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EXHIBIT 10.11
NOTE AGREEMENT
EarthCare Company
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
12% Subordinated Notes
Due March 30, 2008
February 11, 2000
To each of the Purchasers of the above Notes listed in the Schedule of
Purchasers attached hereto as Schedule 1:
Gentlemen:
EarthCare Company, a Delaware corporation (the "Company"), hereby
agrees with you (each herein called a "Purchaser" and together, the
"Purchasers") as follows:
1. AUTHORIZATION OF NOTES AND COMMON STOCK: The Company will
authorize the issue and sale of (i) up to $20,000,000 in aggregate principal
amount of its 12% Subordinated Notes due February 28, 2008 (the "Notes"), and
(ii) warrants (the "Warrants") evidencing the right to purchase in the aggregate
400,000 shares of Common Stock, $.0001 par value ("Common Stock"), of the
Company, at the Warrant Purchase Price per share, such number of shares and the
Warrant Purchase Price being subject to adjustment as provided in the Warrants.
Each Note issued hereunder will be dated the date purchased by you hereunder,
will mature on March 30, 2008, will bear interest on its unpaid principal
balance from the date of issuance at the rate of 12% per annum, payable
semi-annually on September 30 and March 30 each year (an "Interest Payment
Date"), commencing on September 30, 2000 and continuing to March 30, 2008, and
thereafter shall bear interest on its unpaid principal balance at the rate of
18% per annum, payable semi-annually on September 30 and March 30 each year, and
upon prepayment of a Note; provided, however, the Company, at its option may
defer the interest payment that is otherwise due and payable on September 30,
2000, to March 30, 2001, at which date it shall be due and payable together with
interest on the deferred amount at the rate of 12% per annum compounded
semi-annually. The Notes will have the other terms and provisions provided
herein and in the form of Note attached hereto as Exhibit A, with such changes
therefrom, if any, as may be approved by you and the Company. Each Warrant shall
be in the form attached hereto as Exhibit B, with such changes therefrom, if
any, as may be approved by you and the company. The term "Note" or "Notes" as
used herein shall include each Note delivered pursuant to any provision of this
Agreement and each Note delivered in substitution or exchange for any such Note
pursuant to any such provision. Certain capitalized terms used in this Agreement
are defined in Section 14.
2. PURCHASE AND SALE OF NOTES. The Company will issue and sell to
you and, subject to the terms and conditions of this Agreement, you will
purchase from the Company, at the Closings provided for in Section 3, the
principal amount of Notes specified opposite your name in the Schedule of
Purchasers at the purchase price of 100% of the principal amount or value
thereof.
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3. CLOSING. The sale of the Notes to be purchased by you will
take place at the offices of the Company, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., Dallas Time, at a closing to occur not later than
February __, 2000, or such other Business Day thereafter as may be agreed upon
by the Purchasers and the Company. Each such closing is referred to herein as a
"Closing," the Date of each such Closing is referred to herein as a "Closing
Date."
At the Closing, the Company will deliver to you the Notes to be
purchased by you in the form of one Note (or such greater number of Notes as you
may request in denominations of not less than $1,000.00 per note and integral
multiples thereof and a minimum principal amount of $25,000 unless otherwise
agreed to by the Company), each dated the date of the Closing and registered in
your name (or in the name of your nominee as indicated on the Schedule of
Purchasers or otherwise made known in writing by you to the Company prior to the
Closing), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor.
4. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to you that:
4.1. ORGANIZATION, QUALIFICATION, STANDING, CAPITAL STOCK, ETC. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, has the corporate power to
own its properties and to carry on its businesses as the same are now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned by it or the nature
of its businesses makes such qualification necessary, except where the failure
to so qualify would not have a Material Adverse Effect. The authorized capital
stock of the Company consists of 70,000,000 shares of Common Stock, $0.0001 par
value per share, of which 11,122,784 shares are issued and outstanding and
30,000,000 shares of Preferred ▇▇▇▇▇, ▇.▇▇▇▇ par value per share, of which zero
shares of Preferred Stock are issued and outstanding. All of such outstanding
shares have been validly issued and are fully paid and nonassessable. The
Company has reserved (i) 1,304,348 shares of Common Stock for issuance pursuant
to the conversion of the 10% Convertible Subordinated Notes due October __,
2006, (ii) [3,030,565] shares of Common Stock for issuance pursuant to options
and warrants outstanding on the date hereof, (iii) 120,000 shares of Common
Stock for issuance pursuant to acquisition agreements, and (iv) 5,000,000 shares
of Common Stock for issuance in acquisitions pursuant to the Company
registration statement on Form S-1. Except as stated in this Section 4.1, the
Company has not reserved any additional shares for issuance (except as expressly
required by this Agreement) and has not issued any shares of its Common Stock.
Except for those described in the second preceding sentence, there are not
outstanding, nor is the Company subject to any agreement, arrangement, or
understanding under which there may become outstanding, any option, warrant, or
other right to purchase or subscribe to, or security convertible into or
exchangeable for, any shares of capital stock of any class of the Company. The
Company's Subsidiaries are identified in Item 1 of the Form 10-K and such Item
correctly states the jurisdiction of organization and the extent of the
Company's ownership of outstanding voting securities of each such Subsidiary.
All such voting securities are owned by the Company free and clear of any liens,
claims or encumbrances of any nature.
4.2. FINANCIAL STATEMENTS, SUBSEQUENT CHANGES, ETC. The Form 10-K,
one or more copies of which have been furnished to you, contains consolidated
balance sheets of the Company and its consolidated Subsidiary, and the
consolidated statements of income, stockholders' equity, and cash flows of the
Company and its consolidated Subsidiaries for each of the three years ended
December 31, 1998, including notes thereto, and the opinion of
PriceWaterhouseCoopers LLP, independent certified public accountants with
respect to such financial statements. The Form 10-Q, one or more copies of which
have been furnished to
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you, contains the unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries at, and the unaudited consolidated statements of
income, stockholders' equity, and cash flows of the Company and its consolidated
Subsidiaries for the period ended, September 30, 1999. All of the foregoing
financial statements are complete and correct in all material respects and
fairly present in all material respects the consolidated financial condition of
the Company and its consolidated Subsidiaries at the respective dates of said
balance sheets and the consolidated results of operations of the Company and its
consolidated Subsidiaries for the respective periods covered thereby. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as otherwise noted therein). There were no material
liabilities, direct or indirect, fixed or contingent, of the Company and its
consolidated Subsidiaries as of the respective dates of such balance sheets that
are not reflected therein or in the notes thereto. There has been no material
change in the consolidated condition, financial or otherwise, or operations of
the Company and its consolidated Subsidiaries since September 30, 1999, nor has
the Company or any Subsidiaries, except for the execution, delivery, and
performance of this Agreement, incurred any Indebtedness for borrowed money,
incurred any material liability, contingent or otherwise, except in the ordinary
course of business (including acquisitions of business and assets), or entered
into any material commitment or other transaction not in the ordinary course of
business since such date.
4.3. OTHER INFORMATION AS TO THE COMPANY. Each of the documents
filed by the Company with the SEC complied (the "SEC Filings") when filed in all
material respects with all of the requirements of the Securities Act and the
Exchange Act, as applicable, and did not contain any untrue statement of a
material fact or omit to state any material fact required to be contained
therein or necessary or necessary in order to make the statements therein not
misleading.
4.4. LITIGATION. Except as disclosed in the SEC Filings or Schedule
4.4, there is no action, suit or proceeding at law or in equity or by or before
any governmental instrumentality or agency or any arbitrator now pending or, to
the Company's knowledge, threatened, against, or affecting the Company, its
Subsidiaries or any of their respective properties or rights, which, if
adversely determined, would be reasonable likely to, either in any case or in
the aggregate result in a Material Adverse Change, or result in any substantial
liability not adequately covered by insurance, or for which adequate reserves
are not maintained on the Company's consolidated balance sheet.
4.5. FRANCHISES, LICENSES, TRADEMARKS, ETC. Except as disclosed in
the SEC Filings or Schedule 4.5, the Company and the Subsidiaries have all
franchises, permits, licenses and other authority as are necessary to enable it
to conduct its business as now conducted and as proposed to be conducted, and to
the best of the Company's knowledge, neither the Company nor any Subsidiary is
in default under any such franchises, permits, licenses or other authority.
