-----------------------------------------------------------------------
LABTEC ENTERPRISES, INC.
$6,000,000 Principal Amount
of
Senior Subordinated Notes Due October 1, 2005
50,000 Shares of Common Stock
PURCHASE AGREEMENT
-----------------------------------------------------------------------
Dated October 7, 1997
TABLE OF CONTENTS
PAGE
SECTION 1. PURCHASE AND SALE OF SECURITIES.......................... 1
1.1 Issue of Securities...................................... 1
1.2 Sale and Purchase of the Securities; the Closing......... 1
1.3 Purchaser's Representations; Source of Funds; Brokers.... 2
1.4 Failure to Close; Postponement........................... 4
1.5 Expenses................................................. 4
1.6 Indemnification.......................................... 5
1.7 Contribution............................................. 6
1.8 Registration and Transfer of Securities.................. 6
SECTION 2. CLOSING CONDITIONS....................................... 7
2.1 Opinion of Counsel....................................... 7
2.2 Representations and Warranties True; No Event of Default. 7
2.3 Compliance with this Agreement........................... 7
2.4 Officers' Certificate.................................... 7
2.5 Purchase Permitted by Applicable Laws; Legal Investment.. 7
2.6 Completion of Other Transactions......................... 8
2.7 Consents and Permits..................................... 8
2.8 Stockholders Agreement................................... 8
2.9 Financial Condition; Sources and Uses of Funds........... 8
SECTION 3. HOLDER'S SPECIAL RIGHTS.................................. 8
3.1 Delivery Expenses........................................ 8
3.2 Issue Taxes.............................................. 9
3.3 Direct Payment........................................... 9
3.4 Lost, Destroyed, Stolen, etc. Securities................. 9
SECTION 4. REPRESENTATIONS AND WARRANTIES........................... 9
4.1 Organization, Standing and Qualification................. 10
4.2 Capitalization........................................... 10
4.3 Authorization of Agreement and Other Documents........... 11
4.4 No Violation............................................. 11
4.5 Use of Proceeds.......................................... 12
4.6 No Default............................................... 12
4.7 Outstanding Indebtedness; Senior Debt; Liens............. 12
4.8 Financial Statements..................................... 12
4.9 No Material Adverse Change............................... 13
4.10 Full Disclosure.......................................... 13
4.11 Litigation............................................... 13
4.12 Title to Properties...................................... 13
4.13 Taxes.................................................... 13
4.14 ERISA.................................................... 14
4.15 Compliance with Laws..................................... 15
4.16 No Violation of Regulations of Board of Governors
of Federal Reserve System.............................. 15
4.17 Private Offering......................................... 15
- i -
PAGE
4.18 Governmental Regulations..................................15
4.19 SEC Reports...............................................15
4.20 Brokers...................................................15
4.21 Environmental Compliance..................................16
4.22 Intellectual Property.....................................16
4.23 Solvency..................................................17
4.24 Labor Relations...........................................17
4.25 Material Contracts........................................17
4.26 Survival of Representations and Warranties................17
SECTION 5. COVENANTS.................................................17
5.1 Payment of Notes..........................................17
5.2 Delivery of Financial Statements and Reports; SEC Reports.18
5.3 Compliance Certificate....................................19
5.4 Stay, Extension and Usury Laws............................19
5.5 Limitation on Restricted Payments.........................19
5.6 Corporate Existence.......................................20
5.7 Same Business.............................................20
5.8 Taxes.....................................................20
5.9 Investment Company Act; United States Real Property
Holding Corporation.....................................20
5.10 No Merger, etc............................................20
5.11 Limitation on Additional Indebtedness.....................21
5.12 Limitation on Transactions With Affiliates................21
5.13 Restrictions on Liens.....................................22
5.14 Sale of Assets............................................22
5.15 Ownership of Subsidiaries.................................23
5.16 Insurance.................................................23
5.17 Issuances of Capital Stock................................23
5.18 ▇▇▇▇▇ Notices.............................................23
5.19 Inconsistent Agreements...................................23
5.20 Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries..................................23
5.21 Limitation on Acquisitions................................24
5.22 Compliance with Laws......................................24
SECTION 6. DEFAULTS AND REMEDIES.....................................24
6.1 Events of Default.........................................24
6.2 Acceleration of Notes.....................................26
6.3 Other Remedies............................................26
6.4 Waiver of Past Defaults...................................26
6.5 Rights of Holders to Receive Payment......................26
6.6 Undertaking for Costs.....................................27
SECTION 7. SUBORDINATION.............................................27
7.1 Notes Subordinated to Senior Debt.........................27
7.2 No Payment on Notes in Certain Circumstances..............27
7.3 Payment Over Proceeds upon Dissolution, Etc...............28
7.4 Payments May Be Paid Prior to Dissolution.................29
7.5 Subrogation...............................................29
- ii -
PAGE
7.6 Obligations of the Company Unconditional.................. 29
7.7 Reliance on Judicial Order or Certificate of
Liquidating Agent....................................... 30
7.8 Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of Senior Debt...... 30
7.9 This Section 7 Not To Prevent Events of Default........... 30
SECTION 8. DEFINITIONS............................................... 30
SECTION 9. MISCELLANEOUS............................................. 40
9.1 Notices................................................... 40
9.2 Successors and Assigns.................................... 40
9.3 Amendment and Waiver...................................... 40
9.4 Counterparts.............................................. 41
9.5 Headings.................................................. 41
9.6 Governing Law............................................. 41
9.7 Entire Agreement.......................................... 41
9.8 Severability.............................................. 41
9.9 Confidentiality........................................... 41
- iii -
SCHEDULE 1.2 Company Bank Account
SCHEDULE 4.1 Organization, Standing and Qualification
SCHEDULE 4.2 Capitalization
SCHEDULE 4.4 No Violation
SCHEDULE 4.7 Indebtedness
SCHEDULE 4.9 Material Adverse Change
SCHEDULE 4.11 Litigation
SCHEDULE 4.13 Taxes
SCHEDULE 4.14 Employee Benefit Plans
SCHEDULE 4.21 Environmental Compliance
SCHEDULE 4.22 Intellectual Property
SCHEDULE 4.25 Material Contracts
SCHEDULE 5.11 Existing Indebtedness
SCHEDULE 5.20 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries
SCHEDULE 8.01 Permitted Investments
SCHEDULE 8.02 Permitted Liens
▇▇▇▇▇ A NOTES
ANNEX B OPINION OF COUNSEL TO COMPANY
ANNEX C STOCKHOLDERS AGREEMENT
ANNEX D FINANCIAL STATEMENTS
- iv -
LABTEC ENTERPRISES, INC.
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
October 7, 1997
The KB Mezzanine Fund II, L.P.
c/o Equinox Investment Partners, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Ladies and Gentlemen:
Labtec Enterprises, Inc., a Delaware corporation, f/k/a LEI Holdings,
Inc. (the "Company") hereby agrees with you as follows:
SECTION 1. PURCHASE AND SALE OF SECURITIES
1.1 Issue of Securities
On or before the Closing (as hereinafter defined), the Company
will have authorized the issuance of its Senior Subordinated Notes due October
1, 2005 (the "Notes"), in the aggregate principal amount of $6,000,000 to be
issued in the form attached hereto as Annex A.
On or before the Closing, the Company will have authorized the
issuance to you of 50,000 shares (the "Shares") of its Common Stock, $0.01 par
value.
Capitalized terms used herein without definition shall have
the meanings specified in Section 8 hereof. The Notes and the Shares are
collectively referred to herein as the "Securities."
Each Note will be in the principal amount of $100,000 or
integral multiples of $50,000 in excess thereof; and will be dated as provided
in Section 1.2 hereof. Each Share will be dated as provided in Section 1.2
hereof.
1.2 Sale and Purchase of the Securities; the Closing
In reliance upon your representations made in Section 1.3
hereof and subject to the terms and conditions set forth herein, the Company
hereby agrees to sell to you the Securities at a purchase price of $953.065 per
$1,000 principal amount of Notes and $5.6322 per Share. In reliance upon the
representations and warranties of the Company contained herein and subject to
the terms and conditions set forth herein, you hereby agree to purchase the
Securities from the Company.
You and the Company agree that, for purposes of Section
1273(b) and pursuant to Section 1273(c)(2) of the Code, the "issue price" of
each Note of $100,000 principal amount is equal to its purchase price as
specified above.
The sale and purchase of the Securities shall take place at a
closing (the "Closing") at the offices of Ropes & Gray, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 a.m., New York time, on October 7, 1997, or such other
business day on or prior to October 31, 1997, as may be agreed upon by you and
the Company (the "Closing Date"). At the Closing, the Company will deliver to
you the Securities (in such permitted denomination or denominations and
registered in your name or the name of such nominee or nominees as you may
request), dated the Closing Date, against payment of the purchase price therefor
(net of the aggregate closing fee of $120,000 to be paid to the Purchaser by the
Company at Closing) by intra-bank or federal funds bank wire transfer of same
day funds to such bank account as the Company shall designate at least two
Business Days prior to the Closing and which is identified on Schedule 1.2
hereto. The Company shall have delivered to you or to such other persons as you
shall direct, prior to Closing, a check dated the Closing Date in the amount of
any out-of-pocket expenses for which you or your investment advisor are entitled
to reimbursement pursuant to Section 1.5 hereof, including, without limitation,
the reasonable fees and expenses of your counsel, or at your election shall
authorize you to deduct such amount from the purchase price for the Securities,
provided that you agree to provide the Company with a statement describing any
amounts to be so paid at least one Business Day prior to the Closing.
1.3 Purchaser's Representations; Source of Funds; Brokers
(a) You represent that you are purchasing the Securities
solely for your own account and not as nominee or agent for any other person and
not with a view to, or for offer or sale in connection with, any distribution
thereof (within the meaning of the Securities Act) that would be in violation of
the securities laws of the United States of America or any state thereof,
without prejudice, however, to your right at all times to sell or otherwise
dispose of all or any part of said Securities pursuant to a registration
statement under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act, and subject, nevertheless, to
the disposition of your property being at all times within your control.
You further represent that you are knowledgeable,
sophisticated and experienced in business and financial matters; that you have
previously invested in securities similar to the Securities and fully understand
the limitations on transfer described in Section 1.3(b) hereof and the
restrictions on sales and other dispositions in this Agreement and the
Stockholders Agreement; that you are able to bear the economic risk of your
investment in the Securities and are presently able to afford the complete loss
of such investment; that you are an "accredited investor" as defined in
Regulation D promulgated under the Securities Act; and that you have been
afforded access to information about the Company and the Company's financial
condition, results of operations, business, property, management and prospects
sufficient to enable you to evaluate your investment in the Securities. You
acknowledge that you have conducted your own analysis of the Company's financial
condition and other foregoing factors in determining to make an investment in
the Securities.
(b) If you intend to sell or otherwise dispose of all or any
part of the Securities (other than pursuant to an effective registration
statement under the Securities Act), you will deliver to the Company a legal
opinion from counsel, and in form and substance, reasonably satisfactory to the
Company, that an exemption from registration under the Securities Act is
available; provided that if Shares are being sold pursuant to Rule 144, such
opinion will be required only if required by the Company's transfer agent or
otherwise reasonably requested by the Company. The Company will reimburse you
for the reasonable fees and expenses incurred by you in obtaining any such
opinion of counsel. Upon original issuance thereof, and until such time as the
same is no longer required under the applicable requirements of the Securities
Act, the Notes (and all securities issued in exchange therefor or substitution
thereof) shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED
IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, ASSIGNED,
- 2 -
PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF, AN EFFECTIVE
REGISTRATION UNDER THE ACT COVERING THE TRANSFER OR AN OPINION OF
COUNSEL, SATISFACTORY TO THE ISSUER, THAT REGISTRATION UNDER THE ACT IS
NOT REQUIRED."
In addition, all Notes shall bear the following legend until such time as the
same is no longer required under the applicable provisions of this Agreement:
"THE TRANSFER OF THIS NOTE ADDITIONALLY IS SUBJECT TO THE
PROVISIONS OF SECTION 1.8 OF THE PURCHASE AGREEMENT DATED AS OF OCTOBER
7, 1997 BETWEEN THE ISSUER AND THE PURCHASER OF THE NOTES."
In addition, all Shares will bear any other legend required by the Stockholders
Agreement; provided that the Company agrees, for the benefit of Purchaser, that
notwithstanding the requirement of any legend required by the Stockholders
Agreement, if Shares are being sold pursuant to Rule 144, an opinion of counsel
relating to the availability of an exemption from registration will be required
only if required by the Company's transfer agent or otherwise reasonably
requested by the Company.
(c) You represent that no part of the funds to be used to
purchase the Securities constitutes assets allocated to any trust which contains
the assets of any employee pension benefit plan listed on Schedule 4.14 (being
pension benefit plans with respect to which the Company or any corporation
considered an affiliate of the Company within the meaning of Section 407(d)(7)
of ERISA is a party in interest or disqualified person). The representation made
by you in the preceding sentence is made in reliance upon your review of the
list of employee pension benefit plans set forth on Schedule 4.14. As used in
this Section 1.3(c), the terms "employee pension benefit plan," "separate
account" and "party in interest" shall have the meanings assigned to such terms
in Section 3 of ERISA and the terms "disqualified person" and "prohibited
transaction" shall have the meanings assigned to such terms in Section 4975 of
the Code.
