Exhibit 10.27
EXECUTION COPY
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SUBORDINATED CONVERTIBLE NOTE PURCHASE AGREEMENT
Among
THE MURRAYHILL COMPANY
as Borrower
AND
TA SUBORDINATED DEBT FUND, L.P.
AND
TA INVESTORS II, L.P.
as Noteholders
Dated as of May 24, 2004
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THE MURRAYHILL COMPANY
Subordinated Convertible Subordinated Note Purchase Agreement
Dated as of May 24, 2004
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS.......................................................................................1
1.1. Definitions.......................................................................................1
1.2. Accounting Terms..................................................................................7
ARTICLE II - AUTHORIZATION, PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS.......................................8
2.1. The Securities....................................................................................8
2.2. Purchase of the Convertible Subordinated Notes; Conversion into Subordinated Notes and Warrants...8
2.3. Use of Proceeds...................................................................................9
2.4. Payments and Endorsements.........................................................................9
2.5. Redemptions and Mandatory Repurchase.............................................................10
2.6. Default Rate of Interest.........................................................................11
2.7. Maximum Legal Rate of Interest...................................................................12
2.8. Payment on Non-Business Days.....................................................................12
2.9. Transfer and Exchange of Notes...................................................................12
2.10. Replacement of Notes.............................................................................12
2.11. Other Notices....................................................................................13
2.12. Performance of Obligations.......................................................................13
2.13. Issue Price; Original Issue Discount.............................................................13
2.14. Ranking..........................................................................................13
ARTICLE III - CONDITIONS TO NOTEHOLDERS' OBLIGATIONS.........................................................14
3.1. Capitalization...................................................................................14
3.2. Prior Debt.......................................................................................14
3.3. Related Transactions.............................................................................14
3.4. Fees.............................................................................................14
3.5. Delivery of Documents............................................................................14
3.6. Representations and Warranties...................................................................15
3.7. Use of Proceeds..................................................................................15
3.8. Compliance with this Agreement...................................................................15
3.9. Consummation of the Transactions.................................................................15
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE NOTEHOLDERS...............................................15
4.1. Authorization; Enforceability....................................................................15
4.2. Own Account......................................................................................16
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4.3. Investment Intent................................................................................16
4.4. Securities Laws..................................................................................16
4.5. No Broker........................................................................................16
4.6. Restrictive Legend...............................................................................16
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BORROWER.......................................................17
5.1. Organization.....................................................................................17
5.2. Authorization; No Conflict.......................................................................17
5.3. Validity; Binding Nature.........................................................................17
5.4. Financial Condition..............................................................................17
5.5. No Material Adverse Change.......................................................................18
5.6. Litigation.......................................................................................18
5.7. Ownership of Properties; Liens...................................................................18
5.8. Capitalization...................................................................................18
5.9. Pension Plans....................................................................................18
5.10. Investment Company Act...........................................................................19
5.11. Public Utility Holding Company Act...............................................................19
5.12. Margin Stock.....................................................................................19
5.13. Taxes............................................................................................19
5.14. Solvency.........................................................................................19
5.15. Environmental Matters............................................................................20
5.16. Insurance........................................................................................20
5.17. Information......................................................................................20
5.18. Intellectual Property............................................................................20
5.19. Restrictive Provisions...........................................................................21
5.20. Labor Matters....................................................................................21
5.21. No Default.......................................................................................21
5.22. Related Agreements...............................................................................21
ARTICLE VI - AFFIRMATIVE COVENANTS OF BORROWER...............................................................22
6.1. Financial and Business Information...............................................................22
6.2. Notice of Default; Litigation; ERISA Matters.....................................................23
6.3. Financial Records; Inspections; Accountants......................................................24
6.4. Maintenance of Property; Insurance...............................................................24
6.5. Compliance with Laws.............................................................................25
6.6. Existence, Rights and Properties.................................................................26
6.7. Employee Benefit Plans...........................................................................26
6.8. Environmental Matters............................................................................26
6.9. Litigation.......................................................................................26
6.10. Taxes............................................................................................26
6.11. Reserved.........................................................................................27
6.12. Places of Business...............................................................................27
6.13. Verification of Information......................................................................27
6.14. Reserved.........................................................................................27
6.15. Intellectual Property............................................................................27
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ARTICLE VII - NEGATIVE COVENANTS OF BORROWER.................................................................28
7.1. Debt.............................................................................................28
7.2. Liens............................................................................................28
7.3. Restricted Payments..............................................................................29
7.4. Mergers; Consolidations; Asset Sales.............................................................30
7.5. Modification of Organizational Documents.........................................................30
7.6. Use of Proceeds..................................................................................30
7.7. Transactions with Affiliates.....................................................................30
7.8. Inconsistent Agreements..........................................................................30
7.9. Business Activities..............................................................................30
7.10. Investments......................................................................................31
7.11. Restriction of Amendments to Certain Documents...................................................31
7.12. Fiscal Year......................................................................................31
ARTICLE VIII - DEFAULT.......................................................................................31
8.1. Events of Default................................................................................31
8.2. Cure.............................................................................................33
8.3. Rights and Remedies on Default...................................................................34
8.4. Nature of Remedies...............................................................................34
8.5. Set-Off..........................................................................................34
8.6. Distribution of Proceeds.........................................................................35
ARTICLE IX - MISCELLANEOUS...................................................................................35
9.1. No Waiver; Cumulative Remedies...................................................................35
9.2. Amendments, Waivers and Consents.................................................................35
9.3. Addresses for Notices, Etc.......................................................................36
9.4. Costs, Expenses and Taxes........................................................................36
9.5. Assignability; Binding Agreement.................................................................36
9.6. Payments in Respect of Notes.....................................................................37
9.7. Indemnification..................................................................................37
9.8. Survival of Representations and Warranties.......................................................37
9.9. Prior Agreements.................................................................................38
9.10. Severability.....................................................................................38
9.11. Governing Law....................................................................................38
9.12. Dispute Resolution...............................................................................38
9.13. Consent to Jurisdiction..........................................................................39
9.14. Counterparts.....................................................................................39
9.15. Further Assurances...............................................................................39
9.16. Specific Performance.............................................................................39
9.17. Actions by Noteholders...........................................................................39
9.18. Limitation of Liability..........................................................................40
9.19. Confidentiality Agreement........................................................................40
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SCHEDULES, EXHIBITS & ANNEXES
EXHIBITS
Exhibit A Form of Joinder Agreement
Exhibit 2.1 Form of Note
Exhibit 2.2 Allocation of Note Purchase Amount
SCHEDULES
Schedule 3.2 Prior Debt
Schedule 5.4.1 Consolidated Financial Projections
Schedule 5.6 Litigation
Schedule 5.8 Capitalization
Schedule 5.16 Insurance
Schedule 5.20 Labor Matters
Schedule 7.1 Debt
Schedules 7.2 Liens
Schedule 7.10 Investments
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SUBORDINATED CONVERTIBLE NOTE PURCHASE AGREEMENT
This
Subordinated Convertible Note Purchase Agreement is dated as of May
24, 2004 (as amended, restated or otherwise modified and in effect from time to
time, this "AGREEMENT") by and among The Murrayhill Company, a Colorado
corporation ("BORROWER"), TA Subordinated Debt Fund, L.P., a Delaware limited
partnership ("TA DEBT FUND" or a "NOTEHOLDER"), and TA Investors II, L.P., a
Delaware limited partnership (a "NOTEHOLDER" and, together with TA Debt Fund and
their successors and assigns, "NOTEHOLDERS").
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE I - DEFINITIONS
1.1. DEFINITIONS. As used herein, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"ACCOUNT" shall have the meaning as defined in the UCC.
"ACCOUNT DEBTOR" shall mean any Person who is obligated to Borrower or any
Subsidiary with respect to any Account.
"ACQUISITION" shall mean, with respect to any Person any transaction or
series of related transactions for the purpose of or resulting, directly or
indirectly, in (a) the acquisition of all or substantially all of the assets of
such Person, or of all or substantially all of any business or division of such
Person, (b) the acquisition of in excess of 50% of the capital stock,
partnership interests, membership interests or equity of such Person, or
otherwise causing such Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than a Person
that is already a Subsidiary).
"AFFILIATE" shall mean any Person that would be considered to be an
affiliate of Borrower under Rule 144 of the Securities Act, as in effect on the
date hereof, if Borrower were issuing securities; PROVIDED that, with respect to
Borrower, the term "Affiliate" shall not include any Noteholder.
"AGREEMENT" shall mean this Agreement as amended, restated or otherwise
modified and in effect from time to time.
"APPLICABLE LAW" shall mean all applicable laws, statutes and rules and
regulations thereunder and interpretations thereof by any court of competent
jurisdiction or by any governmental or other regulatory body or official charged
with the administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time heretofore or
hereafter made upon or otherwise
issued to any Noteholder by any central bank or other fiscal, monetary or other
authority, whether or not having the force of law, including, without
limitation, any change according to a prescribed schedule of increasing
requirements.
"BORROWER" shall have the meaning set forth in the Preamble.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or public
holiday or the equivalent for banks under the laws of the Commonwealth of
Massachusetts.
"CAPITAL EXPENDITURES" shall mean all expenditures which, in accordance
with GAAP, would be required to be capitalized and shown on the consolidated
balance sheet of Borrower and its Subsidiaries, but excluding expenditures made
in connection with the replacement, substitution or restoration of assets to the
extent financed (a) from insurance proceeds (or other similar recoveries) paid
on account of the loss of or damage to the assets being replaced or restored or
(b) with awards of compensation arising from the taking by eminent domain or
condemnation of the assets being replaced.
"CAPITALIZED LEASE OBLIGATION" shall mean any Debt represented by the
principal portion of obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
"CAPITAL LEASE" shall mean, with respect to any Person, any lease of (or
other agreement conveying the right to use) any real or personal property by
such Person that, in conformity with GAAP, is accounted for as a capital lease
on the balance sheet of such Person.
"CASH EQUIVALENT INVESTMENT" shall mean, at any time, (a) any evidence of
Debt, maturing not more than one year after such time, issued or guaranteed by
the United States Government or any agency thereof, (b) commercial paper, or
corporate demand notes, in each case rated at least A-l by Standard & Poor's
Ratings Group or P-l by ▇▇▇▇▇'▇ Investors Service, Inc., (c) any certificate of
deposit (or time deposit represented by a certificate of deposit) or banker's
acceptance maturing not more than one year after such time, or any overnight
Federal Funds transaction that is issued or sold by any commercial banking
institution that is a member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less than $500,000,000 and (d)
any repurchase agreement entered into with any commercial banking institution of
the nature referred to in clause (c) above which (i) is secured by a fully
perfected security interest in any obligation of the type described in any of
clauses (a) through (c) above and (ii) has a market value at the time such
repurchase agreement is entered into of not less than 100% of the repurchase
obligation of such commercial banking institution thereunder.
"CLOSING" shall have the meaning assigned to that term in Section 2.2.
"CLOSING DATE" shall have the meaning assigned to that term in Section 2.2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
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"COLLATERAL" shall mean all of the property now owned or at any time
hereafter acquired by Borrower or in which Borrower now has or at any time in
the future may acquire any right, title or interest.
"COMMON STOCK" includes (i) the voting common stock of TMHC Holdings, par
value $0.01 per share, as authorized on the date of this Agreement, (ii)
Borrower's voting common stock, par value $0.01 per share, as authorized on the
date of this Agreement, (iii) any other common stock of any class or classes
(however designated) of TMHC Holdings or Borrower, authorized on or after the
date hereof, and (iv) any other securities into which or for which any of the
securities described in (i), (ii) or (iii) above may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
"CONSOLIDATED" OR "CONSOLIDATED" shall mean, with respect to any term
defined herein, that term as applied to the accounts of Borrower and its
Subsidiaries, consolidated in accordance with GAAP.
"CONTINGENT OBLIGATION" shall mean, with respect to any Person, any
agreement, undertaking or arrangement by which such Person guarantees, endorses
or otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to or otherwise to invest in a debtor, or otherwise to assure a creditor
against loss) any indebtedness, obligation or other liability of any other
Person (other than by endorsements of instruments in the course of collection),
or guarantees the payment of dividends or other distributions upon the shares of
any other Person. The amount of any such Person's obligation in respect of any
Contingent Obligation shall (subject to any limitation set forth therein) be
deemed to be the principal amount of the debt, obligation or other liability
supported thereby.
"CONTROLLED GROUP" shall mean all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with
Borrower, are treated as a single employer under Section 414 of the Code or
Section 4001 of ERISA.