Except as disclosed in the SEC Filings or Schedule 4.5, the Company and each
Subsidiaries own (or have made appropriate application for) or are duly licensed
to use trademarks, trademark rights, trade names, trade name rights, and
copyrights required to conduct its business as the same is now being operated,
to the Company's knowledge, and none of the foregoing conflict with or infringe
trademarks, copyrights, or trade names of others.
4.6. DUE AUTHORIZATION AND COMPLIANCE WITH OTHER INSTRUMENTS. This
Agreement and the Notes have been duly and validly authorized by all requisite
corporate proceeding and this Agreement constitutes, and the Notes when executed
and delivered will be, valid and legally binding obligations of the Company
enforceable against the Company in accordance with their terms except as
enforceability is limited by bankruptcy, insolvency, reorganization, moratorium,
or other laws relating to or affecting generally the
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enforcement of creditors' rights and except to the extent that availability of
equitable remedies are subject to the discretion of courts before which any
proceeding therefor may be brought and the Notes will be entitled to the
benefits of this Agreement and are not subject to any preemptive or similar
rights on the part of any holder or holders of shares of capital stock of the
Company. The shares of Common Stock to be issued to you in payment of any
interest payment have been authorized for issuance, are not subject to any
preemptive or similar rights on the part of any holder or holders of shares of
capital stock of the Company and, if issued in payment of interest, will be
validly issued, fully paid and nonassessable.
4.7. BURDENSOME AND CONFLICTING AGREEMENTS AND VIOLATIONS OF
CHARTER PROVISIONS. Neither the Company nor any Subsidiary is bound by any
agreement or instrument or subject to any charter or other corporate restriction
which materially and adversely affects its business, properties, operations,
prospects or condition, financial or otherwise. The Company is not in violation
of its charter or by-laws or of any agreement or instrument by which it is
bound, or of any statute, law, rule or regulation, or of any judgment, decree,
writ, injunction, order or award of any arbitrator, court or governmental
authority applicable to it, in a manner that could result in the imposition of
substantial penalties or result in a Material Adverse Change. Neither the
authorization, execution and delivery of this Agreement or the Notes, the
issuance and delivery of shares of Common Stock in payment of interest, the
consummation of the transactions herein and therein contemplated, nor the
fulfillment of or compliance with the terms hereof and thereof, will conflict
with or result in a breach of any of the terms of the charter or by-laws, or of
any material statute, law, rule or regulation, or of any judgment, decree, writ,
injunction, order or award of any arbitrator, court or governmental authority,
or of any instrument, which is applicable to the Company or its Subsidiaries or
by which the Company or any Subsidiary is bound, or result in the imposition of
any lien upon any of the properties or assets of the Company or its
Subsidiaries.
4.8. CONSENTS AND APPROVALS. The Company has obtained or made
provisions to obtain all material (a) governmental consents, approvals and
authorizations, and registrations and filings with governmental authorities, and
(b) consents, approvals, waivers and notifications of stockholders, creditors,
lessors and other non-governmental persons, in each case, in connection with the
execution and delivery of this Agreement and the Notes, and the consummation of
the transactions herein and therein contemplated.
4.9. TAX RETURNS AND PAYMENTS. The Company and its Subsidiaries
have filed all required information and tax returns and reports and have paid,
or adequately provided for the payment of, all taxes, assessments and other
governmental charges that are material in amount respectively imposed upon them
or upon any of their respective assets, income or franchises, other than any
such charges which are currently payable without penalty or interest. The
charges, accruals and reserves on the books of the Company and the Subsidiaries
with respect to taxes for all fiscal periods are adequate, in the opinion of the
Company, and neither the Company nor any Subsidiary knows of any actual or
proposed tax assessment that is material in amount for any fiscal period or of
any basis therefor against which adequate reserves have not been set up. The
Company has not been advised that any federal income tax or information return
of the Company or any Subsidiary has been, or will be, examined or audited by
the Internal Revenue Service.
4.10. OFFERING OF THE SECURITIES. Neither the Company nor anyone
authorized to act on its behalf has or will directly or indirectly sell or offer
the Securities or any part thereof or any similar securities to, or solicit any
offer to buy any thereof from, any Person so as to bring the issue and sale of
any thereof within the provisions of Section 5 of the Securities Act.
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4.11. OTHER ADVERSE FACTS, ETC. To the best of the Company's
knowledge, there are no existing facts or circumstances which materially and
adversely affect, or (insofar as the Company can now reasonably foresee) in the
future may materially and adversely affect, the business, prospects, results of
operations or condition, financial or otherwise, of the Company and the
Subsidiaries, on a consolidated basis, which are not disclosed in the Form 10-K,
the Form 10-Q, other documents filed with the SEC pursuant to the Exchange Act,
or in this Agreement or any exhibit hereto, or which are required to be
disclosed by the Company in an Exchange Act filing.
4.12. STATUS UNDER CERTAIN STATUTES. Neither the Company nor any
Subsidiary is either (i) a "public utility company" or a "holding company", or
an "affiliate" or a "subsidiary company" of a "holding company", or an
"affiliate" of such a "subsidiary company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, or (ii) a "public
utility" as defined in the Federal Power Act, as amended, or (iii) an
"investment company" or an "affiliated person" thereof or an "affiliated person"
of any such "affiliated person," as such terms are defined in the Investment
Company Act of 1940, as amended.
5. PREPAYMENT OF THE NOTES.
5.1. OPTIONAL PREPAYMENT. The Company may, at its option at any
time, upon notice as provided in Section 5.3, prepay, without premium or
penalty, all or any portion (but not less than $500,000 and only in multiples of
$100,000 for portions in excess of $500,000) of the outstanding principal of the
Notes, such prepayment of principal to be accompanied by payment of all interest
accrued and unpaid on the principal being repaid.
5.2. MANDATORY PREPAYMENT. The Company shall, upon notice as
provided in Section 5.3, prepay the outstanding principal of the Notes, plus
accrued and unpaid interest to and including the Prepayment Date upon the
occurrence of the following events:
(a) The Company completes an offering of equity securities
pursuant to which the Company realizes net proceeds at least
equal to the outstanding principal of the Notes and all
accrued and unpaid interest on the Notes;
(b) The Company is in compliance with all affirmative covenants
under the Senior Obligations; and
(c) The prepayment of the Notes would not cause a Senior
Obligations Default and the Company obtains the prior written
consent of the Designated Holders of the Senior Obligations.
5.3. NOTICE OF PREPAYMENT. The Company will give each holder of any
Notes written notice of any prepayment of Notes under Section 5.1 or 5.2 not
less than 15 days and not more than 60 days prior to the Prepayment Date, such
notice to specify the Prepayment Date, the aggregate amount of Notes to be
redeemed, the principal amount of each Note held by such holder to be redeemed
as of the date of such notice. Such notice shall be accompanied by a certificate
of the chief financial officer of the Company certifying that the conditions of
Section 5.1 or 5.2 have been fulfilled and specifying the particulars of such
fulfillment.
5.4. MATURITY; SURRENDER. With respect to a prepayment of the Notes
pursuant to Section 5.1 or 5.2, the principal amount of each Note shall mature
and become due and payable on the Prepayment Date, together with interest on
such principal amount accrued and unpaid to the Prepayment Date. From and after
the Prepayment Date, unless the Company
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shall fail to pay such principal amount when so due and payable, together with
interest on such principal, as aforesaid, interest on such principal amount
shall cease to accrue. Any Note prepaid shall, after such prepayment, be
surrendered to the Company and canceled.
5.5. FAILURE TO PREPAY. If the Notes are not prepaid in full on or
before September 30, 2000, the Company shall distribute pro rata to the holders
of the Notes Warrants evidencing the right to purchase in the aggregate 400,000
shares of Common Stock of the Company, at per share Warrant Purchase Price, such
number of shares and the purchase price being subject to adjustment as provided
in the Warrants.