(d) The Purchaser has not dealt with any broker, finder,
commission agent or other Person in connection with the sale of the Securities
and the transactions contemplated by this Agreement and the Purchaser is not
under any obligation to pay any broker's or finder's fee or commission or
similar payment in connection with such transactions. The Purchaser hereby
agrees to indemnify and hold the Company harmless from and against any and all
actions, suits, claims, costs, expenses, losses, liabilities and/or obligations
in connection with or relating to any broker's or finder's fees or commission or
similar payment in connection with such transactions, except with respect to
such fees or commissions incurred by action of the Company, Sun Capital, ▇▇▇▇
Capital or their respective Affiliates (other than the Purchaser), so long as
the Purchaser receives notice of any such action, suit, claim, etc., reasonably
promptly after the Company become aware thereof; provided that the failure to
give such notice as provided in this sentence shall not relieve the Purchaser of
its obligations under this sentence except to the extent, and only to the
extent, that the Purchaser is actually prejudiced by such failure to give
notice.
1.4 Failure to Close; Postponement
If at the Closing any of the conditions to the Closing
specified in this Agreement shall not have been fulfilled to your reasonable
satisfaction or if the Closing fails to occur on or before October 31, 1997 (for
any reason other than your default or failure to fund the purchase of the
Securities), you shall, at your election and notwithstanding anything to the
contrary in this Agreement, be relieved of all further obligations under this
Agreement without thereby waiving any rights you may have by reason of such
nonfulfillment or failure. Nothing in this Section 1.4 shall operate to relieve
the Company from any of its obligations hereunder.
- 3 -
1.5 Expenses
(a) The Company agrees to pay or reimburse all reasonable
expenses relating to this Agreement, including but not limited to:
(1) the cost of preparing and reproducing this Agreement, the
Securities and any other documents contemplated hereby or thereby;
(2) all reasonable out-of-pocket expenses incurred by you or
your investment advisor in connection with the transactions contemplated by this
Agreement and the other documents referred to in clause (1) above, including,
without limitation, travel and lodging expenses and all other reasonable
out-of-pocket costs incurred in connection with your review of the Company's
business and operations;
(3) to the extent not specifically included in subparagraph
(2) immediately above, the reasonable fees and expenses of your counsel, ▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, in connection herewith;
(4) the cost of delivering to your home office or the office
of your designee, insured to your satisfaction, this Agreement, the Securities
and any other documents contemplated hereby or thereby;
(5) all reasonable out-of-pocket expenses incurred by you or
your investment advisor or your affiliates, including without limitation,
Equinox Investment Partners, L.L.C., in monitoring the Company and your
investment in the Securities, for so long as you hold any Securities; and
(6) all your reasonable out-of-pocket expenses (including the
reasonable fees and expenses of counsel) relating to any amendment,
modification, waiver, consent or preservation or enforcement of rights under
this Agreement or the Notes.
(b) In addition, the Company agrees to reimburse the Purchaser
for all reasonable out-of-pocket expenses (including the reasonable fees and
expenses of counsel) relating to any amendment, modification, waiver, consent or
preservation or enforcement of rights under the Stockholders Agreement or the
Agreement of Limited Partnership of Sun Multimedia Partners, L.P. (the
"Partnership Agreement"), without duplication of any reimbursement of expenses
available to you under the terms of the Stockholders Agreement or the
Partnership Agreement, and the Company agrees to reimburse the Purchaser for the
following costs and expenses (including those costs and expenses that by the
terms of the Stockholders Agreement are not reimbursable to other holders of the
Company's equity securities): (i) the reasonable fees and expenses of not more
than one counsel for the Purchaser in connection with a registration under
Section 9.1 or 9.2 of the Stockholders Agreement; (ii) the reasonable
out-of-pocket expenses incurred by the Purchaser in complying with the
requirements imposed by this Agreement or the Stockholders Agreement on the
transfer of any Securities, including counsel fees and expenses in connection
with the delivery of opinions or supplemental agreements required by the Company
in connection with such transfers and (iii) reasonable out-of-pocket expenses
incurred in connection with your service as a board member..
1.6 Indemnification
The Company (the "Indemnifying Party") hereby agrees, without
limitation as to time, to indemnify you and your Agents, Affiliates and partners
(collectively, the "Indemnified Parties") against, and hold you and them
harmless from, all losses, claims, damages, liabilities and costs (including the
costs of preparation and reasonable attorneys' fees and expenses) (collectively,
"Losses") incurred by you or them and arising out of or as a result of any
investigation, litigation or other proceeding (whether or not you or they are a
party thereto) related to the entering into and/or performance of this
Agreement, the Notes, the Partnership
- 4 -
Agreement and the Stockholders Agreement or the use of the proceeds from the
sale of the Securities hereunder or the consummation of any other transactions
contemplated in this Agreement, the Notes, the Partnership Agreement and the
Stockholders Agreement (but excluding any such Losses, to the extent incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified). The Indemnifying Party agrees to reimburse any Indemnified Party
promptly for all such indemnifiable Losses as they are incurred by such
Indemnified Party. The obligations of the Indemnifying Party to each Indemnified
Party hereunder shall be separate obligations and the Indemnifying Party's
liability to any such Indemnified Party hereunder shall not be extinguished
solely because any other Indemnified Party is not entitled to indemnity
hereunder. The obligations of the Indemnifying Party under this Section 1.6
shall survive the payment or prepayment of the Notes, at maturity, upon
acceleration, redemption or otherwise, any transfer of the Securities by you and
the termination of this Agreement.
In case any action shall be brought against any Indemnified
Party with respect to which indemnity may be sought against the Indemnifying
Party hereunder, such Indemnified Party shall promptly notify the Indemnifying
Party in writing and it shall, if it so desires, assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Party and payment of all reasonable fees and expenses. The failure to so notify
such Indemnifying Party shall not affect any obligation it may have to any
Indemnified Party under this letter or otherwise except to the extent it is
adversely affected by such failure. Each Indemnified Party shall have the right
to employ separate counsel in such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Indemnified Party unless: (i) the Indemnifying Party has agreed in writing
to pay such expenses; or (ii) the Indemnifying Party has failed to assume the
defense and employ counsel or (iii) the named parties to any such action
(including any impleaded parties) include any Indemnified Party and such
Indemnifying Party, and such Indemnified Party shall have been advised by
outside counsel that there may be one or more legal defenses available to it
which are inconsistent with or additional to those available to the Indemnifying
Party, and that such differing or additional defenses would present such counsel
with a conflict or interest disabling it from pursuing a joint defense of the
Company and such Indemnified Party, provided that, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ separate
counsel in the circumstances described in clauses (i), (ii) or (iii) above, the
Indemnifying Party shall not have the right to assume the defense of such action
or proceeding; provided, however, that the Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be responsible hereunder for
the fees and expenses of more than one such firm of separate counsel (in
addition to any necessary local counsel) for all Indemnified Parties, which
counsel shall be designated by such Indemnified Parties. The Indemnifying Party
shall not be liable for any settlement of any such action effected without its
written consent (which shall not be unreasonably withheld). The Indemnifying
Party agrees that it will not, without the Indemnified Party's prior consent,
which shall not be unreasonably withheld, settle or compromise any pending or
threatened claim, action or suit in respect of which indemnification or
contribution may be sought hereunder unless the foregoing contains an
unconditional release of such Indemnified Party from all liability and
obligation arising therefrom.
1.7 Contribution
If the indemnification provided for in Section 1.6 is
unavailable to any Indemnified Party in respect of any Losses which, by the
terms of Section 1.6, would otherwise be indemnifiable thereunder, then the
Indemnifying Party, in lieu of indemnifying such Persons, shall have an
obligation to contribute to the amount paid or payable by such Persons as a
result of such Losses in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party, its subsidiaries and/or any other
Person or Persons (other than you and the other Indemnified Parties) and you and
the other Indemnified Parties in connection with the actions which resulted in
such Losses as well as any other relevant equitable considerations. The amount
paid
- 5 -
or payable by any such Person as a result of the Losses referred to above shall
be deemed to include, subject to the limitations set forth in Section 1.6, any
legal or other fees or expenses reasonably incurred by such Person in connection
with any investigation, lawsuit or legal or administrative action or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 1.7 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
1.8 Registration and Transfer of Securities
(a) The Company shall maintain a register for the Securities
in which it shall provide for the registration and transfer of the Securities.
Transfers of Shares will be subject to the restrictions and conditions set forth
in the Stockholders Agreement. In addition to the limitations prescribed by
Section 1.3(b), and except as otherwise consented to by the Company, transfers
of Notes may be made only as follows: (i) Notes may be transferred to any Fund
Investor or Affiliate of any Fund Investor; (ii) with the approval of the
Company's Board of Directors, Notes may be transferred to the Company or any
Subsidiary of the Company; and (iii) Notes may be transferred by any Holder in a
liquidating distribution of such Holder to its general and limited partners. In
no event will Notes be transferred to any holder who is not an "accredited
investor" as defined in Regulation D under the Securities Act or to any Person
or Persons if as a result of such transfer there would be at any time more than
twenty-five (25) holders of Notes.
(b) Subject to the transferee's compliance with any transfer
restrictions imposed by this Agreement or the Stockholders Agreement, upon
surrender for registration of transfer of any Note or Share, the Company, at its
expense, shall execute and deliver, in the name of the designated transferee or
transferees, one or more new Notes or Share certificates of the same type, and
of a like aggregate principal amount or number of shares.
(c) Notes or Share certificates may be exchanged at the option
of any Holder thereof for Notes or Share certificates of a like aggregate
principal amount or number of shares, but in different denominations. Whenever
any Notes or Share certificates are so surrendered for exchange, the Company, at
its expense, shall execute and deliver the Notes or Share certificates which the
holder making the exchange is entitled to receive.
(d) All Notes or Share certificates issued upon any such
registration of transfer or exchange of such Notes or Share certificates shall
be the legal and valid obligations of the Company, evidencing the same
interests, and entitled to the same benefits, as Notes or Share surrendered upon
such registration of transfer or exchange.
(e) Every Note or Share certificate presented or surrendered
for registration of transfer or exchange shall (if so required by the Company)
be duly endorsed or shall be accompanied by a written instrument of transfer in
form satisfactory to the Company duly executed by the Holder thereof or its
attorney duly authorized in writing.
SECTION 2. CLOSING CONDITIONS
Your obligation to purchase and pay for the Securities to be
delivered to you at the Closing shall be subject to the satisfaction of the
following conditions on or before the Closing Date:
- 6 -
2.1 Opinion of Counsel
You shall have received a favorable opinion, dated the Closing
Date and addressed to you, from Ropes & Gray, counsel for the Company, in form
and substance satisfactory to you, as to the matters set forth on Annex B to
this Agreement. In rendering such opinion, such counsel may rely as to factual
matters upon certificates or other documents furnished by officers and directors
of the Company (copies of which shall be delivered to you) and by government
officials, and upon such other documents as such counsel deem appropriate as a
basis for its opinions. Such counsel may specify the jurisdictions in which they
are admitted to practice and that they are not admitted to practice in any other
jurisdiction and are not experts in the law of any other jurisdiction.
2.2 Representations and Warranties True; No Event of Default
The representations and warranties of the Company contained in
Section 4 hereof shall be true at and as of the Closing Date, after giving
effect to the transactions contemplated by this Agreement. There shall exist at
and as of the Closing Date (after giving effect to the transactions contemplated
by this Agreement) no Default or Event of Default.
2.3 Compliance with this Agreement
The Company shall have performed and complied with all
agreements, covenants and conditions contained herein and any other document
contemplated hereby which are required to be performed or complied with by the
Company on or before the Closing Date.
2.4 Officers' Certificate
You shall have received a certificate or certificates, dated
the Closing Date and signed by each of the Chief Executive Officer and the Chief
Financial Officer of the Company, certifying that the conditions set forth in
Sections 2.2, 2.3, 2.6, 2.7 and 2.8 hereof are satisfied on and as of such date
and further certifying as to such other matters as you may request in the
exercise of your reasonable discretion.
2.5 Purchase Permitted by Applicable Laws; Legal Investment
Your purchase of and payment for the Securities (a) shall not
be prohibited by any applicable law or governmental regulation (including,
without limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System), (b) shall not subject you to any penalty or, in your
reasonable judgment, other onerous condition under or pursuant to any applicable
law or governmental regulation, and (c) shall be permitted by the laws and
regulations of the jurisdictions to which you are subject.
2.6 Completion of Other Transactions
Prior to the sale to you of the Securities at the Closing, (a)
the Merger shall be consummated in accordance with its terms; (b) Speaker
Acquisition Corp. shall have issued and sold to Sun Multimedia Partners, L.P.
967,647 shares of its common stock for a net purchase price of $5.6322 per
share, pursuant to the terms of that certain Stock Subscription Agreement, dated
as of October 7, 1997, by and between Speaker Acquisition Corp. and Sun
Multimedia Partners, L.P.; and (c) Sun Multimedia Partners, L.P. shall have
issued or sold to you the Class B Interests reflected on a schedule to the
Partnership Agreement for an aggregate investment of $1,430,000 pursuant to the
terms of the Partnership Agreement.
- 7 -
Counterparts, conformed as executed, of all other documents
delivered at the Closing, shall be delivered to you.
