EXHIBIT 10.10
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NOTE PURCHASE AGREEMENT
BY AND AMONG
DIRECTED ELECTRONICS, INC.
DEI HOLDINGS, INC.
DEI HEADQUARTERS, INC.
AND
AMERICAN CAPITAL FINANCIAL SERVICES, INC.,
AS AGENT
AND
THE PURCHASERS IDENTIFIED ON
ANNEX A HERETO
JUNE 17, 2004
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$37,000,000 SENIOR SUBORDINATED NOTES DUE 2011
$37,000,000 JUNIOR SUBORDINATED NOTES DUE 2012
TABLE OF CONTENTS
PAGE
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ARTICLE 1 DEFINITIONS.................................................... 1
1.1 Certain Definitions............................................ 1
1.2 Accounting Principles.......................................... 18
1.3 Other Definitional Provisions; Construction.................... 19
ARTICLE 2 ISSUE AND SALE OF SUBORDINATED NOTES........................... 19
2.1 Subordinated Notes............................................. 19
2.2 Sale and Purchase.............................................. 19
2.3 The Closing.................................................... 19
ARTICLE 3 REPAYMENT OF THE SUBORDINATED NOTES............................ 20
3.1 Interest Rates and Interest Payments........................... 20
3.2 Repayment of Subordinated Notes................................ 20
3.3 Optional Prepayment of Subordinated Notes...................... 21
3.4 Notice of Optional Prepayment.................................. 21
3.5 Mandatory Prepayment........................................... 22
3.6 Home Office Payment............................................ 22
3.7 Taxes.......................................................... 22
3.8 Maximum Lawful Rate............................................ 23
3.9 Capital Adequacy............................................... 23
3.10 Certain Waivers................................................ 23
ARTICLE 4 CONDITIONS..................................................... 24
4.1 Conditions to the Purchase of Subordinated Notes............... 24
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES............. 26
5.1 Representations and Warranties of Loan Parties................. 26
5.2 Absolute Reliance on the Representations and Warranties........ 33
ARTICLE 6 TRANSFER OF SUBORDINATED NOTES................................. 33
6.1 Restricted Securities.......................................... 33
6.2 Legends; Purchaser's Representations........................... 33
6.3 Transfer of Subordinated Notes................................. 34
6.4 Replacement of Lost Subordinated Notes......................... 34
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TABLE OF CONTENTS
(CONTINUED)
6.5 No Other Representations Affected.............................. 34
ARTICLE 7 COVENANTS...................................................... 35
7.1 Affirmative Covenants.......................................... 35
7.2 Negative Covenants............................................. 41
7.3 Financial Covenants............................................ 49
ARTICLE 8 EVENTS OF DEFAULT.............................................. 50
8.1 Events of Default.............................................. 50
8.2 Consequences of Event of Default............................... 52
ARTICLE 9 THE AGENT...................................................... 52
9.1 Authorization and Action....................................... 52
9.2 Delegation of Duties........................................... 53
9.3 Exculpatory Provisions......................................... 53
9.4 Reliance....................................................... 53
9.5 Non-Reliance on Agent and Other Purchasers..................... 54
9.6 Agent in its Individual Capacity............................... 54
9.7 Successor Agent................................................ 54
9.8 Collections and Disbursements.................................. 54
9.9 Reporting...................................................... 55
9.10 Consent of Purchasers.......................................... 55
9.11 This Article Not Applicable to Loan Parties.................... 56
ARTICLE 10 SUBORDINATION OF JUNIOR SUBORDINATED NOTES..................... 57
10.1 General........................................................ 57
10.2 Default in Respect of Senior Subordinated Notes................ 57
10.3 Insolvency, etc................................................ 58
10.4 Limited Suspension of Remedies of Holders of Junior
Subordinated Notes............................................. 59
10.5 Proof of Claim................................................. 59
10.6 Acceleration of Junior Subordinated Notes...................... 59
10.7 Turnover of Payments........................................... 60
10.8 Obligations Not Impaired....................................... 60
10.9 Payment of Debt; Subrogation................................... 61
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TABLE OF CONTENTS
(CONTINUED)
10.10 Reliance of Holders of Senior Subordinated Notes; Amendments... 61
ARTICLE 11 MISCELLANEOUS.................................................. 61
11.1 Successors and Assigns......................................... 61
11.2 Modifications and Amendments................................... 62
11.3 No Implied Waivers; Cumulative Remedies; Writing Required...... 62
11.4 Reimbursement of Expenses...................................... 62
11.5 Holidays....................................................... 62
11.6 Notices........................................................ 62
11.7 Survival....................................................... 64
11.8 Governing Law.................................................. 64
11.9 Jurisdiction, Consent to Service of Process.................... 64
11.10 Jury Trial Waiver.............................................. 65
11.11 Severability................................................... 65
11.12 Headings....................................................... 65
11.13 Indemnity...................................................... 65
11.14 Environmental Indemnity........................................ 66
11.15 Counterparts................................................... 67
11.16 Integration.................................................... 67
11.17 Subordination.................................................. 67
SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT................................... 68
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TABLE OF CONTENTS
(CONTINUED)
ANNEX
Annex A Purchasers and Payment Information
Annex B Purchaser Allocations of Subordinated Notes
Annex C One-Time Add-Backs
SCHEDULES
Organizational Schedule Schedule 5.1(a)
Litigation Schedule Schedule 5.1(j)
Environmental Schedule Schedule 5.1(l)
Taxes Schedule Schedule 5.1(n)
Properties Schedule Schedule 5.1(q)
Intellectual Property Schedule Schedule 5.1(r)
Liabilities Schedule Schedule 5.1(w)
Permitted Encumbrances Schedule Schedule 7.2(b)
EXHIBITS
Exhibit A-1 Form of Senior Subordinated Note
Exhibit A-2 Form of Junior Subordinated Note
Exhibit B Form of Compliance Certificate
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NOTE PURCHASE AGREEMENT
$37,000,000 AGGREGATE PRINCIPAL AMOUNT OF SENIOR SUBORDINATED NOTES DUE
JUNE 17, 2011
$37,000,000 AGGREGATE PRINCIPAL AMOUNT OF JUNIOR SUBORDINATED NOTES DUE
JUNE 17, 2012
THIS NOTE PURCHASE AGREEMENT (this "Agreement"), dated as of June 17,
2004, is by and among DIRECTED ELECTRONICS, INC., a California corporation
("Company"), DEI HOLDINGS, INC., a Florida corporation ("Holdings"), and DEI
HEADQUARTERS, INC., a Florida corporation ("Headquarters", and together with
Company and Holdings, the "Loan Parties"), the note purchasers that are now and
hereafter at any time parties hereto and are listed in Annex A (or any amendment
or supplement thereto) attached hereto (each a "Purchaser" and collectively,
"Purchasers"), and AMERICAN CAPITAL FINANCIAL SERVICES, INC., a Delaware
corporation ("ACFS"), as administrative agent for Purchasers (in such capacity
"Agent"). Capitalized terms used and not defined elsewhere in this Agreement are
defined in Article 1 hereof.
RECITALS
The Loan Parties have proposed selling Subordinated Notes to
Purchasers in the aggregate amount of $74,000,000 for the purpose of repaying
debt, providing for working capital and general corporate requirements of
Company, and recapitalizing Company's balance sheet.
NOW, THEREFORE, the parties hereto, in consideration of the premises
and their mutual covenants and agreements herein set forth and intending to be
legally bound hereby, covenant and agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. In addition to other words and terms defined
elsewhere in this Agreement, the following words and terms shall have the
meanings set forth below (and such meanings shall be equally applicable to both
the singular and plural form of the terms defined, as the context may require):
"ACCOUNTS" means all present and future rights of the Loan Parties to
payment for goods sold or leased or for services rendered (including any such
rights evidenced by instruments or chattel paper), whether due or to become due,
whether now existing or hereinafter arising and wherever arising, and whether or
not they have been earned by performance.
"ACFS" shall have the meaning assigned to such term in the preamble
hereto.
"AFFILIATE" as applied to any Person, shall mean any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to (i) direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting securities
or by contract or otherwise or (ii) vote twenty-five percent (25%) or more of
the securities having ordinary voting power for the election of directors of
such Person.
"AGENT" shall have the meaning assigned to such term in the preamble
hereto and any successor agent provided for hereunder.
"AGREEMENT" shall mean this Note Purchase Agreement, as the same may
be amended, restated, supplemented or otherwise modified from time to time.
"ASSET SALE" means the sale by any Loan Party to any Person other than
Company or any of its wholly-owned Subsidiaries of (i) any of the capital stock
of any of Company's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of any Loan Party, or (iii) any other assets
(whether tangible or intangible) of any Loan Party (other than (a) inventory
sold in the ordinary course of business and (b) any such other assets in an
aggregate amount not to exceed $230,000 in any fiscal year).
"BUSINESS" shall mean the principal business of the Loan Parties as
set forth in Section 5.1(b) herein and as such shall continue to be conducted
following the purchase and sale of the Subordinated Notes.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which banking institutions in Bethesda, Maryland or New York, New
York are authorized or required by law to close.
"BY-LAWS" shall mean the by-laws, partnership agreement, member
agreement, operating agreement or analogous instrument governing the operations
of each of the Loan Parties, as applicable, including all amendments and
supplements thereto.
"CAPITAL LEASE", as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9604, et seq.), as amended,
and rules, regulations and standards issued thereunder.
"CHANGE OF CONTROL" shall mean the occurrence of any of the following:
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(a) Affiliates of Trivest shall cease to beneficially own and control,
on a fully-diluted basis, at least a majority of the issued and outstanding
shares of capital stock of Holdings entitled to vote for the election of members
of the Board of Directors of Holdings; or
(b) the initial public offer of securities by Holdings other than an
offering of securities for an employee benefit plan on SEC Form S-8 or a
successor form; or
(c) Holdings shall cease to beneficially own and control, on a
fully-diluted basis, less than 100% of the issued and outstanding shares of
capital stock of Company entitled to vote for the election of members of the
Board of Directors of Company.
"CHARTER DOCUMENTS" shall mean the Articles of Incorporation,
Certificate of Incorporation, certificate of limited partnership, certificate of
limited liability company, charter or analogous organic instrument filed with
the appropriate Governmental Authorities of each of the Loan Parties, as
applicable, including all amendments and supplements thereto.
"CLOSING" shall have the meaning assigned to such term in Section 2.3
hereof.
"CLOSING DATE" shall have the meaning assigned to such term in Section
2.3 hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" shall have the meaning assigned to such term in the preamble
hereto.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the sum of
(i) the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that portion of Capital
Leases which is capitalized on the consolidated balance sheet of the Loan
Parties) by the Loan Parties during that period that, in conformity with GAAP,
are included in "additions to property, plant or equipment" or comparable items
reflected in the consolidated statement of cash flows of the Loan Parties plus
(ii) to the extent not covered by clause (i) of this definition, the aggregate
of all expenditures by the Loan Parties during that period to acquire (by
purchase or otherwise) the business, property or fixed assets of any Person, or
the capital stock or other evidence of beneficial ownership of any Person that,
as a result of such acquisition, becomes a Subsidiary of a Loan Party.
"CONSOLIDATED EBITDA" means, for any period, the sum of the amounts
for such period of (a) Consolidated Net Income, plus, to the extent deducted in
determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii)
provisions for taxes based on income, (iii) total depreciation expense, (iv)
total amortization
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expense, (v) management fees paid to Trivest pursuant to the Management
Agreement to the extent permitted by Section 7.2(f), (vi) other non-recurring
and non-cash items reducing Consolidated Net Income, in an aggregate amount not
to exceed $3,000,000 and (vii) other one-time add-backs set forth on Annex C
less (b) interest income and any non-operating, non-recurring and non-operating,
non-cash items increasing Consolidated Net Income, all of the foregoing as
determined on a consolidated basis for the Loan Parties in conformity with GAAP;
provided that in calculating any such items for such period, any Asset Sales or
other acquisitions or dispositions of assets during such period shall have been
deemed to have occurred on the first day of such period.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum (without
duplication) of the amounts for such period of (i) Consolidated Interest
Expense, to the extent payable in cash (ii) cash payments for taxes based on
income (excluding cash payments for taxes resulting from that certain one-time
settlement in favor of Company in the amount of approximately $6,500,000 from
Toyota Motor Corporation), and (iii) all scheduled principal payments to be made
by the Loan Parties (whether or not such payments are actually made) on all
Indebtedness of the Loan Parties (including, without limitation, the principal
component of all Capital Leases), all of the foregoing as determined on a
consolidated basis for the Loan Parties in conformity with GAAP; provided that,
solely with respect to clauses (i) and (iii) above, (a) such components of the
Consolidated Fixed Charges for the four-Fiscal Quarter period ending on the last
day of the first complete Fiscal Quarter after the Closing Date shall be such
components of Consolidated Fixed Charges for such Fiscal Quarter multiplied by
four, (b) such components of Consolidated Fixed Charges for the four-Fiscal
Quarter period ending on the last day of the second complete Fiscal Quarter
after the Closing Date shall be such components of Consolidated Fixed Charges
for the first two complete Fiscal Quarters after the Closing Date multiplied by
two, and (c) such components of Consolidated Fixed Charges for the four-Fiscal
Quarter period ending on the last day of the third complete Fiscal Quarter after
the Closing Date shall be such components of Consolidated Fixed Charges for the
first three complete Fiscal Quarters after the Closing Date multiplied by
four-thirds.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of the Loan Parties on a consolidated basis
with respect to all outstanding Indebtedness of the Loan Parties, including all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and net costs under Interest Rate
Agreements.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of the Loan Parties on a consolidated basis for such period taken as a
single accounting period determined in conformity with GAAP; provided that there
shall be excluded (i) the income (or loss) of any Person (other than a Loan
Party) in which any other Person (other than the Loan Parties) has a joint
interest, except to the extent of the amount of dividends or other distributions
actually paid to the Loan Parties by such Person during such period, (ii) the
income of any Subsidiary of Company to the extent
4
that the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary, (iii) any
after-tax gains or losses attributable to Asset Sales or returned surplus assets
of any Plan, and (iv) (to the extent not included in clauses (i) through (iii)
above) any net extraordinary gains or net non-cash extraordinary losses.
"CONSOLIDATED SENIOR DEBT" means, as at any date of determination, all
Consolidated Total Debt that is not subordinated in right of payment to the
Senior Obligations.
"CONSOLIDATED SENIOR LEVERAGE RATIO" means, as at the last day of any
Fiscal Quarter, the ratio of (a) Consolidated Senior Debt as of the last day of
such Fiscal Quarter, to (b) Consolidated EBITDA for the four Fiscal Quarter
period then ended.
"CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of the Loan Parties,
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED TOTAL LEVERAGE RATIO" means, as at the last day of any
Fiscal Quarter, the ratio of (a) Consolidated Total Debt as of the last day of
such Fiscal Quarter, to (b) Consolidated EBITDA for the four Fiscal Quarter
period then ended.
"CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Hedge Agreements. Contingent Obligations shall include (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (c) any liability of such Person for
the obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclauses (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise
5
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"CONTROLLED GROUP" shall mean the "controlled group of corporations"
as that term is defined in Section 1563 of the Internal Revenue Code of 1986, as
amended, of which the Loan Parties are a part from time to time.
"COVERED TAXES" shall have the meaning assigned to such term in
Section 3.7 hereof.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement to which any of the Loan Parties is a party.
"DEFAULT" shall mean any event or condition that, but for the giving
of notice or the lapse of time, or both, would constitute an Event of Default.
"DISTRIBUTION" shall mean Company's dividend payment to Holdings in an
amount not to exceed $111,320,000, and Holdings' payment of such amount as
follows:
(a) a dividend payment to equity owners of Holdings in an amount not
to exceed $72,250,000,
(b) a dividend payment to certain equity owners of Holdings that have
converted junior subordinated notes in an amount not to exceed $28,915,000,
(c) a payment in an amount not to exceed $8,870,000 to certain warrant
holders pursuant to the terms of such warrants, and
(d) an equity gain share payment in an amount not to exceed
$1,285,000.
"DOLLARS" and the sign "$"shall mean the lawful money of the United
States of America.
"ENVIRONMENTAL CLAIM" means any investigation, notice, notice of
violation, claim, action, suit, proceeding, demand, abatement order or other
order or directive (conditional or otherwise), by any Governmental Authority or
any other Person, arising (i) pursuant to or in connection with any actual or
alleged violation of any Environmental Law, (ii) in connection with any
Pollutant or any actual or alleged Hazardous Materials Activity, or (iii) in
connection with any actual or alleged damage, injury, threat or harm to health,
safety, natural resources or the environment.
"ENVIRONMENTAL LAWS" shall mean any Laws that address, are related to
or are otherwise concerned with environmental or health issues, including any
Laws relating to any emissions, releases or discharges of Pollutants into
ambient air, surface water, ground water or land, or otherwise relating to the
generation, processing,
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distribution, use, treatment, storage, disposal, transport, handling or clean-up
of Pollutants or any exposure or impact on worker health.
"ENVIRONMENTAL LIABILITIES" shall mean any obligations or liabilities
(including any claims, suits or other assertions of obligations or liabilities)
that are:
(a) related to environmental or health issues (including on-site or
off-site contamination by Pollutants of surface or subsurface soil or water, and
occupational safety and health); and
(b) based upon or related to (i) any provision of present or future
United States or foreign Environmental Law (including CERCLA and RCRA, as
defined herein), or (ii) any judgment, order, writ, decree, permit or injunction
imposed by any court, administrative agency or tribunal related to compliance
with Environmental Laws.
Subject to compliance with paragraphs (a) or (b), above, the term
"Environmental Liabilities" includes: (i) fines, penalties, judgments, awards,
settlements, losses, damages (including foreseeable and unforeseeable
consequential damages), costs, fees (including reasonable attorneys' and
reasonable consultants' fees), expenses and disbursements; (ii) defense and
other responses to any administrative or judicial action (including claims,
notice letters, complaints, and other assertions of liability); and (iii)
financial responsibility for (1) cleanup costs and injunctive relief, including
any Removal, Remedial or other Response actions, and natural resource damages,
and (2) any other compliance or remedial measures required under Environmental
Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may from time to time be amended, and the rules and
regulations of any governmental agency or authority, as from time to time in
effect, promulgated thereunder.
"EURODOLLAR RESERVE PERCENTAGE" shall means for any day, the
percentage (expressed as a decimal and rounded upwards, if necessary, to the
next higher 1/100th of 1%) which is in effect for such day as prescribed by the
Federal Reserve Board (or any successor) for determining the maximum reserve
requirement (including without limitation any basic, supplemental or emergency
reserves) in respect of Eurocurrency liabilities, as defined in Regulation D of
such Board as in effect from time to time, or any similar category of
liabilities for a member bank of the Federal Reserve System in New York City.
