EXHIBIT 2
NOTE AND WARRANT PURCHASE AGREEMENT
By and Among
AEGIS COMMUNICATIONS GROUP, INC.,
DEUTSCHE BANK AG - LONDON ACTING THROUGH
DB ADVISORS, LLC AS INVESTMENT ADVISOR
AND
ESSAR GLOBAL LIMITED
Dated as of November 5, 2003
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Table of Contents
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions....................................................1
Article II
PURCHASE AND SALE OF Interests
SECTION 2.01 Sale and Issuance of Notes and Warrants........................9
SECTION 2.02 Closing........................................................9
SECTION 2.03 Closing Deliveries by the Company.............................10
SECTION 2.04 Closing Deliveries by the Purchasers..........................10
ARTICLE III
REPRESENTATIONS AND WArranties
OF THE COMPANY
SECTION 3.01 Organization, Authority and Qualification of the Company......11
SECTION 3.02 Subsidiaries..................................................12
SECTION 3.03 Debt and Capitalization.......................................12
SECTION 3.04 No Conflict...................................................13
SECTION 3.05 Consents and Approvals........................................13
SECTION 3.06 Compliance with Laws..........................................14
SECTION 3.07 Financial Information; Books and Records......................14
SECTION 3.08 Litigation....................................................14
SECTION 3.09 SEC Reports...................................................14
SECTION 3.10 Valid Issuance of the Notes, Warrants
and Warrant Shares............................................15
SECTION 3.11 Absence of Certain Changes or Events; Absence of
Undisclosed Liabilities.......................................15
SECTION 3.12 Material Contracts............................................16
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SECTION 3.13 Intellectual Property.........................................17
SECTION 3.14 Taxes.........................................................18
SECTION 3.15 Properties; Encumbrances......................................19
SECTION 3.16 Insurance.....................................................19
SECTION 3.17 Environmental Matters.........................................19
SECTION 3.18 Employee Benefit Plans; Labor Matters.........................20
SECTION 3.19 Labor.........................................................22
SECTION 3.20 Investment Company............................................22
SECTION 3.21 Brokers.......................................................22
SECTION 3.22 Indemnification...............................................22
SECTION 3.23 Registration Rights...........................................23
SECTION 3.24 Affiliate Agreements..........................................23
SECTION 3.25 Existing Merger Agreement.....................................23
SECTION 3.26 Fairness Opinion..............................................23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
SECTION 4.01 Organization and Authority of Each of the Purchasers..........23
SECTION 4.02 No Conflict...................................................24
SECTION 4.03 Restricted Securities.........................................24
SECTION 4.04 Accredited Investor...........................................24
SECTION 4.05 Purchase Entirely For Own Account.............................24
SECTION 4.06 Investment Company............................................24
ARTICLE V
ADDITIONAL AGREEMENTS
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SECTION 5.01 Access to Information.........................................24
SECTION 5.02 Information Statement.........................................25
SECTION 5.03 Further Action................................................25
SECTION 5.04 Corporate Actions.............................................26
SECTION 5.05 Affiliate Agreements..........................................26
SECTION 5.06 Directors' and Officers' Insurance............................26
SECTION 5.07 Use of Proceeds...............................................27
SECTION 5.08 Preferred Stock Amendment.....................................27
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01 Conditions to Obligations of the Purchasers...................27
SECTION 6.02 Conditions to Obligations of the Company......................29
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Survival of Representations and Warranties....................29
SECTION 7.02 Indemnification by the Company................................29
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Amendment; Waiver.............................................30
SECTION 8.02 Confidentiality...............................................31
SECTION 8.03 Expenses......................................................31
SECTION 8.04 Notices.......................................................31
SECTION 8.05 Severability..................................................32
SECTION 8.06 Assignment....................................................33
SECTION 8.07 Third Party Beneficiaries and Transfers.......................33
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SECTION 8.08 Governing Law; Consent to Jurisdiction........................33
SECTION 8.09 Waiver of Jury Trial..........................................33
SECTION 8.10 Entire Agreement..............................................33
SECTION 8.11 Headings......................................................33
SECTION 8.12 Counterparts..................................................34
SECTION 8.13 Public Announcements..........................................34
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NOTE AND WARRANT PURCHASE AGREEMENT, dated as of November 5, 2003 (the
"Agreement"), by and among AEGIS COMMUNICATIONS GROUP, INC. (the "Company"), a
Delaware corporation, Deutsche Bank AG - London acting through DB Advisors, LLC
as investment advisor and Essar Global Limited (collectively, the "Purchasers").
WHEREAS, the Company desires to sell, and the Purchasers desire to
buy, secured promissory notes in the principal amount of $28,231,167 (the
"Notes"), in the form attached hereto as Exhibit A allocated between the
Purchasers in accordance with Schedule 1 hereto;
WHEREAS, the Company desires to sell, and the Purchasers desire to
buy, warrants to purchase 527,661,932 shares of Common Stock of the Company (the
"Warrants"), in the form attached hereto as Exhibit B allocated between the
Purchasers in accordance with Schedule 1 hereto;
WHEREAS, in connection with the acquisition of the Notes and the
Warrants by the Purchasers, and the sale of the Notes and the Warrants by the
Company, the Purchasers and the Company will enter into the Ancillary
Agreements;
WHEREAS, simultaneously with the execution hereof, the Required
Stockholder Approvals have been obtained by execution of the Written Consent;
WHEREAS, simultaneously with the execution hereof, the holders of the
Preferred Stock (other than the holders of the Series B Preferred Stock) have
agreed to cancel or convert their Preferred Stock into Common Stock as of the
Closing and the Subsequent Closing Date; and
WHEREAS, simultaneously with the Closing, the Company shall use the
proceeds of the Notes in accordance with Schedule 2 hereto.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Company and the Purchasers
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Affiliate Agreements" shall have the meaning set forth in Section
3.24.
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"Agreement" shall have the meaning set forth in the Preamble.
"Ancillary Agreements" means the Notes, the Registration Rights
Agreement and the Stockholders Agreement.
"Balance Sheet Date" shall have the meaning set forth in Section 3.15.
"Bank Debt" means an amount sufficient to extinguish all obligations
of the Company and its Subsidiaries under the Fourth Amended and Restated
Credit Agreement, dated April 14, 2003, among IQI, Inc., the Company (as a
guarantor), and various financial institutions, with the Bank of Nova
Scotia as documentation agent and administrative agent and Credit Suisse
First Boston as a syndication agent (not including any indebtedness for
letters of credit issued under this facility, for which the Purchasers and
the Company will be responsible), including but not limited to any
pre-termination or other fees or penalties imposed by the above-referenced
financial institutions, and secure appropriate releases thereunder.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which commercial banks are required or authorized by Law to be
closed in the State of New York.
"Claims" means any and all administrative, regulatory or judicial
actions, suits, petitions, appeals, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations, proceedings, consent
orders or consent agreements.
"Closing" shall have the meaning set forth in Section 2.02.
"Closing Date" shall have the meaning set forth in Section 2.02.
"Code" shall have the meaning set forth in Section 3.18(a).
"Commitment Fee" means the commitment fee in the amount of $150,000 in
accordance with the terms of the commitment letter provided by ▇▇▇▇▇ Fargo
Foothill with regard to the Credit Facility.
"Common Stock" means the common stock, $0.01 par value per share, of
the Company.
"Common Stock Equivalents" means any issuance of any warrants, options
or subscription or purchase rights with respect to shares of Common Stock
and the issuance of any securities convertible into, or exchangeable for,
shares of Common Stock and the issuance of any warrants, options or
subscription or purchase rights with respect to such convertible or
exchangeable securities.
"Company" shall have the meaning set forth in the Preamble.
"Company Balance Sheet" shall have the meaning set forth in Section
3.15.
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"Company Disclosure Letter" means the schedule that modifies the
representations, warranties or covenants of the Company contained herein
and which is an integral part of this Agreement. The Company Disclosure
Letter, which shall identify the representation and warranty to which the
exception identified therein relates, will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in Article
III.
"Company Employee Plan" shall have the meaning set forth in Section
3.18(a).
"Company Intellectual Property" shall have the meaning set forth in
Section 3.13(a).
"Company Property" means any real property and improvements at any
time owned, leased or operated by the Company or any of its Subsidiaries.
"Company Subsidiaries" shall have the meaning set forth in Section
3.02.
"Covered Person" shall have the meaning set forth in Section 3.22.
"Credit Facility" means a revolving credit facility in the amount of
$30,000,000 to be entered into by the Company and ▇▇▇▇▇ Fargo Foothill or
another third party on terms and conditions no less favorable to the
Company than had previously been negotiated with ▇▇▇▇▇ Fargo Foothill.
"Deal Expenses" means the fees and expenses of the investment banker
referenced in Section 3.21, the Company's legal fees and expenses
(including those related to completing the termination of warrants and
options required by Section 6.01(d)), accounting fees and expenses (not
including any fees or expenses payable to BDO ▇▇▇▇▇▇▇), and other
reasonable transaction-related fees and expenses relating to the
transactions contemplated by this Agreement and incurred by the Company
prior to Closing.
"Encumbrance" means any security interest, pledge, hypothecation,
mortgage, lien including, without limitation, Tax liens (other than (a)
liens for Taxes not yet due and payable or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings, (b) purchase
money liens and liens securing rental payments under capital lease
arrangements, and (c) liens arising in the ordinary course of business and
not incurred in the borrowing of money), charge, or encumbrance.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations or proceedings under any
Environmental Law or any permit issued under any such Environmental Law
(for purposes of this definition, "Claims"), including, without limitation,
(i) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or
damages pursuant to any applicable Environmental Law and (ii) any and all
Claims by any third party seeking damages, contribution, indemnification,
cost recovery,
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compensation or injunctive relief resulting from Hazardous Materials or
arising from alleged injury or threat of injury to health, safety or the
environment.
"Environmental Law" means any federal, state, foreign or local
statute, law, rule, regulation, ordinance, guideline, policy, code or rule
of common law in effect and in each case as amended as of the date hereof
and the Closing Date, and any judicial or administrative interpretation
thereof applicable to the Company or its operations or property as of the
date hereof and the Closing Date, including any judicial or administrative
order, consent decree or judgment, relating to the environment, health,
safety or Hazardous Materials, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. ss. 9601 et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. ss. 6901 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. ss. 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et seq.; the Clean Air Act, 42
U.S.C. ss. 7401 et seq.; Occupational Safety and Health Act, 29 U.S.C. ss.