2.7 Consents and Permits
The Company shall have received all consents, approvals, and
authorizations necessary to permit the issuance and sale of the Securities and
the consummation of the other transactions contemplated hereby.
2.8 Stockholders Agreement
The Stockholders Agreement shall have been entered into by the
parties thereto in the form attached hereto as Annex C, and you shall have
received an original, duly executed by the parties thereto, of the Stockholders
Agreement.
2.9 Financial Condition; Sources and Uses of Funds
You shall have received from ▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Financial
Officer of the Company, (a) certificates of financial condition for the Company
after giving effect to the issuance of the Securities, the application of the
proceeds therefrom, and the other transactions contemplated hereby, which
certificates shall be satisfactory to you and your counsel, and (b) a detailed
statement, dated the Closing Date, of sources and uses of funds from your
investment in the Securities and the other transactions being undertaken by the
Company concurrently herewith.
SECTION 3. HOLDER'S SPECIAL RIGHTS
The provisions of this Section 3 (other than Section 3.3(b))
shall apply, notwithstanding anything to the contrary in this Agreement, with
respect to Transfer Restricted Securities only.
3.1 Delivery Expenses
If a Holder surrenders any Security to the Company for
substitution or replacement, the Company shall pay the cost of delivering to
such ▇▇▇▇▇▇'s home office or to the office of such ▇▇▇▇▇▇'s designee from the
Company, as the case may be, insured to such ▇▇▇▇▇▇'s satisfaction, each
Security issued in substitution or replacement for the surrendered Security.
3.2 Issue Taxes
The Company agrees to pay all transfer, stamp and other
similar taxes in connection with the issuance, sale, delivery or transfer by the
Company to the Purchaser of the Securities and the execution and delivery of
this Agreement and any other agreements and instruments contemplated thereby and
any modification of any of such Securities, Agreement or such other agreements
and instruments and will save you harmless without limitation as to time against
any and all liabilities with respect to all such taxes. The obligations of the
Company under this Section 3.2 shall survive the payment or prepayment of the
Notes, the cancellation of the Shares and the termination of this Agreement.
- 8 -
3.3 Direct Payment
(a) The Company will pay or cause to be paid all amounts
payable with respect to any Note (without any presentment of such Note and
without any notation of such payment being made thereon) by crediting (before
1:00 p.m., New York time), by federal funds bank wire transfer to each Holder's
account in any bank in the United States as may be designated and specified in
writing by such Holder at least two Business Days prior thereto. The Purchaser's
initial bank account for this purpose is on the signature page hereof.
(b) Notwithstanding anything to the contrary contained in the
Notes, if any principal amount payable with respect to a Note is payable on a
Legal Holiday, then the Company shall pay such amount on the next succeeding
Business Day, and interest shall accrue on such amount until the date on which
such amount is paid and payment of such accrued interest shall be made
concurrently with the payment of such amount, provided that the Company may
elect to pay in full (but not in part) any such amount on the last Business Day
prior to the date such payment otherwise would be due, and no such additional
interest shall accrue on such amount. Notwithstanding anything to the contrary
contained in the Notes, if any interest payable with respect to a Note is
payable on a Legal Holiday, then the Company shall pay such interest on the next
succeeding Business Day, and such extension of time shall be included in the
computation of the interest payment, provided that the Company may elect to pay
in full (but not in part) any such interest on the last Business Day prior to
the date such payment otherwise would be due, and such diminution in time shall
be included in the computation of the interest payment.
3.4 Lost, Destroyed, Stolen, etc. Securities
Notwithstanding any provision to the contrary, if any Security
of which the Purchaser or any other institutional Holder (or nominee thereof)
which is a transferee is the owner is mutilated, destroyed, lost or stolen, then
the affidavit of the Purchaser's or such ▇▇▇▇▇▇'s treasurer or assistant
treasurer (or other authorized officer), briefly setting forth the circumstances
with respect to such mutilation, destruction, loss or theft, shall be accepted
as satisfactory evidence thereof, and no indemnity, security or payment of
charges or expenses shall be required as a condition to the execution and
delivery by the Company or the transfer agent, as the case may be, with respect
to such Security, of new Securities for a like aggregate principal amount or
number of shares, as applicable, in substitution therefor, other than the
Purchaser's or such Holder's unsecured written agreement reasonably satisfactory
to indemnify the Company or the transfer agent, as the case may be.
SECTION 4. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants that, as of the
date hereof after giving effect to the Merger:
4.1 Organization, Standing and Qualification
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation; has all requisite power and authority to own or lease and operate
its properties and to carry on its business as now conducted and as proposed to
be conducted; and is duly qualified or licensed to do business as a foreign
corporation in good standing in all jurisdictions in which it owns or leases
property or in which the conduct of its business requires it so to qualify or be
licensed, in each case, except where the absence of such power or authority or
the failure to be so qualified or licensed would not have a Material Adverse
Effect. The Company has heretofore delivered to your counsel complete and
correct copies of its Charter Documents as presently in effect.
- 9 -
(b) The Company has all requisite power and authority to enter
into and perform all of its obligations under this Agreement and the
Stockholders Agreement, to issue and perform all of its obligations under the
Securities and to carry out the transactions contemplated hereby and thereby.
(c) The Company has identified on Schedule 4.1(c) (i) the name
and jurisdiction of incorporation or organization of each of its Subsidiaries
and (ii) the percentage of the issued and the outstanding capital stock and
other equity securities (including rights, warrants and options to acquire, and
all securities convertible into or exchangeable for, such capital stock) of each
such Subsidiary owned directly or indirectly by the Company. All such shares of
capital stock and other equity securities have been duly authorized and validly
issued and are fully paid and nonassessable and are owned by the Company and its
Subsidiaries beneficially and of record, free and clear of any Lien, except for
Permitted Liens and such other Liens as set forth on Schedule 4.1(c).
4.2 Capitalization
The authorized capital stock of the Company consists solely of
2,500,000 shares of Common Stock, $.01 par value, of which 1,258,236 shares are
issued and outstanding (after giving effect to the issuance of the Shares), and
3,000 shares of preferred stock, $.01 par value, of which no shares are issued
and outstanding.
Except as otherwise set forth above, all such outstanding
shares (including the Shares) have been duly authorized and validly issued and
are fully paid and nonassessable.
Except as set forth in Schedule 4.2 hereto or as provided in
the Stockholders Agreement, (a) there are no outstanding subscriptions,
warrants, options, calls or commitments of any character relating to or
entitling any Person to purchase or otherwise acquire any Capital Stock of the
Company; (b) there are no obligations or securities convertible into or
exchangeable or exercisable for shares of Capital Stock of the Company or any
commitments of any character relating to or entitling any Person to purchase or
otherwise acquire any such obligations or securities; and (c) there are no
preemptive or similar rights to subscribe for or to purchase any Capital Stock
of the Company.
Except for the exceptions noted in the immediately preceding
paragraph, Schedule 4.2 identifies (i) all holders of Capital Stock of the
Company as of the date hereof after giving effect to the Merger, and all holders
of outstanding rights, warrants and options to acquire Capital Stock of the
Company as of the date hereof after giving effect to the Merger, (ii) the title
of the class and series, and amount, of securities held by each of such holders
and (iii) the number of shares of Common Stock of the Company into which the
securities held by each of such holders may be exercised or converted. Schedule
4.2 additionally sets forth the pro forma fully diluted share capitalization of
the Company, subject to the foregoing exceptions.
The Company has not entered into any agreement to register its
equity or debt securities under the Securities Act, except for the Stockholders
Agreement or as identified on Schedule 4.2 hereto.
4.3 Authorization of Agreement and Other Documents
(a) The Recapitalization has been consummated substantially in
accordance with the terms of the Recapitalization Agreement and in accordance
with applicable laws.
(b) The Company has taken all actions necessary to authorize
it to enter into and perform all of its obligations under this Agreement and the
Stockholders Agreement, to issue and perform all of its
- 10 -
obligations under the Securities and to consummate the transactions contemplated
hereby and thereby. This Agreement, the Notes and the Stockholders Agreement are
legal, valid and binding obligations of the Company, enforceable against it in
accordance with their respective terms, except for (a) the effect thereon of
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting the rights of creditors generally and (b) limitations
imposed by federal or state law or equitable principles upon the specific
enforceability of any of the remedies, covenants or other provisions thereof and
upon the availability of injunctive relief or other equitable remedies.
4.4 No Violation
Except as set forth in Schedule 4.4, neither the execution or
delivery of this Agreement or the Stockholders Agreement, nor the issuance, sale
or delivery of the Securities, nor the performance by the Company of its
obligations under this Agreement, the Notes or the Stockholders Agreement nor
the consummation of the transactions contemplated hereby or thereby, will:
(a) violate any provision of the Charter Documents of the
Company;
(b) violate any statute, law, rule or regulation or any
judgment, decree, order, regulation or rule of any court or
governmental authority to which the Company or any of its properties
may be subject;
(c) permit or cause the acceleration of the maturity of any
debt or obligation of the Company the acceleration of which would
result in a Material Adverse Effect; or
(d) violate, or be in conflict with, or constitute a default
under, or permit the termination of, or require the consent of any
Person under, or result in the creation of any Lien upon any property
of the Company under, any mortgage, indenture, loan agreement, note,
debenture or other agreement for borrowed money or any other material
agreement to which the Company is a party or by which the Company (or
its properties) may be bound, other than such violations, conflicts,
defaults, terminations and Liens, or such failures to obtain consents,
which could not reasonably be expected to result in a Material Adverse
Effect.
The Company is not in default (without giving effect to any
grace or cure period or notice requirement) under any agreement for borrowed
money or under any agreement pursuant to which any of its securities were sold,
except for such defaults as could not reasonably be expected to result in a
Material Adverse Effect.
4.5 Use of Proceeds
The net proceeds from the sale of the Securities hereunder
will be used solely for the refinancing of existing debt, for the payment of the
cash consideration provided for in the Recapitalization Agreement and for
general corporate purposes, including working capital and the payment of fees
and expenses incurred in connection with the transactions contemplated by this
Agreement and the Recapitalization Agreement. Immediately upon Closing and the
effectiveness of the Merger, the Credit Agreement shall be in full force and
effect, under which the Company will have (i) up to $13.0 million in available
revolving credit borrowings, subject to customary conditions precedent as
specified in such credit facility, of which up to $1.5 million will be drawn as
of the Closing Date, and (ii) $27.0 million in term loans, all of which will be
outstanding as of the Closing Date.
- 11 -
4.6 No Default
No event has occurred, the occurrence of which (and no event
has failed to occur, the non-occurrence of which) constitutes a Default or Event
of Default.
4.7 Outstanding Indebtedness; Senior Debt; Liens
The capitalization table on Schedule 4.7 sets forth and
identifies in reasonable detail all outstanding short-term and long-term
Indebtedness of the Company (other than Indebtedness that in the aggregate does
not exceed $100,000), after giving effect to the Merger and the transactions
contemplated by Sections 2.6 and 4.5 hereof (excluding the Notes). Except for
Indebtedness under the Credit Agreement, Schedule 4.7 includes the names of the
holders, principal amounts, required interest payments, maturity dates, any
security therefor and any other entity which directly or indirectly guaranteed
all such Indebtedness.
There are no Liens outstanding on the date hereof on any
material property or asset of the Company, other than Permitted Liens.
4.8 Financial Statements
Attached hereto as Annex D are (i) the audited consolidated
balance sheet and consolidated statement of income and cash flows of the Company
as of and for the fiscal year ended March 31, 1997, (ii) the unaudited
consolidated balance sheet and consolidated statement of income of the Company
as of and for the five months ended August 31, 1997, and (iii) the pro forma
consolidated balance sheet of the Company and its Subsidiaries as of August 31,
1997.
Except as otherwise stated in the notes thereto, and for such
matters as would be reflected in notes or for normal year-end audit adjustments
for the statements for the period ended August 31, 1997, such balance sheets and
statements of income and cash flows referred to in clauses (i) and (ii) (which
reflect all adjustments, consisting only of normally recurring accruals which,
in the opinion of the Company, are necessary for fair presentation) have been
prepared in conformity with GAAP (or, for the statements for the five-month
period ended August 31, 1997, substantially in conformity with GAAP) applied on
a consistent basis through all the periods involved and fairly present the
consolidated financial position and results of operations of the Company as of
the dates and for the periods indicated.
Except for liabilities incurred in connection with the
transactions contemplated hereby, and as reflected in such balance sheets and
any notes thereto (subject to the foregoing qualifications), the Company has no
liabilities, absolute or contingent, other than current ordinary course
liabilities incurred in connection with the conduct, consistent with past
practices, of the business of the Company, and other than such liabilities or
obligations which, individually or in the aggregate, would not be reasonably
likely to have a Material Adverse Effect.
4.9 No Material Adverse Change
Except as set forth on Schedule 4.9, since August 31, 1997,
the Company has not suffered any material adverse change in its properties,
business, operations, earnings, assets, liabilities or condition (financial or
otherwise), except for liabilities incurred in connection with the transactions
contemplated hereby.
- 12 -
4.10 Full Disclosure
All factual information (taken as a whole) heretofore or
contemporaneously furnished to the Purchaser in connection with the negotiation
and sale of the Securities by or on behalf of the Company (including information
contained in Schedules and Annexes to this Agreement) is true and correct in all
material respects as of the date when made and is not incomplete by failing to
state material facts necessary to make such information (taken as a whole) not
misleading in light of the circumstances under which such information was
provided.
