affiliate of the Company, is at a price not less than fair market value and
the aggregate sale price for such sale and all other sales (whether or nor
related) during any single fiscal year made in reliance on this subclause
(C) does not exceed $1,000,000, provided that at least 50% of the net
proceeds from any such dispositions in excess of $250,000 during any single
fiscal year are applied to reduce outstanding Indebtedness.
(f) Investments in Other Persons. Without the prior written
----------------------------
consent of the Purchasers, make or permit any Subsidiary to make, any loan
or advance to any Person, or purchase, otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any capital stock, assets or
other property of, obligations of, or any interest in, any Person, except:
(i) investments by the Company or a Subsidiary in evidences of
indebtedness issued or fully guaranteed by the United States of
America and having a maturity of not more than one year from the date
of acquisition;
(ii) investments by the Company or a Subsidiary in certificates
of deposit, notes, acceptances and repurchase agreements having a
maturity of not more than one year from the date of acquisition issued
by a bank organized in the United States having capital, surplus and
undivided profits of at least $100,000,000 and whose parent holding
company has long-term debt rated Aa1 or higher, and whose commercial
paper (if rated) is rated Prime 1 by ▇▇▇▇▇'▇ Investors Service, Inc.;
(iii) loans or advances from a Subsidiary to the Company or from
the Company to a Subsidiary;
(iv) investments by the Company or a Subsidiary in the highest-
rated commercial paper having a maturity of not more than one year
from the date of acquisition;
(v) advances to employees for travel or relocation in
accordance with the ordinary course of business; and
(vi) acquisitions or assets, capital stock or other property
which individually and in the aggregate are not material to the
Company or such Subsidiary (assets, capital stock and other property
with a fair market value of less than $250,000 acquired in any one-
year period in the aggregate shall not be deemed "material");
provided, however, that each such acquisition can be made in
compliance with the other terms of this Agreement, including, without
limitation, Section 7.02(l).
-9-
(g) Distributions. Without the prior written consent of the
-------------
Purchasers, declare or pay any dividends, purchase, redeem, retire, or
otherwise acquire for value any of its capital stock (or rights, options or
warrants to purchase such shares) now or hereafter outstanding, return any
capital to its stockholders as such, or make any distribution of assets to
its stockholders as such, or permit any Subsidiary to do any of the
foregoing (such transactions being hereinafter referred to as
"Distributions"); provided, however, that nothing herein contained shall
prevent:
(i) the Company from effecting a stock split or declaring or
paying any dividend consisting of shares of any class of Common Stock
to the holders of shares of such class of Common Stock, provided that
such stock split or dividend is effected equally across all classes of
Common Stock, or
(ii) any Subsidiary from declaring or making payment of cash and
stock dividends, returns of capital or distributions of assets to the
Company;
if in the case of any such transaction the Distribution can be made in
compliance with the other terms of this Agreement.
(h) Dealings with Affiliates. Without the prior written consent
------------------------
of the Purchasers, enter or permit any Subsidiary to enter into any
transaction with any holder of any class of capital stock of the Company,
or any member of their families or any corporation or other entity in which
any one or more of such stockholders or members of their immediate families
directly or indirectly holds any class of capital stock; provided, however,
that this Section 7.02(h) shall not apply to any transaction which is
governed by Section 7.02(m) or to the sale of goods or services in the
ordinary course of business.
(i) Maintenance of Ownership of Subsidiaries. Sell or other-
----------------------------------------
wise dispose of any shares of capital stock of any Subsidiary, except to
the Company or another Subsidiary, or permit any Subsidiary to issue, sell
or otherwise dispose of any shares of its capital stock or the capital
stock of any Subsidiary, except to the Company or another Subsidiary,
provided, however, that nothing herein contained shall prevent any merger,
consolidation or transfer of assets permitted by subsection 7.02(e).
(j) Change in Nature of Business. Without the prior written
----------------------------
consent of the Purchasers, make, or permit any Subsidiary to make, any
change in the nature of its business as carried on at the date hereof.