"EVENT OF DEFAULT" shall mean any of the events of default described
in Section 8.1 hereof.
"FINANCIAL PROJECTIONS" shall have the meaning assigned to such term
in Section 5.1(c) (3) hereof.
"FINANCIAL STATEMENTS" shall have the meaning assigned to such term in
Section 5.1(a) hereof.
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"FISCAL QUARTER" shall mean a fiscal quarter of any Fiscal Year.
"FISCAL YEAR" or "FISCAL YEAR" shall mean each twelve month period
ending on December 31 of each year.
"GAAP" shall have the meaning assigned to such term in Section 1.2
hereof.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GUARANTY" shall mean any guaranty of the payment or performance of
any Indebtedness or other obligation and any other arrangement whereby credit is
extended to one obligor on the basis of any promise of another Person, whether
that promise is expressed in terms of an obligation to pay the Indebtedness of
such obligor, or to purchase an obligation owed by such obligor, or to purchase
goods and services from such obligor pursuant to a take-or-pay contract, or to
maintain the capital, working capital, solvency or general financial condition
of such obligor, whether or not any such arrangement is reflected on the balance
sheet of such other Person, firm or corporation, or referred to in a footnote
thereto, but shall not include endorsements of items for collection in the
ordinary course of business. For the purpose of all computations made under this
Agreement, the amount of a Guaranty in respect of any obligation shall be deemed
to be equal to the maximum aggregate amount of such obligation or, if the
Guaranty is limited to less than the full amount of such obligation, the maximum
aggregate potential liability under the terms of the Guaranty.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed or
threatened activity, event or occurrence involving any Pollutant, including the
use, manufacture, possession, storage, holding, presence, existence, location,
Release, threatened Release, discharge, placement, generation, transportation,
processing, construction, treatment, abatement, removal, remediation, disposal,
disposition or handling of any Pollutant, and any corrective action or response
action with respect to any of the foregoing.
"HEADQUARTERS" shall have the meaning assigned to such term in the
preamble hereto.
"HOLDINGS" shall have the meaning assigned to such term in the
Recitals hereto.
"HEDGE AGREEMENT" means an Interest Rate Agreement or a Currency
Agreement designed to hedge against fluctuations in interest rates or currency
values, respectively.
"INDEBTEDNESS" as applied to any Person, shall mean (i) all
indebtedness for borrowed money (ii) that portion of obligations with respect to
Capital Leases that is
8
properly classified as a liability on a balance sheet in conformity with GAAP,
(iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements shall not
constitute Indebtedness.
"INTEREST RATE AGREEMENT" shall mean any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement to which any Loan Party is a party.
"INVESTMENT" shall mean (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary of
Company), (ii) any direct or indirect redemption, retirement, purchase or other
acquisition for value, by any Subsidiary of Company from any Person other than
Company or any of its Subsidiaries, of any equity Securities of such Subsidiary,
(iii) any direct or indirect loan, advance (other than advances to employees for
moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution by
Company or any of its Subsidiaries to any other Person (other than a
wholly-owned Subsidiary of Company), including all indebtedness and accounts
receivable from that other Person that are not current assets or did not arise
from sales to that other Person in the ordinary course of business, or (iv)
Interest Rate Agreements or Currency Agreement not constituting Hedge
Agreements. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
"JUNIOR DEBT" shall mean all Indebtedness, obligations and liabilities
under or relating to the Junior Subordinated Notes.
"JUNIOR PROCESSING FEE" shall mean an amount equal to 2.25% of the
aggregate principal amount of the Junior Subordinated Notes.
"JUNIOR SUBORDINATED NOTES" shall have the meaning assigned to such
term in Section 2.1(b) hereof.
"KEY-MAN INSURANCE" shall have the meaning assigned to such term in
Section 7.1(c)(ii).
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"LAWS" shall mean all U.S. and foreign federal, state or local
statutes, laws, rules, regulations, ordinances, codes, policies, rules of common
law, and the like, now or hereafter in effect, including any judicial or
administrative interpretations thereof, and any judicial or administrative
orders, consents, decrees or judgments.
"LETTER OF CREDIT" shall mean any letter of credit issued by Wachovia
Bank, National Association pursuant to the terms of the Senior Credit Agreement,
as such letter of credit may be amended, modified, extended, renewed or replaced
from time to time.
"LIBOR" shall mean, for each LIBOR Period therefor, and subject to the
final sentence of this definition, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any
successor page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 A.M. (London time) two Business Days prior to the first day
of such LIBOR Period for a term comparable to such LIBOR Period. If for any
reason such rate is not available, the term "LIBOR" shall mean, for each LIBOR
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 A.M.
(London time) two Business Days prior to the first day of such LIBOR Period for
a term comparable to such LIBOR Period; provided, however, if more than one rate
is specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest
1/100 of 1%). If, for any reason, neither of such rates is available, then
"LIBOR" shall mean the rate per annum at which, as reasonably determined by
Agent, Dollars in an amount comparable to the then aggregate outstanding
principal amount of the Senior Subordinated Notes are being offered to leading
banks at approximately 11:00 A.M. London time, two (2) Business Days prior to
the commencement of the applicable LIBOR Period for settlement in immediately
available funds by leading banks in the London interbank market for a period
equal to such LIBOR Period. For the periods from (i) the Closing Date to July
10, 2004 and (ii) April 10, 2011 to June 17, ▇▇▇▇, "▇▇▇▇▇" shall mean a rate of
interest determined by Agent, equal to the rate of interest that under current
practice is listed as the one-month London Interbank Offered Rate as of the
commencement of such period under the heading "Money Rates" in the Eastern
Edition of The Wall Street Journal (and should such practice change, such other
indication of prevailing LIBOR as may reasonably be chosen by the Required
Purchasers).
"LIBOR BUSINESS DAY" means a business day on which banks in the city
of London are generally open for interbank or foreign exchange transactions.
"LIBOR PERIOD" means each three-month period commencing on July 10,
2004 (or if such date is not a LIBOR Business Day, the next succeeding LIBOR
Business Day) and ending three months thereafter; provided, that the foregoing
provision relating to LIBOR Periods is subject to the following:
10
(a) if any LIBOR Period would otherwise end on a day that is not a
LIBOR Business Day, such LIBOR Period shall be extended to the next succeeding
LIBOR Business Day unless the result of such extension would be to carry such
LIBOR Period into another calendar month in which event such LIBOR Period shall
end on the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the maturity
date of the Senior Subordinated Notes shall end on such date; and
(c) any LIBOR Period that begins on the last LIBOR Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such LIBOR Period) shall end on the last
LIBOR Business Day of a calendar month.
"LIBOR RATE" shall mean a rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) determined by Agent pursuant to the
following formula:
LIBOR Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
"LIEN" shall mean any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"LOAN PARTIES" shall have the meaning assigned to such term in the
preamble to this Agreement.
"MANAGE" and "MANAGEMENT" shall mean generation, production, handling,
distribution, use, storage, treatment, transportation, recycling, reuse and/or
disposal, as those terms are defined in CERCLA, RCRA and other Environmental
Laws.
"MANAGEMENT AGREEMENT" shall mean that certain Management Agreement
dated as of December 21, 1999, as amended and modified, by and between Trivest
and Company, as in effect on the Closing Date.
"MATERIAL ADVERSE CHANGE" shall mean any change that has or could
reasonably be expected to have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" shall mean (i) a material adverse effect
upon the business, operations, properties, assets, condition (financial or
otherwise) or prospects of the Loan Parties, taken as a whole, or (ii) the
material impairment of the ability of Company, individually, or the Loan
Parties, taken as a whole to perform, or of Agent or Purchasers to enforce, the
Subordinated Obligations.
11
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan (within the
meaning of Section 3(37) of ERISA) that is maintained for the benefit of the
employees of the Loan Parties or any member of the Controlled Group.
"OPERATING LEASE" means, as applied to any Person, any lease
(including leases that may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"OTHER SUBORDINATED JUNIOR NOTES" shall have the meaning assigned to
such term in Section 10.3 hereof.
"OTHER TAXES" shall have the meaning assigned to such term in Section
3.7 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any other governmental agency,
department or instrumentality succeeding to the functions thereof.
"PERMITTED ACQUISITION" shall mean an acquisition or any series of
related acquisitions by a Loan Party of (a) all or substantially all of the
assets or a majority of the outstanding voting stock or economic interests of a
Person that is incorporated, formed or organized in the United States or Canada
or (b) any division, line of business or other business unit of a Person that is
incorporated, formed or organized in the United States or Canada (such Person or
such division, line of business or other business unit of such Person shall be
referred to herein as the "Target"), in each case that is a type of business (or
assets used in a type of business) permitted to be engaged in by the Loan
Parties pursuant to Section 7.2(l) hereof, so long as (i) no Default or Event of
Default shall then exist or would exist after giving effect thereto, (ii)
Company shall demonstrate to the reasonable satisfaction of Agent and the
Required Purchasers that, after giving effect to the acquisition on a pro forma
basis (giving effect to adjustments for owner compensation for such period,
documented to the reasonable satisfaction of the Agent, to the extent such
compensation does not continue after such acquisition), (A) the Consolidated
Total Leverage Ratio shall be less than or equal to the ratio that is 0.25 lower
than the Consolidated Total Leverage Ratio then required under Section 7.3 and
(B) Loan Parties are in compliance with each of the financial covenants set
forth in Section 7.3, (iii) the Target shall have earnings before interest,
taxes, depreciation and amortization for the four fiscal quarter period prior to
the acquisition date in an amount greater than $0, as adjusted for owner
compensation for such period, documented to the reasonable satisfaction of the
Agent, to the extent such compensation does not continue after such acquisition
(provided that the aggregate consideration paid by the Loan Parties shall not
exceed $5,000,000 for any Target which, but for such owner compensation
adjustment, would have negative earnings for such period), (iv) such acquisition
shall not be a "hostile" acquisition and shall have been approved by the board
of directors and/or shareholders of the applicable Loan Party and the Target,
(v) the Company shall have provided at least ten (10) days prior written notice
of such acquisition to the Agent, (vi)
12
after giving effect to such acquisition, there shall be at least $5,000,000 of
borrowing availability under the revolver facility pursuant to the Senior
Financing and (vii) the aggregate consideration (including without limitation
equity consideration, earn outs or deferred compensation or non-competition
arrangements and the amount of Indebtedness and other liabilities assumed by
Loan Parties) paid by Loan Parties (A) in connection with any such acquisition
of a Target organized in Canada shall not exceed $7,000,000, (B) in connection
with any other such acquisition shall not exceed $10,000,000 and (C) for all
acquisitions made during any twelve month period shall not exceed $20,000,000.
"PERMITTED LIENS" shall mean the following types of Liens (excluding
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA, any Lien relating to or imposed in connection with any
Environmental Claim, and any such Lien expressly prohibited by the Senior Credit
Agreement and Senior Loan Documents as in effect on the date hereof):
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by Section
7.1(d);
(ii) statutory Liens of landlords, statutory Liens of banks and
rights of set-off, statutory Liens of carriers, warehousemen,
mechanics, repairmen, workmen and materialmen, and other Liens imposed
by law, in each case incurred in the ordinary course of business (a)
for amounts not yet overdue or (b) for amounts that are overdue and
that (in the case of any such amounts overdue for a period in excess
of 5 days) are being contested in good faith by appropriate
proceedings, so long as such reserves or other appropriate provisions,
if any, as shall be required by GAAP shall have been made for any such
contested amounts;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, trade contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(iv) any attachment or judgment Lien not constituting an Event of
Default under Section 8.1(j);
(v) leases or subleases granted to third parties in accordance
with Section 7.2(d) and not interfering in any material respect with
the ordinary conduct of the business of the Loan Parties;
(vi) easements, rights-of-way, restrictions, encroachments, and
other minor defects or irregularities in title, in each case which do
not and
13
will not interfere in any material respect with the ordinary conduct
of the business of the Loan Parties;
(vii) any (A) interest or title of a lessor or sublessor under
any lease permitted by Section 7.2(d), (B) restriction or encumbrance
that the interest or title of such lessor or sublessor may be subject
to, or (C) subordination of the interest of the lessee or sublessee
under such lease to any restriction or encumbrance referred to in the
preceding clause (B), so long as the holder of such restriction or
encumbrance agrees to recognize the rights of such lessee or sublessee
under such lease;
(viii) Liens arising from filing UCC financing statements
relating solely to leases permitted by this Agreement;
(ix) Liens securing inventory financed through the issuance of
commercial letters of credit permitted pursuant to Section 7.2(c);
(x) Liens in favor of a Hedge Agreement Provider in connection
with a Secured Hedge Agreement (as such terms are defined in the
Senior Credit Agreement as in effect on the date hereof).
"PERSON" shall mean and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative or regulatory bodies thereof.
"PLAN" shall mean any employee benefit plan (within the meaning of
Section 3(3) of ERISA), other than a Multiemployer Plan, established or
maintained by any of the Loan Parties or any member of the Controlled Group.
"POLLUTANT" shall include any "hazardous substance" and any "pollutant
or contaminant" as those terms are defined in CERCLA; any "hazardous waste" as
that term is defined in RCRA; and any "hazardous material" as that term is
defined in the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et
seq.), as amended; and including without limitation any petroleum product or
byproduct, solvent, flammable or explosive material, radioactive material,
asbestos, polychlorinated biphenyls ("PCBs"), dioxins, dibenzofurans, heavy
metals, and radon gas; and including any other substance or material that is
reasonably determined to present a threat, hazard or risk to human health or the
environment under Environmental Laws.
"PROCESSING FEE" shall mean the aggregate of the Senior Processing Fee
and the Junior Processing Fee to be paid by the Loan Parties to Purchasers or
their designee in consideration of the financing transactions herein.
14
"PROPERTIES AND FACILITIES" shall have the meaning assigned to such
term in Section 5.1(q) hereof.
"PROPRIETARY RIGHTS" shall mean all right, title, and interest in the
following intellectual property, including both statutory and common law rights:
(i) copyrights in published and unpublished works, and all applications,
registrations and renewals relating thereto; (ii) registered or unregistered
trademarks, service marks, domain names, logos, trade dress and other source or
business identifiers, and the goodwill associated therewith; (iii) patents,
patent applications, and other patent or industrial property rights in any
country; and (iv) trade secrets, confidential or proprietary information,
inventions, ideas, designs, concepts, compilations of information, methods,
techniques, procedures, processes, and know-how, whether or not patentable
patents, trademarks, trade names, service marks, copyrights, inventions,
production methods, licenses, formulas, know-how and trade secrets, regardless
of whether such are registered with any Governmental Authorities, including
applications therefor.
"PURCHASE DOCUMENTS" shall mean this Agreement, the Subordinated Notes
and all other agreements, instruments and documents delivered in connection
therewith (other than the documents executed in connection with the Senior
Financing) as any or all of the foregoing may be supplemented or amended from
time to time.
"PURCHASER" shall have the meaning assigned to such term in the
preamble hereto and in Section 6.2 hereof.
"PURCHASER INDEMNIFIED PARTIES" shall have the meaning assigned to
such term in Section 11.13.
"RCRA" shall mean the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.), as amended, and all rules, regulations and
standards.
"RECAPITALIZATION" shall mean the recapitalization of Company and its
Subsidiaries as a result of: (i) the Loan Parties' sale of the Subordinated
Notes pursuant to this Agreement and (ii) the Senior Financing.
"RECEIVABLES" shall mean all of such Loan Party's accounts, contract
rights, instruments (including those evidencing indebtedness owed to such Loan
Party by its Affiliates), documents, chattel paper, general intangibles relating
to accounts, drafts and acceptances, and all other forms of obligations owing to
such Loan Party arising out of or in connection with the sale or lease of
inventory or the rendition of services, all guarantees and other security
therefor, whether secured or unsecured, now existing or hereafter created, and
whether or not specifically sold or assigned to Agent hereunder.
"RELEASE" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Pollutants into the indoor or outdoor environment
(including the abandonment or disposal of any barrels, containers or other
closed receptacles containing
15
any Pollutant), including the movement of any Pollutant through the air, soil,
surface water or groundwater.
"REMOVAL," "REMEDIAL" and "RESPONSE" actions shall mean the types of
activities that are authorized and might be taken by a Government Authority
under CERCLA, RCRA or other Environmental Laws in response to a violation of
Environmental Law.
"REPORTABLE EVENT" shall mean any of the events that are reportable
under Section 4043 of ERISA and the regulations promulgated thereunder, other
than an occurrence for which the thirty (30) day notice contained in 29 C.F.R.
Section 2615.3(a) is waived.
"REQUIRED PURCHASERS" shall mean, at any time, Purchasers holding a
pro rata percentage of the outstanding principal amount of the Subordinated
Notes aggregating at least 66-2/3% at such time.
"SEC" shall mean the Securities and Exchange Commission and any
governmental body or agency succeeding to the functions thereof.
"SECURITIES" shall mean any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SENIOR AGENT" shall mean the Administrative Agent as defined in the
Senior Credit Agreement.
"SENIOR CASH INTEREST" shall have the meaning assigned to such term in
Section 3.1 hereof
"SENIOR CREDIT AGREEMENT" shall mean that certain Credit Agreement by
and among Company, Wachovia Bank, National Association, Wachovia Capital
Markets, LLC, CIBC WORLD MARKETS CORP., CIBC World Markets, LLC and the other
parties thereto dated as of the date hereof, together with the related documents
thereto (including, without limitation, any guaranty agreements and security and
pledge agreements) in each case as such may be amended (including the amendment
and restatement thereof), refinanced, supplemented, restated, or otherwise
modified from time to time as permitted under the Subordination Agreement.
"SENIOR FINANCING" shall mean the financing pursuant to the Senior
Credit Agreement and the Senior Loan Documents.
16
"SENIOR LENDER" shall collectively mean the banks and other lending
institutions party to the Senior Credit Agreement.
"SENIOR LOAN DOCUMENTS" shall mean all loan documents executed in
connection with the Senior Credit Agreement, including (without limitation), the
Guaranties and Collateral Documents as such terms are defined in the Senior
Credit Agreement.
"SENIOR OBLIGATIONS" shall have the meaning assigned to the term
"Obligations" in the Senior Credit Agreement.
"SENIOR PROCESSING FEE" shall mean an amount equal to 2.0% of the
aggregate principal amount of the Senior Subordinated Notes.
"SENIOR SUBORDINATED NOTES" shall have the meaning assigned to such
term in Section 2.1(a) hereof.
"SENIOR SUBORDINATED NOTES BLOCKING NOTICE" shall have the meaning
assigned to such term in Section 10.2(b)(i) hereof.
"SENIOR SUBORDINATED NOTES COVENANT DEFAULT" shall have the meaning
assigned to such term in Section 10.2(b) hereof.
"SENIOR SUBORDINATED NOTES PAYMENT DEFAULT" shall have the meaning
assigned such term in Section 10.2(a) hereof.