"DEBT" of any Person shall mean, without duplication, (a) all indebtedness
of such Person for borrowed money, whether or not evidenced by bonds,
debentures, notes or similar instruments, (b) all obligations of such Person as
lessee under Capital Leases which have been or should be recorded as liabilities
on a balance sheet of such Person in accordance with GAAP, (c) all obligations
of such Person to pay the deferred purchase price of property or services
(excluding trade accounts payable in the ordinary course of business), (d) all
indebtedness secured by a Lien on the property of such Person, whether or not
such indebtedness shall have been assumed by such Person, (e) all obligations,
contingent or otherwise, with respect to the face amount of all letters of
credit (whether or not drawn) and banker's acceptances issued for the account of
such Person, (f) all Hedging Obligations of such Person, (g) all Contingent
Obligations of such Person, (h) all indebtedness of any partnership of which
such Person is a general partner, (i) all obligations of such Person under any
Synthetic Lease transaction, where such obligations are considered borrowed
money indebtedness for tax purposes but the transaction is
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classified as an operating lease in accordance with GAAP. Notwithstanding the
foreoing, Debt shall not include any amounts payable by the Company under
Section 1.11 of the Stock Purchase and Redemption Agreement.
"ENVIRONMENTAL CLAIMS" shall mean all claims, however asserted, by any
governmental, regulatory or judicial authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law, or
for release or injury to the environment or any Person or property.
"ENVIRONMENTAL LAWS" shall mean all applicable present or future federal,
state or local laws, statutes, common law duties, rules, regulations, ordinances
and codes, together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any governmental
authority, in each case relating to any matter arising out of or relating to
health and safety, or pollution or protection of the environment or workplace,
including any of the foregoing relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal, distribution,
discharge, release, control or cleanup of any Hazardous Substance.
"ERISA" shall mean part 6 subtitle B of title I of the Employee Retirement
Income Security Act of 1974, as amended.
"EVENT OF DEFAULT" shall have the meaning assigned to that term in Section
8.1.
"FISCAL QUARTER" shall mean each quarterly accounting period during any
Fiscal Year; PROVIDED that for purposes hereof, all references to the Fiscal
Quarter ending March 31, June 30, September 30 or December 31 shall mean the
first, second, third or fourth Fiscal Quarter of the applicable Fiscal Year,
respectively, irrespective of the actual date on which such Fiscal Quarter may
end.
"FISCAL YEAR" or "FISCAL YEAR" shall mean the fiscal year of Borrower and
its Subsidiaries ending on December 31 of each calendar year.
"GAAP" or "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" shall mean generally
accepted accounting principles of the United States consistently applied with
past financial statements of Borrower adopting the same principles.
"GOVERNMENTAL AUTHORITY" shall have the meaning assigned to that term in
Section 9.18.
"HAZARDOUS SUBSTANCES" shall mean hazardous waste, hazardous substance,
pollutant, contaminant, toxic substance, oil, hazardous material, chemical or
other substance regulated by any Environmental Law.
"HEDGING OBLIGATION" shall mean, with respect to any Person, any liability
of such Person under any interest rate, currency or commodity swap agreement,
cap agreement or collar agreement, and any other agreement or arrangement
designed to protect such Person against fluctuations in interest rates, currency
exchange rates or commodity prices.
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"INTELLECTUAL PROPERTY" shall mean all patent, copyright, trade secret,
trademark, trade name, service ▇▇▇▇, Internet domain name, logo or other ▇▇▇▇ or
logo, or other proprietary rights or valid licenses thereof.
"INVENTORY" shall have the meaning as defined in the UCC.
"INVESTMENT" shall mean (a) the purchase of any debt or equity security of
any Person, (b) the making of any loan or advance to any Person, (c) becoming
obligated with respect to a Contingent Obligation in respect of obligations of
any Person (other than travel and similar advances to employees in the ordinary
course of business) or (d) the making of an Acquisition.
"LIEN" shall mean, with respect to any Person, any interest granted by such
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person which secures payment or performance of any
obligation and shall include any mortgage, lien, encumbrance, charger or other
security interest of any kind, whether arising by contract, as a matter of law,
by judicial process or otherwise.
"MANDATORY REPURCHASE EVENT" shall mean the occurrence of any one of any of
the following events: (a) the shareholders of Borrower immediately after giving
effect to the consummation of the Related Transactions, shall collectively cease
to, directly or indirectly, own and control at least 51% of the outstanding
equity interests of Borrower; (b) a majority of Borrower's board of directors
(or similar governing body) shall cease to consist of the directors (or similar
parties) of Borrower on the Closing Date (after giving effect to the Related
Transactions) and other directors (or similar parties) whose nomination for
election to Borrower's board of directors (or similar governing body) is
recommended by at least a majority of the foregoing described directors (or
similar parties), (c) there shall be consummated (i) any consolidation or merger
of Borrower or its Subsidiaries where the equity interest holders of Borrower or
its Subsidiaries, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own, directly or
indirectly, shares or other equity interests representing in the aggregate fifty
percent (50%) or more of the voting power of the corporation or other entity
issuing cash or securities in the consolidation or merger (or of its ultimate
parent corporation or other entity, if any), (ii) any sale of all or
substantially all of the assets of Borrower, and (iii) any plan or proposal for
the liquidation or dissolution of Borrower or (d) Borrower's initial public
offering of its equity interests.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
assets, liabilities, condition (financial or other), business, or results of
operations of Borrower and its Subsidiaries, taken as a whole.
"NOTES" shall mean, collectively, the Convertible Subordinated Notes and
the Subordinated Notes.
"OBLIGATIONS" shall mean all now existing or hereafter arising debts,
obligations, covenants, and duties of payment or performance of every kind,
matured or unmatured,
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direct or contingent, owing, arising, due, or payable to the Noteholders, by or
from Borrower, whether existing on the date of this Agreement or arising
thereafter, whether arising out of this Agreement or any other Subordinated
Notes Documents or otherwise, including, without limitation, all obligations to
repay principal of and interest on all the Loans, and to pay interest, fees,
costs, charges, expenses, professional fees, and all sums chargeable to
Borrower, under the Subordinated Notes Documents, whether or not evidenced by
any note or other instrument.
"PENSION PLAN" shall mean a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
Multiemployer Pension Plan), and to which Borrower or any member of the
Controlled Group may have any liability, including any liability by reason of
having been a substantial employer within the meaning of Section 4063 of ERISA
at any time during the five years prior to the date hereof, or by reason of
being deemed to be a contributing sponsor under Section 4069 of ERISA.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, trust, unincorporated association, business, or other legal
entity, and any government or any governmental agency or political subdivision
thereof.
"PREFERRED STOCK" shall mean the preferred stock received by TA Associates
and its Affiliates in connection with the Stock Purchase and Redemption
Agreement.
"PRIOR DEBT" shall mean the Debt listed on Schedule 3.2.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain Registration Rights
Agreement entered into in connection with the Stock Purchase and Redemption
Agreement.
"RELATED AGREEMENTS" shall mean the Stock Purchase and Redemption
Agreement, the Shareholders Agreement and the Registration Rights Agreement.
"RELATED TRANSACTIONS" shall mean the transactions contemplated by the
Related Agreements.
"SECURITIES" shall mean, collectively, the Convertible Subordinated Notes,
the Subordinated Notes, the Warrants and the Warrant Shares.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar successor federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.
"SHAREHOLDERS AGREEMENT" shall mean that certain Shareholders Agreement
entered into in connection with the Stock Purchase and Redemption Agreement.
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"STOCK PURCHASE AND REDEMPTION AGREEMENT" shall mean that certain Stock
Purchase Agreement of even date herewith by and among Borrower and the
Stockholders and Investors named therein.
"SUBORDINATED DEBT" means debt or other obligations of Borrower that is
subordinated to the Obligations on terms and conditions that are satisfactory to
the Noteholders in their sole discretion.
"SUBORDINATED NOTES DOCUMENTS" shall mean this Agreement, the Notes and the
Warrants.
"SUBSIDIARY" shall mean, with respect to any Person, any other Person which
such first Person shall, directly or indirectly, have the power to vote or
direct the voting of sufficient securities to elect a majority of directors (or
persons performing similar functions) or with respect to which such first Person
acts as a general partner or managing member or otherwise controls the
day-to-day operations of such other Person. Any reference herein to a Subsidiary
of Borrower shall include any Subsidiary of Borrower as of the Closing Date or
at any time thereafter.
"SYNTHETIC LEASES" shall mean leases, under which Borrower or any of its
Subsidiaries is the lessee or obligor, treated (i) as an operating lease on the
balance sheet of the lessee or obligor in accordance with GAAP and (ii) as a
loan or financing for U.S. income tax purposes.
"TA ASSOCIATES" shall mean TA Debt Fund and TA Investors II, L.P..
"TMHC HOLDINGS" shall mean TMHC Holdings, Inc., a Delaware corporation and
sole stockholder of Borrower.
"UCC" shall mean the Uniform Commercial Code as in effect on the date
hereof and from time to time in the State of
New York; PROVIDED that if by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the security interests in any Collateral or the
availability of any remedy hereunder is governed by the Uniform Commercial Code
as in effect on or after the date hereof in any other jurisdiction, "UCC" means
the Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such perfection or effect of perfection or
non-perfection or availability of such remedy.
"WHOLLY-OWNED SUBSIDIARY" shall mean, as to any Person, another Person all
of the equity interests of which (except directors' qualifying shares) are
directly or indirectly owned by such Person and/or another Wholly-Owned
Subsidiary of such Person.
1.2. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP, and all financial data
submitted pursuant to this Agreement and all financial tests to be calculated in
accordance with this Agreement shall be prepared and calculated in accordance
with GAAP. All financial tests relating to Borrower or any of its Subsidiaries
shall be calculated with respect to Borrower and its Subsidiaries on a
consolidated basis.
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ARTICLE II - AUTHORIZATION, PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS
2.1. THE SECURITIES. Borrower has authorized the issuance of senior
subordinated convertible notes due May 24, 2010 in the aggregate original
principal amount of $10,000,000 (individually, a "CONVERTIBLE SUBORDINATED
NOTE", collectively, and together with any notes delivered in exchange or
replacement therefor, the "CONVERTIBLE SUBORDINATED NOTES"). The Convertible
Subordinated Notes shall be in the form set forth as Exhibit 2.1 attached hereto
and shall (a) be payable on May 24, 2010 and (b) bear interest compounded
quarterly (based on a 360-day year of twelve 30-day months) on the unpaid
principal amount thereof until due at the rate of 12% per annum, payable in cash
quarterly in arrears on May 31, August 31, November 30 and February 28 in each
year, commencing August 31, 2004, and at maturity or prior prepayment of the
Convertible Subordinated Notes in full. The Convertible Subordinated Notes shall
be convertible at any time, in the sole discretion of any Noteholder thereof,
upon such Noteholder's delivery of notice to Borrower of its intent to convert,
into (i) senior subordinated notes due May 24, 2010 in the aggregate principal
amount of $9,990,000 plus any interest owed in arrears on the Convertible
Subordinated Notes on the date of conversion, in the form set forth as Exhibit
2.1(i) attached hereto (referred to herein individually as a "SUBORDINATED NOTE"
and collectively, together with any notes delivered in exchange or replacement
thereof, as the "SUBORDINATED NOTES"), and (ii) common stock purchase warrants
of Borrower for the purchase of an aggregate of 289,807 of the fully diluted
common equity shares (subject to adjustment in the case of stock splits, stock
dividends, combinations, recapitalizations and the like) of TMHC Holdings Common
Stock (the "WARRANT SHARES") exercisable at a price per share of $.01 (subject
to adjustment), in the form set forth as Exhibit 2.1(ii) attached hereto
(referred to herein individually as a "WARRANT" and collectively, together any
warrants delivered in exchange or replacement therefore, as the "WARRANTS"). The
Subordinated Notes shall (a) be payable on May 24, 2010, and (b) bear interest
compounded quarterly (based on a 360-day year of twelve 30-day months) on the
unpaid principal amount thereof plus any interest owed in arrears on the
Convertible Subordinated Notes as of the Conversion Date (as defined in Section
2.2 of this Agreement) until due at the rate of 12% per annum, payable in cash
quarterly in arrears on May 31, August 31, November 30 and February 28 in each
year, commencing the Conversion Date, and at maturity or prior payments of the
Subordinated Notes in full. Borrower has authorized the issuance to the
Noteholders of the Convertible Subordinated Notes, and upon conversion thereof,
the Subordinated Notes and the Warrants, and, upon exercise of the Warrants, the
issuance and sale of the Warrant Shares.