6. CONDITIONS PRECEDENT.
6.1. CLOSING. Your obligation to purchase from the Company the
principal amount of Notes specified opposite your name in the Schedule of
Purchasers at any Closing shall be subject to the following conditions
precedent:
(A) OPINIONS OF COMPANY COUNSEL. You shall have received from ▇▇▇▇
▇. ▇▇▇▇▇, counsel for the Company, an opinion, dated the Closing Date and
updated each subsequent Closing Date, satisfactory in form and substance to you
to the effect that:
(i) the Company is a corporation validly existing and in
good standing under the laws of its state of incorporation, has the
corporate power to own its properties and to carry on its business as
now being conducted, and is duly qualified to do business and is in
good standing in each jurisdiction in which its ownership or leasing of
property requires such qualification;
(ii) the Company has full corporate power and authority to
execute and deliver this Agreement, to make and deliver the Notes and
to perform and observe the terms and provisions of this Agreement and
of the Notes;
(iii) this Agreement has been duly authorized, executed,
and delivered by the Company and constitutes the legal, valid, and
binding obligation of the Company, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, rearrangement,
moratorium, reorganization, or similar debtor relief laws affecting the
rights of creditors generally from time to time in effect and except to
the extent that availability of equitable remedies are subject to the
discretion of the court before which any proceeding therefor may be
brought and that rights to indemnification may be limited by applicable
law;
(iv) the Notes sold to you on the Closing Date have been
duly authorized, executed, and delivered by the Company, constitute the
valid and legally binding obligations of the Company and are entitled
to the benefits of this Agreement, subject to applicable bankruptcy,
insolvency, rearrangement, moratorium, reorganization, or similar
debtor relief laws affecting the rights of creditors generally from
time to time in effect and except to the extent that availability of
equitable remedies are subject to the discretion of the court before
which any proceeding therefor may be brought;
(v) neither the execution and delivery of this Agreement
and the Securities nor performance and observance of the terms and
provisions hereof and thereof violate or conflict with the Articles of
Incorporation or By-Laws of the Company, conflict with or result in any
material breach or contravention of any provision of any currently
applicable statute or regulation and existing interpretations thereof
or governmental regulation, or of any order, writ, injunction, decree,
or award of any court, arbitrator, or governmental authority known to
such counsel so as to
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result in a Material Adverse Change, or conflict with or result in any
material breach of any of the terms, conditions, or provisions of, or
constitute a default under, or result in the creation or imposition of
any lien, charge, or encumbrance upon any of the properties or assets
of the Company pursuant to the terms of, any instrument evidencing any
Senior Obligations;
(vi) it is not necessary in connection with the issuance
and delivery of the Securities to you on the Closing Date under the
circumstances contemplated by, and in accordance with the terms of,
this Agreement to register the Securities under the Securities Act or
to register or qualify the Securities under any applicable state
securities of the States of [identify States where Securities are
offered and sold] or to qualify an indenture in respect of the Notes
under the Trust Indenture Act; and
(vii) all approvals and authorizations by any state or
federal agency or body required for the issuance and sale of the
Securities to you and for the execution and delivery of this Agreement
have been obtained or that no such approvals of authorizations are
required.
(B) REPRESENTATIONS AND DEFAULTS. The representations and
warranties made by the Company herein shall be true and correct in all material
respects on and as of the Closing Date with the same effects as if they had been
made on and as of the Closing Date (except as to any changes resulting from
transactions expressly reflected herein or contemplated hereby) and no Event of
Default (as defined in Section 11), nor any condition or event which, after
notice or lapse of time, or both, would constitute such an Event of Default,
shall exist; and the Company shall deliver to you on the Closing Date a
certificate of the President and the Treasurer of the Company to the foregoing
effects.
(C) DOCUMENTS. All proceedings to be taken in connection with the
transactions contemplated by this Agreement to be consummated at or prior to the
Closing Date, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to you and you shall have received original
counterparts or certified or other copies of all documents which you may have
reasonably requested in connection with said transactions and of all corporate
proceedings in connection therewith, in form and substance reasonably
satisfactory to you and your counsel.
(D) NO MATERIAL ADVERSE CHANGE. As of the Closing Date, no
Material Adverse Change has occurred in the business or financial condition of
the Company.
(F) BANK CONSENT. The Company shall have received the consent, of
its lenders under the Senior Credit Agreement (as defined in Section 9.7) to the
issuance and sale of up to $20,000,000 in aggregate principal amount of the
Notes, and the execution and performance of this Agreement and the transactions
contemplated hereby.
7. COVENANTS OF THE COMPANY. The Company covenants and agrees
that, so long as any of the Notes are outstanding, it will comply with the
following provisions, subject to the provisions of Section 15:
AFFIRMATIVE COVENANTS
7.1. USE OF PROCEEDS. The Company will apply all proceeds (net of
costs directly related to the preparation and negotiation of this Agreement and
the offering and sale of the Notes) derived from the sale of the Notes to
acquisitions and for general corporate purposes.
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7.2. PAYMENT OF PRINCIPAL AND INTEREST. The Company will make all
payments of principal of and interest on the Notes at the time the same shall
become due thereunder or hereunder.
7.3. TAXES. The Company will, and will cause each Subsidiary to,
promptly pay and discharge all lawful taxes, assessments, and governmental
charges or levies (other than taxes, assessments, and other governmental charges
imposed by foreign jurisdictions or otherwise which in the aggregate are not
material to the business or assets of the Company on an individual or
consolidated basis) imposed on it or upon its income or profits, or upon any of
its properties, real or personal, before the same shall become in default, as
well as all lawful claims for labor, materials, and supplies or otherwise which,
if unpaid, might become a lien or charge upon its properties or any part
thereof; provided, however, that neither the Company nor any Subsidiary shall
not be required to pay or cause to be paid any such tax, assessment, charge,
levy or claim prior to institution of foreclosure proceedings if the validity
thereof shall be contested in good faith by appropriate proceedings and if the
Company shall have established reserves deemed by the Company adequate with
respect to such tax, assessment, charge, levy, or claim or as may be required by
generally accepted accounting principles consistently applied.
7.4. INSURANCE. The Company will, and will cause its Subsidiaries
to, maintain liability, property damage, and insurance on its insurable property
against fire and other hazards with financially sound and responsible insurance
carriers in the relative proportionate amounts usually carried by reasonable and
prudent companies conducting businesses similar to that of the Company.
7.5. MAINTENANCE OF EXISTENCE AND PROPERTIES. The Company will keep
its corporate existence in full force and effect. The Company will, and will
cause its Subsidiaries to, keep its properties in good repair, working order,
and condition (ordinary wear and tear excepted), and from time to time will make
all needful and proper repairs, renewals, replacements, extensions, additions,
betterments, and improvements thereto, so that the business carried on may be
properly conducted at all times in accordance with prudent business management.
The Company will, and will cause each Subsidiary to, comply with all applicable
laws and regulations (including Environmental Laws), decrees, orders, judgments,
licenses and permits, including without limitation all environmental permits
("Applicable Laws"), except where noncompliance with such Applicable Laws would
not cause a Material Adverse Change.
7.6. FINANCIAL STATEMENTS AND COMPLIANCE CERTIFICATES. The Company
will, and will cause each Subsidiary to, keep books of record and account in
which full, true and correct entries in all material respects in accordance with
generally accepted accounting principles will be made of all dealings or
transactions in relation to its business and activities. The Company shall
furnish to each holder of any of the Notes:
(A) as soon as available and in any event within 47 days after the
close of each fiscal quarter, commencing with the fiscal quarter ending
September 30, 1999, an unaudited consolidated balance sheet of the Company and
its consolidated Subsidiaries as of the end of such quarter and consolidated
statements of income, stockholders' equity, and cash flows of the Company and
its consolidated Subsidiaries for such quarter and for the expired portion of
the then current fiscal year, setting forth comparable figures for the same
quarter and expired portion of the previous fiscal year, and prepared and
certified by the chief financial officer of the Company, subject to year-end
audit adjustment;
(B) as soon as available and in any event within 92 days after the
close of each fiscal
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year of the Company, a balance sheet of the Company as of the end of such fiscal
year and statements of income, stockholders' equity, and cash flows of the
Company for such fiscal year, setting forth comparable figures for the previous
fiscal year, all reported upon, and certified, by PriceWaterhouseCoopers LLP or
other independent certified public accountants of nationally recognized
standing;
(C) with each financial statement required to be delivered
pursuant to the provisions of paragraph (a) or (b) above, a certificate of the
President and the chief financial officer of the Company stating that to their
knowledge there does not exist any Event of Default or any condition or event
which after notice or lapse of time, or both, would constitute an Event of
Default, or specifying the nature and period of existence of each such Event of
Default, condition or event and the action the Company is taking or proposes to
take with respect thereto;
(D) copies of all financial statements and reports sent by the
Company to its shareholders and of all regular and periodic reports, if any,
filed by it with the SEC pursuant to any statute administered by the SEC; and
(E) such other information relating to the business and financial
condition of the Company as may from time to time be reasonably requested by
you.