"SOLVENT" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"SUBORDINATED DEBT" shall mean all Indebtedness, obligations,
liabilities, costs, fees and expenses of the Loan Parties under or relating to
the Subordinated Notes.
"SUBORDINATED NOTES" shall have the meaning assigned to such term in
Section 2.1(b) hereof.
17
"SUBORDINATED OBLIGATIONS" shall mean all obligations of every nature
of each Loan Party from time to time owed to Agent, Purchasers or any of them
under the Purchase Documents, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"SUBORDINATION AGREEMENT" shall have the meaning assigned to such term
in Section 11.17 hereof.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
Company.
"TAXES" shall have the meaning assigned to such term in Section 3.7
hereof.
"TRANSACTION DOCUMENTS" shall have the meaning assigned to such term
in Section 5.1(f) hereof.
"TRANSACTIONS" shall mean the incurrence of debt and the issuance of
Subordinated Notes in connection therewith, and all such other transactions, as
contemplated by this Agreement, the Subordinated Notes and all other agreements
contemplated hereby and thereby.
"TRIVEST" shall mean Trivest Partners, L.P., a Florida limited
partnership.
"UST" shall mean an underground storage tank, including as that term
is defined in RCRA and in rules, regulations and standards issued pursuant to
RCRA and comparable state and local Environmental Laws.
1.2 Accounting Principles. Except as specifically provided otherwise
in this Agreement, all accounting terms used herein that are not specifically
defined shall have the meanings customarily given them in accordance with
generally accepted accounting principles in the United States of America
consistently applied ("GAAP"). Notwithstanding anything to the contrary in this
Agreement, for purposes of calculation of the financial covenants set forth in
Section 7.3, all accounting determinations and computations hereunder shall be
made in accordance with GAAP as in effect as of the date of such preparation
(and delivered together with the reconciliation statements provided for in
Section 7.1(e)(vii) hereof).
18
1.3 Other Definitional Provisions; Construction. Whenever the context
so requires, neuter gender includes the masculine and feminine, the singular
number includes the plural and vice versa. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and references to section, article, annex, schedule, exhibit and like
references are references to this Agreement unless otherwise specified. A
Default or Event of Default shall "continue" or be "continuing" until such
Default or Event of Default has been cured or waived by Agent and Purchasers.
References in this Agreement to any Persons shall include such Persons,
successors and permitted assigns. Other terms contained in this Agreement (which
are not otherwise specifically defined herein) shall have meanings provided in
Article 9 of the New York Uniform Commercial Code on the date hereof to the
extent the same are used or defined therein.
ARTICLE 2
ISSUE AND SALE OF SUBORDINATED NOTES
2.1 Subordinated Notes.
(a) Senior Subordinated Notes. The Loan Parties have duly authorized
the issuance and sale to Purchasers designated on Annex A of $37,000,000 in
aggregate principal amount of the Loan Parties' Senior Subordinated Notes Due
June 17, 2011 (together with any Subordinated Notes issued in substitution
therefor pursuant to Sections 6.3 and 6.4, the "Senior Subordinated Notes"), to
be substantially in the form of the Senior Subordinated Note attached hereto as
Exhibit A-1.
(b) Junior Subordinated Notes. The Loan Parties have duly authorized
the issuance and sale to Purchasers designated on Annex A of $37,000,000 in
aggregate principal amount of the Loan Parties' Junior Subordinated Notes Due
June 17, 2012 (together with any Subordinated Notes issued in substitution
therefor pursuant to Sections 6.3 and 6.4, the "Junior Subordinated Notes", and
together with the Senior Subordinated Notes, the "Subordinated Notes"), to be
substantially in the form of the Junior Subordinated Note attached hereto as
Exhibit A-2.
2.2 Sale and Purchase. Subject to the terms and conditions and in
reliance upon the representations, warranties and agreements set forth herein,
on the Closing Date the Loan Parties shall sell to Purchasers, and Purchasers
shall purchase from the Loan Parties, in an amount equal to the relative portion
of the Subordinated Notes to be purchased by each Purchaser as set forth on
Annex B, the Subordinated Notes in the aggregate principal amount set forth in
Section 2.1 hereof for $74,000,000 in the aggregate.
2.3 The Closing. The closing ("the "Closing") of the sale and purchase
of the Subordinated Notes, by the delivery of and payment for the Subordinated
Notes, shall be made at the offices of Weil, Gotshal & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, commencing at 10:00 a.m., local time, on June 17,
2004 or at such
19
place or on such other date on or before June 17, 2004 as may be mutually
agreeable to the Loan Parties and Purchasers. The date and time of the Closing
as finally determined pursuant to this Section 2.3 are referred to herein as the
"Closing Date." Delivery of the Subordinated Notes shall be made to Purchasers
against payment of the purchase price therefor, less any unpaid Processing Fee
and any other amounts payable pursuant to Section 4.1(e) hereof, by wire
transfer of immediately available funds in the manner agreed to by the Loan
Parties and Purchasers. The Subordinated Notes shall be issued in such name or
names and in such permitted denomination or denominations, numbers and amounts
as set forth in Annex B or as Purchasers may request in writing not less than
two (2) Business Days before the Closing Date.
ARTICLE 3
REPAYMENT OF THE SUBORDINATED NOTES
3.1 Interest Rates and Interest Payments.
(a) Senior Subordinated Notes. The Loan Parties, jointly and
severally, covenant and agree to make payments to the Agent for the ratable
benefit of Purchasers, of accrued interest on the Senior Subordinated Notes on
the 10th day of January, April, July and October each year during the term of
the Senior Subordinated Notes, commencing on October 10, 2004 (or if any such
day is not a Business Day, the next succeeding Business Day). The Senior
Subordinated Notes shall bear interest payable in cash on the outstanding
principal amount thereof at a rate equal to LIBOR Rate plus eight (8)% per annum
("Senior Cash Interest").
(b) Junior Subordinated Notes. The Loan Parties, jointly and
severally, covenant and agree to make payments to the Agent for the ratable
benefit of Purchasers, of accrued interest on the Junior Subordinated Notes on
the 10th day of January, April, July and October each year during the term of
the Junior Subordinated Notes, commencing on October 10, 2004 (or if any such
day is not a Business Day, the next succeeding Business Day). The Junior
Subordinated Notes shall bear interest payable in cash on the outstanding
principal amount thereof at a rate equal to twelve percent (12%) per annum.
(c) Computation of Interest. Interest on the Subordinated Notes shall
be computed on the basis of a year with three hundred sixty (360) days, composed
of twelve (12) thirty (30) - day months, and the actual number of days elapsed.
3.2 Repayment of Subordinated Notes.
(a) Senior Subordinated Notes. The Loan Parties, jointly and
severally, covenant and agree to repay to the Agent, for the ratable benefit of
Purchasers, the unpaid balance of the Senior Subordinated Notes in full,
together with all the accrued and unpaid interest, fees and other amounts due
hereunder, in one (1) payment of $37,000,000 or such other principal amount as
is then outstanding, together with all accrued and unpaid interest, fees and
other amounts due hereunder on June 17, 2011.
20
The Agent's determination of the amount of Senior Subordinated Notes at any time
shall be conclusive and binding, absent manifest error.
(b) Junior Subordinated Notes. The Loan Parties, jointly and
severally, covenant and agree to repay to the Agent, for the ratable benefit of
Purchasers, the unpaid balance of the Subordinated Junior Notes in full,
together with all the accrued and unpaid interest, fees and other amounts due
hereunder, in one (1) payment of $37,000,000 or such other principal amount as
is then outstanding, together with all accrued and unpaid interest, fees and
other amounts due hereunder on June 17, 2012. The Agent's determination of the
amount of Junior Subordinated Notes at any time shall be conclusive and binding,
absent manifest error.
3.3 Optional Prepayment of Subordinated Notes. Subject to the terms of
this Section 3.3 and the Subordination Agreement, the Loan Parties may prepay to
the Agent, for the ratable benefit of Purchasers, the outstanding principal
amount of the Subordinated Notes in whole or in part in multiples of $100,000,
or such lesser amount as is then outstanding, at any time at a price equal to
(i) the accrued interest, if any, to the date set for prepayment, plus (ii) in
the case of the Junior Subordinated Notes only, a prepayment fee, representing
the amortization of certain of Purchasers' costs incurred in connection with the
purchase of the Junior Subordinated Notes, equal to the principal amount prepaid
thereon multiplied by the following percentage:
If Prepaid During
the 12-Month Period
Ending on June 17
of the Following Years: Percentage
----------------------- ----------
2005 3%
2006 2%
2007 1%
provided, however, that no prepayment shall be applied to the Junior
Subordinated Notes so long as the Senior Subordinated Notes remain outstanding.
3.4 Notice of Optional Prepayment. If the Loan Parties shall elect to
prepay any Subordinated Notes pursuant to Section 3.3 hereof, the Loan Parties
shall give notice of such prepayment to Agent, each holder of the Subordinated
Notes to be prepaid and Senior Agent not less than thirty (30) days or more than
ninety (90) days prior to the date fixed for prepayment, specifying (i) the date
on which such prepayment is to be made, (ii) the principal amount of such
Subordinated Notes to be prepaid on such date, and (iii) the premium, if any,
and accrued interest applicable to the prepayment. Such notice shall be
accompanied by a certificate of the Chairman of the Board of Directors, the
President or the Vice President and of the Treasurer of Company that such
prepayment is being made in compliance with Section 3.3 hereof and the
Subordination Agreement. Notice of prepayment having been so given, the
aggregate principal amount of the Subordinated Notes specified in such notice,
together with accrued interest thereon
21
and the premium, if any, shall become due and payable on the prepayment date set
forth in such notice.
3.5 Mandatory Prepayment. Subject to the Subordination Agreement, the
Subordinated Notes shall be prepaid in full, together with all interest, fees
and expenses plus a prepayment premium computed in accordance with Section 3.3
hereof, as if such prepayment were a voluntary prepayment, in the event of a
Change of Control or upon such Subordinated Notes becoming due as a consequence
of an Event of Default pursuant to Section 8.2.
3.6 Home Office Payment. The Loan Parties shall pay all sums becoming
due on any Subordinated Note for principal, premium, if any, and interest to
Agent by the method and at the address specified for such purpose in Annex A, or
by such other method or at such other address as Purchasers shall have from time
to time specified to the Loan Parties in writing for such purpose, without the
presentation or surrender of such Subordinated Note or the making of any
notation thereon, except that upon written request of the Loan Parties made
concurrently with or reasonably promptly after payment or prepayment in full of
any Subordinated Note, each holder of a Subordinated Note shall surrender such
Subordinated Note for cancellation, reasonably promptly after such request, to
the Loan Parties at their principal executive office.
3.7 Taxes. Any and all payments by the Loan Parties hereunder or under
the Subordinated Notes or other Purchase Documents that are made to or for the
benefit of Purchasers shall be made free and clear of and without deduction for
any and all present or future taxes, levies, imposts, deductions, charges or
withholdings and penalties, interests and all other liabilities with respect
thereto (collectively, "Taxes"), excluding taxes imposed on Agent's or
Purchasers' net income or capital and franchise taxes imposed on any of them by
the jurisdiction under the laws of which any of them is organized or any
political subdivision thereof (all such nonexcluded Taxes being hereinafter
referred to as "Covered Taxes"). If any of the Loan Parties shall be required by
law to deduct any Covered Taxes from or in respect of any sum payable hereunder
or under any Subordinated Notes or other Purchase Documents to Agent for the
benefit of Purchasers, or to Purchasers, the sum payable shall be increased as
may be necessary so that after making all required deductions of Covered Taxes
(including deductions of Covered Taxes applicable to additional sums payable
under this paragraph), each Purchaser receives an amount equal to the sum it
would have received had no such deductions been made. The Loan Parties shall
make such deductions and the Loan Parties shall pay the full amount so deducted
to the relevant taxation authority or other authority in accordance with
applicable law. In addition, the Loan Parties agree to pay any present or future
stamp, documentary, excise, privilege, intangible or similar levies that arise
at any time or from time to time from any payment made under any and all
Purchase Documents or from the execution or delivery by the Loan Parties or from
the filing or recording or maintenance of, or otherwise with respect to the
exercise by Agent or Purchasers of their respective rights under any and all
Purchase Documents (collectively, "Other Taxes"). The Loan Parties shall
indemnify Agent and Purchasers for the full amount of Covered Taxes imposed on
or with respect to amounts payable
22
hereunder and Other Taxes, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. Payment of this
indemnification shall be made within thirty (30) days from the date Agent or
Purchasers provide the Loan Parties with a certificate certifying and setting
forth in reasonable detail the calculation thereof as to the amount and type of
such Taxes. Any such certificates submitted by Agent or Purchasers in good faith
to the Loan Parties shall, absent manifest error, be final, conclusive and
binding on all parties. The obligation of the Loan Parties under this Section
3.7 shall survive the payment of the Subordinated Notes and the termination of
this Agreement. Within thirty (30) days after the Loan Parties have received a
receipt for payment of Covered Taxes and/or Other Taxes, the Loan Parties shall
furnish to Agent the original or certified copy of a receipt evidencing payment
thereof.
3.8 Maximum Lawful Rate. This Agreement, the Subordinated Notes and
the other Purchase Documents are hereby limited by this Section 3.8. In no
event, whether by reason of acceleration of the maturity of the amounts due
hereunder or otherwise, shall interest and fees contracted for, charged,
received, paid or agreed to be paid to Purchasers exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever, interest
and fees would otherwise be payable to Agent or Purchasers in excess of the
maximum amount permissible under applicable law, the interest and fees shall be
reduced to the maximum amount permitted under applicable law. If from any
circumstance, Agent or Purchasers shall have received anything of value deemed
interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excess of interest shall be applied to the reduction of the
principal amount of the Subordinated Notes, in such manner as may be determined
by Purchasers, and not to the payment of fees or interest, or if such excess
interest exceeds the unpaid balance of the principal amount of the Subordinated
Notes, such excess shall be refunded to the Loan Parties.
3.9 Capital Adequacy. Subject to the Subordination Agreement, if,
after the date hereof, either the introduction of or any change of the
interpretation of any law or the compliance by Purchasers with any guideline or
request from any Governmental Authority (whether or not having the force of law)
has or would have the effect of reducing the rate of return on the capital or
assets of Purchasers as a consequence of, as determined by Agent or Purchasers
in their reasonable discretion, the existence of any Purchaser's obligations
under this Agreement or any other Purchase Documents, then, upon written demand
by Purchasers, the Loan Parties promptly shall pay to Purchasers, from the time
as specified by Purchasers, additional amounts reasonably deemed material with
respect to its anticipated rate of return to compensate Purchaser in light of
such circumstances. The obligations of the Loan Parties under this Section 3.9
shall survive the payments of the Subordinated Notes and the termination of this
Agreement.
3.10 Certain Waivers. The Loan Parties unconditionally waive (i) any
rights to presentment, demand, protest or (except as expressly required hereby)
notice of any kind, and (ii) any rights of rescission, setoff, counterclaim or
defense to payment
23
under the Subordinated Notes or otherwise that the Loan Parties may have or
claim against any Purchaser, the Agent or any prior Purchaser or Agent.
ARTICLE 4
CONDITIONS
4.1 Conditions to the Purchase of Subordinated Notes. The obligation
of Purchasers to purchase and pay for the Subordinated Notes is subject to the
satisfaction, prior to or at the Closing, of the following conditions:
(a) Representations and Warranties True. The representations and
warranties contained in Article 5 hereof shall be true and correct in all
material respects at and as of the date of this Agreement and, except to the
extent of changes caused by the transactions expressly contemplated herein, at
and as of the Closing Date as though then made.
(b) Material Adverse Change. There shall have been no Material Adverse
Change since December 31, 2003.
(c) Subordination Agreement. The Subordination Agreement shall have
been executed by the parties thereto on terms reasonably satisfactory to Agent
and Purchasers.
(d) Closing Documents. The Loan Parties shall have delivered or caused
to be delivered to Agent all of the following documents in form and substance
satisfactory to Agent:
(i) two or more Subordinated Notes (as designated by Agent and
Purchasers pursuant to Section 2.1 and Annex A hereof) in aggregate
original principal amounts as set forth herein, duly completed and
executed by the Loan Parties;
(ii) recent certificates of good standing for each of the Loan
Parties issued by their respective jurisdictions of organization and
each jurisdiction where it is qualified to operate as a foreign
corporation, or its equivalent;
(iii) a recent copy of the Charter Documents of each of the Loan
Parties, certified by the appropriate governmental official of the
jurisdiction of its organization;
(iv) a copy of the By-laws of each of the Loan Parties, certified
as of the Closing Date by the secretary, assistant secretary, manager
or general partner, as applicable, of each respective Loan Party;
(v) a certificate of the secretary or assistant secretary,
manager or general partner of each of the Loan Parties, certifying as
to the names
24
and true signatures of the officers or other authorized person of the
respective Loan Party authorized to sign this Agreement and the other
documents to be delivered by the respective Loan Party hereunder;
(vi) copies of the resolutions duly adopted by each Loan Party's
board of directors, general partners, board of managers or other
governing body, authorizing the execution, delivery and performance by
the respective Loan Party of this Agreement and each of the other
agreements, instruments and documents contemplated hereby to which the
respective Loan Party is a party to, and the consummation of all of
the other Transactions, certified as of the Closing Date by the
secretary, assistant secretary, manager or general partner of the
respective Loan Party;
(vii) a certificate dated as of the Closing Date from an officer,
general partner or manager of each of the Loan Parties stating that
the conditions specified in this Section 4.1 have been fully satisfied
or waived by Agent;
(viii) certificates of insurance evidencing the existence of all
insurance required to be maintained by the Loan Parties pursuant to
Section 7.1(c)(i), and Agent shall be satisfied with the type and
extent of such coverage;
(ix) an opinion of ▇▇▇▇▇▇▇▇▇ & Traurig LLP, counsel to the Loan
Parties, in form and substance satisfactory to the Agent;
(x) copies of all material leases to which any of the Loan
Parties is a party to; and
(xi) such other documents relating to the Transactions as Agent
or its special counsel may reasonably request.
(e) Purchaser's Fees and Expenses.
(i) Processing Fee. On the Closing Date, the Loan Parties shall
have paid the Processing Fee to ACFS (and the Loan Parties hereby
authorize Agent to deduct the unpaid amount of such Processing Fee
from the aggregate proceeds from the sales of the Subordinated Notes
by the Loan Parties);
(ii) Other Fees and Expenses. On the Closing Date, the Loan
Parties shall have paid the fees and expenses of Agent and Purchasers,
payable by the Loan Parties pursuant to Section 11.4 hereof (and the
Loan Parties hereby authorize Agent to deduct all such amounts from
the aggregate proceeds of the sale of the Subordinated Notes by the
Loan Parties).
