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EXHIBIT 10.31
LOAN AGREEMENT
BETWEEN
SIRROM CAPITAL CORPORATION
d/b/a
TANDEM CAPITAL
AND
BIKERS DREAM, INC.,
ULTRA ACQUISITION CORPORATION
AS BORROWERS
JUNE 22, 1998
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LOAN AGREEMENT
This LOAN AGREEMENT (the "Agreement ") entered into the 22nd day of June,
1998, by and between BIKERS DREAM, INC., a California corporation (the
"Company"), ULTRA ACQUISITION CORPORATION, a Nevada corporation (a "Co-Maker"),
and SIRROM CAPITAL CORPORATION d/b/a TANDEM CAPITAL, a Tennessee corporation
(the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and each Co-Maker (each a "Borrower" and collectively
the "Borrowers") desires to obtain additional capital to refinance current
indebtedness outstanding to the Purchaser and for use in connection with its
business through the issue and sale of certain securities, and Purchaser is
willing to purchase such obligations from the Company and each Co- Maker, on the
terms and conditions set forth herein. Capitalized terms shall have the meanings
assigned by Section 11 unless otherwise defined herein.
NOW, THEREFORE, in mutual consideration of the premises and the respective
representations, warranties, covenants and agreements contained herein, the
parties agree as follows:
1. The Loan.
1.1 The Note. The Loan shall be evidenced by a Secured Promissory
Note or Notes of the Borrowers in favor of the Purchaser in the original
aggregate principal amount of Four Million Five Hundred Thousand Dollars
($4,500,000.00), to be dated the Closing Date, to bear interest from such date
at the rate of 12.00% per annum, payable quarterly by automatic debit on the
first day of each March, June, September and December in each year, commencing
September 1, 1998, and at maturity, to mature on June 22, 2001, and to bear such
other terms as are set forth in the form attached hereto as Exhibit A-l.
Interest on the Notes shall be computed on the basis of a 360-day year of twelve
30-day months. The Borrowers may prepay the indebtedness evidenced by the Notes
without premium or penalty and as provided by Section 1.2. The term "Note" and
"Notes" as used herein includes the Note in the form of Exhibit A-1 and any
other Note delivered pursuant to this Agreement.
1.2 Optional Prepayment.
(a) The Notes may be prepaid, at the Borrowers' option, in
whole at any time or in part from time to time, provided that in case of each
optional prepayment, the Company
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shall give written notice (the "Redemption Notice") to each holder of a Note to
be prepaid not less than 10 nor more than 20 Business Days prior to the date
fixed for such prepayment (the "Redemption Date"). The Redemption Notice shall
specify the Redemption Date, the aggregate principal amount of the Notes to be
prepaid on the Redemption Date, the principal amount of Notes held by such
holder to be prepaid on such date, and the Redemption Price, which shall be
equal to the sum of (A) the aggregate principal amount of the Notes called for
prepayment, plus (B) all accrued but unpaid interest on such Notes, plus (C)
interest on (i) any principal payment not paid when due, and (ii) any accrued
but unpaid interest not paid when due, at an annual rate of 19% (or, if less,
the maximum rate permitted by applicable law), plus (D) any expenses or costs of
collection to which the holder of the Notes is entitled pursuant to the Notes.
After the Redemption Notice is mailed, Notes called for prepayment shall become
due and payable on the Redemption Date at the Redemption Price.
(b) Neither the Borrowers nor any Affiliate of any Borrower,
directly or indirectly, may repurchase or make any offer to repurchase any Notes
unless the offer has been made to repurchase Notes, pro rata, from all holders
of the Notes at the same time and upon the same terms. If any Notes are
repurchased or otherwise acquired by the Borrowers or any Affiliate of any
Borrower, such Notes shall be deemed to be no longer outstanding for purposes of
any provisions of this Agreement.
1.3 Warrants. In consideration of the Purchaser's purchase of the
Notes, the Company shall grant to Purchaser the following Warrants.
(a) Initial Warrants. At the Closing, the Company shall grant,
issue, and deliver to Purchaser a Stock Purchase Warrant, dated the Closing
Date, in the form attached hereto as Exhibit A-2 (the "Initial Warrant"),
entitling Purchaser to purchase up to 370,000 Shares of the Company's Common
Stock at an initial Exercise Price of $4.0625 per Share, at any time and from
time to time during the five year period beginning on the Closing Date. The
Exercise Price of the Initial Warrants shall automatically be reset on the first
anniversary of the Closing Date at the lesser of (i) $4.0625, or (ii) the
average closing bid price of the Company's Common Stock for the 20 trading days
immediately preceding such anniversary, provided that no adjustment shall be
made which increases the then effective Exercise Price.
(b) Contingent Warrants. Until the indebtedness evidenced by
the Notes has been paid in full, on the anniversary of the Closing Date of each
year beginning on the anniversary of the Closing Date, in the year 1999, the
Company shall grant, issue, and deliver to Purchaser additional Stock Purchase
Warrants, in the form of Exhibit A-3 (the "Contingent Warrants"), each entitling
Purchaser to purchase up to 200,000 Shares of Common Stock at an initial
Exercise Price equal to the greater of (i) $4.00, or (ii) 80% of the average
closing bid price of the Company's Common Stock for the 20 trading days
preceding such anniversary date, at any
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time and from time to time during the five year period beginning on the date of
issue of such Contingent Warrant.
1.4 Commitment; Closing Date. Subject to the terms and conditions
hereof and on the basis of the representations and warranties hereinafter set
forth, the Borrowers agree to issue and sell to Purchaser, and Purchaser agrees
to purchase from the Borrowers, Notes (the "Notes") in the aggregate principal
amount of Four Million Five Hundred Thousand Dollars ($4,500,000.00) at a
purchase price equal to 100% of the principal amount thereof, at the Closing.
Delivery of the Notes (the "Closing") shall be made at the offices of Tandem
Capital, Inc., Nashville, Tennessee, against payment therefor by federal funds
wire transfer in immediately available funds and to the accounts and in the
amounts set forth in the Borrowers' wire instructions in the form of Exhibit B
hereto, at 10:00 A.M., Nashville time, on June 22, 1998, or such later date as
the Borrowers and Purchaser shall agree (the "Closing Date"). The Notes
delivered to Purchaser on the Closing Date shall be delivered to Purchaser in
the form of a single Note for the full amount of such purchase price (unless
different denominations are specified by Purchaser), registered on the books of
the Borrowers in Purchaser's name or in the name of such nominee as Purchaser
may specify and, with appropriate insertions, in the form attached hereto as
Exhibit A-1, all as Purchaser may specify at least 24 hours prior to the date
fixed for delivery.
1.5 Processing Fee. The Borrowers shall pay to Purchaser on or
before the Closing Date a processing fee of $52,500.00.
2. Representations and Warranties of the Borrowers. Each of the Borrowers
hereby represents and warrants to Purchaser as follows:
2.1 Corporate Status.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, and has
the corporate power to own and operate its properties, to carry on its business
as now conducted and to enter into and to perform its obligations under this
Agreement, the Notes, the Registration Rights Agreement, and any other document
executed and delivered by the Borrowers in connection herewith or therewith
(collectively, the "Operative Documents"). The Company is qualified to do
business and is in good standing in each state or other jurisdiction in which
such qualification is necessary under applicable law, except where the failure
to so qualify would not have a Material Adverse Effect. Each Co-Maker is duly
organized, validly existing and in good standing under the laws of the state of
its organization, and has the corporate power to own and operate its properties,
to carry on its business as now conducted and to enter into and to perform its
obligations under the Operative Documents. Each Co-Maker is qualified to do
business and is in good standing in each state or other jurisdiction in which
such qualification is necessary under applicable law, except where the failure
to so qualify would not have a Material Adverse Effect.
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(b) Schedule 2.1(b) sets forth a complete list of each (i)
Subsidiary, and (ii) corporation, partnership, joint venture, limited liability
company or other business organization which is an Affiliate of the Company, in
which any Borrower owns, directly or indirectly, any capital stock or other
equity interest in excess of $1,000, which list shows the jurisdiction of
incorporation or other organization and the percentage of stock or other equity
interest of each such entity owned by the Company. Each such entity is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of incorporation or other organization as indicated on Schedule
2.1(b), each has all requisite power and authority and holds all material
licenses, permits and other required authorizations from government authorities
necessary to own its properties and assets and to conduct its business as now
being conducted, and each is qualified to do business and is in good standing in
every jurisdiction in which such qualification is necessary under applicable
law, except where the failure to so qualify would not have a Material Adverse
Effect. Except as set forth on Schedule 2.1(b), all of the outstanding shares of
capital stock, or other equity interest, of each such entity owned, directly or
indirectly, by any Borrower have been validly issued, are fully paid and
nonassessable, and are owned by the Borrower free and clear of all liens,
charges, security interests, or encumbrances.
2.2 Capitalization.
(a) The authorized capital stock of the Company consists of
(i) 10,000,000 shares of Preferred Stock, no par value, of which three shares of
Series A Preferred Stock, 943,463 shares of Series B Preferred Stock, and 155
shares of Series C Preferred Stock are issued and outstanding as of the date
hereof, and (ii) 25,000,000 shares of Common Stock, no par value, 2,814,107 of
which were issued and outstanding as of the date hereof. All shares of Common
Stock outstanding have been validly issued and are fully paid and nonassessable.
Except as set forth on Schedule 2.2(a), there are no statutory or contractual
preemptive rights, rights of first refusal, antidilution rights, or any similar
rights held by any party with respect to the issuance of the Notes.
(b) The Company has not granted, or agreed to grant or issue,
any options, warrants or rights to purchase or acquire from the Company any
shares of capital stock of the Company, there are no securities outstanding or
committed to be issued by the Company or any Subsidiary which are convertible
into or exchangeable for any shares of capital stock or other securities of the
Company, and there are no contracts, commitments, agreements, understandings,
arrangements or restrictions as to which the Company is a party, or by which it
is bound, relating to any shares of capital stock or other securities of the
Company, whether or not outstanding except for (i) the Notes and Warrants to be
issued pursuant to this Agreement, and (ii) such options, warrants and other
rights to acquire capital stock of the Company set forth on Schedule 2.2(b).
