EXHIBIT 2
EXECUTION VERSION
-----------------
NOTE AND WARRANT PURCHASE AGREEMENT
BY AND AMONG
▇▇ ▇▇▇▇▇▇ LIMITED PARTNERSHIP
WORKSTREAM INC.
▇▇▇▇▇▇▇▇ SORTER CO., INC.
NEW MAVERICK DESK, INC.
AND
BANC ONE MEZZANINE CORPORATION
DATED AS OF SEPTEMBER 17, 2002
1. Definitions and Related Matters.........................................................................1
1.1 Definitions....................................................................................1
1.2 Accounting Principles.........................................................................17
1.3 Other Interpretive Matters....................................................................17
2. Authorization and Closing..............................................................................17
2.1 Authorization of the Securities...............................................................17
2.2 Purchase and Sale of the Securities...........................................................18
2.3 The Closing...................................................................................18
3. Conditions of the Purchaser's Obligation at the Closing................................................18
3.1 Representations, Warranties and Covenants; No Event of Default................................18
3.2 Closing Documents.............................................................................18
3.3 Certificate of Incorporation..................................................................19
3.4 Stockholders Agreement........................................................................19
3.5 Registration Agreement........................................................................19
3.6 Security Agreement............................................................................19
3.7 Loan Party Guaranty...........................................................................20
3.8 Pledge Agreement..............................................................................20
3.9 Intercreditor Agreements......................................................................20
3.10 Solvency Certificate..........................................................................20
3.11 Opinion of the Company's Counsel..............................................................20
3.12 Consolidated Balance Sheet and Projections....................................................20
3.13 Senior Loan Agreements........................................................................20
3.14 Investments...................................................................................20
3.15 Tab Merger Agreement..........................................................................20
3.16 Tab Merger Opinions...........................................................................21
3.17 Key-Man Life Insurance........................................................................21
3.18 Closing Fees and Expenses.....................................................................21
3.19 Sale of Securities to the Purchaser...........................................................21
3.20 Securities Law Compliance.....................................................................21
3.21 Existing Indebtedness.........................................................................21
3.22 Proceedings...................................................................................21
3.23 Due Diligence.................................................................................22
3.24 No Material Adverse Change....................................................................22
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3.25 Compliance with Applicable Laws...............................................................22
3.26 Lien Searches.................................................................................23
3.27 Waiver........................................................................................23
4. Representations and Warranties of the WSI Parties......................................................23
4.1 Organization, Power and Licenses..............................................................23
4.2 Capitalization and Related Matters............................................................23
4.3 Authorization; No Breach......................................................................24
4.4 Financial Statements..........................................................................25
4.5 Financial Statements and Projections..........................................................26
4.6 Absence of Undisclosed Liabilities............................................................26
4.7 No Material Adverse Change....................................................................27
4.8 Absence of Certain Developments...............................................................27
4.9 Assets........................................................................................28
4.10 Tax Matters...................................................................................28
4.11 Contracts and Commitments.....................................................................29
4.12 Intellectual Property Rights..................................................................31
4.13 Litigation, etc...............................................................................32
4.14 Product Warranty..............................................................................32
4.15 Brokerage.....................................................................................32
4.16 Governmental Consent, etc.....................................................................33
4.17 Insurance.....................................................................................33
4.18 Employees.....................................................................................33
4.19 ERISA.........................................................................................33
4.20 Compliance with Laws..........................................................................34
4.21 Environmental and Safety Matters..............................................................34
4.22 Affiliated Transactions.......................................................................35
4.23 Solvency, etc.................................................................................36
4.24 Investment Company............................................................................36
4.25 Margin Regulations............................................................................36
4.26 Public Utility Holding Company Act............................................................36
4.27 Tab Merger Documents and Senior Loan Documents Representations; Holding Company Status........36
4.28 Disclosure....................................................................................37
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4.29 Closing Date..................................................................................37
5. Affirmative Covenants..................................................................................37
5.1 Financial Statements and Other Information....................................................37
5.2 Inspection of Property........................................................................41
5.3 Attendance at Board Meetings..................................................................41
5.4 Conduct of Business...........................................................................42
5.5 Maintenance of Property and Existence.........................................................42
5.6 Taxes.........................................................................................42
5.7 Contracts and Agreements......................................................................42
5.8 Compliance with Laws..........................................................................42
5.9 Environmental and Safety Requirements.........................................................42
5.10 Insurance.....................................................................................43
5.11 Key-Man Policy................................................................................43
5.12 Books and Records.............................................................................43
5.13 Compliance with Agreements....................................................................43
5.14 Senior Loan Documents.........................................................................43
5.15 HSM Note......................................................................................43
5.16 Intellectual Property Rights..................................................................43
5.17 Rank; Most Favored Covenant Status............................................................43
5.18 Formation of Subsidiaries.....................................................................44
5.19 Guaranty of Put Arrangement...................................................................44
5.20 Dessy Put.....................................................................................44
5.21 Further Assurances............................................................................45
6. Negative Covenants.....................................................................................45
6.1 Restricted Junior Payments....................................................................45
6.2 Issuance of Notes, etc........................................................................45
6.3 Loans, Advances, Guarantees and Investments...................................................46
6.4 Mergers.......................................................................................46
6.5 Dispositions..................................................................................46
6.6 Liquidations, etc.............................................................................46
6.7 Acquisitions..................................................................................46
6.8 Business......................................................................................46
6.9 Restrictive Agreements........................................................................46
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6.10 Affiliate Transactions........................................................................47
6.11 Subsidiaries..................................................................................47
6.12 Indebtedness; Liens...........................................................................47
6.13 Operating Leases..............................................................................47
6.14 Fiscal Year...................................................................................47
6.15 Prepayments, etc..............................................................................47
6.16 Option Plans..................................................................................47
6.17 Capital Stock.................................................................................47
6.18 Use of Proceeds...............................................................................47
6.19 Organizational Documents......................................................................47
6.20 Financial Covenants...........................................................................47
6.21 Margin Regulations............................................................................49
6.22 Amendment of Other Agreements.................................................................49
6.23 Senior Loan Documents.........................................................................49
6.24 Intellectual Property Rights..................................................................50
6.25 Employee Benefit Plans........................................................................50
6.26 Contracts.....................................................................................50
6.27 Cancellation of Claims........................................................................50
6.28 Disclosure....................................................................................50
7. Transfer of Restricted Securities......................................................................50
7.1 General Provisions............................................................................50
7.2 Information Requests..........................................................................50
7.3 Legend Removal................................................................................50
8. BHC Regulatory Matters.................................................................................50
8.1 Generally.....................................................................................50
8.2 Exchange of Stock.............................................................................51
8.3 Other Holders.................................................................................51
9. Preemptive Rights......................................................................................51
9.1 Generally.....................................................................................51
9.2 Exercise of Rights............................................................................52
9.3 Expiration of Periods.........................................................................52
10. Events of Default......................................................................................52
10.1 Definition of Event of Default................................................................52
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10.2 Consequences of Events of Default.............................................................56
11. Miscellaneous..........................................................................................56
11.1 Expenses......................................................................................56
11.2 Remedies......................................................................................57
11.3 Purchaser's Investment Representations........................................................57
11.4 Amendments and Waivers........................................................................58
11.5 Survival of Agreement.........................................................................58
11.6 No Setoffs, etc...............................................................................59
11.7 Successors and Assigns........................................................................59
11.8 Severability..................................................................................59
11.9 Counterparts..................................................................................59
11.10 Descriptive Headings; Interpretation..........................................................59
11.11 Governing Law.................................................................................59
11.12 Notices.......................................................................................60
11.13 Consideration for Warrant; Treatment of Fees..................................................61
11.14 Construction..................................................................................61
11.15 Complete Agreement............................................................................62
11.16 Indemnification...............................................................................62
11.17 Payment Set Aside.............................................................................62
11.18 Jurisdiction and Venue........................................................................63
11.19 Waiver of Right to Jury Trial.................................................................63
11.20 Certain Waivers...............................................................................63
11.21 Nature of Obligations.........................................................................64
11.22 Confidentiality...............................................................................64
List of Exhibits
List of Disclosure Schedules
v
▇▇ ▇▇▇▇▇▇ LIMITED PARTNERSHIP
WORKSTREAM INC.
▇▇▇▇▇▇▇▇ SORTER CO., INC.
NEW MAVERICK DESK, INC.
NOTE AND WARRANT PURCHASE AGREEMENT
-----------------------------------
THIS NOTE AND WARRANT PURCHASE AGREEMENT (as amended,
restated, amended and restated, supplemented or otherwise modified from time to
time, this "AGREEMENT") is made as of September 17, 2002, by and among ▇▇ ▇▇▇▇▇▇
LIMITED PARTNERSHIP, a Delaware limited partnership (herein, together with its
successors and assigns, "HSM"), WORKSTREAM INC., a Delaware corporation and
Wholly Owned Subsidiary of HSM (herein, together with its successors and
assigns, the "COMPANY"), ▇▇▇▇▇▇▇▇ SORTER CO., INC., an Ohio corporation and
Wholly Owned Subsidiary of the Company (herein, together with its successors and
assigns, "▇▇▇▇▇▇▇▇"), NEW MAVERICK DESK, INC., a Delaware corporation and Wholly
Owned Subsidiary of the Company (herein, together with its successors and
assigns, "MAVERICK"), and BANC ONE MEZZANINE CORPORATION, a Delaware corporation
("BOMC"), and each of the other holders of Securities (as such term is defined
herein) who becomes a party hereto in accordance with the terms hereof (BOMC and
such other holders are collectively referred to herein as the "PURCHASERS" and
individually as a "PURCHASER").
The parties hereto agree as follows:
1. DEFINITIONS AND RELATED MATTERS.
1.1 DEFINITIONS. For the purposes of this Agreement, the following
terms have the meanings set forth below (such meanings to be applicable to both
the singular and plural forms of the terms defined):
"AFFILIATE" of any particular Person means any other Person
directly or indirectly controlling, controlled by or under common control with
such particular Person. The term "CONTROL" means the possession, directly or
indirectly, of the power to direct the management and policies of a Person
whether through the ownership of voting securities, by contract or otherwise.
"AFFILIATED GROUP" means any affiliated group as defined in
Code ss.1504 that has filed a consolidated return for federal income tax
purposes (or any similar group under state, local or foreign law) for a period
during which any of the Company or any of its Subsidiaries was a member.
"AGREEMENT" has the meaning provided in the preamble hereof.
"BHC HOLDERS" means BOMC and any other holder of the Note or
Warrant or Underlying Common Stock which is subject to the Bank Holding Company
Act and any related regulations.
"BOARD" means the Board of Directors of the Company.
"BOMC" has the meaning provided in the preamble hereof.
"BORROWER" means each of the Company, ▇▇▇▇▇▇▇▇ and Maverick,
and "Borrowers" means the Company, ▇▇▇▇▇▇▇▇ and Maverick, collectively.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
public holiday under the laws of the State of Illinois or other day on which
banking institutions are authorized or obligated to close in Chicago, Illinois.
"CAPITAL EXPENDITURES" means, with respect to any Person, all
expenditures which, in accordance with GAAP, would be required to be capitalized
and shown on the consolidated balance sheet of such Person, but excluding
expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (a) from insurance proceeds (or
other similar recoveries) paid on account of the loss of or damage to the assets
being replaced or restored or (b) with awards of compensation arising from the
taking by eminent domain or condemnation (or consideration from a purchase in
lieu of condemnation) of the assets being replaced.
"CAPITALIZED LEASE" means, with respect to any Person, any
lease of (or other agreement conveying the right to use) any real or personal
property by such Person that, in conformity with GAAP, would be required to be
accounted for as a capital lease on the balance sheet of such Person.
"CAPITALIZED LEASE OBLIGATIONS" means the amount of the
liability reflecting the aggregate discounted amount of future payments under
all Capitalized Leases calculated in accordance with GAAP consistently applied
and Statement of Financial Accounting Standards No. 13.
"CAPITAL STOCK" means any and all shares, interests,
participations, rights or other equivalents, however designated, of any class of
stock or equity securities, including, without limitation, capital stock,
limited liability company interests, general or limited partnership interests or
any rights or participations therein.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CERTIFICATE OF INCORPORATION" means the certificate of
incorporation of the Company.
"CHANGE IN CONTROL" means (a) ▇▇ ▇▇▇▇▇▇ Corp. shall cease to
be the general partner of HSM or ▇▇ ▇▇▇▇▇▇ Corp. shall cease to be the general
partner of MSTP, (b) HSM shall cease to, directly or indirectly, own and control
at least (i) 51% of the outstanding capital stock of the Company or (ii) that
percentage of the outstanding voting capital stock of the Company necessary at
all times to elect a majority of the Board of the Company, (c) any Person or
"group" (within the meaning of Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934 as in effect on the Closing Date) other than HSM shall have
acquired a greater beneficial
2
ownership in the Company's voting capital stock than that held by HSM, (d) the
Company shall cease to directly own and control 100% of each class of the
outstanding capital stock of each of ▇▇▇▇▇▇▇▇ and Maverick (other than, with the
prior written consent of BOMC, pursuant to a merger of ▇▇▇▇▇▇▇▇ and/or Maverick
with the Company or consolidation of ▇▇▇▇▇▇▇▇ and/or Maverick and the Company),
(e) any sale of all or substantially all of the assets of the Company, ▇▇▇▇▇▇▇▇
or Maverick (other than, with the prior written consent of BOMC, in the case of
▇▇▇▇▇▇▇▇ or Maverick only, to another Wholly Owned Subsidiary of the Company or
to the Company), (f) Tab shall cease to be a Wholly Owned Subsidiary of TALP (g)
HSM and MSTP shall fail to own, in the aggregate, at least ninety percent 90% of
the limited partnership interests of TALP, or (h) HSM shall fail to own at least
seventy percent (70%) of the partnership interests of TALP, or (i) if ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇▇ shall cease to be both the chief executive officer of the Company
and a member of the Board with full voting power (other than by reason of death
or disability of ▇▇. ▇▇▇▇▇▇▇▇▇▇▇, provided that a replacement chief executive
officer and Board member reasonably acceptable to BOMC takes office within sixty
(60) days of the date of death or disability).
"CLASS A COMMON STOCK" means the Company's Class A Common
Stock, par value $1.00 per share, as defined in the Certificate of
Incorporation.
"CLASS B COMMON STOCK" means the Company's Class B Common
Stock, par value $1.00 per share, as defined in the Certificate of
Incorporation.
"CLOSING" means the closing of the purchase and sale of the
Securities contemplated by this Agreement.
"CLOSING DATE" means the date on which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as amended,
and any reference to any particular Code section shall be interpreted to include
any revision of or successor to that section regardless of how numbered or
classified.
"COLLATERAL ASSIGNMENT OF INSURANCE" means a collateral
assignment of insurance policies by the Company, and acknowledged by the
insurer, in favor of the Purchaser with respect to the Key-Man Policy in the
form of EXHIBIT I hereto, as the same may be amended, restated, amended and
restated, supplemented or otherwise modified from time to time.
"COMMON STOCK" means, collectively, the Class A Common Stock,
the Class B Common Stock and any capital stock of any class or series of the
Company hereafter authorized that is not limited to a fixed sum or percentage of
par or stated value in respect of the rights of the holders thereof to
participate in dividends or distributions or in the distribution of assets upon
any liquidation, dissolution or winding up of the Company.
"COMPANY" has the meaning provided in the preamble hereof.
"COMPANY BALANCE SHEET" means the consolidated balance sheet
of the Company and its Subsidiaries after giving effect to the transactions
contemplated hereby and each of the other Transaction Documents, attached hereto
as EXHIBIT J.
3
"COMPANY PROJECTIONS" means the projections of the
consolidated income, balance sheet and cash flows of the Company and its
Subsidiaries for the six fiscal years ending through March 31, 2008, attached
hereto as EXHIBIT L.
"COMPANY PLEDGE AGREEMENT" means a pledge agreement by the
Company in favor of the Purchaser in the form of EXHIBIT F-1 hereto, as the same
may be amended, restated, amended and restated, supplemented or otherwise
modified from time to time in accordance with the terms hereof and thereof.
"COMPUTATION PERIOD" means each period of four consecutive
fiscal quarters ending on the last day of a fiscal quarter.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the
aggregate of all interest paid or accrued by the Company and its Subsidiaries on
a consolidated basis during such period, including all interest, fees and costs
payable with respect to the Indebtedness of the Company and its Subsidiaries
(other than fees and costs that may be capitalized as transaction costs in
accordance with GAAP) and the interest portion of Capitalized Lease Obligations,
all as determined on a consolidated basis in accordance with GAAP consistently
applied.
"CONSOLIDATED NET INCOME" means, for any period, the
consolidated net after-tax income (or loss) of the Company and its Subsidiaries
for such period determined in accordance with GAAP; provided that in determining
Consolidated Net Income hereunder, the following items shall be excluded: (i)
gains (and losses) from the sale or disposition of assets outside of the
ordinary course of business and extraordinary items (determined in accordance
with GAAP consistently applied), and (ii) income (and losses) of any Person
(other than Wholly Owned Subsidiaries of the Company) in which the Company or
any of its Subsidiaries has an ownership interest unless received by the Company
or one of its Subsidiaries in a cash distribution.
"CONSOLIDATED TOTAL ASSETS" means, on any date, the amount of
all assets of the Company and its Subsidiaries on that date, determined on a
consolidated basis, which, in accordance with GAAP, should be classified on the
Company's consolidated balance sheet as assets.
"DESSY" means ▇▇▇▇ Dessy, an individual.
"DESSY INTERCREDITOR AGREEMENT" means an Intercreditor and
Subordination Agreement by and among Dessy, Maverick, the Company and the
Purchaser substantially in form of EXHIBIT G-2 attached hereto, as the same may
be amended, restated, amended and restated, supplemented or otherwise modified
from time to time in accordance with the terms hereof and thereof.
"DESSY SUBDEBT" means the Indebtedness of Maverick to Mr. ▇▇▇▇
Dessy in the original principal amount of $2,000,000, pursuant to that certain
7.5% Junior Subordinated Note Due January 6, 2005.
"DISTRIBUTION" means any distribution by any WSI Party with
respect to its respective capital stock, whether in cash, securities or other
property.
4
"EBITDA" means, for any period, Consolidated Net Income for
such period plus, to the extent deducted in determining such Consolidated Net
Income, Consolidated Interest Expense, income tax expense, depreciation,
amortization (including impairment charges against goodwill) and Workstream
Administrative Expenses to the extent permitted to be paid hereunder; provided,
that for each fiscal month set forth below, EBITDA shall be deemed to be the
amount set forth below for such fiscal month:
--------------------------------- ---------------------------
FISCAL MONTH EBITDA
--------------------------------- ---------------------------
January 2002 $131,000
--------------------------------- ---------------------------
February 2002 $252,000
--------------------------------- ---------------------------
March 2002 $541,000
--------------------------------- ---------------------------
April 2002 $58,000
--------------------------------- ---------------------------
May 2002 $173,000
--------------------------------- ---------------------------
June 2002 $276,000
--------------------------------- ---------------------------
July 2002 $110,000
--------------------------------- ---------------------------
August 2002 $200,000
--------------------------------- ---------------------------
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" means all federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law, in
each case concerning public health and safety, worker health and safety and
pollution or protection of the environment (including, without limitation, all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control or cleanup of any
Hazardous Substance), each as amended and as now or hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of
1974 (or any successor legislation thereto) and any regulations promulgated
thereunder, all as amended from time to time.
"ERISA AFFILIATE" means, with respect to any Person, any trade
or business (whether or not incorporated) under common control with such Person
and which, together with such Person, are treated as a single employer within
the meaning of Section 414 of the Code. Unless otherwise provided herein, "ERISA
Affiliate" refers to an ERISA Affiliate of any WSI Party.
"ERISA EVENT" means, as to any WSI Party or any ERISA
Affiliate (i) a Reportable Event as defined in Section 4043 of ERISA and the
regulations issued thereunder
5
(other than a Reportable Event for which notice has been waived by regulation),
(ii) the withdrawal of any WSI Party or any ERISA Affiliate from a Pension Plan
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA or was deemed under Section 4062(e) of ERISA, (iii) the termination of a
Pension Plan, the filing of notice of intent to terminate a Pension Plan or the
treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA, (iv) the institution of proceedings to terminate a Pension Plan by the
PBGC, (v) the partial or complete withdrawal of any WSI Party or any ERISA
Affiliate from a Multiemployer Plan, (vi) the imposition of a lien on any WSI
Party or any ERISA Affiliate pursuant to Section 412 of the Code or Section 302
of ERISA, (vii) any event or condition which results in the reorganization or
insolvency of a Multiemployer Plan to which any WSI Party or any ERISA Affiliate
has any liability under Section 4241 or Section 4245 of ERISA, respectively, and
(viii) any event or condition which results in the termination of a
Multiemployer Plan, or the institution by the PBGC of proceedings to terminate a
Multiemployer Plan to which any WSI Party or any ERISA Affiliate has any
liability under Section 4041A of ERISA or Section 4042 of ERISA, respectively.