25
(f) Legal Investment. On the Closing Date, Purchasers' purchases of
the Subordinated Notes shall not be prohibited by any applicable law, rule or
regulation of any Governmental Authority (including, without limitation,
Regulations T, U or X of the Board of Governors of the Federal Reserve System.
(g) Proceedings. All proceedings taken or required to be taken in
connection with the transactions contemplated hereby to be consummated at or
prior to the Closing and all documents relating thereto shall be satisfactory in
form and substance to Agent and its special counsel and to Purchasers and their
special counsel.
(h) Background Investigations. Agent shall be satisfied with the
results of background investigations of Messrs. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇.
(i) Consummation of Senior Financing. The Senior Financing shall have
been consummated in form and substance satisfactory to the Purchasers in the
Purchasers' sole discretion and the Purchasers shall have been provided copies
of all agreements, instruments and documents in connection therewith.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES
5.1 Representations and Warranties of Loan Parties. As a material
inducement to Agent and Purchasers to enter into this Agreement, and purchase
the Subordinated Notes, the Loan Parties, jointly and severally, hereby
represent and warrant to Agent and Purchasers, as of the Closing Date, as
follows:
(a) Organization and Power. Each of the Loan Parties is a corporation
duly organized, validly existing and in good standing under the laws of its
state of formation. Each of the Loan Parties has all requisite corporate or
other organizational power and authority and all material licenses, permits,
approvals and authorizations necessary to own and operate its properties, to
carry on its businesses as now conducted and presently proposed to be conducted
and to carry out the Transactions, and is qualified to do business in the
jurisdictions listed on the "Organization Schedule" attached hereto as Schedule
5.1(a), which includes every jurisdiction where the failure to so qualify might
reasonably be expected to have a Material Adverse Effect. Each of the Loan
Parties has its principal place of business as set forth on the "Organization
Schedule". The copies of the Charter Documents and By-Laws of the Loan Parties
that have been furnished to Agent reflect all amendments made thereto at any
time prior to the date of this Agreement and are correct and complete.
(b) Principal Business. The Loan Parties are primarily engaged in the
business of designing, sourcing and marketing consumer electronics for
automotive and home use, including, without limitation, security and convenience
audio and video products and similar and related businesses.
(c) Financial Statements and Financial Projections.
26
(i) Financial Statements; Historical Statements. The Loan Parties
have delivered to the Agent copies of their audited consolidated
year-end financial statements for and as of the end of the three (3)
fiscal years ended December 31, 2001, 2002 and 2003, and unaudited
balance sheet, income statements and cash flow statements for the four
(4) month period ended April 30, 2004 (together, the "Financial
Statements"). The Financial Statements were compiled from the books
and records maintained by the Loan Parties' management, and fairly
present, in all material respects, the consolidated financial
condition of the Loan Parties as of their dates and the results of
operations for the fiscal periods then ended (subject, in the case of
any such unaudited financial statement, to the absence of footnotes
and to changes resulting from audit and normal year-end adjustment)
and have been prepared in conformity with GAAP consistently applied.
(ii) Pro Forma Balance Sheet. The unaudited pro forma balance
sheet of Company and its Subsidiaries as of April 30 2004, a copy of
which has heretofore been delivered to the Agent, gives pro forma
effect to the consummation of the Recapitalization, and the payment of
transaction fees and expenses related to the foregoing, all as if such
events had occurred on such date (the "Pro Forma Balance Sheet"). The
Pro Forma Balance Sheet has been prepared in a manner consistent with
GAAP and the financial statements described in Section 5.1(c)(i)
(subject to the absence of footnotes required by GAAP and subject to
normal year-end adjustments) and, subject to stated assumptions made
in good faith and having a reasonable basis set forth therein,
presents fairly the financial condition of Company and its
Subsidiaries on an unaudited pro forma basis as of the date set forth
therein after giving effect to the consummation of the transactions
described above.
(iii) Financial Projections. The Loan Parties have delivered to
the Agent financial projections of the Loan Parties for the period
December 31, 2004 through December 31, 2010 derived from various
assumptions of the Loan Parties' management (the "Financial
Projections"). The Financial Projections represent a reasonable range
of possible results in light of the history of the Business and the
Loan Parties, present and foreseeable conditions and the intentions of
the Loan Parties' management. The Financial Projections accurately
reflect the liabilities of the Loan Parties upon consummation of the
Recapitalization as of the Closing Date.
(iv) Accuracy of Financial Statements. The Loan Parties do not
have any liabilities, contingent or otherwise, or forward or long-term
commitments that are not disclosed in the Financial Statements or in
the notes thereto, and except as disclosed therein there are no
unrealized or
27
anticipated losses from any commitments of the Loan Parties that could
reasonably be expected to have a Material Adverse Effect.
(d) Capitalization and Related Matters. As of the Closing Date and
immediately thereafter, the authorized capital stock of Company will consist of
1,000 shares of common stock of which 1000 of such shares are issued and
outstanding and of which no shares have been reserved for issuance. As of the
Closing Date, the authorized capital stock of each of the other Loan Parties and
the number and ownership of all outstanding capital stock of each of the other
Loan Parties is set forth on the Organization Schedule. As of the Closing Date,
none of the Loan Parties will have outstanding any stock or securities
convertible into or exchangeable for any shares of its capital stock other than
the options set forth on the Organization Schedule and none of the Loan Parties
will have outstanding any rights or options to subscribe for or to purchase its
capital stock or any stock or securities convertible into or exchangeable for
its capital stock. As of the Closing Date, none of the Loan Parties will be
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock. As of the Closing, all of the
outstanding shares of each Loan Party's capital stock will be validly issued,
fully paid and nonassessable. None of the Loan Parties have violated any
applicable federal or state securities laws in connection with the offer, sale
or issuance of any of its capital stock, and the offer, sale and issuance of the
Subordinated Notes hereunder do not require registration under the Securities
Act or any applicable state securities laws. There are no agreements among
Company's stockholders with respect to the voting or transfer of Company's
capital stock other than as contemplated herein.
(e) Subsidiaries. The Loan Parties do not own, or hold any rights to
acquire, any shares of stock or any other security or interest in any other
Person, and the Loan Parties have no Subsidiaries, except in each case as set
forth on the Organizational Schedule.
(f) Authorization; No Breach. The execution, delivery and performance
of this Agreement, the other Purchase Documents and all other agreements
contemplated hereby and thereby to which each of the Loan Parties is a party
(collectively, the "Transaction Documents"), and the consummation of the
Transactions, have been duly authorized by each of the Loan Parties. The
execution and delivery by each of the Loan Parties of the Transaction Documents
and the consummation of the Transactions do not and will not (i) conflict with
or result in a breach of the terms, conditions or provisions of, (ii) constitute
a default under, (iii) result in the creation of any Lien upon any of the Loan
Parties' capital stock, assets or properties pursuant to, (iv) give any third
party the right to accelerate any obligation under, (v) result in a violation
of, or (vi) require any authorization, consent, approval, exemption or other
action by or notice to any Governmental Authority pursuant to: (A) the Charter
Documents of any of the Loan Parties, (B) any material law, statute, rule or
regulation to which any of the Loan Parties is subject, or (C) any material
agreement, instrument, order, judgment or decree to which any of the Loan
Parties is a party or to which they or their assets or properties are subject.
28
(g) Governmental Approvals. Except as specifically provided by the
Transaction Documents, no registration with or consent or approval of, or other
action by, any Governmental Authority is or will be required in connection with
the consummation of the Transactions by the Loan Parties.
(h) Enforceability. This Agreement constitutes, and each of the other
Transaction Documents when duly executed and delivered by each of the Loan
Parties who are parties thereto will constitute, legal, valid and binding
obligations of each of the Loan Parties enforceable in accordance with their
respective terms except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditor's
rights generally or by equitable principles relating to enforceability.
(i) No Material Adverse Change. Since December 31, 2003, there has
been no Material Adverse Change.
(j) Litigation. Except as described in the "Litigation Schedule"
attached hereto as Schedule 5.1(j), there are no actions, suits or proceedings
at law or in equity or by or before any arbitrator or any Governmental Authority
now pending or, to the best knowledge of the Loan Parties' management,
threatened against or filed by or affecting any of the Loan Parties or any of
their directors or officers in such capacity or the businesses, assets or rights
of any of the Loan Parties which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(k) Compliance with Laws. The Loan Parties are not in violation in any
material respect of any material applicable Law. The Loan Parties are not in
default with respect to any material judgment, order, writ, injunction, decree,
rule or regulation of any Governmental Authority. The Loan Parties are not in,
and the consummation of the Transactions will not cause any, default concerning
any material judgment, order, writ, injunction or decree of any Governmental
Authority, and there is no material investigation, enforcement action or
regulatory action pending or threatened against or affecting any of the Loan
Parties by any Governmental Authority, except as set forth on the Litigation
Schedule. Except as set forth in the Litigation Schedule, there is no remedial
or other corrective action that any of the Loan Parties is required to take to
remain in compliance with any material judgment, order, writ, injunction or
decree of any Governmental Authority or to maintain any material permits,
approvals or licenses granted by any Governmental Authority in full force and
effect. During the past ten (10) years, none of the officers, directors or
management of any of the Loan Parties have been arrested or convicted of any
material crime nor have any of them been bankrupt or an officer or director of a
bankrupt corporation or other bankrupt entity.
(l) Environmental Protection. Except as specified in the
"Environmental Schedule" attached hereto as Schedule 5.1(l) and after giving
effect to the Transactions: (i) the business of the Loan Parties, the methods
and means employed by the Loan Parties in the operation thereof (including all
operations and conditions at or in the properties of the Loan Parties), and the
real property assets owned, leased, managed, used, controlled, held or operated
by the Loan Parties, comply in all material
29
respects with all applicable Environmental Laws; (ii) with respect to the
Properties and Facilities, and except as disclosed in the Environmental
Schedule, the Loan Parties have obtained, possess, and are in material
compliance with all permits, licenses, reviews, certifications, approvals,
registrations, consents, and any other authorizations required under any
Environmental Laws; (iii) the Loan Parties have not received (x) any claim or
notice of violation, lien, complaint, suit, order or other claim or notice to
the effect that the Loan Parties are or may be liable to any Person as a result
of (A) the environmental condition of any of their Properties and Facilities or
any other property, or (B) the release or threatened release of any Pollutant,
or (y) any letter or request for information under Section 104 of the CERCLA, or
comparable state laws, and to the best of each Loan Party's knowledge, none of
the operations of the Loan Parties is the subject of any investigation by a
Governmental Authority evaluating whether any remedial action is needed to
respond to a release or threatened release of any Pollutant at the Properties
and Facilities or at any other location, including any location to which the
Loan Parties have transported, or arranged for the transportation of, any
Pollutants with respect to the Properties and Facilities; (iv) except as
disclosed in the Environmental Schedule, neither the Loan Parties nor, to the
knowledge of the Loan Parties, any prior owner or operator has incurred in the
past, or is now subject to, any material Environmental Liabilities; (v) except
as disclosed in the Environmental Schedule, there are no Liens, covenants, deed
restrictions, notice or registration requirements, or other limitations
applicable to the Properties and Facilities, based upon any Environmental Laws
or other legal obligations; (vi) there are no USTs located in, at, on, or under
the Properties and Facilities; and (vii) there are no PCBs, lead paint, asbestos
(of any type or form), or materials, articles or products containing PCBs, lead
paint or asbestos, located in, at, on, under, or a part of the Properties and
Facilities (including, without limitation, any building, structure, or other
improvement that is a part of the Properties and Facilities), and all of the
PCBs, lead paint, asbestos, and materials, articles and products containing
PCBs, lead paint or asbestos identified in the Environmental Schedule are in
material compliance with all Environmental Laws.
(m) Legal Investments; Use of Proceeds. The Loan Parties will use the
proceeds from the sale of the Subordinated Notes to (i) refinance certain
existing Indebtedness of Company on the Closing Date, (ii) finance the
Distribution (iii) pay transaction costs and expenses associated with this
Agreement and the Senior Credit Agreement on the Closing Date and (iv) provide
for the working capital and general corporate requirements of Company and its
Subsidiaries, including capital expenditures and Permitted Acquisitions (as
defined in the Senior Credit Agreement). The Loan Parties are not engaged in the
business of extending credit for the purpose of purchasing or carrying any
"margin stock" or "margin security" (within the meaning of Regulations T, U or X
issued by the Board of Governors of the Federal Reserve System), and no proceeds
of the sale of the Subordinated Notes will be used to purchase or carry any
margin stock or margin security or to extend credit to others for the purpose of
purchasing or carrying any margin stock or margin security.
(n) Taxes. Except as set forth in the "Taxes Schedule" attached hereto
as Schedule 5.1(n), each of the Loan Parties has filed or caused to be filed all
Federal,
30
state and local tax returns that are required to be filed by it, and, except for
taxes that have been contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been set aside on their books, has paid
or caused to be paid all taxes shown to be due and payable on such returns or on
any assessments received by it, including payroll taxes.
(o) Labor and Employment. The Loan Parties are and each of their Plans
is in compliance in all material respects with those provisions of ERISA, the
Code, the Age Discrimination in Employment Act, and the regulations and
published interpretations thereunder that are applicable to the Loan Parties or
any such Plan. As of the date hereof, no Reportable Event has occurred with
respect to any Plan as to which any of the Loan Parties are or were required to
file a report with the PBGC. No Plan has unfunded benefit liabilities (within
the meaning of Section 4001(a)(18) of ERISA) or any accumulated funding
deficiency (within the meaning of Section 302(a)(2) of ERISA), whether or not
waived, and neither the Loan Parties nor any member of the Controlled Group
sponsors, maintains, contributes to, or is obligated (whether contingent or
otherwise) to contribute to, any Multiemployer Plan. The Loan Parties are in
compliance in all material respects with all labor and employment laws, rules,
regulations and requirements of all applicable domestic and foreign
jurisdictions. There are no pending or threatened work stoppages, strikes or
material labor disputes.
(p) Investment Company Act; Public Utility Holding Company Act. None
of the Loan Parties is (i) an "investment company" or "controlled" by an
investment company within the meaning of the Investment Company Act of 1940, as
amended, or (ii) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
(q) Properties; Security Interests. The Loan Parties have good and
marketable title to, or valid leasehold interests in, all of the material assets
and properties used or useful by the Loan Parties in the Business (collectively,
the "Properties and Facilities"), subject to no Liens except for Permitted
Liens. All of the Properties and Facilities are in good repair, working order
and condition (except for equipment reflected on the Loan Parties' books and
records as obsolete or worn-out, and ordinary wear and tear) and all such assets
and properties are owned by the Loan Parties free and clear of all Liens except
for Permitted Liens. The Properties and Facilities constitute all of the
material assets, properties and rights of any type used in or necessary for the
conduct of the Business. All real estate owned or leased by any of the Loan
Parties is listed on the "Properties Schedule," attached hereto as Schedule
5.1(q).
(r) Intellectual Property; Licenses. Each of the Loan Parties
possesses or holds valid licenses to all Proprietary Rights necessary to conduct
the Business as heretofore conducted or as proposed to be conducted by it. All
Proprietary Rights registered in the name of any of the Loan Parties and
applications therefor filed by any of the Loan Parties are listed on the
"Intellectual Property Schedule," attached hereto as
31
Schedule 5.1(r). No event has occurred that permits, or after notice or lapse of
time or both would permit, the revocation or termination of any of the
foregoing, which taken in isolation or when considered with all other such
revocations or terminations could reasonably be expected to have a Material
Adverse Effect. To the knowledge of the Loan Parties (after reasonable inquiry),
none of the material Property Rights owned by or used under license by any Loan
Party infringes, misappropriates or conflicts with any Proprietary Rights or
other rights of any other Person; no material products or services sold by any
Loan Party in connection with the Business is infringing on, misappropriating or
making any unlawful or unauthorized use of any Proprietary Rights or other
rights of another Person; and no Loan Party has notice or knowledge that any
other Person is infringing upon, misappropriating or making any unlawful or
unauthorized use of any material Proprietary Rights of any Loan Party. None of
the Loan Parties has notice or knowledge of any facts or any past, present or
threatened occurrence that could preclude or impair the Loan Parties' ability to
retain or obtain any authorization necessary for the operation of the Business.
(s) Solvency. After giving effect to the Transactions, Company
individually is, and the Loan Parties taken as a whole are, Solvent.
(t) Complete Disclosure. All factual information contained in the
Purchase Documents and otherwise furnished by or on behalf of the Loan Parties
to Agent for purposes of or in connection with this Agreement or the
Transactions is, and all other such factual information hereafter furnished by
or on behalf of the Loan Parties will be, true and accurate in all material
respects on the date as of which such information is furnished and not
incomplete by omitting to state any material fact necessary to make such
information not misleading at such time in light of the circumstances under
which such information was provided.
(u) Broker's or Finder's Commissions. No broker's or finder's or
placement fee or commission will be payable to any broker or agent engaged by
the Loan Parties or any of its officers, directors or agents with respect to the
issuance and sale of the Subordinated Notes, or the transactions contemplated by
this Agreement, including without limitation the Transactions, except for fees
payable to ACFS, Purchasers and Agent. The Loan Parties agree to indemnify Agent
and Purchasers and to hold them harmless from and against any claim, demand or
liability for broker's or finder's or placement fees or similar commissions,
whether or not payable by the Loan Parties, alleged to have been incurred in
connection with such transactions, other than any broker's or finder's fees
payable to Persons engaged by ACFS, Agent or Purchasers.
(v) Absence of Undisclosed Liabilities. Except as set forth on the
"Liabilities Schedule," attached hereto as Schedule 5.1(w), the Borrower has no
material liabilities or obligations, either accrued, absolute, contingent or
otherwise, except:
(i) those liabilities or obligations set forth on the Financial
Statements and not heretofore paid or discharged,
32
(ii) liabilities arising in the ordinary course of business under
any agreement, contract, commitment, lease or plan specifically
disclosed on the schedules hereto or not required to be disclosed
because of the term or amount involved or otherwise, and
(iii) those liabilities or obligations incurred, consistently
with past business practice, in or as a result of the normal and
ordinary course of business.
(w) Accuracy of Information. None of the Purchase Documents nor any
other information furnished to any of the Purchasers by any of the Loan Parties
and any of their Affiliates in connection with the Transactions contains any
untrue statement of material fact or omits to state any material fact necessary
to make the statements contained therein not misleading.
(x) Foreign Assets Control Regulations, Etc. None of the Loan Parties
is an "enemy" or an "ally of the enemy" within the meaning of Section 2 of the
Trading with the Enemy Act of the United States of America (50 U.S.C. App.
Sections 1 et seq.), as amended. None of the Loan Parties is in violation of (a)
the Trading with the Enemy Act, as amended, (b) any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto or (c) the USA Patriot Act, Title III of Pub. L. 107-56, signed
into law October 26, 2001. No Loan Party (i) is a blocked person described in
section 1 of the Anti-Terrorism Order or (ii) to the best of its knowledge,
engages in any dealings or transactions, or is otherwise associated, with any
such blocked person.