2.2. PURCHASE OF THE CONVERTIBLE SUBORDINATED NOTES; CONVERSION INTO
SUBORDINATED NOTES AND WARRANTS . Subject to and in reliance upon the
representations and warranties of Borrower contained in this Agreement and upon
the other terms and conditions hereof, each Noteholder severally agrees to
purchase Convertible Subordinated Notes from Borrower in the principal amount
set forth opposite such Noteholder's name on Exhibit 2.2 attached hereto. The
Convertible Subordinated Notes shall be purchased at a closing (the "CLOSING")
to be held at such location as agreed to by Borrower and the Noteholders, at
10:00 a.m. local time on the date on which this
8
Agreement is executed and delivered and the conditions described in Article III
hereof have been satisfied (the "CLOSING DATE"). At the Closing, Borrower will
initially issue one Convertible Subordinated Note to each Noteholder, payable to
such Noteholder or its registered assigns, in the principal amount set forth
opposite such Noteholder's name on Exhibit 2.2, against receipt of immediately
available funds by wire transfer to an account or accounts designated by
Borrower prior to the Closing in the amount set forth next to such Noteholder's
name on Exhibit 2.2 (or in such other manner as is set forth on Exhibit 2.2). On
the date that a Noteholder delivers notice to the Company of its intent to
convert a Convertible Subordinated Note (a "CONVERSION DATE"), such Convertible
Subordinated Note shall be deemed as of such date to be converted into (a) a
Subordinated Note in the principal amount set forth opposite such Noteholder's
name on Exhibit 2.2(a) attached hereto, and (b) a Warrant to purchase the number
of Warrant Shares set forth opposite such Noteholder's name on Exhibit 2.2(b)
attached hereto. On a Conversion Date, Borrower will immediately execute and
deliver the Subordinate Note(s) and the Warrant(s) to the applicable
Noteholder(s), and thereafter any Convertible Subordinated Notes so converted
shall be deemed to be canceled and of no further force or effect.
2.3. USE OF PROCEEDS. Borrower agree to use the full proceeds of the
Convertible Subordinated Notes to consummate the investment and redemption
transactions contemplated in the Stock Purchase and Redemption Agreement.
2.4. PAYMENTS AND ENDORSEMENTS.
(a) Payments of principal, interest and premium, if any, on
the Notes shall be made without set off or counterclaim, directly by wire
transfer to an account designated in writing by each Noteholder, without any
presentment or notation of payment, except that prior to any transfer of any
Note, the holder thereof shall endorse on such Note a record of the date to
which interest has been paid and all payments made on account of principal of
such Note. All payments and prepayments of principal of, and interest on, the
Notes shall be applied (to the extent thereof) to all of the Notes PRO RATA
based on the principal amount outstanding and held by each holder thereof.
(b) Anything herein to the contrary notwithstanding, if any
changes in present or future Applicable Law shall impose on Borrower any
obligation with respect to any amount payable by it hereunder or under any of
the other Related Agreements to withhold or deduct any taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, Borrower will pay to the
Noteholders, on the date on which such amount is due and payable hereunder or
under such other Related Agreements, such additional amount in United States
dollars as shall be necessary to enable the Noteholders to receive the same net
amount which the Noteholders would have received on such due date if no such
obligation had been imposed upon Borrower.
(c) The obligations of Borrower under this Section 2.4 shall
survive the payment in full of all amounts due hereunder or under the Notes.
9
2.5. REDEMPTIONS AND MANDATORY REPURCHASE.
2.5.1. REQUIRED REDEMPTION. On the stated or accelerated maturity
of the Notes, Borrower will pay the principal amount of the Notes then
outstanding together with all accrued and unpaid interest thereon. No redemption
of less than all of the Notes shall affect the obligation of Borrower to make
the redemption required by this sub-Section.
2.5.2. OPTIONAL REDEMPTIONS. In addition to the redemption of the
Notes required under sub-Section 2.5.1, Borrower may, at any time upon the prior
written approval of each of a majority of the members of Borrower's board of
directors and a majority of the independent members of Borrower's board of
directors, voluntarily redeem the Notes, in whole or in part (in integral
multiples of Five Hundred Thousand Dollars ($500,000)), together with all
accrued and unpaid interest on the amount so redeemed through the date of
redemption, at a redemption price equal to:
(a) if such voluntary redemption, including a redemption
pursuant to sub-Section 2.5.4, occurs on or prior to the first anniversary of
this Agreement, one hundred six percent (106%) of the sum of the principal
amount to be redeemed plus any accrued but unpaid interest thereon;
(b) if such voluntary redemption, including a redemption
pursuant to sub-Section 2.5.4, occurs after the first anniversary of this
Agreement but on or prior to the second anniversary of this Agreement, one
hundred five percent (105%) of the sum of the principal amount to be redeemed
plus any accrued but unpaid interest thereon;
(c) if such voluntary redemption, including a redemption
pursuant to sub-Section 2.5.4, occurs after the second anniversary of this
Agreement but on or prior to the third anniversary of this Agreement, one
hundred four percent (104%) of the sum of the principal amount to be redeemed
plus any accrued but unpaid interest thereon;
(d) if such voluntary redemption, including a redemption
pursuant to sub-Section 2.5.4, occurs after the third anniversary of such
Agreement but on or prior to the fourth anniversary of this Agreement, one
hundred three percent (103%) of the sum of the principal amount to be redeemed
plus any accrued but unpaid interest thereon;
(e) if such voluntary redemption, including a redemption
pursuant to sub-Section 2.5.4, occurs after the fourth anniversary of this
Agreement but on or prior to the fifth anniversary of this Agreement, one
hundred two percent (102%) of the sum of the principal amount to be redeemed
plus any accrued but unpaid interest thereon; or
(f) if such voluntary redemption, including a redemption
pursuant to sub-Section 2.5.4, occurs after the fifth anniversary but prior to
the sixth
10
anniversary of this Agreement, one hundred one percent (101%) of the sum of the
principal amount to be redeemed plus any accrued but unpaid interest thereon.
2.5.3. NOTICE OF REDEMPTIONS; PRO RATA REDEMPTIONS. Written notice
of any redemption pursuant to sub-Section 2.5.1 or sub-Section 2.5.2 shall be
given to all holders of the Notes at least thirty (30) Business Days prior to
the date of any such redemption and if any such redemption relates to the
Convertible Subordinated Notes such notice shall also state that the Noteholders
have the right to convert the Convertible Subordinated Notes at any time prior
to such redemption. Each redemption of the Notes pursuant to sub-Sections 2.5.1
and 2.5.2 shall be made so that the Notes then held by each holder shall be
redeemed in a principal amount which shall bear the same ratio to the total
unpaid principal amount being redeemed on all the Notes as the unpaid principal
amount of the Notes then held by such holder bears to the aggregate unpaid
principal amount of the Notes then outstanding.
2.5.4. MANDATORY REPURCHASE OF NOTES. As soon as possible, and in
any event within five (5) Business Days after the occurrence of a Mandatory
Repurchase Event, Borrower shall furnish to each Noteholder written notice
setting forth in reasonable detail the facts and circumstances underlying such
Mandatory Repurchase Event. The occurrence of any such Mandatory Repurchase
Event shall constitute an irrevocable offer by Borrower to purchase all of the
Notes held by such Noteholder at one hundred percent (100%) of the principal
amount thereof, on a date to be specified by Borrower, which date shall be not
less than thirty (30) days nor more than ninety (90) days after the occurrence
of such Mandatory Repurchase Event, together with all accrued and unpaid
interest on the amount so purchased through the date of purchase and together
with any amounts otherwise payable pursuant to sub-Section 2.5.2. Following
receipt of any notice constituting an offer to purchase the Notes hereunder,
each Noteholder shall advise Borrower, by written notice, within ten (10)
Business Days after receipt of such offer, as to whether it desires to sell all
or any of the Notes, as applicable, held by it (in integral multiples of Five
Hundred Thousand Dollars ($500,000)), specifying the principal amount of the
Notes to be sold by it. If a Noteholder accepts such offer but does not specify
an amount it wishes to receive, it will be deemed to have elected to sell all of
the Notes held by it. If a Noteholder fails to respond to such offer by Borrower
within the ten (10) Business Day acceptance period, such offer shall expire in
accordance with its terms.
2.6. DEFAULT RATE OF INTEREST. If an Event of Default has occurred and is
continuing, from and after the date such Event of Default has occurred the
entire outstanding unpaid principal balance of the Notes and any unpaid interest
from time to time in default shall bear interest, payable on demand in cash, at
the rate of sixteen percent (16%) per annum, compounded quarterly, or such lower
rate as then may be the maximum rate permitted by applicable law; PROVIDED,
HOWEVER, that upon the cessation or cure of such Event of Default, if no other
Event of Default is then continuing, the Notes shall again bear interest at the
rate of twelve percent (12%) per annum as set forth in Section 2.1.
11
2.7. MAXIMUM LEGAL RATE OF INTEREST. Nothing in this Agreement or in the
Notes shall require Borrower to pay interest at a rate in excess of the maximum
rate permitted by applicable law.
2.8. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made shall
be due on a day which is not a Business Day, such payment may be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest due.
2.9. TRANSFER AND EXCHANGE OF NOTES. The holder of any Note, as
applicable, may, prior to maturity or prepayment thereof, surrender such Note at
the principal office of Borrower for transfer or exchange. Any holder desiring
to transfer or exchange any Note shall first notify Borrower in writing at least
five (5) days in advance of such transfer or exchange. Within a reasonable time
after such notice to Borrower from a holder of its intention to make such
exchange and without expense (other than transfer taxes, if any) to such holder,
Borrower shall issue in exchange therefor another Note in denominations of One
Hundred Thousand Dollars ($100,000) and multiples thereof, except in the case of
a Note for the balance of the aggregate amount of the Note, or Notes so
transferred which shall be in a minimum denomination of One Hundred Thousand
Dollars ($100,000), all as requested by the holder, for the same aggregate
principal amount, as of the date of such issuance, as the unpaid principal
amount of the Note or Notes so surrendered and having the same maturity and rate
of interest, containing the same provisions and subject to the same terms and
conditions as the Note or Notes so surrendered (provided that no minimum shall
apply to a liquidating distribution of Notes to investors in a Noteholder and
any Notes so distributed may be subsequently transferred by such investor and
its successors in the original denomination thereof without restriction under
this sentence). Each new Note shall be made payable to such Person or Persons,
or assigns, as the holder of such surrendered Note may designate, and such
transfer or exchange shall be made in such a manner that no gain or loss of
principal or interest shall result therefrom. Borrower shall have no obligation
hereunder or under any Note to any person other than the registered holder of
each such Note. Notwithstanding anything to the contrary contained herein, no
Noteholder shall be permitted to transfer any of its Notes unless such
Noteholder's transferee has agreed in writing to be bound by the terms of this
Agreement and the other Subordinated Notes Documents, including the
representations and warranties set forth in Article IV hereof.
2.10. REPLACEMENT OF NOTES. Upon receipt of evidence satisfactory to
Borrower of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to
Borrower, or, in the case of any such mutilation, upon surrender and
cancellation of such Note, Borrower will issue a new Note of like tenor and
amount and dated the date to which interest has been paid, in lieu of such lost,
stolen, destroyed or mutilated Note; PROVIDED, HOWEVER, if any Note of which a
Noteholder, its nominee, or any of its partners is the holder is lost, stolen or
destroyed, the affidavit of an authorized partner or officer of the holder
setting forth the circumstances with respect to such loss, theft or destruction
shall be accepted as satisfactory evidence thereof, and no indemnification bond
or other security shall be
12
required as a condition to the execution and delivery by Borrower of a new Note
in replacement of such lost, stolen or destroyed Note other than the holders
written agreement to indemnify Borrower.
2.11. OTHER NOTICES. So long as any Notes are outstanding, Borrower shall
provide written notice to each Noteholder at least thirty (30) Business Days
prior to the occurrence or closing of a Mandatory Repurchase Event or a public
offering of securities by Borrower setting forth in reasonable detail the facts
and circumstances underlying such Mandatory Repurchase Event or public offering.
2.12. PERFORMANCE OF OBLIGATIONS. Borrower agrees that its obligations
hereunder shall not be discharged until payment and performance, in full, of the
Obligations has occurred, and that its obligations under this Section 2.12 shall
be absolute and unconditional, irrespective of, and unaffected by,
2.12.1. the genuineness, validity, regularity, enforceability or
any future amendment of, or change in, this Agreement, any other Subordinated
Notes Document or any other agreement, document or instrument to which Borrower
is or may become a party;
2.12.2. the absence of any action to enforce this Agreement
(including this Section 2.12) or any other Subordinated Notes Document or the
waiver or consent with respect to any of the provisions thereof;
2.12.3. the existence, value or condition of, or any Noteholder's
failure to perfect its Lien against, any security for the Obligations or any
action, or the absence of any action, by any Noteholder in respect thereof
(including the release of any such security);
2.12.4. the insolvency of any Noteholder; or
2.12.5. any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor.
2.13. ISSUE PRICE; ORIGINAL ISSUE DISCOUNT. Borrower and each Noteholder
recognize and agree that (i) the Convertible Subordinated Notes will not be
issued with original issue discount within the meaning of Section 1273 of the
Code, and (ii) the issue price of any Note issued by the Company, within the
meaning of Section 1273 of the Code, will be determined in accordance with the
rules in Section 1273(b)(3) or 1273(b)(4), as applicable, at the time of the
conversion of the Convertible Subordinated Note in respect of which such Note is
issued. Borrower and each Noteholder agree to comply with all tax, accounting,
regulatory and other reporting requirements in a manner which is consistent with
the foregoing.