Except as and to the extent required by law or by any regulatory authority
having jurisdiction over you, and except for disclosures to prospective
transferees of any of your Notes, you will not willfully disclose to others
information obtained from any such inspection or discussion which the Company
advises you is confidential in nature.
7.7. NOTICE OF DEFAULT. The Company will within ten Business Days
notify you upon becoming aware of the occurrence of any Event of Default
hereunder (or the occurrence of any event or existence of any condition which
with notice or lapse of time, or both, would be reasonably likely to become an
Event of Default) or any event of default under any instrument evidencing Senior
Obligations.
7.8. REPURCHASE OF THE NOTES AT THE OPTION OF THE HOLDER UPON A
CHANGE IN CONTROL.
(a) Upon the occurrence of a Change of Control, the Company shall
make an offer (subject only to conditions required by applicable law, if any) to
each Holder (the "Change of Control Offer"), to repurchase for cash all or any
part of such holder's Notes on a date (the "Change of Control Purchase Date")
that is no later than 60 Business Days after the occurrence of such Change of
Control, at the Change of Control Purchase Price specified below, plus accrued
and unpaid interest to the Change of Control Purchase Date, and each Holder
shall have the right, at such Holder's option, to tender such Holder's Notes to
the Company on the terms set forth in the Change of Control Offer. The Change of
Control Offer shall be made within 10 Business Days following a Change of
Control, and shall remain open for 20 Business Days following its commencement
(the "Change of Control Offer Period"). Upon expiration of the Change of Control
Offer Period, the Company promptly, but, in any event, no later than 60 Business
Days from the Change of Control, shall purchase all Notes properly tendered in
response to the Change of Control Offer and each Holder who has given a notice
pursuant to this Section 7.8 that such Holder desires to accept the Change of
Control Offer for all or part of such Holder's Notes shall be obligated to
tender and sell such Notes to the Company pursuant to such Offer.
(b) As used herein, a "Change of Control" means:
(i) any merger or consolidation of the Company with or into
any Person or any sale, transfer or other conveyance, whether direct or
indirect, of all or
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substantially all of the assets of the Company on a consolidated basis,
in one transaction or a series of related transactions, if, immediately
after giving effect to such transaction(s), any "person" or "group" (as
such terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act, whether or not applicable), is or becomes the beneficial
owner (as such term is used in Rule 13d-3 of the Exchange Act or any
successor provision thereto), directly or indirectly, of more than 50%
of the total voting power in the aggregate normally entitled to vote in
the election of directors, managers or trustees, as applicable, of the
transferee(s) or surviving entity or entities,
(ii) any "person" or "group," becomes the beneficial owner,
directly or indirectly, of more than 50% of the total voting power in
the aggregate of all classes of capital stock of the Company then
outstanding normally entitled to vote in elections of directors, or
(iii) during any period of 12 consecutive months after the
Closing Date, individuals, together with successors selected by such
individuals, who at the beginning of any such 12-month period
constituted the Board of Directors of the Company cease for any reason
(other than a planned retirement) to constitute a majority of the Board
of Directors of the Company then in office, as applicable;
provided, however, that any transaction that would otherwise fall within clause
(i), (ii), or (iii) with respect to which discussions between the Company and
the other Person to such transaction were initiated prior to the date hereof.
The "Change of Control Purchase Price" means 100% of the principal
amount of the Notes, if a Change of Control occurs on or prior to the second
anniversary of the Closing Date;
(c) On or before the Change of Control Purchase Date, the Company
will (i) accept for payment the Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) promptly pay the Holders of Notes
so accepted an amount equal to the Change of Control Purchase Price (together
with accrued and unpaid interest, if any), and (iii) authenticate and deliver to
such Holders a new Note equal in principal amount to any unpurchased portion of
the Note surrendered.
NEGATIVE COVENANTS
7.9. LIMITATION ON CONSOLIDATION, MERGER AND SALE. The Company
shall not consolidate with or merge with any other corporation or convey,
transfer or lease substantially all of its assets in a single transaction or
series of transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance,
transfer or lease substantially all of the assets of the
Company as an entirety, as the case may be, shall be a solvent
corporation organized and existing under the laws of the
United States or any State thereof (including the District of
Columbia), and, if the Company is not such corporation, such
corporation shall have executed and delivered to each holder
of any Notes its assumption of the due and punctual
performance and observance of each covenant and condition of
this Agreement and the Notes; and
(b) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be
continuing.
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No such conveyance, transfer or lease of substantially all of the
assets of the Company shall have the effect of releasing the Company or any
successor corporation that shall theretofore have become such in the manner
prescribed in this Section 7.9 from its liability under this Agreement, the
Other Agreements to which the Company is a party or the Notes.
7.10 NO DIVIDENDS. The Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly declare or pay any dividend or make
any distribution on account of the capital stock (including all shares,
interests, participations, rights or other equivalents of corporate stock) of
the Company or any of its Subsidiaries (other than dividends or distributions
payable to the Company or any of its Subsidiaries and other than dividends or
distributions in connection with a shareholder rights plan).
7.11 OTHER SUBORDINATED INDEBTEDNESS. The Company shall not incur
any Indebtedness other than the Senior Obligations that is or purports to be
senior in right of payment to the Notes without the written consent of Holders
holding a majority in principal amount of the Notes.
8. PAYMENT, REGISTRATION AND TRANSFER OF NOTES.
8.1. PLACE OF PAYMENT. The Company will promptly and punctually pay
the interest on the Notes held by you without any presentment thereof; and the
Company will pay all amounts payable to you in respect of principal of and
interest on the Notes to you or your nominees at the address specified in
Schedule 1, or at such other place as you may from time to time designate in
writing.
8.2. REGISTRATION AND TRANSFER. The Company agrees to maintain an
office (or to appoint an agent having an office) in Dallas, Texas, or such other
city as the Company may designate by notice in writing to you, at which Notes
may be surrendered for transfer and reissuance, for exchange, replacement, or
cancellation. The Company shall keep or cause to be kept, at the office or
agency so maintained, a register or registers in which the Company or its agent
shall register the names and addresses of the Holders and shall transfer
registered Notes in accordance with this Agreement. Upon surrender for transfer
of any registered Note duly assigned by the registered holder (or its duly
authorized attorney) to the transferee(s) thereof and subject to satisfaction of
the requirements set forth in Section 12.4 if such Note is then a Restricted
Note, the Company shall execute and deliver a new registered Note (or Notes in
appropriately subdivided denominations of principal), dated the most recent date
to which interest shall have been paid on the surrendered Note, in an equal
principal amount with notation of payments of principal made thereon, or in a
principal amount equal to the original principal amount as reduced by payments
of principal theretofore made on the Note surrendered, in the name of, and
payable to the order of, the transferee(s) thereof. No service charge shall be
assessed for any transfer, registration, reissuance, exchange, or notation of
payment hereunder.
8.3. INTEREST. Interest on the Notes shall be computed on the basis
of a 365-day year at a rate of 12% per annum from the Closing Date, payable in
equal semiannual installments on each Interest Payment Date of each year (or
such prorated amount as may be applicable with respect to the first payment)
until the principal on the Notes becomes due and payable. To the extent
permitted by law, interest on any overdue payment of principal or interest shall
be payable quarterly at a rate equal to 18% per annum.
Interest on the Notes shall be payable on each Interest Payment Date in
cash or, at the option of the Company, by the issuance to the Holder of shares
of Common Stock with a
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Current Market Price on the Interest Payment Date equal to the interest payable
on such Interest Payment Date;
8.4 COMMON STOCK ISSUED IN PAYMENT OF INTEREST. Any shares of
Common Stock issued pursuant to Section 8.3 shall be validly issued, fully paid
and nonassessable shares of the Common Stock of the Company and shall be subject
to the restrictions on transfer set forth in Section 12 hereof.