(k) No Amendment or Waiver of Charter Documents . Amend,
-------------------------------------------
alter, repeal or terminate its Articles of Incorporation (or comparable
charter documents) without the prior written consent of the Purchasers.
(l) Capital Expenditures. Make, or permit any Subsidiary to
--------------------
make or incur, Capital Expenditures in an aggregate amount in excess of
$5,000,000 in fiscal year 1999, and $1,650,000 in any fiscal year
thereafter.
-10-
(m) Compensation. Pay, directly or indirectly, as salary,
------------
bonuses, fringe benefits, expenses, stock option grants, drawing accounts
or otherwise any compensation to any executive officer (or any relative of
any executive officer) of the Company or any Subsidiary not approved by the
Compensation Committee of the Board other than such compensation
arrangements as are in place as of the Initial Closing Date.
(n) Preferred Stock. Without the prior written consent of the
---------------
Purchasers, issue any shares of, or rights to acquire any shares of,
Preferred Stock as authorized in the Company's Articles of Incorporation as
amended and in effect on May 21, 1999 (except the 931,044 shares of
Series A Preferred Stock and the 439,589 shares of Series B Preferred Stock
and the 2,581,756 shares of Series C Preferred Stock authorized for
issuance as of that date).
1.08. Section 7.03(e) and (f), respectively, are hereby amended to read in
their entirety as follows:
(e) at the time of delivery of each monthly and annual statement, a
certificate, executed by the chief financial officer of the Company,
stating that such officer has caused this Agreement, the Notes, and the
Warrants to be reviewed and has no knowledge of any default by the Company
or any Subsidiary in the performance or observance of any of the provisions
of this Agreement, the Notes or the Warrants or, if such officer has such
knowledge, specifying such default and the nature thereof, and setting
forth computations in reasonable detail demonstrating compliance with the
provisions of subsections 7.01(l) and subsections 7.02(b) and (d);
(f) at the time of delivery of each annual statement, a certificate
executed by the Company's independent public accountants, setting forth
computations in reasonable detail demonstrating compliance with the
provisions of subsections 7.01(l) and subsections 7.02(b) and (d);
1.09. Section 8.01 is hereby amended to read in its entirety as follows:
Events of Default. If any of the following events ("Events of
-----------------
Default") shall occur and be continuing:
(a) The Company shall fail to pay any installment of principal
of any of the Notes when due; or
(b) The Company shall fail to pay any interest or premium, if
any, on any of the Notes when due; or
(c) The Company shall default in the performance of any
covenant contained in subsections 7.01(l) or shall default in the
performance of any covenant contained in Section 7.02 for ten (10)
consecutive Business days; or
-11-
(d) Any representation or warranty made by the Company in this
Agreement or by the Company (or any of its officers) in any certificate,
instrument or written statement made or delivered pursuant to or in
connection with this Agreement, shall prove to have been incorrect when
made in any material respect; or
(e) The Company or any Subsidiary shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement,
the Notes or the Warrants on its part to be performed or observed and any
such failure remains unremedied for fifteen (15) Business Days after
written notice thereof shall have been given to the Company by any
registered holder of the Notes; or
(f) The Company or any Subsidiary shall fail to pay any
Indebtedness for Money Borrowed exceeding $100,000 owing by the Company or
such Subsidiary (as the case may be), or any interest or premium thereon,
when due (or, if permitted by the terms of the relevant document, within
any applicable grace period), whether such Indebtedness for Money Borrowed
shall become due by scheduled maturity, by required prepayment, by
acceleration, by demand or otherwise, or shall fail to perform any term,
covenant or agreement on its part to be performed under any agreement or
instrument evidencing or securing or relating to any such Indebtedness for
Money Borrowed owing by the Company or any Subsidiary, as the case may be,
when required to be performed (or, if permitted by the terms of the
relevant document, within any applicable grace period), if the effect of
such failure to pay or perform is to accelerate, or to permit the holder or
holders of such Indebtedness for Money Borrowed, or the trustee or trustees
under any such agreement or instrument to accelerate the maturity of such