2.14. RANKING. The Obligations and the rights and remedies of the
Noteholders under the Subordinated Notes Documents shall be senior in right of
payment to all Subordinated Debt of Borrower and its Subsidiaries.
13
ARTICLE III - CONDITIONS TO NOTEHOLDERS' OBLIGATIONS
The obligation of each Noteholder to purchase its Convertible Subordinated
Notes at the Closing is subject to the following conditions precedent, all or
any of which may be waived by the unanimous written agreement of the
Noteholders:
3.1. CAPITALIZATION. Borrower has received cash equity contributions from
TA Associates and its Affiliates and any other investors party to the Stock
Purchase and Redemption Agreement in an amount not less than $4,000,000.
3.2. PRIOR DEBT. The Prior Debt set forth on Schedule 3.2 hereto has been
(or concurrently with the initial borrowing will be) paid in full.
3.3. RELATED TRANSACTIONS. Borrower has completed (or concurrently with
the purchase of the Convertible Subordinated Notes hereunder will complete) the
Related Transactions in accordance with the terms of the Related Agreements
(without any amendment thereto or waiver unless consented to by the
Noteholders).
3.4. FEES. Borrower shall have paid all fees, costs and expenses due and
payable on the Closing Date.
3.5. DELIVERY OF DOCUMENTS. Borrower shall have delivered the following
documents in form and substance satisfactory to the Noteholders (and, as
applicable, duly executed and dated the Closing Date or an earlier date
satisfactory to the Noteholders):
3.5.1. AGREEMENT. This Agreement.
3.5.2. NOTES. Convertible Subordinated Notes for each Noteholder
purchasing a Convertible Subordinated Note hereunder.
3.5.3. RELATED AGREEMENTS. Copies of the Related Agreements
certified by Borrower's secretary or an assistant secretary.
3.5.4. LIEN SEARCHES. Copies of Uniform Commercial Code search
reports.
3.5.5. PAYOFF; RELEASE. Payoff letters evidencing repayment in
full of all Prior Debt, termination of all agreements relating thereto and the
release of all Liens granted in connection therewith, with Uniform Commercial
Code or other appropriate termination statements and documents effective to
evidence the foregoing.
3.5.6. LETTER OF DIRECTION. A letter of direction containing funds
flow information, with respect to the proceeds of the Convertible Subordinated
Notes on the Closing Date.
3.5.7. AUTHORIZATION DOCUMENTS. Borrower's (i) charter, certified
by the appropriate governmental authority, (ii) good standing certificates in
its state of incorporation, (iii) bylaws, (iv) resolutions of its board of
directors approving and
14
authorizing the execution, delivery and performance of the Subordinated Notes
Documents and the transactions contemplated thereby, and (v) signature and
incumbency certificates of its officers executing any of the Subordinated Notes
Documents, all certified by the secretary or any assistant secretary of Borrower
as being in full force and effect without modification.
3.5.8. OPINIONS OF COUNSEL. Opinions of counsel for Borrower,
including local counsel reasonably requested by Noteholders, and all other
opinions issued pursuant to the Related Transactions, which opinions shall
authorize the Noteholders to rely thereon.
3.5.9. FINANCIALS. The financial statements, projections and
balance sheet of Borrower described in Section 6.1.
3.5.10. CONSENTS. Evidence that all necessary consents, permits
and approvals (governmental or otherwise) required for the execution, delivery
and performance by Borrower of the Subordinated Notes Documents and the Related
Transactions have been duly obtained and are in full force and effect.
3.5.11. OTHER DOCUMENTS. Such other certificates, documents and
agreements as any Noteholder may reasonably request.
3.6. REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Borrower set forth in Article V hereof shall be true and correct
in all respects at the time of, and immediately after giving effect to, the
purchase of the Convertible Subordinated Notes.
3.7. USE OF PROCEEDS. Borrower shall have used, or simultaneously with
the Closing shall use, funds from the sale of the Convertible Subordinated Notes
for the purposes described in Section 2.3.
3.8. COMPLIANCE WITH THIS AGREEMENT. Borrower shall have performed and
complied with all of their agreements and satisfied the conditions set forth or
contemplated herein that are required to be performed or complied with or
satisfied by it on or before the Closing Date.
3.9. CONSUMMATION OF THE TRANSACTIONS. The transactions contemplated by
the Related Agreements shall have been consummated.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE NOTEHOLDERS
Each Noteholder, for itself only, hereby represents and warrants, which
representations and warranties shall survive the closing, that:
4.1. AUTHORIZATION; ENFORCEABILITY. Such Noteholder has duly authorized,
executed and delivered this Agreement and such of the Related Agreements as
require
15
execution by such Noteholder, and each constitutes the valid and binding
obligation of such Noteholder enforceable in accordance with its terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights and except to the extent that availability of
the remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
4.2. OWN ACCOUNT. Such Noteholder is acquiring the Convertible
Subordinated Notes for its own account, and not as nominee or agent. Such
Noteholder is an "accredited investor" as defined in Rule 501(a) under the
Securities Act.
4.3. INVESTMENT INTENT. The Convertible Subordinated Notes are being and
will be acquired for the purpose of investment and not with a view to
distribution or resale thereof; subject, nevertheless, to the condition that,
except as otherwise provided herein and subject to compliance with applicable
securities laws, the disposition of the property of such Noteholder shall at all
times be within its control. Such Noteholder was not formed solely for the
purpose of making an investment in Borrower or its Subsidiaries.
4.4. SECURITIES LAWS. Such Noteholder can bear the economic risk of its
investment for an indefinite period of time. Such Noteholder understands that
the Notes are not, and will not be, registered under the Securities Act or any
applicable state securities laws, except as may be provided in this Agreement,
and may not be resold unless subsequently registered under the Securities Act
and such other laws or unless an exemption from such registration is available.
Such Noteholder acknowledges that, in issuing the Convertible Subordinated
Notes, Borrower is relying on the representations and warranties of such
Noteholder in this Article IV.
4.5. NO BROKER. No Person has or will have, as a result of the
transactions contemplated by this Agreement, any rights, interest or valid claim
against or upon Borrower or any of its Subsidiaries for any commission, fee or
other compensation as a finder or broker because of any act or omission by such
Noteholder or any agent of such Noteholder.
4.6. RESTRICTIVE LEGEND. Such Noteholder hereby acknowledges that the
Convertible Subordinated Notes (unless no longer required in the opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to Borrower,
it being agreed that ▇▇▇▇▇▇▇ Procter LLP shall be satisfactory) shall bear a
legend substantially in the following form (in addition to any other legend
required by the Related Agreements):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES OR BLUE SKY LAWS AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1) PURSUANT
TO A REGISTRATION STATEMENT WITH RESPECT
16
TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT
TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING
TO THE DISPOSITION OF SECURITIES AND (3) IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES AND BLUE SKY LAWS.
The acquisition by such Noteholder of the Convertible Subordinated Notes
shall constitute a confirmation by it of the foregoing representations.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BORROWER
To induce the Noteholders to enter into this Agreement, Borrower represents
and warrants to the Noteholders that, after giving effect to the Related
Transactions:
5.1. ORGANIZATION. Borrower is a corporation validly existing and in good
standing under the laws of the State of Colorado, and Borrower and each
Subsidiary of Borrower is duly qualified to do business in each jurisdiction
where, because of the nature of its activities or properties, such qualification
is required, except for such jurisdictions where the failure to so qualify would
not have a Material Adverse Effect.
5.2. AUTHORIZATION; NO CONFLICT. Borrower is duly authorized to execute
and deliver each Subordinated Notes Document, is duly authorized to borrow
monies hereunder, and is duly authorized to perform its Obligations under each
Subordinated Notes Document. The execution, delivery and performance by Borrower
of this Agreement and of each Subordinated Notes Document, and the borrowings by
Borrower hereunder, do not and will not (a) require any consent or approval of
any governmental agency or authority (other than any consent or approval which
has been obtained and is in full force and effect and federal and state security
law filings), (b) conflict with (i) any provision of law, (ii) the charter,
by-laws or other organizational documents of Borrower (iii) any agreement,
indenture, instrument or other document, or any judgment, order or decree, which
is binding upon Borrower or any of its respective properties or (c) require, or
result in, the creation or imposition of any Lien on any asset of Borrower or
any of its Subsidiaries.
5.3. VALIDITY; BINDING NATURE. Each of this Agreement and each other
Subordinated Notes Document is the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms, subject to
bankruptcy, insolvency and similar laws affecting the enforceability of
creditors' rights generally and to general principles of equity.
5.4. FINANCIAL CONDITION. The audited consolidated financial statements
of Borrower as at its Fiscal Years ended December 31, 2002 and December 31,
2003, and the unaudited consolidated financial statements of Borrower as at
March 31, 2004, copies of each of which have been delivered to the Noteholders
pursuant hereto, were prepared in accordance with GAAP (subject, in the case of
such unaudited statements, to the absence of footnotes and to normal year-end
adjustments) and present fairly the
17
consolidated financial condition of Borrower as at such dates and the results of
its operations for the periods then ended on a consolidated basis.
5.4.1. The consolidated financial projections (including an
operating budget and a cash flow budget) of Borrower for the six (6) year period
commencing December 31, 2004 delivered to Noteholders on or prior to the Closing
Date and attached hereto as Schedule 5.4.1 were prepared by Borrower in good
faith and (ii) were prepared in accordance with assumptions for which Borrower
have a reasonable basis, and the accompanying consolidated balance sheet of
Borrower as at the Closing Date, adjusted to give effect to the consummation of
the Related Transactions and the financings contemplated hereby as if such
transactions had occurred on such date, is consistent in all material respects
with such projections.
5.5. NO MATERIAL ADVERSE CHANGE. Since March 31, 2004, there has been no
material adverse change in the financial condition, operations, assets, business
or properties of Borrower taken as a whole.
5.6. LITIGATION. No litigation (including derivative actions),
arbitration proceeding or governmental investigation or proceeding is pending
or, to Borrower's knowledge, threatened against Borrower which could reasonably
be expected to have a Material Adverse Effect, except as set forth in Schedule
5.6. As of the Closing Date, other than any liability incident to such
litigation or proceedings, Borrower does not have any material Contingent
Obligations not listed on Schedule 7.1.
5.7. OWNERSHIP OF PROPERTIES; LIENS. Borrower owns good and, in the case
of real property, marketable title to all of its properties and assets, real and
personal, tangible and intangible, of any nature whatsoever (including patents,
trademarks, trade names, service marks and copyrights), free and clear of all
Liens, charges and claims (including infringement claims with respect to
patents, trademarks, service marks, copyrights and the like), except as
permitted by Section 7.2, and except for taxes not yet due and payable and
immaterial Liens and encumbrances.
5.8. CAPITALIZATION. All issued and outstanding equity securities of
Borrower are duly authorized and validly issued, fully paid, non-assessable, and
free and clear of all Liens, and such securities were issued in compliance with
all applicable state and federal laws concerning the issuance of securities.
Schedule 5.8 sets forth the authorized equity securities of Borrower as of the
Closing Date. All of the issued and outstanding equity of Borrower is owned as
set forth on Schedule 5.8 as of the Closing Date. As of the Closing Date, except
as set forth on Schedule 5.8, there are no pre-emptive or other outstanding
rights, options, warrants, conversion rights or other similar agreements or
understandings for the purchase or acquisition of any equity interests of
Borrower.
5.9. PENSION PLANS. During the twelve-consecutive-month period prior to
the Closing Date or the purchase of any Convertible Subordinated Notes
hereunder, (i) no steps have been taken to terminate any Pension Plan and (ii)
no contribution failure has occurred with respect to any Pension Plan sufficient
to give rise to a Lien under Section 302(f) of ERISA. No condition exists or
event or transaction has occurred with respect to
18
any Pension Plan which could result in the incurrence by Borrower of any
material liability, fine or penalty. All contributions (if any) have been made
to any Multiemployer Pension Plan that are required to be made by Borrower or
any other member of the Controlled Group under the terms of the plan or of any
collective bargaining agreement or by applicable law. Neither Borrower nor any
member of the Controlled Group has withdrawn or partially withdrawn from any
Multiemployer Pension Plan, incurred any withdrawal liability with respect to
any such plan or received notice of any claim or demand for withdrawal liability
or partial withdrawal liability from any such plan, and no condition has
occurred which, if continued, could result in a withdrawal or partial withdrawal
from any such plan, and neither Borrower nor any member of the Controlled Group
has received any notice (i) that any Multiemployer Pension Plan is in
reorganization, (ii) that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of any excise tax, (iii) that any
such plan is or has been funded at a rate less than that required under Section
412 of the IRC, (iv) that any such plan is or may be terminated, or (v) that any
such plan is or may become insolvent.
5.10. INVESTMENT COMPANY ACT. Borrower is not an "investment company" or a
company "controlled" by an "investment company" or a "subsidiary" of an
"investment company," in each case, within the meaning of the Investment Company
Act of 1940.