4.11 Litigation
Except as set forth on Schedule 4.11, there is no action,
proceeding or investigation pending, or to the knowledge of the management of
the Company after due inquiry, threatened, against or affecting the Company in
any court or before any governmental authority or arbitration board or tribunal,
foreign or domestic, except for such actions which, if adversely determined,
singly and in the aggregate, would not have a Material Adverse Effect, and there
is no such action seeking to restrain, enjoin, prevent the consummation of or
otherwise challenge, this Agreement, the Recapitalization Agreement, the
Stockholders Agreement or the issuance of the Securities or the other
transactions contemplated hereby or thereby.
The Company is not subject to any judgment, order, decree,
rule or regulation of any court, governmental authority or arbitration board or
tribunal which has or which can reasonably be expected to have a Material
Adverse Effect.
4.12 Title to Properties
Except for such defects of title or Liens as could not
reasonably be expected to have a Material Adverse Effect and except for
Permitted Liens, the Company has good and marketable title to, or a validly
subsisting leasehold interest in, all material properties (tangible or
intangible) it purports to own or lease, free and clear of all Liens.
4.13 Taxes
Except as could not reasonably be expected to have a Material
Adverse Effect, all tax returns required to be filed by the Company in any
jurisdiction (including foreign jurisdictions) have been so filed, and all
taxes, assessments, fees and other charges due or claimed to be due from the
Company which are due and payable have been paid, other than those being
contested in good faith or those currently payable without penalty or interest.
The Company knows of no actual or proposed material additional tax assessments
for any fiscal period against the Company or of any basis therefor. Except as
stated in Schedule 4.13, none of the Company's tax returns are under audit, and
no waivers of the statute of limitations or extensions of time with respect to
any tax returns have been granted by the Company. The Company is not a United
States real property holding corporation as defined in Section 897(c)(2) of the
Internal Revenue Code.
4.14 ERISA
(a) The execution and delivery of this Agreement and the sale
of the Securities to be purchased by you will not involve any material
prohibited transaction within the meaning of ERISA or Section 4975 of the Code.
The representation made in the preceding sentence is made in reliance upon and
subject to the accuracy of your representation in Section 1.3 hereof as to the
source of the funds to be used by you to purchase said Securities.
- 13 -
(b) Schedule 4.14 sets forth each Plan; each Plan (and each
related trust, insurance contract or fund) is in substantial compliance with its
terms and with all applicable laws, including without limitation ERISA and the
Code; each Plan (and related trust, if any) which is intended to be qualified
under Section 401(a) of the Code has received a determination letter from the
Internal Revenue Service to the effect that it meets the requirements of
Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; no
Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA)
is insolvent or in reorganization; no Plan has an Unfunded Current Liability; no
Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an
accumulated funding deficiency, within the meaning of such sections of the Code
or ERISA, or has applied for or received a waiver of an accumulated funding
deficiency or an extension of any amortization period, within the meaning of
Section 412 of the Code or Section 303 or 304 of ERISA; all contributions
required to be made with respect to a Plan have been timely made; neither the
Company nor any Subsidiary of the Company nor any ERISA Affiliate has incurred
any material liability (including any material indirect, contingent or secondary
liability) to or on account of a Plan pursuant to Section 409, 502(i), 502(l),
515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29),
4971 or 4975 of the Code or expects to incur any such liability under any of the
foregoing sections with respect to any Plan; no proceedings have been instituted
to terminate, or to appoint a trustee to administer, any Plan which is subject
to Title IV of ERISA; no condition exists which presents a material risk to the
Company or any Subsidiary of the Company or any ERISA Affiliate of incurring a
liability to or on account of a Plan pursuant to the foregoing provisions of
ERISA and the Code; no action, suit, proceeding, hearing, audit or investigation
with respect to the administration, operation or the investment of assets of any
Plan (other than routine claims for benefits) is pending, expected or
threatened; using actuarial assumptions and computation methods consistent with
Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the
Company and its Subsidiaries and its ERISA Affiliates to all Plans which are
multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of
a complete withdrawal therefrom, as of the close of the most recent fiscal year
of each such Plan ended prior to the date hereof would not exceed $500,000; each
group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2)
of the Code) which covers or has covered employees or former employees of the
Company any subsidiary of the Company or any ERISA Affiliate has at all times
been operated in compliance with the provisions of Part 6 of subtitle B of Title
I of ERISA and Section 4980B of the Code; no lien imposed under the Code or
ERISA on the assets of the Company or any Subsidiary of the Company or any ERISA
Affiliate exists or is likely to arise on account of any Plan; and the Company
and its Subsidiaries may cease contributions to or terminate any employee
benefit plan maintained by any of them without incurring any material liability.
4.15 Compliance with Laws
The Company is not in violation of any statutes, laws,
ordinances, or governmental rules or regulations or any judgment, order or
decree (federal, state, local or foreign) to which it is subject or has failed
to obtain any licenses, permits, franchises or other governmental authorizations
necessary to the ownership or operation of its properties or the conduct of its
businesses except, in each case, where such violation or failure could not be
reasonably expected to have a Material Adverse Effect.
4.16 No Violation of Regulations of Board of Governors of Federal Reserve
System
None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of the
Securities) will violate or result in a violation of Section 7 of the Exchange
Act or any regulation issued pursuant thereto, including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System.
- 14 -
4.17 Private Offering
Assuming the accuracy of your representations contained in
Section 1.3(a) hereof, the sale of the Securities hereunder is exempt from the
registration and prospectus delivery requirements of the Securities Act. In
offering and selling the Securities, the Company has used no form of general
solicitation or general advertising that would cause such offer or sale to be
deemed a public offering under Section 4(2) of the Securities Act.
You are the sole purchaser of the Securities. Neither the
Company nor anyone acting on its behalf, will offer or sell the Securities, or
any portion of them, if such offer or sale might bring the issuance and sale of
the Securities to you hereunder within the provisions of Section 5 of the
Securities Act, or offer any similar securities for issuance or sale to, or
solicit any offer to acquire any of the same from, or otherwise approach or
negotiate with respect thereto with, anyone if the sale of the Securities and
any such securities could be integrated as a single offering for the purposes of
the Securities Act.
4.18 Governmental Regulations
The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, and is not a "holding company" or a
"subsidiary" or "affiliate" of a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended. The Company is not
subject to regulation under any federal or state statute or regulation limiting
its ability to incur indebtedness for borrowed money (other than Regulation X of
the Board of Governors of the Federal Reserve System).
4.19 SEC Reports
The Company is not currently required to file any reports with
the SEC under Section 13 or 15(d) of the Exchange Act.
4.20 Brokers
The Company has not dealt with any broker, finder, commission
agent or other Person in connection with the sale of the Securities and the
transactions contemplated by this Agreement (other than the Purchaser) and the
Company is not under any obligation to pay any broker's or finder's fee or
commission or similar payment in connection with such transactions (other than
the closing fee payable by the Company to the Purchaser or its designees as set
forth in Section 1.2). The Company hereby agrees to indemnify and hold the
Holders harmless from and against any and all actions, suits, claims, costs,
expenses, losses, liabilities and/or obligations in connection with or relating
to any broker's or finder's fees or commission or similar payment in connection
with such transactions, except with respect to such fees or commissions incurred
by the Purchaser for its account, so long as the Company receives notice of any
such action, suit, claim, etc., reasonably promptly after the Holders become
aware thereof; provided that the failure to give such notice as provided in this
sentence shall not relieve the Company of its obligations under this sentence
except to the extent, and only to the extent, that the Company is actually
prejudiced by such failure to give notice.
4.21 Environmental Compliance
(a) The Company each of its Subsidiaries and each Predecessor
Corporation has complied with all applicable Environmental Laws and the
requirements of any permits issued under such Environmental Laws. There are no
pending or, to the best knowledge of the Company, past or threatened
Environmental Claims against the Company or any of its Subsidiaries or any Real
Property owned or operated by the
- 15 -
Company or any of its Subsidiaries. There are no facts, circumstances,
conditions or occurrences on any Real Property owned or operated by the Company
or any of its Subsidiaries or, to the best knowledge of the Company, on any
property adjoining or in the vicinity of any such Real Property that would
reasonably be expected (i) to form the basis of an Environmental Claim against
the Company or any of its Subsidiaries or any such Real Property or (ii) to
cause any such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property by Company or any of its
Subsidiaries under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated,
used, treated or stored on, or transported to or from, any Real Property owned
or operated by the Company or any of its Subsidiaries or any Predecessor
Corporation where such generation, use, treatment or storage has violated or
would reasonably be expected to violate any Environmental Law. Hazardous
Materials have not at any time been Released on or from any Real Property owned
or operated by the Company or any of its Subsidiaries or any Predecessor
Corporation. There are not now any underground storage tanks located on any Real
Property owned or operated by the Company or any of its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section
4.21 the representations made in this Section 4.21 shall only be untrue if the
aggregate effect of all conditions, failures, noncompliances, Environmental
Claims, Releases and presence of underground storage tanks, in each case of the
types described above, could reasonably be expected to have a Material Adverse
Effect.
4.22 Intellectual Property
Except as disclosed on Schedule 4.22 or as could not
reasonably be expected to have a Material Adverse Effect, the Company owns, or
is licensed under, and has the rights to use, all patents, inventions,
trademarks and trade names (collectively, "Intellectual Property") used in, or
necessary for the conduct of, its business as currently conducted, and the
consummation of the transactions contemplated by this Agreement or the
Recapitalization Agreement will not alter or impair any such rights.
4.23 Solvency
After giving effect to the issuance of the Securities, the
consummation of the Merger and the execution, delivery and performance of this
Agreement and any instrument governing Indebtedness of the Company incurred as
of the Closing Date, the Company is not (x) insolvent or (y) left with
unreasonably small capital with which to engage in its anticipated business, and
the Company has not, as of the Closing Date, incurred debts beyond its ability
to pay such debts as they mature.
4.24 Labor Relations
The Company is not engaged in any unfair labor practice that
could reasonably be expected to have a Material Adverse Effect. Except as could
not reasonably be expected to have a Material Adverse Effect, there is (a) no
unfair labor practice complaint pending or to the best knowledge of the Company,
threatened against the Company before the National Labor Relations Board and no
grievance or arbitration proceeding arising out of or under collective
bargaining agreements is so pending or known to be threatened, (b) no strike,
labor dispute, slowdown or stoppage pending or to the best knowledge of the
Company, threatened, against the Company, and (c) no union representation
question existing with respect to the employees of the Company and no union
organizing activities are taking place.
- 16 -
4.25 Material Contracts
The Purchaser has heretofore been provided with all material
contracts and licenses to which the Company is a party or is bound, and all such
contracts and licenses the breach or termination of which would have a Material
Adverse Effect (collectively, the "Material Contracts"). Except as set forth on
Schedule 4.25 or as could not reasonably be expected to have a Material Adverse
Effect, all such Material Contracts are in full force and effect.
4.26 Survival of Representations and Warranties
All statements contained in any certificate delivered to you
by or on behalf of the Company pursuant to this Agreement shall be deemed to
constitute representations and warranties under this Agreement with the same
force and effect as the representations and warranties expressly set forth
herein. All of the Company's representations and warranties thereunder and
hereunder shall survive the execution and delivery of the same, any
investigation by you and the issuance of the Securities.
SECTION 5. COVENANTS
So long as any of the Notes remain unpaid and outstanding, the
Company covenants to the Holders of outstanding Notes as follows:
5.1 Payment of Notes; Satisfaction of Obligations
The Company shall pay the principal of and interest on the
Notes on the dates and in the manner provided in the Notes.
If there has occurred and is continuing any Event of Default
under Sections 6.1(1) or 6.1(2) hereof, then to the extent lawful, the Company
shall pay interest (including interest accruing after the commencement of any
proceeding under any Bankruptcy Law) on all unpaid amounts outstanding under the
Notes (including overdue installments of principal or interest) at the Default
Rate.
5.2 Delivery of Financial Statements and Reports; SEC Reports
(a) The Company will deliver to each Holder of Securities
the following:
(1) within 30 days after the last day of each fiscal
month of the Company (or within 45 days in the case of fiscal
quarter-end or within 90 days in the case of fiscal year end), a
consolidated balance sheet of the Company and its Subsidiaries as of
the end of such month and related consolidated statements of income and
retained earnings and of cash flow of the Company and its Subsidiaries
for such month and for the portion of the fiscal year through the end
of such month, all in reasonable detail and prepared in accordance with
GAAP consistently applied (subject to normal year-end audit adjustments
and the absence of footnotes), and accompanied by a comparison of
current month results and year-to-date results as reported in such
consolidated statements to results for the corresponding periods of the
prior fiscal year;
(2) within 90 days after the close of each fiscal
year of the Company, an audited consolidated balance sheet of the
Company and its Subsidiaries as of the close of such fiscal year, and
related audited consolidated statements of income and retained earnings
and of cash flow of the Company and its Subsidiaries for such fiscal
year, reported on (without any material qualification arising from the
scope of the audit) by Price Waterhouse LLP or another nationally
recognized firm
- 17 -
of independent certified public accountants and prepared in accordance
with GAAP consistently applied;
(3) within 60 days after the first day of each fiscal
year beginning on or after April 1, 1998, reasonably detailed quarterly
budget plans for the Company for such fiscal year;
(4) as soon as available to the Company, copies of
any financial statements and other reports prepared with respect to
nonconsolidated subsidiaries or joint ventures in which the Company has
made any Investment or otherwise has any ownership interest, in the
form received or prepared by the Company;
(5) copies of all auditors' reports delivered to
holders of Senior Debt under Section 7.01(g) of the Credit Agreement or
any successor provision; and
(6) copies of any compliance certificates or notice
of default or litigation delivered to holders of Senior Debt under
Sections 7.01(e) or (f) of the Credit Agreement or any successor
provision.