"EVENT OF DEFAULT" has the meaning provided in SECTION 10.1
hereof.
"FEDERAL BANKRUPTCY CODE" means Title 11 of the United States
Code.
"FINANCING DOCUMENTS" means this Agreement, the Note, the
Warrant, the Stockholders Agreement, the Security Agreement, the Registration
Agreement, the Loan Party Guaranty, the Intercreditor Agreements, the Pledge
Agreements, the Collateral Assignment of Insurance, the Mortgage, the Solvency
Certificate, the Certificate of Incorporation and each of the other agreements,
documents and instruments executed in connection herewith and therewith (other
than the Senior Loan Documents and the Tab Merger Documents).
"FIXED CHARGE COVERAGE RATIO" means, for any Computation
Period, the ratio of (a) the total for such period of EBITDA minus the sum of
(i) all income taxes and tax distributions described in SECTION 6.1(ii) paid by
the Company and its Subsidiaries during such period, (ii) all Workstream
Administrative Expenses paid by the Company and its Subsidiaries during such
period, and (iii) all Capital Expenditures of the Company and its Subsidiaries
on a consolidated basis during such period TO (b) the sum for such period of (i)
Consolidated Interest Expense paid in cash plus (ii) scheduled payments of
principal of Total Debt; provided, however, that for purposes of calculating the
Fixed Charge Coverage Ratio for the first four (4) Computation Periods following
the Closing Date, (i) the Consolidated Interest Expense paid in cash shall be
deemed to be the scheduled interest payments due and owing under the Note during
the first year following the Closing Date plus all interest paid after the
Closing Date other than interest on the Note and (ii) scheduled payments of
principal on the Total Debt shall be deemed to be the scheduled principal
payments due and owing under the Note during the first year following the
Closing Date plus any other schedule principal payments made in respect of the
Total Debt after the Closing Date.
"GAAP" means generally accepted accounting principles as
promulgated by the Financial Accounting Standards Board, as in effect from time
to time (subject to the provisions of SECTION 1.2 hereof).
6
"GUARANTEE" means any guarantee of the payment or performance
of any Indebtedness or other obligation and any other arrangement whereby credit
is extended (or continued) to one obligor on the basis of any promise of another
Person, whether that promise is expressed in terms of an obligation to (i) pay
the Indebtedness or other liabilities of such obligor, (ii) purchase an
obligation owed by such obligor, (iii) purchase goods and services from such
obligor pursuant to a take-or-pay contract, (iv) maintain the capital, working
capital, solvency or general financial condition of such obligor or invest in
the obligor, or (v) otherwise assure any creditor of such obligor against loss
(including by way of an agreement to repurchase or reimburse), whether by direct
or indirect agreement, contingent or otherwise, and whether or not any such
arrangement is listed on the balance sheet of such other Person or referred to
in a footnote thereto, but shall not include endorsements of items for
collection in the ordinary course of business. The amount of any Guarantee shall
be equal to the amount of the obligation so guaranteed or otherwise supported
or, if not a fixed or determined amount, the maximum amount guaranteed or
supported.
"GUARANTOR" means each Person party to the Loan Party Guaranty
from time to time.
"▇▇▇▇▇▇▇▇" has the meaning provided in the preamble hereof.
"HAZARDOUS SUBSTANCE" means anything that is a "hazardous
substance" pursuant to CERCLA, anything that is a "solid waste" or "hazardous
waste" pursuant to the federal Resource Conversation and Recovery Act, anything
that is a "pollutant" pursuant to the Federal Water Pollution Control Act,
anything that is a "hazardous chemical" pursuant to the federal Occupational
Safety and Health Act, anything that is a "pesticide" pursuant to the Federal
Insecticide, Fungicide, and Rodenticide Act, any petroleum product or byproduct,
asbestos, polychlorinated biphenyl, noise or radiation.
"HEDGING OBLIGATION" means, with respect to any Person, any
liability of such Person under any interest rate, currency or commodity swap
agreement, cap agreement or collar agreement, and any other agreement or
arrangement designed to protect a Person against fluctuations in interest rates,
currency exchange rates or commodity prices.
"HSM" has the meaning provided in the preamble hereof.
"HSM BALANCE SHEET" means the balance sheet of HSM after
giving effect to the transactions contemplated hereby and each of the other
Transaction Documents, attached hereto as EXHIBIT K.
"HSM NOTE" means that certain promissory note by HSM in favor
of WSI dated as of the Closing Date in the original principal amount of
$3,500,000.
"HSM PLEDGE AGREEMENT" means a pledge agreement by HSM in
favor of the Purchaser in the form of EXHIBIT F-2 hereto, as the same may be
amended, restated, amended and restated, supplemented or otherwise modified from
time to time in accordance with the terms hereof and thereof.
7
"HSM PROJECTIONS" means the projections of the income, balance
sheet and cash flows of HSM for the six fiscal years ending through March 31,
2008, attached hereto as EXHIBIT M.
"INDEBTEDNESS" means at a particular time, without
duplication, (i) any indebtedness for borrowed money or issued in substitution
for or exchange of indebtedness for borrowed money, (ii) any indebtedness
evidenced by any note, bond, debenture or other debt instrument, (iii) any
indebtedness for the deferred purchase price of property or services with
respect to which a Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business), (iv) any commitment by which a Person assures
a creditor against loss (including contingent reimbursement obligations with
respect to letters of credit, surety bonds and other similar instruments), (v)
any obligations for which a Person is obligated pursuant to a Guarantee, (vi)
any Capitalized Lease Obligations with respect to which a Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or with respect
to which obligations a Person assures a creditor against loss, (vii) any
indebtedness secured by a Lien on such Person's assets whether or not such
indebtedness shall have been assumed by such Person, (viii) obligations in
respect of any unfunded pension plans and any unsatisfied obligation for
Withdrawal Liability to a Multiemployer Plan (ix) all obligations, contingent or
otherwise, with respect to the face amount of all letters of credit (whether or
not drawn) and banker's acceptances issued for the account of such Person, (x)
all Hedging Obligations of such Person, (xi) all Indebtedness of any partnership
of which such Person is a general partner, (xii) all obligations of such Person
under any synthetic lease transaction, where such obligations are considered
borrowed money indebtedness for tax purposes but the transaction is classified
as an operating lease in accordance with GAAP, (xiii) all equity securities (or
debt convertible into equity securities) that are mandatorily redeemable or
redeemable at the option of the holder thereof, and (xiv) in the case of the
Company and its Subsidiaries, the obligation of the Company to redeem the
Warrant or Underlying Common Stock on the Exercise Date, but only to the extent
the holder thereof has a present right to require such redemption.
"INDEMNITEES" has the meaning provided in SECTION 11.16
hereof.
"INTELLECTUAL PROPERTY RIGHTS" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and business names and registrations and
applications for registration thereof, together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information),
(vii) domain and similar names, (viii) other intellectual property rights and
(ix) copies and tangible embodiments thereof (in whatever form or medium).
8
"INTERCREDITOR AGREEMENTS" means the Senior Intercreditor
Agreement and the Dessy Intercreditor Agreement, collectively.
"INVESTMENT" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests, membership interests and joint venture interests) of any other Person
and (ii) any capital contribution by such Person to any other Person.
"IRS" means the United States Internal Revenue Service.
"KEY-MAN POLICY" has the meaning provided in SECTION 3.17
hereof.
"KNOWLEDGE" or "AWARE" means and includes the actual knowledge
or awareness, after reasonably diligent inquiry, of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ Dessy or ▇▇▇▇ ▇▇▇▇▇▇▇, or of their successors in their
respective capacities.
"LATEST BALANCE SHEETS" has the meaning provided in SECTION
4.4(b) hereof.
"LIABILITIES" has the meaning provided in SECTION 11.16
hereof.
"LIENS" means any mortgage, pledge, security interest,
encumbrance, lien, charge or other restriction of any kind whatsoever (including
any conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables of any Person with recourse against such
Person, its Subsidiaries or Affiliates, or any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code or any similar
statute other than to reflect ownership by a third party of property leased to
any Person or any of its Subsidiaries under a lease which is not in the nature
of a conditional sale or title retention agreement.
"LOAN PARTY GUARANTY" means a loan party guaranty by HSM and
any other Guarantor that becomes a party thereto in the form of EXHIBIT D hereto
as the same may be amended, restated, amended and restated, supplemented or
otherwise modified from time to time in accordance with the terms hereof and
thereof.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the financial condition, operating results, assets, liabilities, operations,
condition (financial or otherwise), business or prospects of the WSI Parties,
taken as a whole, (b) the ability of the Borrowers to repay the Note or (c) the
ability of any WSI Party to perform any of its obligations under the Securities
or any of the Transaction Documents; provided, however, that in determining
whether there has been a Material Adverse Effect, any adverse effect
attributable to either of the following shall be disregarded: (i) the effects of
the declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States or any material disruption in commercial banking
services; and (ii) the commencement of a war or police action by the United
States.
"MATERIAL INDEBTEDNESS" means any Indebtedness under any
indenture, loan agreement, note or other instrument which evidences Indebtedness
in excess of $200,000 in
9
principal amount which has been or hereafter may be issued or outstanding, and,
in the case of Maverick and ▇▇▇▇▇▇▇▇, includes the Senior Debt.
"MAVERICK" has the meaning provided in the preamble hereof.
"MERGER PARTIES" means Tab, TALP and TAC.
"MORTGAGE" means a mortgage by ▇▇▇▇▇▇▇▇ in favor of the
Purchaser encumbering the real property located at Fairfield, Ohio, as the same
may be amended, restated, amended and restated, supplemented or otherwise
modified from time to time in accordance with the terms hereof and thereof.
"MSTP" means MS TP Limited Partnership, a Delaware limited
partnership.
"MSTP PLEDGE AGREEMENT" means a pledge agreement by MSTP in
favor of the Purchaser with respect to its limited partnership interests in TALP
and its ownership interests in the general partner of TALP in the form of
EXHIBIT F-3 hereto as the same may be amended, restated, amended and restated,
supplemented or otherwise modified from time to time in accordance with the
terms hereof and thereof.
"MULTIEMPLOYER PLAN" means a "MULTIEMPLOYER PLAN" as defined
in Section 4001(a)(3) of ERISA and to which any Person is making, is obligated
to make, has made or been obligated to make contributions on behalf of
participants who are or were employed by any of them or to which such person has
any current or potential liability.
"NOTE" means the 14% Senior Subordinated Note of the Borrowers
in favor of the Purchaser in an original aggregate principal amount of
$7,000,000, in form and substance as set forth in EXHIBIT A attached hereto, as
the same may be amended, restated, amended and restated, supplemented or
otherwise modified from time to time in accordance with the terms hereof and
thereof, and any replacement or replacements therefor.
"OFFICER'S CERTIFICATE" means, with respect to any Person, a
certificate (as to which there shall be no personal, as opposed to corporate,
liability) signed by such Person's chief executive officer, president or chief
financial officer on behalf of such Person, stating that (i) the officer signing
such certificate has made or has caused to be made reasonable investigations to
verify the accuracy of the information set forth in such certificate and (ii)
based on such investigations, to that officer's knowledge, such certificate does
not misstate any material fact and does not omit to state any fact necessary to
make the certificate not misleading.
"OPERATING LEASE" means for any Person any lease of property
which would not be classified as a Capitalized Lease under GAAP consistently
applied, other than a lease under which such Person is the lessor.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"PENSION PLAN" means a "pension plan," as such term is defined
in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in
10
Section 4001(a)(3) of ERISA), and to which any WSI Party or ERISA Affiliate may
have liability, including any liability by reason of having been a substantial
employer within the meaning of Section 4063 of ERISA at any time during the
preceding five years, or by reason of being deemed to be a contributing sponsor
under Section 4069 of ERISA.
"PERMITTED INDEBTEDNESS" means (i) with respect to ▇▇▇▇▇▇▇▇
and Maverick, the Senior Debt, (ii) any Indebtedness incurred pursuant to the
terms of this Agreement and the Transaction Documents, (iii) Indebtedness of any
Borrower owed to any other Borrower, (iv) Indebtedness of the Company and its
Subsidiaries under Capitalized Leases and purchase money Indebtedness of the
Company and its Subsidiaries secured by Permitted Liens not in excess of
$300,000 in the aggregate at any time outstanding, and (v) the Permitted
Subordinated Indebtedness.
"PERMITTED LIENS" means:
(i) tax liens for taxes not yet due and payable or which are
being contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with GAAP
consistently applied;
(ii) deposits or pledges made in connection with, or to secure
payment of, utilities or similar services, workers' compensation,
unemployment insurance, old age pensions or other social security
obligations and statutory liens relating to employee wages;
(iii) (A) Liens arising in connection with Capitalized Leases
of the Company and its Subsidiaries (and attaching only to the property
being leased) and (B) purchase money security interests in any property
acquired by the Company or any of its Subsidiaries, in each case
securing Permitted Indebtedness not to exceed $300,000 in the aggregate
at any time outstanding;
(iv) mechanics', materialmen's or contractors' liens or
encumbrances or any similar lien or restriction for amounts not yet due
and payable arising in the ordinary course of business by operation of
law;
(v) easements, rights-of-way, restrictions and other similar
charges and encumbrances not materially interfering with the ordinary
conduct of the business of the Company and its Subsidiaries or
materially detracting from the value of the assets of the Company and
its Subsidiaries; and
(vi) Liens on the assets of the Company and its Subsidiaries
outstanding on the date hereof which secure Permitted Indebtedness and
which are described on the LIENS SCHEDULE.
"PERMITTED SUBORDINATED INDEBTEDNESS" means the Dessy Subdebt,
provided that such Indebtedness is subordinated to the obligations of the
Company and its Subsidiaries hereunder and under the Note in a manner acceptable
to the Purchaser in its sole discretion.
11
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof and any other entity.
"PLAN" means, with respect to any Person or any ERISA
Affiliate, as required by the context at any time, an employee benefit plan, as
defined in Section 3(3) of ERISA, which any Person or any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"PLEDGE AGREEMENTS" means the Company Pledge Agreement, the
HSM Pledge Agreement, and the MSTP Pledge Agreement, collectively.
"POTENTIAL EVENT OF DEFAULT" means any event or occurrence
which with the mere passage of time or the giving of notice or both would
constitute an Event of Default.
"PURCHASER" has the meaning provided in the preamble hereof.
"PURCHASER REPRESENTATIVE" means a representative of the
Purchasers, in the case of there being more than one Purchaser, which initially
shall be BOMC.
"QUALIFIED PLAN" means an employee pension benefit plan, as
defined in Section 3(2) of ERISA, which is intended to be tax-qualified under
Section 401(a) of the Code, and which any WSI Party or any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"QUALIFIED PUBLIC OFFERING" means the consummation of an
underwritten public offering pursuant to an effective registration statement
filed by the Company (or any successor entity to the Company) with the
Securities and Exchange Commission under the Securities Act with respect to
common equity of the Company (or any successor entity) with gross proceeds (less
underwriting commission, fees and discounts) to the Company of at least
$15,000,000.
"REGISTRATION AGREEMENT" means a registration rights agreement
by and between the Company and the Purchaser in the form of EXHIBIT C attached
hereto, as the same may be amended, restated, amended and restated, supplemented
or otherwise modified from time to time in accordance with the terms hereof and
thereof.
"REGULATORY PROBLEM" means any transaction, circumstance or
situation whereby (i) a Person and such Person's Affiliates would own, control
or have power over a quantity of securities of any kind issued by the Company or
any other entity greater than is permitted under any requirement of any
governmental authority, or (ii) it has been asserted by any governmental
regulatory agency (or such Person reasonably believes, after consultation with
legal counsel, that there is a risk of such assertion) that such Person and its
Affiliates are not entitled to hold, or exercise any significant right with
respect to, the Warrants or Underlying Common Stock held by such Person.
"RELEASE" has the meaning set forth in CERCLA.
12
"REPORTABLE EVENT" means any of the events listed in Section
4043(c)(1), (2), (3), (5), (6), (8) or (9) of ERISA.
"RESTRICTED JUNIOR PAYMENTS" means (a) any Distribution or
Stock Purchase, (b) any dividend, distribution, or other payment made, any
liability incurred, or any other consideration given for the purchase,
conversion, exchange, acquisition, redemption, or retirement of any class of
capital stock of any WSI Party, upon exercise of any stock or capital
appreciation rights or as a dividend, distribution, return of capital,
redemption of options, or other distribution of any kind on any class of capital
stock of any WSI Party outstanding at any time, (c) any payment or prepayment of
principal of, premium, if any, or interest on, or any redemption, conversion,
exchange, retirement, defeasance, sinking fund, or similar payment, purchase or
other acquisition for value, direct or indirect (i) of any Indebtedness other
than the Senior Debt (in accordance with the Senior Intercreditor Agreement) and
the Note or (ii) on any class of capital stock of any WSI Party now or hereafter
outstanding, or the issuance of a notice of an intention to do any of the
foregoing, (d) any payment made to retire, or to obtain the surrender of, any
outstanding warrants, options, or other rights to acquire shares of any class of
capital stock of the Company or any of its Subsidiaries now or hereafter
outstanding and (e) any payment by any WSI Party of (i) any management fees and
other management charges, fees and reimbursement for expenses, consulting fees
or any similar fees, whether pursuant to a management agreement or otherwise and
whether to an Affiliate or otherwise, or (ii) any expenses, salary and benefits
and other items included in the Workstream Administrative Expenses.
"RESTRICTED SECURITIES" means (i) the Securities issued
hereunder, (ii) the Underlying Common Stock, (iii) any securities issued upon
conversion or exchange of the securities referred to in clauses (i) and (ii)
above, and (iv) any securities issued with respect to the securities referred to
in clauses (i), (ii) or (iii) above by way of a distribution or split or in
connection with a combination of securities, recapitalization, merger,
consolidation or other reorganization. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have (a) been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) become eligible
for sale pursuant to Rule 144(k) (or any similar provision then in force) under
the Securities Act or (c) been otherwise transferred and new certificates for
them not bearing the Securities Act legend set forth in SECTION 11.3 have been
delivered by the Company in accordance with SECTION 7. Whenever any particular
securities cease to be Restricted Securities, the holder thereof shall be
entitled to receive from the Company or the applicable Borrower, as the case may
be, without expense, new securities of like tenor not bearing a Securities Act
legend of the character set forth in SECTION 11.3.
"SECURITIES" means the Note and the Warrant issued and sold to
the Purchaser hereunder, and also means and includes the Underlying Common
Stock.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" includes any governmental
body or agency succeeding to the functions thereof.
13
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"SECURITY AGREEMENT" means a security agreement by the
Borrowers in favor of the Purchaser in the form of EXHIBIT E hereto as the same
may be amended, restated, amended and restated, supplemented or otherwise
modified from time to time in accordance with the terms hereof and thereof.
"SENIOR DEBT" shall mean the aggregate "Liabilities," as such
term is defined in each of the Senior Loan Agreements, together with (a) to the
extent constituting a Permitted Refinancing (as such term is defined in the
Senior Intercreditor Agreement), all complete or partial refinancings of the
Liabilities, (b) to the extent constituting a Permitted Refinancing, any
amendments, modifications, renewals or extensions thereof and (c) any interest,
fees, costs or expenses accruing thereon or incurred with respect thereto after
the commencement of an Insolvency or Liquidation Proceeding (as such term is
defined in the Senior Intercreditor Agreement), without regard to whether or not
such interest, fee, cost or expense is an allowed claim; PROVIDED, HOWEVER, that
in no event shall the principal amount of the Senior Debt exceed the sum of
$1,000,000, reduced by the amount of any permanent commitment reductions under
the Senior Loan Agreements to the extent that such reductions may not be
reborrowed; PROVIDED FURTHER, that no refinancing or replacement of the Senior
Debt shall amend, modify, extend or renew any of the Senior Loan Documents
except in compliance with the provisions of the Senior Intercreditor Agreement.
"SENIOR INTERCREDITOR AGREEMENT" means a subordination and
intercreditor agreement by and among the Borrowers, the Senior Lender and the
Purchaser in form and substance as set forth in EXHIBIT G-1 attached hereto, as
the same may be amended, restated, amended and restated, supplemented or
otherwise modified in accordance with the terms hereof and thereof.