Except as set forth on Schedule 2.2(b), all such shares have been duly reserved
for issuance, have been duly and validly authorized, and upon issuance in
accordance
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with the terms of the respective instruments and receipt of payment therefor,
will be validly issued, fully paid, and nonassessable.
(c) The Common Stock issuable upon exercise of the Warrants
has been duly and validly reserved for issuance and, upon issuance in accordance
with, and upon receipt of the consideration required under, the terms of this
Agreement, the Notes, and the Warrants, will be duly and validly issued, fully
paid, and nonassessable and will be free of restrictions on transfer other than
restrictions under applicable state and federal securities laws.
2.3 Authorization. Except as set forth on Schedule 2.3, each of the
Borrowers has full legal right, power and authority to enter into and perform
its obligations under the Operative Documents without the consent or approval of
any other person, firm, governmental agency, or other legal entity, and any
required consents or approvals shall have been obtained prior to the Closing.
The execution and delivery of this Agreement, the issuance of the Notes
hereunder, the execution and delivery of each other document in connection
herewith or therewith to which any Borrower is a party, and the performance by
each Borrower of its obligations hereunder or thereunder, have been duly
authorized by all necessary corporate action properly taken, have received all
necessary governmental approvals, if any were required, and except as set forth
on Schedule 2.3 do not and will not contravene or conflict with (i) the articles
of incorporation or partnership or the bylaws or of any Borrower, (ii) any
material agreement to which any Borrower is a party or by which any of them or
any of their properties is bound, or constitute a default thereunder, or result
in the creation or imposition of any lien, charge, security interest, or
encumbrance of any nature upon any of the property or assets of any Borrower
pursuant to the terms of any such agreement or instrument, or (iii) violate any
provision of law or any applicable judgment, ordinance, regulation or order of
any court or governmental agency. The officer executing this Agreement, the
Notes, and any other document executed and delivered by any Borrower in
connection herewith or therewith, is duly authorized to act on behalf of such
Borrower.
2.4 Validity and Binding Effect. Each of the Operative Documents is
the legal, valid and binding obligation of the Borrowers, enforceable against
the Borrowers in accordance with its terms, subject to such limitations on
enforceability as may exist under equitable principles of law or the application
of bankruptcy or insolvency laws.
2.5 Contracts and Other Commitments. Other than as filed by the
Company with the Securities and Exchange Commission ("SEC") as an exhibit
pursuant to any of the SEC Reports (each such disclosed or filed agreement an
"Applicable Contract"), none of the Borrowers is bound by any material loans,
liens, pledges, security interests, agreements, indentures, or instruments
defining the rights of security holders under any securities or other financings
upon which any Borrower is obligated or by which any Borrower is bound.
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2.6 Litigation. Except as set forth on Schedule 2.6, there is no
litigation, arbitration, claim, proceeding or investigation pending or
threatened in writing to which any Borrower is a party or of which any of its
respective properties or assets is the subject which, if determined adversely to
the Borrower, would individually or in the aggregate have a Material Adverse
Effect.
2.7 Financial Statements. The consolidated financial statements of
the Company for the fiscal years ended December 31, 1997, December 31, 1996,
December 31, 1995; and the unaudited consolidated financial statements of the
Company and its Subsidiaries as of and for the five months ended May 31, 1998,
and the related notes, copies of which the Company previously has delivered to
Purchaser, fairly present the financial position, results of operations, cash
flows and changes in stockholders' equity of the Company, at the respective
dates of and for the periods to which they apply in such financial statements,
and have been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods indicated,
subject, in the case of interim financial statements, to normal recurring
year-end adjustments (the effect of which will not, individually or in the
aggregate, be materially adverse) and the absence of notes (that, if presented,
would not differ materially from those included in the most recent audited
consolidated financial statements). No financial statements of any other
person(s) are required by GAAP to be included in the consolidated financial
statements of the Company.
2.8 SEC Reports. The Company's Common Stock is listed for trading on
the over the counter market and quoted on the National Association of Securities
Dealers Electronic Bulletin Board, and has been duly registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
has filed all reports, registrations, proxy or information statements, and all
other documents, together with any amendments required to be made thereto,
required to be filed with the SEC under the Securities Act and the Exchange Act
(collectively, the "SEC Reports"). As of their respective dates, the SEC Reports
complied in all material respects with all rules and regulations promulgated by
the SEC and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
2.9 Absence of Changes. Except as set forth on Schedule 2.9, since
December 31, 1997, (i) none of the Borrowers has incurred any liabilities or
obligations, direct or contingent, or entered into any transactions, not in the
ordinary course of business, that are material to the Company, (ii) none of the
Borrowers has purchased any of its outstanding capital stock or declared, or
paid any dividend or other distribution or payment in respect of its capital
stock, (iii) there has not been any material change in the authorized or issued
capital stock, long-term debt, or short-term debt of the Borrowers, and (iv)
there has not been any material
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adverse change in or affecting the business, operations, properties, assets, or
condition (financial or otherwise) of the Company.
2.10 No Defaults. Except as set forth on Schedule 2.10 and except
where a default or event of default does not constitute a Material Adverse
Event, no default or event of default by any Borrower exists under this
Agreement or any of the other Operative Documents, or under any Applicable
Contract, or other material instrument or agreement to which any Borrower is a
party or by which any Borrower or its respective properties are bound or, to the
knowledge of the Borrowers, affected, and to the knowledge of the Borrowers no
event has occurred and is continuing that with notice or the passage of time or
both would constitute a default or event of default thereunder.
2.11 Compliance With Law. The Borrowers are in compliance with all
foreign, federal, state or local laws, regulations, decrees and orders directly
applicable to them (including but not limited to the Foreign Corrupt Practices
Act, occupational and health standards and controls, antitrust, monopoly,
restraint of trade or unfair competition), except to the extent that
noncompliance, in the aggregate, does not constitute a Material Adverse Event.
2.12 Taxes. Except where failure to file would not constitute a
Material Adverse Event, the Borrowers have filed or caused to be filed all
federal, state and local income, excise and franchise tax returns for taxable
years ending during calendar years 1995, 1996, 1997, and 1998 required to be
filed (except for returns that have been appropriately extended), and have paid,
or provided for the payment of, all taxes shown to be due and payable on said
returns and all other taxes, impositions, assessments, fees or other charges
imposed on them by any governmental authority, agency or instrumentality, prior
to any delinquency with respect thereto (other than taxes, impositions,
assessments, fees and charges currently being contested in good faith by
appropriate proceedings, for which amounts have been reserved in accordance with
GAAP), and the Borrowers do not know of any proposed assessment for additional
taxes or any basis therefor. No tax liens have been filed against any of the
Borrowers or any of their properties.
2.13 Certain Transactions. Except as set forth in Schedule 2.13 and
in the SEC Reports, and except as to indebtedness incurred in the ordinary
course of business and approved by the Board of Directors of the Company, none
of the Borrowers is indebted, directly or indirectly, to any of its officers or
directors, or to their respective spouses or children, or to any of their
affiliates, in excess of an aggregate amount of $60,000, and none of such
officers or directors or any member of their immediate families or affiliates,
is indebted to any of the Borrowers in excess of an aggregate amount of $60,000,
or has any direct or indirect ownership interest in any firm or corporation with
which any Borrower is affiliated or with which any Borrower has a business
relationship, or any firm or corporation which competes with any Borrower.
Except as set forth in the proxy statements or other SEC Reports, no officer or
director
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of any Borrower or any member of their immediate families or affiliates is,
directly or indirectly, interested in any contract with any Borrower that would
require disclosure under Item 404 of Regulation S-K. No Borrower is a guarantor
or indemnitor of any indebtedness of any other person, firm or corporation
(except other Borrowers).
2.14 Title to Property. Each Borrower has good and marketable title
to all real and personal property owned by it, free and clear of all liens,
security interests, pledges, encumbrances, claims and restrictions of every kind
and nature whatsoever, except as disclosed on Schedule 2.14, and except for such
liens, security interests, pledges, encumbrances, claims and restrictions which
individually or in the aggregate are not material. Any real property and
buildings held under lease by any Borrower are held under valid existing and
enforceable leases, and to the best of the Borrowers' knowledge no default has
occurred or is continuing thereunder which might result in any Material Adverse
Effect.
2.15 Intellectual Property.
(a) Except as set forth in Schedule 2.15, or for items that
individually or in the aggregate do not constitute a Material Adverse Event, to
the Borrowers' knowledge, each of the Borrowers is the lawful owner or has a
valid right to use the proprietary information used in its business free and
clear of any claim, right, trademark, patent or copyright protection of any
third party; provided, however, that this paragraph (a) shall not be deemed to
include any representation regarding the absence of infringements or conflicts
with the rights of others, which representation is made only in paragraph (c)
hereof. As used herein, "proprietary information" includes without limitation
(i) any computer software and any documentation, inventions, and technical and
nontechnical data related thereto, and (ii) other documentation, inventions and
data related to patterns, plans, methods, techniques, drawings, finances,
customer lists, suppliers, products, special pricing and cost information,
designs, processes, procedures, formulas, research data owned or used by any
Borrower or marketing studies conducted by any Borrower, which the Borrowers
consider to be commercially important and competitively sensitive and which
generally has not been disclosed to third parties other than customers in the
ordinary course of business.
(b) Except as set forth in Schedule 2.15, or for items that
individually or in the aggregate do not constitute a Material Adverse Event, to
the Borrowers' knowledge, each of the Borrowers has good and marketable title to
or has a valid right to use all patents, trademarks, trade names, service marks,
copyrights or other intangible property rights, and registrations or
applications for registration thereof, owned by the Company or any Subsidiary or
used or required by such Borrower in the operation of its business as presently
being conducted; provided, however, that this paragraph (b) shall not be deemed
to include any representation regarding the absence of infringements or
conflicts with the rights of others, which representation is made only in
paragraph (c) hereof.