5.11. PUBLIC UTILITY HOLDING COMPANY ACT. Borrower is not a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," within
the meaning of the Public Utility Holding Company Act of 1935.
5.12. MARGIN STOCK. Neither Borrower nor any of its Subsidiaries is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Convertible Subordinated Notes will be used to purchase or carry any margin
security or to extend credit to others for the purpose of purchasing or carrying
any margin security or in any other manner which would involve a violation of
any of the applicable regulations of the Board of Governors of the Federal
Reserve System.
5.13. TAXES. Borrower has filed all material tax returns and reports
required by law to have been filed by it and has paid all material taxes and
governmental charges thereby shown to be owing, except any such taxes or charges
which are being diligently contested in good faith by appropriate proceedings
and for which adequate reserves in accordance with GAAP shall have been set
aside on its books.
5.14. SOLVENCY. On the Closing Date, and immediately prior to and after
giving effect to the purchase of each Convertible Subordinated Note hereunder
and the use of the proceeds thereof, with respect to Borrower, (a) the fair
value of its assets is greater than the amount of its liabilities (including
disputed, contingent and unliquidated liabilities) as such value is established
and liabilities evaluated, (b) it is able to realize upon its assets and pay its
debts and other liabilities (including disputed, probable contingent and
unliquidated liabilities) as they mature in the normal course of business,
19
(c) it does not intend to, and does not believe that it will, incur debts or
liabilities beyond its ability to pay as such debts and liabilities mature, and
(d) it is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which its property would constitute
unreasonably small capital.
5.15. ENVIRONMENTAL MATTERS. The on-going operations of Borrower comply in
all respects with all Environmental Laws, except such non-compliance which could
not (if enforced in accordance with applicable law) reasonably be expected to
result in a Material Adverse Effect. Borrower has obtained, and maintained in
good standing, all licenses, permits, authorizations and registrations required
under any Environmental Law and necessary for its ordinary course operations,
and Borrower is in compliance with all material terms and conditions thereof,
except where the failure to do so could not reasonably be expected to result in
material liability to Borrower and could not reasonably be expected to result in
a Material Adverse Effect. Neither Borrower nor any of its respective properties
or operations is subject to any outstanding written order from or agreement with
any Federal, state or local governmental authority, or subject to any judicial
or docketed administrative proceeding, respecting any Environmental Law,
Environmental Claim or Hazardous Substance. To Borrower's knowledge, there are
no Hazardous Substances or other conditions or circumstances existing with
respect to any property, or arising from operations prior to the Closing Date,
of Borrower that could reasonably be expected to result in a Material Adverse
Effect. Borrower does not have any underground storage tanks that are not
properly registered or permitted under applicable Environmental Laws or that are
leaking or disposing of Hazardous Substances.
5.16. INSURANCE. Borrower and its respective properties are insured with
financially sound and reputable insurance companies which are not Affiliates of
Borrower, in such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and owning
similar properties in localities where Borrower operates. A true and complete
listing of such insurance as of the Closing Date, including issuers, coverages
and deductibles, is set forth on Schedule 5.16.
5.17. INFORMATION. All information heretofore or contemporaneously
herewith furnished in writing by Borrower to Noteholders for purposes of or in
connection with this Agreement and the transactions contemplated hereby is, and
all written information hereafter furnished by or on behalf of Borrower to
Noteholders pursuant hereto or in connection herewith will be, true and accurate
in every material respect on the date as of which such information is dated or
certified, and none of such information is or will be incomplete by omitting to
state any material fact necessary to make such information not misleading in
light of the circumstances under which made.
5.18. INTELLECTUAL PROPERTY. Borrower owns and possesses or has a license
or other right to use all patents, patent rights, trademarks, trademark rights,
trade names, trade name rights, service marks, service ▇▇▇▇ rights and
copyrights as are necessary for the conduct of the business of Borrower, and, to
Borrower's knowledge, without any infringement upon rights of others which could
reasonably be expected to have a Material Adverse Effect.
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5.19. RESTRICTIVE PROVISIONS. Borrower is not a party to any agreement or
contract or subject to any restriction contained in its operative documents
which could reasonably be expected to have a Material Adverse Effect.
5.20. LABOR MATTERS. Except as set forth on Schedule 5.20, Borrower is not
subject to any labor or collective bargaining agreement. There are no existing
or threatened strikes, lockouts or other labor disputes involving Borrower that
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect. Hours worked by and payment made to employees of Borrower are
not in violation of the Fair Labor Standards Act or any other applicable law,
rule or regulation dealing with such matters.
5.21. NO DEFAULT. No Event of Default exists or would result from the
incurrence by Borrower of any Debt hereunder or under any Subordinated Notes
Document.
5.22. RELATED AGREEMENTS. Borrower has furnished Noteholders a true and
correct copy of the Related Agreements pursuant hereto. Borrower and, to
Borrower's knowledge, each other party to the Related Agreements, has duly taken
all necessary organizational action to authorize the execution, delivery and
performance of the Related Agreements and the consummation of transactions
contemplated thereby. As of the Closing Date, the Related Transactions have been
consummated in accordance with the terms of the Related Agreements. The Related
Transactions will comply with all applicable legal requirements, and all
necessary governmental, regulatory, creditor, shareholder, partner and other
material consents, approvals and exemptions required to be obtained by Borrower
and, to Borrower's knowledge, each other party to the Related Agreements in
connection with the Related Transactions will be, prior to consummation of the
Related Transactions, duly obtained and will be in full force and effect. As of
the date of the Related Agreements, all applicable waiting periods with respect
to the Related Transactions will have expired without any action being taken by
any competent governmental authority which restrains, prevents or imposes
material adverse conditions upon the consummation of the Related Transactions.
The execution and delivery of the Related Agreements did not, and the
consummation of the Related Transactions will not, violate any statute or
regulation of the United States (including any securities law) or of any state
or other applicable jurisdiction, or any order, judgment or decree of any court
or governmental body binding on Borrower or, to Borrower's knowledge, any other
party to the Related Agreements, or result in a breach of, or constitute a
default under, any material agreement, indenture, instrument or other document,
or any judgment, order or decree, to which Borrower is a party or by which
Borrower is bound or, to Borrower's knowledge, to which any other party to the
Related Agreements is a party or by which any such party is bound. No statement
or representation made in the Related Agreements by Borrower or, to Borrower's
knowledge, any other Person, contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they are made, not misleading.
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ARTICLE VI - AFFIRMATIVE COVENANTS OF BORROWER
Borrower covenants and agrees that so long as any of the Securities are
outstanding:
6.1. FINANCIAL AND BUSINESS INFORMATION. Borrower shall furnish to the
Noteholders each of the following:
6.1.1. ANNUAL REPORT. Promptly when available and in any event
within 90 days after the close of each Fiscal Year: (a) a copy of the annual
audit report of Borrower and its Subsidiaries for such Fiscal Year, including
therein a consolidated balance sheet and statements of earnings and cash flows
of Borrower and its Subsidiaries as at the end of and for such Fiscal Year,
certified without qualification by independent auditors of recognized standing
selected by Borrower and reasonably acceptable to Noteholders, and (b) a
consolidating balance sheet of Borrower and its Subsidiaries as of the end of
such Fiscal Year and consolidating statements of earnings and cash flows for
Borrower and its Subsidiaries for such Fiscal Year, certified by the chief
financial officer of Borrower.
6.1.2. INTERIM REPORTS.
(a) Promptly when available and in any event within
forty-five (45) days after the end of each first, second and third Fiscal
Quarter, consolidated and consolidating balance sheets of Borrower and its
Subsidiaries as of the end of such Fiscal Quarter, together with consolidated
and consolidating statements of earnings and cash flows for such Fiscal Quarter
and for the period beginning with the first day of such Fiscal Year and ending
on the last day of such Fiscal Quarter, certified by the chief financial officer
of Borrower; and
(b) Promptly when available and in any event within thirty
(30) days after the end of each calendar month other than December, (i)
consolidated and consolidating balance sheets of Borrower and its subsidiaries
as of the end of such month, together with consolidated and consolidating
statements of earnings and a consolidated and consolidating statement of cash
flows for such month and for the period beginning with the first day of such
Fiscal Year and ending on the last day of such month, certified by the chief
financial officer of Borrower, and (ii) a written statement of Borrower's
management setting forth a discussion of Borrower's financial condition, changes
in financial condition and results of operations.
6.1.3. PROJECTIONS. By the first day of each fiscal year annual
consolidated and consolidating projections for Borrower and its Subsidiaries for
the fiscal year then beginning, including capital and operating expenses, cash
flow and income and loss, all prepared on a monthly basis.
6.1.4. RESERVED.
6.1.5. MANAGEMENT REPORT. Promptly upon receipt thereof, copies of
all detailed financial and management reports submitted to Borrower by
independent
22
auditors in connection with each annual or interim audit made by such auditors
of the books of Borrower.
6.1.6. OTHER INFORMATION. Such other data, reports, statements and
information (financial or otherwise) as the Noteholders may reasonably request.
6.2. NOTICE OF DEFAULT; LITIGATION; ERISA MATTERS. Borrower shall
promptly, and, in any event, within three (3) Business Days upon becoming aware
of any of the following, deliver written notice describing the same and the
steps being taken by Borrower with respect thereto:
6.2.1. EVENT OF DEFAULT. The occurrence of any Event of Default;
if any Person shall give any notice or take any other action in respect of a
claimed default (whether or not it would constitute an Event of Default) of (i)
this Agreement, (ii) any other note, (iii) any evidence of indebtedness or
indenture, or (iv) any other material financial obligation to which or with
respect to which Borrower or any of its Subsidiaries is a party or obligor,
whether as principal, guarantor, surety or otherwise, then Borrower shall
forthwith give written notice thereof to the Noteholders, describing the notice
or action and the nature of the claimed default.
6.2.2. VIOLATION OF LAW.
(a) The occurrence of any violation of any federal, state or
local law that Borrower or any of its Subsidiaries reports in writing (or for
which any written report supplemental to any oral report is made) to any
federal, state or local governmental agency;
(b) A violation of law as set forth in sub-Section 6.2.2(a),
of any inquiry, proceeding, investigation, or other action, including a notice
from any agency of potential legal liability, of any federal, state or local
governmental agency or board, that could reasonably be expected to have a
Material Adverse Effect.
6.2.3. RELATED AGREEMENTS.
(a) Being aware of a material breach or violation of any term
of or a default or event of default under any Related Agreements; or
(b) Giving or receiving of any notice under any Related
Agreement, by Borrower or any of its Subsidiaries.
6.2.4. CHANGE IN INSURANCE STATUS. Any cancellation or material
change in any insurance maintained by Borrower or a Subsidiary of Borrower.
6.2.5. MATERIAL ADVERSE DEVELOPMENT. Borrower or any of Borrower's
officers becoming aware of any development or other information which would
reasonably be expected to materially and adversely affect the businesses,
financial condition, or Property of Borrower or its ability to perform under
this Agreement.
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6.3. FINANCIAL RECORDS; INSPECTIONS; ACCOUNTANTS.
6.3.1. FINANCIAL RECORDS. Borrower shall keep current and accurate
books of records and accounts in which full and correct entries will be made of
all of its business transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP.
6.3.2. INSPECTION. Borrower shall permit the Noteholders and their
respective designated representatives, at their expense, upon reasonable prior
notice if no Event of Default has occurred and is continuing (in which case no
such notice shall be required) to visit and inspect any of the properties of
Borrower or any of its Subsidiaries, to examine the books of account of Borrower
and its Subsidiaries (and to make copies thereof and extracts therefrom), and to
discuss the affairs, finances and accounts of Borrower and its Subsidiaries
with, and to be advised as to the same by, its and their officers, all at such
reasonable times so as to not interfere with the normal operations of Borrower
and at reasonable intervals but no more than two (2) times per year in total,
during normal business hours, in each case, if no Event of Default has occurred
and is continuing as any Noteholder may reasonably request (and at any time and
without notice if an Event of Default has occurred and is continuing).
6.3.3. COMMUNICATIONS WITH ACCOUNTANTS. Upon the occurrence and
during continuance of an Event of Default, Borrower hereby authorizes the
Noteholders to communicate directly with the independent certified public
accountants of Borrower and shall authorize such accountants to disclose to the
Noteholders any and all financial statements and other supporting financial
documents and schedules including copies of any management letter with respect
to the business, financial condition and other affairs of Borrower or any of its
Subsidiaries, at the expense of Borrower. Borrower will at all times engage any
nationally-recognized independent certified public accountants as the
independent certified public accountants of Borrower and its Subsidiaries and
will not permit more than ninety (90) days to elapse between the cessation of
such firm's (or any successor firm's) engagement as the independent certified
public accountants of Borrower and its Subsidiaries. Upon the occurrence and
continuance of an Event of Default, at the request of the Noteholders, Borrower
shall deliver a letter addressed to such accountants instructing them to comply
with the provisions of this sub-Section 6.3.3.