"SENIOR LENDER" means LaSalle Bank National Association.
"SENIOR LOAN AGREEMENTS" means that certain Loan and Security
Agreement dated as of March 28, 1997, as amended through the date hereof, by and
between ▇▇▇▇▇▇▇▇ and the Senior Lender, and that certain Loan and Security
Agreement dated as of January 5, 1998, as amended through the date hereof, by
and between Maverick and the Senior Lender, and any amendment or modification
thereto from time to time in accordance with the provisions of this Agreement
and the Senior Intercreditor Agreement, provided, however, that any Indebtedness
under the Senior Loan Agreements shall be considered "Senior Debt" hereunder
only to the extent that such Indebtedness is incurred under a formula-based
revolving credit facility (which may include a term component).
"SENIOR LOAN DOCUMENTS" means the Senior Loan Agreements,
including all notes issued thereunder and all other agreements and instruments
(including collateral documents) entered into in connection therewith, all as
originally executed and as amended, modified, extended, renewed, refinanced or
replaced from time to time in accordance with the provisions of the Senior
Intercreditor Agreement.
14
"SOLVENCY CERTIFICATE" means a solvency certificate (as to
which there shall be no personal, as opposed to corporate, liability) from the
chief executive officer of the Borrowers, in the form of EXHIBIT H attached
hereto, addressed to the Purchaser and dated the Closing Date.
"STOCKHOLDERS AGREEMENT" means a Stockholder Agreement by and
among HSM, the Company and the Purchaser in form and substance satisfactory to
the Purchaser.
"STOCK PURCHASE" means any redemption, acquisition, purchase
or other retirement of any capital stock of any WSI Party (including preferred
stock) or of any warrants, rights or other options to purchase such capital
stock, other than upon any conversion thereof into or exchange thereof for other
shares or other equity interests of the same class or tenor of such Person's
capital stock.
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control (or have the power to be or control) a
managing director, manager or general partner of such limited liability company,
partnership, association or other business entity.
"TAB" means Tab Products Co., a Delaware corporation, both
before and after giving effect to the Tab Merger.
"TAB MERGER" means the merger of TAC with and into Tab
pursuant to the Tab Merger Agreement, with Tab being the survivor of such
merger.
"TAB MERGER AGREEMENT" means that certain Merger Agreement
dated as of July 29, 2002 by and among the Tab Merger Parties.
"TAB MERGER DOCUMENTS" means the Tab Merger Agreement and all
other agreements and instruments entered into in connection therewith, other
than the Financing Documents and the Senior Loan Documents.
"TAC" means T Acquisition Co., a Delaware corporation, and
Wholly Owned Subsidiary of TALP.
"TALP" means T Acquisition L.P., a Delaware limited
partnership.
15
"TAX" or "TAXES" means any federal, state, county, local,
foreign or other income, gross receipts, ad valorem, franchise, profits, sales
or use, transfer, registration, excise, utility, environmental, communications,
real or personal property, capital stock, membership interest, license, payroll,
wage or other withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other taxes of any kind
whatsoever (including deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing
with respect to Taxes, including any schedules attached thereto and including
any amendment thereof.
"TITLE IV PLAN" means a Pension Plan which is covered by Title
IV of ERISA.
"TOTAL DEBT" means all Indebtedness together with all accrued
and unpaid interest thereon of the Company and its Subsidiaries, determined on a
consolidated basis.
"TOTAL DEBT TO EBITDA RATIO" means for any Computation Period,
the ratio of (a) Total Debt less cash and cash equivalents of the Company and
its Subsidiaries as of the last day of the Computation Period minus the Dessy
Subdebt to (b) EBITDA for such Computation Period; provided that notwithstanding
anything in GAAP to the contrary, for purposes of calculating the Total Debt to
EBITDA Ratio, the amount of Total Debt shall be the face amount of such Total
Debt.
"TRANSACTION DOCUMENTS" means the Financing Documents, the
Senior Loan Documents, the Tab Merger Documents and each of the other
agreements, documents and instruments expressly contemplated hereby and thereby.
"TRANSACTION PARTY" means each of HSM, MSTP, the Company,
▇▇▇▇▇▇▇▇, Maverick and the Merger Parties.
"UNDERLYING COMMON STOCK" means (i) the Common Stock issued or
issuable upon exercise of the Warrants, (ii) any Common Stock issued or issuable
upon conversion or exchange of the securities referred to in clause(i) above,
(iii) any other Common Stock purchased or otherwise acquired by any Purchaser or
other holder of Securities and (iv) any Common Stock issued or issuable with
respect to the securities referred to in clauses (i), (ii) and (iii) above by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular shares of Underlying Common Stock, such shares will cease to be
Underlying Common Stock when they have been (a) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, (b) distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 under the Securities Act (or any similar provision
then in force) or (c) repurchased by the Company or any of its Subsidiaries.
"WARRANT" means a stock purchase warrant of the Company in
favor of the Purchaser in the form of EXHIBIT B hereto as the same may be
amended, restated, amended and restated, supplemented or otherwise modified from
time to time in accordance with the terms hereof and thereto.
16
"WHOLLY OWNED SUBSIDIARY" means, with respect to any Person, a
Subsidiary of which all of the outstanding capital stock or other ownership
interests are owned by such Person or another Wholly Owned Subsidiary of such
Person.
"WITHDRAWAL LIABILITY" means, at any time, the aggregate
amount of the liabilities, if any, pursuant to Section 4201 of ERISA, and any
increase in contributions pursuant to Section 4243 of ERISA with respect to all
Multiemployer Plans.
"WORKSTREAM ADMINISTRATIVE EXPENSES" means the salary,
benefits and expenses of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ and other
administrative items that are charged and have historically been charged to the
Company's "Workstream Administrative Department;" provided that for each of the
fiscal months of September 2001 through and including August 2002, Workstream
Administrative Expenses shall be deemed to have been $16,667 per such fiscal
month.
"WSI PARTIES" means, collectively, HSM, the Company and each
of its Subsidiaries.
1.2 ACCOUNTING PRINCIPLES. The classification, character and
amount of all assets, liabilities, capital accounts and reserves and of all
items of income and expense to be determined, and any consolidation or other
accounting computation to be made, and the interpretation of any definition
containing any financial term, pursuant to this Agreement shall be determined
and made in accordance with GAAP; provided that if because of a change in GAAP
after the date of this Agreement any WSI Party would be required to alter a
previously utilized accounting principle, method or policy in order to remain in
compliance with GAAP, such determination shall be made in accordance with GAAP,
and, for the purposes of this Agreement and all computations hereunder, continue
to be made in accordance with the such WSI Party's previous accounting
principles, methods and policies.
1.3 OTHER INTERPRETIVE MATTERS. In this Agreement, the Note and
each other Financing Document to which the Purchaser or any WSI Party is a
party, unless a clear contrary intention appears: (i) the singular number
includes the plural number and vice versa; (ii) reference to any Person includes
such Person's successors and assigns but, if applicable, only if such successors
and assigns are permitted by this Agreement or such other Financing Document,
and reference to a Person in a particular capacity excludes such Person in any
other capacity or individually; (iii) reference to any gender includes each
other gender; (iv) reference to any agreement (including this Agreement and the
Schedules hereto), document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time in accordance
with the terms thereof and, if applicable, the terms hereof (and without giving
effect to any amendment or modification that would not be permitted in
accordance with the terms hereof); (v) reference to any applicable law means
such applicable law as amended, modified, codified or reenacted, in whole or in
part, and in effect from time to time, including rules and regulations
promulgated thereunder and reference to any particular provision of any
applicable law shall be interpreted to include any revision of or successor to
that provision regardless of how numbered or classified; (vi) reference to any
Article, Section or Exhibit means such Article or Section hereof or such Exhibit
hereto; (vii) "hereunder," "hereof," "hereto" and words of similar import shall
be deemed references to this Agreement as a whole and not to any particular
Section or
17
other provision hereof; (viii) "including" (and with correlative meaning
"include") means including without limiting the generality of any description
preceding such term; (ix) relative to the determining of any period of time,
"from" means "from and including" and "to" and "through" mean "to and
including"; (x) "or", "either" and "any" are not exclusive; and (xi) references
to any Subsidiary of a Person shall be given effect only at such times as such
Person has one or more Subsidiaries.
2. Authorization and Closing.
2.1 AUTHORIZATION OF THE SECURITIES. The Borrowers have authorized
the issuance and sale to the Purchaser of the Note. The Company has authorized
the issuance and sale to the Purchaser of the Warrant, which represents 26.00%
of the aggregate capital stock of the Company on a fully diluted basis at the
time of exercise.
2.2 PURCHASE AND SALE OF THE SECURITIES. At the Closing, the
Borrowers shall sell to the Purchaser and, subject to the terms and conditions
set forth herein, the Purchaser shall purchase from the Borrowers, the Note in
the aggregate principal amount of $7,000,000 for a purchase price equal to
$6,000,000. At the Closing, the Company shall sell to the Purchaser and, subject
to the terms and conditions set forth herein, the Purchaser shall purchase from
the Company the Warrant representing 26.00% of the outstanding aggregate capital
stock of the Company on a fully diluted basis at the time of exercise for a
purchase price equal to $1,000,000.
2.3 THE CLOSING. The Closing shall take place at the offices of
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇, Cleveland, Ohio on the "Closing Date" under the Tab
Merger Agreement (of which date Borrowers shall give Purchaser not less than
five (5) Business Days prior written notice), but in no event later than
November 30, 2002, or at such other place or on such other date as may be
mutually agreeable to the Company and the Purchaser. At the Closing, the Company
and the Borrowers shall deliver to the Purchaser instruments evidencing the
Securities to be purchased by the Purchaser, issued in the name of the Purchaser
or its nominee(s), upon payment of the purchase price thereof by wire transfer
of immediately available funds, to an account designated by the Company at least
three (3) Business Days prior to the Closing, in the aggregate amount of
$7,000,000 (net of fees and pursuant to SECTION 3.18).
3. CONDITIONS OF THE PURCHASER'S OBLIGATION AT THE CLOSING. The
obligation of the Purchaser to purchase and pay for the Securities to be issued
at the Closing is subject to the fulfillment as of the Closing Date, but in no
event later than November 30, 2002, of the following conditions to the
Purchaser's satisfaction in its sole discretion:
3.1 REPRESENTATIONS, WARRANTIES AND COVENANTS; NO EVENT OF
DEFAULT. The representations and warranties contained in SECTION 4 hereof shall
be true and correct at and as of the Closing Date (both immediately prior to and
immediately after giving effect to the transactions contemplated by the
Transaction Documents) as though then made, and each of the Transaction Parties
shall have performed all of the covenants required to be performed by them
hereunder and under the other documents, agreements and instruments executed in
connection herewith that are to be complied with or performed by such
Transaction Party on or prior to the Closing Date, and there shall not exist any
Event of Default or Potential Event of Default.
18
3.2 CLOSING DOCUMENTS. The Transaction Parties shall have
delivered to the Purchaser all of the following documents:
(i) the Note, duly completed and executed by the Borrowers;
(ii) the Warrant, duly completed and executed by the Company;
(iii) an Officer's Certificate of the WSI Parties, dated the
Closing Date, stating that the conditions specified in SECTION 2 and
SECTION 3 have been satisfied;
(iv) certified copies of the resolutions duly adopted by each
Transaction Party authorizing the execution, delivery and performance
of each of the Transaction Documents to which it is a party, the
issuance and sale of the Securities, the reservation for issuance upon
exercise of the Warrant of the number of shares of the Class B Common
Stock issuable upon exercise of the Warrant and the number of shares of
Class A Common Stock issuable upon conversion of the Class B Common
Stock, and the consummation of all other transactions contemplated by
this Agreement;
(v) certificates of the secretaries of each Transaction Party
certifying the names and the signatures of the officers of each such
Transaction Party authorized to sign the Transaction Documents and each
of the other agreements, documents and instruments contemplated hereby;
(vi) certified copies of each Transaction Party's certificate
or articles of incorporation and by laws or regulations, or other
organizational documents, each as in effect on the Closing Date, and in
each case in form and substance acceptable to the Purchaser;
(vii) certificates of good standing (or the local law
equivalent) of each Transaction Party, dated not more than ten days
prior to the Closing Date, issued by the Secretary of State of the
state of incorporation, formation or organization of such Person and
such other jurisdictions where such Person owns property or conducts
business;
(viii) certified copies of the Tab Merger Documents, the
Senior Loan Documents and each other Transaction Document, each as in
effect on the Closing Date;
(ix) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of
the transactions hereunder (including all blue sky law filings and
waivers of all preemptive rights and rights of first refusal);
(x) a list after giving effect to the transactions
contemplated by this Agreement of (x) the name of each Person serving
as a director on the board of directors of each WSI Party, (y) the name
and title of each WSI Party's officers and (z) the name of each
stockholder of each WSI Party setting forth the number and class of
shares held by each such stockholder; and
(xi) such other documents relating to the transactions
contemplated by this Agreement as the Purchaser or its special counsel
may reasonably request.
19
3.3 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
shall be in form and substance satisfactory to the Purchaser and shall be in
full force and effect under the laws of the State of Delaware as of the Closing
Date.
3.4 STOCKHOLDERS AGREEMENT. HSM, the Company and the Purchaser
shall have entered into the Stockholders Agreement, and such agreement shall be
in full force and effect as of the Closing Date.
3.5 REGISTRATION AGREEMENT. The Company and the Purchaser shall
have entered into the Registration Agreement, and such agreement shall be in
full force and effect as of the Closing Date.
3.6 SECURITY AGREEMENT. The Borrowers shall have duly authorized,
executed and delivered the Security Agreement, the Security Agreement shall be
in full force and effect as of the Closing Date, the Purchaser shall have a
valid perfected security interest in the collateral described therein, and
proper financing statements in respect thereof shall have been recorded in each
applicable filing office.
3.7 LOAN PARTY GUARANTY. HSM shall have duly authorized, executed
and delivered the Loan Party Guaranty, and the Loan Party Guaranty shall be in
full force and effect as of the Closing Date.
3.8 PLEDGE AGREEMENT. Each of the Company, HSM and MSTP shall have
duly authorized, executed and delivered the Pledge Agreement to which it is a
party, together with all certificates representing the capital stock pledged
thereunder, and each such Pledge Agreement shall be in full force and effect as
of the Closing Date.
3.9 INTERCREDITOR AGREEMENTS. The Borrowers, the Senior Lender and
the Purchaser shall have entered into the Senior Intercreditor Agreement, and
the Senior Intercreditor Agreement shall be in full force and effect as of the
Closing Date. Dessy, Maverick, the Company and the Purchaser shall have entered
into the Dessy Intercreditor Agreement, and the Dessy Intercreditor Agreement
shall be in full force and effect as of the Closing Date.
3.10 SOLVENCY CERTIFICATE. The Purchaser shall have received the
Solvency Certificate from the chief executive officer of the Borrowers dated the
Closing Date.
3.11 OPINION OF THE COMPANY'S COUNSEL. The Purchaser shall have
received from ▇▇▇▇▇▇▇, Muething & ▇▇▇▇▇▇▇, PLL, counsel for the WSI Parties, an
opinion addressed to the Purchaser, dated the Closing Date, in form and
substance satisfactory to the Purchaser.
3.12 CONSOLIDATED BALANCE SHEET AND PROJECTIONS. The Purchaser
shall have received the Company Balance Sheet, the Company Projections, the HSM
Balance Sheet and the HSM Projections.
3.13 SENIOR LOAN AGREEMENTS. The Company and the Senior Lender
shall have entered into the Senior Loan Agreements providing for revolving loans
to ▇▇▇▇▇▇▇▇ and Maverick of up to $1,000,000 in the aggregate in form and
substance satisfactory to the Purchaser, and the Senior Loan Agreements shall be
in full force and effect as of the Closing
20
Date and shall not have been amended or modified. No revolving loans shall be
outstanding on the Closing Date to ▇▇▇▇▇▇▇▇ or Maverick, and ▇▇▇▇▇▇▇▇ and
Maverick, collectively, shall have unused availability on the Closing Date under
the Senior Loan Agreements of at least $975,000.
3.14 INVESTMENTS. The Company shall have repaid to HSM that certain
Promissory Note in the amount of $3,500,000 dated as of March 28, 1997 by the
Company in favor of HSM, HSM shall have issued the HSM Note to the Company, and
HSM and MSTP shall have made investments in TALP in the amounts of $7,000,000
and $3,000,000, respectively, and all such notes and investments shall be in
form and substance acceptable to the Purchaser.
3.15 TAB MERGER AGREEMENT. The Tab Merger Agreement shall be in
form and substance satisfactory to the Purchaser, shall be in full force and
effect as of the Closing Date, and shall not have been amended or modified. The
conditions set forth in the Tab Merger Agreement shall have been satisfied in
full (without reliance on any waiver by HSM, MSTP, TALP or TAC), and the Tab
Merger shall have been consummated in accordance with the terms of the Tab
Merger Agreement and all applicable laws.
3.16 TAB MERGER OPINIONS. The Purchaser shall have received copies
of all opinions delivered in connection with the Tab Merger, together with
reliance letters with respect to such original opinions.
3.17 KEY-MAN LIFE INSURANCE. The Company shall have obtained a
key-man life insurance policy on the life of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ in the face
amount of $3,500,000 (the "KEY-MAN POLICY"), which policy shall be in full force
and effect as of the Closing Date. Such insurance policy shall name the Company
and the Purchaser as beneficiaries and shall provide that such insurance
policies may not be canceled unless the insurance carrier gives at least 30 days
prior written notice of such cancellation to the Purchaser. The Company shall
have entered into, and the insurance company shall have acknowledged, the
Collateral Assignment of Insurance with respect to the face amount of the
Key-Man Policy, and the Collateral Assignment of Insurance shall be in full
force and effect as of the Closing Date.
3.18 CLOSING FEES AND EXPENSES. The Company and the Borrowers shall
have (i) paid to the Purchaser a commitment fee in the aggregate amount of
$140,000 in connection with the sale and purchase of the Securities and (ii)
reimbursed the Purchaser for the fees and expenses as provided in SECTION 11.1
hereof.
3.19 SALE OF SECURITIES TO THE PURCHASER. Each of the Company and
the Borrowers shall have sold to the Purchaser the Securities to be purchased by
the Purchaser hereunder at the Closing Date.
3.20 SECURITIES LAW COMPLIANCE. Each of the Company and the
Borrowers shall have made all filings under all applicable federal and state
securities laws that, assuming the truth and correctness of Purchaser's
representations and warranties in SECTION 11.3 hereof, are necessary to
consummate the issuance of the Securities pursuant to this Agreement and the
issuance of the Underlying Common Stock upon exercise of the Warrant and the
conversion of Class B Common Stock into Class A Common Stock in compliance with
such laws.
21
3.21 EXISTING INDEBTEDNESS. The outstanding amount of the
Indebtedness of the Borrowers described on the attached "USE OF PROCEEDS
SCHEDULE" shall have been paid in full as of the Closing Date, including,
without limitation, the existing Indebtedness of the Company in the original
principal amount of $3,500,000 to HSM pursuant to the promissory note dated
March 28, 1997 and the Indebtedness of ▇▇▇▇▇▇▇▇ and Maverick to LaSalle (other
than the revolver component of the Senior Debt, which in any event shall be
undrawn at closing and other than the outstanding letters of credit in the
amount of $15,000 and $10,000 issued by the Senior Lender), and the Borrowers
shall have received appropriate payoff letters, lien releases and other
documents satisfactory in form and substance to the Purchaser. On the Closing
Date, no Borrower shall have any Indebtedness outstanding other than Permitted
Indebtedness.
3.22 PROCEEDINGS. All proceedings taken or required to be taken by
the Transaction Parties in connection with the transactions contemplated hereby
to be consummated on or prior to the Closing Date and all documents incident
thereto shall be satisfactory in form and substance to the Purchaser and its
special counsel.
3.23 DUE DILIGENCE. The Purchaser shall be satisfied in its sole
discretion with the results of its legal, environmental, insurance, tax and
accounting due diligence regarding the Transaction Parties.