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(c) Except as disclosed on Schedule 2.15, none of the
Borrowers has any knowledge of any infringements or conflicts by any Borrower
with asserted rights of others with respect to copyrights, patents, trademarks,
service marks, trade names, trade secrets or other intangible property rights or
know-how, which constitute a Material Adverse Event. To the Borrowers'
knowledge, except for items that individually or in the aggregate do not
constitute a Material Adverse Event, no products or processes of the Borrowers
infringe or conflict with any rights of patent or copyright, or any discovery,
invention, product or process, that is the subject of a patent or copyright
application or registration known to any Borrower. Except for items that
individually or in the aggregate do not constitute a Material Adverse Event,
each Borrower follows such procedures as are necessary or appropriate to provide
reasonable protection of the Borrowers' trade secrets and proprietary rights in
intellectual property of all kinds. To the knowledge of the Borrowers, no person
employed by or affiliated with the Company or any Co-Maker has employed or
proposes to employ any trade secret or any information or documentation
proprietary to any former employer, and to the knowledge of the Borrowers, no
person employed by or affiliated with any Borrower has violated any confidential
relationship that such person may have had with any third person, in connection
with the development, manufacture or sale of any product or proposed product or
the development or sale of any service or proposed service of the Borrowers,
except for items that individually or in the aggregate do not constitute a
Material Adverse Event.
2.16 Environmental Matters. Each Borrower has duly complied in all
material respects with, and its business, operations, assets, equipment,
property, leaseholds or other facilities are in compliance in all material
respects with, the provisions of all federal, state and local environmental,
health, and safety laws, codes and ordinances, and all rules and regulations
promulgated thereunder, except to the extent that the violation thereof does not
constitute a Material Adverse Event. Each Borrower has been issued and will
maintain all required material federal, state and local permits, licenses,
certificates and approvals relating to (i) air emissions; (ii) discharges to
surface water or groundwater; (iii) noise emissions; (iv) solid or liquid waste
disposal; (v) the use, generation, storage, transportation or disposal of toxic
or hazardous substances or wastes (which shall include any and all such
materials listed in any federal, state or local law, code or ordinance and all
rules and regulations promulgated thereunder as hazardous or potentially
hazardous); or (vi) other environmental, health or safety matters, except to the
extent that the violation thereof does not constitute a Material Adverse Event.
No Borrower has received notice of, and no Borrower knows of, a material
violation of any federal, state or local environmental, health or safety laws,
codes or ordinances, and any rules or regulations promulgated thereunder with
respect to its businesses, operations, assets, equipment, property, leaseholds,
or other facilities. Except in accordance with a valid governmental permit,
license, certificate or approval, there has been no emission, spill, release or
discharge into or upon (i) the air; (ii) soils, or any improvements located
thereon; (iii) surface water or groundwater; or (iv) the sewer, septic system or
waste treatment, storage or disposal system servicing the premises, of any toxic
or hazardous substances or wastes at or from the premises of any Borrower,
except to the
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extent that the violation thereof does not constitute a Material Adverse Event.
To the best of its knowledge, none of the Borrowers has any material
indebtedness, obligation or liability (absolute or contingent, matured or not
matured), with respect to the storage, treatment, cleanup or disposal of any
solid wastes, hazardous wastes or other toxic or hazardous substances (including
without limitation any such indebtedness, obligation, or liability with respect
to any current regulation, law or statute regarding such storage, treatment,
cleanup or disposal).
2.17 Accounting Matters. The Borrowers maintain a system of internal
accounting controls sufficient to provide reasonable assurance that in all
material respects (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain accountability for the assets of the Borrowers; (iii) access to the
assets of each Borrower is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets of the Borrowers is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
2.18 Distributions to Company. Except for limitations under
applicable law and under the Senior Credit Agreement, none of the other
Borrowers are currently prohibited, directly or indirectly, from paying any
dividends or making any other distributions to the Company or to any other
Borrower, from repaying to the Company or to any other Borrower any loans or
advances to such Borrower, or from transferring any of such Borrower's property
or assets to the Company or to any other Borrower.
2.19 Prior Sales. All offers and sales of the Company's capital
stock prior to the date hereof were at all relevant times (i) exempt from the
registration requirements of the Securities Act or were duly registered under
the Securities Act, and (ii) were duly registered or were the subject of an
available exemption from the registration requirements of all applicable state
securities or Blue Sky laws.
2.20 Regulatory Compliance. The conduct of the business and the
ownership of the assets of the Borrowers is not dependent on any license,
permit, approval, waiver or other authorization of any federal, state or local
governmental or regulatory body which the Borrowers have not obtained, except to
the extent that the absence thereof does not constitute a Material Adverse
Event. All material licenses, permits and authorizations held by the Borrowers
are in full force and effect.
2.21 Margin Regulations. No Borrower is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock. No
proceeds received pursuant to this Agreement will be used to purchase or carry
any equity security of a class which is registered pursuant to Section 12 of the
Exchange Act.
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2.22 [Reserved.]
2.23 Limited Offering. Subject in part to the truth and accuracy of
Purchaser's representations set forth in this Agreement, the offer, sale and
issuance of the Notes is exempt from the registration requirements of the
Securities Act, and no Borrower nor any authorized agent acting on behalf of any
Borrower has taken or will take any action hereafter that would cause the loss
of such exemption.
2.24 Registration Obligations. Except as described in Schedule 2.24,
and except with respect to any registration statement on Form S-8 to be filed in
connection with the Company's stock option plan, the Company is not under any
obligation to register under the Securities Act or the Trust Indenture Act of
1939, as amended, any of its presently outstanding securities or any of its
securities that are proposed to be subsequently issued.
2.25 Insurance. Each of the Borrowers has maintained insurance
coverage with respect to their respective properties and business in such forms
and amounts and against such risks, casualties and contingencies as are
customary for companies of comparable size and condition (financial and
otherwise) engaged in the same or a similar business and owning and operating
similar properties.
2.26 Governmental Consents. No consent, approval, qualification,
order or authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of the Borrowers in connection
with the their valid execution, delivery, or performance of this Agreement,
except such filings as have been made prior to the Closing, and except notices
of sale required to be filed with the Securities and Exchange Commission under
Regulation D of the Securities Act or such post-closing filings as may be
required under applicable state securities laws, which will be timely filed
within the applicable periods therefor.
2.27 Employees. To the best of the Borrowers' knowledge, there is no
strike, labor dispute or union organization activity pending or threatened
between any Borrower and its employees. None of the Borrowers' employees belongs
to any union or collective bargaining unit. Each Borrower has complied in all
material respects with all applicable state and federal equal opportunity and
other laws related to employment. To the best of the Borrowers' knowledge, no
employee of any Borrower is in violation of any material judgment, decree, or
order, or any term of any employment contract, patent disclosure agreement, or
other contract or agreement relating to the relationship of any such employee
with such Borrower or any other party because of the nature of the business
conducted or presently proposed to be conducted by the Borrowers or to the use
by the employee of his best efforts with respect to such business. Other than as
set forth on Schedule 2.27, no Borrower is a party to or bound by any material
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, or retirement agreement. To the best of the
Borrowers' knowledge, no officer or key employee, or any group
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of key employees, intends to terminate employment with any Borrower, nor does
any Borrower have a present intention to terminate the employment of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, to applicable state law, and to existing employment contracts set
forth on Schedule 2.27, the employment of each officer and employee of the
Borrowers is terminable at will.
2.28 ERISA. Each Borrower is in compliance in all material respects
with all applicable provisions of Title IV of the Employee Retirement Income
Security Act of 1974, Pub. L. No.93-406, September 2, 1974, 88 Stat. 829,
29U.S.C.A. SS 1001 et seq. (1975), as amended from time to time ("ERISA").
Neither a reportable event nor a prohibited transaction (as defined in ERISA)
has occurred and is continuing with respect to any "pension plan" maintained by
any Borrower (as such term is defined in ERISA, a '"Plan"); no notice of intent
to terminate a Plan has been filed nor has any Plan been terminated; no
circumstances exist which constitute grounds entitling the Pension Benefit
Guaranty Corporation (together with any entity succeeding to or all of its
functions, the "PBGC") to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such proceedings;
no Borrower nor any commonly controlled entity (as defined in ERISA) has
completely or partially withdrawn from a multi employer plan (as defined in
ERISA). Each Borrower and each commonly controlled entity has met its minimum
funding requirements under ERISA with respect to all of its Plans and the
present fair market value of all Plan property exceeds the present value of all
vested benefits under each Plan, as determined on the most recent valuation date
of the Plan and in accordance with the provisions of ERISA and the regulations
thereunder for calculating the potential liability of the Borrower or any
commonly controlled entity to the PBGC or the Plan under Title IV or ERISA; and
no Borrower has incurred any liability to the PBGC under ERISA.
2.29 Fees/Commissions. Except as set forth on Schedule 2.29, no
Borrower has agreed to pay any finder's fee, commission, origination fee or
other fee or charge to any person or entity with respect to or as a result of
the consummation of the transactions contemplated hereunder, except for (i) the
processing fee due to Purchaser under Section 1.5, and (ii) reimbursement of
Purchaser's expenses under Section 12.1.
2.30 Survival. The representations and warranties of the Borrowers
contained in this Agreement are made as of the date hereof and shall survive
until this Agreement terminates in accordance with Section 12.5 hereof.
3. Representations and Warranties of Purchaser. The Purchaser hereby
represents to the Borrowers as follows:
3.1 Corporate Status. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Tennessee
and has the corporate power to own and operate its properties, to carry on its
business as now conducted and to enter
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into and to perform its obligations under this Agreement and any other document
executed or delivered by Purchaser in connection herewith.