651 et seq.; Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq.; the
Safe Drinking Water Act, 42 U.S.C. ss. 300f et seq.; and their state and
local counterparts and equivalents.
"ERISA" shall have the meaning set forth in Section 3.18(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and all rules and regulations promulgated thereunder.
"Final Order" means action taken by the relevant regulatory authority
relating to this Agreement or the Ancillary Agreements or the transactions
contemplated hereby or thereby which has not been reversed, stayed,
enjoined, set aside, annulled or suspended, with respect to which any
waiting period prescribed by law before the transactions contemplated
hereby or thereby may be consummated has expired, and as to which all
conditions to the consummation of such transactions prescribed by Law,
regulation or order have been satisfied.
"Financial Statements" means the audited consolidated balance sheet of
each of the Company and its consolidated Subsidiaries for each of the last
three fiscal years ended December 31, 2002, 2001 and 2000 and the related
audited consolidated statements of income, retained earnings, stockholders'
equity and changes in financial position, together with the related notes
and schedules thereto, accompanied by the reports of accountants.
"Fixed Asset List" shall have the meaning set forth in Section 3.15.
"GAAP" means the generally accepted accounting principles applied in
the United States.
"Governmental Authority" means any United States or non-United States
federal, national, supranational, state, provincial, local, or similar
government, governmental, regulatory or administrative authority, agency or
commission or any court, tribunal, or
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judicial or arbitral body, including the SEC or the appropriate state
public utilities commissions.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any
Governmental Authority.
"Hazardous Materials" means (i) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; (ii) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"extremely hazardous substances," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," or words of similar import, under any
applicable Environmental Law; and (iii) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and all rules and regulations promulgated thereunder.
"Indebtedness" of any Person means (a) all indebtedness of such Person
for borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person to pay the deferred purchase price of property or services (other
than trade payables and accrued liabilities arising in the ordinary course
of business), (d) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired
by such Person (even though the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or
sale of such property), (e) all capitalized lease obligations of such
Person, (f) all obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities securing Indebtedness,
(g) all unconditional obligations of such Person to purchase, redeem,
retire, defease or otherwise acquire for value any capital stock of such
Person or any warrants, rights or options to acquire such capital stock,
(h) all Indebtedness of any other Person of the type referred to in clauses
(a) through (g) guaranteed by such Person or for which such Person shall
otherwise (including pursuant to any keepwell, makewell or similar
arrangement) become directly or indirectly liable (other than indirectly as
a result of a performance guarantee not entered into with respect to
Indebtedness), and (i) all third party Indebtedness of the type referred to
in clauses (a) through (h) above secured by any lien or security interest
on property (including accounts and contract rights) owned by the Person
whose Indebtedness is being measured, even though such Person has not
assumed or become liable for the payment of such third party Indebtedness.
"Indemnified Persons" shall have the meaning set forth in Section
5.06(a).
"Information Statement" shall have the meaning set forth in Section
5.02.
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"Initial Warrants" means the 68,084,517 Warrants to be issued to the
Purchasers in accordance with Schedule 1 hereto at the Closing.
"Interim Financial Statements" means the unaudited consolidated
balance sheet of the Company and its consolidated Subsidiaries as of March
31, 2003 and June 30, 2003 and related consolidated statements of income,
retained earnings, stockholders' equity and changes in financial position
together with the related notes and schedules thereto.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations promulgated thereunder.
"IRS" means the Internal Revenue Service of the United States.
"Largest Customers" shall have the meaning set forth in Section
3.12(b).
"Largest Suppliers" shall have the meaning set forth in Section
3.12(b).
"Law" means any United States or non-United States federal, national,
supranational, state, provincial, local or similar statute, law, ordinance,
regulation, rule, code, order, requirement or rule of law (including,
without limitation, common law).
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising
under any Law, Action or Governmental Order and those arising under any
contract, agreement, arrangement, commitment or undertaking.
"Loss" shall have the meaning set forth in Section 7.02(a).
"Majority Stockholders" means Questor Partners Fund II, L.P., a
Delaware limited partnership, Questor Side-by-Side Partners II, L.P., a
Delaware limited partnership, Questor Side-by-Side Partners II 3(c)(1),
L.P., a Delaware limited partnership, ▇▇▇▇▇▇ Equity Investors III, L.P., a
Delaware limited partnership, and TC Co-Investors, LLC, a Delaware limited
liability company.
"Material Adverse Effect" means any circumstance, change in or effect
on the Company or its business that, individually or in the aggregate with
all other circumstances, changes in or effects on the Company is or is
reasonably likely to be materially adverse to the business, operations,
assets or liabilities (including, without limitation, contingent
liabilities), results of operations or the financial condition of the
Company and its Subsidiaries taken as a whole; provided, however, that the
term "Material Adverse Effect" shall not include (a) any circumstance,
change or effect that arises out of or is attributable to (i) general
business or economic conditions affecting the United States economy
generally, or (ii) general business or economic conditions relating to any
industries in which the Company or any of its Subsidiaries participates, in
each case which does not affect the Company or any of its Subsidiaries in a
materially disproportionate manner relative to other Persons engaged in
such industry (including but not limited to any changes in regulation of
the telemarketing/telephone solicitation
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industry, such as "do not call lists" or otherwise, in any jurisdiction in
which the Company operates), or (b) any circumstance, change or effect
arising from or relating to any change in U.S. generally accepted
accounting principles.
"Material Contracts" shall have the meaning set forth in Section 3.12.
"Merger Agreement" shall have the meaning set forth in Section 3.25.
"Multiemployer Plan" shall have the meaning set forth in Section
3.18(c).
"Notes" shall have the meaning set forth in the Recitals.
"Person" means any individual, partnership, firm, corporation, limited
liability company, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a
person under Section 13(d)(3) of the Exchange Act.
"Preferred Stock" means the preferred stock, $0.01 par value per
share, of the Company.
"Preferred Stock Amendment" shall have the meaning set forth in
Section 5.08.
"Purchase Price" shall have the meaning set forth in Section 2.01.
"Purchasers" shall have the meaning set forth in the Preamble.
"Purchasers' Expenses" shall have the meaning set forth in Section
8.03.
"Purchaser Indemnified Party" shall have the meaning set forth in
Section 7.02(a).
"Registration Rights Agreement" means the Registration Rights
Agreement in the form attached hereto as Exhibit C to be entered into by
the Purchasers and the Company as of the Closing Date.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying or seeping into or upon any
land or water or air, or otherwise entering into the environment.
"Required Stockholder Approval" shall have the meaning set forth in
Section 3.01(b).
"SEC" means the Securities and Exchange Commission.
"SEC Reports" shall have the meaning set forth in Section 3.09.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations promulgated thereunder.
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"Security Agreement" means the Guaranty and Security Agreement to be
entered into by the Purchasers, the Company and a collateral agent
reasonably acceptable to the Company and the Purchasers as soon as
practical after the Closing Date.
"Series D Preferred" means the Series D Preferred Stock, par value
$.01 per share, of the Company.
"Series E Preferred" means the Series E Preferred Stock, par value
$.01 per share, of the Company.
"Series F Preferred" means the Series F Preferred Stock, par value
$.01 per share, of the Company.
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the present
fair salable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond
such Person's ability to pay such debts and liabilities as they mature and
(d) such Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such Person's
property would constitute an unreasonably small capital. The amount of
contingent liabilities at any time shall be computed as the amount that, in
the light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual
or matured liability.
"Stockholders Agreement" means the Stockholders Agreement in the form
attached hereto as Exhibit D to be entered into by the Purchasers, the
Company, certain members of management of the Company and the Majority
Stockholders as of the Closing Date.
"Subordinated Debt" means the Amended and Restated Promissory Note,
dated April 11, 2003, in the original principal amount of $808,600, payable
to the order of ▇▇▇▇▇▇ ▇▇▇▇▇, the Amended and Restated Promissory Note,
dated April 11, 2003, in the original principal amount of $191,400, payable
to the order of the ▇▇▇▇▇▇ ▇▇▇▇▇ 1995 Grantor Retained Trust, the Amended
and Restated Promissory Note, dated April 11, 2003, in the original
principal amount of $4,212,236, payable to the order of ▇▇▇▇▇▇ Equity
Investors III, L.P., and the Amended and Restated Promissory Note, dated
April 11, 2003, in the original principal amount of $9,194,844, payable to
the order of ▇▇▇▇▇▇ Equity Investors III, L.P.
"Subsequent Closing Date" shall have the meaning set forth in Section
2.02.
"Subsequent Warrants" means the 459,577,415 Warrants to be issued to
the Purchasers in accordance with Schedule 1 hereto on the Subsequent
Closing Date.
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"Subsidiaries" means, with respect to any Person, any and all
corporations, partnerships, limited liability companies, joint ventures,
associations and other entities controlled by such Person directly or
indirectly through one or more intermediaries.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation, taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers'
compensation, unemployment compensation, or net worth; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer,
value added, or gains taxes; license, registration and documentation fees;
and customs' duties, tariffs, and similar charges.
"Tax Returns" shall have the meaning set forth in Section 3.14.
"▇▇▇▇▇▇" means ▇▇▇▇▇▇ Equity Investors III, L.P., a Delaware limited
partnership, and TC Co-Investors, LLC, a Delaware limited liability
company.
"▇▇▇▇▇▇ Condition" shall have the meaning set forth in Section
6.01(c).
"Third Party Claims" shall have the meaning set forth in Section
7.02(c).
"Warrants" shall have the meaning set forth in the Recitals.
"Written Consent" means the written consent in form and substance
acceptable to the Purchasers evidencing the Required Stockholder Approvals.
ARTICLE II
PURCHASE AND SALE OF INTERESTS
SECTION 2.01 Sale and Issuance of Notes and Warrants. Subject to the
terms and conditions of this Agreement, the Company hereby agrees to sell and
issue to the Purchasers, and the Purchasers, severally but not jointly, hereby
agree to purchase from the Company, the principal amount of Notes and the number
of Warrants set forth opposite such Purchaser's name on Schedule 1 hereto in
exchange for cash in the aggregate amount of $28,231,167 (the "Purchase Price").
SECTION 2.02 Closing. Subject to the terms and conditions of this
Agreement, the issuance, sale and purchase of the Notes and the Initial Warrants
contemplated by this Agreement shall take place at a closing (the "Closing") to
be held at the offices of Shearman & Sterling LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, on the date hereof following the satisfaction or waiver
of all other conditions to the obligations of the parties set forth in Article
VI (other than those conditions that by their nature are to be fulfilled at
Closing), or at such other place or at such other time or such other date as the
Purchasers and the
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Company shall mutually agree upon in writing (the date on which the Closing
takes place being the "Closing Date"). The Subsequent Warrants shall be issued
to the Purchasers in accordance with Schedule 1 hereto on the first Business Day
after the expiration of the 20 calendar day waiting period required by
Regulation 14C of the Exchange Act (the "Subsequent Closing Date").