3.24 NO MATERIAL ADVERSE CHANGE. Since March 31, 2002, there shall
have been no material adverse change in the operating results, assets,
liabilities, operations, condition (financial or otherwise), business prospects,
employee relations or customer or supplier relations of the Transaction Parties;
PROVIDED, HOWEVER, that in determining whether there has been a material adverse
change, any adverse change attributable to either of the following shall be
disregarded: (i) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any material disruption in
commercial banking services; and (ii) the commencement of a war or police action
by the United States; and PROVIDED, FURTHER, that a material adverse change
shall be deemed to have occurred if EBITDA measured on a cumulative basis for
the current fiscal year of the Borrowers fails for the periods set forth below
to be greater than the amount set forth below:
--------------------------------- ----------------------------
Fiscal Year to Date through the Cumulative EBITDA
month ended:
--------------------------------- ----------------------------
June $431,100
--------------------------------- ----------------------------
July $613,200
--------------------------------- ----------------------------
August $813,200
--------------------------------- ----------------------------
September $1,063,200
--------------------------------- ----------------------------
October $1,288,200
--------------------------------- ----------------------------
22
--------------------------------- ----------------------------
November $1,513,200
--------------------------------- ----------------------------
December $1,794,500
--------------------------------- ----------------------------
3.25 COMPLIANCE WITH APPLICABLE LAWS. The purchase of the
Securities by the Purchaser hereunder shall not be prohibited by any applicable
law or governmental rule or regulation and shall not subject the Purchaser to
any penalty, liability or, in the Purchaser's sole judgment, other onerous
condition under or pursuant to any applicable law or governmental rule or
regulation, and the purchase of the Securities by the Purchaser hereunder shall
be permitted by laws, rules and regulations of the jurisdictions and
governmental authorities and agencies to which the Purchaser is subject.
3.26 MORTGAGE. ▇▇▇▇▇▇▇▇ shall have duly authorized, executed and
delivered the Mortgage, in form and substance acceptable to the Purchaser, and
the Mortgage shall be in full force and effect as of the Closing Date.
3.27 LIEN SEARCHES. The Purchaser shall have received appropriate
lien searches of recent date on each Transaction Party in each relevant
jurisdiction, such lien searches to be in form and substance acceptable to the
Purchaser.
3.28 WAIVER. Any condition specified in this SECTION 3 may be
waived if consented to by the Purchaser; provided that no such waiver shall be
effective against the Purchaser unless it is set forth in a writing specifically
referring to this Agreement and executed by the Purchaser.
4. REPRESENTATIONS AND WARRANTIES OF THE WSI PARTIES. As a
material inducement to the Purchaser to enter into this Agreement and purchase
the Securities hereunder, each of the WSI Parties hereby represents and warrants
to the Purchaser that each of the following statements are true, complete and
correct as of the date of this Agreement and will be true, complete and correct
as of the Closing both before and after giving effect to the Tab Merger and the
other transactions contemplated by the Transaction Documents to occur on the
Closing Date:
4.1 ORGANIZATION, POWER AND LICENSES. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and is qualified to do business in every jurisdiction in which
its ownership of property or conduct of business requires it to qualify.
▇▇▇▇▇▇▇▇ is a corporation duly incorporated, validly existing and in good
standing under the laws of Ohio and is qualified to do business in every
jurisdiction in which its ownership of property or conduct of business requires
it to qualify except where the failure to be so qualified would not have a
Material Adverse Effect. Maverick is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware and is
23
qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to qualify except where the failure
to be so qualified would not have a Material Adverse Effect. HSM is a limited
partnership duly formed, validly existing and in good standing under the laws of
Delaware and is qualified to do business in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify. MSTP is a
is a limited partnership duly formed, validly existing and in good standing
under the laws of Delaware and is qualified to do business in every jurisdiction
in which its ownership of property or conduct of business requires it to
qualify. Each Transaction Party possesses all requisite power and authority and
all material licenses, permits and authorizations necessary to own and operate
its properties, to carry on its businesses as now conducted and presently
proposed to be conducted and to carry out the transactions contemplated by this
Agreement after giving effect to the transactions contemplated by the
Transaction Documents. The copies of each Transaction Party's certificate or
articles of incorporation and regulations or bylaws or other organizational
documents which have been furnished to the Purchaser's special counsel reflect
all amendments made thereto at any time prior to the date of this Agreement and
are true, correct and complete.
4.2 CAPITALIZATION AND RELATED MATTERS.
(i) The attached CAPITALIZATION SCHEDULE accurately sets forth
the following information with respect to the capitalization of the WSI
Parties and MSTP as of the Closing and immediately thereafter: (1) the
authorized number of shares (or other units) of each class of capital
stock, (2) the number of shares (or other units) of each class of
capital stock issued and outstanding, (3) the number of shares (or
other units) of each class of capital stock reserved for issuance upon
exercise of options, warrants or convertible securities, (4) the name
of each holder of capital stock and the number of shares (or other
units) and percentage interest owned by each such holder (or in the
case of a partnership, the name of each general and limited partner and
the percentage of partnership interests owned by each such partner) and
(5) with respect to all outstanding options and rights to acquire
capital stock: the holder, the number and class of shares (or other
units) covered, the exercise price and the expiration date. As of the
Closing Date, none of MSTP or any WSI Party shall have outstanding any
capital stock or securities convertible or exchangeable for any of its
capital stock or containing any profit participation features, nor
shall it have outstanding any rights or options to subscribe for or to
purchase its capital stock or any securities convertible into or
exchangeable for any capital stock or any equity appreciation rights or
phantom equity plans or registration rights for its capital stock,
except as set forth on the CAPITALIZATION SCHEDULE. As of the Closing
Date, none of MSTP or any WSI Party shall be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire
any of its capital stock or any warrants, options or other rights to
acquire its capital stock, except as set forth on the CAPITALIZATION
SCHEDULE. As of the Closing, all of the capital stock of each WSI Party
shall be validly issued, fully paid and nonassessable and all such
shares (or other units) of capital stock are owned free and clear of
all Liens other than Liens in favor of the Purchaser created pursuant
to the Financing Documents. The Common Stock issuable upon the exercise
of the Warrant will, when issued, be duly authorized and validly
issued, fully paid and nonassessable.
(ii) There are no statutory or contractual preemptive rights
or rights of refusal with respect to the issuance of the Securities
hereunder or the issuance of the Common Stock upon exercise of the
Warrant. Assuming the truth and correctness of Purchaser's warranties
and representations in Section 11.3 hereof, no WSI Party has violated
any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer,
sale and issuance of the Securities hereunder and the issuance of the
Common Stock upon exercise of the Warrant do not require
24
registration under the Securities Act or any applicable state
securities laws. There are no agreements among the Company's
shareholders with respect to the voting or transfer of the Company's
capital stock or with respect to any other aspect of the Company's
affairs, except for the Stockholders Agreement. Other than the
Agreement of Limited Partnership of HSM, as amended through the date
hereof, there are no agreements between HSM's partners with respect to
the voting or transfer of HSM's capital stock or with respect to any
other aspect of HSM's affairs.
4.3 AUTHORIZATION; NO BREACH. The execution, delivery and
performance of each of the Transaction Documents to which any Transaction Party
is a party have been duly authorized by each such Transaction Party. Each of the
Transaction Documents to which any Transaction Party is a party each constitutes
a valid and binding obligation of such Transaction Party, enforceable in
accordance with its terms, except to the extent that the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws generally affecting creditors' rights and by equitable
principles (whether enforcement is sought in equity or at law). The execution
and delivery by each Transaction Party of each of the Transaction Documents to
which any Transaction Party is a party, the offering, sale and issuance of the
Securities hereunder, the issuance of the Common Stock upon exercise of the
Warrant, the issuance of Class A Common Stock upon conversion of the Class B
Common Stock, the issuance of nonvoting securities in exchange for voting
securities pursuant to SECTION 8 or otherwise in accordance with the Transaction
Documents, and the fulfillment of and compliance with the respective terms
hereof and thereof by the Transaction Parties, do not and shall not (i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) result in the creation of any Lien upon any
Transaction Party's capital stock or assets pursuant to, (iv) give any third
party the right to modify, terminate or accelerate any obligation under, (v)
result in a violation of, or (vi) require any authorization, consent, approval,
exemption or other action by or notice or declaration to, or filing with, any
third party, court or administrative or governmental body or agency pursuant to,
the articles or certificate of incorporation, regulations or bylaws or other
charter or organizational documents of any Transaction Party, or any law,
statute, rule or regulation to which any Transaction Party is subject (including
any usury laws applicable to the Note), or any material agreement, instrument,
order, judgment or decree to which any Transaction Party is subject. Except as
set forth on the RESTRICTIONS SCHEDULE, no Subsidiary of the Company is subject
to any restrictions upon making loans or advances or paying Distributions to,
transferring property to, or repaying any Indebtedness owed to any WSI Party.
HSM is not subject to any restrictions upon making loans or advances or paying
Distributions to, transferring property to, or repaying any Indebtedness owed to
the Company.
4.4 FINANCIAL STATEMENTS. (i) Attached hereto as the FINANCIAL
STATEMENTS SCHEDULE are the following financial statements:
(a) the audited balance sheets of HSM and the audited
consolidated balance sheets of the Company and its Subsidiaries, in
each case as of March 31, 2001 and March 31, 2002, and the related
statements of income and cash flows (or the equivalent) for the
respective twelve-month periods then ended;
25
(b) the unaudited balance sheet of HSM and the unaudited
consolidated balance sheet of the Company and its Subsidiaries, in each
case as of June 29, 2002 (collectively, the "LATEST BALANCE SHEETS"),
and the related statements of income and cash flows (or the equivalent)
for the period then ended.
(ii) Each of the foregoing financial statements (including in
all cases the notes thereto, if any) (a) is accurate and complete, is
consistent with the books and records of the WSI Parties (which, in
turn, are accurate and complete), (b) has been prepared in accordance
with GAAP consistently applied and (c) presents fairly in all material
respects the consolidated financial condition, results of operations
and cash flows of the WSI Parties to which it relates in accordance
with GAAP consistently applied as of the dates and for the periods set
forth therein.
(iii) Except as set forth on the FINANCIAL STATEMENTS
SCHEDULE, the accounts receivable shown on the Latest Balance Sheets
and all accounts receivable reflected on each WSI Party's books and
records that have arisen subsequent to the date of the Latest Balance
Sheets have been collected or, to each WSI Party's knowledge, are
collectible at the amount shown on such Latest Balance Sheets or such
books and records (less the allowance in the aggregate for doubtful
accounts shown thereon or in such books and records) and such accounts
receivable are not subject to any known offsets or defenses (whether or
not meritorious). Except as set forth in the Financial Statements
Schedule, the inventories shown on the Latest Balance Sheets represent
quantities on hand as of the date thereof, are of a quality and
quantity usable and saleable in the ordinary course of business, and
are valued on the FIFO basis consistent with that at the end of prior
periods.
4.5 FINANCIAL STATEMENTS AND PROJECTIONS. (i) The Company Balance
Sheet as of March 31, 2002 is complete and correct and presents fairly in all
material respects the consolidated financial condition of the Company and its
Subsidiaries as of such date as if the transactions contemplated by this
Agreement and the other Transaction Documents had occurred immediately prior to
such date.
(ii) The HSM Balance Sheet as of March 31, 2002 is complete
and correct and presents fairly in all material respects the financial condition
of HSM as of such date as if the transactions contemplated by this Agreement and
the other Transaction Documents had occurred immediately prior to such date.
(iii) The Company Projections are a true, correct and complete
copy of the latest projections of the consolidated income, balance sheet and
cash flows of the Company and its Subsidiaries for the six fiscal years ending
through March 31, 2008. The Company Projections are based on, and have been
prepared on the basis of, the assumptions of the Company and its Subsidiaries
set forth therein, which assumptions are fair and reasonable in light of the
historical financial performance of the Company and its Subsidiaries and of
current and reasonably foreseeable business conditions and reflect the
reasonable estimate of the Company and its Subsidiaries of the results of
operations and other information projected therein. The Company and its
Subsidiaries are not aware of any facts or conditions which would cause them to
believe that the financial results set forth in the projections will not be
achievable.
26
(iv) The HSM Projections are a true, correct and complete copy
of the latest projections of the income, balance sheet and cash flows of HSM for
the six fiscal years ending through March 31, 2008. The HSM Projections are
based on, and have been prepared on the basis of, the assumptions of HSM set
forth therein, which assumptions are fair and reasonable in light of the
historical financial performance of HSM and of current and reasonably
foreseeable business conditions and reflect the reasonable estimate of HSM of
the results of operations and other information projected therein. HSM is not
aware of any facts or conditions which would cause it to believe that the
financial results set forth in the projections will not be achievable.
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. No WSI Party has any
obligation or liability (whether accrued, absolute, contingent, unliquidated or
otherwise, whether or not known to any WSI Party, whether due or to become due
and regardless of when asserted) arising out of transactions entered into at or
prior to the Closing, or any action or inaction at or prior to the Closing, or
any state of facts existing at or prior to the Closing other than: (i)
liabilities set forth on the Latest Balance Sheets (including any notes
thereto), (ii) liabilities and obligations which have arisen after the date of
the Latest Balance Sheets in the ordinary course of business (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit) and (iii) other liabilities and obligations
expressly disclosed on the attached LIABILITIES SCHEDULE.
4.7 NO MATERIAL ADVERSE CHANGE. Since the date of the Latest
Balance Sheets, there has been no material adverse change in the operating
results, assets, liabilities, operations, business, condition (financial or
otherwise), prospects, employee relations or customer or supplier relations of
the WSI Parties, taken as a whole; provided, however, that in determining
whether there has been any material adverse change, any adverse change
attributable to either of the following shall be disregarded: (i) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States or any material disruption in commercial banking
services; and (ii) the commencement of a war or police action by the United
States.
4.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly
contemplated by this Agreement or as set forth on the attached DEVELOPMENTS
SCHEDULE, since the date of the Latest Balance Sheets, no WSI Party has:
(a) issued any notes, bonds or other debt securities or
any capital stock or other equity securities or any securities
convertible, exchangeable or exercisable into any capital stock or
other equity securities;
(b) borrowed any amount or incurred or become subject to
any liabilities, except current liabilities incurred in the ordinary
course of business and liabilities under contracts entered into in the
ordinary course of business;
(c) discharged or satisfied any Lien or paid any
obligation or liability, other than current liabilities paid in the
ordinary course of business;
(d) declared or made any payment or distribution of cash
or other property to its shareholders, partners or other equityholders
with respect to its capital stock or other equity securities or
purchased or redeemed any of its capital stock or other
27
equity securities (including any warrants, options or other rights to
acquire its capital stock or other equity securities);
(e) mortgaged or pledged any of its properties or assets
or subjected them to any Lien, except Permitted Liens;
(f) sold, assigned or transferred any of its tangible
assets, except in the ordinary course of business, or canceled any
debts or claims;
(g) sold, assigned or transferred any Intellectual
Property Rights or other intangible assets, or disclosed any
proprietary confidential information to any Person;
(h) suffered any extraordinary losses or waived any rights
of value, whether or not in the ordinary course of business or
consistent with past practice;
(i) made Capital Expenditures or commitments therefor that
aggregate in excess of $130,000;
(j) made any loans or advances to, guarantees for the
benefit of, or any Investments in, any Persons in excess of $5,000 in
the aggregate;
(k) suffered any damage, destruction or casualty loss
exceeding in the aggregate $25,000, whether or not covered by
insurance;
(l) made any Investment in or taken steps to incorporate
any Subsidiary;
(m) entered into any other material transaction, whether
or not in the ordinary course of business; or
(n) agreed to do any of the foregoing.
4.9 ASSETS. Except as set forth on the attached ASSETS SCHEDULE,
each WSI Party has good and marketable title to, or a valid leasehold interest
in, the properties and assets used by it, located on its premises or shown on
the Latest Balance Sheets or acquired thereafter, free and clear of all Liens,
except for Permitted Liens and except for properties and assets disposed of in
the ordinary course of business since the date of the Latest Balance Sheets.
Except as described on the ASSETS SCHEDULE, each WSI Party's buildings,
equipment and other tangible assets, taken as a whole, are in good operating
condition (ordinary wear and tear excepted) and are fit for use in the ordinary
course of business. Each WSI Party owns, or has a valid leasehold interest in,
all assets necessary for the conduct of its business as presently conducted and
as presently proposed to be conducted and as conducted by such WSI Party for the
past twelve (12) months.
4.10 TAX MATTERS. Except as set forth on the attached TAXES
SCHEDULE:
(i) the WSI Parties have filed all Tax Returns which they are
required to file under applicable laws and regulations; all such Tax
Returns are true, correct and
28
complete in all material respects and have been prepared in compliance
with all applicable laws and regulations in all material respects; the
WSI Parties have paid all Taxes due and owing by them (whether or not
such Taxes are required to be shown on a Tax Return) and have withheld
and paid over to the appropriate taxing authority all Taxes which they
are required to withhold from amounts paid or owing to any employee,
members, creditor or other third party; no WSI Party has waived any
statute of limitations with respect to any Taxes or agreed to any
extension of time with respect to any Tax assessment or deficiency; the
accrual for Taxes on the applicable Latest Balance Sheets would be
adequate to pay all Tax liabilities of the WSI Parties if their current
tax year were treated as ending on the date of such Latest Balance
Sheets (excluding any amount recorded which is attributable solely to
timing differences between book and Tax income); since the date of the
applicable Latest Balance Sheets, the WSI Parties have not incurred any
liability for Taxes other than in the ordinary course of business; the
assessment of any additional Taxes for periods for which Tax Returns
have been filed by the WSI Parties shall not exceed the recorded
liability therefor on the applicable Latest Balance Sheets (excluding
any amount recorded which is attributable solely to timing differences
between book and Tax income); with respect to each taxable period of
the WSI Parties ending on or before March 31, 1997, either such taxable
period has been audited by the relevant taxing authority or the time
for assessing or collecting income Tax with respect to each such
taxable period has closed and such taxable period is not subject to
review by any relevant taxing authority; no foreign, federal, state or
local tax audits or administrative or judicial proceedings are pending
or being conducted with respect to any WSI Party, no information
related to Tax matters has been requested by any foreign, federal,
state or local taxing authority and no written notice indicating an
intent to open an audit or other review has been received by any WSI
Party from any foreign, federal, state or local taxing authority; and
there are no material unresolved questions or claims concerning any WSI
Party's or Tab's Tax liability.
(ii) No WSI Party has made an election under ss.341(f) of the
Code. No WSI Party is liable for the Taxes of another Person that is
not a Subsidiary of such WSI Party (a) under Treas. Reg. ss.1.1502-6
(or comparable provisions of state, local or foreign law), (b) as a
transferee or successor, (c) by contract or indemnity or (d) otherwise.
No WSI Party is a party to any tax sharing agreement. The WSI Parties
have disclosed on their federal income Tax Returns any position taken
for which substantial authority (within the meaning of Code
ss.6662(d)(2)(B)(i)) did not exist at the time the return was filed. No
WSI Party has made any payments, is obligated to make payments or is a
party to an agreement that could obligate it to make any payments that
would not be deductible under Code ss.280G.
(iii) No WSI Party has been a member of an Affiliated Group
other than the one of which the Company was the common parent, or filed
or been included in a combined, consolidated or unitary income Tax
Return, other than one filed by the Company.
(iv) On the date of its incorporation or formation, as the
case may be, and at all times thereafter, each of the Company and each
of its Subsidiaries has been classified as a corporation, and HSM has
been classified as a partnership for (a) federal income tax
29
purposes and (b) for state and local income tax purposes in each state
and locality in which it is or has been required to file income tax
returns.
4.11 CONTRACTS AND COMMITMENTS.
(i) Except as expressly contemplated by this Agreement or as
set forth on the attached CONTRACTS SCHEDULE or the attached EMPLOYEE
BENEFITS SCHEDULE, no WSI Party is a party to or bound by any written
or oral:
(a) pension, profit sharing, option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs,
policies or arrangements;
(b) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or other
basis providing annual compensation in excess of $50,000 or contract
relating to loans to officers, directors or Affiliates;
(c) contract under which it has advanced or loaned any
other Person amounts in the aggregate exceeding $25,000;
(d) agreement or indenture relating to borrowed money or
other Indebtedness or the mortgaging, pledging or otherwise placing a
Lien on any material asset or material group of assets;
(e) agreement or instrument which might restrict its
ability to make Distributions to the Company or any Borrower, or that
would have the effect of limiting the Company or any of its
Subsidiaries from performing any of its obligations under this
Agreement, the Note, or any other Transaction Document.
(f) Guarantee of any obligation in excess of $25,000;
(g) lease or agreement under which it is lessee or lessor
of any property, real or personal, except for any lease of real or
personal property under which the aggregate annual rental payments do
not exceed $25,000;
(h) assignment, license, indemnification or agreement with
respect to any intangible property (including any Intellectual Property
Rights);
(i) warranty agreement with respect to its services
rendered or its products sold or leased;
(j) agreement under which it has granted any Person any
registration rights (including demand and piggyback registration
rights);
30
(k) sales, distribution, franchise, business opportunity,
relationship or similar agreement;
(l) agreement with a term of more than six months which is
not terminable by it upon less than 30 days notice without penalty; or
(m) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world.