3.2 Authorization. Purchaser has full legal right, power and
authority to enter into and perform its obligations under this Agreement and any
other document executed and delivered by Purchaser in connection herewith,
without the consent or approval of any other person, firm, governmental agency
or other legal entity. The execution and delivery of this Agreement and any
other document executed and delivered by Purchaser in connection herewith, and
the performance by Purchaser of its obligations hereunder and/or thereunder are
within the corporate powers of Purchaser, have received all necessary
governmental approvals, if any were required, and do not and will not contravene
or conflict with (i) the Charter or Bylaws of Purchaser, (ii) any material
agreement to which Purchaser is a party or by which it or any of its properties
is bound, or constitute a default thereunder, or result in the creation or
imposition of any lien, charge, security interest or encumbrance of any nature
upon any of the property or assets of Purchaser pursuant to the terms of any
such agreement or instrument, or (iii) violate any provision of law or any
applicable judgment, ordinance, regulation or order of any court or governmental
agency. The officer(s) executing this Agreement and any other document executed
and delivered by Purchaser in connection herewith, is duly authorized to act on
behalf of Purchaser.
3.3 Validity and Binding Effect. This Agreement and any other
document executed and delivered by Purchaser in connection herewith have been
authorized by all requisite corporate action, and are the legal, valid and
binding obligations of the Purchaser, enforceable against it in accordance with
their respective terms, subject to such limitations on enforceability as may
exist under equitable principles of law or the application of bankruptcy or
insolvency laws.
3.4 Accredited Investor Investment Intent. Purchaser is a registered
investment company under the Investment Company Act and as such is an
"accredited investor" under Rule 501(a) under the Securities Act. Purchaser is
acquiring the Notes for its own account, for investment, and not with a view to
the distribution or resale thereof, in whole or in part, in violation of the
Securities Act or any applicable state securities law, and Purchaser has no
present intention of selling, negotiating or otherwise disposing of the Notes;
it being understood that Purchaser intends to transfer and assign the Notes and
all Purchaser's rights and obligations under this Agreement to one or more
wholly-owned Subsidiaries of Purchaser. Purchaser has relied solely upon an
independent investigation made by it and its representatives, if any, and has,
prior to the date hereof been given access to and the opportunity to examine all
books and records of the Company, and all material contracts and documents of
the Company. In making its investment decision to purchase the Notes, Purchaser
is not relying on any oral or written representations or assurances from the
Company or any other person or any representation of the Company or any other
person other than as set forth in this Agreement, or on any information
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other than that contained in the Company's SEC Reports. Purchaser has such
experience in business and financial matters that it is capable of evaluating
the risk of its investment and determining the suitability of its investment.
3.5 Survival. The representations and warranties of the Purchaser
contained in this Agreement shall survive until this Agreement terminates in
accordance with Section 12.5 hereof.
4. Conditions Precedent to the Obligations of Purchaser. The obligation of
Purchaser to purchase and pay for the Notes on the Closing Date shall be subject
to the satisfaction, on or before the Closing Date, of each of the conditions
set forth below. These conditions are for Purchaser's sole benefit and may be
waived by Purchaser at any time in its sole discretion.
4.1 Representations and Warranties. The representations and
warranties of the Borrowers contained in this Agreement and in any Schedule
hereto or any document or instrument delivered to Purchaser or its
representatives hereunder, shall have been true and correct when made and shall
be true and correct in all material respects as of the Closing Date as if made
on such date, except to the extent such representations and warranties expressly
relate to a specific date. Each of the Borrowers shall have duly performed all
of the covenants and agreements to be performed by it hereunder on or prior to
the Closing Date.
4.2 Officer's Certificate. The Borrowers shall have delivered to
Purchaser a certificate, dated the Closing Date, signed by the President of the
Company, substantially in the form attached hereto as Exhibit C.
4.3 Satisfactory Proceedings and President's Certificate. All
proceedings taken in connection with the transactions contemplated by this
Agreement, and all documents necessary to the consummation thereof, shall be
satisfactory in form and substance to Purchaser and Purchaser's counsel, and the
Borrowers shall have delivered to Purchaser a certificate, dated the Closing
Date, signed by the President of the Company, substantially in the form attached
hereto as Exhibit D.
4.4 Legal Opinion. Purchaser shall have received the opinion of
counsel for the Borrowers, dated the Closing Date, addressed to Purchaser, in
form and substance satisfactory to Purchaser's counsel, and covering the matters
set forth in Exhibit E hereto.
4.5 Authorization Agreement. The Borrowers shall have delivered to
Purchaser an Authorization Agreement for Pre-Authorized Payments (Debit), dated
the Closing Date, executed by a duly authorized officer, in the form attached
hereto as Exhibit F.
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4.6 Existence and Authority. The Borrowers shall have delivered to
Purchaser the following certificates of public officials, in each case as of a
date within ten days of the Closing Date:
(a) the certificate or articles of incorporation of the
Company and each of the Subsidiaries, certified by the Secretary of State or
other appropriate official in the jurisdiction by which each such entity is
incorporated; and
(b) a certificate as to the legal existence and good standing
of the Company and each of the Subsidiaries issued by the Secretary of State or
other appropriate official of the jurisdiction by which each such entity is
incorporated.
4.7 Delivery of Operative Documents. The Borrowers shall have
delivered to Purchaser the following documents, executed by the Borrowers and
dated the Closing Date:
(a) the Note;
(b) the Initial Warrant;
(c) the Security Agreement in the form of Exhibit G, executed
by the each of the Borrowers;
(d) the Financing Statements;
(e) Warrant Valuation Letter in the form of Exhibit H;
(f) Closing Statement in the form of Exhibit I; and
(g) Registration Rights Agreement between the Company and the
Purchaser in the form of Exhibit J.
4.8 Required Consents. Any consents or approvals required to be
obtained from any third party, including any holder of indebtedness or any
outstanding security of the Company, and any amendments of agreements which
shall be necessary to permit the consummation of the transactions contemplated
hereby on the respective Closing Date, shall have been obtained and all such
consents or amendments shall be satisfactory in form and substance to Purchaser
and Purchaser's counsel.
4.9 Waiver of Conditions. If on the Closing Date the Borrowers fail
to tender to Purchaser the Notes to be issued to Purchaser, or if the conditions
specified in this Section 4 have not been fulfilled, Purchaser may thereupon
elect to be relieved of all further obligations
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under this Agreement and shall (i) be paid the processing fee provided by
Section 1.5, and (ii) be paid the expense allowance provided by Section 12.1,
which processing fee and expense reimbursement shall be treated as liquidated
damages and as Purchaser's sole remedy if on the Closing Date the Borrowers fail
to tender to Purchaser the Notes or if the conditions specified in this Section
4 have not been fulfilled. Without limiting the foregoing, if the conditions
specified in this Section 4 have not been fulfilled, Purchaser may waive
compliance by the Borrowers with any such condition to such extent as Purchaser,
in Purchaser's sole discretion, may determine. Nothing in this Section 4.9 shall
operate to relieve any Borrower of any of its obligations hereunder, or to waive
any of Purchaser's rights against the Borrowers.
5. Covenants of the Borrowers. From and after the Closing Dates and
continuing so long as any amount remains unpaid on any of the Notes.
5.1 Use of Proceeds. The Borrowers shall use the proceeds of the
Notes for general corporate purposes, including acquisitions, working capital
and debt repayment.
5.2 Corporate Existence, Etc. Each Borrower shall preserve and keep
in force and effect its corporate existence and good standing in the state of
its organization, its qualification and good standing in each jurisdiction where
such qualification is required by applicable law except where the failure to so
qualify would not have a Material Adverse Effect, and all licenses and permits
necessary to the proper conduct of its business.
5.3 Maintenance of Properties, Etc. Each Borrower will maintain,
preserve and keep its properties and assets which are used or useful in the
conduct of its business (whether owned in fee or pursuant to a leasehold
interest) in good repair and working order, excepting normal wear and tear;' and
from time to time will make all necessary repairs, replacements, renewals and
additions required to maintain the efficiency thereof.
5.4 Nature of Business. None of the Borrowers will engage in any
business if, as a result, the general nature of the business, taken on a
consolidated basis, which would then be engaged in by the Company would be
substantially changed from the general nature of the business engaged in by the
Company on the date of this Agreement
5.5 Insurance. Each Borrower will maintain insurance coverage with
respect to their respective properties and business in such forms and amounts
and against such risks, casualties and contingencies as are customary for
corporations of comparable size and condition (financial and otherwise) engaged
in the same or a similar business and owning and operating similar properties.
5.6 Taxes, Claims for Labor and Materials. The Borrowers will
promptly pay and discharge (i) all lawful taxes, assessments and governmental
charges or levies imposed upon
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the respective property or business of the Borrowers, (ii) all trade accounts
payable in accordance with usual and customary business terms, and (iii) all
claims for work, labor or materials, which if unpaid might become a lien or
charge upon any property of a Borrower; provided, the Borrowers shall not be
required to pay any such tax, assessment, charge, levy, account payable or claim
if (i) the validity, applicability or amount thereof is being contested in good
faith by appropriate actions or proceedings which will prevent the forfeiture or
sale of any property of any Borrower or any material interference with the use
thereof by any Borrower, and (ii) each of the Borrowers shall set aside on its
books, reserves deemed by it to be adequate with respect thereto, and (iii)
failure to pay such item individually or in the aggregate would not constitute a
Material Adverse Event.
5.7 Compliance with Laws, Agreements, Etc. Except where failure to
do so does not and would not constitute a Material Adverse Event, each Borrower
shall maintain its business operations and property owned or used in connection
therewith in compliance with (i) all applicable federal, state and local laws,
regulations and ordinances, and such laws, regulations and ordinances of foreign
jurisdictions, governing such business operations and the use and ownership of
such property, and (ii) all agreements, licenses, franchises, indentures and
mortgages to which the it is a party or by which it or any of its properties is
bound.
5.8 ERISA Matters. If any Borrower has in effect, or hereafter
institutes, a pension plan that is subject to the requirements of Title IV of
ERISA (a "Plan"), then the following covenants shall be applicable during such
period as any such Plan shall be in effect: (i) throughout the existence of the
Plan, the Borrower's contributions under the Plan will meet the minimum funding
standards required by ERISA and the Borrower will not institute a distress
termination of the Plan; and (ii) the Borrower will send to Purchaser a copy of
any notice of a reportable event (as defined in ERISA) required by ERISA to be
filed with the Labor Department or the PBGC, at the time that such notice is so
filed.