5.2 Absolute Reliance on the Representations and Warranties. All
representations and warranties contained in this Agreement and any financial
statements, instruments, certificates, schedules or other documents delivered in
connection herewith, shall survive the execution and delivery of this Agreement,
regardless of any investigation made by Agent or Purchasers or on Agent's or
Purchasers' behalf.
ARTICLE 6
TRANSFER OF SUBORDINATED NOTES
6.1 Restricted Securities. Purchasers acknowledge that the
Subordinated Notes have not been registered under the Securities Act and may be
resold only if registered pursuant to the provisions of the Securities Act or if
an exemption from registration is available, and that the Loan Parties are not
required to register any of the Subordinated Notes under the Securities Act.
6.2 Legends; Purchaser's Representations. Each of the Purchasers
hereby represents and warrants to the Loan Parties that it is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act and is
acquiring the Subordinated Notes for investment for its own account, with no
present intention of
33
dividing its participation with others (except for a potential transfer or
transfers of the Subordinated Notes to an affiliate or affiliates of Purchasers)
or reselling or otherwise distributing the same in violation of the Securities
Act or any applicable state securities laws. The Loan Parties may place an
appropriate legend on the Subordinated Notes owned by Purchasers concerning the
restrictions set forth in this Article 6. Upon the assignment or transfer by
Purchasers or any of its successors or assignees of all or any part of the
Subordinated Notes, the term "Purchaser" as used herein shall thereafter mean,
to the extent thereof, the then holder or holders of such Subordinated Notes, or
portion thereof.
6.3 Transfer of Subordinated Notes. Subject to Section 6.2 hereof, a
holder of a Subordinated Note may transfer such Subordinated Note to a new
holder, or may exchange such Subordinated Note for Subordinated Notes of
different denominations (but in no event of denominations of less than $100,000
in original principal amount), by surrendering such Subordinated Note to the
Loan Parties duly endorsed for transfer or accompanied by a duly executed
instrument of transfer naming the new holder (or the current holder if submitted
for exchange only), together with written instructions for the issuance of one
or more new Subordinated Notes specifying the respective principal amounts of
each new Subordinated Note and the name of each new holder and each address
therefor. The Loan Parties shall simultaneously deliver to such holder or its
designee such new Subordinated Notes, shall ▇▇▇▇ the surrendered Subordinated
Notes as canceled and shall provide notice of such transfer to Agent. In lieu of
the foregoing procedures, a holder may assign a Subordinated Note (in whole but
not in part) to a new holder by sending written notice to the Loan Parties and
Agent of such assignment specifying the new holder's name and address; in such
case, the Loan Parties shall promptly acknowledge such assignment in writing to
both the old and new holder.
6.4 Replacement of Lost Subordinated Notes. Upon receipt of evidence
reasonably satisfactory to the Loan Parties of the mutilation, destruction, loss
or theft of any Subordinated Notes and the ownership thereof, the Loan Parties
shall, upon the written request of the holder of such Subordinated Notes,
execute and deliver in replacement thereof new Subordinated Notes in the same
form, in the same original principal amount and dated the same date as the
Subordinated Notes so mutilated, destroyed, lost or stolen; and such
Subordinated Notes so mutilated, destroyed, lost or stolen shall then be deemed
no longer outstanding hereunder. If the Subordinated Notes being replaced have
been mutilated, they shall be surrendered to the Loan Parties; and if such
replaced Subordinated Notes have been destroyed, lost or stolen, such holder
shall furnish the Loan Parties with an indemnity in writing to save it harmless
in respect of such replaced Subordinated Notes.
6.5 No Other Representations Affected. Nothing contained in this
Article 6 shall limit the full force or effect of any representation, agreement
or warranty made herein or in connection herewith to Purchaser.
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ARTICLE 7
COVENANTS
7.1 Affirmative Covenants. The Loan Parties, jointly and severally,
covenant that, so long as all or any of the principal amount of the Subordinated
Notes or any interest thereon shall remain outstanding the Loan Parties shall:
(a) Existence. Except as permitted by Section 7.2(e), do or cause to
be done all things necessary to preserve, renew and keep in full force and
effect its legal existence.
(b) Businesses and Properties; Compliance with Laws. At all times (i)
do or cause to be done all things necessary to preserve, renew and keep in full
force and effect the rights, licenses, registrations, permits, certifications,
approvals, consents, franchises, patents, copyrights, trademarks and trade
names, and any other trade names that are or are reasonably expected to become
material to the conduct of their businesses; provided, however, that no Loan
Party shall be required to preserve any such right or franchise if the Board of
Directors of such Loan Party shall determine that the preservation thereof is no
longer desirable in the conduct of the business of such Loan Party, as the case
may be, and that the loss thereof is not disadvantageous in any material respect
to the Loan Parties, Agent or Purchasers; (ii) comply in all material respects
with all laws and regulations applicable to the operation of such business,
including but not limited to, all Environmental Laws, whether now in effect or
hereafter enacted and with all other applicable laws and regulations,
noncompliance with which could reasonably be expected to cause, individually or
in the aggregate, a Material Adverse Effect, (iii) take all action that may be
required to obtain, preserve, renew and extend all rights, patents, copyrights,
trademarks, tradenames, franchises, registrations, certifications, approvals,
consents, licenses, permits and any other authorizations that are or are
reasonably expected to become material to the operation of such business, (iv)
maintain, preserve and protect all property material to the conduct of such
business, and (v) except for obsolete or worn out equipment and ordinary wear
and tear, keep their property in good repair, working order and condition and
from time to time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be properly conducted
at all times.
(c) Insurance. (i) Maintain insurance required by the Purchase
Documents and any and all contracts entered into by the Loan Parties, including
but not limited to: (A) coverage on their insurable properties (including all
inventory, equipment and real property) against the perils of fire, theft and
burglary; (B) public liability; (C) workers' compensation; (D) business
interruption; (E) product liability; and (F) such other risks as are customary
with companies similarly situated and in the same or similar business as that of
the Loan Parties, in each case under policies issued by financially sound and
reputable insurers in such amounts as are customary with companies similarly
situated and in the same or similar business. Each of the Loan Parties shall pay
all insurance premiums payable by it and shall deliver the policy or policies of
such
35
insurance (or certificates of insurance with, on request, copies of such
policies) to Agent. All insurance policies of the Loan Parties shall contain
endorsements, in form and substance reasonably satisfactory to Agent, providing
that the insurance shall not be cancelable except upon thirty (30) days' prior
written notice to Agent. Agent, on behalf of Purchasers, shall be shown as a
loss payee and an additional named insured party under all such insurance
policies.
(ii) Within ninety (90) calendar days of the Closing Date, obtain, and
thereafter maintain, key-man insurance ("Key-Man Insurance") with respect to ▇▇.
▇▇▇▇▇▇▇ on the following basis:
(A) such insurance shall be with respect to the death and disability
of ▇▇. ▇▇▇▇▇▇▇,
(B) such insurance shall be paid for by the Loan Parties,
(C) such insurance shall be issued by a carrier or carriers reasonably
acceptable to Agent, and shall name Agent (on behalf of the
Purchasers) and Senior Agent (on behalf of the Senior Lender) each as
beneficiaries of 50% of the proceeds of such insurance,
(D) such insurance shall be in such amounts up to (but not exceeding)
$5,000,000 with respect to both death and disability and allocated
between such death and disability benefits as Agent and Senior Agent
shall agree, provided that the Loan Parties shall not be required to
pay premiums in respect of such insurance in an amount in excess of
the lower of (i) $40,000 and (ii) the premiums required to obtain
insurance on both death and disability of ▇▇. ▇▇▇▇▇▇▇ in the amount of
$5,000,000.
(d) Obligations and Taxes. Pay and discharge promptly when due all
taxes, assessments and governmental charges or levies imposed upon them or upon
their income or profits or in respect of their assets or properties before the
same shall become delinquent or in default, as well as all lawful claims for
labor, materials and supplies or otherwise, which, if unpaid, might give rise to
Liens or charges upon such assets or properties or any part thereof; provided,
however, that the Loan Parties shall not be required to pay and discharge or to
cause to be paid and discharged any such tax, assessment, charge, levy or claim
so long as the validity or amount thereof shall be contested in good faith by
appropriate proceedings and the Loan Parties shall have set aside on their books
adequate reserves with respect thereto.
(e) Financial Statements; Reports. Furnish to Agent:
(i) Annual Statements. Within 120 days after the end of each
fiscal year, a balance sheet and statements of operations,
stockholders' equity and cash flows of the Loan Parties showing the
financial condition of the Loan Parties as of the close of such year
and the results of operations during such year, all of the foregoing
financial statements to be
36
audited by a firm of independent certified public accountants of
recognized national standing reasonably acceptable to Agent and
accompanied by an opinion of such accountants without material
exceptions or qualifications.
(ii) Quarterly Statements. Within forty-five (45) calendar days
after the end of each calendar quarter, financial statements
(including a balance sheet and cash flow and income statements)
showing the financial condition of the Loan Parties as of the end of
each such quarter and for the then elapsed portion of the current
fiscal year, together with comparisons to the corresponding periods in
the preceding year and the budget for such periods, accompanied by a
certificate of an officer that such financial statements have been
prepared in accordance with GAAP, consistently applied excluding
certain reclassifications that are only made in the year-end audited
financial statements, and setting forth in comparative form the
respective financial statements for the corresponding date and period
in the previous fiscal year.
(iii) Format; Management Report; Certificate of Compliance. Each
balance sheet, operations statement and cash flow statement furnished
to Agent or Purchasers pursuant to subsections (i) and (ii) of this
7.1(e) shall be furnished by an electronic means in Excel spreadsheet
format containing such line items and other formatting requirements as
may be reasonably specified by Agent. Each financial statement
furnished to Agent pursuant to subsections (i) and (ii) of this
Section 7.1(e) shall be accompanied by (A) a written narrative report
by the management of the Loan Parties explaining material developments
and trends in the Business and such financial statements and (B) a
written certificate signed by the Loan Parties' chief financial
officer or other senior officer to the effect that no Default or Event
of Default has occurred during the period covered by such statements
or, if any such Default or Event of Default has occurred during such
period, setting forth a description of such Default or Event of
Default and specifying the action, if any, taken by the Loan Parties
to remedy the same, and a compliance certificate in the form of
Exhibit B hereto showing the Loan Parties' compliance with the
covenants set forth in Section 7.3.
(iv) Accountant Reports. Promptly upon the receipt thereof,
copies of all reports, if any, submitted to the Loan Parties by
independent certified public accountants in connection with each
annual, interim or special audit or review of the financial statements
of the Loan Parties made by such accountants, including but not
limited to, any comment letter submitted by such accountants to
management in connection with any annual review.
37
(v) Projections. As soon as available, but in no event later than
45 days following the beginning of each Fiscal Year, a projection of
the Loan Parties' balance sheet, and income and cash flow statements,
respectively, for such Fiscal Year and comparable actual and budgeted
figures for the previous year; and within ten (10) days after any
material update or amendment of any such plan or forecast, a copy of
such update or amendment, including a description of and reasons for
such update or amendment. Each such projection, update or amendment
shall be accompanied by a written certificate signed by the Loan
Parties' chief financial officer or other senior officer to the effect
that it has been prepared on the basis of the Loan Parties' historical
financial statements and records, together with the assumptions set
forth in such projection and that it reflects expectations, after
reasonable analysis, of the Loan Parties' management as to the matters
set forth therein.
(vi) Additional Information. Reasonably promptly, from time to
time, such other information regarding the compliance by the Loan
Parties with the terms of this Agreement and the other Purchase
Documents or the affairs, operations or condition (financial or
otherwise) of the Loan Parties as Agent or Required Purchasers may
reasonably request and that is capable of being obtained, produced or
generated by the Loan Parties or of which the Loan Parties have
knowledge.
(vii) Reconciliation Statements: If, as a result of any change in
accounting principles and policies from those used in the preparation
of the audited financial statements referred to in Section 5.1(c)
hereof (other than an immaterial change in GAAP), the consolidated
financial statements of the Loan Parties delivered pursuant to Section
7.1(e) (i), (ii) or (v) hereof will differ in any material respect
from the consolidated financial statements that would have been
delivered pursuant to such Sections had no such change in accounting
principles and policies been made, then (A) together with the first
delivery of financial statements pursuant to Section 7.1(e) (i), (ii)
or (v) hereof following such change, consolidated financial statements
of the Loan Parties for (y) the current Fiscal Year to the effective
date of such change and (z) the two full Fiscal Years immediately
preceding the Fiscal Year in which such change is made, in each case
prepared on a pro forma basis as if such change had been in effect
during such periods, and (B) together with each delivery of financial
statements pursuant to Section 7.1(e) (i), (ii) or (v) hereof
following such change, a written statement of the chief financial
officer of Company setting forth the differences (including any
differences that would affect any calculations relating to the
financial covenants set forth in Section 7.3) which would have
resulted if such financial statements had been prepared without giving
effect to such change.
38
(f) Litigation and Other Notices. Give Agent written notice (and
copies, as applicable) of the following promptly after any Loan Party has or
receives notice or knowledge of the following:
(i) Orders; Injunctions. The issuance by any court or
governmental agency or authority of any injunction, order, decision or
other restraint prohibiting, or having the effect of prohibiting, the
making of any loan or the initiation of any litigation or similar
proceeding seeking any such injunction, order or other restraint.
(ii) Litigation. (A) The notice, filing or commencement of any
action, suit or proceeding against any of the Loan Parties whether at
law or in equity or by or before any court or any Federal, state,
municipal or other governmental agency or authority and that, if
adversely determined against any of the Loan Parties, could result in
uninsured liability in excess of $500,000 in the aggregate, (B) the
notice, filing or commencement of any action, suit or proceeding by
any of the Loan Parties whether at law or in equity or by or before
any court or any Federal, state, municipal or other governmental
agency or authority and that, if determined in favor of such Loan
Party, could result in a judgment in favor of such Loan Party in
excess of $500,000 in the aggregate, and (C) in the case of each of
(A) and (B) above, (x) copies of all pleadings of all such lawsuits
and, in the case of other actions, a letter stating the nature of such
action and copies of all relevant documents, and (y) notice of any
material development in such matter.
(iii) Environmental Matters. (A) Any release or threatened
release of any Pollutant required to be reported to any Federal, state
or local governmental or regulatory agency under any applicable
Environmental Laws, (B) any Removal, Remedial or Response action taken
by any of the Loan Parties or any other person in response to any
Pollutant in, at, on or under, a part of or about any of the Loan
Parties' properties or any other property, (C) any violation by any of
the Loan Parties of any Environmental Law, in each case, that could
result in a Material Adverse Effect, or (D) any notice, claim or other
information that any of the Loan Parties might be subject to an
Environmental Liability.
(iv) Default. Any Default or Event of Default, specifying the
nature and extent thereof and the action (if any) that is proposed to
be taken with respect thereto.
(v) Material Adverse Effect. Any development in the business or
affairs of any of the Loan Parties that could reasonably be expected
to have a Material Adverse Effect.
39
(vi) Board Meetings. Written notice of each regular meeting of
each Loan Party's Board of Directors at least 15 days in advance of
such meeting and prior written notice of each special meeting of each
Loan Party's Board of Directors no later than the date on which the
members of the Board of Directors are notified of such special meeting
and in any event no later than 48 hours prior to such special meeting
(except to the extent shorter notice is required in the event of an
emergency). In addition, the Loan Parties shall send Agent copies of
all reports and materials provided to members of the Board of
Directors at meetings or otherwise.
(g) ERISA. Comply in all material respects with the applicable
provisions of ERISA and the provisions of the Code relating thereto and furnish
to Agent, and if requested by them in writing, furnish to Purchasers, (i) as
soon as possible, and in any event within thirty (30) days after the Loan
Parties know or have reason to know thereof, notice of (A) the establishment by
the Loan Parties of any Plan, (B) the commencement by the Loan Parties of
contributions to a Multiemployer Plan, (C) any failure by the Loan Parties or
any of their ERISA Affiliates to make contributions required by Section 302 of
ERISA (whether or not such requirement is waived pursuant to Section 303 of
ERISA), or (D) the occurrence of any Reportable Event with respect to any Plan
or Multiemployer Plan for which the reporting requirement is not waived,
together with a statement of an officer setting forth details as to such
Reportable Event and the action that the Loan Parties propose to take with
respect thereto, together with a copy of the notice of such Reportable Event
given to the PBGC if any such notice was provided by the Loan Parties, and (ii)
promptly after receipt thereof, a copy of any notice the Loan Parties may
receive from the PBGC relating to the intention of the PBGC to terminate any
Plan or Multiemployer Plan, or to appoint a trustee to administer any Plan or
Multiemployer Plan, and (iii) promptly after receipt thereof, a copy of any
notice of withdrawal liability from any Multiemployer Plan.
(h) Maintaining Records; Access to Premises and Inspections. Maintain
financial records in accordance with generally accepted practices and, upon
reasonable notice: (i) not more than three (3) times in any consecutive twelve
month period, and (ii) at any time as Agent or any Purchaser may request after
the occurrence and during the continuation of a Default or Event of Default,
permit any authorized representative designated by Agent to visit and inspect
the properties and financial records of the Loan Parties and to make extracts
from such financial records, all at the Loan Parties' reasonable expense, and
permit any authorized representative designated by Agent or any Purchasers to
discuss the affairs, finances and condition of the Loan Parties with the Loan
Parties' chief financial officers and such other officers as the Loan Parties
shall deem appropriate, and the Loan Parties' independent public accountants.
(i) Board of Directors. Ensure that:
(i) Company's Board of Directors shall meet (in person or through
teleconference) at least twice per calendar year.
40
(ii) Purchasers shall have the right, exercisable by Required
Purchasers, to designate an observer, without voting rights, who shall
be entitled to attend all meetings of the Loan Parties' boards of
directors, any committees thereof, and stockholders. Any observer
designated by Purchasers' shall be entitled to notice of all meetings
of the Loan Parties' boards of directors, any committees thereof and
stockholders, and to information provided to any directors and
stockholders. Such observer shall receive reimbursement for reasonable
out-of-pocket expenses from the Loan Parties incurred in connection
with attendance at boards of directors, committee and stockholder
meetings.