9. SUBORDINATION OF NOTES. The Company covenants and agrees, and
each holder of a Note, by acceptance thereof, likewise covenants and agrees (i)
that, to the extent and in the manner set forth in this Section 9, the Company's
Senior Obligations (as defined in Section 9.1), if any, will be senior in right
of payment to the Notes, and (ii) that the subordination provisions set forth in
this Section 9 are, and are intended to be, an inducement and a consideration to
each holder of any Senior Obligations, whether such Senior Obligation was
created or acquired before or after the date of this Agreement, to acquire and
continue to hold, or to continue to hold, such Senior Obligation, and each
holder of Senior Obligations shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or continuing to
hold, such Senior Obligations.
9.1. SUBORDINATION TO SENIOR OBLIGATIONS. As used herein, "senior
in right of payment to the Notes" means that:
(a) no part of the Debt shall have any claim to the assets of
the Company on a parity with or prior to the claim of the Senior
Obligations; and
(b) unless and until the Senior Obligations have been paid in
full, without the express prior written consent of all holders of such
Senior Obligations, no Holder will take, demand (including by means of
any legal action) or receive from the Company, and the Company will not
make, give or permit, directly or indirectly, by set-off, prepayment,
purchase or in any other manner, any cash payment of or security for
the whole or any part of the Debt; provided, however, that (x) so long
as no default exists in the payment of any principal of or premium, if
any, or interest on any Senior Obligations, the Company may make, and
the Holders may receive, scheduled payments on account of the Debt in
accordance with the terms hereof, except if a default in the
performance or observance of any term or condition relating to any
Senior Obligations (other than a default in the payment of any
principal of or premium, if any, or interest on the Senior Obligations)
has occurred and is continuing that permits the holders of the Senior
Obligations to declare such Senior Obligations to be due and payable,
any Designated Holder of Senior Obligations (as defined in Section 9.6)
may give notice (a "Senior Blockage Notice") to the Company (provided,
however, no more than one Senior Blockage Notice may be given during
any 360 consecutive day period) that until all Senior Obligations are
paid in full, no scheduled payments (whether in cash or securities, but
excluding additional Notes) may be made by the Company on account of
the Debt during the period ("Senior Blockage Period") commencing on the
date of such Senior Blockage Notice and ending on the earliest of: (A)
180 days after the date of such Senior Blockage Notice; (B) the date
such default is cured or waived; and (C) the date that the holders of
the Senior Obligations shall have given notice to the Company of
termination of the Senior Blockage Period, and except when a default in
the payment of any principal of, premium if any, or interest on the
Senior Obligations has occurred and is continuing or would result
therefrom, and (y) upon the acceleration of the maturity of any Senior
Obligations, the Holders may accelerate the scheduled maturities of the
Notes if and to the extent permitted hereby at such time but such
acceleration shall not give (i) any Holder any right
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to take, demand (including by means of any legal action) or receive
from the Company, or (ii) the Company the right to make, give or
permit, directly or indirectly, by set-off, prepayment, purchase or in
any other manner, any cash payment of or security for the whole or any
part of the Notes unless and until the Senior Obligations have been
paid in full.
9.2. PAYMENTS DUE HOLDERS OF SENIOR OBLIGATIONS. Any payment or
distribution by the Company to which any Holder would be entitled except for the
provisions hereof (whether in cash or securities, but excluding additional
Notes) shall be paid or delivered by the Holder, or any receiver, trustee in
bankruptcy, liquidating trustee, disbursing agent or other Person making such
payment or distribution, to the holders of the Senior Obligations or their
representative, ratably in accordance with the amounts thereof, to the extent
necessary to pay in full all Senior Obligations, before any payment or
distribution shall be made to any Holder.
9.3. MEANING OF PAYMENT IN FULL. The expressions "prior payment in
full," "payment in full," "paid in full" and any other similar terms or phrases
when used herein with respect to the Senior Obligations shall mean the payment
in full in cash of all of the Senior Obligations; and the expression "any cash
payment of or security for the whole or any part of the Debt" and any other
similar terms or phrases when used herein shall not be deemed to include a
payment or distribution of stock or securities of the Company provided for by a
plan of reorganization or readjustment authorized by an order or decree of a
court of competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy law, or of any other corporation provided for by such plan
of reorganization or readjustment, which stock or securities are subordinated in
right of payment to all then outstanding Senior Obligations to substantially the
same extent as the Notes are so subordinated as provided in this Section 9.7.
The consolidation of the Company with, or the merger of the Company into,
another Person or the liquidation or dissolution of the Company following the
conveyance or transfer of all or substantially all of its properties and assets
as an entirety to another Person upon the terms and conditions set forth in
Section 7.9 shall not be deemed a "proceeding" for the purposes of this Section
9.7 if the Person formed by such consolidation or into which the Company is
merged or the Person which acquires by conveyance or transfer such properties
and assets as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions set
forth in Section 7.9.
9.4. MEANING OF SENIOR OBLIGATIONS. As used herein, "Senior
Obligations" shall mean collectively all obligations of the Company (i) under or
in connection with the Senior Credit Agreement (as defined below) and the other
"Loan Documents" referred to in the Senior Credit Agreement; (ii) to any Bank
(as defined below) or any affiliate of a Bank under or in connection with (x)
any interest rate, currency or commodity swap agreement, cap agreement or collar
agreement or any other agreement or arrangement designed to protect the Company
against fluctuations in interest rates, currency exchange rates or commodity
prices, or (y) any purchase card or credit card issued by such Bank or such
affiliate, (iii) to any Bank or any affiliate of any Bank under or in connection
with any other credit arrangement (including without limitation any lease by
such Bank or such affiliate, any guaranty issued by the Company in favor of such
Bank or such affiliate and any deposit account services (including in respect of
any overdraft) if such obligation is secured by the assets of the Company; and
(iv) under or in connection with any other secured Indebtedness of the Company
having an initial principal amount in excess of $5,000,000 which by its express
terms states that it is a "Senior Obligation"; in each case (a) whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter incurred, and (b) whether on account of principal, premium, interest
(including, without limitation, interest accruing after the maturity date of any
Senior Obligation and interest accruing after the commencement of any
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bankruptcy, insolvency, reorganization or similar proceeding relating to the
Company, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding), reimbursement obligations, fees, indemnities,
costs, expenses or otherwise. For purposes of the foregoing, "Senior Credit
Agreement" means the Credit Agreement dated as of February __, 2000 among the
Company, various financial institutions and Bank of America, N.A., as
Administrative Agent and BankBoston N.A., as Syndication Agent, as amended,
restated or otherwise modified from time to time, together with any replacement
or refinancing thereof; and "Bank" means any bank, insurance company, mutual
fund or other financial institution which from time to time is a party to the
Senior Credit Agreement.
9.5. MEANING OF DEBT. As used herein, "Debt" shall mean
collectively the unpaid principal of, premium, if any, and interest on
(including, without limitation, interest accruing after the maturity date of any
Note and interest accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to the Company, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) and all other obligations in respect of the
Notes, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter incurred, in each case whether on account of
principal, premium, interest, reimbursement obligations, rights to rescission,
fees, indemnities, costs, expenses or otherwise.
9.6. MEANING OF DESIGNATED HOLDER OF SENIOR OBLIGATIONS. As used
herein, "Designated Holder of Senior Obligations" means (i) the Administrative
Agent under the Senior Credit Agreement or (ii) any holder of Senior Obligations
(or representative of holders of Senior Obligations) in an initial aggregate
principal amount of $20,000,000 or more (excluding Senior Obligations under the
Senior Credit Agreement).
9.7. BANKRUPTCY PROCEEDINGS. Any Designated Holder of Senior
Obligations is hereby authorized to (i) file an appropriate claim for and on
behalf of any Holder if such Holder does not file, and there is not otherwise
filed on behalf of such Holder, a proper claim or proof of claim in the form
required in any bankruptcy, insolvency, reorganization or similar proceeding
with respect to the Company at least 30 days before the expiration of the time
to file such claim or proof of claim and (ii) file an appropriate ballot for and
on behalf of any Holder if such Holder does not file, and there is not otherwise
filed on behalf of such Holder, a proper ballot in any such proceeding in the
form required at least 10 days before the expiration of the time to file such
ballot.