Indebtedness for Money Borrowed, unless such failure to pay or perform
shall be waived by the holder or holders of such Indebtedness for Money
Borrowed or such trustee or trustees; or
(g) The Company or any Significant Subsidiary (as such term is
defined in Section 5.1 of Part A of Article Fourth of the Company's
Articles of Incorporation, as amended and in effect on May 21, 1999) shall
(i) admit in writing its inability to pay its debts generally as they
become due; (ii) commence a voluntary case under Title 11 of the United
States Code as from time to time in effect, or authorize, by appropriate
proceedings of its board of directors or other governing body, the
commencement of such a voluntary case; (iii) file an answer or other
pleading admitting or failing to deny the material allegations of a
petition filed against it commencing an involuntary case under said Title
11, or seeking, consenting to or acquiescing in the relief therein
provided, or by its failing to controvert timely the material allegations
of any such petition; (iv) be the subject of the entry of an order for
relief in any involuntary case commenced under said Title 11; (v) seek
relief as a debtor under any applicable law, other than said Title 11, of
any jurisdiction relating to the liquidation or reorganization of debtors
or to the modification or alteration of the rights of creditors, or by its
consenting to or acquiescing in such relief; (vi) be the subject of the
entry of an order by a court of competent jurisdiction (a) finding it to be
bankrupt or insolvent, (b) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its
creditors, or (c) assuming custody of, or appointing a receiver or other
custodian for, all or a substantial part of its property; or (vii) make an
assignment for the benefit of, or enter into a composition with, its
creditors, or appoint or consent to the appointment of a receiver or
-12-
other custodian for all or a substantial part of its property; or
(h) A Change in Control occurs, which Change in Control is not
consented to specifically with reference to this Section 8.01(h) by the
Purchasers; or
(i) Any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against a substantial part of the
property of the Company or any Subsidiary and such judgment, writ, or
similar process shall not be released, vacated or fully bonded within sixty
(60) days after its issue or levy;
then, and in any such event,
(1) the Purchasers may, by notice to the Company, declare the
entire unpaid principal amount of the Notes, all interest accrued and
unpaid thereon and all other amounts payable under this Agreement to
be forthwith due and payable, whereupon the Notes, all such accrued
interest and all such amounts shall become and be forthwith due and
payable (unless there shall have occurred an Event of Default under
subsection 8.01(g) in which case all such amounts shall automatically
become due and payable), without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived
by the Company, and
(2) the Purchasers may proceed to protect and enforce their
rights by suit in equity (including without limitation a suit for
rescission), action at law and/or other appropriate proceeding either
for specific performance of any covenant, provision or condition
contained or incorporated by reference in this Agreement or any term
of the Articles of Incorporation of the Company, or in aid of the
exercise of any power granted in this Agreement or in the Articles of
Incorporation of the Company.
1.10. Section 9.24 is hereby amended to read in its entirety as follows:
Confidentiality. The Company's obligations under Sections 7.01(f)
---------------
and 7.03 shall at all times be contingent upon the Purchasers' agreement,
and the Purchasers hereby agrees, to take all reasonable precautions to
safeguard the confidentiality of the information received by or disclosed
to the Purchasers by the Company in the fulfillment of the Company's
obligations under such Sections and to refrain from disclosure of such
information to anyone other than a person who will assist the Purchasers in
evaluating the Company or to the Purchasers' accountants, attorneys and
other professional advisors and, in the case of Section 7.03, to its equity
investors (but only to the extent reasonably necessary to meet the
Purchasers' reporting obligations).
1. Modification to Terms of Notes.
------------------------------
2.01. Modification of Notes. The parties hereto agree that, subject to
---------------------
the terms of the Purchase Agreement, the scheduled maturity date of the Notes be
changed from September 30, 2004 to November 30, 2003, and that, in accordance
with Section 1.02 of this Amendment, the
-13-
Purchase Agreement shall be deemed to be amended to reflect such new maturity
date.