7.2 Negative Covenants. The Loan Parties, jointly and severally,
covenant that, so long as all or any part of the principal amount of the
Subordinated Notes or any interest thereon shall remain outstanding:
(a) Indebtedness. None of the Loan Parties shall, directly or
indirectly, create, incur, assume guarantee, or otherwise become or remain
directly or indirectly liable with respect to, any Indebtedness, except:
(i) Indebtedness under this Agreement;
(ii) Indebtedness under the Senior Financing, to which payment
under the Subordinated Notes shall be subordinated in accordance with
the terms of the Subordination Agreement; provided, however, that the
principal amount of such Indebtedness shall at no time exceed
$150,000,000 without the prior written consent of Agent;
(iii) Indebtedness with respect to Contingent Obligations
permitted by Section 7.2(c) and, upon any matured obligations actually
arising pursuant thereto, the Indebtedness corresponding to the
Contingent Obligations so extinguished;
(iv) Indebtedness in respect of Capital Leases; provided that
such Capital Leases are permitted under the terms of Section 7.2(d);
(v) Inter-company Indebtedness among the Loan Parties;
(vi) Indebtedness and obligations owing under Hedge Agreements
entered into in order to manage existing or anticipated interest rate
or exchange rate risks and not for speculative purposes;
(vii) other Indebtedness in an aggregate principal amount not to
exceed $2,300,000 at any time outstanding; provided, that, such
Indebtedness is subordinated to the Indebtedness under this Agreement
on terms reasonably satisfactory to Agent; and
41
(viii) trade letters of credit entered into in the ordinary
course of the Loan Parties' business.
(b) Negative Pledge; Liens. The Loan Parties shall not create, incur,
assume or suffer to exist any Lien of any kind on any of their properties or
assets of any kind, except the following:
(i) Liens created in connection with the Senior Financing;
(ii) Permitted Liens;
(iii) Liens listed on the "Permitted Encumbrances Schedule"
attached hereto as Schedule 7.2(b); and
(iv) other Liens on assets securing Indebtedness incurred to
acquire such assets pursuant to Section 7.2(a)(vii) in an aggregate
amount not to exceed the aggregate purchase price of such assets.
(c) Contingent Liabilities. The Loan Parties shall not, directly or
indirectly, create or become or remain liable with respect to any Contingent
Obligation, except:
(i) the Loan Parties may become and remain liable with respect to
Contingent Obligations in respect of Letters of Credit issued under
the Senior Credit Agreement or with respect to guaranties provided in
connection with the Senior Financing;
(ii) the Loan Parties may become and remain liable with respect
to other Contingent Obligations (including letters of credit and
Contingent Obligations assumed in Permitted Acquisitions) in an
aggregate amount not to exceed $5,750,000 at any time;
(iii) the Loan Parties may become and remain liable (A) with
respect to Contingent Obligations under the Management Agreement and
(B) in respect of customary indemnification and purchase price
adjustment obligations incurred in connection with (x) Asset Sales or
other sales of assets, in each case permitted under this Agreement,
and (y) Permitted Acquisitions;
(iv) the Loan Parties may become and remain liable with respect
to Contingent Obligations in respect of any Indebtedness of the Loan
Parties permitted by Section 7.2(a);
(v) the Loan Parties may become and remain liable with respect to
Contingent Obligations incurred in the ordinary course of business
with respect to surety and appeal bonds, performance bonds and other
similar obligations; and
42
(vi) the Loan Parties may become and remain liable with respect
to Contingent Obligations incurred in the ordinary course of business
under indemnity agreements to title insurers to cause such title
insurers to issue title insurance policies to Senior Agent and/or to
the Loan Parties.
(d) Leases. The Loan Parties shall not become liable in any way,
whether directly or by assignment or as a guarantor or other surety, for the
obligations of the lessee under any lease, whether an Operating Lease or a
Capital Lease (other than intercompany leases between Loan Parties, and other
than Company's lease of its headquarters offices and warehouse space pursuant to
the Lease Agreement entered into as of July 14, 2003 between Company and Green
Properties, Inc., and any successor or replacement lease ("Headquarters
Lease")), unless, immediately after giving effect to the incurrence of liability
with respect to any such lease, the aggregate amount of all rental payments
under all such leases (excluding the Headquarters Lease and any other leases of
the Loan Parties relating to a Permitted Acquisition), shall not exceed $287,500
in any Fiscal Year.
(e) Mergers, Sales, Acquisitions etc. The Loan Parties shall not alter
the corporate, capital or legal structure of the Loan Parties, or enter into any
transaction of merger or consolidation, or liquidate, wind-up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease
(as lessor or sublessor), transfer or otherwise dispose of, in one transaction
or a series of transactions, all or any part of its business, property or
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or substantially all the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person (other than purchases or other acquisitions of
inventory, materials and equipment in the ordinary course of the Loan Parties'
Business), except:
(i) any Subsidiary of Company may be merged with or into Company
or any wholly-owned Subsidiary of Company, or be liquidated, wound up
or dissolved, or all or any part of its business, property or assets
may be conveyed, sold, leased, transferred or otherwise disposed of,
in one transaction or a series of transactions, to Company or any
wholly-owned Subsidiary of Company; provided that, in the case of such
a merger, Company or such wholly-owned Subsidiary shall be the
continuing or surviving corporation;
(ii) the Loan Parties may make Consolidated Capital Expenditures
permitted under Section 7.3(b);
(iii) the Loan Parties may dispose of obsolete, worn out or
surplus property in the ordinary course of business;
43
(iv) the Loan Parties may sell or otherwise dispose of (A)
inventory sold in the ordinary course of business, and (B) any such
other assets in an aggregate amount not to exceed $230,000 in any
fiscal year; provided that the consideration received for such assets
shall be in an amount at least equal to the fair market value thereof;
(v) the Loan Parties may sell or discount, in each case without
recourse and in the ordinary course of business, Accounts arising in
the ordinary course of business, but only in connection with the
compromise or collection thereof and not as part of any financing
transaction;
(vi) the Loan Parties may grant leases and subleases to other
Persons in the ordinary course of business not materially interfering
with the conduct of the business of the Loan Parties; and
(vii) the Loan Parties may make or enter into Permitted
Acquisitions.
(f) Affiliate Transactions. The Loan Parties shall not, directly or
indirectly, enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any holder of 5% or more of any class of equity Securities of a
Loan Party or with any Affiliate of a Loan Party or of any such holder, on terms
that are less favorable to such Loan Party than those that might be obtained at
the time from Persons who are not such a holder or Affiliate; provided that the
foregoing restriction shall not apply to (i) any transaction between Loan
Parties, (ii) reasonable and customary fees paid to members of the Boards of
Directors of the Loan Parties; provided, however, that if any person is a member
of the Board of Directors of more than one Loan Party, such person shall be paid
no more than reasonable and customary fees payable as if such person were a
member of the Board of Directors of only one Loan Party, or (iii) payment to
Trivest of a transaction fee of $1,500,000 in connection with the consummation
of the Senior Financing and the transactions contemplated by this Agreement or
(iv) the Management Agreement; provided, that amounts payable under the
Management Agreement shall not be (A) increased from amounts payable under the
Management Agreement as in effect on the date hereof, or (B) payable upon the
occurrence and during the continuation of an Event of Default under Section
8.1(a), (g) or (h) hereof. Notwithstanding any provision of this Agreement to
the contrary, the Loan Parties may reimburse Trivest for the reasonable and
allocable charges in the ordinary course of business (including the
reimbursement of reasonable out-of-pocket expenses) of the Trivest Legal
Department for services rendered to the Loan Parties provided that such charges
are incurred in the ordinary course of business and at rates no less favorable
to the Loan Parties than rates that would be charged for similar services
rendered by persons who are not Affiliates of the Loan Parties.
(g) Dividends and Stock Purchases. The Loan Parties shall not directly
or indirectly: declare or pay any dividends or make any distribution of any kind
44
on their outstanding capital stock or any other payment of any kind to any of
their stockholders or its Affiliates (including any redemption, purchase or
acquisition of, whether in cash or in property, securities or a combination
thereof, any partnership interests or capital accounts or warrants, options or
any of their other securities), or set aside any sum for any such purpose other
than:
(i) such dividends, distributions or payments paid solely to
Company or its Subsidiaries;
(ii) payment of the Distribution;
(iii) Company may make a distribution to Holdings to redeem
shares of Holdings' capital stock or warrants or options to acquire
any such shares from employees of the Loan Parties upon the death or
other termination of employment of such employees, provided that all
of the following conditions are satisfied:
(A) no Default or Event of Default shall have occurred and
be continuing or would arise as a result of such distribution;
(B) after giving effect to such distribution (together with
all prior or concurrent distributions permitted under this Section
7.2(g)(iii)), Company shall be in compliance on a pro forma basis with
the covenants set forth in Section 7.3, recomputed for the most recent
calendar quarter for which financial statements have been delivered by
Company pursuant to Section 7.1(e); and
(C) the aggregate amount of such distributions permitted in
any Fiscal Year shall not exceed $575,000;
(iv) if Company files a consolidated income tax return with
Holdings, Company may make distributions to Holdings to permit
Holdings to pay federal and state income taxes then due and owing,
franchise taxes and other similar licensing expenses incurred in the
ordinary course of business; provided that the amount of such
distributions shall not be greater, nor the receipt by Company of tax
benefits less, than they would have been had Company not filed a
consolidated income tax return with Holdings; and
(v) Company may make distributions to Holdings to enable the
payment of out-of-pocket expenses of members of the board of directors
of Holdings who are not otherwise employees or consultants to Holdings
or any of its Subsidiaries, Trivest, or any of their respective
Affiliates, provided that the aggregate amount of such fees shall not
exceed $62,500 during any period of 12 consecutive months.
45
(h) Advances, Investments and Loans. The Loan Parties shall not
purchase, or hold beneficially any stock, other securities or evidences of
Indebtedness of, or make or permit to exist any loan, Guaranty or advance to, or
make any investment or acquire any interest whatsoever in, any other Person
(including, but not limited to, the formation or acquisition of any
Subsidiaries), except:
(i) securities issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality
thereof having maturities of not more than six (6) months from the
date of acquisition;
(ii) United States dollar-denominated time deposits, certificates
of deposit and bankers acceptances of any bank whose short-term debt
rating from Standard & Poor's Ratings Group, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. ("S&P"), is at least A-1 or the equivalent
or whose short-term debt rating from ▇▇▇▇▇'▇ Investors Service, Inc.
("▇▇▇▇▇'▇") is at least P-1 or the equivalent with maturities of not
more than six months from the date of acquisition;
(iii) commercial paper with a rating of at least A-1 or the
equivalent by S&P or at least P-1 or the equivalent by Moody's
maturing within six months after the date of acquisition;
(iv) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within six months
from the date of acquisition thereof and, at the time of acquisition,
having one of the two highest ratings obtainable from either S&P or
Moody's;
(v) Investments in money market funds, substantially all the
assets of which are comprised of securities of the types described in
clauses (i) through (iv) above;
(vi) deposit accounts maintained in accordance with the Senior
Credit Agreement;
(vii) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of suppliers and
customers and in settlement of delinquent obligations of, and other
disputes with, customers and suppliers arising in the ordinary course
of business;
(viii) Receivables owing to the Loan Parties created or acquired
in the ordinary course of business and payable on the customary trade
terms of the Loan Parties;
46
(ix) deposits made in the ordinary course of business consistent
with past practices to secure the performance of leases or in
connection with bidding on government contracts;
(x) advances to employees in the ordinary course of business for
business expenses; provided, however, that the aggregate amount of
such advances at any time outstanding shall not exceed $20,000;
(xi) the Loan Parties may make Permitted Acquisitions;
(xii) loan to employees in an aggregate amount not to exceed
$775,000 at any one time, for the purpose of assisting its employees
in the acquisition of certain stock of Holdings;
(xiii) securities issued by other Loan Parties; and
(xiv) other Investments not to exceed $460,000 in the aggregate.
(i) Use of Proceeds. The Loan Parties shall not use any proceeds from
the sale of the Subordinated Notes hereunder, directly or indirectly, for the
purposes of purchasing or carrying any "margin securities" within the meaning of
Regulations T, U or X promulgated by the Board of Governors of the Federal
Reserve Board or for the purpose of arranging for the extension of credit
secured, directly or indirectly, in whole or in part by collateral that includes
any "margin securities."
(j) Amendment of Charter Documents. The Loan Parties shall not amend,
terminate, modify or waive or agree to the amendment, modification or waiver of
any material term or provision of their respective Charter Documents or By-laws
that could reasonably be expected to have a Material Adverse Effect or otherwise
have an adverse effect on Agent's or any Purchaser's rights under the Purchase
Documents.
(k) Subsidiaries. None of the Loan Parties shall create, form or
acquire any Subsidiary except for (i) domestic Subsidiaries, and (ii) Canadian
Subsidiaries acquired in, or formed to consummate, a Permitted Acquisition,
provided that, in the event of (i) or (ii) of this Section 7.2(k), any such
Subsidiary shall become a Loan Party contemporaneously with or promptly after
such entity becomes a Subsidiary of a Loan Party on terms reasonably
satisfactory to Agent.
(l) Business. None of the Loan Parties shall engage, directly or
indirectly, in any business other than the Business.
(m) Fiscal Year; Accounting. None of the Loan Parties shall change its
Fiscal Year from ending on December 31 or method of accounting (other than
immaterial changes in methods), except as required by GAAP.
(n) Establishment of New or Changed Business Locations. None of the
Loan Parties shall relocate its principal executive offices or other facilities
or
47
establish new business locations or store any inventory or other assets at a
location not identified to Agent on or before the date hereof, without providing
not less than thirty (30) days advance written notice to Agent.
(o) Changed or Additional Business Names. None of the Loan Parties
shall change its corporate name, establish new or additional trade names or
change its state of organization without providing not less than thirty (30)
days advance written notice to Agent.
(p) Holdings. Notwithstanding any other provision of this Agreement to
the contrary, Holdings shall not engage in any operations, business or activity,
or incur any liabilities, other than (i) holding 100% of the capital stock of
Company or any Subsidiary established and operated in compliance with Section
7.2(k) and (ii) performing its obligations under (A) the Senior Loan Documents
and (B) the Purchase Documents. For the avoidance of doubt, the phrase
"operations, business, activity or incur any liabilities" as used in the
preceding sentence does not include activities or liabilities involving the
capital stock of Holdings (including, without limitation, the issuance of
capital stock) or any matters relating to the corporate governance, existence or
payment of taxes of Holdings. In the event that all of the direct holders of the
capital stock of Holdings form one or more holding companies through which such
holders collectively own their equity interests in Holdings, Holdings shall
cause each such holding company to comply with the requirements of this Section
7.2(p) (except that the reference to capital stock of Company in Section
7.2(p)(i) shall be deemed to refer to capital stock of Holdings owned by such
new holding company).
(q) Sales and Lease-Backs. Each Loan Party shall not directly or
indirectly, become or remain liable as lessee or as a guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
property (whether real, personal or mixed), whether now owned or hereafter
acquired, (i) which such Loan Party has sold or transferred or is to sell or
transfer to any other Person (other than any other Loan Party) or (ii) which
such Loan Party intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by any Person (other
than any Loan Party) in connection with such lease; provided that a Loan Party
may become and remain liable as lessee, guarantor or other surety with respect
to any such lease if and to the extent that such Loan Party would be permitted
to enter into, and remain liable under, such lease under Section 7.2(d).
(r) Sale or Discount of Receivables. Except for sales permitted
pursuant to Section 7.2(e)(v), the Loan Parties shall not, directly or
indirectly, sell with recourse, or discount or otherwise sell for less than the
face value thereof, any of its notes or accounts receivable.
(s) Disposal of Subsidiary Stock. Except for any sale of 100% of the
capital stock or other equity Securities of any of Company's Subsidiaries in
compliance with the provisions of Section 7.2(e), the Loan Parties shall not:
48
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except to qualify directors if
required by applicable law; or
(ii) permit any of its Subsidiaries directly or indirectly to
sell, assign, pledge or otherwise encumber or dispose of any shares of
capital stock or other equity Securities of any of its Subsidiaries
(including such Subsidiary), except to Company, another Subsidiary of
Company, or to qualify directors if required by applicable law.
(t) No Acquisition of Real Estate. No Loan Party shall acquire any fee
interests in any real property.
7.3 Financial Covenants. The Loan Parties, jointly and severally,
covenant that, so long as all or any part of the principal amount of the
Subordinated Notes or any interest thereon shall remain outstanding:
(a) Maximum Consolidated Total Leverage Ratio. The Loan Parties shall
not permit the Consolidated Total Leverage Ratio as of the last day of any
Fiscal Quarter ending during any of the periods set forth below to exceed the
correlative ratio indicated:
Period Maximum Consolidated Total Leverage Ratio
------ -----------------------------------------
July 1, 2004 to June 30, 2005 6.0 to 1.0
July 1, 2005 to June 30, 2006 5.5 to 1.0
July 1, 2006 to June 30, 2007 5.0 to 1.0
July 1, 2007 to June 30, 2008 4.0 to 1.0
July 1, 2008 and thereafter 3.5 to 1.0
Maximum Consolidated Senior Leverage Ratio. The Loan Parties shall not
permit the Consolidated Senior Leverage Ratio as of the last day of any Fiscal
Quarter ending during any of the periods set forth below to exceed the
correlative ratio indicated:
Period Maximum Consolidated Senior Leverage Ratio
------ ------------------------------------------
July 1, 2004 to June 30, 2005 4.0 to 1.0
July 1, 2005 to June 30, 2006 3.5 to 1.0
July 1, 2006 and thereafter 3.0 to 1.0
49
Minimum Fixed Charge Coverage Ratio. The Loan Parties shall not permit
the ratio of (i) Consolidated EBITDA minus Consolidated Capital Expenditures to
(ii) Consolidated Fixed Charges for any four consecutive Fiscal Quarter periods
ending during the term of this Agreement (excluding the Fiscal Quarter period
ending on June 30, 2004) to be less than 1.05 to 1.0.