9.8. ACTIONS FOLLOWING DEFAULT. If any Event of Default shall occur
and be continuing, the Holders shall not, without the prior written consent of
the agent under the Senior Credit Agreement (the "Agent"), accelerate the
maturity of any Debt, or institute proceedings to enforce or collect any Debt,
or commence or join with any other creditor of the Company in commencing any
bankruptcy, insolvency, reorganization or similar proceeding against the
Company, or otherwise exercise any right or remedy in respect of the Debt,
except after the first to occur of a Standstill Termination Event or the 30th
day following the giving of notice of such Event of Default to the Agent by a
Holder. For purposes of the foregoing, a "Standstill Termination Event" will be
deemed to occur upon (1) commencement of a bankruptcy, insolvency,
reorganization or similar proceeding by or against the Company (provided that if
such proceeding is instituted against the Company, a Standstill Termination
Event shall only be deemed to occur in respect thereof if such proceeding has
not been dismissed within 60 days of commencement thereof or if the Company
acquiesces thereto) or (2) the acceleration of the maturity of any Senior
Obligations.
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9.9. NO MODIFICATIONS WITHOUT CONSENT OF DESIGNATED HOLDERS. The
Holders agree with and for the benefit of each holder of Senior Obligations that
no provision of this Section 9 may be amended or otherwise modified, and no
other provision of this Agreement may be amended or otherwise modified in any
manner which is adverse to the holders of the Senior Obligations, without (in
each case) the prior written consent of all Designated Holders of Senior
Obligations.
9.10. OBLIGATIONS UNIMPAIRED. Nothing contained in this Section 9 is
intended to or shall impair as between the Company, its creditors other than the
holders of Senior Obligations and the Holders, the obligation of the Company,
which shall be absolute and unconditional, to pay to the Holders the principal
of and interest on the Notes, as and when the same will become due and payable
in accordance with the terms thereof, or to affect the relative rights of the
Holders and creditors of the Company other than the holders of Senior
Obligations, nor shall anything herein or therein prevent the holder of any Note
from exercising all remedies otherwise permitted by applicable law upon default,
subject to the rights, if any, under this Section 9 of the holders of Senior
Obligations in respect of any required notice of the exercise of any such remedy
or cash, property, or securities of the Company received upon the exercise of
any such remedy.
10. SUBSTITUTION OF NOTES. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction, or mutilation of any Note,
and of indemnity satisfactory to it (which, in the case of any original
purchaser of the Notes, shall be a contractual obligation of such purchaser) and
upon surrender, at the office or agency maintained in accordance with Section 8,
and cancellation of any Note, if mutilated, the Company will execute and deliver
a new Note of like tenor, in lieu of such Note, dated the most recent date to
which interest on such Note shall have been paid.
11. EVENTS OF DEFAULT. If any one or more of the following events
(herein called "Events of Default") shall occur and be continuing:
(A) default shall be made in the payment of principal of any of
the Notes when and as the same shall become due and payable, either at maturity
or by acceleration or otherwise;
(B) default shall be made in the payment of interest on the Notes
when the same becomes due and payable and the default continues for a period of
30 days;
(c) default shall be made in the due performance or
observance of any other material covenant, agreement, or provision
herein to be performed or observed by the Company or a material breach
shall exist in any representation or warranty herein contained, and
such default or material breach shall have continued for a period of 30
days after written notice thereof to the Company from any holder or
Holders of Notes aggregating not less than 51% of the aggregate
principal amount of the Notes then outstanding; provided, however, that
if any such default or material breach shall be such that it cannot be
cured or corrected within such 30-day period, such period shall be
extended for such additional period of time (not exceeding 30
additional days) as shall be necessary to effect such cure or
correction if curative or corrective action is instituted within said
30-day period and thereafter diligently pursued;
(d) the Company or any Subsidiary shall (i) apply for or
consent to the appointment of a receiver, trustee, or liquidator of the
Company or such Subsidiary or any of their respective assets, (ii) make
a general assignment for the benefit of creditors, (iii) be adjudicated
a bankrupt or insolvent or (iv) file a voluntary
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petition in bankruptcy, or a petition or answer seeking reorganization
or an arrangement with creditors to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, moratorium,
dissolution, liquidation, or debtor relief law, or any chapter of any
such law, or an answer admitting the material allegations of a petition
filed against it in any proceeding under any such law or chapter, or
corporate action shall be taken by the Company or any Subsidiary for
the purpose of effecting any of the foregoing; or an order, judgment,
or decree shall be entered, without the application, approval, or
consent of the Company or a Subsidiary, by any court of competent
jurisdiction, approving a petition seeking liquidation or
reorganization of the Company or such Subsidiary, as applicable, of all
or a substantial part of the assets of the Company or such Subsidiary;
and provided that such order, judgment, or decree remains in effect for
more than 30 days, whether or not consecutive;
(e) a Senior Obligations Default shall occur and continue
for a period of 90 days;
(f) default shall occur with respect to any other
Indebtedness for borrowed money of the Company or any Subsidiary (other
than the Notes or Senior Obligations) or under any agreement under
which such Indebtedness may be issued by the Company or such Subsidiary
and such default shall continue for more than the period of grace, if
any, therein specified, if the aggregate amount of such Indebtedness
for which such default shall have occurred exceeds $500,000; or
(g) final judgment for the payment of money in excess of
$500,000 shall be rendered against the Company or any Subsidiary and
the same shall remain undischarged for a period of 60 days during which
execution shall not be effectively stayed;
then and in each and every such case the Holders of Notes aggregating not less
than 51% of the aggregate principal amount of the Notes then outstanding may by
notice in writing to the Company declare the unpaid principal of the Notes
together with accrued interest thereon to be forthwith due and payable and
thereupon such principal and interest shall be due and payable without
presentment, protest, or further demand or notice of any kind, all of which are
hereby expressly waived.
This Section 11, however, is subject to the condition that, if at any
time after the principal of the Notes shall have become so due and payable, and
before any judgment or decree for the payment of the moneys so due, or any
thereof, shall be entered and if all arrears of interest upon the Notes and all
other sums payable under the Notes (except the principal on the Notes which
solely by reason of such declaration shall have become payable) shall have been
duly paid, then and in every such case the Holders of Notes aggregating not less
than 66-2/3% of the aggregate principal amount of the Notes then outstanding
may, by written notice to the Company, either temporarily suspend or permanently
rescind and annul such declaration and its consequences; but no such suspension
or rescission and annulment shall extend to or affect any prior, concurrent, or
subsequent default or Event of Default (other than the ones identified by the
Holders declaring them due as the ones upon which such declaration was based) or
impair any right consequent thereon.
Notwithstanding anything to the contrary herein, if default shall be
made in the payment of any principal of, or interest on, any Note when and as
the same shall become due and payable, at maturity (but not merely by virtue of
an acceleration pursuant to the foregoing provisions of this Section 11), the
holder of such Note may by notice in writing to the Company declare the unpaid
principal of such Note, with accrued interest, to be forthwith due and payable
and thereupon such principal and interest shall be due and payable
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without presentment, protest, or further demand or notice of any kind, all of
which are hereby expressly waived.
If any holder of a Note shall demand payment thereof or take any other
action (of which the Company has actual knowledge) in respect of an Event of
Default, the Company will forthwith give written notice thereof, specifying such
action and the nature of such event, to each holder of record of the Notes then
outstanding. The Company will also give prompt written notice to each holder of
record of the Notes at the time outstanding of any written notice of suspension,
rescission, or annulment given to it as aforesaid.
The Company covenants that, if default be made in any payment of
principal of or interest on any Note, it will pay to the holder thereof such
further amount as shall be reasonably sufficient to cover the cost and expense
of collection, including, without limitation, court costs and reasonable
compensation to the attorneys and counsel of the holder for all services
rendered in that connection.
No course of dealing between the Company and any holder of a Note or
any delay on the part of the holder of a Note in exercising any rights
thereunder or hereunder shall operate as a waiver of any rights of any such
holder.