5.9 Books and Records: Rights of Inspection. Each Borrower will keep
proper books of record and account in which entries will be made of all dealings
or transactions of or in relation to the business and affairs of the Borrower,
in accordance with GAAP consistently maintained. Each Borrower shall permit a
representative of Purchaser to visit any of its properties and inspect its books
and financial records, and will discuss its accounts, affairs and finances with
a representative of Purchaser, during normal business hours, at all such times
as Purchaser may reasonably request, and subject to Purchaser's execution of a
confidentiality agreement in form and substance reasonably acceptable to
Purchaser.
5.10 Reports. The Borrowers will furnish to Purchaser the following
information, which information shall be subject to confidential treatment by
Purchaser:
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(a) Monthly Statements. Within 30 days after the end of each
month, beginning the month of June, 1998, monthly internal financial reports
consisting of an unaudited consolidated balance sheet and an unaudited statement
of operations for the one-month period then ended;
(b) Quarterly Statements. As soon as available and in any
event within 45 days after the end of each quarterly fiscal period (except the
last) of each fiscal year, copies of:
(i) consolidated balance sheets of the Company as of the
close of the fiscal period then ended, setting forth in comparative form the
consolidated figures at the end of the preceding fiscal year,
(ii) consolidated statements of income of the Company
for the fiscal period then ended, setting forth in comparative form the
consolidated figures for the corresponding period of the preceding fiscal year,
and
(iii) consolidated statements of cash flows of the
Company for the portion of the fiscal year ending with such fiscal period,
setting forth in comparative form the consolidated figures for the corresponding
period of the preceding fiscal year,
all in reasonable detail and accompanied by a certificate of an authorized
financial officer of the Company that such financial statements fairly present
the financial condition and results of operations and cash flows of the Company
at and for the periods presented, subject to normal year-end adjustment;
provided, that delivery of the Company's quarterly report on Form 10-Q or Form
10-QSB as filed with the SEC shall be deemed satisfaction of the obligations
imposed by this Section 5.10(b);
(c) Annual Statements. As soon as available and in any event within
90 days after the close of each fiscal year of the Company, copies of:
(i) consolidated balance sheets of the Company as of the
close of such fiscal year, and
(ii) consolidated statements of income and consolidated
statements of changes in stockholders' equity and cash flows of the Company for
such fiscal year,
in each case setting forth in comparative form the consolidated figures for the
preceding fiscal year, all in reasonable detail and accompanied by an
unqualified report thereon of a firm of independent public accountants of
recognized national standing; provided, that delivery of the Company's annual
report on Form 10-K as filed with the SEC shall be deemed satisfaction of the
obligations imposed by this Section 5.10(c);
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(d) Special Audit Reports. Promptly upon receipt thereof, one
copy of each interim or special audit made by independent accountants of the
books of any Borrower;
(e) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Company to stockholders generally and of each periodic or
current report, and any registration statement or prospectus filed by the
Company with any securities exchange or the SEC or any successor agency, and
copies of any orders in any proceedings to which any Borrower is a party, issued
by any governmental agency, federal or state, having jurisdiction over the
Borrower. Each Borrower specifically covenants to use reasonable commercial
efforts to timely file each such item required to be filed with the SEC and each
state requiring securities laws filings; and
(f) Requested Information. With reasonable promptness, such
financial data and other information relating to the business of the Borrowers
as Purchaser may from time to time reasonably request, subject to Purchaser's
duty of confidentiality.
5.11 Limitations on Debt and Obligations. Except as to
(i) Indebtedness existing on the date hereof and reflected on
(a) the Company's unaudited balance sheet as of May 31, 1998, or (b) Schedule
5.11, as the same Indebtedness may be extended or renewed (but not increased,
except to the extent of committed availability on the date hereof, but not
otherwise);
(ii) the Indebtedness incurred pursuant to the Notes;
(iii) accounts payable and other trade payables incurred in
the ordinary course of business;
(iv) purchase money indebtedness incurred in the purchase of
equipment and other property used by the Borrowers in the ordinary course of
business, such purchase money indebtedness not to exceed an aggregate additional
amount of principal and accrued interest thereon of $250,000 at any time
outstanding;
(v) obligations of any Borrower pursuant to capitalized
leases;
(vi) Indebtedness that refinances secured Indebtedness under
clause (i) above, provided that the collateral for such new Indebtedness is the
same type of collateral for the refinanced secured Indebtedness and the
aggregate principal amount of such Indebtedness does not exceed the maximum
principal amount outstanding and/or committed under the refinanced Indebtedness
plus interest accrued to the date of refinancing; and
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(vii) Indebtedness incurred in connection with the acquisition
of a business (including the assets of a business), provided such Indebtedness
is secured solely by the assets of the business so acquired, and is otherwise
nonrecourse to each of the Borrowers;
the Company shall not, on a consolidated basis, incur additional indebtedness
which is senior to or pari passu with the Notes without the prior written
consent of Purchaser.
5.12 Guaranties. Without the prior written consent of Purchaser, no
Borrower will become or be liable in respect of any Guaranty except Guaranties
by the Borrowers which are limited in maximum financial exposure to the amounts
set forth in, and are incurred in compliance with, the provisions of Section
5.11 of this Agreement.
5.13 Limitation on Liens. Without the prior written consent of
Purchaser, no Borrower will create or incur, or suffer to be incurred or to
exist, any mortgage, pledge, security interest, encumbrance, lien or charge of
any kind (collectively, "Liens") on its property or assets, whether now owned or
hereafter acquired, or upon any income or profits therefrom, or transfer any
property for the purpose of subjecting the same to the payment of obligations in
priority to the payment of its general creditors, or acquire or agree to acquire
any property or assets upon conditional sales agreement or other title retention
devices, except those Liens which exist as of the date hereof as set forth on
Schedule 2.14, Liens on accounts receivable and/or inventory of the Company
permitted by Section 5.11, Liens securing Indebtedness permitted by Section 5.11
(vi), and except:
(a) purchase money liens on and security interests in
equipment hereafter acquired securing Indebtedness permitted by Section 5.11
(iv) of this Agreement, provided that such liens and security interests attach
only to the equipment so acquired and do not encumber any other property of any
Borrower;
(b) liens for taxes (excluding federal and state income taxes)
not yet payable or being contested in good faith by appropriate proceedings and
for which reserves determined in accordance with GAAP have been provided on the
books of the Borrowers;
(c) mechanics', materialmen's, warehousemen's, landlords',
carriers' or other like liens arising in the ordinary course of business,
arising with respect to obligations which are not overdue for a period longer
than 90 days or which are being contested in good faith by appropriate
proceedings and for which reserves determined in accordance with GAAP have been
provided on the books of the Borrowers;
(d) deposits or pledges to secure the performance of bids,
tenders, contracts, leases, public or statutory obligations, surety or appeal
bonds or other deposits or
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pledges for purposes of a like general nature or given in the ordinary course of
business by a Borrower; and
(e) other encumbrances consisting of zoning restrictions,
easements, restrictions on the use of real property or minor irregularities in
the title thereto, which do not arise in connection with the borrowing of, or
any obligation for the payment of, money and which, in the aggregate, do not
materially detract from the value of the premises or the business, properties or
assets of any Borrower
5.14 Restricted Payments. Except as set forth on Schedule 5.14, no
Borrower shall, without the prior written consent of Purchaser and except as
hereinafter provided:
(a) declare or pay any dividends, either in cash or property,
on any shares of its capital stock of any class, except dividends or other
distributions payable solely in shares of Common Stock of the Company; or
(b) directly or indirectly, or through any Affiliate,
purchase, redeem or retire any shares of its capital stock of any class or any
warrants, rights or options to purchase or acquire any shares of its capital
stock (other than in exchange for or out of the net proceeds to the Borrower
from the substantially concurrent issue or sale of other shares of capital stock
or warrants, rights or options to purchase or acquire any shares of its capital
stock); or
(c) make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock, provided,
that distributions from any Borrower to another Borrower, shall be permitted; or
(d) make any payment or distribution, either directly or
indirectly or through any Affiliate, with respect to any indebtedness of a
Borrower, to any Affiliate of the Borrower.
5.15 Investments. The Borrowers will not make any Investments
outside the ordinary course of business, without the prior written consent of
Purchaser, except:
(a) Investments in direct obligations of the United States of
America, or any agency or instrumentality of the United States of America, the
payment or guaranty of which constitutes a full faith and credit obligation of
the United States of America, in either case maturing in twelve months or less
from the date of acquisition thereof;
(b) Investments in certificates of deposit maturing within one
year from the date of origin, issued by a bank or trust company organized under
the laws of the United States or any state thereof, having capital, surplus and
undivided profits aggregating at least
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$100,000,000 and whose long-term certificates of deposit are, at the time of
acquisition thereof by Company or a Subsidiary, rated AA or better by Standard &
Poor's Corporation or AA or better by ▇▇▇▇▇'▇ Investors Service, Inc.;
(c) Investments in commercial paper maturing in 270 days or
less from the date of issuance which, at the time of acquisition by the Company
or any Subsidiary, is accorded the highest rating by Standard & Poor's
Corporation, ▇▇▇▇▇'▇ Investors Service, Inc. or another nationally recognized
credit rating agency of similar standing;
(d) Loans or advances in the usual and ordinary course of
business to officers, directors and employees for expenses (including moving
expenses related to a transfer) incidental to carrying on the business of the
Borrowers;
(e) receivables arising from the sale of goods and services in
the ordinary course of business;
(f) acquisitions, mergers, and consolidations permissible
under Section 5.16(a)(ii); and
(g) money market mutual funds of the quality offered by
Fidelity, ▇. ▇▇▇▇ Price, or similar organizations.