2.02. Cancellation of Notes. Upon execution and delivery of this Amendment,
---------------------
in order to properly reflect the new maturity date of the Notes as contemplated
by Section 2.01 hereof, the Purchasers shall each surrender the Notes in
exchange for new Notes (the "New Notes"), dated March 31, 1999 (the last day
through which interest thereon has been accounted for). The New Notes issued in
exchange for the Notes shall be substantially in the form set forth as Exhibit A
---------
attached hereto and shall be in the aggregate principal amounts set forth
opposite the Purchasers' respective names on Schedule I attached hereto. The
----------
parties hereto further agree that any reference to the term Notes in the
Purchase Agreement shall include the New Notes issued in exchange for the Notes
pursuant to this Section 2.02.
3. Waiver. The Company has indicated to the Purchasers that the Company is
------
not in compliance with the financial covenants set forth in Sections 7.01(m)
through 7.01(q) of the Purchase Agreement (as in effect prior to the amendments
set forth in this Amendment). Based on the representations and warranties set
forth herein, and subject to the terms and conditions of this Amendment, the
Purchasers hereby waive any and all Events of Default resulting from the
Company's failure to comply with the financial covenants set forth in Sections
7.01(m) through 7.01(q) of the Purchase Agreement (as in effect prior to the
amendments set forth in this Amendment) up to and through the date of this
Amendment. The foregoing waiver shall apply only to those specific Sections of
the Purchase Agreement referenced above (as in effect prior to the amendments
set forth in this Amendment). Except as set forth herein, nothing herein shall
be deemed to constitute an amendment, modification or waiver of any other
covenant set forth in the Purchase Agreement or any breach, default or Event of
Default under the Purchase Agreement (as amended hereby) that may arise after
the date hereof.
4. Miscellaneous.
-------------
4.01. Effect. The Assignment Agreement shall remain in full force and
------
effect, and the Purchase Agreement (as amended hereby) shall remain in full
force and effect.
4.02. No Waiver. This Amendment is effective only in the specific instance
---------
and for the specific purpose for which it is executed and shall not be
considered a waiver or agreement to amend as to any provision of the Purchase
Agreement (as amended) in the future.
4.03. Defined Terms. All capitalized terms used but not specifically
-------------
defined herein shall have the same meanings given such terms in the Purchase
Agreement unless the context clearly indicates or dictates a contrary meaning.
4.04. Notices. All notices, requests, demands and other communications
-------
provided for in this Amendment shall be delivered in compliance with Section
9.03 of the Purchase Agreement.
4.05. Costs, Expenses, Taxes. The Company agrees to pay on demand all
----------------------
costs and expenses of the Purchasers in connection with the preparation,
execution and delivery of this Amendment and other instruments and documents to
be delivered hereunder, including the reasonable fees and out-of-pocket expenses
of Messrs. ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, special counsel for the Purchasers.
-14-
4.06. Governing Law. This Amendment shall be governed by, and construed
-------------
and enforced in accordance with, the internal laws of The Commonwealth of
Massachusetts.
4.07. Seal. This Amendment is executed as an instrument under seal.
----
4.08. Counterparts. This Amendment may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Amendment by signing
any of such counterparts.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-15-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 5
or have caused it to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
LAW OFFICE INFORMATION SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
CAPITAL RESOURCE LENDERS III, L.P.
By: Capital Resource Partners III, L.L.C.
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
CRP INVESTMENT PARTNERS III, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-16-
SCHEDULE I
----------
PRINCIPAL AMOUNTS OF NOTES
REFLECTING NEW MATURITY DATE
----------------------------
Name Principal Amount
---- ----------------
Capital Resource Lenders III, L.P. $9,824,050
CRP Investment Partners, L.L.C. $ 11,539
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ $ 153,844
----------
TOTAL: $9,989,433
==========