(b) Capital Expenditures. The Loan Parties shall not make or incur, or
commit to make or incur, Consolidated Capital Expenditures in an aggregate
amount in excess of $4,000,000 in any Fiscal Year; provided that such permitted
amount of Consolidated Capital Expenditures may be increased in any Fiscal Year
by carrying forward 50% of any unused amount from the immediately preceding
fiscal year; provided further that with respect to any Fiscal Year, Consolidated
Capital Expenditures made during any such fiscal year shall be deemed to be made
first with respect to the applicable limitation for such Fiscal Year and then
with respect to any carry forward amount to the extent applicable
ARTICLE 8
EVENTS OF DEFAULT
8.1 Events of Default. An Event of Default shall mean the occurrence
of one or more of the following described events:
(a) any Loan Party shall default in the payment of (i) interest on any
Subordinated Note within five (5) days after its due date or (ii) principal of
any Subordinated Note when due, whether at maturity, upon notice of prepayment
in accordance with Sections 3.3 or 3.4, upon any scheduled payment date, a
mandatory prepayment date in accordance with Section 3.5 or by acceleration or
otherwise;
(b) (i) any Loan Party shall default under any agreement under which
any Indebtedness (other than the Senior Obligations) in an aggregate principal
amount of $575,000 or more is created in a manner entitling the holder of such
Indebtedness to accelerate the maturity of such Indebtedness or (ii) the Senior
Agent or any Senior Lender shall accelerate the maturity of any or all of the
principal amount outstanding of Indebtedness under the Senior Financing;
(c) any representation or warranty herein made by any Loan Party, or
any certificate or financial statement furnished pursuant to the provisions
hereof, shall prove to have been false or misleading in any material respect as
of the time made or furnished or deemed made or furnished;
(d) any Loan Party shall default in the performance of any covenant,
condition or provision of Section 7.1(h), 7.2 or 7.3;
50
(e) [intentionally omitted]
(f) any Loan Party shall default in the performance of any other
covenant, condition or provision of this Agreement, any Subordinated Note or any
other Purchase Document, and such default shall not be remedied to Agent's or
Required Purchasers' satisfaction for a period of thirty (30) days of the
earlier of (i) written notice from an Agent of such default or (ii) actual
knowledge by any Loan Party of such default;
(g) a proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
any Loan Party in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of any Loan Party or for any substantial part
of its property, or for the winding-up or liquidation of their affairs, and such
proceeding shall remain undismissed or unstayed and in effect for a period of
sixty (60) days;
(h) any Loan Party shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of any Loan Party or for any substantial part of their
property, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay their debts as they become due, or shall take any
action in furtherance of any of the foregoing;
(i) both the following events shall occur: (i) a Reportable Event, the
occurrence of which would have a Material Adverse Effect that could cause the
imposition of a Lien under Section 4068 of ERISA, shall have occurred with
respect to any Plan or Plans; and (ii) the aggregate amount of the then "current
liability" (as defined in Section 412(l)(7) of the Internal Revenue Code of
1986, as amended) of all accrued benefits under such Plan or Plans exceeds the
then current value of the assets allocable to such benefits by more than
$575,000 at such time;
(j) a final judgment that with other undischarged final judgments
against any Loan Party, exceeds an aggregate of $1,150,000 (excluding judgments
to the extent the applicable Loan Party is fully insured or the deductible or
retention limit does not exceed $1,150,000 and with respect to which the insurer
has assumed responsibility in writing), shall have been entered against any Loan
Party if, within sixty (60) days after the entry thereof, such judgment shall
not have been discharged or execution thereof stayed pending appeal, or if,
within sixty (60) days after the expiration of any such stay, such judgment
shall not have been discharged;
(k) any Purchase Document shall at any time after the Closing Date
cease for any reason to be in full force and effect; or
51
(l) a Change of Control shall have occurred.
8.2 Consequences of Event of Default.
(a) Bankruptcy. If an Event of Default specified in paragraphs (g) or
(h) of Section 8.1 hereof shall occur, the unpaid balance of the Subordinated
Notes and interest accrued thereon and all other liabilities of the Loan Parties
to the holders thereof hereunder and thereunder shall be immediately due and
payable, without presentment, demand, protest or (except as expressly required
hereby) notice of any kind, all of which are hereby expressly waived.
(b) Other Defaults. If any other Event of Default shall occur,
Required Purchasers may at their option, by written notice to the Loan Parties,
declare the entire unpaid balance of the Subordinated Notes, and interest
accrued thereon and all other liabilities of the Loan Parties hereunder and
thereunder to be forthwith due and payable, and the same shall thereupon become
immediately due and payable, without presentment, demand, protest or (except as
expressly required hereby) notice of any kind, all of which are hereby expressly
waived; provided, that in the case of a default specified in clause (ii) of
paragraph (a) of Section 8.1 hereof shall occur, any holder of a Subordinated
Note as to which such Event of Default has occurred may declare the entire
unpaid balance of such Subordinated Note (but only such Subordinated Note) and
other amounts due hereunder and thereunder with regard to such Subordinated Note
to become immediately due and payable.
(c) Penalty Interest. Following the occurrence and during the
continuance of any Event of Default, the holders of the Subordinated Notes shall
be entitled to receive, to the extent permitted by applicable law, interest on
the outstanding principal of, and premium and overdue interest, if any, on, the
Subordinated Notes at a rate per annum equal to the interest rate thereon
(determined as provided in Section 3.1) plus two hundred (200) basis points
(such rate, the "Default Rate") provided, that, with respect to any Event of
Default pursuant to Section 8.1(a), such interest at the Default Rate shall be
payable by the Loan Parties from the due date for payment and without regard to
any cure period in Section 8.1(a) hereof.
(d) Premium. In the event of any acceleration of Subordinated Notes
pursuant to Section 8.2(b) hereof, the Loan Parties shall also pay to Agent, for
the ratable benefit of Purchasers, the prepayment premium that would otherwise
be payable upon any voluntary prepayment of such Subordinated Notes.
ARTICLE 9
THE AGENT
9.1 Authorization and Action. Each Purchaser and each subsequent
holder of any Subordinated Note by its acceptance thereof, hereby designates and
appoints ACFS as Agent hereunder and authorizes ACFS to take such actions as
agent on its behalf and to exercise such powers as are delegated to Agent by the
terms of this
52
Agreement and the other Purchase Documents, together with such powers as are
reasonably incidental thereto. Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of Agent shall
be read into this Agreement or otherwise exist for Agent. In performing its
functions and duties hereunder, Agent shall act solely as agent for Purchasers
and shall not assume, nor shall be deemed to have assumed, any obligation or
relationship of trust or agency with or for the Loan Parties or any of their
respective successors or assigns. Agent shall not be required to take any action
that exposes Agent to personal liability or that is contrary to this Agreement
or applicable Laws. The appointment and authority of Agent hereunder shall
terminate at the indefeasible payment in full of the Subordinated Notes and
related obligations.
9.2 Delegation of Duties. Agent may execute any of its duties under
this Agreement by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither Agent nor any of its directors,
officers, agents or employees shall be (i) liable for any action lawfully taken
or omitted to be taken by it or them under or in connection with this Agreement
(except for its, their or such Person's own gross negligence or willful
misconduct or, in the case of Agent, the breach of its obligations expressly set
forth in this Agreement, unless such action was taken or omitted to be taken by
Agent at the direction of the Required Purchasers), or (ii) responsible in any
manner to any of the Purchasers for any recitals, statements, representations or
warranties made by the Loan Parties contained in this Agreement or in any
certificate, report, statement or other document referred to or provided for in,
or received under or in connection with, this Agreement for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other document furnished in connection herewith, or for any failure of any
of the Loan Parties to perform their respective obligations hereunder, or for
the satisfaction of any condition specified in Article 4. Agent shall not be
under any obligation to any Purchaser to ascertain or to inquire as to the
observance or performance of any of the agreements or covenants contained in, or
conditions of, this Agreement or any other Transaction Document, or to inspect
the properties, books or records of any of the Loan Parties.
9.4 Reliance. Agent shall in all cases be entitled to rely, and shall
be fully protected in relying, upon any document or conversation believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Loan Parties), independent accountants and
other experts selected by Agent. Agent shall in all cases be fully justified in
failing or refusing to take any action under this Agreement or any other
document furnished in connection herewith unless it shall first receive such
advice or concurrence of the Required Purchasers or all of the Purchasers, as
applicable, as it deems appropriate or it shall first be indemnified to its
53
satisfaction by Purchasers; provided, that, unless and until Agent shall have
received such advice, Agent may take or refrain from taking any action, as Agent
shall deem advisable and in the best interests of Purchasers. Agent shall in all
cases be fully protected in acting, or in refraining from acting, in accordance
with a request of the Required Purchasers or all of the Purchasers, as
applicable, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all Purchasers.
9.5 Non-Reliance on Agent and Other Purchasers. Each Purchaser
expressly acknowledges that neither Agent, nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any representations
or warranties to it and that no act by Agent or hereafter taken, including,
without limitation, any review of the affairs of the Loan Parties, shall be
deemed to constitute any representation or warranty by Agent. Each Purchaser
represents and warrants to Agent that it has and will, independently and without
reliance upon Agent or any other Purchaser and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, prospects, financial and
other conditions and creditworthiness of the Loan Parties and made its own
decision to enter into this Agreement.
9.6 Agent in its Individual Capacity. Agent, and each of its
Affiliates may make loans to, purchase securities from, provide services to,
accept deposits from and generally engage in any kind of business with the Loan
Parties or any Affiliate of the Loan Parties as though Agent were not Agent
hereunder.
9.7 Successor Agent. Agent may, upon forty-five (45) days' notice to
the Loan Parties and Purchasers, and Agent shall, upon the direction of the
Required Purchasers (other than Agent, in its individual capacity), resign as
Agent. If Agent shall resign, then the Required Purchasers during such
forty-five (45) day period shall appoint a successor Agent and if the Required
Purchasers direct Agent to resign, such direction shall include an appointment
of a successor Agent. If for any reason no successor Agent is appointed by the
Required Purchasers during such forty-five (45) day period, then effective upon
the expiration of such forty-five (45) day period, Purchasers shall perform all
of the duties of Agent hereunder and the Loan Parties shall make all payments in
respect of the Subordinated Notes directly to the applicable Purchaser and for
all purposes shall deal directly with Purchasers. After any retiring Agent's
resignation hereunder as Agent, the provisions of Article 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
9.8 Collections and Disbursements.
(a) Agent shall have the right to collect and receive all payments of
the Subordinated Notes, and to collect and receive all reimbursements due
hereunder, together with all fees, charges or other amounts due under this
Agreement and the other Purchase Documents with regard to the Subordinated
Notes, and Agent will remit to each Purchaser, according to its pro rata
percentage, all such payments actually received by Agent in accordance with the
settlement procedures established from time to time.
54
Settlements shall occur on such dates as Agent may elect in its sole discretion,
but which shall be no later than two (2) Business Days following receipt
thereof.
(b) If any such payment received by Agent is rescinded or otherwise
required to be returned for any reason at any time, whether before or after
termination of this Agreement or the other Purchase Documents, each Purchaser
shall, upon written notice from Agent, promptly pay over to Agent its pro rata
percentage of the amounts so rescinded or returned, together with interest and
other fees thereon so rescinded or returned.
(c) All payments by Agent and Purchasers to each other hereunder shall
be in immediately available funds. Agent shall at all times maintain proper
books of accounts and records reflecting the interest of each Purchaser in the
Subordinated Notes, in a manner customary to Agent's keeping of such records,
which books and records shall be available for inspection by each Purchaser at
reasonable times during normal business hours, at such Purchaser's sole expense.
Agent may treat the payees of any Subordinated Note as the holder thereof until
written notice of the transfer thereof shall have been received by Agent in
accordance with Section 6.3. In the event that any Purchaser shall receive any
payment in reduction of the Subordinated Notes in an amount greater than its
applicable pro rata percentage in respect of obligations to Purchaser evidenced
hereby (including, without limitation, amounts obtained by reason of setoffs)
such Purchaser shall hold such excess in trust for Agent (on behalf of all other
Purchasers) and shall promptly remit to Agent such excess amount so that the
amounts received by each Purchaser hereunder shall at all times be in accordance
with its applicable pro rata percentage. If, however, any Purchaser that has
received any such excess amount fails to remit such amount to the Agent, the
Agent shall reallocate the amounts paid on the next payment date to each
Purchaser so that, after giving effect to such payments, the pro rata
obligations owed by the Loan Parties to each Purchaser shall be in an amount
equal to the pro rata amount owed by the Loan Parties before the date of the
payment of such excess amount. In no event shall any Purchaser be deemed to have
a participation or other right in, to or against any other Purchaser's Note as a
result of the payment of any excess amount.
9.9 Reporting. During the term of this Agreement, Agent shall promptly
furnish each Purchaser with copies of all notices and financial statements of
the Loan Parties required to be delivered or obtained hereunder and such other
financial statements and reports and other information in Agent's possession as
any Purchaser may reasonably request. Agent shall immediately notify Purchasers
when it receives actual knowledge of any Event of Default under the Purchase
Documents.
9.10 Consent of Purchasers.
(a) Except as expressly provided herein, Agent shall have the sole and
exclusive right to service, administer and monitor the Subordinated Notes and
the Purchase Documents related thereto, including, without limitation, the right
to exercise all rights, remedies, privileges and options under this Agreement
and under the other
55
Purchase Documents, including, without limitation, the credit judgment with
respect to the purchasing of the Subordinated Notes and the determination as to
the basis on which and extent to which purchases of Subordinated Notes may be
made.
(b) Notwithstanding anything to the contrary contained in Section
9.10(a) above, Agent shall not, without the prior written consent of all
Purchasers then holding Subordinated Notes: (i) extend any payment date under
the Subordinated Notes, (ii) reduce any interest rate applicable to any of the
Subordinated Notes or any fee payable to Purchasers hereunder, (iii) waive any
Event of Default under Section 8.1(a), (iv) compromise or settle all or a
portion of the Indebtedness under the Subordinated Notes, (v) release any
obligor from the Indebtedness under the Subordinated Notes except in connection
with full payment and satisfaction of all Indebtedness under the Subordinated
Notes, (vi) amend the definition of Required Purchasers, or (vii) amend this
Section 9.10(b).
(c) Notwithstanding anything to the contrary contained in Section
9.10(a) above, and subject to any applicable limitation set forth in Section
9.10(b) above, Agent shall not, without the prior written consent of Required
Purchasers: (i) waive any Event of Default; (ii) consent to any Loan Parties'
taking any action that, if taken, would constitute an Event of Default under
this Agreement or under any of the other Purchase Documents; or (iii) amend or
modify or agree to an amendment or modification of this Agreement or other
Purchase Documents.
(d) After an acceleration of the Indebtedness, Agent shall have the
sole and exclusive right, after consultation (to the extent reasonably
practicable under the circumstances) with all Purchasers and, unless otherwise
directed in writing by Required Purchasers, to exercise or refrain from
exercising any and all rights, remedies, privileges and options under this
Agreement or the other Purchase Documents and available at law or in equity to
protect the rights of Agent and Purchasers and collect the Indebtedness under
the Subordinated Notes, including, without limitation, instituting and pursuing
all legal actions brought against any Loan Party or to collect the Indebtedness
under the Subordinated Notes, or defending any and all actions brought by any
Loan Party or other Person; or incurring expenses or otherwise making
expenditures to protect the collateral, the Subordinated Notes or Agent's or any
Purchaser's rights or remedies.
9.11 This Article Not Applicable to Loan Parties. This Article 9 is
included in this Agreement solely for the purpose of determining certain rights
as between Agent and Purchasers and does not create, nor shall it give rise to,
any rights in or obligations on the part of the Loan Parties and all rights and
obligations of the Loan Parties (other than as specifically set forth herein)
under this Agreement shall be determined by reference to the provisions of this
Agreement other than this Article 9.
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ARTICLE 10
SUBORDINATION OF JUNIOR SUBORDINATED NOTES
10.1 General. The Junior Debt is subordinate and junior in right of
payment to the Senior Subordinated Notes to the extent provided in this Article
10.
10.2 Default in Respect of Senior Subordinated Notes.
(a) Senior Subordinated Notes Payment Default. In the event of a Event
of Default pursuant to Section 8.1(a) with respect to the Senior Subordinated
Notes (a "Senior Subordinated Notes Payment Default") then, unless and until
such Senior Subordinated Notes Payment Default shall have been cured or waived
or shall have ceased to exist, no direct or indirect payment (in cash, property
or by set-off or otherwise, except that payment may be made by delivery of
Junior Subordinated Notes) shall be made on account of the principal of, or
prepayment premium, if any, or any other amount in respect of, or interest on,
any Junior Subordinated Notes, or as a sinking fund for any Junior Subordinated
Notes, or in respect of any redemption, retirement, purchase or other
acquisition of any Junior Subordinated Notes, during any period:
(i) commencing on the date notice of such Senior Subordinated
Notes Payment Default shall have been given to the Purchasers holding
Junior Subordinated Notes by the Agent and ending on the date on which
such Senior Subordinated Notes Payment Default shall have been cured
or waived or shall have ceased to exist; or
(ii) in which the maturity of such Senior Subordinated Notes
shall have been accelerated in respect of such Senior Subordinated
Notes Payment Default and such acceleration shall not have been
annulled.
(b) Senior Subordinated Notes Covenant Default. In the event of a
Event of Default with respect to the Senior Subordinated Notes other than
pursuant to Section 8.1(a) (a "Senior Subordinated Notes Covenant Default"),
then, unless and until such Senior Subordinated Notes Covenant Default shall
have been cured or waived or shall have ceased to exist, no direct or indirect
payment (in cash, property or by set-off or otherwise, except that payment may
be made by delivery of Junior Subordinated Notes) shall be made on account of
the principal of, or prepayment premium, if any, or any other amount in respect
of, or interest on, any Junior Subordinated Notes, or as a sinking fund for any
Junior Subordinated Notes, or in respect of any redemption, retirement, purchase
or other acquisition of any Junior Subordinated Notes, during any period:
(i) of one hundred eighty (180) days after written notice (a
"Senior Subordinated Notes Blocking Notice") of such Senior
Subordinated Notes Covenant Default shall have been given to the Loan
Parties and to the Purchasers holding Junior Subordinated Notes by the
Agent, provided that only one (1) such Senior Subordinated Notes
57
Blocking Notice shall be given pursuant to the terms of this Section
10.2(b)(i) in any three hundred sixty (360) day period; or
(ii) in which an effective notice of acceleration of the maturity
of such Senior Subordinated Notes shall have been transmitted to the
Loan Parties and each of the holders of the Junior Subordinated Notes
in respect of such Senior Subordinated Notes Covenant Default and such
acceleration shall not have been annulled, or in which notice of the
failure to pay such Senior Subordinated Notes upon its final maturity
shall have been transmitted to the Loan Parties and each of the
holders of the Junior Subordinated Notes and such failure shall be
continuing;
provided that (A) no Senior Subordinated Notes Covenant Default that served as
the basis for, or existed at the time of, a previous Senior Subordinated Notes
Blocking Notice, shall provide the basis for a subsequent Senior Subordinated
Notes Blocking Notice unless such Senior Subordinated Notes Covenant Default has
been cured or waived for a period of at least one hundred eighty (180)
consecutive days, and (B) notwithstanding the foregoing, no more than four (4)
payment blockages may be imposed under any of the provisions of this Section
10.2(b) while the Junior Subordinated Notes shall remain outstanding.
(c) Notice by Agent. The Agent shall give written notice to each
holder of Junior Subordinated Notes of any Senior Subordinated Notes Payment
Default or Senior Subordinated Notes Covenant Default (and any acceleration of
the maturity of any Indebtedness as a result thereof) and the receipt of any
notice under Section 10.2(a) or (b), immediately upon the occurrence or receipt
thereof, as the case may be.