5.16 Mergers, Consolidations and Sales of Assets.
(a) Without the prior written consent of Purchaser, which
shall not be unreasonably withheld, no Borrower shall (i) consolidate with or be
a party to a merger or share exchange with any other corporation, or (ii) sell,
lease or otherwise dispose of all or any substantial part (as defined in
paragraph (d) of this Section 5.16) of its assets; provided, however, that:
(i) any Borrower may merge or consolidate with or into
the Company or any wholly-owned Subsidiary so long as in any merger or
consolidation involving the Company, the Company shall be the surviving or
continuing corporation; and
(ii) the Company may consolidate or merge with any other
corporation, or acquire all or a substantial portion of the assets or stock of
any other entity, provided that such corporation or entity is engaged primarily
in the Company's general line of business on a consolidated basis as conducted
on the date hereof, and further provided that (A) Company shall be the surviving
or continuing corporation, (B) at the time of such consolidation or merger or
acquisition and after giving effect thereto, no Default or Event of Default
shall have occurred and be continuing, (C) such consolidation or merger or
acquisition shall be deemed in
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the good faith estimate of the Board of Directors to be a consolidation or
merger or acquisition that will be accretive to earnings per share not later
than the second fiscal year following the consolidation or merger, and (D) such
consolidation or merger or acquisition shall be approved unanimously by the
Company's Board of Directors; and
(iii) any Borrower may sell, lease or otherwise dispose
of all or any substantial part of its assets to the Company or any other
Wholly-owned Subsidiary.
(b) Without the prior written consent of Purchaser, no
Borrower other than the Company shall issue or sell any shares of stock of any
class (including as "stock" for the purposes of this Section 5.16, any warrants,
rights or options to purchase or otherwise acquire stock or other securities
exchangeable for or convertible into stock) of such Borrower to any person other
than the Company or a Wholly-owned Subsidiary, except for the purpose of
qualifying directors.
(c) Without the prior written consent of Purchaser, the
Company will not sell, transfer or otherwise dispose of any shares of stock in
any Subsidiary (except to qualify directors) or any indebtedness of any
Subsidiary, and will not permit any Subsidiary to sell, transfer or otherwise
dispose of (except to the Company or a Wholly-owned Subsidiary) any shares of
stock or any indebtedness of any other Subsidiary, unless all of the following
conditions are met:
(i) simultaneously with such sale, transfer or
disposition, all shares of stock and all indebtedness of such Subsidiary at the
time owned by the Company and by every other Subsidiary shall be sold,
transferred or disposed of as an entirety;
(ii) the Board of Directors of the Company shall have
determined, as evidenced by a resolution thereof, that the retention of such
stock and indebtedness is no longer in the best interests of the Company;
(iii) such stock and Indebtedness is sold, transferred
or otherwise disposed of to a person, for a cash consideration and on terms
reasonably deemed by the Board of Directors to be adequate and satisfactory;
(iv) the Subsidiary being disposed of shall not have any
continuing investment in the Company or any other Subsidiary not being
simultaneously disposed of; and
(v) such sale or other disposition does not involve a
substantial part (as hereinafter defined) of the assets of the Company and its
Subsidiaries taken as a whole.
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Provided, that, notwithstanding this Section 5.16(c), without the prior written
consent of Purchaser, no Borrower shall sell, transfer, or otherwise dispose of
any shares of stock or other equity interest of any other Borrower, or any
indebtedness of any other Borrower, except sales, transfers, or other
dispositions between Borrowers.
(d) As used in this Agreement, a sale, lease or other
disposition of assets shall be deemed to be a "substantial part" of the assets
of the Company and its Subsidiaries only if the book value of such assets, when
added to the book value of all other assets sold, leased or otherwise disposed
of by the Company and its Subsidiaries (other than in the ordinary course of
business and other than expressly permitted by this Section 5.16) during the
twelve month period ending on the date of such sale, lease or other disposition,
exceeds 25 percent of the consolidated net tangible assets of the Company and
its Subsidiaries determined as of the end of the immediately preceding fiscal
year.
5.17 Transactions with Affiliates. Except as set forth on Schedule
5.17, without the prior written consent of Purchaser, the Borrowers shall not
enter into or be a party to any transaction or arrangement with any officer,
director or Affiliate (including, without limitation, the purchase from, sale
to, or exchange of property with, or the rendering of any service by or for, any
Affiliate), except in the ordinary course of and pursuant to the reasonable
requirements of the Borrowers' business and upon fair and reasonable terms no
less favorable to the Borrowers than could be obtained in an arm's-length
transaction with a person other than an Affiliate, in each case as determined in
good faith by a majority of the disinterested directors of the Company.
5.18 Notice. The Borrowers shall promptly upon the discovery thereof
give written notice to Purchaser of (i) the occurrence of any Default or Event
of Default under this Agreement, (ii) the occurrence of any default or event of
default under any other material agreement providing for Indebtedness of any
Borrower or under any material capitalized lease obligation, (iii) any material
actions, suits or proceedings instituted by any person against any Borrower or
affecting any of their assets, or (iv) any investigation initiated by, or any
dispute between and any governmental regulatory body, on the one hand, and any
Borrower, on the other hand, which dispute might materially interfere with the
normal operations of the Borrowers; provided, however, that Purchaser shall not
disclose any such information provided in (iii) or (iv) above to any third party
other than Purchaser's counsel and except to the extent required by law or
otherwise authorized by the Company.
5.19 Board of Directors Observer Rights. For so long as the
Purchaser or any Affiliate of Purchaser owns Notes representing at least 25% of
the original principal amount of the Notes, the Company shall invite one
representative of Purchaser to attend, at the Company's expense, all meetings of
the Company's Board of Directors and all committees of the Company's Board of
Directors in a nonvoting observer capacity and, in this respect, shall provide
such representative copies of all notices and meeting agenda in advance of such
meetings and shall
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permit such representative to review all documents and other materials provided
to directors at such meetings. The Company shall also provide Purchaser, in
advance, with copies of all actions proposed to be taken by the Board of
Directors in lieu of meeting. Purchaser shall execute a confidentiality and
nondisclosure agreement with respect to any information obtained by or provided
to Purchaser's representative.
5.20 Annual Plan. The Board of Directors shall adopt no later than
the thirtieth day of each fiscal year, a financial plan for the Company, which
shall include at least a projection of income and expenses (including capital
expenditures) and a projected cash flows statement for each fiscal period in
such fiscal year, and a projected balance sheet as of the end of each month in
such fiscal year (the "Annual Plan"). The Annual Plan may only be amended or
revised, in any material manner, with the approval of the Board of Directors.
5.21 Further Assurances. The Borrowers will take and cause to be
taken all actions reasonably requested by Purchaser to effect the transactions
contemplated by this Agreement and the other Operative Documents.
6. [Reserved.]
7. [Reserved.]
8. Restrictions on Transfer; Registration Rights.
8.1 Legends; Restrictions on Transfer. Neither the Notes, nor the
Warrants, nor the shares of Common Stock issuable upon exercise of Warrants have
been registered under the Securities Act or any state securities laws. Each Note
and Warrant issued pursuant to this Agreement and each stock certificate issued
upon exercise of Warrants shall bear a legend in substantially the following
form:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW. THESE SECURITIES MAY NOT BE
TRANSFERRED WITHOUT SUCH REGISTRATION OR EXEMPTION
THEREFROM.
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8.2 Registration Rights. The Purchaser shall be entitled to register
Common Stock issuable upon exercise of Warrants as provided in the Registration
Rights Agreement in the form of Exhibit J.
9. Events of Default; Remedies.
9.1 Events of Default. The occurrence of any one of the following
shall constitute an "Event of Default" under this Agreement:
(a) Default shall occur in the payment of interest on any Note
when the same shall have become due, provided, that any such default shall be
curable within two Business Days if the failure to make such payment when due
was caused by a financial institution's error in effecting an automatic debit
transaction against an account containing sufficient funds; or
(b) Default shall occur in the making of any payment of the
principal of any Note or the premium, if any, thereon at the expressed or any
accelerated maturity date or at any date fixed by the Borrowers for prepayment,
provided, that any such default shall be curable within two Business Days if the
failure to make such payment when due was caused by a financial institution's
error in effecting an automatic debit transaction against an account containing
sufficient funds; or
(c) Default shall be made in the payment of the principal of
or interest on any Indebtedness (other than the Notes) of any Borrower in excess
of $250,000 and such default shall continue beyond the period of grace, if any,
allowed with respect thereto; or
(d) [Reserved]; or
(e) Default shall occur in the observance or performance of
any covenant or agreement contained in Sections 5.11 through 5.20 hereof which
is not remedied within 30 days; or
(f) Default shall occur in the observance or performance of
any other provision of this Agreement which is not remedied within 30 days after
the earlier of (i) the date on which either any Borrower first obtains knowledge
of such default, and (ii) the date on which written notice thereof is given to
the Borrowers by the holder of any Note; or
(g) Any representation or warranty made by the Borrowers
herein, or made by any Borrower in any statement or certificate furnished by
such Borrower in connection with the consummation of the issuance and delivery
of the Notes or furnished by such Borrower pursuant hereto, is untrue in any
material respect as of the date of the issuance or making thereof
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and would have a Material Adverse Effect, subject to the limitations on survival
of Section 12.5; or
(h) Final judgments for the payment of money in uninsured
amounts aggregating in excess of $100,000, are outstanding against any Borrower
or against any property or assets of such Borrower and any one of such judgments
has remained unpaid, unvacated, unbonded or unstayed by appeal or otherwise for
a period of 30 days from the date of its entry; or
(i) Any Borrower becomes insolvent or bankrupt, is generally
not paying its debts as they become due or makes an assignment for the benefit
of creditors, or any Borrower applies for or consents to the appointment of a
custodian, trustee, liquidator, or receiver or for the major part of its
property; or
(j) A custodian, trustee, liquidator, or receiver is appointed
for any Borrower or for a substantial part of its property (as defined by
Section 5.16(d)) and is not discharged within 60 days after such appointment; or
(k) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar law
or laws for the relief of debtors, are instituted by or against any Borrower,
and are consented to or are not dismissed within 60 days after such institution;
or
(l) ▇▇▇▇ ▇▇▇▇▇▇▇▇ (President and Chief Executive Officer)
shall resign or be terminated, other than for cause and other than as a result
of death or disability, from his current offices and capacities with the
Company, and a successor acceptable to Purchaser shall not have been elected
within 90 days after such resignation or termination; provided, that if no such
successor 15 elected, an Event of Default shall be deemed to have occurred and
have been continuing from and after the date of such resignation or termination.