(b) Each financial statement delivered pursuant to paragraph
(a) (1) and (2) of this Section 5.2 shall be in a form reasonably acceptable to
the Purchaser (or, if the Purchaser is no longer a holder of Transfer Restricted
Securities, a Holder Representative). Financial statements that are either in
the form delivered under Section 7.01 of the Credit Agreement or in a form
substantially consistent with or providing the information included in the
financial statements delivered to the Purchaser as of the Closing Date shall be
deemed to comply with the foregoing requirements.
(c) The requirements of paragraphs (a) and (b) of this Section
5.2 shall not apply to the Company in the event that the Company is required to
deliver and does deliver reports to the Holders pursuant to Section 5.2(e).
(d) Nothing in this Section shall be deemed to require the
Company to consolidate the results of operations of any person in its financial
statements, if such consolidation is not otherwise required pursuant to GAAP.
(e) The Company shall deliver to the Holders within 15 days
after it files them with the SEC copies of any annual reports and any
information, documents and other reports which the Company becomes required to
file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
5.3 Compliance Certificate
(a) The Company shall deliver to the Holders, within 45 days
after the end of each fiscal quarter and within 90 days after the end of each
fiscal year of the Company an Officers' Certificate stating that to such
officer's knowledge no Default or Event of Default has occurred (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he or she may have knowledge). The Officers'
Certificate shall set forth all financial calculations for such fiscal quarter
or fiscal year necessary to demonstrate the Company's compliance with Sections
5.11 hereof.
(b) The Company will deliver to the Holders, forthwith upon
becoming aware of any Default or Event of Default, a notice specifying in
reasonable detail such Default or Event of Default and the nature of any
remedial or corrective action the Company proposes to take with respect thereto.
- 18 -
5.4 Stay, Extension and Usury Laws
The Company covenants and agrees (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of its obligations under this Agreement
or the Securities; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Holders, but will suffer and permit the
execution of every such power as though no such law has been enacted.
5.5 Limitation on Restricted Payments
The Company shall not, directly or indirectly:
(a) declare or pay any dividend on, or make any distribution
to the holders (as such) in respect of, any shares of its Capital Stock (other
than pro-rata dividends payable solely in shares of Capital Stock or other
Equity Interests);
(b) repurchase, redeem or otherwise retire for value any
Equity Interests of the Company or any Subsidiary (other than any such Equity
Interest of a directly or indirectly wholly-owned Subsidiary of the Company and,
with respect to any non-wholly owned Subsidiary, other than on a pro-rata basis
from all holders of such Equity Interests) or other Affiliate of the Company;
(c) permit any Subsidiary to declare or pay any dividend on,
or make any distribution to the holders (as such) in respect of, any shares of
its Capital Stock, except on a pro-rata basis to all of its stockholders;
(d) permit any Subsidiary to repurchase, redeem or otherwise
retire for value any Equity Interests of it, the Company or any Affiliate of
either of them (other than any such Equity Interests owned by the Company or any
other directly or indirectly wholly owned Subsidiary of the Company and, with
respect to any non-wholly owned Subsidiary, other than the repurchase,
redemption or retirement of Equity Interests of such Subsidiary on a pro-rata
basis from all holders of such Equity Interests); or
(e) make, or permit any Subsidiary to make, any Investment
(other than a Permitted Investment) or Restricted Debt Prepayment;
provided that, notwithstanding anything to the contrary in this Section 5.5, the
Company may redeem or purchase shares of Common Stock or options to purchase
Common Stock held by former employees in connection with or following their
termination of employment.
5.6 Corporate Existence
The Company will do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate existence and the
corporate existence of each of its Subsidiaries in accordance with the
respective organizational documents of each of them and the corporate rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or corporate existence, if the
Board of Directors of the Company shall determine that the preservation thereof
is no longer desirable in the conduct of the
- 19 -
business of the Company and its Subsidiaries taken as a whole. The Company shall
give prompt written notice to the Holder Representative of any dissolution,
winding-up, liquidation or reorganization of the Company.
5.7 Same Business
The Company and its Subsidiaries will not engage in businesses
which are not of the same general type as conducted by the Company and its
Subsidiaries on the date hereof or which do not have a substantial connection
thereto.
5.8 Taxes
The Company shall, and shall cause its Subsidiaries to, pay
prior to delinquency all material taxes, assessments and governmental levies
except as contested in good faith and by appropriate proceedings.
5.9 Investment Company Act; United States Real Property Holding Corporation
Neither the Company nor any of its Subsidiaries shall become
an investment company subject to registration under the Investment Company Act
of 1940, as amended. Neither the Company nor any of its Subsidiaries shall
become a United States real property holding corporation as defined in Section
897(c)(2) of the Internal Revenue Code.
5.10 No Merger, etc.
Neither the Company nor any of its Subsidiaries shall
consolidate or merge with or into, or sell, lease, convey or otherwise dispose
of all or substantially all of their respective assets to, any Person; provided,
however, that (a) any Subsidiary of the Company may consolidate or merge with or
into the Company or any of its other wholly owned Subsidiaries if such
consolidation or merger is otherwise permissible under Section 5.6, (b) the
Company or any Subsidiary may enter into any merger in which it is the surviving
corporation and in connection with any Permitted Investment so long as the
Company or such Subsidiary is the surviving entity of such merger and (c) the
Company may engage in any merger which does not effect a Change of Control. This
Section 5.10 shall not be construed so as to prohibit the Merger.
5.11 Limitation on Additional Indebtedness
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to (collectively,
"incur") any Indebtedness other than: (a) the Indebtedness represented by the
Notes; (b) Senior Debt; (c) Indebtedness outstanding on the Closing Date and
listed on Schedule 5.11, including any subsequent extension, renewal or
refinancing thereof which does not increase the principal amount or shorten the
final maturity date thereof; (d) Capitalized Lease Obligations and purchase
money Indebtedness secured by Liens on assets the acquisition or development of
which was financed with the proceeds of such Indebtedness, or extensions or
refinancings of such purchase money Indebtedness, so long as the aggregate
principal amount of the Indebtedness does not exceed 100% (nor upon initial
incurrence is less than 80%) of the lesser of the fair market value or the
purchase price or cost of development of the property subject to such Lien; (e)
Indebtedness consisting of intercompany loans between Subsidiaries of the
Company or between the Company and a Subsidiary of the Company; (f) Indebtedness
of a Subsidiary acquired in an acquisition authorized under Section 5.21 (or
assumed at the time of such an acquisition of assets securing such
Indebtedness), provided that (i) such Indebtedness was not incurred in
connection with, or in anticipation or contemplation of, such acquisition and
(ii) such Indebtedness is not Indebtedness for borrowed money (it being
understood that, for purposes of this clause (f), Capitalized Lease Obligations
and purchase money Indebtedness shall not constitute
- 20 -
debt for borrowed money); (g) Indebtedness of Foreign Subsidiaries not otherwise
permitted hereunder; provided that the aggregate amount of Indebtedness
permitted under this clause (g) shall not exceed $2,000,000 at any one time
outstanding; (h) additional Indebtedness of the Company and its Domestic
Subsidiaries not otherwise permitted hereunder not exceeding $3,000,000 in
aggregate principal amount at any one time outstanding; and (i) Indebtedness
permitted under Sections 8.04(c), (e), (h) and (j) of the Credit Agreement.
5.12 Limitation on Transactions With Affiliates
Neither the Company nor any of its Subsidiaries shall sell,
lease, transfer or otherwise dispose of any of its properties or assets to or
purchase any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, an
Affiliate (an "Affiliate Transaction"), except on terms that are no less
favorable to the Company or the relevant Subsidiary than those that could have
been obtained in a comparable transaction by the Company or such Subsidiary from
an unrelated person; provided, however, that the Company and its wholly-owned
Subsidiaries may engage in any sale, lease, transfer, or other disposition of
property among themselves and may enter into any contract, agreement,
understanding, loan, advance or guarantee among themselves; and provided further
that the following in any event shall be permitted: (i) the transactions
contemplated under the Recapitalization Agreement; (ii) so long as no Default or
Event of Default exists, the payment, on a quarterly basis, of management fees
to ▇▇▇▇ Capital and/or the Bain Affiliates and Sun Capital and/or the Sun
Affiliates in an aggregate amount (for all such Persons taken together) not to
exceed, in any fiscal quarter of the Company, the sum of (x) $125,000 and (y)
any amounts permitted to be paid in any prior fiscal quarter under clause (x)
which were not previously paid (plus interest thereon at a rate not to exceed
12% per annum); (iii) the reimbursement of ▇▇▇▇ Capital and/or the Bain
Affiliates and Sun Capital and/or the Sun Affiliates for their reasonable
out-of-pocket expenses incurred by them in connection with performing management
services to the Company and its Subsidiaries under the Management Agreement by
and between the Company and Sun Multimedia Advisors, Inc.; and (iv) the payment
of one time fees to ▇▇▇▇ Capital and/or the Bain Affiliates and Sun Capital
and/or the Sun Affiliates in connection with each acquisition of a company or
line of business by the Company or its Subsidiaries, provided that such fees are
permitted by the Partnership Agreement.
5.13 Restrictions on Liens
The Company will not itself, and will not permit any
Subsidiary, to create or suffer to exist any Liens upon any assets of the
Company or any Subsidiary or any shares of capital stock of any Subsidiary, in
either case now owned or hereafter acquired, provided, however, that this
Section 5.13 shall not prohibit the creation or continuing existence of (i) any
Permitted Liens or (ii) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 6.1(6).
5.14 Sale of Assets
(a) Neither the Company nor any of its Subsidiaries shall
sell, lease, convey or otherwise dispose (whether in one transaction or a series
of transactions) of any assets (including capital stock of any Subsidiaries),
other than sales of inventory, product displays or other assets in the ordinary
course of business (an "Asset Sale"), if the aggregate Net Proceeds of all Asset
Sales during any fiscal year exceed $10,000,000; provided that the foregoing
shall not preclude the Company or any Subsidiary from engaging in a sale of all
or substantially all of its assets in a transaction that complies with Section
5.10.
(b) Without the consent of the Holders of at least a majority
in principal amount of the Notes, (i) the consideration received in any Asset
Sale may not be less than the fair market value of such asset (as determined in
good faith by senior management of the Company) and (ii) except for assets with
a fair market value of not greater than $1,000,000 in the aggregate that may be
sold during any fiscal year, the
- 21 -
consideration received for such assets shall be applied, within 360 days of the
Asset Sale, to the purchase of assets to be used in the business of the Company
and/or its Subsidiaries or to the repayment of Senior Debt.
(c) At least 80% of the consideration for each such Asset Sale
received by the Company or such Subsidiary shall be in the form of cash;
provided, however, that the amount of (i) any liabilities (as shown on the
Company's or such Subsidiary's most recent balance sheet or in the notes
thereto) of the Company or any Subsidiary that are assumed by the transferee of
any such assets or stock sold, leased, conveyed or disposed of and (ii) any
notes or other obligations received by the Company or any Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary into
cash, shall be deemed to be cash for purposes of this Section 5.14(c).
(d) Notwithstanding the foregoing limitations, the Company and
its Subsidiaries may (i) sell or discount, in each case without recourse,
accounts receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof, (ii) sell for cash or
exchange specific items of equipment, so long as the purpose of each such sale
or exchange is to acquire (and results within 360 days of such sale or exchange
in the acquisition of) replacement items of equipment which are the functional
equivalent of the item of equipment so sold or exchanged, (iii) sublease as
lessor real or personal property located at a place of business where it has
ceased to continue its operations until the expiration of the principal lease
with respect to such property; (iv) in the ordinary course of business, license
patents, trademarks, copyrights and know-how to third Persons and to one
another; and (v) lease as lessor equipment, machinery or real property to one or
more wholly-owned domestic Subsidiaries so long as such lease is for fair market
value (determined in good faith by the Company's board of directors or senior
management).
5.15 Ownership of Subsidiaries
Except as permitted by Sections 5.6, 5.10 and 5.14 above, the
Company shall maintain (along with one or more Subsidiaries in the case of an
indirect Subsidiary) good and valid title to those Equity Interests of each of
its Subsidiaries owned by it, free and clear of any Lien other than Permitted
Liens.
5.16 Insurance
The Company shall maintain liability, casualty and other
insurance with a reputable insurer or insurers in such amounts and against such
risks as is carried by responsible companies engaged in similar businesses and
owning similar assets.
5.17 Issuances of Capital Stock
Neither the Company nor any of its Subsidiaries shall issue
any shares of Capital Stock, or rights, warrants, options or other securities
exercisable or exchangeable for or convertible into Capital Stock, at any time
after the date hereof, to employees, officers or directors of the Company or its
Subsidiaries, unless (i) the purchase or exercise price per share is no less
than fair market value as of the grant date (as determined in good faith by the
Board of Directors of the Company) or (ii) the Purchaser has preemptive rights
with respect to such issuance pursuant to the terms of Section 8.1 of the
Stockholders Agreement.