10.3 Insolvency, etc. In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to any Loan Parties, its creditors or its Properties and Facilities;
(b) any proceeding for the liquidation, dissolution or other
winding-up of the Loan Parties, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings;
(c) any assignment by the Loan Parties for the benefit of creditors;
or
(d) any other marshalling of the assets of the Loan Parties,
all Senior Subordinated Notes shall be paid in full in cash before any payment
or distribution, whether in cash, securities (other than securities of the Loan
Parties' or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinated, at least to the extent
provided in this Article 10 with respect to Junior Subordinated Notes, to the
payment of all Senior Subordinated Notes at the time outstanding and to any
securities issued in respect thereof under any such plan of
58
reorganization or readjustment (such securities being referred to as "Other
Subordinated Junior Notes")) or other property shall be made to any holder of
any Junior Subordinated Notes on account of any Junior Subordinated Notes.
Any payment or distribution, whether made in cash, securities (other than Other
Subordinated Junior Notes) or other property, and whether made directly or
indirectly that would otherwise (but for this Section 10.3) be payable or
deliverable in respect of Subordinated Debt shall first be paid or delivered
directly to the holders of Senior Subordinated Notes in accordance with the
priorities then existing among such holders until all Senior Subordinated Notes
shall have been paid in full in cash.
10.4 Limited Suspension of Remedies of Holders of Junior Subordinated
Notes. At any time during which payment on the Junior Subordinated Notes shall
be prohibited pursuant to the terms of Sections 10.2, no holder of Junior
Subordinated Notes (or the Agent in respect thereof) may:
(a) declare or join in the declaration of any Subordinated Debt to be
due and payable or otherwise accelerate the maturity of the principal of the
Notes, accrued interest thereon or prepayment premium or other amounts due
thereunder, or
(b) commence any administrative, legal or equitable action against the
Loan Parties;
provided, however, that the limitations contained in clauses (a) and (b) above
shall terminate with respect to such period on the earlier of (i) the date on
which the holders of the Senior Subordinated Notes accelerate the maturity of
the Senior Subordinated Notes pursuant to Section 10.2 and (ii) the date that is
the one hundred eightieth (180th) day after the date of delivery of written
notice by the Agent to the holders of the Junior Subordinated Notes of the
occurrence and continuance of a Default or Event of Default under this
Agreement.
10.5 Proof of Claim. Each holder of Junior Subordinated Notes
irrevocably authorizes and empowers the holders of Senior Subordinated Notes in
any proceeding under any federal or state bankruptcy or insolvency law, or any
other reorganization, dissolution or liquidation proceedings of the Loan Parties
to file a proof of claim on behalf of such holder of Junior Subordinated Notes,
with respect to the Junior Subordinated Notes, and the other amounts owing
hereunder and the Subordinated Notes if (and only if) such holder of Junior
Subordinated Notes fails to file proof of its claims prior to ten (10) days
before the expiration of the time period during which such proof of claim must
be filed. Neither this Section 10.5, nor any other provisions hereof, shall be
construed to give the holders of Senior Subordinated Notes any right to vote any
Junior Subordinated Notes, or any related claim, whether in connection with any
resolution, arrangement, plan of reorganization, compromise, settlement,
election, or otherwise.
10.6 Acceleration of Junior Subordinated Notes. In the event that any
Junior Subordinated Notes shall be declared due and payable as the result of the
59
occurrence of any one or more Events of Default in respect thereof, under
circumstances when the terms of Section 10.2 do not prohibit payment on Junior
Subordinated Notes, no payment shall be made in respect of any Junior
Subordinated Notes unless and until all Senior Subordinated Notes shall have
been paid in full in cash or such declaration and its consequences shall have
been rescinded and all such Events of Default shall have been remedied or waived
or shall have ceased to exist.
10.7 Turnover of Payments.
If:
(i) any payment or distribution shall be collected or received by
any holders of Junior Subordinated Notes in contravention of any of
the terms of this Article 10 and prior to the payment in full in cash
of the Senior Subordinated Notes at the time outstanding; and
(ii) the Agent shall have notified such holders of Junior
Subordinated Notes, within one hundred eighty (180) days of any such
payment or distribution, of the facts by reason of which such
collection or receipt so contravenes this Article 10;
then such holders of Junior Subordinated Notes shall deliver such payment or
distribution, to the extent necessary to pay all such Senior Subordinated Notes
in full in cash, to the holders of such Senior Subordinated Notes and, until so
delivered, the same shall be held in trust by such holders of Junior
Subordinated Notes as the property of the holders of such Senior Subordinated
Notes. If after any amount is delivered to the holders of Senior Subordinated
Notes pursuant to this Section 10.7, whether or not such amounts have been
applied to the payment of Senior Subordinated Notes, and the outstanding Senior
Subordinated Notes shall thereafter be paid in full in cash by the Loan Parties
or otherwise other than pursuant to this Section 10.7, the holders of Senior
Subordinated Notes shall return to such holders of Junior Subordinated Notes an
amount equal to the amount delivered to such holders of Senior Subordinated
Notes pursuant to this Section 10.7.
10.8 Obligations Not Impaired.
(a) No Impairment of Senior Subordinated Note. No right of any present
or future holder of any Senior Subordinated Notes to enforce the subordination
as herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Loan Parties or by any act or failure
to act, in good faith, by any such holder, or by any non-compliance by the Loan
Parties with the terms, provisions and covenants of this Agreement, regardless
of any knowledge thereof any such holder may have or be otherwise charged with.
(b) No Impairment of Junior Subordinated Notes. Nothing contained in
this Article 10 shall impair, as between the Loan Parties and any holder of
Junior Subordinated Notes, the obligation of the Loan Parties to pay to such
holder the principal
60
thereof and prepayment premium, if any, and interest thereon as and when the
same shall become due and payable in accordance with the terms of this
Agreement, or prevent any holder of any Junior Subordinated Notes from
exercising all rights, powers and remedies otherwise permitted by applicable law
or under this Agreement all subject to the rights of the holders of the Senior
Subordinated Notes to receive cash, securities (other than Other Subordinated
Junior Notes) or other property otherwise payable or deliverable to the holders
of Junior Subordinated Notes.
10.9 Payment of Debt; Subrogation. Upon the payment in full of all
Senior Subordinated Notes in cash, the holders of Junior Subordinated Notes
shall be subrogated to all rights of any holder of Senior Subordinated Notes to
receive any further payments or distributions applicable to the Senior
Subordinated Notes until the Junior Subordinated Notes shall have been paid in
full, and such payments or distributions received by the holders of Junior
Subordinated Notes by reason of such subrogation, of cash, securities or other
property which otherwise would be paid or distributed to the holders of Senior
Subordinated Notes, shall, as between the Loan Parties and its creditors other
than the holders of Senior Subordinated Notes, on the one hand, and the holders
of Junior Subordinated Notes, on the other hand, be deemed to be a payment by
the Loan Parties on account of Senior Subordinated Notes and not on account of
Junior Subordinated Notes.
10.10 Reliance of Holders of Senior Subordinated Notes; Amendments.
(a) Reliance of Holders of Senior Subordinated Notes. Each holder of
Junior Subordinated Notes by its acceptance thereof shall be deemed to
acknowledge and agree that the foregoing subordination provisions are, and are
intended to be, an inducement to and a consideration of each holder of any
Senior Subordinated Notes, whether such Senior Subordinated Note was created or
acquired before or after the creation of Junior Subordinated Notes, to acquire
and hold, or to continue to hold, such Senior Subordinated Notes, and such
holder of Senior Subordinated Notes shall be deemed conclusively to have relied
on such subordination provisions in acquiring and holding, or in continuing to
hold, such Senior Subordinated Notes.
(b) Amendments. Notwithstanding anything to the contrary herein, no
amendment, waiver or other modification of this Article 10 shall be effective
unless such amendment, waiver or other modification shall have been approved in
writing by Agent and all of the holders of Senior Subordinated Notes outstanding
at the time of such amendment, waiver or other modification.
ARTICLE 11
MISCELLANEOUS
11.1 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that (i) the Loan Parties may not assign or transfer their
rights hereunder or any interest herein or delegate their duties hereunder and
(ii) Purchasers shall have the right to
61
assign their rights hereunder and under the Subordinated Notes in accordance
with Article 6.
11.2 Modifications and Amendments. The provisions of this Agreement
may be modified, waived or amended, but only by a written instrument signed by
each of the Loan Parties to be bound thereby and Agent on behalf of Purchasers
upon satisfaction of the conditions set forth in Section 9.10.
11.3 No Implied Waivers; Cumulative Remedies; Writing Required. No
delay or failure in exercising any right, power or remedy hereunder shall affect
or operate as a waiver thereof; nor shall any single or partial exercise thereof
or any abandonment or discontinuance of steps to enforce such a right, power or
remedy preclude any further exercise thereof or of any other right, power or
remedy. The rights and remedies hereunder are cumulative and not exclusive of
any rights or remedies that Agent or Purchasers or any holder of Subordinated
Notes would otherwise have. Any waiver, permit, consent or approval of any kind
or character of any breach or default under this Agreement or any such waiver of
any provision or condition of this Agreement must be in writing, satisfy the
conditions set forth in Section 9.10 and shall be effective only to the extent
in such writing specifically set forth.
11.4 Reimbursement of Expenses. The Loan Parties jointly and severally
agree to pay or reimburse Agent and Purchasers upon demand for all fees and
expenses incurred or payable by Agent or Purchasers (including, without
limitation, (i) reasonable fees and expenses of special counsel for Agent or any
Purchaser and (ii) reasonable charges for services performed for Purchasers by
Agent's internal auditing staff with respect to the origination of the
Subordinated Notes and during the continuance of an Event of Default), from time
to time (i) arising in connection with the negotiation, preparation and
execution of this Agreement, the Subordinated Notes, the other Purchase
Documents and all other instruments and documents to be delivered hereunder or
thereunder or arising in connection with the transactions contemplated hereunder
or thereunder, (ii) relating to any amendments, waivers or consents pursuant to
the provisions hereof or thereof, and (iii) arising in connection with the
enforcement of this Agreement or collection of any Subordinated Note.
11.5 Holidays. Whenever any payment or action to be made or taken
hereunder or under the Subordinated Notes shall be stated to be due on a day
that is not a Business Day, such payment or action shall be made or taken on the
next following Business Day, and such extension of time shall be included in
computing interest or fees, if any, in connection with such payment or action.
11.6 Notices. All notices and other communications given to or made
upon any party hereto in connection with this Agreement shall, except as
otherwise expressly herein provided, be in writing (including telecopy, but in
such case, a confirming copy shall be sent by another permitted means) and
mailed via certified mail, telecopied or delivered by guaranteed overnight
parcel express service or courier to the respective parties, as follows:
62
to the Loan Parties:
Directed Electronics, Inc.
▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇
President and Chief Executive Officer
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Trivest Partners, L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Director & General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
to Agent:
American Capital Strategies, Ltd.
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Compliance Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
American Capital Strategies, Ltd.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
Managing Director and Principal
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
63
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
to Purchasers:
As set forth on Annex A
or in accordance with any subsequent written direction from the recipient party
to the sending party. All such notices and other communications shall, except as
otherwise expressly herein provided, be effective upon delivery if delivered by
courier or overnight parcel express service; in the case of certified mail,
three (3) Business Days after the date sent; or in the case of telecopy, when
received.
11.7 Survival. All representations, warranties, covenants and
agreements of the Loan Parties contained herein or made in writing in connection
herewith shall survive the execution and delivery of this Agreement and the
purchase of the Subordinated Notes and shall continue in full force and effect
so long as any Subordinated Note is outstanding and until payment in full of all
of the Loan Parties' obligations hereunder or thereunder. All obligations
relating to indemnification hereunder shall survive any termination of this
Agreement and shall continue for the length of any applicable statute of
limitations.
11.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES.
11.9 Jurisdiction, Consent to Service of Process.
(a) THE LOAN PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMIT,
FOR THEMSELVES AND THEIR PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW
YORK STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN THE
CITY OF NEW YORK, THE STATE OF NEW YORK, AND ANY APPELLATE COURT FROM ANY
THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTES OR ANY OTHER PURCHASE DOCUMENT, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH NEW YORK OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH
OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED
64
IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED
BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT AGENT AND
PURCHASERS MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT, THE NOTES OR ANY OTHER PURCHASE DOCUMENT AGAINST THE LOAN PARTIES OR
THEIR PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(b) THE LOAN PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO
THE FULLEST EXTENT THEY MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT
THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER
PURCHASE DOCUMENT IN ANY NEW YORK OR FEDERAL COURT. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT.
(c) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.6 HEREOF. NOTHING IN
THIS AGREEMENT SHALL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
11.10 Jury Trial Waiver. THE LOAN PARTIES HEREBY IRREVOCABLY WAIVE ANY
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY
RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR (II) ARISING FROM ANY
DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS AGREEMENT AND AGREE
THAT ANY SUCH ACTION OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
11.11 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable Law in any jurisdiction, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating any other provision of this Agreement.
11.12 Headings. Article, section and subsection headings in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
11.13 Indemnity. The Loan Parties (and their successors and assigns),
jointly and severally, hereby release and discharge, and agree to indemnify,
defend and
65
hold harmless Agent (and any prior Agent), Purchasers (and any prior Purchaser)
and their Affiliates, Subsidiaries, officers, directors, employees, agents and
representatives, and the successors and assigns of all of the foregoing (all
such Persons, collectively, the "Purchaser Indemnified Parties") in connection
with any losses, claims, damages, liabilities and expenses, including reasonable
attorneys' fees, to which any Purchaser Indemnified Party may become subject
(other than as a result of the gross negligence or willful misconduct of any
such Person), insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) arise out of or by reason of any investigation,
litigation or other proceedings related to or resulting from any act of, or
omission by, the Loan Parties or their Affiliates or any officer, director,
employee, agent or representative of the Loan Parties or their Affiliates with
respect to the Transactions, the Subordinated Notes, Charter Documents, the
By-laws or any agreements entered into in connection with any such agreements,
instruments or documents and to reimburse the Purchaser Indemnified Parties upon
demand, for any legal or other expenses incurred in connection with
investigating or defending any such loss, claim, damage, liability, expense or
action. To the extent that the foregoing undertakings may be unenforceable for
any reason, the Loan Parties agree to make the maximum contribution to the
payment and satisfaction of indemnified liabilities set forth in this Section
11.13 that is permissible under applicable Law.
11.14 Environmental Indemnity. The Loan Parties (and their successors
and assigns) jointly and severally hereby release and discharge, and agree to
defend, indemnify and hold harmless, Agent (and any prior Agent), Purchasers
(and any prior Purchaser) and their Subsidiaries, Affiliates, partners,
customers, guests, and invitees, and the successors and assigns of all of the
foregoing, and their respective officers, directors, employees, agents and
representatives, from and against any and all Environmental Liabilities (other
than Environmental Liabilities that result from the gross negligence or willful
misconduct of such indemnitees), whenever and by whomever asserted, to the
extent that such Environmental Liabilities are based upon, or otherwise relate
to: (i) any condition at any time in, at, on, under, a part of, involving or
otherwise related to the Properties and Facilities (including any of the
properties, materials, articles, products, or other things included in or
otherwise a part of the Properties and Facilities); (ii) any action or failure
to act of any Person, including any prior owner or operator of the Properties
and Facilities (including any of the properties, materials, articles, products,
or other things included in or otherwise a part of the Properties and
Facilities), involving or otherwise related to the Properties and Facilities or
operations of the Loan Parties; (iii) the Management of any Pollutant, material,
article or product (including Management of any material, article or product
containing a Pollutant) in any physical state and at any time, involving or
otherwise related to the Properties and Facilities or any property covered by
clause (iv) (including Management either from the Properties and Facilities or
from any property covered by clause (iv), and Management to, at, involving or
otherwise related to the Properties and Facilities or any property covered by
clause (iv)); (iv) conditions, and actions or failures to act, in, at, on,
under, a part of, involving or otherwise related to any property other than the
Properties and Facilities, which property was, at or prior to the Closing Date,
(I) acquired, held, sold, owned, operated, leased, managed, or divested by, or
otherwise associated with, (A) the Loan Parties, (B) any of
66
the Loan Parties' Affiliates, or (C) any predecessor or successor organization
of those identified in (A) or (B); or (II) engaged in any tolling, contract
manufacturing or processing, or other similar activities for, with, or on behalf
of the Loan Parties; (v) any violation of or noncompliance with or the assertion
of any Lien under the Environmental Laws, (vi) the presence of any toxic or
hazardous substances, wastes or contaminants on, at or from the past and present
properties and facilities, including, without limitation, human exposure
thereto; (vii) any spill, release, discharge or emission affecting the past and
present properties and facilities, whether or not the same originates or
emanates from such properties and facilities or any contiguous real estate,
including, without limitation, any loss of value of such properties and
facilities as a result thereof; or (viii) a misrepresentation in any
representation or warranty or breach of or failure to perform any covenant made
by the Loan Parties in this Agreement. This indemnity and agreement to defend
and hold harmless shall survive any termination or satisfaction of the
Subordinated Notes or the sale, assignment or foreclosure thereof or the sale,
transfer or conveyance of all or part of the past and present properties and
facilities or any other circumstances that might otherwise constitute a legal or
equitable release or discharge, in whole or in part, of the Loan Parties under
the Subordinated Notes.
11.15 Counterparts. This Agreement may be executed in any number of
counterparts and by any party hereto on separate counterparts, each of which,
when so executed and delivered, shall be an original, but all such counterparts
shall together constitute one and the same instrument.
11.16 Integration. This Agreement and the other Purchase Documents set
forth the entire understanding of the parties hereto with respect to all matters
contemplated hereby and supersede all previous agreements and understandings
among them concerning such matters. No statements or agreements, oral or
written, made prior to or at the signing hereof, shall vary, waive or modify the
written terms hereof.
11.17 Subordination. THE OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE
IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION
AGREEMENT (THE "SUBORDINATION AGREEMENT") DATED AS OF THE DATE HEREOF AMONG
SENIOR AGENT, AGENT, AND THE LOAN PARTIES, TO THE INDEBTEDNESS, OBLIGATIONS AND
OTHER LIABILITIES OWED BY THE LOAN PARTIES UNDER AND PURSUANT TO THE SENIOR
CREDIT AGREEMENT AND EACH RELATED LOAN DOCUMENT (AS DEFINED THEREIN), AND
PURCHASERS, BY THEIR ACCEPTANCE HEREOF, ACKNOWLEDGE AND AGREE TO BE BOUND BY THE
PROVISIONS OF THE SUBORDINATION AGREEMENT.
* * *
67
SIGNATURE PAGE TO
NOTE PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
LOAN PARTIES:
DIRECTED ELECTRONICS, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
DEI HOLDINGS, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
DEI HEADQUARTERS, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
AGENT:
AMERICAN CAPITAL FINANCIAL SERVICES,
INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
PURCHASERS:
AMERICAN CAPITAL STRATEGIES, LTD.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