9.2 Remedies Upon Default.
(a) If an Event of Default shall occur, and for so long as
such Event of Default continues, the interest rate on the Notes shall increase
by 7% per annum, that is, to 19.00% per annum, until such Event of Default is
cured or waived.
(b) Purchaser shall be entitled to appoint an additional
representative to attend, at the Company's expense, all meetings of the
Company's Board of Directors and all committees of the Company's Board of
Directors in a nonvoting observer capacity and, in this respect, shall provide
such representative copies of all notices and meeting agenda in advance of such
meetings and shall permit such representative to review all documents and other
materials
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provided to directors at such meetings. The Company shall also provide
Purchaser, in advance, with copies of all actions proposed to be taken by the
Board of Directors in lieu of meeting. Purchaser shall execute a confidentiality
and nondisclosure agreement with respect to any information obtained by or
provided to Purchaser's representative.
(c) When any Event of Default has occurred, or if the holder
of any Note or of any other evidence of indebtedness of the Company gives any
notice or takes any other action with respect to a reasonably claimed default,
the Company agrees to give notice within three Business Days of such event to
all holders of the Notes then outstanding.
9.3 Acceleration of Maturities. When any Event of Default described
in paragraph (a), (b) or (c) of Section 9.1 has occurred and is continuing, any
holder of any Note may, and when any Event of Default described in paragraphs
(d) through (i), inclusive, and (1) of Section 9.1 has occurred and is
continuing, the holder or holders of 50% or more of the principal amount of
Notes at the time outstanding may, by notice to the Borrowers, declare the
entire principal and all interest accrued on all Notes to be, and all Notes
shall thereupon become, forthwith due and payable, without any presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived. When any Event of Default described in paragraph (j) or (k) of Section
9.1 has occurred, then all outstanding Notes shall immediately become due and
payable without presentment, demand or notice of any kind, all of which are
hereby expressly waived. Upon the Notes becoming due and payable as a result of
any Event of Default as aforesaid, the Borrowers will forthwith pay to the
holders of the Notes the entire principal and interest accrued on the Notes. No
course of dealing on the part of any Note holder nor any delay or failure on the
part of any Note holder to exercise any right shall operate as a waiver of such
right or otherwise prejudice such holder's rights, powers and remedies. Each
Borrower further agrees, to the fullest extent permitted by law, to pay to the
holder or holders of the Notes all costs and expenses, including reasonable
attorneys' fees, incurred by them in the collection of any Notes upon any Event
of Default hereunder or thereon.
9.4 Joint and Several Obligations. The obligations of the Borrowers
under this Agreement, the Notes, and the other Operative Documents, are joint
and several. Each of the Borrowers shall be fully responsible for payment and
performance of such obligations.
10. Amendments, Waivers and Consents.
10.1 Consent Required. Any term, covenant, agreement or condition of
this Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the holders of at least 50% in aggregate principal amount of
outstanding Notes; provided that without the written consent of the holders of
all of the Notes then outstanding, no such waiver, modification, alteration or
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amendment shall be effective (i) which will change the time of payment of the
principal of or the interest on any Note or reduce the principal amount thereof
or change the rate of interest thereon, (ii) which will change any of the
provisions with respect to optional prepayments, or (iii) which will change the
percentage of holders of the Notes required to consent to any such amendment,
modification or waiver of any of the provisions of Section 9 or Section 10.
10.2 Solicitation of Note Holders. No Borrower shall, directly or
indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any holder of the
Notes as consideration for or as an inducement to the entering into by any
holder of the Notes of any waiver or amendment of any of the terms and
provisions of this Agreement, unless such remuneration is concurrently offered,
on the same terms, ratably to the holders of all of the Notes then outstanding.
10.3 Effect of Amendment or Waiver. Any such amendment or waiver
shall apply equally to all of the holders of the Notes and shall be binding upon
them, upon each future holder of any Note, and upon the Borrowers, whether or
not such Note shall have been marked to indicate such amendment or waiver. No
such amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
11. Interpretation of Agreement; Definitions.
11.1 Definitions. As used herein,
"Affiliate" means any person (i) which directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under common control
with, the Company, (ii) which beneficially owns or holds 10 % or more of any
class of the Voting Stock of the Company, or (iii) 10 % or more of the Voting
Stock (or in the case of a person which is not a corporation, 10% or more of the
equity interest) of which is beneficially owned or held by the Company or a
Subsidiary.
"Business Day" means any day other than a Saturday, Sunday, or other day
on which banks in Tennessee or California are authorized to close.
"Change in Control" means (i) when any person or entity, including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, other than the Company or a wholly-owned subsidiary thereof or any
employee benefit plan of the Company or any of its subsidiaries, becomes the
beneficial owner of the Company's securities having 50% or more of the combined
voting power of the then outstanding securities of the Company that may be cast
for the election of directors of the Company (other than as a result of an
issuance of securities initiated by the Company in the ordinary course of
business), or (ii) two-thirds of the Company's Board of Directors is removed or
not re-elected.
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The term "control" (including the terms "controlling," "controlled by" and
"under common control") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
person, whether through the ownership of Voting Stock, by contract, or
otherwise.
"Default" means any event or condition, the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default as defined in Section 9.1.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer any successor sections.
"Exercise Price" means the Exercise Price per share of Common Stock
issuable upon exercise of the Warrants, as defined by the Initial Warrant and
the Contingent Warrants, as applicable.
"Fair Market Value" per share of common stock means (i) in the case of a
security listed or admitted to trading on any national securities exchange, the
last reported sale price, regular way (as determined in accordance with the
practices of such exchange), on each day, or if no sale takes place on any day,
the last reported sale price, regular way) as determined in accordance with the
practices of such exchange) on the immediately preceding trading day (and in the
case of a security traded on more than one national securities exchange, at such
price upon the exchange on which the volume of trading during the last calendar
year was the greatest), (ii) in the case of a security not then listed or
admitted to trading on any national securities exchange, the last reported sale
price on such day, or if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reputable quotation
service designated by the Company, and (iii) in the case of a security not then
listed or admitted to trading on any securities exchange and as to which no such
reported sale price or bid and asked prices are available, the average of the
reported high bid and low asked prices on such day, as reported by a reputable
quotation service, or The Wall Street Journal, or if there are no bids and asked
prices on such day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported.
"Guaranties" by any person means all obligations (other than endorsements
in the ordinary course of business of negotiable instruments for deposit or
collection) of such person guaranteeing, or in effect guaranteeing, any
Indebtedness, dividend or other obligation of any other person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (A) for the purchase or payment of such
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Indebtedness or obligation, (B)to maintain working capital or other balance
sheet condition or (C) otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation, or (iii) to lease
property or to purchase securities or other property or services primarily for
the purpose of assuring the owner of such Indebtedness or obligation of the
ability of the primary obligor to make payment of the Indebtedness or
obligation, or (iv) otherwise to assure the owner of the Indebtedness or
obligation of the primary obligor against loss in respect thereof. For the
purposes of all computations made under this Agreement, a Guaranty in respect of
any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to
the principal amount of such Indebtedness for borrowed money which has been
guaranteed, and a Guaranty in respect of any other obligation or liability or
any dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend.
"Hazardous Substance" means any hazardous or toxic material, substance or
waste, pollutant or contaminant which is regulated under any statute, law,
ordinance, rule or regulation of any local, state, regional or Federal authority
having jurisdiction over the property of the Company and its Subsidiaries or its
use, including but not limited to any material, substance or waste which is: (i)
defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. SS 1317.1) as amended; (ii) regulated as a
hazardous waste under Section 1004 or Section 3001 of the Federal Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act (42
U.S.C. SS 6901 et seq.) as amended; (iii) defined as a hazardous substance under
Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. SS 9601 et seq.) as amended; or (iv) defined or
regulated as a hazardous substance or hazardous waste under any rules or
regulations promulgated under any of the foregoing statutes.
"Indebtedness" of any person means and includes all obligations of such
person which in accordance with GAAP shall be classified upon a balance sheet of
such person as liabilities of such person, and in any event shall include all
(i) obligations of such person for borrowed money or which have been incurred in
connection with the acquisition of property or assets, (ii) obligations secured
by any lien or other charge upon property or assets owned by such person, even
though such person has not assumed or become liable for the payment of such
obligations, (iii) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the case of default are limited to
repossession or sale or property, (iv) capitalized rentals, and (v) Guaranties
of obligations of others of the character referred to in this definition.
"Investments" means all investments, in cash or by delivery of property
made, directly or indirectly in any person, whether by acquisition of shares of
capital stock, indebtedness or other obligations or securities or by loan,
advance, capital contribution or otherwise; provided, however
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that "Investments" shall not mean or include routine investments in property to
be used or consumed in the ordinary course of business.
"Material Adverse Event" means any event or circumstance, or set of events
or circumstances, individually or collectively, that reasonably could be
expected to result in any (i) material adverse effect upon the validity or
enforceability of any of the Operative Documents, or (ii) material adverse
effect on the financial condition or results of operations of the Company and
its Subsidiaries, taken as a whole (either a "Material Adverse Effect"), or
(iii) material default or potential material default under any of the Operative
Documents.
"Person" means an individual, partnership, corporation, limited liability
company, joint venture, sole proprietorship, trust or any other unincorporated
organization or business association, and a government or government agency or
political subdivision thereof.
"Plan" means a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Registration Rights Agreement" means the Registration Rights Agreement
between the Company and the Purchaser of even date herewith.
"Security" has the same meaning as in Section 2(1) of the Securities Act
of 1933, as amended.
The term "subsidiary" means, as to any particular parent corporation, any
corporation of which more than 50% (by number of votes) of the Voting Stock
shall be owned by such parent corporation and/or one or more corporations which
are themselves subsidiaries of such parent corporation. The term "Subsidiary"
shall mean a subsidiary of the Company.