(ii) All of the contracts, agreements and instruments set
forth on the CONTRACTS SCHEDULE are valid, binding and enforceable in
accordance with their respective terms. The WSI Parties have performed
all obligations required to be performed by them and are not in default
under or in breach of nor in receipt of any claim of default or breach
under any contract, agreement or instrument to which it is subject; no
event has occurred which with the passage of time or the giving of
notice or both would result in a default, breach or event of
noncompliance by any WSI Party under any contract, agreement or
instrument to which any WSI Party is subject; no WSI Party has any
present expectation or intention of not fully performing all such
obligations; no WSI Party has knowledge of any breach or anticipated
breach by the other parties to any contract, agreement, instrument or
commitment to which it is a party; no WSI Party has delivered or
received notice of, or has knowledge that any other party intends to
deliver any notice of, termination or non-renewal of term under any
material contract, agreement or instrument to which it is subject; and
no WSI Party is a party to any contract requiring it to purchase or
sell goods or services or lease property above or below (as the case
may be) prevailing market prices and rates or any other materially
adverse contract or commitment.
(iii) Purchaser's special counsel has been supplied with a
true and correct copy of each of the written instruments, plans,
contracts and agreements and an accurate description of each of the
oral arrangements, contracts and agreements which are referred to on
the CONTRACTS SCHEDULE, together with all amendments, waivers or other
changes thereto.
4.12 INTELLECTUAL PROPERTY RIGHTS.
(i) The attached INTELLECTUAL PROPERTY SCHEDULE contains a
complete and accurate list of all (a) patented or registered
Intellectual Property Rights owned or used by any WSI Party, (b)
pending patent applications and applications for registrations of other
Intellectual Property Rights filed by any WSI Party, (c) unregistered
trade names and business names owned or used by any WSI Party and (d)
unregistered material trademarks, service marks, copyrights, mask works
and computer software owned or used by any WSI Party. The INTELLECTUAL
PROPERTY SCHEDULE also contains a complete and accurate list of all
material licenses and other rights granted by any WSI Party to any
third party with respect to any Intellectual Property Rights and all
licenses and other rights granted by any third party to any WSI Party
with respect to any material Intellectual Property Rights, in each case
identifying the subject Intellectual Property Rights. Each WSI Party
owns all right (subject to the use rights of others under federal
copyright law and under federal or state trademark law), title and
interest to, or has the
31
right to use pursuant to a valid license, all Intellectual Property
Rights necessary for the operation of its business as presently
conducted and as presently proposed to be conducted, free and clear of
all Liens. The loss or expiration of any Intellectual Property Right or
related group of Intellectual Property Rights owned or used by the WSI
Parties has not had and would not reasonably be expected to have a
Material Adverse Effect, and no such loss or expiration is threatened,
pending or reasonably foreseeable. The WSI Parties have taken all
necessary and desirable actions to maintain and protect the material
Intellectual Property Rights which they own. To the best of each WSI
Party's knowledge, the owners of any Intellectual Property Rights
licensed to such WSI Party have taken all necessary actions to maintain
and protect the Intellectual Property Rights which are subject to such
licenses.
(ii) (a) the WSI Parties own all right (subject to the use
rights of others under federal copyright law and under federal or state
trademark law), title and interest in and to all of the owned
Intellectual Property Rights listed on such schedule, free and clear of
all Liens other than Permitted Liens, (b) there have been no claims
made against any WSI Party asserting the invalidity, misuse or
unenforceability of any of such owned Intellectual Property Rights, and
there are no valid grounds for the same, (c) no WSI Party has received
any notices of, and is not aware of any facts which indicate a
likelihood of, any infringement or misappropriation by, or conflict
with, any third party with respect to such owned Intellectual Property
Rights (including any demand or request that any WSI Party license any
rights from a third party), (d) the conduct of each WSI Party's
business has not infringed, misappropriated or conflicted with and does
not infringe, misappropriate or conflict with any Intellectual Property
Rights of other Persons, nor would any future conduct as presently
contemplated infringe, misappropriate or conflict with any Intellectual
Property Rights of other Persons and (e) to the best of each WSI
Party's knowledge, the Intellectual Property Rights owned by or
licensed to it have not been infringed, misappropriated or conflicted
by other Persons. The transactions contemplated by this Agreement shall
have no Material Adverse Effect on any WSI Party's right, title and
interest in and to the Intellectual Property Rights listed on the
INTELLECTUAL PROPERTY SCHEDULE.
4.13 LITIGATION, ETC. Except as set forth on the attached
LITIGATION SCHEDULE, there are no actions, suits, proceedings, orders,
investigations or claims pending or, to the best of each WSI Party's
knowledge, threatened against or affecting it or any of its assets (or
to the best of each WSI Party's knowledge, pending or threatened
against or affecting any of the officers, directors, managers, or
employees of it with respect to its businesses or proposed business
activities), or pending or threatened by any WSI Party against any
third party, at law or in equity, or before or by any governmental
department, commission, board, bureau, agency or instrumentality
(including any actions, suit, proceedings or investigations with
respect to the transactions contemplated by this Agreement); nor has
there been any such actions, suits, proceedings, orders, investigations
or claims pending against or affecting any WSI Party during the past
five years; no WSI Party was or is subject to any arbitration
proceedings under collective bargaining agreements or otherwise or, to
the best of each WSI Party's knowledge, any governmental investigations
or inquiries (including inquiries as to the qualification to hold or
receive any license or permit); and, to the best of each WSI Party's
knowledge, there is no basis for any of the foregoing. No WSI Party is
subject to any judgment, order or decree of any court
32
or other governmental agency, and no WSI Party has received any opinion
or memorandum or legal advice from legal counsel to the effect that it
is exposed, from a legal standpoint, to any liability or disadvantage
which may be material to its business. None of the litigation set forth
on the LITIGATION SCHEDULE has had or will have a Material Adverse
Effect, and all such litigation is fully covered by insurance (subject
to customary deductibles).
4.14 PRODUCT WARRANTY. All products manufactured by the WSI Parties
have been manufactured in conformity with all applicable contractual commitments
and all express or implied warranties, and in conformity in all material
respects with all laws, rules and regulations promulgated by any federal, state
or local government or agency or division thereof having jurisdiction over them
and regulating their products. No such products are defective or would subject
any WSI party to any valid claim for product liability.
4.15 BROKERAGE. Except as set forth on the attached BROKERAGE
SCHEDULE, there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement and the other Transaction Documents based on any arrangement or
agreement binding upon any Transaction Party. The WSI Parties shall pay, and
hold the Purchasers harmless against, any liability, loss or expense (including
attorneys' fees and out-of-pocket expenses) arising in connection with any such
claim.
4.16 GOVERNMENTAL CONSENT, ETC. Assuming the truth and correctness
of the Purchaser's representations and warranties in SECTION 11.3 hereof, no
permit, consent, approval or authorization of, or declaration to or filing with,
any governmental authority is required in connection with the execution,
delivery and performance by the WSI Parties of this Agreement, by the
Transaction Parties of the other Transaction Documents or the other agreements
contemplated hereby or thereby to which either of them is a party, or the
consummation by the Transaction Parties of any other transactions contemplated
hereby or thereby, except as set forth on the attached CONSENTS SCHEDULE.
4.17 INSURANCE. No WSI Party is in default with respect to its
obligations under any insurance policy maintained by it, and no WSI Party has
been denied insurance coverage. The insurance coverage of each WSI Party is
customary for prudent corporations of similar size engaged in similar lines of
business. Except as set forth on the INSURANCE SCHEDULE, no WSI Party has any
self-insurance or co-insurance programs, and the reserves set forth on the
applicable Latest Balance Sheets are adequate to cover all anticipated
liabilities with respect to any such self-insurance or co-insurance programs.
4.18 EMPLOYEES. No WSI Party is aware that any executive or key
employee of it or any group of employees of it has any plans to terminate
employment with it. Each WSI Party has complied in all material respects with
all laws relating to the employment of labor (including provisions thereof
relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes), and no WSI Party is aware that it
has any material labor relations problems (including any union organization
activities, threatened or actual strikes or work stoppages or material
grievances). No WSI Party, and to the best knowledge of each WSI Party, any of
its employees is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreements affecting in any material respect
or in conflict in any material respect with the present or proposed business
activities of the WSI Parties.
33
4.19 ERISA. Except as set forth on the attached EMPLOYEE BENEFITS
SCHEDULE:
(i) MULTIEMPLOYER PLANS. No WSI Party has any obligation to
contribute to (or any other liability, including current or potential
withdrawal liability, with respect to) any Multiemployer Plan.
(ii) RETIREE WELFARE PLANS. No WSI Party maintains or has any
obligation to contribute to (or any other liability with respect to)
any plan or arrangement whether or not terminated, which provides
medical, health, life insurance or other welfare-type benefits for
current or future retired or terminated employees (except for limited
continued medical benefit coverage required to be provided under
Section 4980B of the Code or as required under applicable state law).
(iii) DEFINED BENEFIT PLANS. No WSI Party maintains,
contributes to or has any liability under (or with respect to) any
employee plan which is a tax-qualified "defined benefit plan" (as
defined in Section 3(35) of ERISA), whether or not terminated.
(iv) DEFINED CONTRIBUTION PLANS. No WSI Party maintains,
contributes to or has any liability under (or with respect to) any
employee plan which is a tax-qualified "defined contribution plan" (as
defined in Section 3(34) of ERISA), whether or not terminated.
(v) OTHER PLANS. No WSI Party maintains, contributes to or has
any liability under (or with respect to) any plan or arrangement
providing benefits to current or former employees, including any bonus
plan, plan for deferred compensation, employee health or other welfare
benefit plan or other arrangement, whether or not terminated and
whether or not subject to ERISA.
(vi) UNFUNDED LIABILITY. No Plan maintained by any WSI Party
or to which any WSI Party has an obligation to contribute, or with
respect to which any WSI Party has any other liability, has any
material unfunded liability.
(vii) PLAN QUALIFICATION AND COMPLIANCE. Each employee benefit
plan set forth on the EMPLOYEE BENEFITS SCHEDULE that is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS as to the qualification of such plan
and, to the best knowledge of each WSI Party after due inquiry, nothing
has occurred since the date of such determination letter that could
reasonably be expected to adversely affect the qualification of such
plan. Each employee benefit plan set forth on the EMPLOYEE BENEFITS
SCHEDULE and all related trusts, insurance contracts and funds have
been maintained, funded and administered in compliance in all material
respects with their respective terms and with all applicable Laws.
(viii) THE COMPANY. For purposes of this SECTION 4.19, the
term "WSI Party" also includes all organizations under common control
with any WSI Party, or treated, together with any WSI Party, as a
single employer pursuant to Section 414(b), (c), (m) or (o) of the
Code.
34
4.20 COMPLIANCE WITH LAWS. No WSI Party has violated any law or any
governmental rule or regulation or requirement, and no WSI Party has received
notice of any such violation.
4.21 ENVIRONMENTAL AND SAFETY MATTERS.
(i) Each WSI Party has complied and is in compliance in all
material respects with all Environmental and Safety Requirements.
(ii) Without limiting the generality of the foregoing, each
WSI Party has obtained and complied with, and is in compliance with, in
all material respects, all permits, licenses and other authorizations
that may be required pursuant to Environmental and Safety Requirements
for the occupation of its facilities and the operation of its business;
a list of all such permits, licenses and other authorizations is set
forth on the ENVIRONMENTAL AND SAFETY MATTERS SCHEDULE.
(iii) No WSI Party has received any written or oral notice,
report or other information regarding any actual or alleged material
violation of Environmental and Safety Requirements, or any material
liabilities or potential material liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, relating to it or
its facilities arising under Environmental and Safety Requirements.
(iv) Except as set forth in the ENVIRONMENTAL AND SAFETY
MATTERS SCHEDULE, none of the following exists at any property or
facility owned or operated by any WSI Party: (1) underground storage
tanks; (2) asbestos-containing material in any form or condition; (3)
materials or equipment containing polychlorinated biphenyls; or (4)
landfills, surface impoundments, or disposal areas.
(v) No WSI Party has treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled, or released any
substance, including any Hazardous Substance, or owned or operated any
property or facility (and no such property or facility is contaminated
by any such substance) in a manner that has given or could give rise to
material liabilities to such WSI Party, including any material
liability for response costs, corrective action costs, personal injury,
property damage, natural resources damages or attorney fees, pursuant
to CERCLA or the Solid Waste Disposal Act, as amended or any other
Environmental and Safety Requirements.
(vi) No facts, events or conditions relating to the past or
present facilities, properties or operations of any WSI Party will
prevent, hinder or limit continued compliance with Environmental and
Safety Requirements, give rise to any investigatory, remedial or
corrective obligations pursuant to Environmental and Safety
Requirements, or give rise to any other liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) pursuant to
Environmental and Safety Requirements, including any relating to onsite
or offsite releases or threatened releases of any Hazardous Substance,
personal injury, property damage or natural resources damage.
(vii) Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any
obligations for site investigation or cleanup,
35
or notification to or consent of government agencies or third parties,
pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" Environmental and Safety Requirements.
(viii) No WSI Party has, either expressly or by operation of
law, assumed or undertaken any liability, including any obligation for
corrective or remedial action, of any other person relating to
Environmental and Safety Requirements.
4.22 AFFILIATED TRANSACTIONS. Except as set forth on the attached
AFFILIATED TRANSACTIONS SCHEDULE, no officer, director, manager, member,
employee, stockholder, partner or Affiliate of any WSI Party or any individual
related by blood, marriage or adoption to any such individual or any entity in
which any such Person or individual owns any beneficial interest, is a party to
any agreement, contract, commitment, transaction or arrangement with any WSI
Party or has any material interest in any material property used by any WSI
Party.
4.23 SOLVENCY, ETC. Each WSI Party is solvent on a going concern
basis as of the date of this Agreement and shall not become insolvent as a
result of the consummation of the transactions contemplated by this Agreement
and the other Transaction Documents. Each WSI Party is, and after giving effect
to the transactions contemplated by this Agreement and the other Transaction
Documents shall be, able to pay its debts as they become due, and each WSI
Party's property now has, and after giving effect to the transactions
contemplated hereby shall have, a fair salable value greater than the amounts
required to pay its debts (including a reasonable estimate of the amount of all
contingent liabilities). Each WSI Party has adequate capital to carry on its
business, and after giving effect to the transactions contemplated by this
Agreement and the other Transaction Documents, each WSI Party shall have
adequate capital to conduct its business. No transfer of property is being made
and no obligation is being incurred in connection with the transactions
contemplated by this Agreement with the intent to hinder, delay or defraud
either present or future creditors of any WSI Party.
4.24 INVESTMENT COMPANY. No WSI Party is an "investment company" or
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended, nor is any WSI Party, directly or indirectly, controlled by or
acting on behalf of any Person which is an "investment company" within the
meaning of such act. The purchase of the Securities, the application of the
proceeds and repayment thereof by the WSI Parties and the consummation of the
transactions contemplated by this Agreement will not violate any provision of
such act or any rule, regulation or order issued by the Securities and Exchange
Commission thereunder.
4.25 MARGIN REGULATIONS. No WSI Party owns any "margin security,"
as the term is defined in Regulation U of the Federal Reserve Board, and the
proceeds of the Securities will be used only for the purposes contemplated
hereunder. None of the proceeds of the Securities will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security, for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the securities purchased under this Agreement to be
considered "purpose credit" within the meaning of Regulations T, U or X of the
Federal Reserve Board. The purchase of the Securities will not constitute a
violation of such Regulations T, U or X.
36
4.26 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor
any of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company," or an "affiliate"
of a "subsidiary company" of a "holding company," within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
4.27 TAB MERGER DOCUMENTS AND SENIOR LOAN DOCUMENTS
REPRESENTATIONS; HOLDING COMPANY STATUS. Each of the representations and
warranties in the Tab Merger Documents and the Senior Loan Documents are true
and correct in all respects, in each case regardless of any limitation on
survival set forth therein, and are hereby incorporated herein by reference. On
and at all times prior to the Closing Date, HSM has not engaged in any business
activity, or incurred any Indebtedness or, except as set forth on the
CAPITALIZATION SCHEDULE, other obligations of any type, other than the
transactions contemplated by this Agreement and the ownership of the capital
stock of the Company and ownership interests in TALP. At all times following the
Closing Date, HSM shall not own or lease, directly or indirectly, any real,
personal, intangible or tangible property of any nature, other than the capital
stock of the Company and ownership interests in TALP and HSM shall not conduct,
transact or otherwise engage in any material business or operations other than
those incidental to the ownership of the capital stock of the Company and
ownership interests in TALP. On and at all times prior to the Closing Date, the
Company has not engaged in any business activity, or incurred any Indebtedness
or, except as set forth on the CAPITALIZATION SCHEDULE, other obligations of any
type, other than the transactions contemplated by this Agreement and the
ownership of the capital stock of ▇▇▇▇▇▇▇▇ and Maverick. At all times following
the Closing Date, the Company shall not own or lease, directly or indirectly,
any real, personal, intangible or tangible property of any nature, other than
the capital stock of ▇▇▇▇▇▇▇▇ and Maverick and the Company shall not conduct,
transact or otherwise engage in any material business or operations other than
those incidental to the ownership of the capital stock of ▇▇▇▇▇▇▇▇ and Maverick.
4.28 DISCLOSURE. Neither this Agreement nor any of the exhibits,
schedules, attachments, written statements, documents, certificates or other
items prepared or supplied to any Purchaser (including any items incorporated by
reference) by or on behalf of any Transaction Party with respect to the
transactions contemplated hereby contain any untrue statement of a material fact
or omit a material fact necessary to make each statement contained herein or
therein, in light of the circumstances under which such statement was made, not
misleading. There is no fact which any Transaction Party has not disclosed to
the Purchaser in writing and of which any of its officers, directors, managers
or executive employees is aware (other than general economic conditions) and
which has had or would reasonably be expected to have a Material Adverse Effect.
4.29 CLOSING DATE. The representations and warranties of the WSI
Parties contained in this SECTION 4 and elsewhere in this Agreement and all
information contained in any exhibit, schedule or attachment hereto or in any
certificate or other writing (including any items incorporated by reference)
delivered by, or on behalf of, any Transaction Party to any Purchaser shall be
true and correct in all material respects on the Closing Date as though then
made, both immediately prior to and immediately after giving effect to the
transactions contemplated by this Agreement and the other Transaction Documents.