SECTION 2.03 Closing Deliveries by the Company. (a) At the Closing,
the Company shall deliver, or cause to be delivered, to the Purchaser:
(i) the Notes executed by the Company;
(ii) the Initial Warrants executed by the Company;
(iii) the Written Consent executed by the Majority Stockholders;
(iv) the Ancillary Agreements executed by the Company; and
(v) the certificates, opinions and other documents required to be
delivered pursuant to Section 6.01 and any other certificates or
documents reasonably requested by the Purchasers.
(b) On the Subsequent Closing Date, the Company shall deliver, or
cause to be delivered, to the Purchasers:
(i) the Subsequent Warrants in accordance with Schedule 1 hereto; and
(ii) evidence of the Preferred Stock Amendment and the conversion of
the outstanding Series F Preferred.
SECTION 2.04 Closing Deliveries by the Purchasers. At the Closing, the
Purchasers shall deliver, or cause to be delivered, to the Company:
(a) the Purchase Price by wire transfer in immediately available funds
to an account designated in writing by the Company to the Purchasers prior
to the Closing Date;
(b) the Ancillary Agreements executed by the Purchasers; and
(c) the certificates, opinions and other documents required to be
delivered pursuant to Section 6.02 and any other certificates or documents
reasonably requested by the Company.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
As an inducement to the Purchasers to enter into this Agreement, the
Company hereby represents and warrants to the Purchasers as follows, except as
set forth in the Company Disclosure Letter:
SECTION 3.01 Organization, Authority and Qualification of the Company.
(a) Each of the Company and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all necessary corporate power and authority to execute and
deliver this Agreement and the Ancillary Agreements, to carry out its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. Each of the Company and its Subsidiaries has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and is
qualified to do business in the jurisdictions listed in Section 3.01 of the
Company Disclosure Letter. Each of the Company and its Subsidiaries is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly qualified and in good standing would not
have a Material Adverse Effect. The Company is Solvent. The execution and
delivery of this Agreement and the Ancillary Agreements by the Company, the
performance by the Company of its respective obligations hereunder and
thereunder and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly authorized by all requisite action on the part
of the Company and its stockholders, as the case may be. This Agreement has
been, and upon their execution and delivery, the Ancillary Agreements, the Notes
and the Warrants shall have been, duly executed and delivered by the Company,
and (assuming in the case of this Agreement and the Ancillary Agreements, due
authorization, execution and delivery by the Purchasers) shall constitute,
legal, valid and binding obligations of the Company, except as may be limited by
any applicable bankruptcy, insolvency or other Laws affecting the rights of
creditors generally.
(b) This Agreement and the Ancillary Agreements and the transactions
contemplated hereby and thereby have been unanimously approved by the Board of
Directors and the Board of Directors has recommended that the transactions
contemplated by this Agreement and the Ancillary Agreements be approved by the
Company's stockholders. Section 3.01(b) of the Company Disclosure Letter sets
forth the stockholder approvals required to be obtained under applicable Law and
the Company's Certificate of Incorporation (including any certificates of
designation of classes or series of Preferred Stock) for (i) the issuance of the
Warrants and the Common Stock issuable upon exercise thereof, (ii) the amendment
of the Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock to 800,000,000 and to effect the Preferred
Stock Amendment and (iii) stockholder approval of any other aspects of the
transactions contemplated by this Agreement, which the Board of Directors of the
Company may reasonably determine to be desirable or appropriate to submit to the
stockholders of the Company for approval (collectively, the "Required
Stockholder Approval"). The Written Consent executed simultaneously with the
execution of this Agreement
11
is the only action required to be taken by the Company's stockholders to obtain
the Required Stockholder Approval.
SECTION 3.02 Subsidiaries. Section 3.02 of the Company Disclosure
Letter sets forth the Subsidiaries of the Company (the "Company Subsidiaries").
Each of the Company Subsidiaries is wholly owned by the Company other than
Advanced Telemarketing Corporation.
SECTION 3.03 Debt and Capitalization. (a) Except for the Bank Debt,
the Subordinated Debt and except as disclosed in Section 3.03 of the Company
Disclosure Letter, the Company has no long-term debt. Section 3.03 of the
Company Disclosure Letter sets forth the amounts outstanding under the Bank Debt
and the Subordinated Debt as of the date hereof.
(b) The authorized capital stock of the Company consists of
200,000,000 shares of Common Stock and 2,000,000 shares of Preferred Stock. As
of October 31, 2003, 52,171,168 shares of Common Stock were issued and
outstanding (not including 475,600 shares that were held in the Company's
treasury), and the following shares of Preferred Stock were issued and
outstanding: (i) 29,778 shares of Series B Preferred Stock, which are not
convertible into shares of Common Stock, (ii) 144,493 shares of Series D
Preferred Stock, which are convertible into 7,224,669 shares of Common Stock,
(iii) 82,281 shares of Series E Preferred Stock, which are convertible into
3,464,457 shares of Common Stock, and (iv) 46,750 shares of Series F Preferred
Stock, which are convertible into 69,055,189 shares of Common Stock. Assuming
conversion of all shares of Preferred Stock (other than the Series B Preferred
Stock) and the exercise of all outstanding options and warrants exercisable for
Common Stock, 131,915,483 shares of Common Stock would be outstanding as of the
date hereof. Except as set forth in Section 3.03(b) of the Company Disclosure
Letter, each of the record owners of all shares of Company Common Stock and
Preferred Stock are set forth in Section 3.03(b) of the Company Disclosure
Letter and each of the outstanding shares of capital stock of the Company and
its Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, has been issued in accordance with the registration or
qualification provisions of the Securities Act, and any relevant state
securities Laws, or pursuant to valid exemptions therefrom, and has not been
issued in violation of (nor are any of the authorized shares of capital stock of
the Company subject to) any preemptive or similar rights created by Law, the
Certificate of Incorporation or Bylaws of the Company, or any agreement to which
the Company is a party or bound. Except as set forth in Section 3.03(b) of the
Company Disclosure Letter, the outstanding shares of capital stock of the
Company Subsidiaries are owned, of record and beneficially, by the Company or
another Company Subsidiary, free and clear of all Encumbrances. Except as set
forth in Section 3.03(b) of the Company Disclosure Letter, no bonds, debentures,
notes or other indebtedness having the right to vote on any matters on which the
stockholders of the Company may vote are issued or outstanding.
(c) Except as set forth in Section 3.03(c) of the Company Disclosure
Letter, there are no outstanding options, warrants, subscriptions, calls,
convertible securities, phantom equity, equity appreciation or similar rights,
or other rights, agreements, arrangements or commitments (contingent or
otherwise) (including, without limitation, any right of conversion or exchange
under any outstanding security, instrument or other agreement or any preemptive
right)
12
obligating the Company or any of its Subsidiaries to deliver or sell, or cause
to be issued, delivered or sold, any shares of its capital stock or other
securities, instruments or rights which are, directly or indirectly, convertible
into or exercisable or exchangeable for any shares of its capital stock. All
items listed in Section 3.03(c) of the Company Disclosure Letter will be
cancelled, terminated or released as of the Closing such that no liability will
continue to the Purchasers or the Company.
(d) There are no outstanding contractual obligations, contingent or
otherwise, of the Company or any of its Subsidiaries to (i) repurchase, redeem
or otherwise acquire any shares of the capital stock of the Company or any of
its Subsidiaries or (ii) provide funds to, or make any investment in (in the
form of a loan, capital contribution or otherwise), or provide any guarantee
with respect to the obligations of, any Person, other than advances to the
Company Subsidiaries in the normal course of business. Except as described in
Section 3.03(d) of the Company Disclosure Letter, neither the Company nor any of
its Subsidiaries (x) directly or indirectly owns, (y) has agreed to purchase or
otherwise acquire or (z) holds any interest convertible into or exchangeable or
exercisable for any material amount of capital stock (or equivalent equity
interest) of any Person (other than Company Subsidiaries). There are no
agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any Person is or may be entitled to receive any
payment based on the revenues or earnings, or calculated in accordance
therewith, of the Company or any of its Subsidiaries. Except as described in
Section 3.03(d) in the Company Disclosure Letter (and as will be terminated as
of the Closing), there are no shareholder agreements, voting trusts, proxies or
other material agreements or understandings in effect with respect to the voting
or transfer of any shares of capital stock of the Company or any of its
Subsidiaries to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound.
SECTION 3.04 No Conflict. (a) The execution, delivery and performance
of this Agreement and the Ancillary Agreements by the Company do not and will
not (i) violate, conflict with or result in the breach of any provision of the
Certificate of Incorporation and By-laws of the Company or any of its
Subsidiaries, (ii) conflict with or violate any Law or Governmental Order
applicable to the Company, any of its Subsidiaries or any of the assets,
properties or businesses of the Company or any of its Subsidiaries, or (iii)
conflict with, result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any Encumbrance on any of the shares of Common Stock or any of
the assets of the Company or its Subsidiaries pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which the Company is a party or
by which any of the shares of Common Stock or any of the assets of the Company
or any of its Subsidiaries is bound or affected, other than such conflicts or
violations described in clauses (i) through (iii) above as would not reasonably
be expected to have a Material Adverse Effect.
SECTION 3.05 Consents and Approvals. Other than as set forth in
Section 3.05 of the Company Disclosure Letter, the execution, delivery and
performance of this Agreement and the Ancillary Agreements by the Company do not
and will not require any
13
material consent, approval, authorization or other order of, action by, filing
with or notification to, any Governmental Authority or other Person.
SECTION 3.06 Compliance with Laws. (a) The Company has conducted and
continues to conduct its business, in all material respects, in accordance with
all Laws and Governmental Orders applicable to the Company or its properties or
business, and the Company is not in violation in any material respect of any Law
or Governmental Order.
(b) No Governmental Order has or, to the knowledge of the Company,
could affect the legality, validity or enforceability of this Agreement, any
Ancillary Agreement or the consummation of the transactions contemplated hereby
or thereby.