"Voting Stock" means securities of any class or classes the holders of
which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or persons performing similar functions).
"Warrants" means the Initial Warrant and the Contingent Warrants.
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) shall be owned by the Company
and/or one or more of its Subsidiaries.
11.2 Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other
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accounting computation is required to be made for the purposes of this
Agreement, the same shall be done in accordance with GAAP, to the extent
applicable, except where such principles are inconsistent with the requirements
of this Agreement.
11.3 Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any person, or which such person is prohibited
from taking such provision shall be applicable whether the action in question is
taken directly or indirectly by such person.
12. Miscellaneous.
12.1 Expenses, Stamp Tax Indemnity. Whether or not the transactions
herein contemplated shall be consummated, the Borrowers agree to pay to
Purchaser (i) Purchaser's out-of-pocket expenses in connection with the entering
into of this Agreement and the consummation of the transactions contemplated
hereby, including but not limited to the reasonable fees, expenses and
disbursements of Purchaser's counsel, and (ii) so long as Purchaser holds any of
the Notes, all such expenses relating to any amendment, waiver or consent
pursuant to the provisions hereof (whether or not the same are actually executed
and delivered), including, without limitation, any amendments, waivers or
consents resulting from any work-out, restructuring or similar proceedings
relating to the performance by any Borrower of its obligations under this
Agreement and the Notes. The Borrowers also agree to pay and hold Purchaser
harmless against any and all liability with respect to stamp and other taxes, if
any, which may be payable in connection with the execution and delivery of this
Agreement or the Notes, whether or not any Notes are then outstanding. The
Borrowers agree to protect and indemnify Purchaser against any liability for any
and all brokerage fees and commissions payable or claimed to be payable to any
person as a result of any actions of the Borrowers or their agents in connection
with the transactions contemplated by this Agreement.
12.2 Powers and Rights Not Waived; Remedies Cumulative. No delay or
failure on the part of the holder of any Note in the exercise of any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof; or the
exercise of any other power or right. The rights and remedies of the holder of
any Note are cumulative to and are not exclusive of any rights or remedies any
such holder would otherwise have, and no waiver or consent, given or extended
hereunder, shall extend to or affect any obligation or right not expressly
waived or consented to.
12.3 Notices. All communications provided for hereunder shall be in
writing and shall be delivered personally, or mailed by registered mail, or by
prepaid overnight air courier, or by facsimile communication, in each case
addressed:
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If to Purchaser: Tandem Capital, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: C. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: 404-816-6854
If to Borrowers: Bikers Dream, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇, President
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: Day ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
or such other address as Purchaser or the subsequent holder of any Note
initially issued to Purchaser may designate to the Company in writing, or such
other address as the Company may in writing designate to Purchaser or to a
subsequent holder of the Note initially issued to Purchaser; provided, however,
that a notice sent by overnight air courier shall only be effective if delivered
at a street address designated for such purpose by such person and a notice sent
by facsimile communication shall only be effective if made by confirmed
transmission at a telephone number designated for such purpose by such person
or, in either case, as Purchaser or a subsequent holder of any Notes initially
issued to Purchaser may designate to the Company in writing or at a telephone
number herein set forth.
12.4 Assignments. This Agreement, the Notes and the other Operative
Documents may be endorsed, assigned and/or transferred in whole or in part by
Purchaser, and any such holder and/or assignee of the same shall succeed to and
be possessed of the rights and powers of Purchaser under all of the same to the
extent transferred and assigned; provided, however, that Purchaser shall not
make any such transfer to a competitor of the Company without the prior written
consent of the Company. No Borrower shall assign any of its rights or delegate
any of its duties under this Agreement or any of the other Operative Documents
by operation of
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law or otherwise without the prior express written consent of Purchaser, which
may be withheld in Purchaser's sole and unfettered discretion, and if the
Company obtains such consent, this Agreement and such other Operative Documents
shall be binding upon such assignee.
12.5 Survival of Covenants and Representations. All representations
and warranties made by the Borrowers or the Purchaser herein and in any
instruments or certificates delivered pursuant hereto shall survive for a period
of eighteen months following the respective Closing Date, except the
representations and warranties made in Sections 2.1, 2.2, 2.3, and 2.4 by the
Borrowers, and in Sections 3.1, 3.2, 3.3, and 3.4 by Purchaser, which shall
survive until payment in full of the principal amount of, all accrued but unpaid
interest under, and all expenses and other costs required to be paid by the
Borrowers under, the Notes. All covenants made by the Borrowers and the
Purchaser herein and in any instruments or certificates delivered pursuant
hereto shall survive the closing and the delivery of this Agreement and the
Notes, until the termination of this Agreement, which shall terminate and be of
no further force or effect upon the payment in full of the principal amount of,
all accrued but unpaid interest under, and all expenses and other costs required
to be paid by the Borrowers under, the Notes.
12.6 Severability. Should any part of this Agreement for any reason
be declared invalid or unenforceable, such decision shall not affect the
validity of any remaining portion, which remaining portion shall remain in force
and effect as if this Agreement had been executed with the invalid or
unenforceable portion thereof eliminated and it is hereby declared the intention
of the parties hereto that they would have executed the remaining portion of
this Agreement without including therein any such part, parts or portion which
may for any reason, be hereafter declared invalid or unenforceable.
12.7 Governing Law; Jurisdiction and Venue. This Agreement and the
Notes issued and sold hereunder shall be governed by and construed in accordance
with California law, without regard to its conflicts of law rules. The Borrowers
hereby consent to jurisdiction, service of process, and venue in the federal and
state courts having jurisdiction in the State of Tennessee or in the State of
California, for the purpose of any action arising out of any obligations under
this Agreement, and expressly waive jury trial and any and all objections as to
jurisdiction, service of process, and venue in such courts.
12.8 Captions; Counterparts. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof. This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
12.9 Confidentiality. Each party hereto agrees that, except with the
prior written permission of the other party hereto, it shall at all times keep
confidential and not divulge, furnish
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or make accessible to anyone any confidential information, knowledge or data
concerning or relating to the business or financial affairs of the other party
to which such party has been or shall become privy by reason of this Agreement,
discussions or negotiations relating to this Agreement, the performance of its
obligations hereunder or the ownership of the Note purchased hereunder, except
as such disclosure may be required by law, rule, or regulation, or by the rules
of any securities exchange or NASDAQ which may be applicable to the Company.
12.10 Publicity. The Company and Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby. No party shall issue any press
release or otherwise make any public statement without the prior written consent
of the other, which consent shall not be unreasonably withheld or delayed,
except as such disclosure may be required by law.
[rest of page intentionally left blank]
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WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be
executed and delivered by their duly authorized officers as of the date first
written above.
BIKERS DREAM, INC. ULTRA ACQUISITION CORPORATION
By: /s/ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇. ▇▇▇▇▇▇▇▇
--------------------------------- -------------------------------------
Title: President/CEO Title: President
SIRROM CAPITAL CORPORATION
d/b/a/ TANDEM CAPITAL
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Title: Vice President
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BIKERS DREAM, INC.
SCHEDULES
2.1(b): Ultra Acquisition Corp., a Nevada corporation
Bikers Dream International, Inc., a California corporation
Bikers Dream Eagle Enterprises, a California corporation
Bikers Dream Management Services, a California corporation
Bikers Dream Distribution, Inc., a California corporation
Each of the subsidiaries set forth above are wholly owned by
Bikers Dream, Inc.
In addition, the Company owns Ultra Bikers, LLC, a California
limited liability company for which dissolution proceedings have
begun.
2.2(a): None.
2.2(b): See attached.
2.3: None.
2.6: ▇▇▇▇▇▇ v. Bikers Dream, Inc.
▇▇▇▇ Acres v. Bikers Dream, Inc.
The Company entered into a settlement agreement with ▇▇▇▇ ▇▇▇▇▇▇
in July 1997 pursuant to which the Company was to register and
issue a number of shares of common stock. Insofar as the
registration statement pertaining to these shares, while filed,
has not yet been declared effective, ▇▇. ▇▇▇▇▇▇' counsel has
expressed dissatisfaction with the Company's performance under
the settlement agreement and has threatened to take legal action.
2.9: Since December 31, 1998, the Company has issued 275,262 shares of
common stock and 155 shares of Series C Preferred Stock.
On February 5, 1998, the Company effected a one for five reverse
split of its common stock.
The Company and Co-Maker have entered into flooring agreements
with CANA Capital.
2.10: None.
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2.13: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the President's wife, is employed by the Company,
pursuant to an employment agreement, at an annual salary of
$110,000.
2.14: Landlord consent required for Riverside properties.
2.15: None.
2.24: ▇▇▇▇ ▇▇▇▇▇▇ (registration statement on Form S-3 filed).
▇▇▇▇ Acres Investments, Inc.
All holders of Series B preferred. All holders of Series C
preferred.
Series C Warrants.
Series D Warrants.
Series E Warrants.
Series F Warrants.
Holders of certain options listed on Schedule 2.2(b), other than,
generally, options granted pursuant to stock option plans.
2.27: ▇▇▇▇ ▇▇▇▇▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇.
1995 Incentive Stock Option Plan.
1995 Non-Qualified Stock Option Plan.
1995 Non-Qualified Directors' Stock Option Plan.
2.29: ▇▇▇▇▇▇ ▇▇▇▇ receives 2%.
5.14: None.
5.17: None.
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Schedule 2.2(b)
The Company has 155 shares of Series C Preferred Stock outstanding, convertible
as of June 9, 1998 into 1,291,667 shares of common stock.
The Company has 943,463 shares of Series B Preferred stock outstanding,
convertible as of June 9, 1998 into 943,463 shares of common stock.
The Company has three shares of Series A Preferred Stock outstanding,
convertible as of June 9, 1998 into 77,000 shares of common stock.
The Company has options outstanding to purchase 877,387 shares of common stock
(see attached schedule of options).
The Company has warrants outstanding to purchase 877,749 shares of common stock
(see attached schedule of warrants).
3