5.18 ERISA Notices
Promptly, but in any event within 15 days, the Company shall
deliver to the Purchaser (or, if the Purchaser is no longer a Holder, a Holder
Representative), any notices, records or documents required to be provided to
the Banks (as defined in the Credit Agreement) under Section 7.08 of the Credit
Agreement, as in effect on the date hereof.
- 22 -
5.19 Inconsistent Agreements
The Company shall not, and shall not permit its Subsidiaries
to supplement, amend or otherwise modify the terms of its Articles or
Certificate of Incorporation or Bylaws, if the effect thereof would be
materially adverse to the Holders.
5.20 Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries
The Company will not, and will not permit any Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Subsidiary of the Company to (a) pay dividends or make any other distributions
on its Capital Stock or any other interest or participation in, or measured by,
its profits owned by, or pay any Indebtedness owed to, the Company or a
Subsidiary of the Company, (b) make loans or advances to the Company or a
Subsidiary of the Company or (c) transfer any of its properties or assets to the
Company or to any Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reasons of (i) any restrictions existing under
or contemplated by the Credit Agreement or by any other agreements in effect on
the date hereof and identified on Schedule 5.20; (ii) any restrictions, with
respect to a Subsidiary of the Company that is not a Subsidiary of the Company
on the date hereof, in existence at the time such Person becomes a Subsidiary of
the Company; or (iii) any restrictions existing under any agreement that
refinances or replaces the agreements containing the restrictions in clause (i);
provided that the terms and conditions of any such restrictions are no less
favorable to the Holders than those under or pursuant to the agreement
evidencing the Indebtedness refinanced. Nothing contained in this Section 5.20
shall prevent the Company or any of its Subsidiaries from entering into any
agreement (i) permitting or providing for the incurrence of Liens otherwise
permitted by Section 5.13 or (ii) restricting the sale or other disposition of
property securing Indebtedness.
5.21 Limitation on Acquisitions
The Company shall not, directly or indirectly, and shall not
permit any Subsidiary to, acquire, in one transaction or a series of
transactions, any stock or assets of any Person (an "Acquisition") involving or
having an aggregate value in excess of $10,000,000, unless such Acquisition has
been approved in writing by the Purchaser (or, if the Purchaser is no longer a
Holder of any Notes, by the Holders of a majority in principal amount of the
then outstanding Notes).
5.22 Compliance with Laws
The Company will, and will cause its Subsidiaries to, comply
with all statutes, ordinances, governmental rules and regulations, judgments,
orders and decrees (including all Environmental Laws) to which any of them is
subject, and obtain and keep in effect all licenses, permits, franchises and
other governmental authorizations necessary to the ownership or operation of
their respective properties or the conduct of their respective businesses,
except to the extent that the failure to so comply or obtain and keep in effect
would not have a Material Adverse Effect.
- 23 -
SECTION 6. DEFAULTS AND REMEDIES
6.1 Events of Default
An "Event of Default" occurs if:
(1) the Company defaults in the payment of the principal of
any Note when the same becomes due and payable at maturity, upon redemption or
otherwise;
(2) the Company defaults in the payment of interest on any
Note when the same becomes due and payable and the Default continues for a
period of five days;
(3) the Company fails to comply in any material respect with
any of the agreements, covenants, or provisions of this Agreement (other than
Section 1.5(b)) or the Notes and the Default continues for the period and after
the notice specified below;
(4) any of the representations or warranties of the Company
made in or in connection with this Agreement are, taken as a whole, untrue in
any material respect as of the date when made in a manner adverse to the Company
and its Material Subsidiaries;
(5) an event of default occurs and is continuing under any
Indebtedness of the Company or any of its Material Subsidiaries, which default
has resulted in the acceleration of such Indebtedness prior to its expressed
maturity and the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness the maturity of which has been
so accelerated and has not been paid, aggregates $2,000,000 or more;
(6) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction against the
Company or any Material Subsidiary of the Company and such remains unpaid or
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days and is not insured against (after giving effect to customary
deductibles), provided that the aggregate of all such judgments exceeds
$2,000,000;
(7) the Company or any Material Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors,
(E) admits in writing that it is generally unable to
pay its debts as the same become due; or
- 24 -
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any of its
Material Subsidiaries in an involuntary case,
(B) appoints a Custodian of the Company or any of its
Material Subsidiaries or for all or substantially all of its property,
or
(C) orders the liquidation of the Company or any of
its Material Subsidiaries, and the order or decree remains unstayed and
in effect for 60 days.
The term "Bankruptcy Law" means title 11, U.S. Code or any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
A Default under clause (3) is not an Event of Default until
the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes notify the Company of the Default and the Company does not
cure the Default within 30 days after receipt of the notice. The notice must
specify the Default, demand that it be remedied and state that the notice is a
"Notice of Default."
6.2 Acceleration of Notes
Subject to the provisions of Section 7, if an Event of Default
(other than an Event of Default specified in clauses (7) or (8) of Section 6.1
with respect to the Company) occurs and is continuing, the Holders of at least
25% in aggregate principal amount of the then outstanding Notes, by notice to
the Company, may declare the unpaid principal of and any accrued interest on all
the Notes to be due and payable. Subject to the provisions of Section 7,
immediately upon such declaration, the principal and interest shall be due and
payable; provided, however, that so long as the Credit Agreement shall be in
effect, if an Event of Default shall have occurred and be continuing (other than
an Event of Default specified in clauses (7) or (8) above with respect to the
Company), any such acceleration shall not be effective until the earlier of (x)
five Business Days following delivery of a notice of acceleration specifying the
respective Event of Default and stating that it is a "notice of acceleration" to
the agent bank under the Credit Agreement (but only if such Event of Default is
then continuing) and (y) the acceleration of any Indebtedness under the Credit
Agreement. Subject to the provisions of Section 7, if an Event of Default
specified in clause (7) or (8) of Section 6.1 occurs with respect to the
Company, such an amount shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of any Holder. The
Holders of at least a majority in principal amount of the then outstanding Notes
by notice to the Company may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of the acceleration.
6.3 Other Remedies
Subject to the provisions of Section 7, if an Event of Default
occurs and is continuing, Holders of the Notes may pursue any available remedy
to collect the payment of principal or interest on the Notes or to enforce the
performance of any provision of the Notes or this Agreement.
- 25 -
A delay or omission by any Holder of any Notes in exercising
any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
6.4 Waiver of Past Defaults
The Holders of at least a majority in principal amount of the
then outstanding Notes by notice to the Company may waive an existing Default or
Event of Default and its consequences except a continuing Default or Event of
Default in the payment of the principal of or interest on any Notes.
6.5 Rights of Holders to Receive Payment
Notwithstanding any other provision of this Agreement (other
than the provisions of Section 7), the right of any Holder of a Note to receive
payment of principal and interest on the Note, on or after the respective due
dates expressed in the Note, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of the Holder.
6.6 Undertaking for Costs
In any suit for the enforcement of any right or remedy under
this Agreement, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
SECTION 7. SUBORDINATION
For purposes of this Section 7 only, the term "Holder" shall
refer only to any holder of the Notes.
7.1 Notes Subordinated to Senior Debt
The Company, for itself and its successors, including the
Company, covenants and agrees, and each Holder, by its acceptance thereof,
likewise covenants and agrees, that all Notes shall be issued subject to the
provisions of this Section 7 and each Person holding any Note, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts and
agrees that the payment of all Obligations on the Notes by the Company shall, to
the extent and in the manner herein set forth, be subordinated and junior in
right of payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on the Senior Debt; that the subordination is for the benefit of,
and shall be enforceable directly by, the holders of Senior Debt, and that each
holder of Senior Debt whether now outstanding or hereafter created, incurred,
assumed or guaranteed shall be deemed to have acquired Senior Debt in reliance
upon the covenants and provisions contained in this Agreement and the Notes.
7.2 No Payment on Notes in Certain Circumstances
(a) If any default occurs and is continuing in the payment
when due, whether at maturity, upon any redemption, by declaration or otherwise,
of any principal of, interest on, unpaid drawings for letters of credit issued
in respect of or regularly accruing fees with respect to any Senior Debt, no
payment of any kind or character shall be made by or on behalf of the Company or
any other Person on its or their behalf with respect to any Obligations on the
Notes or to acquire any of the Notes for cash or property or otherwise. In
- 26 -
addition, if any other event of default occurs and is continuing with respect to
any Senior Debt, as such event of default is defined in the instrument creating
or evidencing such Senior Debt, permitting the holders of such Senior Debt then
outstanding to accelerate the maturity thereof and the Representative for the
respective issue of Senior Debt gives written notice of the event of default to
the Company and the Holder Representative which notice shall specify that it is
intended to serve as a blockage notice under this Section 7.2(a) (a "Blockage
Notice"), then, unless and until all events of default have been cured or waived
or have ceased to exist or the Company and the Holder Representative receive
notice from the Representative for the respective issue of Senior Debt
terminating the Blockage Period (as defined below), during the 179 days after
the delivery of such Blockage Notice (the "Blockage Period"), neither the
Company nor any other Person on its behalf shall (x) make any payment of any
kind or character with respect to any Obligations on the Notes or (y) acquire
any of the Notes for cash or property or otherwise. Notwithstanding anything
herein to the contrary, in no event will a Blockage Period extend beyond 179
days from the date the payment on the Notes was due and only one such Blockage
Period may be commenced with respect to any and all Senior Debt within any 360
consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Senior Debt
shall be, or be made, the basis for commencement of a second Blockage Period by
the Representative of such Senior Debt whether or not within a period of 360
consecutive days unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days (it being acknowledged that
any subsequent action or any breach of any financial covenants for a period
commencing after the date of commencement of such Blockage Period that, in
either case, would give rise to an event of default pursuant to any provisions
under which an event of default previously existed or was continuing shall
constitute a new event of default for this purpose).
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Holders when such payment is prohibited by
Section 7.2(a), such payment shall be held in trust for the benefit of, and
shall be paid or delivered to, the holders of Senior Debt (pro rata to such
holders on the basis of the respective amount of Senior Debt held by such
holders) or their respective Representative, as their respective interests may
appear. The Holder Representative shall be entitled to rely on information
regarding amounts then due and owing on the Senior Debt, if any, received from
the holders of Senior Debt (or their Representatives) or, if such information is
not received from such holders or their Representatives, from the Company and
only amounts included in the information provided to the Holder Representative
shall be paid to the holders of Senior Debt.
Nothing contained in this Section 7 shall limit the right of
the Holders to take any action to accelerate the maturity of the Notes pursuant
to Section 6.2 or to pursue any rights or remedies hereunder; provided that all
Senior Debt thereafter due or declared to be due shall first be paid in full in
cash or Cash Equivalents before the Holders are entitled to receive any payment
of any kind or character with respect to Obligations on the Notes.
7.3 Payment Over Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any total or partial liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshalling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash or Cash Equivalents, or such payment duly provided
for to the satisfaction of the holders of Senior Debt, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Notes, or for the acquisition of any of the Notes for cash or property or
otherwise (except that Holders may receive securities of the Company that are
unsecured and subordinated at least to the same extent as the Notes to Senior
Debt as provided in the Agreement, that do not have a maturity any shorter than
- 27 -
the security being replaced and that will not cause the Notes to be treated in
any case or proceeding as part of the same class of claims as the Senior Debt or
any class of claims pari passu with, or senior to, the Senior Debt for any
payment or distribution). Upon any such dissolution, winding-up, liquidation,
reorganization, receivership or similar proceeding, any payment or distribution
of assets of the Company of any kind or character, whether in cash, property or
securities, to which the Holders under this Agreement would be entitled, except
for the provisions hereof, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by the Holders under this Agreement if received by
them, directly to the holders of Senior Debt (pro rata to such holders on the
basis of the respective amounts of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash or
Cash Equivalents after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Debt or part thereof originally intended to
be satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, shall be received by any Holder when
such payment or distribution is prohibited by Section 7.3(a), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Debt (pro rata to such holders on the
basis of the respective amount of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash or
Cash Equivalents, after giving effect to any concurrent payment, distribution or
provision thereof to or for the holders of such Senior Debt.
7.4 Payments May Be Paid Prior to Dissolution
Nothing contained in this Section 7 or elsewhere in this
Agreement shall prevent the Company, except under the conditions described in
Sections 7.2 and 7.3, from making payments at any time for the purpose of making
payments of principal of and interest on the Notes. The Company shall give
prompt written notice to the Holder Representative of any dissolution,
winding-up, liquidation or reorganization of the Company.
7.5 Subrogation
Subject to the payment in full in cash or Cash Equivalents of
all Senior Debt, the Holders shall be subrogated to the rights of the holders of
Senior Debt to receive payments or distributions of cash, property or securities
of the Company applicable to the Senior Debt until the Notes shall be paid in
full; and, for the purposes of such subrogation, no such payments or
distribution to the holders of the Senior Debt by or on behalf of the Company or
by or on behalf of the Holders by virtue of this Section 7 which otherwise would
have been made to the Holders shall, as between the Company and the Holders, be
deemed to be a payment by the Company to or on account of the Senior Debt, it
being understood that the provisions of this Section
- 28 -
7 are and are intended solely for the purpose of defining the relative rights of
the Holders, on the one hand, and the holders of the Senior Debt, on the other
hand.