SECTION 3.07 Financial Information; Books and Records. The Financial
Statements and the Interim Financial Statements (i) were prepared in accordance
with the books of account and other financial records of the Company and its
consolidated Subsidiaries, (ii) present fairly in all material respects the
consolidated financial condition and results of the consolidated operations and
cash flows and changes in stockholders' equity of the Company and its
consolidated Subsidiaries as of the dates thereof or for the periods covered
thereby, (iii) have been prepared in accordance with GAAP applied on a basis
consistent with past practice (except as may be described in the notes thereto
and, in the case of the Interim Financial Statements, subject to normal year-end
adjustments), (iv) in the case of the Financial Statements, include all
adjustments that are necessary for a fair presentation of consolidated financial
condition and results of the operations as of the dates thereof or for the
periods covered thereby and (v) comply, in all material respects, with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The books and records of the Company and its
Subsidiaries have been, and are being, maintained in accordance with GAAP,
applicable legal and regulatory requirements and reflect in all material
respects the substance of events and transactions that should be included
therein.
SECTION 3.08 Litigation. Except as set forth in Section 3.08 of the
Company Disclosure Letter or SEC Reports, there are no material Actions by or
against the Company or any of its Subsidiaries, relating to the Company or any
of its Subsidiaries or affecting any of the assets or rights of the Company or
any of its Subsidiaries pending before any Governmental Authority (or, to the
knowledge of the Company, after reasonable inquiry, threatened to be brought by
or before any Governmental Authority) and neither the Company nor any of its
Subsidiaries nor any of their respective assets or properties is subject to any
material Governmental Order (nor, to the knowledge of the Company, after
reasonable inquiry, are there any such material Governmental Orders threatened
to be imposed by any Governmental Authority).
SECTION 3.09 SEC Reports. The filings required to be made by the
Company under the Securities Act and the Exchange Act (the "SEC Reports") have
been filed in a timely manner with the SEC, including all forms, statements,
reports, written agreements and all documents, exhibits, amendments and
supplements appertaining thereto, and the Company has complied in all material
respects with all applicable requirements of the appropriate act and the rules
and regulations thereunder. As of their respective dates, the SEC Reports did
not contain any untrue statement of a material fact or omit to state a material
fact required to be
14
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the Company
Subsidiaries is required to file any form, report or other document with the
SEC. The SEC has not initiated any proceeding or, to the Company's knowledge,
investigation into the business or operations of the Company or any of its
Subsidiaries. The Company has timely filed all certifications and statements
required by (a) Rule 13a-14 or Rule 15d-14 under the Exchange Act or (b) 18
U.S.C. Section 1350 (Section 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002) with respect
to the SEC Reports filed after July 30, 2002. Within 90 days preceding the date
of each applicable SEC Report, the Company has conducted an evaluation under the
supervision and with the participation of its management, including the
Company's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of its disclosure controls and
procedures, and has concluded that its disclosure controls and procedures are
effective to ensure that information required to be disclosed in the SEC Reports
is recorded, processed, summarized and reported, within the periods specified
in, and in accordance with the requirements of, the SEC's rules, regulations and
forms. Based on such evaluations, (i) there were no significant deficiencies in
the design or operation of internal controls which could adversely affect the
Company's ability to record, process, summarize and report financial data or
material weaknesses in internal controls and (ii) there was no fraud, whether or
not material, that involved management or other employees of the Company or any
of its Subsidiaries who have a significant role in the Company's internal
controls. As used in this Section 3.09, the term "file" shall be broadly
construed to include any document or information "filed" or "furnished" to the
SEC.
SECTION 3.10 Valid Issuance of the Notes, Warrants and Warrant Shares.
At the Closing, the Notes will be duly authorized by the Company and, when
executed and delivered by the Company, will be a valid and binding obligation of
the Company enforceable in accordance with its terms, except as may be limited
by any applicable bankruptcy, insolvency or other Laws affecting the rights of
creditors generally. The Warrants, when issued in compliance with the provisions
of this Agreement, will be duly authorized and executed by the Company and will
be valid and binding obligations of the Company enforceable in accordance with
their terms. The shares of Common Stock issuable upon exercise of the Warrants
will, upon necessary amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock, be duly authorized and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Warrants for the consideration expressed therein, will be duly and validly
issued, fully paid, and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer that result from applicable state
and federal securities Laws.
SECTION 3.11 Absence of Certain Changes or Events; Absence of
Undisclosed Liabilities. (a) Except as disclosed in the SEC Reports or as set
forth in Section 3.11(a) of the Company Disclosure Letter and except for the
transactions contemplated hereby, since December 31, 2002, the Company and its
Subsidiaries, taken as a whole, have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and there has not
been: (i) any damage, destruction or loss (whether or not covered by insurance)
with respect to any assets of the Company or any of its Subsidiaries that has
had or is reasonably likely to have a Material Adverse Effect; (ii) any material
change by the Company or any of its Subsidiaries in their accounting methods,
principles or practices (except as may be required by
15
applicable Law or GAAP); (iii) any declaration, setting aside or payment of any
dividends or distributions in respect of shares of the capital stock of the
Company or any of its Subsidiaries or any redemption, purchase or other
acquisition by the Company or any of its Subsidiaries of any of their
securities, except with respect to the Preferred Stock; (iv) any split,
combination or reclassification of any capital stock of the Company or any of
its Subsidiaries or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of
capital stock of the Company or any of its Subsidiaries; (v) any acquisition,
divestiture, or investment in the equity or debt securities of any Person
(including in any joint venture or similar arrangement) material to the Company
and its Subsidiaries, taken as a whole; (vi) any entry by the Company or any of
its Subsidiaries into any commitment or transaction material to the Company and
its Subsidiaries, taken as a whole, other than in the ordinary course of
business consistent with past practice; (vii) except for periodic adjustments in
the ordinary course of business consistent with past practice, any increase in
or establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any directors, officers or employees of the Company or any of
its Subsidiaries, or any grant of severance or termination pay, or any contract
or arrangement entered into to make or grant any severance or termination pay,
any payment of any bonus, or the taking of any action not in the ordinary course
of business consistent with past practice with respect to the compensation or
employment of directors, officers or employees of the Company or any of its
Subsidiaries, (viii) any material election made by the Company or any of its
Subsidiaries for federal or state income Tax purposes, (ix) any material
acquisition or disposition of any assets or properties, or any contract for any
such acquisition or disposition entered into, (x) any material lease of real or
personal property entered into, other than in connection with foreclosed
property or in the ordinary course of business consistent with past practice, or
(xi) the occurrence of any event or the existence of any fact or circumstance
which could reasonably be expected to have a Material Adverse Effect.
(b) As of the date hereof, except as and to the extent set forth in
Section 3.11(b) of the Company Disclosure Letter, in the Financial Statements or
in the SEC Reports, neither the Company nor any of its Subsidiaries has any
material Liabilities or obligations (whether absolute, accrued, contingent or
otherwise), other than Liabilities or obligations related to the transactions
contemplated by this Agreement.
SECTION 3.12 Material Contracts. (a) Section 3.12(a) of the Company
Disclosure Letter sets forth (i) any "material contracts" (as such term is
defined in Item 601(b)(10) of Regulation S-K); (ii) any material joint ventures,
partnerships, or similar arrangements; (iii) other agreements or arrangements
that give rise to a right of the other parties thereto to terminate such
material contract or to a right of first refusal or similar right thereunder as
a result of the execution and delivery of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby; (iv) any material employment, consulting, severance or termination
agreement with any director, officer, employee, agent or consultant of the
Company or any of its Subsidiaries; (v) any material severance programs,
policies, plans or arrangements to which the Company or any of its Subsidiaries
is obligated (except for any of such items that may be imposed by applicable
Law);
16
or (vi) any agreements, licenses or other arrangements that could, after the
Closing, restrict the Purchasers, or any of their Affiliates, from engaging in
or competing with any line of business or in any geographic area to which or by
which either the Company or any of its Subsidiaries is a party or bound
(collectively, the "Material Contracts"). All Material Contracts are valid and
in full force and effect except to the extent they have previously expired in
accordance with their terms and upon consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements shall continue in
full force and effect without penalty or other adverse consequence. Neither the
Company nor any of its Subsidiaries has violated any provision of, or committed
or failed to perform any act that, with or without notice, lapse of time or
both, would constitute a default under the provisions of, any Material Contract.
Neither the Company nor any of its Subsidiaries has received any notice of
termination, cancellation, breach or default under any Material Contract, and,
to the knowledge of the Company, no other party to any Material Contract is in
breach thereof or default thereunder.
(b) Section 3.12(b) of the Company Disclosure Letter lists the ten
largest customers by approximate annual revenue to the Company and its
Subsidiaries (the "Largest Customers") and the 25 largest suppliers (including
lessors) by approximate annual payments of the Company and its Subsidiaries (the
"Largest Suppliers"), with the amount of revenues or payments, as applicable,
attributable to each such customer and supplier for the Company's 2002 fiscal
year and the first three months of its 2003 fiscal year. Except as described in
Section 3.12(b) of the Company Disclosure Letter, none of the Largest Customers
or Largest Suppliers has terminated or materially altered its relationship with
the Company since the beginning of the Company's 2003 fiscal year, or, to the
Company's knowledge, threatened to do so or otherwise notified the Company of
any intention to do so, except for any such terminations or alterations as would
not have a Material Adverse Effect.
SECTION 3.13 Intellectual Property. (a) The Company and its
Subsidiaries own, or have the right to use without infringing or violating the
rights of any third parties, except where such infringement or violation has not
had, or would not have, a Material Adverse Effect: (i) each trademark, trade
name, brand name, service ▇▇▇▇ or other trade designation owned or licensed by
or to the Company or any of its Subsidiaries, each patent, copyright and similar
intellectual property owned or licensed to or by the Company and each license,
royalty, assignment or other similar agreement and each registration and
application relating to the foregoing that is material to the conduct of the
business of the Company and its Subsidiaries taken as a whole; and (ii) each
agreement relating to technology, know-how or processes that the Company or its
Subsidiaries is licensed or authorized to use, or which it licenses or
authorizes others to use, that is material to the conduct of the business of the
Company and its Subsidiaries taken as a whole (collectively, the "Company
Intellectual Property"). No consent of third parties will be required for the
use of the Company Intellectual Property after the Closing, except as set forth
in Section 3.13(a) of the Company Disclosure Letter or where the failure to
obtain such consent would not have a Material Adverse Effect. No claim has been
asserted by any person against the Company or any of its Subsidiaries regarding
the ownership of or the right to use any Company Intellectual Property or
challenging the rights of the Company or any of its Subsidiaries with respect to
any of the Company Intellectual Property which would have a Material Adverse
Effect. Section 3.13(a) of the Company
17
Disclosure Letter contains a list of all software developed by employees of the
Company in the scope of their employment.