12. SECURITIES ACT.
12.1. INVESTMENT INTENT, ETC. Each of you and each other Person who
has been designated by you as a registered holder to whom Securities will be
initially issued on a Closing Date, by acceptance of such Securities, represent
and in making this sale it is specifically understood and agreed that you and
each such other Person (a) are an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act and the rules and regulations
promulgated thereunder and was not organized for the specific purpose of
acquiring the Shares and (b) are acquiring the Securities to be purchased for
your, or such Person's, own account, or for the account of one or more trusts
which you, or such Person, manage, and not with a view to or for sale in
connection with any distribution thereof, provided that the disposition of your,
or such Person's, property shall at all times be and remain within your, or such
Person's, control.
12.2. RESTRICTIONS ON TRANSFERABILITY. The Notes and Restricted
Stock shall not be transferable except upon the conditions specified in this
Section 12, which conditions are intended to ensure compliance with the
provisions of the Securities Act in respect of the transfer of any Note or
Restricted Stock.
12.3. RESTRICTIVE LEGENDS. Each Note shall (unless otherwise
permitted by the provisions of Section 12.4) be stamped or otherwise imprinted
with a legend in substantially the following form:
"This Note has not been registered under the Securities Act of
1933, as amended, and is transferable only upon the conditions
specified in the Purchase Agreement referred to herein."
Each certificate for Common Stock issued in payment of interest or upon exercise
of a Warrant and each certificate for Common Stock issued to a subsequent
transferee shall (unless otherwise permitted by the provisions of Section 12.4)
be stamped or otherwise imprinted with a legend in substantially the following
form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or any state securities
act. The shares have been acquired for investment and may not be sold,
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transferred, pledged or hypothecated unless (i) they shall have been
registered under the Securities Act of 1933 and any applicable state
securities act, or (ii) the corporation shall have been furnished with
an opinion of counsel, satisfactory to counsel for the corporation,
that registration is not required under any such acts."
12.4. NOTICE OF PROPOSED TRANSFERS. (a) Except as otherwise provided
in paragraph (b) of this Section 12.4, prior to any transfer or attempted
transfer of any Restricted Note or Restricted Stock, the holder thereof shall
give written notice to the Company of such holder's intention to effect such
transfer. Each such notice shall describe the manner and circumstances of the
proposed transfer and shall be accompanied by an opinion of counsel for such
holder satisfactory to the Company, to the effect that such transfer may be
effected without registration of such Restricted Note or Restricted Stock, as
the case may be, under the Securities Act. If such notice is accompanied by such
an opinion, such holder shall be entitled to transfer such security in
conformity with the terms of such notice, and, if the opinion of counsel so
specifies, the securities issued upon any such transfer shall not bear the
restrictive legend set forth in Section 12.3. Such holder shall indemnify the
Company for any transfer effected pursuant to this Section 12.4(a).
(b) The procedures set forth in paragraph (a) of this Section 12.4
shall not apply to any transfer by you (or a transferee pursuant to this
paragraph (b)) of any Restricted Note or Restricted Stock to any of your
Subsidiaries or Affiliates; provided, however, that at the time of such transfer
the transferee shall execute and deliver to the Company an "Investment Letter"
containing substantially the representations provided in Section 12.1 with
respect to the Notes or Common Stock that are the subject of such transfer and
its agreement to be bound by the provisions of this Section 12 and such transfer
is otherwise exempt from registration under the Securities Act and applicable
state securities laws. Notes or Common Stock issued upon such transfer shall
bear the appropriate restrictive legend set forth in Section 12.3.
13. DEFINITIONS.
"Affiliates" of any Person shall mean any Person directly or indirectly
controlling, controlled by or under direct or indirect common control with such
Person. A Person shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such corporation, whether through the ownership
of voting securities, by contract or otherwise.
"Applicable Law" shall have the meaning given such term in Section 7.5.
"Bank" shall have the meaning given such term in Section 9.4
"Business Day" shall mean any day that the Nasdaq Stock Market is open
for trading.
"Change of Control" shall have the meaning given such term in Section
7.8.
"Change of Control Offer" shall have the meaning given such term in
Section 7.8.
"Change of Control Offer Period" shall have the meaning given such term
in Section 7.8.
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"Change of Control Purchase Date" shall have the meaning given such
term in Section 7.8.
"Change of Control Purchase Price" shall have the meaning given such
term in Section 7.8.
"Closing" shall have the meaning given such term in Section 3.
"Closing Date" shall have the meaning given such term in Section 3.
"Common Stock" shall mean the Company's presently authorized Common
Stock, $0.0001 par value per share.
"Company" means EarthCare Company, a Delaware corporation.
"Current Market Price" shall mean, as of any date, 20% of the sum of
the average, for each of the 5 consecutive Trading Days prior to such date, of
the Market Price on such Trading Day.
"Notes" shall have the meaning given such term in Section 1.
"Debt" shall have the meaning given such term in Section 9.5.
"Designated Holder of Senior Obligations" shall have the meaning given
such term in Section 9.6.
"Eligible Holder" shall have the meaning given such term in Section
12.6.
"Environmental Law" shall mean all federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws and regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
"Event of Default" shall have the meaning given such term in Section
11.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Form 10-K" shall mean the Company's Annual Report Pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 for the fiscal year
ended December 31, 1998.
"Form 10-Q" shall mean the Company's Quarterly Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal
quarter ended September 30, 1999.
"Guaranty" shall mean, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any indebtedness, dividend or other obligation of any other Person
in any manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
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(b) to advance or supply funds (i) for the purchase or payment
of such indebtedness or obligation, or (ii) to maintain any working
capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available
funds for the purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"Holder" or "Holders" shall mean, with respect to any Note, the Person
in whose name such Note is registered in the register maintained by the Company
pursuant to Section 8.
"Indebtedness" shall mean, with respect to any Person means, at any
time, without duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising in
the ordinary course of business but including all liabilities created
or arising under any conditional sale or other title retention
agreement with respect to any such property);
(c) all liabilities appearing on its balance sheet in
accordance with generally accepted accounting principles leases with
respect to which the lessee is required concurrently to recognize the
acquisition of an asset and the incurrence of a liability;
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money); and
(f) any Guaranty of such Person with respect to liabilities of
a type described in any of clauses (a) through (e) hereof.
"Interest Payment Date" shall mean the date an installment of interest
becomes due and payable on the Notes in accordance with Section 1.
"Lien" shall mean, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest or title
of any vendor, lessor, lender or other secured party to or of such Person under
any conditional sale or other
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title retention agreement or capital lease, upon or with respect to any property
or asset of such Person (including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).
"Market Price" for any day shall mean (i) if the Common Stock is listed
or admitted for trading on any national securities exchange registered under
Section 6 of the Exchange Act the last sale price, or the closing bid price if
no sale occurred, of such class of stock on the principal national securities
exchange on which such class of stock is listed, or (ii) if not listed or traded
as described in clause (i), the last reported sale price of Common Stock on the
Nasdaq National Market tier of the Nasdaq Stock Market, if so quoted, (iii) if
not quoted as described in clause (ii), the average of the bid and asked price
on the Nasdaq Smallcap Market tier of the Nasdaq Stock Market or any similar
system of automated dissemination of quotations of securities prices then in
common use, if so quoted, or (iv) if not quoted as described in clause (iii),
the mean between the high bid and low asked quotations for Common Stock as
reported by the OTC Bulletin Board Service or National Quotation Bureau
Incorporated if at least two securities dealers have inserted both bid and asked
quotations for such class of stock on at least five of the ten preceding days.
If the Common Stock is quoted on a national securities or central market system,
in lieu of a market or quotation system described above, the closing price shall
be determined in the manner set forth in clause (i) of the preceding sentence if
actual transactions are reported and in the manner set forth in clause (iii) of
the preceding sentence if bid and asked quotations are reported but actual
transactions are not. If none of the conditions set forth above is met, the
closing price of Common Stock on any day or the average of such closing prices
for any period shall be the fair market value of such class of stock as
determined by a member firm of the New York Stock Exchange, Inc. selected by the
Company. If the Market Price cannot be determined under any of the foregoing
methods, Market Price shall mean the fair value per share of Common Stock on
such date determined by the Board of Directors of the Company in good faith,
irrespective of any accounting treatment; provided, however, if Holders of 51%
or more in aggregate principal amount of the Notes disagree with the Board's
determination of the fair value per share of the Common Stock, such fair value
shall be determined by an investment banking firm, which as part of its business
engages in the valuation of businesses and their securities in connection with
mergers and acquisitions, underwritings, distributions, and private placements,
jointly selected by the Company and the Holders. If the Company and the Holders
shall not be able to agree on an investment banking firm to provide such
valuation, then each of the Company and the Holders shall select an investment
banking firm to provide a determination of such fair value and the average of
such determinations shall be the fair value per share of the Common Stock. The
Company shall pay the fees and expenses of any such investment banking firms
retained to provide such valuations.