7.6 Obligations of the Company Unconditional
Nothing contained in this Section 7 or elsewhere in this
Agreement or in the Notes is intended to or shall impair, as among the Company,
its creditors other than the holders of Senior Debt, and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of and any interest on the Notes as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the Holders and creditors of the Company
other than the holders of the Senior Debt, nor shall anything herein or therein
prevent any Holder from exercising all remedies otherwise permitted by
applicable law upon default under this Agreement, subject to the rights, if any,
in respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
7.7 Reliance on Judicial Order or Certificate of Liquidating Agent
Upon any payment or distribution of assets of the Company
referred to in this Section 7, the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or upon a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, delivered to
the Holder Representative, for the purpose of ascertaining the persons entitled
to participate in such distribution, the holders of the Senior Debt and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Section 7.
7.8 Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of Senior Debt
No right of any present or future holders of any Senior Debt
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Agreement, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to any Holder, without incurring responsibility
to any Holder and, without impairing or releasing the subordination provided in
this Section 7 or the obligations hereunder of the Holders of the Notes to the
holders of the Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt,
or any instrument evidencing the same or any agreement under which Senior Debt
is outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person
liable in any manner for the payment or collection of Senior Debt; and (iv)
exercise or refrain from exercising any rights against the Company and any other
Person.
- 29 -
7.9 This Section 7 Not To Prevent Events of Default
The failure to make a payment on account of principal of or
interest on the Notes by reason of any provision of this Section 7 will not be
construed as preventing the occurrence of an Event of Default.
SECTION 8. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
Acquisition: See Section 5.21.
Affiliate: With respect to any specified Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person) or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether in the capacity of officer or director of such Person, through the
ownership of voting securities, by agreement or otherwise.
Affiliate Transaction: See Section 5.12.
Agent: Any Person authorized to act and who acts on behalf of
the Purchaser with respect to the transactions contemplated by this Agreement.
Asset Sales: See Section 5.14.
Bain Affiliates: Any Affiliate (including any employee) of
▇▇▇▇ Capital, provided that for purposes of this Agreement, the term "Bain
Affiliate" shall not include (x) any portfolio company of either ▇▇▇▇ Capital or
any Affiliate of ▇▇▇▇ Capital or (y) any officer or director of the Company or
any of its Subsidiaries who is not also a partner, stockholder, employee or
officer of ▇▇▇▇ Capital.
▇▇▇▇ Capital: ▇▇▇▇ Capital, Inc., a Delaware corporation.
Bankruptcy Law: See Section 6.1.
Blockage Notice: See Section 7.2(a).
Blockage Period: See Section 7.2(a).
Business Day: Any day which is not a Legal Holiday.
Capital Lease: Any lease of any property which would in
accordance with GAAP be required to be classified and accounted for on the
balance sheet of the lessee as a capital lease.
Capitalized Lease Obligation: With respect to any Person for
any period, any obligation of such Person to pay rent or other amounts under a
Capital Lease; the amount of such obligation shall be the capitalized amount
thereof determined in accordance with such principles.
Capital Stock: Any and all shares, interests, participation or
other equivalents (however designated) of corporate stock, including without
limitation all common stock and preferred stock.
- 30 -
Cash Equivalents: (i) marketable direct obligations issued or
unconditionally guaranteed or insured by the United States Government or issued
by any agency or instrumentality thereof and backed by the full faith and credit
of the United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from Standard & Poor's Corporation, ▇▇▇▇▇'▇ Investors
Service, Inc. or another nationally recognized rating agency; (iii) commercial
paper maturing no more than one year from the date of issuance thereof and, at
the time of issuance, having one of the two highest ratings obtainable from
Standard & Poor's Corporation, ▇▇▇▇▇'▇ Investors Service, Inc. or other
nationally recognized rating agency; (iv) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition thereof issued
by any commercial bank organized under the laws of the United States of America
or any state thereof or the District of Columbia having combined capital and
surplus of not less than $250,000,000; (v) Eurodollar time deposits having a
maturity of less than one year purchased from any such commercial bank directly;
(vi) repurchase agreements and reverse repurchase agreements with any such
commercial bank relating to marketable direct obligations described in clauses
(i) and (ii) above, in each case maturing within one year from the date of
acquisition thereof; and (vii) investments in money market funds substantially
all of the assets of which are comprised of securities described in clauses (i)
through (vi) above.
Change of Control: (a) prior to the date of an initial
registered public offering by the Company of its Common Stock, ▇▇▇▇ Capital
and/or the Bain Affiliates and Sun Capital and/or the Sun Affiliates shall cease
to have the right, directly or indirectly, to elect a majority of the members of
the Board of Directors of the Company, whether through stock ownership, voting
agreement or otherwise, or (b) on or after the date of an initial registered
public offering by the Company of its Common Stock, any other Person or "group"
within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of
1934, as amended, as then in effect) shall own at least 30% of the Company's
voting stock and ▇▇▇▇ Capital, the Bain Affiliates, Sun Capital and/or the Sun
Affiliates shall control, directly or indirectly, less voting stock than such
other Person or "group".
Charter Documents: The Articles of Organization, Articles of
Incorporation or Certificate of Incorporation and Bylaws, as amended or restated
(or both) to date, of the Company or any Subsidiary of the Company.
Closing: See Section 1.2.
Closing Date: See Section 1.2.
Code: The Internal Revenue Code of 1986, as amended from time
to time, and any successor statute or law thereto.
Common Stock: The Common Stock, $0.01 par value, of the
Company.
Company: Labtec Enterprises, Inc., a Delaware corporation,
f/k/a LEI Holdings, Inc., the renamed surviving corporation of the merger of LEI
Holdings, Inc. a Delaware corporation, and Speaker Acquisition Corp., a Delaware
corporation.
Consolidated EBITDA: As defined in the Credit Agreement, as in
effect as of the date hereof.
Consolidated Interest Expense: As defined in the Credit
Agreement, as in effect as of the date hereof.
- 31 -
Credit Agreement: That certain Credit Agreement dated as of
October 7, 1997, among the Company, the lenders party thereto from time to time
in their capacities as lenders thereunder and Bankers Trust Company, as agent
(and any successor agent thereunder), together with the documents related
thereto (including, without limitation, any guarantee agreements and security
documents), in each case, as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing, refunding or otherwise restructuring (including, without limitation,
increasing the amount of available borrowings thereunder or adding Subsidiaries
of the Company as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
Custodian: See Section 6.1.
Default: Any event which is, or after notice or passage of
time would be, an Event of Default.
Default Rate: 15% per annum.
Domestic Subsidiary: As defined in the Credit Agreement, as in
effect on the date hereof.
Environmental Claim: As defined in the Credit Agreement, as in
effect on the date hereof.
Environmental Laws: As defined in the Credit Agreement, as in
effect on the date hereof.
Equity Interest: Capital Stock or warrants, options or other
rights to acquire Capital Stock (but excluding any debt security which is
convertible into, or exchangeable for, Capital Stock).
ERISA: The Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute or law thereto.
ERISA Affiliate: As defined in the Credit Agreement, as in
effect on the date hereof.
Event of Default: See Section 6.1.
Exchange Act: The Securities Exchange Act of 1934, as amended,
from time to time, and any successor statute or law thereto.
Foreign Subsidiary: As defined in the Credit Agreement, as in
effect on the date hereof.
Fund Investor: As defined in the Stockholders Agreement.
GAAP: Those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its boards or committees thereof and which are
consistently applied for all periods after the date hereof so as to properly
reflect the financial conditions, and the results of operations and cash flows,
of the Company and its consolidated Subsidiaries, except that any accounting
principle or practice required to be changed by the Accounting Principles Board
or Financial Accounting Standards Board (or other appropriate board or committee
of such boards) in order to continue as a generally accepted accounting
principle or practice may so be changed. In the event of a change in GAAP, this
Agreement, to the extent GAAP applies, shall continue to be construed in
accordance with GAAP as used in the preparation of the Company's financial
statements for its fiscal year
- 32 -
ended March 31, 1997; provided, however, the Purchaser and the Company will
thereafter negotiate in good faith to revise any affected covenants to make such
covenants consistent with GAAP as then in effect, and, after any such revision,
this Agreement will be in accordance with GAAP as then in effect.
guaranty: With respect to any Person, any contract, agreement
or understanding of such Person pursuant to which such Person guarantees, or in
effect guarantees, any Indebtedness of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, including without limitation:
(a) agreements to purchase such Indebtedness or any
property constituting security therefor;
(b) agreements to advance or supply funds (i) for the
purchase or payment of such Indebtedness, or (ii) to maintain working
capital, equity capital or other balance sheet conditions;
(c) agreements to purchase property, securities or
services primarily for the purpose of assuring the holder of such
Indebtedness of the ability of the primary obligor to make payment of
the Indebtedness;
(d) letters or agreements commonly known as "comfort"
or "keepwell" letters or agreements; or
(e) any other agreements to assure the holder of the
Indebtedness of the primary obligor against loss in respect thereof;
except that "guaranty" shall not include (i) the endorsement by a Person in the
ordinary course of business of negotiable instruments or documents for deposit
or collection or (ii) indemnities given by the Company or its Subsidiaries in
brokerage, management and other agreements in the ordinary course of business
substantially consistent with past practices.
Hazardous Material: As defined in the Credit Agreement, as in
effect on the date hereof.
Holder or Holders: The Purchaser (so long as it holds any
Securities) and any other holder of any of the Securities.
Holder Representative: The Purchaser or, if the Purchaser is
no longer a holder of the Notes, the Representative of the Holders as designated
by the holders of a majority in principal amount of the Notes.
Indebtedness: With respect to any Person, the aggregate amount
of, without duplication, the following:
(a) all obligations for borrowed money;
(b) all obligations evidenced by bonds, debentures,
notes or other similar instruments;
(c) all obligations to pay the deferred purchase
price of property or services, except Trade Payables, accrued
commissions and other similar accrued current liabilities in respect of
such obligations, if such liabilities arise in the ordinary course of
business;
(d) all Capitalized Lease Obligations;
- 33 -
(e) all obligations or liabilities of others secured
by a Lien on any asset owned by such Person or Persons whether or not
such obligation or liability is assumed;
(f) all obligations of such Person or Persons,
contingent or otherwise, in respect of any letters of credit or
bankers' acceptances; and
(g) all guaranties.
Indemnified Parties: See Section 1.6.
Indemnifying Party: See Section 1.6.
Initial Public Offering: As defined in the Stockholders
Agreement.
Investment: With respect to any Person, any direct, indirect
or beneficial investment by such Person, whether by means of share purchase,
loan, advance, extension of credit (other than loans to employees in an
aggregate amount not in excess of $500,000 at any time, accounts receivable,
trade credits arising in the ordinary course of business and investments,
including debt obligations, received in connection with the bankruptcy or
reorganization of suppliers and customers and in good faith settlement of
delinquent obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business), capital contribution or otherwise,
in or to any other Person, the guaranty by such Person of any Indebtedness of
any other Person or the subordination of any claim against any other Person to
other Indebtedness of such other Person. Amounts expended by the Company or its
Subsidiaries for Acquisitions in compliance with the provisions of Section 5.21
shall not constitute Investments for purposes of Section 5.5 hereof.
Intellectual Property: See Section 4.22.
Legal Holiday: A Saturday, Sunday or day on which banks and
trust companies in the principal place of business of the Company or in New York
are not required to be open. If a payment date is a Legal Holiday, payment may
be made on the next succeeding day that is not a Legal Holiday, and interest
shall accrue for the intervening period.
Lien: Any material mortgage, pledge, lien, encumbrance,
security interest or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
Losses: See Section 1.6.
Material Adverse Effect: (i) Any material adverse effect upon
the validity or enforceability of this Agreement or the Notes, (ii) any material
adverse effect on the results of operations, financial condition, properties,
assets or business of the Company, or (iii) any material adverse effect on the
ability of the Company to fulfill its obligations under this Agreement, the
Securities and any instrument governing Indebtedness of the Company incurred as
of the Closing Date.
Material Contracts: See Section 4.25.
Material Subsidiary: Any Subsidiary of the Company whose
assets or revenues, respectively, or any Subsidiaries whose aggregate assets or
revenues taken together, constitute 10% or more of the aggregate assets or
revenues of the Company and its Subsidiaries on a consolidated basis, taken as a
whole;
- 34 -
provided that the assets and revenues of any Subsidiary which is not a
wholly-owned Subsidiary shall only be considered to the extent of the direct and
indirect interest of the Company in such Subsidiary.
Merger: As defined in the Recapitalization Agreement.
Net Proceeds: With respect to any sale or other disposition of
any assets or stock, (i) cash (freely convertible into U.S. dollars) received by
the Company or any Subsidiary from such sale or other disposition, after (a)
provision for all income or other taxes measured by or resulting from such sale
or other disposition, (b) payment of all brokerage commissions and other fees
and expenses related to such sale or other disposition, and (c) deduction of
appropriate amounts as a reserve, in accordance with GAAP, against any
liabilities associated with such assets or stock and retained by the Company or
any Subsidiary after such sale or other disposition thereof, including, without
limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the sale or other disposition of such assets or
stock and (ii) promissory notes received by the Company or any Subsidiary from
such sale or other disposition upon the liquidation or conversion of such notes
into cash.