37
5. AFFIRMATIVE COVENANTS. So long as the Note or Warrant remains
outstanding, the WSI Parties shall:
5.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. Deliver to each
Purchaser:
(i) as soon as available but in any event within 30 days after
the end of each monthly accounting period in each fiscal year, (a)
unaudited consolidating and consolidated statements of income and cash
flows of the Company and its Subsidiaries for such monthly period and
for the period from the beginning of the fiscal year to the end of such
month, and unaudited consolidating and consolidated balance sheets of
the Company and its Subsidiaries as of the end of such monthly period,
setting forth in each case comparisons to the Company's and its
Subsidiaries' monthly budget and to the corresponding period in the
preceding fiscal year, and all such statements shall be prepared in
accordance with GAAP consistently applied, subject to the absence of
footnote disclosures and to normal year-end adjustments for recurring
accruals, and shall be certified by the Company's president, chief
executive officer or chief financial officer; (as to which certificate
there shall be no personal, as opposed to corporate, liability); and
(b) unaudited statements of income and cash flows of HSM for such
monthly period and for the period from the beginning of the fiscal year
to the end of such month, and unaudited balance sheets of HSM as of the
end of such monthly period, setting forth in each case comparisons to
HSM's monthly budget and to the corresponding period in the preceding
fiscal year, and all such statements shall be prepared in accordance
with GAAP consistently applied, subject to the absence of footnote
disclosures and to normal year-end adjustments for recurring accruals,
and shall be certified by HSM's president, chief executive officer or
chief financial officer (as to which certificate there shall be no
personal, as opposed to corporate, liability);
(ii) accompanying the financial statements referred to in
SUBSECTION (iii) and (iv) below, an Officer's Certificate of the WSI
Parties (a) stating that there is no Event of Default or Potential
Event of Default in existence and that no WSI Party is in default under
any Transaction Document or any of its other material agreements or, if
any Event of Default or Potential Event of Default or any such default
exists, specifying the nature and period of existence thereof and what
actions the WSI Parties have taken and propose to take with respect
thereto, (b) setting forth in sufficient detail the information and
computations required to establish whether or not the Company and its
Subsidiaries are in compliance with the covenants set forth in SECTION
6.20 during the applicable period and (c) a management report, in
reasonable detail, signed by the president, chief executive officer or
chief financial officer of HSM and the Company in his or her capacity
as such, describing the operations and financial condition of HSM, the
Company and its Subsidiaries for the month and the portion of the
fiscal year then ended (or for the fiscal year then ended in the case
of annual financial statements);
(iii) within 90 days after the end of each fiscal year, (a)
consolidating and consolidated statements of income and cash flows of
the Company and its Subsidiaries for such fiscal year, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year, and (b) statements of
income and cash flows of HSM for such fiscal year, and balance sheets
of HSM as of the end of such
38
fiscal year; in each case, setting forth comparisons to the preceding
fiscal year, prepared in accordance with GAAP consistently applied, and
accompanied by (x) with respect to the consolidated portions of such
statements, an opinion containing no exceptions or qualifications of an
independent accounting firm of recognized national standing (acceptable
to the holders of a majority of the outstanding principal amount of the
Note or, if the Note is not outstanding, the holders of a majority of
the outstanding Underlying Common Stock or Warrant), (y) a certificate
from such accounting firm, addressed to the Board in the case of the
Company, and HSM's partners in the case of HSM, stating that in the
course of its examination nothing came to its attention that caused it
to believe that there was an Event of Default or Potential Event of
Default in existence or that there was any other default by the WSI
Parties in the fulfillment of or compliance with any of the terms,
covenants, provisions or conditions of any other material agreement to
which such WSI Parties are a party or, if such accountants have reason
to believe any Event of Default or Potential Event of Default or other
default by the WSI Parties exists, a certificate specifying the nature
and period of existence thereof and (z) promptly upon receipt, a copy
of such firm's annual management letter to the Board in the case of the
Company, and to HSM's partners in the case of HSM;
(iv) as soon as available, but not later than 30 days after
the end of each fiscal quarter of each year, (a) unaudited
consolidating and consolidated statements of income and cash flows of
the Company and its Subsidiaries for such quarterly period and for the
period from the beginning of the fiscal year to the end of such
quarter, and unaudited consolidating and consolidated balance sheets of
the Company and its Subsidiaries as of the end of such quarterly
period, setting forth in each case comparisons to the Company's and its
Subsidiaries' quarterly budget and to the corresponding period in the
preceding fiscal year, and all such statements shall be prepared in
accordance with GAAP consistently applied, subject to the absence of
footnote disclosures and to normal year-end adjustments for recurring
accruals, and shall be certified by the Company's president, chief
executive officer or chief financial officer (as to which certificate
there shall be no personal, as opposed to corporate, liability), and
(b) unaudited statements of income and cash flows of HSM for such
quarterly period and for the period from the beginning of the fiscal
year to the end of such quarter, and unaudited balance sheets of HSM as
of the end of such quarterly period, setting forth in each case
comparisons to HSM's quarterly budget and to the corresponding period
in the preceding fiscal year, and all such statements shall be prepared
in accordance with GAAP consistently applied, subject to the absence of
footnote disclosures and to normal year-end adjustments for recurring
accruals, and shall be certified by HSM's president, chief executive
officer or chief financial officer (as to which certificate there shall
be no personal, as opposed to corporate, liability);
(v) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of the Company's and its Subsidiaries' operations or financial
affairs given to the Company or any of its Subsidiaries by its
independent accountants (and not otherwise contained in other materials
provided hereunder);
39
(vi) promptly (but in any event within two Business Days)
after the discovery or receipt of notice of any Event of Default or
Potential Event of Default, any default under any Transaction Document
or any other material agreement to which it is a party, any
investigation, notice, proceeding or adverse determination from any
governmental or regulatory authority or agency, any condition or event
that has resulted in or could result in any material liability under
any Environmental and Safety Requirements or any other material adverse
change, event or circumstance affecting any WSI Party (including the
filing of any litigation against any WSI Party that could result in any
material liability to any WSI Party or the existence of any dispute
with any Person which involves a reasonable likelihood of such
litigation being commenced), an Officer's Certificate of the applicable
WSI Party specifying the nature and period of existence thereof and
what actions such WSI Party has taken and proposes to take with respect
thereto; provided, however, that in determining whether there has been
a material adverse change, any adverse change attributable to either of
the following shall be disregarded: (i) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the
United States or any material disruption in commercial banking services
or any limit or the extension of credit generally by banks or other
financial institutions; and (ii) the commencement of a war or police
action by the United States;
(vii) at least 30 days but not more than 90 days prior to the
beginning of each fiscal year, copies of the business plan for the
Company and its Subsidiaries (including management's intentions with
regard to anticipated significant business developments or objectives
of the Company and its Subsidiaries) for each of the next three
succeeding fiscal years and projections (prepared on a monthly basis
for the first succeeding year and on an annual basis for the second and
third succeeding years) of (a) the consolidating and consolidated
balance sheets at the end of each such fiscal year, (b) statements of
income and expense and shareholder's equity for each of such fiscal
years and (c) statements of cash flow for each such fiscal year, all of
the foregoing to be in reasonable detail and certified by the Company's
president, chief executive or chief financial officer (as to which
certificate there shall be no personal, as opposed to corporate,
liability) as having been prepared in good faith and in the exercise of
management's business judgment and promptly upon any revisions thereof,
copies of such revisions;
(viii) within two days after transmission thereof, copies of
all financial statements, proxy statements, reports and any other
general written communications which the Company or any of its
Subsidiaries sends to its shareholders and copies of all registration
statements and all regular, special or periodic reports which it files,
or any of its officers, managers, directors or members of the Board
file with respect to the Company or any of its Subsidiaries, with the
Securities and Exchange Commission or with any securities exchange on
which any of its securities are then listed, and copies of all press
releases and other statements made available generally by the Company
or any of its Subsidiaries to the public concerning material
developments in the Company's and its Subsidiaries' businesses;
(ix) copies of any "Borrowing Base Certificate", as defined in
the Senior Loan Agreements and delivered pursuant to the Senior Loan
Agreements when delivered to the Senior Lender and, at the request of
any Purchaser, copies of any statements, reports,
40
certificates and any other information delivered to the Senior Lender
or the Company's or any of its Subsidiary's shareholders;
(x) promptly (but in any event within two Business Days) after
the receipt of notice of the occurrence of any of the following,
written notice thereof which describes the same and the intended course
of action of such WSI Party with respect thereto: (i) the occurrence or
expected occurrence of any ERISA Event; (ii) the occurrence of any
non-exempt prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Code; (iii) the filing of any funding
waiver request with the IRS with respect to any Pension Plan or the
failure to make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a lien under Section 302 of
ERISA; (iv) the occurrence of any material increase in the benefits
provided under any existing Plan or the establishment of any new Plan
or the commencement of contributions to any Plan to which any WSI Party
or ERISA Affiliate was not previously contributing; or (v) the
occurrence of any other event with respect to any Plan which could
result in the incurrence by any WSI Party or ERISA Affiliate of any
material liability, fine or penalty;
(xi) promptly (but in any event within two Business days) any
notice of any cancellation or material change in any insurance coverage
required to be maintained hereunder;
(xii) immediately upon the earlier of becoming aware of or the
receipt of notice (oral or written) of the acceleration of any
Indebtedness or waiver or cure of any default under any Indebtedness;
(xiii) within two Business Days of a breach or violation or a
default or event of default as defined in and under any Tab Merger
Document and within two Business Days of any material inaccuracy in any
representation and warranty made in any Tab Merger Document, a written
notice setting forth the details of such item;
(xiv) within two Business Days of any WSI Party's knowledge
thereof, written notice of any of (a) the occurrence of a Trigger Event
(as such term is defined in the Warrant) or (b) the execution of a
letter of intent or term sheet with respect to a Change in Control; and
(xv) with reasonable promptness, such other information and
financial data as any Purchaser may reasonably request.
Each of the financial statements referred to in SUBSECTIONS (i), (iii), and (iv)
shall be true and correct and shall fairly present in all material respects as
of the dates and for the periods stated therein the financial condition of the
Company and its Subsidiaries, subject in the case of the unaudited financial
statements to changes resulting from normal year-end adjustments for recurring
accruals (none of which would, alone or in the aggregate, have a Material
Adverse Effect).
5.2 INSPECTION OF PROPERTY. Permit any representatives designated
by any Purchaser, upon reasonable notice and during normal business hours and at
such other times as any such holder may reasonably request, to (i) visit and
inspect any of the properties of the WSI Parties,
41
(ii) examine the financial records and books of accounts of the WSI Parties and
make copies thereof or extracts therefrom and (iii) discuss the affairs,
finances and accounts of any such entities with the Board, board of directors or
managers, officers, key employees and independent accountants of the WSI
Parties. The presentation of an executed copy of this Agreement by any Purchaser
to the independent accountants of any WSI Party shall constitute its permission
to its independent accountants to participate in discussions with such Persons.
The WSI Parties shall grant consent to and permission to, and obtain the
consents of and permission of, any third parties necessary to effectuate the
rights of the Purchasers under this SECTION 5.2.
5.3 ATTENDANCE AT BOARD MEETINGS. Give the Purchaser
Representative written notice of each meeting of each of the board of directors
of the Company and its Subsidiaries (each of which shall be held at least
quarterly) and each committee thereof at the same time and in the same manner as
notice is given to the board of directors or committee thereof (which notice the
Company shall promptly confirm in writing to the Purchaser Representative), and
each of the Company and its Subsidiaries shall permit the Purchaser
Representative to attend as an observer at all such meetings. The Purchaser
Representative shall be entitled to receive all written materials and other
information (including copies of meeting minutes) provided in connection with
such meetings at the same time such materials and information are given to the
board of directors or any committee thereof, as the case may be. If the Company
or any of its Subsidiaries proposes to take any action by written consent in
lieu of a meeting of its board of directors, the Company and its Subsidiaries
shall give written notice thereof to the Purchaser Representative prior to the
effective date of such consent describing in reasonable detail the nature and
substance of such action. The Company and its Subsidiaries shall pay the
reasonable out-of-pocket expenses of the Purchaser Representative incurred in
connection with attending all such meetings.
5.4 CONDUCT OF BUSINESS. Cause to be done all things necessary to
maintain, preserve and renew their existence, rights, franchises, privileges and
qualifications and all material licenses, authorizations and permits necessary
to the conduct of their businesses.
5.5 MAINTENANCE OF PROPERTY AND EXISTENCE. (i) Maintain and keep
their properties in good repair, working order and condition (ordinary wear and
tear excepted), and from time to time make all necessary or desirable repairs,
renewals and replacements, so that their businesses may be properly and
advantageously conducted in all material respects at all times, and (ii)
maintain and preserve (x) their existence and good standing in the jurisdiction
of their organization and (y) their qualification to do business and good
standing (or the local law equivalent) in each jurisdiction where the nature of
their business makes such qualification necessary, other than any such
jurisdiction where the failure to be qualified or in good standing could not
reasonably be expected to have a Material Adverse Effect.
5.6 TAXES. Pay and discharge when payable all Taxes, assessments
and governmental charges imposed upon their properties or upon them or their
income or profits (in each case before the same becomes delinquent and before
penalties accrue thereon) and all claims for labor, materials or supplies which
if unpaid would by law become a Lien upon any of their property, unless and to
the extent that the same are being contested in good faith, diligently and by
appropriate proceedings and adequate reserves (as determined in accordance with
GAAP
42
consistently applied) have been established on their books with respect
thereto and such contest operates to suspend collections of the same.
5.7 CONTRACTS AND AGREEMENTS. Except as provided in Section 5.14,
comply with all obligations incurred by them pursuant to any contract or
agreement, whether oral or written, express or implied, as such obligations
become due, unless and to the extent that the same are being contested in good
faith, diligently and by appropriate proceedings and adequate reserves (as
determined in accordance with GAAP consistently applied) have been established
on their books with respect thereto.
5.8 COMPLIANCE WITH LAWS. Comply with all applicable laws, rules
and regulations of all governmental authorities.
5.9 ENVIRONMENTAL AND SAFETY REQUIREMENTS. Comply in all material
respects with all Environmental and Safety Requirements and all permits,
licenses or other authorizations issued thereunder; respond promptly to any
Release or threatened Release of any Hazardous Substance in a manner which
complies in all material respects with all Environmental and Safety Requirements
and reasonably mitigates any risk to human health or the environment; and
provide such documents or information, or conduct at its own cost such studies
or assessments, relating to matters arising under the Environmental and Safety
Requirements as any Purchaser may reasonably request.
5.10 INSURANCE. Apply for and continue in force with good and
responsible insurance companies adequate insurance covering risks of such types
and covering casualties, risks and contingencies of such types and in such
amounts as are customary for prudent companies of similar size engaged in
similar lines of business (but in no event less than such amounts that were
maintained as of the Closing) and, upon payment of any proceeds under such
policy, pay such proceeds as provided in the Note.
5.11 KEY-MAN POLICY. Maintain in effect at all times the Key-Man
Policy in form and substance acceptable to the Purchaser, and, within 30 days
after the Closing Date and thereafter within five (5) Business Days of the date
on which premiums under such policy are due, deliver to the Purchaser an
Officer's Certificate of the Company certifying that all premiums due and owing
have been paid with respect to the Key-Man Policy, together with evidence of
such payment, and that the Key-Man Policy is in full force and effect.
5.12 BOOKS AND RECORDS. Maintain proper books of record and account
which present fairly in all material respects their financial condition and
results of operations and make provisions on their financial statements for all
such proper reserves as in each case are required in accordance with GAAP
consistently applied.
5.13 COMPLIANCE WITH AGREEMENTS. Perform and observe all of their
obligations (i) to each holder of (A) the Note, as set forth in this Agreement
and the Note, and (B) the Warrant and Underlying Common Stock, as set forth in
this Agreement, the Warrant and the Stockholders Agreement, and (ii) under each
of the other Transaction Documents.
5.14 SENIOR LOAN DOCUMENTS. Comply with all covenants and
agreements contained in the Senior Loan Documents, and take no actions
prohibited thereby, in accordance with the terms
43
thereof (it being understood that any failure to perform or observe any
obligations under the Senior Loan Documents that does not otherwise constitute
an Event of Default hereunder shall not by operation of this Section 5.14 result
in an Event of Default hereunder).
5.15 HSM NOTE. With respect to HSM, shall make all payments due and
owing to the Company with respect to the HSM Note, the provisions of which shall
not be amended, waived or modified without the prior written consent of the
Purchasers.
5.16 INTELLECTUAL PROPERTY RIGHTS. Possess and maintain all
material Intellectual Property Rights necessary to the conduct of their
respective businesses and own all right, title and interest in and to, or have a
valid license for, all such material Intellectual Property Rights.
5.17 RANK; MOST FAVORED COVENANT STATUS. Cause the Indebtedness of
the Company and its Subsidiaries incurred to the Purchasers pursuant to this
Agreement and the Financing Documents to at all times be senior to any other
Indebtedness of the Company and its Subsidiaries, other than the Senior Debt.
Except as may be permitted by the terms of the Intercreditor Agreement, no
indenture, guaranty or other similar instrument evidencing Indebtedness entered
into after the date hereof shall include any affirmative or negative business or
financial covenants (or any events of default or other type of restriction which
would have the practical effect of any affirmative or negative business or
financial covenant, including, without limitation, any `put' or mandatory
prepayment of such Indebtedness upon the occurrence of a `change of control')
applicable to the Company or any of its Subsidiaries which are more restrictive
than those set forth herein or in any of the other Financing Documents. Except
as may be permitted by the Intercreditor Agreement, to the extent any amendment,
extension, renewal or refinancing of any Indebtedness which amendment is entered
into after the date hereof (whether or not such Indebtedness is outstanding on
the date hereof) includes affirmative or negative business or financial
covenants (or any events of default or other type of restriction which would
have the practical effect of any affirmative or negative business or financial
covenant, including, without limitation, any `put' or mandatory prepayment of
such Indebtedness upon the occurrence of a `change of control') applicable to
the Company or any of its Subsidiaries which are more restrictive than those set
forth herein or in any of the other Financing Documents, the Company shall
promptly so notify the Purchasers and, if the Purchasers shall so request by
written notice to the WSI Parties, the WSI Parties shall promptly amend this
Agreement to incorporate some or all of such provisions, in the discretion of
the Purchasers, into this Agreement and, to the extent necessary and reasonably
desirable to the Purchasers, into any of the other Financing Documents, all at
the election of the Purchasers.
5.18 FORMATION OF SUBSIDIARIES. At the time of the formation of any
direct or indirect Wholly Owned Subsidiary of the Company or the acquisition of
any direct or indirect Wholly Owned Subsidiary of the Company after the Closing
Date notwithstanding SECTIONS 6.7 and 6.11 to the contrary, or if any direct or
indirect Wholly Owned Subsidiary shall at any time not be a party to a loan
party guaranty in form and substance reasonably satisfactory to the Purchasers,
(a) cause such Subsidiary to provide to the Purchasers a Loan Party Guaranty in
form and substance reasonably satisfactory to the Purchasers which shall be
subordinated to the Senior Debt pursuant to the terms of the Senior
Intercreditor Agreement, and (b) provide to the Purchasers all other
documentation, including one or more opinions of counsel reasonably satisfactory
to the Purchasers, which in their reasonable opinion is appropriate with respect
to such formation and
44
the execution and delivery of the applicable documentation referred to above.
Any documentation, agreement or instrument executed or issued pursuant to this
SECTION 5.18 shall be a "Financing Document" and "Transaction Document" for
purposes of this Agreement. This SECTION 5.18 shall not be construed to
authorize any transaction prohibited by this Agreement, including without
limitation, SECTIONS 6.7 and 6.11.
5.19 GUARANTY OF PUT ARRANGEMENT. Each of ▇▇▇▇▇▇▇▇ and Maverick and
each other Subsidiary of the Company hereby unconditionally guarantees, as
primary obligor and not merely as a surety, the full and prompt payment to each
holder of the Warrant or Underlying Warrant Stock (as such term is defined in
the Warrant) and the performance, when due and at all times thereafter, of any
of the obligations of the Company in respect of each Put (as such term is
defined in the Warrant), including, without limitation, the payment of the Put
Price (as such term is defined in the Warrant) in respect of each share of
Underlying Warrant Stock (as such term is defined in the Warrant).
5.20 DESSY PUT. In the event that Dessy has not exercised his
option to purchase membership interests of HSM, as contemplated by that certain
Option and Exchange Agreement dated as of January 6, 1998 by and between Dessy
and HSM (the "OPTION AGREEMENT") prior to September 30, 2004, then HSM shall
promptly after October 1, 2004, and in any event no later than October 10, 2004,
exercise its right to "put" HSM partnership interests to Dessy in full
satisfaction of the Dessy Subdebt.
5.21 FURTHER ASSURANCES. At any time and from time to time, upon
the reasonable request of any Purchaser, execute, deliver and acknowledge or
cause to be executed, delivered and acknowledged, such further documents and
instruments and do such other acts and things as so requested in order to fully
effect the purpose of this Agreement, the other Financing Documents and any
other agreements, instruments and documents delivered pursuant hereto and
thereto or in connection with the Securities. In addition, if reasonably
requested by any Purchaser, the WSI Parties shall obtain and promptly furnish to
the Purchasers evidence of all governmental approvals as may be required to
enable the WSI Parties to comply with their respective obligations under the
Financing Documents and to continue in business as conducted on the date hereof
without material interruption or interference.
6. NEGATIVE COVENANTS. So long as the Note or Warrant remains
outstanding, no WSI Party shall:
6.1 RESTRICTED JUNIOR PAYMENTS. Directly or indirectly declare,
pay or make any Restricted Junior Payments, except:
(i) so long as no Potential Event of Default, Event of Default
or event of default under the Senior Loan Documents has occurred and is
continuing or would be caused by making such payment, the Company may
pay Workstream Administrative Expenses in an amount not to exceed
$16,667 during any month, provided that the amount shall be reduced to
$8,333 for such month if a Potential Event of Default, Event of Default
or event of default under the Senior Loan Documents has occurred and is
continuing or would be caused by making such payment;
45
(ii) the Subsidiaries of the Company may make Restricted
Junior Payments to the Company to the extent required by the Company to
pay federal and state taxes then owing, and franchise taxes and similar
licensing expenses incurred in the ordinary course of business;
PROVIDED THAT the aggregate contribution to taxes by the Subsidiaries
of the Company as a result of filing a consolidated return by the
Company may not be materially greater, nor the aggregate receipt of tax
benefits materially less, than they would have had if Subsidiaries of
the Company had not filed a consolidated return with the Company;
(iii) provided that no Potential Event of Default, Event of
Default or Event of default under the Senior Loan Documents has
occurred and is continuing or would be caused by making such payment,
Maverick may make regularly scheduled interest payments on the Dessy
Subdebt; and
(iv) HSM may make Restricted Junior Payments in cash to the
Company with respect to the HSM Note.