6.4. MAINTENANCE OF PROPERTY; INSURANCE.
6.4.1. PROPERTY. Borrower shall keep, and cause its Subsidiaries
to keep, all property necessary in the business of Borrower or each such
Subsidiary in good working order and condition, ordinary wear and tear excepted.
6.4.2. INSURANCE. Borrower shall maintain, and cause its
Subsidiaries to maintain, with responsible insurance companies, such insurance
coverage as shall be required by all laws, governmental regulations and court
decrees and orders applicable to it and such other insurance, to such extent and
against such hazards and liabilities, as is customarily maintained by companies
similarly situated; PROVIDED that in any event, such
24
insurance shall insure against all risks and liabilities of the type insured
against as of the Closing Date.
(a) LOSS PAYEE; ADDITIONAL INSURED. Borrower shall cause its
policies of all such casualty insurance to contain standard lender loss payable
provisions and additional insured clauses issued in favor of the Noteholders as
the Noteholders' may request their interests to appear. Upon the request of a
majority of the Noteholders, Borrower shall furnish to the Noteholders a
certificate setting forth in reasonable detail the nature and extent of all
insurance maintained by Borrower and any applicable Subsidiary. Prior to the
Closing Date, Borrower shall cause each issuer of an insurance policy to provide
the Noteholders with an endorsement (i) showing the Noteholders as a loss payee
with respect to each policy of property or casualty insurance and naming the
Noteholders as an additional insured with respect to each policy of liability
insurance, (ii) providing that 30 days' notice will be given to the Noteholders
prior to any cancellation of, or reduction or change in coverage provided by or
other material modification to such policy and (iii) being reasonably acceptable
in all other respects to the Noteholders. Borrower hereby appoints the
Noteholders as its attorney-in-fact, exercisable at its option, to endorse any
check which may be payable to Borrower in order to collect the proceeds of such
insurance, and, to the extent such check is payable to a Subsidiary of Borrower,
Borrower shall cause the appropriate person for such Subsidiary to appoint
Noteholders as such Subsidiary's attorney-in-fact.
(b) RIGHT TO PURCHASE INSURANCE. Unless Borrower provides the
Noteholders with evidence of the continuing insurance coverage required by this
Agreement upon the request of a majority of the Noteholders, the Noteholders may
purchase insurance at Borrower's expense to protect the Noteholders' interest in
the Collateral. This insurance may, but need not, protect Borrower's and any
Subsidiary's interests. The coverage that the Noteholders purchase may, but need
not, pay any claim that is made against Borrower or any Subsidiary in connection
with the Collateral. Borrower may later cancel any insurance purchased by the
Noteholders, but only after providing the Noteholders with evidence that
Borrower has obtained the insurance coverage required by this Agreement. If the
Noteholders purchase insurance for the Collateral, as set forth above, Borrower
will be responsible for the costs of that insurance, including interest and any
other charges that may be imposed with the placement of the insurance, until the
effective date of the cancellation or expiration of the insurance and the costs
of the insurance may be added to the principal amount of the Loans owing
hereunder.
(c) BUSINESS INTERRUPTION INSURANCE. Borrower shall, or shall
cause its Subsidiaries to, obtain and maintain, and shall deliver to the
Noteholders upon their request evidence of, public liability and business
interruption insurance in such amounts as is customary for entities in the same
or similar businesses located in the same or similar area.
6.5. COMPLIANCE WITH LAWS. Borrower shall comply, and shall cause its
Subsidiaries to comply, with any and all laws, ordinances, governmental rules
and regulations, and court or administrative orders or decrees to which any such
Person is
25
subject, whether federal, state or local, and shall obtain and maintain any and
all licenses, permits, franchises, certificates of need, or other governmental
authorizations necessary to the ownership of such Person's Property or to the
conduct of its businesses, which violation or failure to obtain may materially
adversely affect the business, Property, or financial conditions of Borrower,
the Property or Noteholders' rights with respect to the Property.
6.6. EXISTENCE, RIGHTS AND PROPERTIES. Borrower shall do (or cause to be
done) all things necessary to preserve and keep in full force and effect its,
and each of its Subsidiaries' (unless Borrower's board of directors elects not
to continue such Subsidiary's existence), legal existence, good standing, rights
and franchises. Borrower (i) will cause all of its properties and those of its
Subsidiaries used or useful in the conduct of its business or the business of
its Subsidiaries to be maintained and kept in good condition, repair and working
order, ordinary wear and tear excepted, to the extent such properties, in the
reasonable estimation of Borrower, remain necessary for the operation of
Borrower's business, and (ii) will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of Borrower may be necessary so that the business carried on in
connection therewith may be properly conducted at all times.
6.7. EMPLOYEE BENEFIT PLANS. Borrower shall maintain, and cause its
applicable Subsidiaries to maintain, each Pension Plan in substantial compliance
with all applicable requirements of law and regulations.
6.8. ENVIRONMENTAL MATTERS. If any release or disposal of Hazardous
Substances shall occur or shall have occurred on any real property or any other
assets of Borrower or any Subsidiary, Borrower shall cause, or direct the
applicable Subsidiary to cause, the prompt containment and removal of such
Hazardous Substances and the remediation of such real property or other assets
as is necessary to comply in all material respects with all Environmental Laws
and to preserve the value of such real property or other assets. Without
limiting the generality of the foregoing, Borrower shall, and shall cause each
Subsidiary to, comply with each Federal or state judicial or administrative
order requiring the performance at any real property by Borrower or any
Subsidiary of activities in response to the release or threatened release of a
Hazardous Substance.
6.9. LITIGATION. Borrower will, and will cause each of its Subsidiaries
to, give notice to the Noteholders in writing within fifteen (15) days of
becoming aware of any litigation or proceedings threatened in writing or any
pending litigation and proceedings affecting Borrower or any of its Subsidiaries
or to which Borrower or any of its Subsidiaries is or becomes a party involving
an uninsured claim against Borrower or any of its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect and stating the nature
and status of such litigation or proceedings.
6.10. TAXES.
6.10.1. TRANSACTION RELATED. Borrower shall pay all taxes (other
than taxes based upon or measured by the Noteholders' income or revenues), if
any, in
26
connection with the transactions contemplated by this Agreement and the
recording of any financing statements or other document to be executed in
connection therewith. The Obligations of Borrower under this sub-Section 6.10.1
shall survive the payment of its Obligations under this Agreement and the
termination of this Agreement.
6.10.2. PAYMENT OF TAXES AND CLAIMS. Borrower shall pay, before
they become delinquent, all taxes, assessments and governmental charges or
levies imposed upon it or upon its or its Subsidiaries' Property, except for
those being contested in good faith with due diligence by appropriate
proceedings and for which appropriate reserves have been maintained under GAAP.
6.11. RESERVED.
6.12. PLACES OF BUSINESS. Borrower shall give thirty (30) days prior
written notice to the Noteholders of any changes in (a) its or its Subsidiaries'
jurisdiction of organization or (b) the location of its or its Subsidiaries'
chief executive office or any other places of business, or the establishment of
any new, or the discontinuance of any existing, place of business.
6.13. VERIFICATION OF INFORMATION. All information concerning Borrower and
its Affiliates that is provided to the Noteholders will be true and complete in
all material respects and will not omit to state a material fact necessary to
make the statements contained in such information, in light of the circumstances
under which they were made, not misleading.
6.14. RESERVED.
6.15. INTELLECTUAL PROPERTY. Borrower covenants and agrees that it will
take all reasonable steps, in the ordinary course of business consistent with
past practices, necessary to obtain ownership in and/or protection of all
material Intellectual Property owned, used or developed by Borrower and its
Subsidiaries in the conduct of their respective businesses, and that it will not
do any act, or omit to do any act, nor permit any licensee to do any act,
whereby any material Intellectual Property rights of Borrower or any Subsidiary
may become abandoned, invalidated, dedicated to the public domain, or diminished
in value. Without limiting the generality of the foregoing, Borrower covenants
and agrees that it will, and shall cause its Subsidiaries to, (i) diligently
prosecute any applications to obtain registrations of material Intellectual
Property, other than Intellectual Property of a type that is not capable of cost
effective protection or is not eligible for protection through registration,
(ii) preserve and maintain all material Intellectual Property rights in all
jurisdictions in which Borrower or any of its Subsidiaries, as applicable,
conducts or proposes to conduct business, (iii) display appropriate notices of
material Intellectual Property rights on all tangible embodiments; take
reasonable security measures to protect the secrecy and confidentiality of all
valuable information of Borrower and its licensors, (iv) file all such
applications, renewals, certificates and affidavits as may be reasonably
necessary or advisable to obtain and maintain the ownership, validity and
enforceability of all material Intellectual Property rights of Borrower and its
Subsidiaries, (v) appropriately document Borrower's
27
ownership of material Intellectual Property developed by or for Borrower and its
Subsidiaries, (vi) take all reasonable enforcement actions as may be prudent to
protect the material Intellectual Property of Borrower and its Subsidiaries, and
(vii) conduct the business of Borrower and its Subsidiaries so as not to violate
or infringe the Intellectual Property rights of others.
ARTICLE VII - NEGATIVE COVENANTS OF BORROWER
Borrower hereby agrees that, until all Obligations (other than contingent
indemnification obligations to the extent no claim giving rise thereto has been
asserted) are indefeasibly paid in full and all Notes have been terminated or
cancelled, without the prior written consent of the Noteholders, it will not,
and it will not permit any Subsidiary, to:
7.1. DEBT. Incur, assume or suffer to exist any Debt, except:
7.1.1. Obligations under this Agreement and the Subordinated Notes
Documents;
7.1.2. Debt secured by Liens permitted by sub-Section 7.2.4, and
extensions, renewals and refinancings thereof; PROVIDED that the aggregate
amount of all such Debt at any time outstanding shall not exceed $200,000;
7.1.3. Debt described on Schedule 7.1 as of the Closing Date, and
any extension, renewal or refinancing thereof so long as the principal amount
thereof is not increased;
7.1.4. Contingent Obligations arising with respect to customary
indemnification obligations in favor of purchasers in connection with
dispositions of Property permitted under this Agreement;
7.1.5. Debt in connection with the Company's obligations to
reimburse its shareholders or former shareholders for any income tax liability
incurred as a result of the Company's S-corporation income for the period from
January 1, 2004 through the date hereof (the "Tax Distributions").
7.1.6. other Debt, in addition to the Debt listed above, in an
aggregate outstanding amount not at any time exceeding $300,000.
7.2. LIENS. Create or permit to exist any Lien on any of its real or
personal properties, assets or rights of whatsoever nature, whether now owned or
hereafter acquired, except (each a "PERMITTED LIEN"):
7.2.1. Liens for taxes or other governmental charges not at the
time delinquent, thereafter payable without penalty or being diligently
contested in good faith by appropriate proceedings and, in each case, for which
Borrower and its Subsidiaries maintain adequate reserves in accordance with
GAAP;
28
7.2.2. Liens arising in the ordinary course of business (such as
(i) Liens of carriers, warehousemen, mechanics, landlords and materialmen and
other similar Liens imposed by operation of law and (ii) Liens incurred in
connection with worker's compensation, unemployment compensation and other types
of social security (excluding Liens arising under ERISA) or in connection with
surety bonds, bids, performance bonds and similar obligations) for sums not
overdue or being diligently contested in good faith by appropriate proceedings
and not involving any deposits or advances or borrowed money or the deferred
purchase price of property or services and, in each case, for which Borrower and
its Subsidiaries maintain adequate reserves in accordance with GAAP;
7.2.3. Liens described on Schedule 7.2 as of the Closing Date;
7.2.4. subject to the limitation set forth in Section 7.1.2, (i)
Liens arising in connection with Capital Leases (and attaching only to the
property being leased), (ii) Liens existing on property at the time of the
acquisition thereof by Borrower or any Subsidiary (and not created in
contemplation of such acquisition) and (iii) Liens that constitute purchase
money security interests (within the meaning of the UCC) on any property
securing debt incurred for the purpose of financing all or any part of the cost
of acquiring such property; PROVIDED that any such Lien attaches to such
property within 60 days of the acquisition thereof and attaches solely to the
property so acquired;
7.2.5. attachments, appeal bonds, judgments and other similar
Liens, for sums not exceeding $25,000 arising in connection with court
proceedings; PROVIDED that the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings;
7.2.6. easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any material
respect with the ordinary conduct of the business of Borrower or any of its
Subsidiaries; and
7.2.7. the replacement, extension or renewal of any Lien permitted
by sub-Section 7.2.3 above upon or in the same property subject thereto arising
out of the extension, renewal or replacement of the Debt secured thereby
(without increase in the amount thereof).