"Material Adverse Change" shall mean any single circumstance or event
(or series of circumstances or events) having a material adverse effect on the
assets, properties, financial condition, business operations or prospects of the
Company or on the Company and the Subsidiaries, on a consolidated basis.
"Materials of Environmental Concern" shall mean chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum and
petroleum products.
"Nasdaq Stock Market" shall mean The Nasdaq Stock Market, Inc.
"Person" shall mean and include an individual, a partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a
government or any department or agency thereof, and any other entity.
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"Prepayment Date" shall mean the date fixed for prepayment of the Notes
pursuant to Section 5.1.
"Restricted Note" shall mean any Note bearing the restrictive legend
set forth in Section 12.3 hereof.
"Restricted Stock" shall mean shares of Common Stock issued in payment
of interest on the Notes and evidenced by a certificate nearing the restrictive
legend set forth in Section 12.3 hereof or shares issuable upon exercise of the
Warrants.
"SEC" shall mean the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.
"SEC Filings" shall have the meaning given such term in Section 4.3.
"Securities" shall mean the Notes and the Common Stock as the same may
be respectively amended and supplemented from time to time.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
"Senior Blockage Notice" shall have the meaning given such term in
Section 9.1.
"Senior Credit Agreement" shall have the meaning given such term in
Section 9.4.
"Senior Obligations" shall have the meaning given such term in Section
9.4.
"Senior Obligations Default" shall mean a default in payment of the
principal of or sinking fund installments, if any, due with respect to, fees in
respect of or interest on, any Senior Obligations, or any default, or any event
which, with notice or lapse of time or both, would constitute a default, in any
other agreement, term or condition contained in any agreement under which any
Senior Obligations is issued.
"Subsidiaries" shall mean any Person of which at the time of
determination the Company and/or one or more Subsidiaries owns or controls
directly or indirectly more than 50% of the shares of voting stock of such
Person.
"Trading Day" shall mean a day on which an amount greater than zero can
be calculated with respect to the Common Stock under any one or more of the
clauses (i), (ii), or (iii) under the definition of "Market Price" below.
"Warrant" shall have the meaning given such term in Section 1.
"Warrant Purchase Price" shall mean the Current Market Price of the
Common Stock on the Closing Date, such price being subject to adjustment as
provided in the Warrant.
14. WAIVERS; MODIFICATIONS OF AGREEMENT. Any provision in this
Agreement to the contrary notwithstanding, changes in or additions to this
Agreement may be made, and compliance with any covenant or condition herein set
forth may be omitted, if the Company (a) shall obtain from the holders of record
of Notes aggregating not less than 66-2/3% of the aggregate principal amount of
the Notes at the time outstanding (and, in the case of any such change,
addition, or omission adversely affecting the rights pursuant to Section 12 of
any holder of record of Restricted Stock or Notes, additionally from the Holders
of not less than 100% of the number of shares of Restricted Stock or Notes at
the time
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outstanding) their consent thereto in writing and (b) shall deliver copies of
such consent in writing to any such Holders of record who did not execute the
same; provided, however, that without the consent in writing of the holder of
each Note (or, in the case of any change, addition, or omission adversely
affecting the rights pursuant to Section 12 of any holder of record of
Restricted Stock or Notes, as aforesaid, of each share of Restricted Stock or
Notes) affected thereby, no such consent shall be effective to reduce the
principal of or rate of interest payable on, or to postpone any date fixed for
the payment of principal of or any installment of interest on, any Note, to
increase the percentage specified in Section 11 of the principal amount of the
Notes the Holders of which may, in accordance with the provisions of such
Section 11, accelerate the maturity of the Notes upon an Event of Default or to
reduce the percentage of the principal amount of the Notes (or Restricted Stock)
the consent of the Holders of which shall be required under this Section 15.
15. SURVIVAL OF COVENANTS, ETC. All covenants, agreements,
representations, and warranties made herein and in the Notes and in any
certificate delivered pursuant hereto shall survive any investigation made by
you and the execution and delivery to you of the Notes to be purchased by you
and your payment therefor.
16. BROKERS; ISSUANCE TAXES. The Company will hold you free and
harmless from any (a) claim, demand, liability for, or expense in connection
with, any brokers' or finders' fees or commissions claimed by any Person
asserted to be acting on behalf of the Company in connection with this Agreement
or the transactions contemplated herein and (b) taxes, if any, payable upon, or
on account of, issuance of the Notes or the Common Stock.
17. GOVERNING LAW. This Agreement and the Notes are being
delivered in Texas and shall be governed by and construed according to the laws
of the State of Texas without consideration of its conflict of law provisions.
18. NOTICES. Any notice, consent, request, or other communication
required or permitted hereunder shall be in writing and shall be deemed given
when either (a) personally delivered to the intended recipient or (b) sent, by
certified or registered mail, return-receipt requested, addressed to the
intended recipient as follows:
if to the Company, to:
EarthCare Company
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
; if to any of you, to the address given for such of you on Schedule 1 hereto;
if to any other holder of a Note to the address of such holder given to the
Company in accordance with Section 8; and if to any other holder of Restricted
Stock, to the address of such holder as set forth in the stock transfer records
of the Company. Any Person (other than the Company) may change the address to
which notice is to be sent pursuant to the preceding sentence by giving notice
of such new address to the Company in accordance with this Section 19. The
Company may change the address to which notice is to be sent hereunder by giving
notice of such change, in accordance with this Section 19, to each Person
against whom such change shall be effective. Any notice mailed as aforesaid
shall, unless otherwise provided herein, be deemed given on the fifth day after
deposited in the Unites States mail in accordance with the first sentence of
this Section 19.
19. ORIGINAL ISSUE DISCOUNT. The Notes will be subject to the
original issue discount provisions of Section 1273 of the Internal Revenue Code
of 1986, as amended. If the Notes are determined to have been issued with
original issue discount, a holder would
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be required to include a portion of such original issue discount in gross income
in each year, or portion thereof, during which such holder held a Note, even
though no cash payment with respect to such original issue discount would have
been received. The Treasury Regulations under Section 1273 require the Company
and the purchasers of the Notes to make certain joint determines concerning
original issue discount. The Company will use its best efforts to provide the
holders of the Notes with its allocation of the purchase price of the Securities
among the Notes and the Warrants within thirty (30) days following the Closing.
The Company and the purchasers of the Securities agree to cooperate in
determining the amount of original issue discount attributable to the Notes and
in reporting such discount on their respective tax returns.
20. PARTIES IN INTEREST. All of the terms and provisions of this
Agreement shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns.
21. BUSINESS DAYS. Should any installment of the principal of or
interest on any Note become due and payable upon a day other than a day on which
national banks located in Texas, are open for the conduct of banking business,
the maturity thereof shall be extended to the next succeeding day upon which
such banks are open for the conduct of banking business and, in the case of an
installment of principal, interest shall be payable thereon at the rate per
annum specified in such Note during such extension.
22. HEADINGS. The headings of the various sections and subsections
hereof have been inserted for convenience of reference only and shall not be
deemed to in any way modify any of the terms or provisions hereof.
23. COUNTERPARTS. This Agreement may be signed by each party
hereto upon a separate copy, in which event all of said copies shall constitute
a single counterpart of this Agreement. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
If the foregoing is in accordance with your understanding, please sign
the form of confirmation and acceptance on the enclosed counterpart of this
Agreement and return the same to the Company, whereupon this Agreement shall be
a binding agreement between you and the Company.
Very truly yours,
EARTHCARE COMPANY
By:
--------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, President
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The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written
----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Founders Equity Group
By
-------------------------
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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SCHEDULE 1
Schedule of Purchasers
Principal
Amount of
Name and Address Notes
---------------- ------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ $ 9,000,000
Highland Holdings, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Cash Family Limited Partnership
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 7,500,000
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Founders Equity Group 1,000,000
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1,000,000
Auto, Inc.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 1,500,000
-----------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ $20,000,000
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
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