(b) Except as set forth in Section 3.13(b) of the Company Disclosure
Letter, to the Company's knowledge, no person or entity has asserted any claim
that any product, activity or operation of the Company or any of its
Subsidiaries infringes upon or involves, or has resulted in the infringement of,
any proprietary right of such person or entity, except for such infringement
which has not had or would not have a Material Adverse Effect; and no
proceedings have been instituted, are pending or, to the Company's knowledge,
are threatened which challenge the rights of the Company or any of its
Subsidiaries with respect thereto, which would have a Material Adverse Effect.
SECTION 3.14 Taxes. Except for such matters as would not have a
Material Adverse Effect, (i) all returns and reports relating to Taxes ("Tax
Returns") required to be filed by or with respect to the Company and each of its
Subsidiaries have been timely filed; (ii) the Company and each of its
Subsidiaries has paid all Taxes that are due from or with respect to it; (iii)
the Company and each of its Subsidiaries has withheld and paid all Taxes
required by all applicable Laws to be withheld or paid in connection with any
amounts paid or owing to any employee, creditor, independent contractor or other
third party; (iv) there are no outstanding agreements, waivers, or arrangements
extending the statutory period of limitation applicable to any claim for, or the
period for the collection or assessment of, Taxes due from or with respect to
the Company or any of its Subsidiaries for any taxable period; (v) no audit,
action, proceeding, investigation, dispute or claim by any court, governmental
or regulatory authority, or similar person is being conducted or is pending or,
to the Company's knowledge, threatened in regard to any Taxes due from or with
respect to the Company or any of its Subsidiaries or any Tax Return filed by or
with respect to the Company or any of its Subsidiaries; (vi) no claim has been
made by a taxing authority in a jurisdiction in which the Company does not file
Tax Returns that the Company is required to file Tax Returns in such
jurisdiction; (vii) no assessment of any deficiency for Taxes is proposed
against the Company or any of its Subsidiaries or any of their assets; (viii)
there are no liens for Taxes (other than for current Taxes not yet due and
payable) upon the assets of the Company or any of its Subsidiaries; (ix) neither
the Company nor any of its Subsidiaries has any obligation or liability for the
payment of Taxes of any other person arising as a result of Treas. Reg.
ss.1.1502-6 (or any corresponding provision of state, local or foreign income
tax Laws) any obligation to indemnify another person or as a result of the
Company or any of its Subsidiaries assuming or succeeding to the Tax liability
of any other person as a successor, transferee or otherwise; (x) all Taxes
accrued but not yet due and all contingent liabilities for Taxes are adequately
reflected in the reserves for Taxes in the financial statements referred to in
Section 3.07; (xi) none of the Company or any of its Subsidiaries has been a
party to any distribution occurring during the last two years in which the
parties to such distribution treated the distribution as one to which Section
355 of the Code is applicable; (xii) neither the Company nor any of its
Subsidiaries has requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed; (xiii) neither the Company
nor any of its Subsidiaries is a party to any contract that will result in a
requirement to pay any "excess parachute payment" within the meaning of Section
280G of the Code in connection with the transactions contemplated by this
Agreement and the Ancillary Agreements; (xiv) neither the Company nor any of its
Subsidiaries is a party to a tax sharing or tax indemnity
18
agreement or any other agreement of a similar nature that remains in effect;
(xv) neither the Company nor any of its Subsidiaries has filed a consent under
Section 341(f) of the Code concerning collapsible corporations; and (xvi) the
Company has not been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the period specified in
Section 897(c)(1)(A)(ii) of the Code. No cancellation of indebtedness income
will be incurred as a result of the transactions contemplated by this Agreement
and the Ancillary Agreements in excess of the net operating losses available to
the Company to shelter fully such cancellation of indebtedness income.
SECTION 3.15 Properties; Encumbrances. Except as set forth in Section
3.15 of the Company Disclosure Letter, each of the Company and its Subsidiaries
has good, valid and legal title to or, in the case of leased properties and
assets, a valid leasehold interest in, all the properties and assets which it
purports to own or lease (real, personal and mixed, tangible and intangible),
including, without limitation, all the properties and assets reflected in the
Company's balance sheet as of September 30, 2003, which has been previously
provided to the Purchasers (the "Company Balance Sheet"), except for personal
property sold since the date of the Company Balance Sheet (the "Balance Sheet
Date") in the ordinary course of business consistent with past practices, and
except where the failure to have such title or interest would not have a
Material Adverse Effect. Section 3.15 of the Company Disclosure Letter includes
a fixed tangible and intangible asset list as of September 1, 2003 for the
Company and each subsidiary (the "Fixed Asset List"). All properties and assets
reflected in the Company Balance Sheet and the Fixed Asset List are free and
clear of all title defects or objections, liens, claims, charges, security
interests or other encumbrances of any nature whatsoever, except for liens for
current taxes not yet due, and except as would not have a Material Adverse
Effect. To the Company's knowledge, all material tangible properties of the
Company are in a good state of maintenance and repair (ordinary wear and tear
excepted), conform in all material respects with all applicable ordinances,
regulations and zoning laws and are considered by the Company to be adequate for
the current business of the Company in all material respects.
SECTION 3.16 Insurance. Section 3.16 of the Company Disclosure Letter
sets forth a list of all material policies of insurance of the Company and its
Subsidiaries currently in effect, which list is accurate and complete in all
material respects. All of the policies relating to insurance maintained by the
Company or any of its Subsidiaries with respect to its material properties and
the conduct of its business in any material respect (or any comparable policies
entered into as a replacement therefor) are in full force and effect and neither
the Company nor any of its Subsidiaries has received any notice of cancellation
with respect thereto.
SECTION 3.17 Environmental Matters. (i) To the Company's knowledge,
there is no Release or threatened Release of any Hazardous Materials existing
on, beneath or from the surface, subsurface or ground water associated with
Company Property currently occurring, nor has any Release occurred at any time
in the past, which would require investigation, reporting, response, remediation
or other corrective action under any Environmental Law; (ii) to the Company's
knowledge, the Company Property, and all uses and conditions of the Company
Property and all operations of the Company, have been and are in compliance, in
all material aspects, with all Environmental Laws; (iii) the Company has not
received any notice of violation of Environmental Laws or other similar
communication; (iv) to the Company's knowledge, there are no facts or
circumstances relating to the Company Property
19
or the business of the Company that would give rise to any material violation or
liability under any Environmental Law; (v) to the Company's knowledge, the
Company Property and the operations of the Company comply, in all material
respects, with all terms and conditions of any permits issued under
Environmental Laws; and (vi) no Environmental Claims against the Company or any
of its Subsidiaries or any Company Property are pending or, to the Company's
knowledge, threatened.
SECTION 3.18 Employee Benefit Plans; Labor Matters. (a) Set forth in
Section 3.18(a) of the Company Disclosure Letter is a complete and correct list
of all employee benefit plans, arrangements or agreements, including, but not
limited to, any employee benefit plan within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), all plans
or policies providing for "fringe benefits," all other bonus, incentive
compensation, deferred compensation, profit sharing, severance, stock option,
stock purchase, stock appreciation right, supplemental unemployment, layoff,
consulting, or any other similar plan, agreement, policy or understanding, and
any trust, escrow or other agreement related thereto, which provides benefits,
or describes policies or procedures applicable, to any officer, employee,
director, consultant, former officer or former director of the Company, any of
its Subsidiaries, or any other ERISA Affiliate, or any dependent or beneficiary
thereof (each, a "Company Employee Plan," and collectively, the "Company
Employee Plans"). The term "Company ERISA Affiliate" means any corporation,
trade or business which together with the Company would be deemed to be a single
employer under the provisions of ERISA or Section 414 of the Internal Revenue
Code of 1986, as amended (the "Code"). Except as set forth in the Company
Disclosure Letter or as otherwise contemplated pursuant to this Agreement,
neither the Company nor any of its Subsidiaries has communicated to any employee
of the Company or any of its Subsidiaries any intention or commitment to
materially modify any Company Employee Plan or to establish or implement any
other material benefit plan, program or arrangement.
(b) With respect to each Company Employee Plan, the Company has made
available to the Purchasers true, correct and complete copies of (i) the plan
documents and summary plan descriptions and any amendments or modifications
thereto other than for any plans that are Multiemployer Plans (defined below);
(ii) the most recent determination letter, if applicable, received from the
Internal Revenue Service (the "IRS") or a copy of or proof of filing of any
pending applications with the IRS; (iii) the annual reports required to be filed
for the plan years ended December 31, 2000 and December 31, 2001, including all
attachments, exhibits and schedules thereto; (iv) the two most recent actuarial
reports, if applicable; (v) all related trust agreements, insurance contracts or
other funding agreements; and (vi) all other documents, records or other
materials related thereto reasonably requested by the Purchasers.