7.3. RESTRICTED PAYMENTS
7.3.1. Make any dividend or other distribution in respect of its
equity interests, other than the payment of amounts payable under Section 1.11
of the Stock Purchase and Redemption Agreement and other than the Tax
Distributions;
7.3.2. Purchase or redeem any of its equity interests or any
warrants, options or other similar rights or instruments in respect thereof;
7.3.3. Pay any management fees or similar fees to any of its
equity holders or any Affiliate thereof;
29
7.3.4. Make any redemption, prepayment (whether mandatory or
optional), defeasance, repurchase or any other payment (whether for principal,
interest, fees or otherwise) in respect of any Subordinated Debt or pledge any
Property to secure any obligations relating thereto; or
7.3.5. Set aside funds for any of the foregoing.
7.4. MERGERS; CONSOLIDATIONS; ASSET SALES.
7.4.1. Be a party to any merger or consolidation, except for any
such merger or consolidation of any Subsidiary into Borrower.
7.4.2. Sell, transfer, dispose of, convey or lease any of its
assets or equity interests, or sell or assign with or without recourse any
receivables, except for (i) sales and dispositions of assets (excluding any
equity interests of Borrower or any Subsidiary) for at least fair market value
(as determined by the board of directors of Borrower) so long as the net book
value of all assets sold or otherwise disposed of in any Fiscal Year does not
exceed $100,000, (ii) sales of Inventory in the ordinary course of business, and
(iii) transfers to a Wholly-Owned Subsidiary.
7.5. MODIFICATION OF ORGANIZATIONAL DOCUMENTS. Permit the charter,
by-laws or other organizational documents of Borrower to be amended or modified
in any way which could reasonably be expected to adversely affect the interests
of the Noteholders.
7.6. USE OF PROCEEDS. Use the proceeds of the Convertible Subordinated
Notes other than to finance the Related Transactions, for working capital, for
Capital Expenditures and for other general business purposes, and not use or
permit any proceeds of any Convertible Subordinated Note to be used, either
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of "purchasing or carrying" any Margin Stock.
7.7. TRANSACTIONS WITH AFFILIATES. Enter into, or cause, suffer or permit
to exist any transaction, arrangement or contract with any of its Affiliates,
which is on terms that are less favorable than are obtainable from any Person
which is not one of its Affiliates.
7.8. INCONSISTENT AGREEMENTS. Enter into any agreement containing any
provision which would (a) be violated or breached by any borrowing by Borrower
hereunder or by the performance by Borrower of any of its Obligations hereunder
or under any other Subordinated Notes Document, (b) prohibit Borrower from
granting to the Noteholders a Lien on any of its assets or (c) create or permit
to exist or become effective any encumbrance or restriction on the ability of
any Subsidiary to (i) pay dividends or make other distributions to Borrower or
any other Subsidiary, or pay any Debt owed to Borrower or any other Subsidiary,
(ii) make loans or advances to Borrower or (iii) transfer any of its assets or
properties to Borrower.
7.9. BUSINESS ACTIVITIES. (i) Engage in any line of business other than
the businesses engaged in on the Closing Date and businesses reasonably related
thereto and
30
(ii) issue, or permit any Subsidiary to issue, any equity interest other than
any issuance of shares of common equity securities of Borrower pursuant to any
employee or director option or stock purchase program, benefit plan or
compensation program.
7.10. INVESTMENTS. Make or permit to exist any Investment in any other
Person, except the following:
7.10.1. Contingent Obligations constituting Debt permitted by
Section 7.1 or Liens permitted by Section 7.2;
7.10.2. Cash Equivalent Investments;
7.10.3. bank deposits in the ordinary course of business;
7.10.4. Investments in securities of Account Debtors received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such Account Debtors;
7.10.5. Investments listed on Schedule 7.10 as of the Closing Date;
and
7.10.6. Investments in Wholly-Owned Subsidiaries.
7.11. RESTRICTION OF AMENDMENTS TO CERTAIN DOCUMENTS. Amend or otherwise
modify, or waive any rights under (a) any Related Agreement, other than
immaterial amendments, modifications and waivers not adverse to the interests of
Noteholders or (b) any provisions of any Subordinated Debt.
7.12. FISCAL YEAR Change its fiscal year.
ARTICLE VIII - DEFAULT
8.1. EVENTS OF DEFAULT. Each of the following events shall constitute an
event of default ("EVENT OF DEFAULT") and the Noteholders shall thereupon have
the option to declare the Obligations immediately due and payable, all without
demand, notice, presentment or protest or further action of any kind (it also
being understood that the occurrence of any of the events or conditions set
forth in any of sub-Sections 8.1.9 through 8.1.11 shall automatically cause an
acceleration of the Obligations):
8.1.1. NON-PAYMENT. Default in the payment when due of the
principal of any Note, or default, and continuance thereof for two (2) business
days, in the payment when due of interest, fees, charges, expenses or other
monetary obligations owing to the Noteholders by Borrower hereunder or under any
Subordinated Notes Document.
8.1.2. PARTICULAR COVENANT DEFAULTS.
(a) Failure by Borrower to comply with or perform any
covenant set forth in Sections 6.1.1, 6.1.2, 6.1.3, 6.2.1, 6.4.2(a), 6.6, 6.8,
and Article VII; or
31
(b) failure by Borrower to comply with or perform any other
provision of this Agreement or any other Subordinated Notes Documents applicable
to it (and not constituting an Event of Default under any other provision of
this Section 8) and the continuance of such failure described in this clause (b)
for thirty (30) days.
8.1.3. FINANCIAL INFORMATION. The failure of any statement,
report, financial statement, or certificate made or delivered by Borrower or any
of its officers, employees or agents, to the Noteholders to be true and correct,
in all material respects, when so made or delivered.
8.1.4. WARRANTIES OR REPRESENTATIONS. Any warranty, representation
or other statement by or on behalf of Borrower contained in or pursuant to this
Agreement, or in any document, agreement or instrument furnished in compliance
with, relating to, or in reference to this Agreement, is false, erroneous, or
misleading in any material respect when made.
8.1.5. AGREEMENTS WITH OTHERS. A default by Borrower or any of its
Subsidiaries beyond any grace period under any agreement with any creditor for
borrowed money in excess of $100,000 and (a) such default consists of the
failure to pay any principal, premium or interest with respect to such
indebtedness, or (b) such default consists of the failure to perform any
covenant or agreement with respect to such indebtedness if the effect of any
such default in clause (a) or (b) hereof is to cause or permit Borrower's or any
of its Subsidiaries' obligations which are the subject thereof to become due
prior to their maturity date or prior to their regularly scheduled date of
payment.
8.1.6. OTHER AGREEMENTS WITH THE NOTEHOLDERS. The breach or
violation by Borrower of the terms of, or the occurrence of a default or an
event of default (after the expiration of any applicable grace or cure period),
under, any other existing or future agreement (related or unrelated) between or
among Borrower and any of the Noteholders.
8.1.7. JUDGMENTS. The entry or filing of any final judgments which
exceed an aggregate of $100,000 against Borrower which shall have not been paid,
discharged or vacated or had execution thereof stayed pending appeal within
thirty (30) days after such entry or filing of such judgments unless such
judgment is the subject of insurance for which the insurer has acknowledged full
responsibility in writing for amounts exceeding the deductible in writing;
PROVIDED that such deductible shall not exceed $100,000.
8.1.8. ASSIGNMENT FOR BENEFIT OF CREDITORS, ETC. (i) The
assignment or proposed assignment by Borrower or any of its Subsidiaries for the
benefit of creditors generally, (ii) the offering of a composition or extension
to creditors, or (iii) the making or sending of notice of an intended bulk sale
of any business or assets now or hereafter owned or conducted by Borrower or any
of its Subsidiaries which might materially and adversely affect Borrower.
32
8.1.9. BANKRUPTCY, DISSOLUTION, ETC. The commencement of any
action for the dissolution or liquidation of Borrower or any of its
Subsidiaries, or any of them, or the commencement of any proceeding to avoid any
transaction entered into by Borrower or any of its Subsidiaries or the
commencement of any case or proceeding for reorganization or liquidation of
Borrower's or any of its Subsidiaries' debts under the United States Bankruptcy
Code or any other state or federal law, now or hereafter enacted for the relief
of debtors, whether instituted by or against Borrower or any of its
Subsidiaries; provided, that, in any such case or other proceeding which is
commenced against Borrower or any of its Subsidiaries, such case or other
proceeding shall remain undismissed and unstayed for a period of 60 days.
8.1.10. RECEIVER. The appointment of a receiver, liquidator,
custodian, trustee or similar official or fiduciary for Borrower's or for any of
its Subsidiaries' Property.
8.1.11. EXECUTION PROCESS, SEIZURE, ETC. The issuance of any
execution or distraint process against Borrower, any of its Subsidiaries, or any
Property of Borrower or its Subsidiaries is seized by any governmental entity,
federal, state or local.
8.1.12. TERMINATION OF BUSINESS. The termination by Borrower or any
of its Subsidiaries of any material portion of the respective business
operations as presently conducted or as conducted by Borrower or its
Subsidiaries immediately prior to the Closing Date.
8.1.13. PENSION BENEFITS, ETC. The failure by Borrower or any of
its Subsidiaries to comply with ERISA, so that grounds exist to permit the
appointment of a trustee under ERISA to administer such Person's employee plans
or to allow the Pension Benefit Guaranty Corporation to institute proceedings to
appoint a trustee to administer any such plan, or to permit the entry of a lien
to secure any deficiency or claim.
8.1.14. CHANGE OF CONTROL. (a) The shareholders of Borrower
immediately after giving effect to the consummation of the Related Transactions,
shall collectively cease to, directly or indirectly, own and control at least
(i) 51% of the outstanding equity interests of Borrower or (ii) that percentage
of the outstanding voting equity interests of Borrower necessary at all times to
elect a majority of the board of directors of Borrower and to direct the
management policies and decisions of Borrower or (b) a majority of Borrower's
board of directors shall cease to consist of the directors of Borrower on the
Closing Date (after giving effect to the Related Transactions) and the other
directors whose nomination for election to Borrower's board of directors is
recommended by at least a majority of the foregoing described directors.
8.2. CURE. Other than with respect to a cure of an Event of Default
accomplished within a stated cure period hereunder, nothing contained in this
Agreement, the Notes or the Related Agreements shall be deemed to compel the
Noteholders to accept a cure of any Event of Default hereunder.
33
8.3. RIGHTS AND REMEDIES ON DEFAULT.
8.3.1. The Noteholders holding greater than fifty percent (50%),
voting together as a single class, in principal amount of the Notes may, by
notice to Borrower, declare the entire unpaid principal amount of the Notes plus
all interest accrued and unpaid thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Notes, all such accrued
interest and all such amounts shall become and be forthwith due and payable
(unless there shall have occurred an Event of Default under sub-Sections 8.1.9,
8.1.10, or 8.1.11, in which case all such amounts shall automatically become due
and payable), without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by Borrower.
8.3.2. In the case of events of default under Section 8.1, each
Noteholder may proceed to protect and enforce its rights by suit in equity,
action at law and/or other appropriate proceeding either for specific
performance of any covenant, provision or condition contained or incorporated by
reference in this Agreement or in aid of the exercise of any power granted in
this Agreement.
8.3.3. In case any one or more of the Events of Default shall have
occurred and be continuing, and whether or not the Noteholders shall have
accelerated the maturity of the Notes pursuant to sub-Section 8.3.1, each
Noteholder, if owed any amount with respect to the Notes may proceed to protect
and enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement and the other Subordinated Notes Documents or any
instrument pursuant to which the Obligations to such Noteholder are evidenced,
including to the extent permitted by applicable law by obtaining the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, by proceeding to enforce the payment thereof or any
other legal or equitable right of such Noteholder. No remedy herein conferred
upon any Noteholder is intended to be exclusive of any other remedy and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or any other provision of law.
8.4. NATURE OF REMEDIES. All rights and remedies granted to the
Noteholders hereunder and under the Notes and the Related Agreements, or
otherwise available at law or in equity, shall be deemed concurrent and
cumulative, and not alternative remedies, and the Noteholders may proceed with
any number of remedies at the same time until all Obligations are satisfied in
full. The exercise of any one right or remedy shall not be deemed a waiver or
release of any other right or remedy, and the Noteholders, upon or at any time
after the occurrence of an Event of Default, may proceed against Borrower at any
time, under any agreement, with any available remedy and in any order.
8.5. SET-OFF. If any bank account or other Property held by or with the
Noteholders or any Affiliate of the Noteholders is attached or otherwise liened
or levied upon by any third party, the Noteholders shall have and be deemed to
have, without notice to Borrower, the immediate right of set-off and may apply
the funds or other
34
amounts or property thus set off against any of the Obligations hereunder then
due and payable.