6.2 ISSUANCE OF NOTES, ETC. Authorize, issue or enter into any
agreement providing for the issuance (contingent or otherwise) of any notes or
debt securities containing equity features (including any notes or debt
securities convertible into or exchangeable for capital stock or other equity
securities issued in connection with the issuance of capital stock or other
equity securities or containing profit participation features).
6.3 LOANS, ADVANCES, GUARANTEES AND INVESTMENTS. Make any loans or
advances to, Guarantees for the benefit of, or Investments in, any Person,
except that the Company and its Subsidiaries may (a) pay reasonable travel and
business expense advances to employees up to $5,000 per employee and $20,000 in
the aggregate in the ordinary course of business consistent with past practices
and (b) make Investments having a stated maturity no greater than one year from
the date the Company or any of its Subsidiaries makes such Investment in (1)
obligations of the United States government or any agency thereof or obligations
guaranteed by the United States government, (2) certificates of deposit of
commercial banks having combined capital and surplus of at least $50,000,000 or
(3) commercial paper with a rating of at least "Prime-1" by ▇▇▇▇▇'▇ Investors
Service, Inc.
6.4 MERGERS. Merge or consolidate with any Person (other than a
merger or consolidation between or among Wholly Owned Subsidiaries of the
Company or a merger or consolidation of a Wholly Owned Subsidiary into the
Company).
6.5 DISPOSITIONS. Sell, lease or otherwise dispose of any of its
assets (other than dispositions of used, worn-out or obsolete equipment in the
ordinary course of business and sales of inventory in the ordinary course of
business) or sell or permanently dispose of any of its Intellectual Property
Rights, provided that the Company and its Subsidiaries may otherwise sell, lease
or otherwise dispose of up to 5% of the Consolidated Total Assets of the Company
and its Subsidiaries in any twelve month period.
6.6 LIQUIDATIONS, ETC. Except as permitted under SECTION 6.4,
liquidate, dissolve or effect a recapitalization or reorganization in any form
of transaction (including any
46
reorganization into a limited liability company, a partnership or any other
non-corporate entity and any reorganization after which the Company becomes a
Subsidiary of any other Person other than HSM) or otherwise alter its legal
status.
6.7 ACQUISITIONS. Acquire any interest in any company or business
(whether by a purchase of assets, purchase of stock, merger or otherwise), or
enter into any joint venture.
6.8 BUSINESS. In the case of (i) the Subsidiaries of the Company,
enter into the ownership, active management or operation of any business other
than the business engaged in on the Closing Date and businesses reasonably
related thereto, (ii) HSM, engage in any business other than the ownership of
the capital stock of the Company and being a limited partner of TALP, and (iii)
the Company, engage in any business other than the ownership of the capital
stock of ▇▇▇▇▇▇▇▇ and Maverick.
6.9 RESTRICTIVE AGREEMENTS. Enter into, become subject to, amend,
modify or waive any agreement or instrument which by its terms would (under any
circumstances) restrict or otherwise limit or condition (a) the right of any of
the Subsidiaries of the Company to make loans or advances or pay Distributions
to, transfer property to, or repay any Indebtedness owed to, the Company or its
Subsidiaries or (b) any WSI Party's right to perform any of the provisions of
any of the Transaction Documents (including provisions relating to the payment
of principal and interest on the Note and the payment of the redemption price
upon exercise of the Warrant), except for entering into the Senior Loan
Agreements and amending such agreement in accordance with the terms of the
Senior Intercreditor Agreement.
6.10 AFFILIATE TRANSACTIONS. Enter into, amend, modify or
supplement any agreement, transaction, commitment or arrangement with any of its
officers, directors, managers, members, employees, stockholders or Affiliates or
with any individual related by blood, marriage or adoption to any such
individual or with any entity in which any such Person or individual owns a
beneficial interest, except for customary employment arrangements and benefit
programs on reasonable terms and at prices no less favorable to it than the
terms and prices available from an independent third party in an arm's length
transaction and except as otherwise expressly contemplated by this Agreement.
6.11 SUBSIDIARIES. Establish or acquire any Subsidiaries.
6.12 INDEBTEDNESS; LIENS. Create, incur, assume or suffer to exist
any Indebtedness other than Permitted Indebtedness or any Liens other than
Permitted Liens.
6.13 OPERATING LEASES. Enter into any Operating Leases under which
the amount of the aggregate lease payments for all such agreements exceeds
$25,000 on a consolidated basis for any twelve- month period.
6.14 FISCAL YEAR. Change its fiscal year without the prior written
consent of the Purchasers.
6.15 PREPAYMENTS, ETC. Prepay, redeem, purchase, defease or
otherwise satisfy in any manner any principal or interest on any Indebtedness
other than Indebtedness under the Senior
47
Loan Agreements and the Note, and with respect to HSM, other than the
Indebtedness under the HSM Note.
6.16 OPTION PLANS. Amend or modify any option plan or employee
equity ownership plan as in existence as of the Closing, adopt any new option
plan or employee equity ownership plan or issue any capital stock to its
employees.
6.17 CAPITAL STOCK. Issue or sell any shares of the capital stock ,
or rights to acquire shares of the capital stock, to any Person other than the
Company or a Wholly Owned Subsidiary of the Company.
6.18 USE OF PROCEEDS. Use the proceeds from the sale of the
Securities other than as set forth on the USE OF PROCEEDS SCHEDULE.
6.19 ORGANIZATIONAL DOCUMENTS. Make any amendment to its articles
or certificate of incorporation or by laws or partnership agreement or other
organizational documents (as applicable), or file any resolution of its board of
directors or shareholders or partners with the applicable Secretary of State or
other applicable filing office containing any provisions which would adversely
affect or otherwise impair in any respect any rights or remedies of any
Purchaser or the rights or relative priority of the holders of the Warrant or
Underlying Common Stock under this Agreement or any Transaction Document.
6.20 FINANCIAL COVENANTS.
(i) FIXED CHARGE COVERAGE RATIO.
Permit the Fixed Charge Coverage Ratio for any
Computation Period to be less than the applicable ratio set forth below
for such Computation Period:
------------------------------------------------------- ----------------------------------------------------
Computation Fixed Charge
Period Ending Coverage Ratio
------------- --------------
------------------------------------------------------- ----------------------------------------------------
December 2002 1.00 to 1.00
------------------------------------------------------- ----------------------------------------------------
March 2003 1.00 to 1.00
------------------------------------------------------- ----------------------------------------------------
June 2003 1.00 to 1.00
------------------------------------------------------- ----------------------------------------------------
September 2003 1.10 to 1.00
------------------------------------------------------- ----------------------------------------------------
December 2003 1.10 to 1.00
------------------------------------------------------- ----------------------------------------------------
March 2004 1.10 to 1.00
------------------------------------------------------- ----------------------------------------------------
June 2004 and each fiscal quarter thereafter 1.20 to 1.00
------------------------------------------------------- ----------------------------------------------------
(ii) TOTAL DEBT TO EBITDA RATIO.
48
Permit the Total Debt to EBITDA Ratio as of the last
day of any Computation Period to exceed the applicable ratio set forth
below for such Computation Period:
------------------------------------------------------- ----------------------------------------------------
Computation Total Debt to
Period Ending EBITDA Ratio
------------- ------------
------------------------------------------------------- ----------------------------------------------------
December 2002 3.50 to 1.00
------------------------------------------------------- ----------------------------------------------------
March 2003 3.50 to 1.00
------------------------------------------------------- ----------------------------------------------------
June 2003 3.50 to 1.00
------------------------------------------------------- ----------------------------------------------------
September 2003 3.00 to 1.00
------------------------------------------------------- ----------------------------------------------------
December 2003 3.00 to 1.00
------------------------------------------------------- ----------------------------------------------------
March 2004 3.00 to 1.00
------------------------------------------------------- ----------------------------------------------------
June 2004 and each fiscal quarter thereafter 2.50 to 1.00
------------------------------------------------------- ----------------------------------------------------
(iii) EBITDA.
Permit EBITDA for any Computation Period to be less
than the applicable amount set forth below for such Computation Period:
------------------------------------------------------- ----------------------------------------------------
Computation
Period Ending EBITDA
------------- ------
------------------------------------------------------- ----------------------------------------------------
December 2002 $2,000,000
------------------------------------------------------- ----------------------------------------------------
March 2003 $2,000,000
------------------------------------------------------- ----------------------------------------------------
June 2003 $2,000,000
------------------------------------------------------- ----------------------------------------------------
September 2003 $2,500,000
------------------------------------------------------- ----------------------------------------------------
December 2003 $2,500,000
------------------------------------------------------- ----------------------------------------------------
March 2004 $2,500,000
------------------------------------------------------- ----------------------------------------------------
June 2004 and each fiscal quarter thereafter $2,800,000
------------------------------------------------------- ----------------------------------------------------
(iv) CAPITAL EXPENDITURES.
Permit the aggregate amount of all Capital
Expenditures made by the Company and its Subsidiaries during any fiscal
year to exceed: (i) $505,000 for the fiscal year ending March 2003,
(ii) $505,000 for the fiscal year ending March 2004, and (iii) $600,000
for any fiscal year thereafter. For purposes of this section only,
"Capital Expenditures" shall exclude Capital Expenditures made in such
fiscal year in connection with the replacement or substitution of
assets to the extent financed through the disposition of assets,
provided that the replacement and substitution occurs within 180
49
days, is not in excess of $50,000 for all such dispositions in the
aggregate, and the replacement or substituted assets perform the same
or similar function as the assets so replaced or substituted. In
addition to the foregoing, HSM shall make no Capital Expenditures.
Notwithstanding the foregoing, the WSI Parties shall
not be required to comply with the provisions of this SECTION 6.20 if
no portion of the principal amount of the Note is at the time
outstanding.
6.21 MARGIN REGULATIONS. Use any proceeds from the sale of the Note
hereunder, directly or indirectly, for the purposes of purchasing or carrying
any "margin securities" within the meaning of Regulation T, U or X promulgated
by the Board of Governors of the Federal Reserve Board or for the purpose of
arranging for the extension of credit secured, directly or indirectly, in whole
or in part by collateral that includes any "margin securities."
6.22 AMENDMENT OF OTHER AGREEMENTS. Amend, modify or waive any
provision of the Transaction Documents (other than the Senior Loan Agreements in
accordance with the terms of this Agreement and the Senior Intercreditor
Agreement) without the prior written consent of the Purchaser Representative.
6.23 SENIOR LOAN DOCUMENTS. Amend, modify or waive any provision of
the Senior Loan Documents except to the extent permitted by the Senior
Intercreditor Agreement.
6.24 INTELLECTUAL PROPERTY RIGHTS. Take any action, or fail to take
any action, which would result in the invalidity, abandonment, misuse or
unenforceability of any material Intellectual Property Rights or which would
infringe upon in any material respect or misappropriate any rights of other
Persons.
6.25 EMPLOYEE BENEFIT PLANS. Permit to exist any condition in
connection with any Pension Plan which might constitute grounds for the PBGC to
institute proceedings to have such Pension Plan terminated or a trustee
appointed to administer such Pension Plan; and no WSI Party shall engage in, or
permit to exist or occur, or permit any ERISA Affiliate to engage in, or permit
to exist or occur, any other condition, event or transaction with respect to any
Pension Plan or Multiemployer Plan which could result in the incurrence of any
material liability, fine or penalty.
6.26 CONTRACTS. Enter into or be a party to any contract for the
purchase of materials, supplies or other property or services, if such contract
requires it to make payments regardless of whether such materials, supplies or
other property or services are ever delivered.
6.27 CANCELLATION OF CLAIMS. Cancel any claim or debt owing to it,
except in the ordinary course of business and not to exceed $10,000 in any
fiscal year.
6.28 DISCLOSURE. Disclose the names of any Purchaser in any press
release or in any prospectus, proxy statement or other materials with a
governmental entity relating to a public offering of its securities unless such
Purchaser has approved the content of such disclosure in its discretion (which
approval shall not be unreasonably withheld, delayed or conditioned).
50
7. TRANSFER OF RESTRICTED SECURITIES.
7.1 GENERAL PROVISIONS. Restricted Securities are transferable
only pursuant to (i) public offerings registered under the Securities Act, (ii)
Rule 144 or Rule 144A of the Securities and Exchange Commission (or any similar
rule or rules then in force) if such rule is available and (iii) subject to
compliance with applicable security laws, any other legally available means of
transfer. In the absence of an Event of Default, no Purchaser and no other
holder of Securities shall transfer or assign any of the Securities to any
competitor of ▇▇▇▇▇▇▇▇ or Maverick.
7.2 INFORMATION REQUESTS. Upon the request of any Purchaser, each
of the Company and the other Borrowers shall promptly supply to such Purchaser
or its prospective transferees all information regarding the Company and its
Subsidiaries required to be delivered in connection with a transfer hereof.
7.3 LEGEND REMOVAL. If any Restricted Securities become eligible
for sale pursuant to Rule 144(k), each of the Company and the other Borrowers
shall, upon the request of the holder of such Restricted Securities, remove the
legend set forth in SECTION 11.3 from the certificates for such Restricted
Securities.
8. BHC REGULATORY MATTERS
8.1 GENERALLY. Before the Company redeems, purchases or otherwise
acquires, directly or indirectly, or converts or takes any action with respect
to the voting rights of, any shares of any class of its common stock or any
securities convertible into or exchangeable for any shares of any class of its
common stock (other than an exercise of the Warrants) and before the Company
becomes a party to any merger, consolidation, or recapitalization otherwise
permitted hereunder, the Company shall give written notice of such pending
action to all BHC Holders. Upon the written request of any BHC Holder made
within 10 days after its receipt of any such notice stating that after giving
effect to such action the BHC Holder would have a Regulatory Problem, the
Company shall defer taking such action for such period (not to extend beyond 45
days after the BHC Holder's receipt of the Company's original notice) as the BHC
Holder requests to permit it and its Affiliates to reduce the quantity of the
Company's securities they own in order to avoid the Regulatory Problem.
8.2 EXCHANGE OF STOCK. At any BHC Holder's request at any time
(whether in connection with any action by the Company referred to in SECTION 8.1
above or otherwise), the Company shall exchange with the BHC Holder for such
number of shares of Class B Common Stock then held by the BHC Holder as it
designates a like number of shares of Class A Common Stock, and the Company
shall at all times reserve and keep available out of its authorized but unissued
Class A Common Stock, solely for issue upon such exchanges, the number of such
shares deemed sufficient by the Company for such purposes. In the event of any
such exchange of Class B Common Stock for Class A Common Stock, (a) the holders
of such Class A Common Stock shall be entitled to all the rights which such
holders had pursuant to this Agreement, the Certificate of Incorporation, the
Stockholders Agreement and the Registration Agreement as holders of Class B
Common Stock (including the right to have such shares treated as "Underlying
Common Stock" and "Registrable Securities" pursuant to this Agreement, the
Certificate of Incorporation, the Equityholders Agreement and the Registration
Agreement) and
51
(b) if such Class B Common Stock were "Restricted Securities" hereunder, such
Class A Common Stock shall also be deemed to be "Restricted Securities"
hereunder. In addition, if a BHC Holder has a Regulatory Problem, the Company
will cooperate and assist the BHC Holder by taking such actions as may be
necessary or (in the opinion of the BHC Holder) desirable as requested by the
BHC Holder to resolve such Regulatory Problem, including any actions reasonably
requested by the BHC Holder to effectuate and facilitate any transfer by such
BHC Holder of any securities of the Company then held by such BHC Holder to any
Person designated by such BHC Holder.
8.3 OTHER HOLDERS. The Company shall grant to any subsequent
holder of Restricted Securities that is a BHC Holder, upon such holder's
request, the same rights granted to the BHC Holders pursuant to this SECTION 8.
9. PREEMPTIVE RIGHTS.
9.1 GENERALLY. Except for issuances of Common Stock or other
equity securities (a) upon the exercise of the Warrant, (b) upon the exchange of
any voting stock for nonvoting stock pursuant to SECTION 8, or (c) pursuant to a
Qualified Public Offering, if the Company authorizes the issuance or sale of any
shares of Common Stock or other equity securities or any securities containing
options or rights to acquire any shares of Common Stock or containing any
phantom or other equity participation features (other than as a dividend on the
outstanding Common Stock), the Company shall first offer to sell to each holder
of Underlying Common Stock a portion of such Stock or securities equal to the
quotient determined by dividing (1) the number of shares of Underlying Common
Stock held by such holder by (2) the sum of (x) the total number of shares of
Underlying Common Stock and (y) the number of shares of Common Stock outstanding
which are not Underlying Common Stock. If the Company authorizes the issuance or
sale of any notes or debt securities that are subordinate and junior to the
prior payment in full of all Senior Debt, the Company shall first offer to sell
to each holder of the Note a portion of such notes or debt securities equal to
the quotient determined by dividing (1) the aggregate principal amount of the
Note held by such holder by (2) the sum of the aggregate principal amount of the
Note held by all holders of the Note. Each holder of Underlying Common Stock or
the Note (as applicable) shall be entitled to purchase such Common Stock or
securities at the most favorable price and on the most favorable terms as such
securities are to be offered to any other Person; PROVIDED that, at the request
of any holder of the Warrant or Underlying Common Stock, the Company shall offer
to such holder common stock or securities which have no voting rights (other
than required by applicable law) and which are convertible into voting
securities on the same terms as the Class B Common Stock are convertible into
Class A Common Stock but which are otherwise identical to the common stock or
securities being offered. The purchase price for all securities offered to the
holders of Warrant, the Underlying Common Stock and the Note shall be payable in
cash.
9.2 EXERCISE OF RIGHTS. In order to exercise its purchase rights
hereunder, a holder of the Note or Underlying Common Stock, as applicable, must
within 15 days after receipt of written notice from the Company describing in
reasonable detail the common stock or securities being offered, the purchase
price thereof, the payment terms and such holder's percentage allotment deliver
a written notice to the Company describing its election hereunder. If all of the
securities offered to the holders of Underlying Common Stock or the Note, as
applicable, is not
52
fully subscribed by such holders, the remaining securities shall be reoffered by
the Company to the holders purchasing their full allotment upon the terms set
forth in this SECTION 9, except that such holders must exercise their purchase
rights within five days after receipt of such reoffer.
9.3 EXPIRATION OF PERIODS. Upon the expiration of the offering
periods described above, the Company shall be entitled to sell such securities
which the holders of Underlying Common Stock or the Note, as applicable, have
not elected to purchase during the 60 days following such expiration on terms
and conditions no more favorable to the purchasers thereof than those offered to
such holders. Any securities offered or sold by the Company after such 60-day
period must first be reoffered to the holders of Underlying Common Stock or the
Note, as applicable, pursuant to the terms of this SECTION 9.