(c) Except as set forth in the Company Disclosure Letter, (i) each of
the Company Employee Plans has been operated and administered in all material
respects in compliance with applicable Law, including but not limited to ERISA
and the Code; (ii) each of the Company Employee Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a determination
letter from the IRS to such effect and the Company knows of no event that would
cause the disqualification of any such Employee Plan; (iii) with respect to each
Company Employee Plan that is subject to Title IV of ERISA, the present value of
such Company Employee Plan's "accumulated benefit obligation," based on
reasonable actuarial
20
assumptions set forth in the actuarial statement for the Company Employee Plan,
did not, as of its then latest valuation date, exceed the fair value of the
assets of such Employee Plan allocable to such obligation in an amount that
would have a Material Adverse Effect; (iv) no Company Employee Plan provides
welfare benefits (whether or not insured) with respect to current or former
employees of the Company or any of its Subsidiaries beyond their retirement or
other termination of service, other than coverage mandated by applicable law;
(v) no liability under Title IV of ERISA or Section 412 of the Code has been
incurred (directly or indirectly) by the Company or a Company ERISA Affiliate
that has not been satisfied in full; (vi) no Company Employee Plan is a
"multiemployer pension plan," as such term is defined in Section 3(37) of ERISA
("Multiemployer Plan"), or a plan described in Section 4063 of ERISA; (vii) all
contributions or other amounts payable by the Company or any Company ERISA
Affiliate as of the Closing Date with respect to each Company Employee Plan in
respect of current or prior plan years have been paid or accrued in accordance
with GAAP and, if applicable, Section 412 of the Code; (viii) to the knowledge
of the Company, neither the Company, any subsidiary, nor any other Company ERISA
Affiliate has engaged in a transaction in connection with which the Company or
any of its Subsidiaries or any other Company ERISA Affiliate would be subject to
either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a
tax imposed pursuant to Section 4975 or 4976 of the Code; (ix) there are no
pending, anticipated or, to the knowledge of the Company, threatened claims
(other than routine claims for benefits) by, on behalf of or against any of the
Company Employee Plans or any trusts related thereto or against any employee
benefit plan formerly maintained by the Company or any of its Subsidiaries; (x)
the Company Employee Plans could be terminated as of the Closing Date without
any liability to the Purchasers, the Company or any of its Subsidiaries or any
other ERISA Affiliate that, individually or in the aggregate, would have a
Material Adverse Effect; (xi) each agreement, contract or other commitment,
obligation or arrangement relating to a Company Employee Plan or the assets of a
Company Employee Plan (or its related trust) including, but not limited to, each
administrative services agreement, insurance policy or annuity contract, may be
amended or terminated at any time without any liability, cost, or expense,
individually or in the aggregate, to the Company Employee Plan, the Company, or
any of its Subsidiaries that would have a Material Adverse Effect; (xii) neither
the Company, any of its Subsidiaries, nor any other Company ERISA Affiliate
maintains or has ever participated in a multiple employer welfare arrangement as
described in Section 3(40)(A) of ERISA; (xiii) no lien has been filed by any
person or entity and no lien exists by operation of law or otherwise on the
assets of the Company or any of its Subsidiaries relating to, or as a result of,
the operation or maintenance of any Company Employee Plan, and the Company has
no knowledge of the existence of facts or circumstances that would result in the
imposition of such lien; (xiv) neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (1)
result in any material payment becoming due to any director or any employee of
the Company or any of its Subsidiaries; (2) materially increase any benefits
otherwise payable under any Company Employee Plan; (3) result in any
acceleration of the time of payment or vesting of any benefits under any Company
Employee Plan to any material extent; or (4) result, separately or in the
aggregate, in an "excess parachute payment" within the meaning of Section 280G
of the Code; and (xv) no amounts payable under any Company Employee Plan or
other agreement or arrangement will fail to be deductible for United States
federal income tax purposes by virtue of Section 162(m) of the Code.
21
(d) To the knowledge of the Company, except as set forth in Section
3.18(d) of the Company Disclosure Letter, each of the Company and its
Subsidiaries is in compliance with all applicable Laws respecting employment,
employment practices and wages and hours and with all provisions of each
collective bargaining agreement to which it is a party. Except as set forth in
Section 3.18(d) of the Company Disclosure Letter, there is no pending or, to the
Company's knowledge, threatened (i) labor dispute, strike or work stoppage
against the Company or any of its Subsidiaries which may materially interfere
with the respective business activities of the Company or any of its
Subsidiaries prior to or after the Closing or (ii) charge or complaint against
the Company or any of its Subsidiaries by the National Labor Relations Board or
any comparable state agency.
(e) Since December 31, 2001, except as set forth in Section 3.18(e) of
the Company Disclosure Letter, there have not been any claims brought for
violations of any law, rule, code, regulation or requirement of the Occupational
Safety and Health Administration nor, to the Company's knowledge, have there
been any violations of these laws, rules, codes, regulations or requirements.
SECTION 3.19 Labor. No work stoppage involving the Company or any of
its Subsidiaries is pending or, to the knowledge of the Company, threatened.
Neither the Company nor any of its Subsidiaries is involved in, or, to the
knowledge of the Company, threatened with or affected by, any dispute,
arbitration, lawsuit or administrative proceeding relating to labor or
employment matters which might reasonably be expected to interfere in any
material respect with the respective business activities of the Company or any
of its Subsidiaries. No employees of the Company or any of its Subsidiaries are
represented by any labor union, and, to the knowledge of the Company, no labor
union is attempting to organize employees of the Company or any of its
Subsidiaries.
SECTION 3.20 Investment Company. The Company is not, and immediately
after receipt of payment for the Notes and Warrants will not be, an "investment
company" or an entity "controlled" by an "investment company" within the meaning
of the Investment Company Act and shall conduct its business in a manner so that
it will not become subject to the Investment Company Act.
SECTION 3.21 Brokers. No placement agent, broker, finder or investment
banker (other than SunTrust ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Capital Markets, Inc.) is entitled
to any placement, brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement and the Ancillary
Agreements based upon arrangements made by or on behalf of the Company.
SECTION 3.22 Indemnification. Except as disclosed in Section 3.22 of
the Company Disclosure Letter or in this Agreement, the Company is not a party
to any indemnification agreement with any of its directors, officers, employees,
agents or other persons who serve or served in any other capacity with any other
enterprise at the request of the Company (a "Covered Person"), and there are no
claims which have been or, to the knowledge of the Company, will be asserted for
which any Covered Person would be entitled to indemnification under the
Certificate of Incorporation or Bylaws of the Company, applicable Law,
regulation or any indemnification agreement. All indemnification or similar
agreements
22
between the Company and the directors and officers of the Company are
substantially similar and are identified in Section 3.22 of the Company
Disclosure Letter.
SECTION 3.23 Registration Rights. Except as disclosed in Section 3.23
of the Company Disclosure Letter and except for the Registration Rights
Agreement, the Company is not under any obligation that will continue after the
Closing, whether contingent or otherwise, to register any of its securities
under the Securities Act.
SECTION 3.24 Affiliate Agreements. Schedule 3.24 of the Company
Disclosure Letter sets forth all contracts, agreements, understandings or
obligations (oral or written) between the Company and its Affiliates (including
the Majority Stockholders but excluding the Company Subsidiaries) (the
"Affiliate Agreements") as of the date hereof.
SECTION 3.25 Existing Merger Agreement. The Company has the right to
and has terminated the Agreement and Plan of Merger, dated as of July 11, 2003,
by and among Allserve Systems plc, Allserve Systems, Inc. and the Company (the
"Merger Agreement"). Other than payment of the Break-Up Fee (as defined in the
Merger Agreement), to the extent payable, in the amount of $1,137,500, the
Company has no material Liabilities arising from the Merger Agreement or the
Company's termination thereof, although such Liabilities may be alleged or
asserted.
SECTION 3.26 Fairness Opinion. The Company has received, and has
provided the Purchasers with a copy of, the opinion of SunTrust ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Capital Markets, Inc., to the effect that, as of the date of this
Agreement, the transactions contemplated by this Agreement and the Ancillary
Agreements are fair, from a financial point of view, to the Company's
stockholders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
As an inducement to the Company to enter into this Agreement, the
Purchasers severally but not jointly, hereby represent and warrant to the
Company as follows:
SECTION 4.01 Organization and Authority of Each of the Purchasers.
Each of the Purchasers is duly organized, validly existing and in good standing
under the Laws of the jurisdiction of its organization and has all necessary
power and authority to enter into this Agreement and the Ancillary Agreements to
which it is a party, to carry out its obligations hereunder and thereunder and
to consummate the transactions contemplated by this Agreement and thereunder.
The execution and delivery by each of the Purchasers of this Agreement and the
Ancillary Agreements, the performance by each of the Purchasers of its
obligations hereunder and thereunder and the consummation by each of the
Purchasers of the transactions contemplated hereby and thereby have been duly
authorized by all requisite action on the part of each of the Purchasers. This
Agreement has been, and upon their execution and delivery the Ancillary
Agreements shall be, duly executed and delivered by each of the Purchasers, and
(assuming due authorization, execution and delivery by the Company) this
Agreement and the Ancillary
23
Agreements shall constitute legal, valid and binding obligations of the
Purchasers, enforceable against the Purchasers in accordance with their terms.
SECTION 4.02 No Conflict. The execution, delivery and performance by
each of the Purchasers of this Agreement and the Ancillary Agreements do not and
will not (a) violate, conflict with or result in the breach of any provision of
the organizational documents of such Purchaser, (b) conflict with or violate any
Law or Governmental Order applicable to such Purchaser or (c) conflict with, or
result in any breach of, constitute a default (or event which with the giving of
notice or lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which such Purchaser is a party,
which would adversely affect the ability of such Purchaser to carry out its
obligations under, and to consummate the transactions contemplated by, this
Agreement or by the Ancillary Agreements, except in the case of any of the
foregoing that would not be reasonably expected to have a material adverse
effect.
SECTION 4.03 Restricted Securities. Neither the offer nor the sale of
the Notes and the Warrants purchased hereunder will be registered under the
Securities Act, or any state securities Laws. Each of the Purchasers understands
that the offering and sale of the Notes and the Warrants is intended to be
exempt from registration under the Securities Act, by virtue of Section 4(2)
thereof and the provisions of Regulation D promulgated thereunder, based, in
part, upon the representations, warranties and agreements of the Purchasers
contained in this Agreement.
SECTION 4.04 Accredited Investor. Each of the Purchasers is an
"accredited investor" as such term is defined in Rule 501(a) of Regulation D
under the Securities Act.
SECTION 4.05 Purchase Entirely For Own Account. Each of the Purchasers
is acquiring the Notes and the Warrants to be acquired hereunder (and will
acquire the Common Stock upon exercise of the Warrants) for its own account, for
investment and not with a view to the public resale or distribution thereof, in
violation of any securities Law. None of the Purchasers has any contract,
agreement, understanding or arrangement with any Person to sell, grant or
transfer any portion of the Notes or the Warrants.
SECTION 4.06 Investment Company. Neither of the Purchasers is an
"investment company" or an entity "controlled" by an "investment company" within
the meaning of the Investment Company Act.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 Access to Information. At the time of Closing and at any
time thereafter if the Purchasers (a) do not have a director designated to serve
on the Board of Directors of the Company actually serving on such Board of
Directors and (b) continue to hold at
24
least 25% of the Warrants (or Common Stock received upon exercise of the
Warrants) initially purchased hereunder, upon reasonable prior notice, the
Company shall cause its officers, directors, employees, agents, representatives,
accountants and counsel to grant the Purchasers reasonable access during normal
business hours to the offices, properties, books, records and personnel of the
Company and such additional information concerning the business and properties
of the Company as the Purchasers and their representatives may reasonably
request.
SECTION 5.02 Information Statement(a). (a) As promptly as reasonably
practical, but in no event later than 10 Business Days after Closing, the
Company shall prepare and file with the SEC an information statement (as such
information statement may be amended, the "Information Statement") to be sent to
the Company's stockholders in accordance with Regulation 14C of the Exchange
Act. Prior to filing the Information Statement with the SEC, the Company shall
give the Purchasers the opportunity to timely review and comment upon the
Information Statement. The Company will promptly advise, and provide copies to,
the Purchasers of any request by the SEC for additional information, amendment
of the Information Statement or comments thereon and all responses by the
Company thereon.