8.6. DISTRIBUTION OF PROCEEDS. In the event that, following the
occurrence or during the continuance of any Event of Default, any Noteholder
receives any monies with respect to the amounts due hereunder, such monies shall
be distributed for application as follows:
8.6.1. First, to the payment of, or (as the case may be) the
reimbursement of the Noteholders for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or sustained
by the Noteholders in connection with the collection of such monies by the
Noteholders, for the exercise, protection or enforcement by the Noteholders of
all or any of the rights, remedies, powers and privileges of the Noteholders
under this Agreement or any of the other Subordinated Notes Documents pro rata
based on the relative amounts so incurred or sustained by the Noteholders;
8.6.2. Second, to all other Obligations in such order or
preference as the Noteholders may determine; PROVIDED, HOWEVER, that
distributions shall be made among the Noteholders pro rata; and
8.6.3. Third, to Borrower or to such other Persons as are entitled
thereto.
ARTICLE IX - MISCELLANEOUS
9.1. NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of
any Noteholder, in exercising any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
9.2. AMENDMENTS, WAIVERS AND CONSENTS. Any provision in this Agreement or
the Notes or the other Subordinated Notes Documents to the contrary
notwithstanding, changes in or additions to this Agreement may be made, and
compliance with any covenant or provision herein set forth may be omitted or
waived, if Borrower shall, as long as any Notes are outstanding, obtain consent
thereto in writing from the holder or holders of greater than fifty percent
(50%), considered together as a single class, of the aggregate principal amount
of all Notes then outstanding, and shall, in any case, deliver copies of such
consent in writing to all other holders of Notes; PROVIDED that no such consent
shall be effective to reduce or to postpone the date fixed for the payment of
the principal (including any required redemption) or interest payable on any
Note without the consent of the holder thereof, or to alter or amend any
provisions relating to prepayments, mandatory purchase or the terms of
subordination contained in this Agreement and the other Subordinated Notes
Documents, or to alter or amend the consent mechanism provided for under this
Section 9.2.
35
9.3. ADDRESSES FOR NOTICES, ETC. All notices, requests, demands and other
communications provided for hereunder shall be in writing and mailed (by first
class registered or certified mail, postage prepaid), sent by express overnight
courier service or electronic facsimile transmission with a copy by mail, or
delivered to the applicable party at the addresses indicated below:
If to Borrower:
The Murrayhill Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
If to the Noteholders:
TA Associates, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
If to any other holder of the Notes:
at such holder's address for notice as set forth in the transfer
records of Borrower
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section 9.3. All such notices, requests, demands and other
communications shall, when mailed or sent, respectively, be effective (i) three
(3) days after being deposited in the mails or (ii) one Business Day after being
deposited with the express overnight courier service or sent by electronic
facsimile transmission (with receipt confirmed), respectively, addressed as
aforesaid.
9.4. COSTS, EXPENSES AND TAXES. Borrower agree to pay on demand all
reasonable costs and expenses of the Noteholders in connection with the
preparation, execution and delivery of this Agreement, the Notes, the other
Subordinated Notes Documents and other instruments and documents to be delivered
hereunder, and in connection with the consummation of the transactions
contemplated hereby and thereby, as well as all reasonable costs and expenses of
the Noteholders in connection with the amendment, waiver (whether or not such
amendment or waiver becomes effective) or enforcement of this Agreement, the
Notes, the other Subordinated Notes Documents, and other instruments and
documents to be delivered hereunder and thereunder.
9.5. ASSIGNABILITY; BINDING AGREEMENT. This Agreement may not be assigned
by any party hereto without the prior written consent of each other party
hereto; PROVIDED, HOWEVER, that any Noteholder may assign this Agreement freely
without consent to any transferee permitted under Section 2.9. This Agreement
shall be binding upon and enforceable by, and shall inure to the benefit of, the
parties hereto and their
36
respective successors and permitted assigns, and no others. Notwithstanding the
foregoing, nothing in this Agreement is intended to give any Person not named
herein the benefit of any legal or equitable right, remedy or claim under this
Agreement.
9.6. PAYMENTS IN RESPECT OF NOTES. Each Noteholder and any successor
holder of any Notes, by their acceptance thereof, agree that, with respect to
all sums received by them applicable to the payment of principal of or interest
on the Notes, equitable adjustment will be made among them so that, in effect,
all such sums shall be shared ratably by all of the holders of the Notes,
whether received by voluntary payment, by the exercise of the right of set off,
by counterclaim or cross-action or by the enforcement of any or all of the
Notes. If any holder of the Notes receives any payment on its Notes in excess of
its pro rata portion, then such holder receiving such excess payment shall
purchase for cash from the other holders an interest in their Notes in such
amounts as shall result in a ratable participation by all of the holders in the
aggregate unpaid amount of Notes then outstanding. Borrower shall not have any
obligation to any Person under this Section 9.6.
9.7. INDEMNIFICATION. In addition to the payment of the Noteholders'
expenses required pursuant to this Agreement, whether or not the transactions
contemplated hereby shall be consummated, Borrower agrees to jointly and
severally indemnify, pay and hold each Noteholder and the partners, members,
officers, directors, employees and agents of each Noteholder (collectively, the
"INDEMNITEES") harmless from and against, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceedings, whether or not such Indemnitees shall be designated a party
thereto), which may be imposed on, incurred by, or asserted against such
Indemnitee, in any manner relating to or arising out of (i) this Agreement, the
other Subordinated Notes Documents, the Related Agreements and all other matters
related thereto in connection therewith, (ii) the Noteholders' agreement to
purchase the Notes, or the use or intended use of the proceeds of the Notes
hereunder, (iii) the violation of any securities law by Borrower or any of its
Subsidiaries, or (iv) the failure of any of the parties (other than the
Noteholders) to the Related Agreements to comply with any law, rule or
regulation applicable to the transactions contemplated thereby (the "INDEMNIFIED
LIABILITIES"); PROVIDED that Borrower shall have no obligation to an Indemnitee
hereunder with respect to Indemnified Liabilities which are determined by a
final court decision to have resulted from the gross negligence or willful
misconduct of that Indemnitee. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, Borrower shall contribute
the maximum portion which it is permitted to pay and satisfy under applicable
law to the payment and satisfaction of all Indemnified Liabilities incurred by
the Indemnitees or any of them.
9.8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made to the Noteholders in this Agreement, the other Subordinated
Notes Documents, the Related Agreements and any other instrument or document
delivered in
37
connection herewith or therewith, shall survive the execution and delivery
hereof and thereof, regardless of any investigation made by the Noteholders or
on behalf of the Noteholders.
9.9. PRIOR AGREEMENTS. This Agreement and the Related Agreements
constitute the entire agreement between the parties and supersede any prior
understandings or agreements concerning the subject matter hereof or thereof.
9.10. SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
9.11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of
New York, without giving effect to
conflict of laws principles thereof.
9.12. DISPUTE RESOLUTION
(a) All disputes, claims, or controversies arising out of or
relating to this Agreement or any other Subordinated Notes Document that
are not resolved by mutual agreement shall be resolved solely and
exclusively by binding arbitration to be conducted before
J.A.M.S./Endispute, Inc. in
New York,
New York before a single arbitrator
(the "Arbitrator"). The parties understand and agree that this arbitration
shall apply equally to claims of fraud or fraud in the inducement.
(b) The parties covenant and agree that the arbitration shall
commence within one hundred and eighty (180) days of the date on which a
written demand for arbitration is filed by any party hereto (the "Filing
Date"). In connection with the arbitration proceeding, the Arbitrator shall
have the power to order the production of documents by each party and any
third-party witnesses. In addition, each party may take up to three
depositions as of right, and the Arbitrator may in his or her discretion
allow additional depositions upon good cause shown by the moving party.
However, the Arbitrator shall not have the power to order the answering of
interrogatories or the response to requests for admission. In connection
with any arbitration, each party shall provide to the other, no later than
seven (7) business days before the date of the arbitration, the identity of
all persons that may testify at the arbitration and a copy of all documents
that may be introduced at the arbitration or considered or used by a
party's witnesses or experts. The Arbitrator's decision and award shall be
made and delivered within two hundred and forty (240) days of the Filing
Date. The Arbitrator's decision shall set forth a reasoned basis for any
award of damages or finding of liability. The Arbitrator shall not have
power to award damages in excess of actual compensatory damages and shall
not multiply actual damages or award punitive damages or any other damages
that are specifically excluded under this Agreement, and each party hereby
irrevocably waives any claim to such damages.
38
(c) The parties covenant and agree that they will participate in
the arbitration in good faith and that they will, except as provided in
Section 9.4 and 9.7 of this Agreement, (i) bear their own attorneys' fees,
costs and expenses in connection with the arbitration, and (ii) share
equally in the fees and expenses charged by the Arbitrator. Any party
unsuccessfully refusing to comply with an order of the Arbitrators shall be
liable for costs and expenses, including attorneys' fees, incurred by the
other party in enforcing the award. This Section 9.12 applies equally to
requests for temporary, preliminary or permanent injunctive relief, except
that in the case of temporary or preliminary injunctive relief any party
may proceed in court in accordance with Section 9.16 hereof without prior
arbitration for the purpose of avoiding immediate and irreparable harm.
9.13. CONSENT TO JURISDICTION. Except as provided in Section 9.12(c) and
9.16, each of the parties hereto irrevocably and unconditionally consents to the
jurisdiction of J.A.M.S./Endispute, Inc. to resolve all disputes, claims or
controversies arising out of or relating to this Agreement or any other
Subordinated Notes Document, and further consents to the sole and exclusive
jurisdiction of the courts of Colorado and California for the purposes of
enforcing the arbitration provisions of Section 9.12 of this Agreement. Each
party further irrevocably waives any objection to proceeding before the
Arbitrator based upon lack of personal jurisdiction or to the laying of venue
and further irrevocably and unconditionally waives and agrees not to make a
claim in any court that arbitration before the Arbitrator has been brought in an
inconvenient forum. Each of the parties hereto hereby consents to service of
process by registered mail at the address to which notices are to be given. Each
of the parties hereto agrees that its submission to jurisdiction and its consent
to service of process by mail is made for the express benefit of the other
parties hereto.
9.14. COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which when so executed and delivered shall be
taken to be an original, but such counterparts shall together constitute but one
and the same document.
9.15. FURTHER ASSURANCES. From and after the date of this Agreement, upon
the request of the Noteholders, Borrower and its Subsidiaries shall execute and
deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of the Subordinated Notes Documents.
9.16. SPECIFIC PERFORMANCE. Subject to Section 9.12(c), upon breach or
default by Borrower with respect to any obligation hereunder or under the Notes,
each Noteholder shall be entitled to protect and enforce its rights at law, or
in equity or by other appropriate proceedings for specific performance of such
obligation, or for an injunction against such breach or default, or in aid of
the exercise of any power or remedy granted hereby or thereby or by law.
9.17. ACTIONS BY NOTEHOLDERS. Except as provided in Section 9.2, wherever
in this Agreement action is required or permitted to be taken by, or consent is
required of, or
39
a matter requires the satisfaction of, the Noteholders, such action may be taken
by, such consent may be obtained from, or such satisfaction may be expressed by,
the holders of a majority, considered together as a single class, of the
aggregate principal amount of all Notes then outstanding.
9.18. LIMITATION OF LIABILITY. No Noteholder shall have any liability to
Borrower or Borrower's Subsidiaries (whether sounding in tort, contract, or
otherwise) for consequential damages suffered by Borrower or its Subsidiaries in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by the Subordinated Notes Documents, or any act,
omission or event occurring in connection therewith, or for any special
exemplary or punitive damages, and Borrower and its Subsidiaries hereby waive,
to the maximum extent not prohibited by law, any right they may have to claim or
recover any of the foregoing.
9.19. CONFIDENTIALITY AGREEMENT. Each Noteholder shall hold all financial
information of Borrower and its Subsidiaries and other non-public information
obtained from Borrower pursuant to the requirements of this Agreement in
accordance with such Noteholder's customary procedures for handling confidential
information of this nature; PROVIDED, HOWEVER, any Noteholder may disclose such
confidential information (a) to its examiners, affiliates, outside auditors,
counsel and other professional advisors, (b) to any prospective transferees and
assignees of its rights thereunder, (c) in connection with any proceeding or
action to enforce such Noteholder's rights hereunder or in connection herewith
or with the Related Transactions, and (d) as required or requested by any
Governmental Authority or representative thereof or pursuant to legal process;
PROVIDED, FURTHER, that in no event shall any Noteholder be obligated to return
any materials furnished by Borrower or any Subsidiary. For the purposes of this
Section 9.18, the term "GOVERNMENTAL AUTHORITY" shall mean the government of any
nation, state, city, locality or other political subdivision of any thereof, any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
40
IN WITNESS WHEREOF, the parties hereto have executed this Subordinated Note
Purchase Agreement as of the date first above written.
BORROWER: THE MURRAYHILL COMPANY
By:/s/ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
Its: Chief Executive Officer
NOTEHOLDER: TA INVESTORS II, L.P.
By: TA Associates, Inc., its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Managing Director
NOTEHOLDER: TA SUBORDINATED DEBT FUND, L.P.
By: TA Associates SDF LLC, its General Partner
By: TA Associates, Inc., its Manager
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Managing Director