Notes: See Section 1.1.
Obligations: All obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
Officers' Certificate: A certificate signed by any two
officers, one of whom must be the President, the Treasurer or a Vice President
of the Company.
Operating Lease: Any lease other than a Capital Lease.
Partner: Any limited partner of the Purchaser.
Partnership Agreement: See Section 1.5.
Permitted Investment: (i) Investments in Cash Equivalents,
(ii) Investments existing on the date hereof and identified on Schedule 8.01,
(iii) Investments made by the Company or by any direct or indirect Subsidiary of
the Company in the Company or any other direct or indirect Subsidiary of the
Company (including guarantees of indebtedness of the Company by Subsidiaries of
the Company or of Subsidiaries of the Company by the Company or its
Subsidiaries), (iv) Investments taken as partial consideration for Asset Sales
made in compliance with Section 5.14, (v) Investments in Permitted Joint
Ventures; provided that the aggregate amount of Investments under this clause
(v) after the Closing Date shall not exceed $300,000 in the aggregate, (vi)
Investments permitted under any of Sections 8.05(d), (e), (f), (i), (j), (p) or
(r) of the Credit Agreement, as in effect on the date hereof, and (vii)
additional Investments (other than those permitted under clauses (i) through
(vi) above), of the type permitted under Section 8.05(u) of the Credit Agreement
as in effect on the date hereof so long as the amount of such Investments
pursuant to this clause (vii) at any one time outstanding (determined without
regard to write-downs or write offs and net of cash repayments of principal in
the case of loans and equity redemptions in the case of equity Investments) do
not exceed $400,000 in the aggregate.
Permitted Joint Venture: Any Person engaged in business of the
type described in Section 5.7 of which the Company shall own, directly or
indirectly, 25% or more but less than or equal to 50% of the equity and voting
interests and of which another Person (or group of Persons which acts together
in relation to such Permitted Joint Venture) owns the remaining equity and
voting interests.
- 35 -
Permitted Liens: With respect to any Person: (i) pledges or
deposits by such Person under workmen's compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Indebtedness) or leases
to which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States Government bonds
to secure surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent; (ii)
Liens imposed by law, such as carriers, warehousemen's and mechanics' Liens or
Liens arising out of judgments or awards against such Person with respect to
which such Person shall then be prosecuting appeal or other proceedings for
review or which do not materially detract from the value of the property or
assets or materially impair the use thereof; (iii) Liens securing the payment of
taxes, assessments and governmental charges or levies which are not yet subject
to penalties for non-payment or which are being contested in good faith and by
appropriate proceedings; (iv) Liens in favor of issuers of surety bonds or
letters of credit issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; (v) survey exceptions,
encumbrances, easements or reservations of, or rights of others for, rights of
way, sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning of other restrictions as to the use of real properties or
Liens incidental to the conduct of the business of such Person or to the
ownership of its properties which were not incurred in connection with
Indebtedness or other extensions of credit and which do not in the aggregate
materially impair their use in the operation of the business of such Person;
(vi) Liens listed on Schedule 8.02 hereto; (vii) Liens on assets owned by the
Company or its Subsidiaries in favor of any holder of Senior Debt securing
Senior Debt permitted hereunder; (viii) purchase money Liens upon or in any real
or personal property (including fixtures and other equipment) acquired or held
by the Company or any Subsidiary in the ordinary course of business to secure
the purchase price of such property or to secure Indebtedness incurred solely
for the purpose of financing the acquisition or improvement of such property, or
Liens existing on such property at the time of its acquisition (other than any
such Lien created in contemplation of such acquisition) provided that (X) no
such Lien shall extend to or cover any property other than the property being
acquired or improved and (Y) any such Indebtedness would be permitted to be
incurred pursuant to Section 5.11 hereof; (ix) Liens securing Capital Leases or
Operating Leases; (x) licenses, leases or subleases granted to third parties not
interfering in any material respect with the business of the Company and its
Subsidiaries or otherwise permitted hereunder; (xi) Liens on assets of Foreign
Subsidiaries of the Company to the extent securing Indebtedness of such Foreign
Subsidiaries which is permitted pursuant to Section 5.11(g); and (xii)
additional Liens so long as the value of the property subject to such Liens and
the Indebtedness and other obligations secured thereby does not exceed
$1,000,000 in the aggregate.
Person: An individual, partnership, corporation, trust or
unincorporated organization or a government or agency or political subdivision
thereof.
Plan: Any pension plan as defined in Section 3(2) of ERISA,
which is maintained or contributed to by (or to which there is an obligation to
contribute of) the Company, any of its Subsidiaries or any ERISA Affiliate and
each such plan for the five-year period immediately following the latest date on
which the Company, any of its Subsidiaries or any ERISA Affiliate maintained,
contributed to or had an obligation to contribute to such plan.
Post-Petition Interest: Any interest accruing subsequent to
the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law.
Predecesor Corporation: As defined in the Credit Agreement, as
in effect on the date hereof.
Purchaser: The KB Mezzanine Fund II, L.P., a Delaware limited
partnership.
- 36 -
Real Property: As defined in the Credit Agreement, as in
effect on the date hereof.
Recapitalization: As defined in the Recapitalization
Agreement.
Recapitalization Agreement: That certain Recapitalization
Agreement, dated as of August 26, 1997, by and between the Company and Speaker
Acquisition Corp.
Release: As defined in the Credit Agreement, as in effect on
the date hereof.
Rental Obligations: The maximum aggregate fixed rentals paid
or payable by a lessee under any Operating Lease during a specified period
(excluding amounts paid or payable on account of maintenance, ordinary repairs,
insurance, taxes, assessments and other similar charges, whether or not
designated as rental or additional rental), regardless of any amounts received
by such lessee as sublessor under any Operating Lease.
Reportable Event: As defined in the Credit Agreement, as in
effect on the date hereof.
Representative: Any officer, director, principal, attorney,
agent, employee or other representative.
Restricted Debt Prepayment: Any purchase, redemption,
defeasance (including, but not limited to, in substance or legal defeasance) or
other acquisition or retirement for value, directly or indirectly, by the
Company or a Subsidiary, prior to the scheduled maturity or prior to any
scheduled repayment of principal or sinking fund payment, as the case may be, in
respect of indebtedness of the Company that is expressly subordinated in right
of payment to the Notes.
Rule 144: Rule 144 as promulgated by the Securities Exchange
Commission under the Securities Act, as amended from time to time, and any
successor rule or regulation thereto.
SEC: The Securities and Exchange Commission.
Securities: See Section 1.1.
Securities Act: The Securities Act of 1933, as amended from
time to time, and any successor statute or law thereto.
Senior Debt: (i) all Obligations arising under the Credit
Agreement (including, without limitation, Post-Petition Interest with respect
thereto), provided that the aggregate principal amount of Senior Debt
outstanding under this clause (i) at any time shall not exceed $50,000,000; (ii)
Obligations arising under any other instrument evidencing Indebtedness which by
its terms is secured on a substantially ratable basis with the Indebtedness
outstanding under the Credit Agreement (including, without limitation,
Post-Petition Interest with respect thereto), provided that the aggregate
principal amount of Senior Debt outstanding under this clause (ii) at any time
shall not exceed $4,000,000; (iii) Obligations arising under the Credit
Agreement or any other instrument evidencing Indebtedness which is incurred in
connection with or following any Acquisition, and which by its terms is secured
on a substantially ratable basis with the Indebtedness outstanding under the
Credit Agreement (including, without limitation, Post-Petition Interest with
respect thereto), provided that, on a pro forma basis, after giving effect to
such Acquisition and the incurrence of such Indebtedness, the pro forma
Consolidated EBITDA of the Company for the last full 12 fiscal months preceding
incurrence of such Indebtedness (such pro forma Consolidated EBITDA calculated
as if such Acquisition had been consummated at the beginning of such prior
12-month period) is not less than 2.8 times the Company's pro forma
- 37 -
Consolidated Interest Expense for the same period (such pro forma Consolidated
Interest Expense calculated as if such Indebtedness and all other Indebtedness
outstanding or assumed at the time of measurement had been incurred at the
beginning of such prior 12-month period); and provided further that all Senior
Debt outstanding will be considered to have been incurred under clause (i) or
(ii) above, as applicable, before additional Senior Debt may be incurred under
this clause (iii); and (iv) Obligations with respect to Indebtedness permitted
under Section 5.11(h) (including, without limitation, Post-Petition Interest
with respect thereto).
Shares: See Section 1.1.
Stockholders Agreement: That certain Stockholders Agreement of
even date herewith by and among the Company, the Purchaser, and the other
parties identified therein, in the form attached hereto as Annex C.
Subsidiary: With respect to any Person (the "parent"), any
corporation, association or other business entity of which securities or other
ownership interests representing more than 50% of the ordinary voting power are,
at the time as of which any determination is being made, owned or controlled by
the parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent.
Sun Affiliates: Any Affiliate (including any employee) of Sun
Capital, provided that for purposes of this Agreement, the term "Sun Affiliate"
shall not include (x) any portfolio company of either Sun Capital or any
Affiliate of Sun Capital or (y) any officer or director of the Company or any of
its Subsidiaries which is not also a partner, officer, employee or stockholder
of Sun Capital.
Sun Capital: Sun Capital Partners, Inc., a Florida
corporation.
Trade Payables: With respect to any Person, accounts payable
and other similar accrued current liabilities in respect of obligations or
indebtedness to trade creditors created, assumed or guaranteed by such Person or
any of its Subsidiaries in the ordinary course of business in connection with
the obtaining of property or services.
Transfer Restricted Securities: Securities acquired by the
Purchaser directly from the Company or acquired by the holder thereof (i) in
compliance with the transfer restrictions provided in this Agreement and (ii)
other than pursuant to an effective registration under Section 5 of the
Securities Act or pursuant to Rule 144; provided that a Security that has ceased
to be a Transfer Restricted Security cannot thereafter become a Transfer
Restricted Security.
Unfunded Current Liability: As defined in the Credit
Agreement, as in effect on the date hereof.
SECTION 9. MISCELLANEOUS
9.1 Notices
All notices and other communications provided for or permitted
hereunder shall be made by hand-delivery, first-class mail, telecopier, or
overnight air courier guaranteeing next day delivery:
(a) if to you, at your address set forth on the signature page
hereof, with a copy to ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., Fax: (213)
▇▇▇-▇▇▇▇; and
- 38 -
(b) if to the Company, ▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, President, and ▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief
Financial Officer, with copies to Sun Capital Partners, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇
▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇▇; ▇▇▇▇ Capital, Two ▇▇▇▇▇▇
Place, 7th ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Fax: (617) ▇▇▇- ▇▇▇▇; and Ropes & Gray, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Fax: (▇▇▇) ▇▇▇-▇▇▇▇.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back if telexed; when receipt acknowledged, if telecopied; and the
next business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery. The parties may change the addresses to
which notices are to be given by giving five days' prior notice of such change
in accordance herewith.
9.2 Successors and Assigns
This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties, including, without
limitation and without the need for an express assignment, subsequent holders of
Transfer Restricted Securities.
9.3 Amendment and Waiver
Prior to the Closing Date, this Agreement and the Notes may be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may be given, provided that the same are in writing and
signed by you and the Company. Thereafter, except as heretofore expressly
provided otherwise, this Agreement may be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may be given,
provided that the same are in writing and signed by the Company and the Holders
of at least a majority in principal amount of the Notes then outstanding;
provided, however, that any amendment, modification or supplement that (i)
affects or proposes to affect the rate or time for payment of interest on any
Note (including default interest) or the amount of principal or the principal
maturity date of any Note or the redemption or prepayment provisions with
respect thereto, (ii) makes or proposes to make any Note payable in money or
property other than that stated in the Note or (iii) makes or proposes to make
any change in Section 6.4 or 6.5 hereof or this Section 9.3 shall not be binding
upon any Holder of any outstanding Note that has not consented thereto in
writing.
9.4 Counterparts
This Agreement may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
9.5 Headings
The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
- 39 -
9.6 Governing Law
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
9.7 Entire Agreement
This Agreement, together with the Securities, is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement, together with
the Securities, supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
9.8 Severability
In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of your rights and privileges shall be enforceable to
the fullest extent permitted by law.
9.9 Confidentiality
You agree that you will not, and will not permit your
officers, directors, employees or agents to, disclose to any other Person any
information furnished to you by the Company or any Subsidiary, except (i) as
required by law or legal process or by any governmental authority, (ii) such
information as becomes or is generally available to the public other than as a
result of a disclosure prohibited hereby, (iii) such information that is or
becomes available to you on a nonconfidential basis from a source not bound by
this or another confidentiality agreement with the Company or any Subsidiary,
(iv) such information that you disclose to a Person who is a prospective
assignee or transferee of some or all Securities, provided that such Person has
first signed a confidentiality agreement substantially identical to that set
forth in this Section.
- 40 -
If this Agreement is satisfactory to you, please so indicate
by signing the acceptance at the foot of a counterpart of this Agreement and
deliver such counterpart to the Company whereupon this Agreement will become
binding between us in accordance with its terms.
Very truly yours,
LABTEC ENTERPRISES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
- 41 -