(b) The Company represents that the information supplied by the
Company for inclusion in the Information Statement shall not contain any untrue
statement of a material fact or fail to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Information
Statement will comply as to form and substance in all material respects with the
applicable requirements of the Exchange Act.
(c) Each of the Purchasers, severally but not jointly, represents that
the information supplied in writing by such Purchaser for inclusion in the
Information Statement shall not contain any untrue statement of a material fact
or fail to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 5.03 Further Action. (a) Each party hereto shall use its
commercially reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
applicable Law, and execute and deliver such documents and other papers as may
be reasonably required to carry out the provisions of this Agreement and the
Ancillary Agreements and consummate and make effective the transactions
contemplated by this Agreement and the Ancillary Agreements. The Company shall
use its commercially reasonable efforts to obtain the third party consents set
forth in Section 3.05 of the Company Disclosure Letter as soon as practical
after the Closing. The Company shall cooperate with the Purchasers and use its
commercially reasonable efforts to enter into the Credit Facility as soon as
practical after the Closing. No later than the first Business Day after the date
hereof, the Company shall pay the Commitment Fee to ▇▇▇▇▇ Fargo Foothill
pursuant to Section 2.05(a). The Company shall use its commercially reasonable
efforts to enter into the Security Agreement on terms and conditions reasonably
acceptable to the Company and the Purchasers as soon as practical after the
Closing.
(b) Each party hereto shall cooperate and use its commercially
reasonable efforts to (i) promptly prepare and file with the appropriate
Governmental Authorities all
25
necessary reports, applications, petitions, forms, notices or other applicable
documents required or advisable with respect to the transactions contemplated by
this Agreement and the Ancillary Agreements (except for necessary reports,
applications, petitions, forms, notices or other applicable documents required
or advisable solely with respect to the exercise of the Warrants which shall be
promptly prepared and filed upon the request of the Purchasers), (ii) comply, at
the earliest practicable date following the date of receipt by the Purchasers or
the Company, with any request for information or documents from a Governmental
Authority related to, and appropriate in the light of, matters within the
jurisdiction of such Governmental Authority, provided that (x) the parties shall
use their commercially reasonable efforts to keep any such information
confidential to the extent required by the party providing the information and
(y) each party may take, in its reasonable discretion, appropriate legal action
not to provide information relating to trade or business secrets, privileged
information or other information which reasonably should be treated as
confidential, (iii) take all actions necessary or advisable to obtain no later
than the Termination Date all necessary permits, consents, approvals and
authorizations of all Governmental Authorities necessary or advisable to
consummate the transactions contemplated by this Agreement and the Ancillary
Agreements (except for all necessary permits, consents, approvals and
authorizations of all Governmental Authorities necessary or advisable solely
with respect to the exercise of the Warrants for which each party shall take all
actions necessary or advisable to obtain upon the request of the Purchasers) and
(iv) oppose vigorously any litigation that would impede or delay the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, including, without limitation, promptly appealing any
adverse court order.
SECTION 5.04 Corporate Actions. So long as any Warrants are
outstanding, the Company shall at all times have authorized and reserved for
issuance a sufficient number of shares of Common Stock to permit the full
exercise of the Warrants issued in connection with this Agreement.
SECTION 5.05 Affiliate Agreements. The Company shall use its
commercially reasonable efforts to terminate each of the Affiliate Agreements as
of the Closing or as soon as practical thereafter.
SECTION 5.06 Directors' and Officers' Insurance. (a) The Purchasers
and the Company shall cause the provisions of the Certificate of Incorporation
of the Company with respect to indemnification currently set forth in the
Seventh Article of the Certificate of Incorporation and the provisions of the
Bylaws of the Company with respect to indemnification currently set forth in
Article VIII of the Bylaws not to be amended, repealed or otherwise modified for
a period of six years from the Closing in any manner that would affect adversely
the rights thereunder of individuals who, at or prior to the Closing, were
directors, officers, employees, fiduciaries or agents of the Company (the
"Indemnified Persons"), unless such modification shall be required by Law.
(b) At or prior to the Closing, the Company will purchase a
single-premium six-year policy of directors' and officers' liability insurance
covering current and former officers and directors of the Company and its
Subsidiaries in the same amounts and on terms and conditions, including limits,
as favorable to such officers and directors as the policies in effect as of the
date hereof (provided that the Purchasers may substitute for the policies
carried by the
26
Company policies of at least the same coverage containing terms and conditions
which are not less advantageous to the beneficiaries thereof) with respect to
matters or events occurring prior to the Closing.
(c) In the event the Company (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Company shall
assume the obligations set forth in this Section 5.06.
(d) The provisions of this Section 5.06 are intended to be for the
benefit of, and will be enforceable by, each of the Indemnified Persons, their
heirs and their representatives.
(e) Nothing in this Agreement is intended to, will be construed to or
will release, waive or impair any rights to directors' and officers' insurance
claims under any policy that is or has been in existence with respect to the
Company or any of its directors or officers, it being understood and agreed that
the indemnification provided for in this Section 5.06 is supplemental and not
prior to or in substitution for any such claims under such policies.
SECTION 5.07 Use of Proceeds. The Company shall use the proceeds from
the sale and issuance of the Notes and Warrants in accordance with, and in the
order of, Schedule 2 hereto. If it is ultimately determined that all or any
portion of the Break-Up Fee (as defined in the Merger Agreement) is not owed and
the Break-Up Fee or any portion thereof is not paid to Allserve Systems plc or
any of its Affiliates pursuant to the Merger Agreement, the amount of the
Break-Up Fee included on Schedule 2 hereto (less (i) any expenses of the Company
or the Purchasers incurred in connection with the termination of the Merger
Agreement and opposing the Break-Up Fee, (ii) any payments by the Company to
Allserve Systems plc or any of its Affiliates and (iii) less any obligations
owed to the Company by Allserve Systems plc or any of its Affiliates) shall be
distributed reasonably promptly to the holders of the Subordinated Debt pro rata
on the same basis that such holders were initially paid pursuant to Schedule 2
hereto.
SECTION 5.08 Preferred Stock Amendment. Prior to the Subsequent
Closing Date, the Company shall cause the Certificate of Incorporation and the
Certificate of Designation of the Series F Preferred to be amended (the
"Preferred Stock Amendment") to adjust the conversion rate such that, following
such amendment, the 23,375 shares of Series F Preferred outstanding immediately
after the Closing shall be convertible into 46,910,503 shares of Common Stock on
the Subsequent Closing Date.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01 Conditions to Obligations of the Purchasers. The
Purchasers' obligation to purchase and to pay for the Notes and the Warrants on
the Closing Date shall be subject to the satisfaction or waiver of each of the
following conditions precedent on or prior to the Closing Date:
27
(a) Ancillary Agreements. The Company shall have executed and
delivered to the Purchasers each of the Ancillary Agreements to which it is
a party;
(b) Issuance of the Notes and the Warrants. All actions required by
any applicable Law or necessary in the reasonable opinion of the Purchasers
to issue the Notes and the Warrants (other than furnishing the Information
Statement to the Company's stockholders pursuant to Regulation 14C of the
Exchange Act and amending the Company's Certificate of Incorporation to
increase the authorized number of shares of Common Stock) shall have been
duly taken (or provisions therefor shall have been made), including,
without limitation, the making of all registrations and filings, and all
necessary consents shall have been received;
(c) Conversion of Preferred Stock. Contemporaneously with the Closing,
▇▇▇▇▇▇ shall deliver all of its shares of Series D Preferred and Series E
Preferred and 2,572,364 shares of Common Stock to the Company for
cancellation (the "▇▇▇▇▇▇ Condition"). Contemporaneously with the Closing,
all other holders of the Series E Preferred shall convert such shares into
Common Stock in accordance with their respective terms. Contemporaneously
with the Closing, 23,375 shares of Series F Preferred, representing 50% of
the outstanding shares of Series F Preferred as of the Closing, shall be
converted into Common Stock in accordance with their respective terms. On
the Subsequent Closing Date, the remaining 23,375 outstanding shares of
Series F Preferred shall be converted subject to the completion and
effectiveness of the ▇▇▇▇▇▇ Condition and the Preferred Stock Amendment.
(d) Termination of Warrants and Options. All items listed in Section
3.03(c) of the Company Disclosure Letter will be cancelled, terminated or
released by the Closing such that no liability will continue to the
Purchasers or the Company.
(e) Existing Debt. Simultaneously with the Closing, the Company shall
have obtained releases of the Bank Debt and the Subordinated Debt as of the
Closing on substantially the same terms and conditions as have been
previously negotiated in connection with the Merger Agreement and otherwise
in form and substance satisfactory to the Purchasers and in exchange for
the amounts set forth on Schedule 2;
(f) Board Composition. All of the current Directors of the Company
(other than the Chief Executive Officer) hereto shall have delivered their
written resignations effective as of the Closing and the individuals set
forth on Schedule 3 hereto, including six individuals named by the
Purchasers and reasonably acceptable to the Company and comprising a
majority of the Board, shall have been appointed to the Board of Directors
of the Company effective as of the Closing; and
(g) Opinion of Counsel. The Purchasers shall have received from ▇▇▇▇▇▇
& ▇▇▇▇ LLP, counsel for the Company, a legal opinion dated as of the
Closing Date in form and substance mutually agreed upon by the Company and
the Purchasers.
28
SECTION 6.02 Conditions to Obligations of the Company. The obligation
of the Company to sell the Notes and the Warrants on the Closing Date shall be
subject to the satisfaction or waiver of the following conditions precedent on
or prior to the Closing Date:
(a) Ancillary Agreements. The Purchasers shall have executed and
delivered to the Company each of the Ancillary Agreements to which any of
them is a party; and
(b) Purchase Price. The Purchasers shall have paid the Purchase Price
in immediately available funds.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Survival of Representations and Warranties. The
representations and warranties of the Company contained in this Agreement shall
survive the Closing until the first anniversary of the Closing Date, other than
the representations and warranties set forth in Sections 3.01, 3.03 and 3.10,
which shall survive indefinitely. The liability of the Company with respect to
the Company's representations and warranties shall not be reduced by any
investigation made at any time by or on behalf of the Purchasers.
SECTION 7.02 Indemnification by the Company. (a) To the greatest
extent permitted by applicable Law, the Company shall indemnify and hold
harmless the Purchasers and their Affiliates, officers, directors, employees,
agents, successors and assigns (each a "Purchaser Indemnified Party") from and
against any and all Liabilities, losses, diminution in value, damages, claims,
costs and expenses, interest, awards, judgments and penalties (including,
without limitation, attorneys' and consultants' fees and expenses) suffered or
incurred by them (including, without limitation, any Action brought or otherwise
initiated by any of them) (hereinafter a "Loss"), arising out of or resulting
from: (i) the breach of any representation or warranty of the Company contained
herein, or in any agreement, certificate or instrument delivered pursuant hereto
set forth therein) and (ii) the breach of any agreement or covenant of the
Company contained herein.
(b) Notwithstanding the provisions of Section 7.02(a), (i) the Company
shall not be liable for any Loss unless the aggregate amount of Losses exceeds
$100,000 and then only to the extent of such excess and (ii) the maximum
liability of the Company under this Section 7.02 shall not exceed the Purchase
Price; provided, however, that the limitations in this Section 7.02(b) shall not
apply to breaches by the Company of its representations and warranties contained
in Sections 3.01, 3.03 and 3.10 or a breach of the covenants in Section 5.04.
(c) A Purchaser Indemnified Party shall give the Company prompt
written notice of any matter that a Purchaser Indemnified Party has determined
has given or could give rise to a right of indemnification under this Agreement
stating in reasonable detail the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
29
arises. The obligations and Liabilities of the Company under this Article VII
with respect to Losses arising from claims of any third party that are subject
to the indemnification provided for in this Article VII ("Third Party Claims")
shall be governed by and be contingent upon the following additional terms and
conditions: if a Purchaser Indemnified Party shall receive notice of any Third
Party Claim, the Purchaser Indemnified Party shall give the Company prompt
written notice of such Third Party Claim; provided, however, that the failure to
provide such notice shall not release the Company from any of its obligations
under this Article VII except to the extent that the Company is materially
prejudiced by such failure and shall not relieve the Company from any other
obligation or Liability that it may have to any Purchaser Indemnified Party
otherwise than under this Article VII. If the Company acknowledges in writing
its obligation to indemnify the Purchaser Indemnified Party hereunder against
any Losses that may result from such Third Party Claim subject to the
limitations of Section 7.02(b), then the Company shall be entitled to assume and
control the defense of such Third Party Claim at its expense and through counsel
of its choice if it gives notice of its intention to do so to the Purchaser
Indemnified Party within five days of the receipt of such notice from the
Purchaser Indemnified Party; provided, however, that if there exists or is
reasonably likely to exist a conflict of interest that would make it
inappropriate in the judgment of the Purchaser Indemnified Party in its sole and
absolute discretion for the same counsel to represent both the Purchaser
Indemnified Party, on the one hand, and the Company, on the other hand, then the
Purchaser Indemnified Party shall be entitled to retain its own counsel in
addition to any requisite local counsel for which the Purchaser Indemnified
Party reasonably determines counsel is required at the expense of the Company.
In the event that the Company exercises the right to undertake any such defense
against any such Third Party Claim as provided above, the Purchaser Indemnified
Party shall cooperate with the Company in such defense and make available to the
Company, at the expense of the Company, all witnesses, pertinent records,
materials and information in the Purchaser Indemnified Party's possession or
under the Purchaser Indemnified Party's control relating thereto as is
reasonably required by the Company. Similarly, in the event the Purchaser
Indemnified Party is, directly or indirectly, conducting the defense against any
such Third Party Claim, the Company shall cooperate with the Purchaser
Indemnified Party in such defense and make available to the Purchaser
Indemnified Party, at the expense of the Company, all such witnesses, records,
materials and information in the Company's possession or under the Company's
control relating thereto as is reasonably required by the Purchaser Indemnified
Party. No such Third Party Claim may be settled by the Company without the prior
written consent of the Purchaser Indemnified Party, except if such settlement
constitutes a full and unconditional release of the Purchaser Indemnified Party.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Amendment; Waiver. This Agreement may not be amended,
supplemented, modified or restated except by an instrument in writing signed by,
or on behalf of, the parties hereto or by a waiver in accordance with this
Section 8.01. The Company for its own behalf and the Purchasers for their own
behalf, respectively, may (a) extend the time for the performance of any of the
obligations or other acts of any other party, (b) waive any
30
inaccuracies in the representations and warranties of any other party contained
herein or in any document delivered by any other party pursuant hereto or (c)
waive compliance with any of the agreements of any other party or conditions to
such party's obligations contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party to be
bound thereby. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition of this Agreement. The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any of such rights. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
SECTION 8.02 Confidentiality. The Purchasers and the Company covenant
and agree that they will not, and they will cause their principals, Affiliates,
officers and other personnel and authorized representatives not to, use
information concerning another party's business, properties and personnel
received in the course of negotiating this Agreement and investigation in
connection with this transaction and will hold such information (and will cause
the aforesaid persons to hold such information) in confidence until such
information otherwise becomes publicly available or as may be required by
applicable law. Notwithstanding anything in this Section 8.02 or otherwise set
forth in this Agreement, each party (and each employee, representative or other
agent of each party) hereto may disclose to any and all persons, without
limitation of any kind, any information with respect to the United States
federal income "tax treatment" and "tax structure" (in each case, within the
meaning of Treasury Regulation Section 1.6011-4) of the transaction contemplated
hereby and all materials of any kind (including opinions or other Tax analyses)
that are provided to such parties (or their representatives) relating to such
Tax treatment and Tax structure.
SECTION 8.03 Expenses. Except as otherwise specified in this
Agreement, as soon as reasonably practicable after receipt of written request
from the Purchasers but in no event later than 90 days after the date hereof,
the Company shall pay to the Purchasers all reasonable documented out-of-pocket
costs and expenses (including, without limitation, reasonable documented fees
and expenses of counsel) incurred by the Purchasers and their Affiliates in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements, with respect to costs and expenses in connection with due
diligence related to the transactions contemplated hereby and thereby, the
negotiation, execution and delivery of this Agreement, the Ancillary Agreements,
the Notes and the Warrants and the consummation of the transactions contemplated
hereby and thereby (the "Purchasers' Expenses").
SECTION 8.04 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by an internationally recognized overnight courier service, by telecopy,
facsimile or registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 8.04):
31
if to the Company:
(a) Aegis Communications Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Purchasers:
DB Advisors LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: Counsel
Attention: (▇▇▇) ▇▇▇-▇▇▇▇
Essar Global Limited
c/o Essar Group
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ (▇▇)
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with a copy to:
Shearman & Sterling LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
SECTION 8.05 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect for so long as the economic or
legal substance of the transactions contemplated by this Agreement is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced,
32
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated by this Agreement
are consummated as originally contemplated to the greatest extent possible.
SECTION 8.06 Assignment. This Agreement may not be assigned by the
Company, by operation of law or otherwise, without the express written consent
of the Purchasers (which consent may be granted or withheld in the sole
discretion of the Purchasers). The Purchasers may assign this Agreement or any
of its rights and obligations hereunder to one or more Affiliates without the
consent of the Company or to a third party with the consent of the Company,
which consent shall not be unreasonably withheld.
SECTION 8.07 Third Party Beneficiaries and Transfers. Except for the
provisions of Section 5.06 and Article VII relating to indemnified parties, this
Agreement shall be binding upon and inure solely to the benefit of the parties
hereto and their permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person, any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 8.08 Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Delaware. The parties hereto hereby (a) submit to the exclusive jurisdiction of
any state or federal court sitting in the Borough of Manhattan of The City of
New York for the purpose of any action arising out of or relating to this
Agreement brought by any party hereto, and (b) irrevocably waive, and agree not
to assert by way of motion, defense, or otherwise, in any such action, any claim
that it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution, that the
action is brought in an inconvenient forum, that the venue of the action is
improper, or that this Agreement or the transactions contemplated by this
Agreement may not be enforced in or by any of the above-named courts.
SECTION 8.09 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.
SECTION 8.10 Entire Agreement. This Agreement, the Notes, the Warrants
and the Ancillary Agreements constitute the entire agreement of the parties
hereto with respect to the subject matter hereof and thereof and supersede all
prior agreements and undertakings, both written and oral, between the Company
and the Purchasers with respect to the subject matter hereof and thereof.
SECTION 8.11 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
33
SECTION 8.12 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
SECTION 8.13 Public Announcements. Subject to its legal obligations
(including requirements of stock exchanges and other similar regulatory bodies
and the requirements of the Exchange Act), no party shall make any announcement
regarding the entering into of this Agreement or the Closing to the financial
community, governmental entities, employees, customers or the general public
without the prior consent of the other party, which shall not be unreasonably
withheld, and the parties shall cooperate with each other as to the timing and
contents of any such announcement.
[Remainder of page left blank intentionally]
34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers or other representatives thereunto duly
authorized, as of the date first above written.
AEGIS COMMUNICATIONS GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and CEO
DEUTSCHE BANK AG LONDON
BY DB ADVISORS, LLC AS INVESTMENT
ADVISOR.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Director
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
ESSAR GLOBAL LIMITED
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Executive Director
35
Schedule 1
Principal Initial Subsequent Purchase
Amount of Note Warrants Warrants Price
-------------- -------- ---------- ----------
Deutsche Bank AG $14,087,352 33,974,174 229,329,130 $14,087,352
London by
DB Advisors, LLC
as Investment
Advisor
Essar Global $14,143,815 34,110,343 230,248,285 $14,143,815
Limited
36
Schedule 2
Use of Proceeds
Payment to retire Senior Debt $ 12,463,795.25
Retirement of Subordinated Debt:
▇▇▇▇▇▇ $ 7,563,262.76 (93%)
▇▇▇▇▇▇ ▇▇▇▇▇ $ 453,056.36 (6%)
The ▇▇▇▇▇▇ ▇▇▇▇▇ 1995 Grantor Retained $ 107,240.90 (1%)
Annuity Trust
Break-up fee $ 1,137,500
Deal Expenses:
Investment Banking $ 496,646.00
Legal $ 669,001.70
Prepaid Expenses $ 283,900.38
Reserve for Series B Preferred Stock $ 285,200.80
Retention Bonuses $ 427,895.86
Letters of Credit $ 4,343,666.33
A-1
Schedule 3
Directors Appointed as of the Closing
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Madhu ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT A
FORM OF THE NOTES
EXHIBIT B
FORM OF THE WARRANT
B-1
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
C-1
EXHIBIT D
FORM OF STOCKHOLDERS AGREEMENT
D-1