10. EVENTS OF DEFAULT.
10.1 DEFINITION OF EVENT OF DEFAULT. An Event of Default shall be
deemed to have occurred if:
(i) (x) any Borrower or any Guarantor fails to (A) pay when
due and payable (whether at maturity or otherwise) the full amount of
any principal payment (together with any applicable premium) or
interest then accrued on the Note or as otherwise required pursuant to
any other Financing Document or (B) pay within five (5) days of the
date when due and payable (whether at maturity or otherwise) the full
amount of any other amounts payable under this Agreement, the Note or
any other Financing Document, or (y) the Company fails to redeem the
Warrant or Underlying Common Stock as provided in the Warrant;
(ii) any WSI Party:
(a) breaches, or fails to perform or observe, any of the
covenants contained in SECTIONS 5, 6 AND 9 hereof; or
(b) breaches, or fails to perform or observe, any other
provision contained herein, in the Note, any other instrument delivered
pursuant hereto or thereto or any other Financing Document and such
failure continues uncured for 30 days;
(iii) any representation, warranty or information contained
herein or required to be furnished to the Purchaser or holder of the
Securities pursuant to this Agreement or any other Transaction
Document, or any other writing furnished by any Transaction Party to
Purchaser or holder of the Securities, is false or misleading in any
material respect on the date made, repeated or furnished;
(iv) any WSI Party makes an assignment for the benefit of
creditors or admits in writing its inability to pay its debts generally
as they become due; or an order, judgment, decree or injunction is
entered adjudicating any WSI Party bankrupt or insolvent or requiring
the dissolution or split up of any WSI Party or preventing any WSI
Party from conducting all or any part of its business; or any order for
relief with respect to any WSI Party is entered under the Federal
Bankruptcy Code; or any WSI Party petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or
53
liquidator of any WSI Party, or of any substantial part of the assets
of any WSI Party, or commences any proceeding relating to any WSI Party
under any bankruptcy reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar laws of any
jurisdiction now or hereafter in effect; or any such petition or
application is filed, or any such proceeding is commenced, against any
WSI Party and either (a) such WSI Party by any act indicates its
approval thereof, consents thereto or acquiescence therein or (b) such
petition, application or proceeding is not dismissed within 60 days; or
any corporate action is taken by any WSI Party in contemplation of or
for the purpose of effecting any of the foregoing;
(v) a judgment in excess of $250,000 is rendered against any
WSI Party and, within 60 days after entry thereof, such judgment is not
discharged in full or execution thereof stayed pending appeal, or
within 60 days after the expiration of any such stay, such judgment is
not discharged in full;
(vi) any WSI Party's assets are attached, seized, subjected to
a writ or distress warrant, or are levied upon, or come within the
possession of any receiver, trustee, custodian or assignee for the
benefit of creditors in connection with any obligations or liabilities
of the WSI Parties in excess of $100,000 in the aggregate;
(vii) any WSI Party defaults in the performance of any
obligation (other than Indebtedness pursuant to the Senior Loan
Agreements) if the effect of such default is to cause an amount
exceeding $100,000 to become due prior to its stated maturity or to
permit the holder or holders of such obligation to cause an amount
exceeding $100,000 to become due prior to its stated maturity;
(viii) (a) any WSI Party defaults (1) in payment when due
(after taking into account any applicable grace period) of any amounts
(whether by upon scheduled payment, required prepayment, required cash
collection, acceleration, demand or otherwise) of any Material
Indebtedness or (2) in compliance with the terms, covenants or other
provisions of any such indenture, loan agreement, note or other
instrument, if the effect of such default in compliance is to
accelerate or, solely in the case of Indebtedness other than pursuant
to the Senior Loan Agreements, to permit the acceleration of the stated
maturity of such Material Indebtedness (whether or not actually
accelerated) or (in the case of demand obligations) results in demand
for payment of such Indebtedness, or (b) any other event shall occur or
condition shall exist with respect to such Material Indebtedness, if
the effect of such event or condition is to cause, or, solely in the
case of Indebtedness other than pursuant to the Senior Loan Agreements,
permit the holders thereof to cause, such Material Indebtedness to
become due and payable;
(ix) any WSI Party defaults in the performance or observance
of any provision of any agreement or commitment (other than those
relating to Indebtedness) and such default has or is reasonably likely
to have a Material Adverse Effect;
(x) there shall occur any "Event of Default" under and as
defined in either of the Senior Loan Agreements or any of the other
documents entered into between the Senior Lender and ▇▇▇▇▇▇▇▇ or
Maverick in connection therewith;
54
(xi) any of this Agreement, the Note or the Warrant shall
cease to be in full force and effect or declared to be null and void by
a court of competent jurisdiction;
(xii) a Change in Control shall occur;
(xiii) since the Closing, there shall have occurred an event
or condition shall exist which could reasonably be expected to have a
Material Adverse Effect;
(xiv) the institution of any steps by any WSI Party or any
ERISA Affiliate or any other Person to terminate a Pension Plan if, as
a result of such termination, any WSI Party or any such ERISA Affiliate
could be required to make a contribution to such Pension Plan, or could
reasonably expect to incur a liability or obligation to such Pension
Plan, and, in the opinion of the holders of the Note holding a majority
of the aggregate outstanding principal amount of the Note, such
contribution, liability or obligation would reasonably be expected to
have a Material Adverse Effect;
(xv) (1) with respect to any Plan, a prohibited transaction
within the meaning of Section 4975 of the Code or Section 406 of ERISA
occurs which, in the reasonable determination of the holders of the
Note holding a majority of the aggregate outstanding principal amount
of the Note, could result in liability to any WSI Party; (2) with
respect to any Title IV Plan, the filing of a notice to voluntarily
terminate any such plan in a distress termination; (3) with respect to
any Multiemployer Plan, any WSI Party or any ERISA Affiliate shall
incur any Withdrawal Liability; (4) with respect to any Qualified Plan,
any WSI Party or any ERISA Affiliate shall incur an accumulated funding
deficiency or request a funding waiver from the IRS; or (5) with
respect to any Title IV Plan or Multiemployer Plan which has an ERISA
Event not described in clauses (2) through (4) hereof, in the
reasonable determination of the holders of the Note holding a majority
of the aggregate outstanding principal amount of the Note, there is a
reasonable likelihood for termination of any such plan by the PBGC;
provided, however, that the events listed in clauses (1) through (5)
hereof shall constitute Events of Default only if the liability,
deficiency or waiver request of such WSI Party or any ERISA Affiliate,
whether or not assessed, could, in the opinion of the holders of the
Note holding a majority of the aggregate outstanding principal amount
of the Note, reasonably be expected to have a Material Adverse Effect;
(xvi) the Loan Party Guaranty or any provision thereof shall
cease to be in full force or effect as to any Guarantor, or any
Guarantor or any Person acting by or on behalf of any Guarantor shall
deny or disaffirm such Guarantor's obligations under the Loan Party
Guaranty, or any Guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be
performed or observed pursuant to the Loan Party Guaranty and such
default shall continue beyond any grace period specifically applicable
thereof;
(xvii) if any term or provision of any of the Intercreditor
Agreements shall at any time and for any reason cease to be in full
force and effect or shall be declared null and void, or the validity of
enforceability thereof shall be contested by any party thereto (other
than a Purchaser), or any party thereto (other than a Purchaser) shall
deny it has
55
any further liability or obligations under any of the Intercreditor
Agreements or any party thereto (other than a Purchaser) shall fail to
perform any of its obligations under any of the Intercreditor
Agreements;
(xviii) if any term or provision of any of the Pledge
Agreements shall at any time and for any reason cease to be in full
force and effect or shall be declared null and void, or the validity of
enforceability thereof shall be contested by any party thereto (other
than a Purchaser), or any party thereto (other than a Purchaser) shall
deny it has any further liability or obligations under any of the
Pledge Agreements, or any party thereto (other than a Purchaser) shall
fail to perform any of its obligations under any of the Pledge
Agreements, or any default or event of default shall occur thereunder,
or if any representation or warranty made by any party thereto (other
than a Purchaser) shall fail to have been true when made or deemed
made;
(xix) any of the Tab Merger Documents, at any time after its
execution and delivery and for any reason, ceases to be in full force
and effect (except pursuant to its terms) or is declared null and void,
or any party thereto denies it has any further liability or obligation
under (except pursuant to its terms); or
(xx) there shall occur any default by any party under any of
the Tab Merger Documents which could reasonably be expected to expose
any Transaction Party to a claim, loss or liability in excess of
$275,000.
Each of the foregoing shall constitute Events of Default whatever the
reason or cause for any such Event of Default and whether it is voluntary or
involuntary or is effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body.
10.2 CONSEQUENCES OF EVENTS OF DEFAULT.
(i) If any Event of Default has occurred and is continuing,
then the interest rate on the Note shall increase automatically by an
increment of five percentage points effective as of the date of the
Event of Default. Any increase of the interest rate resulting from the
operation of this subsection shall terminate as of the close of
business on the date on which no Event of Default exists (subject to
subsequent increases pursuant to this subsection).
(ii) If an Event of Default of the type described in SECTION
10.1(iv) has occurred, then the aggregate outstanding principal amount
of the Note (together with all accrued interest thereon and all other
amounts due and payable with respect thereto) shall become immediately
due and payable without any action on the part of the holders of the
Note, and the Borrowers shall immediately pay to the holders of the
Note all amounts due and payable with respect to the Note.
(iii) If an Event of Default (other than under SECTION
10.1(iv)) has occurred and is continuing, then any holder or holders of
the Note then outstanding may declare all or any portion of the
outstanding principal amount of the Note (together with all accrued
interest thereon and all other amounts due and payable with respect
thereto) to be
56
immediately due and payable and may demand immediate payment of all or
any portion of the outstanding principal amount of the Note (together
with all such other amounts then due and payable) owned by such holder
or holders. The Borrowers shall give prompt written notice of any such
demand to the other holders of the Note, each of which may demand
immediate payment of all or any portion of such holder's Note. If any
holder or holders of the Note demand immediate payment of all or any
portion of the Note, the Borrowers shall immediately pay to such holder
or holders all amounts due and payable with respect to the Note.
(iv) If any Event of Default has occurred and is continuing,
the amount of Workstream Administrative Expenses permitted to be paid
hereunder shall be reduced as described in SECTION 6.1.
11. MISCELLANEOUS.
11.1 EXPENSES. The WSI Parties shall, jointly and severally, pay,
and hold the Purchasers and all holders of Securities harmless against liability
for the payment of, and reimburse on demand as and when incurred from and
against, (i) all reasonable out-of-pocket costs and expenses incurred by each of
them in connection with their due diligence review of the Transaction Parties,
the preparation, negotiation, execution and interpretation of this Agreement,
the Note, the Warrant, the other Financing Documents and the other Transaction
Documents and the agreements contemplated hereby and thereby, and the
consummation of all of the transactions contemplated hereby and thereby
(including all reasonable fees and expenses of outside legal counsel,
environmental consultants and accountants), which costs and expenses shall be
payable at the Closing or, if the Closing does not occur, payable upon demand,
(ii) all reasonable out-of-pocket fees and expenses actually incurred with
respect to any amendments or waivers (whether or not the same become effective)
under or in respect of each of the Transaction Documents (including all expenses
incurred in connection with any proposed merger, sale or recapitalization of the
Company), (iii) all recording and filing fees, stamp and other taxes which may
be payable in respect of the execution and delivery of this Agreement, the other
Transaction Documents or the issuance, delivery or acquisition of any Securities
or any shares of Common Stock issuable upon exercise of the Warrants or any
Class A Common Stock issuable upon conversion of the Class B Common Stock, and
(iv) the fees and expenses incurred with respect to the interpretation and
enforcement of the rights granted under this Agreement, the Securities, and the
other Transaction Documents (including costs of collection) and the
investigation and enforcement of rights with respect to any Event of Default. If
any WSI Party fails to pay when due any amounts due the Purchasers (giving
effect to any applicable cure or grace period, if any) or fails to comply with
any of its obligations pursuant to this Agreement or any other agreement,
document or instrument executed or delivered in connection herewith (giving
effect to any applicable cure or grace period, if any), the WSI Parties shall,
upon demand by the Purchasers, pay to the Purchasers such further amounts as
shall be sufficient to cover the out-of-pocket cost and expense (including, but
not limited to outside attorneys' fees) actually incurred by or on behalf of the
Purchasers in collecting all such amounts due or in otherwise enforcing the
Purchasers' rights and remedies hereunder. The WSI Parties also agree to pay to
the Purchaser all costs and expenses actually incurred by them, including
reasonable compensation to their outside attorneys for all services rendered, in
connection with the
57
investigation of any Event of Default and enforcement of their rights hereunder
or under the other Transaction Documents.
11.2 REMEDIES. Each holder of Securities shall have all rights and
remedies set forth in this Agreement and the other Financing Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. No remedy hereunder or thereunder conferred is intended to be exclusive
of any other remedy, and each and every such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or thereunder or now
or hereafter existing at law or in equity or by statute or otherwise. Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law.
11.3 PURCHASER'S INVESTMENT REPRESENTATIONS. The Purchaser hereby
represents that it is acquiring the Restricted Securities purchased hereunder or
acquired pursuant hereto for its own account with the present intention of
holding such securities for purposes of investment, and that it has no intention
of selling such securities in a public distribution in violation of the federal
securities laws or any applicable state securities laws; provided that nothing
contained herein shall prevent any Purchaser and subsequent holders of
Restricted Securities from transferring such securities in compliance with the
provisions of SECTION 7 hereof. Each certificate or instrument representing
Restricted Securities shall be imprinted with a legend in substantially the
following form:
"The securities represented by this certificate were
originally issued on _____________, 2002 and have
not been registered under the Securities Act of
1933, as amended. The transfer of the securities
represented by this certificate is subject to the
conditions specified in the Note and Warrant
Purchase Agreement, dated as of September ___, 2002,
and as amended, restated, amended and restated,
supplemented or otherwise modified from time to
time, by and among ▇▇ ▇▇▇▇▇▇ Limited Partnership,
the Company, ▇▇▇▇▇▇▇▇ Sorter Co., Inc. and New
Maverick Desk, Inc., the initial holder hereof and
certain investors, who from time to time become
parties thereto in accordance with the provisions
thereof, and the Company reserves the right to
refuse the transfer of such security until such
conditions have been fulfilled with respect to such
transfer. Upon written request, a copy of such
conditions shall be furnished by the Company to the
holder hereof without charge."
11.4 AMENDMENTS AND WAIVERS. Except as otherwise expressly provided
herein, the provisions of this Agreement and the provisions of the Note may be
amended and a WSI Party may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the WSI Parties
have obtained the written consent of the holders of a majority of the
outstanding principal amount of the Note; provided that no such action shall
change (i) the rate at which or the manner in which interest accrues on the Note
or the time at which such interest becomes payable or (ii) any provision
relating to the scheduled payments or
58
prepayments of principal on the Note, without the written consent of all of the
holders of the outstanding principal amount of the Note; provided further, that
if the Note is not outstanding, the provisions of this Agreement may be amended
or waived and a WSI Party may take any action herein prohibited, only if they
have obtained the written consent of the holders of a majority of the Underlying
Common Stock or the Warrant. No other course of dealing between the WSI Parties,
on the one hand, and the holders of the Securities, on the other hand, or any
delay in exercising any rights hereunder or under the Note or the other
Financing Documents shall operate as a waiver of any rights of any such holders.
For purposes of this Agreement, any portion of the Securities held by the
Company or any of its Subsidiaries shall not be deemed to be outstanding. If any
WSI Party pays any consideration to any holder of the Securities for such
holder's consent to any amendment, modification or waiver hereunder, the WSI
Parties shall also pay each other holder granting its consent hereunder
equivalent consideration computed on a pro rata basis.
11.5 SURVIVAL OF AGREEMENT. All covenants, representations and
warranties contained in this Agreement, the Note and/or the other Transaction
Documents or otherwise made in writing by any WSI Party in connection herewith
or therewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on its behalf. In addition, the
obligations of the WSI Parties pursuant to SECTIONS 11.1, 11.13, 11.16 and 11.17
shall survive the repayment of all amounts payable pursuant to this Agreement,
the Note, the Warrant and the Stockholders Agreement.
11.6 NO SETOFFS, ETC. All payments hereunder and under the Note and
the other Financing Documents shall be made by the Borrowers and the Guarantors
without setoff, offset, deduction or counterclaim, free and clear of all taxes,
levies, imports, duties, fees and charges, and without any withholding,
restriction or conditions imposed by any governmental authority. If the
Borrowers or any Guarantor shall be required by any law to deduct, setoff or
withhold any amount from or in respect of any payment to any Purchaser hereunder
or under the Note, then the amount so payable to such Purchaser shall be
increased as may be necessary so that, after making all required deductions,
setoffs and withholdings, such Purchaser shall receive an amount equal to the
sum it would have received had no such deductions, setoffs or withholding been
made.
11.7 SUCCESSORS AND ASSIGNS. All covenants and agreements contained
in this Agreement by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto whether or not so expressed; provided that no WSI Party shall be
permitted to assign its rights or obligations under this Agreement or the other
Financing Documents. In addition, and whether or not any express assignment has
been made, the provisions of this Agreement which are for any Purchaser's
benefit as a purchaser or holder of Securities are also for the benefit of, and
enforceable by, any subsequent holder of such Securities; provided, however,
that in the absence of an Event of Default, no Purchaser and no other holder of
Securities shall transfer or assign any of the Securities to any competitor of
▇▇▇▇▇▇▇▇ or Maverick. Except as otherwise expressly provided herein, nothing
expressed in or implied from this Agreement or the Financing Documents is
intended to give, or shall be construed to give, any Person, other than the
parties hereto and thereto and their permitted
59
successors and assigns, any benefit or legal or equitable right, remedy or claim
under or by virtue of this Agreement or any such other document.
11.8 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
11.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same Agreement.
11.10 DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings
of this Agreement and the Note are inserted for convenience only and do not
constitute a substantive part of this Agreement.
11.11 GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE
SCHEDULES HERETO AND (EXCEPT AS OTHERWISE EXPRESSLY PROVIDED THEREIN) THE
EXHIBITS HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF OHIO, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF
LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF OHIO OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF OHIO. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF
OHIO SHALL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT (AND
ALL SCHEDULES AND EXHIBITS HERETO), EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE
OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER
JURISDICTION WOULD ORDINARILY APPLY.
11.12 NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid), mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid or sent via facsimile to the number
set forth below with a copy mailed to the recipient as set forth above. Such
notices, demands and other communications shall be sent to the Purchaser and to
the WSI Parties at the addresses indicated below:
To HSM:
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇., ▇▇▇.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇ ▇▇▇▇▇▇ III, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
60
With a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇, Muething & Klekamp, PLL
1400 Provident Tower
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
To the Company and its Subsidiaries:
Workstream Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
61
With a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇, Muething & Klekamp, PLL
1400 Provident Tower
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
To the Purchaser:
Banc One Mezzanine Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which shall not constitute notice) to:
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party. Any
notices or communications made hereunder by the Purchaser or any holder of the
Securities may be made to the Company on behalf of all the Borrowers, and any
notices or communications that are to be given by the Borrowers hereunder may be
given by the Company on the behalf of all Borrowers.
11.13 CONSIDERATION FOR WARRANT; TREATMENT OF FEES. The
Purchaser, the Company and the other Borrowers acknowledge and agree that the
fair market value of the Note issued hereunder is $6,000,000, the fair market
value of the Warrant issued hereunder is $1,000,000 and that, for all purposes
(including tax and accounting), the consideration for the issuance of the
Warrant shall be allocated as set forth in Section 2.2 hereof. The Purchaser,
the Company and the other Borrowers shall file their respective federal, state
and local Tax Returns in a manner which is consistent with such valuation and
allocation and shall not take any action or position (whether in preparation of
Tax Returns, financial statements or otherwise) which is inconsistent with any
of the above.
11.14 CONSTRUCTION. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement. The parties intend that each
62
representation, warranty, and covenant contained herein shall have independent
significance. If any party has breached any representation, warranty, or
covenant contained herein in any respect or any Event of Default shall occur,
the fact that there exists another representation, warranty, or covenant or
Event of Default relating to the same subject matter (regardless of the relative
levels of specificity) which such party has not breached shall not detract from
or mitigate the fact that such party is in breach of the first representation,
warranty, or covenant or that the first Event of Default shall have occurred.
11.15 COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and the other documents of even date herewith delivered or
executed in connection with the transactions contemplated hereby embody the
complete agreement and understanding among the parties and supersede any prior
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way. Except as expressly
represented and warranted in SECTION 4.5 hereof, no WSI Party nor any
shareholder, partner, member, manager, officer or director of any WSI Party
shall be deemed to have made any representation or warranty to the Purchaser
with respect to any projections, estimates or budgets of future revenues,
expenses or expenditures or future results of operations.
11.16 INDEMNIFICATION. In consideration of the Purchaser's execution
and delivery of this Agreement and purchase of the Securities hereunder and in
addition to all of the WSI Parties' other obligations under this Agreement and
in addition to all other rights and remedies available at law or in equity, each
WSI Party shall, jointly and severally, defend, protect and indemnify each
Purchaser and each other holder of Securities and all of their officers,
directors, shareholders, partners, affiliates, employees, agents,
representatives, successors and assigns (including those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES"), and save and hold each of them harmless from and against, and
pay on behalf of or reimburse such party on demand as and when incurred, any and
all actions, causes of action, suits, claims, losses (including diminutions in
value and consequential damages), costs, penalties, fees, liabilities and
damages and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), including reasonable attorneys' fees and disbursements, interest and
penalties and all amounts paid in investigation, defense or settlement of any of
the foregoing and claims relating to any of the foregoing (the "LIABILITIES"),
incurred by the Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities, (b)
the execution, delivery, performance or enforcement of this Agreement and any
other instrument, document or agreement executed pursuant hereto by any of the
Indemnitees, except to the extent any such Liabilities are caused by the
particular Indemnitee's gross negligence or willful misconduct, (c) the past,
present or future environmental condition of any property owned, operated or
used by any WSI Party, their predecessors or successors or of any offsite
treatment, storage or disposal location associated therewith, including the
presence on or under, or the escape, seepage, leakage, spillage, discharge,
emission, release, or threatened release into, onto or from, any such property
or location of any Hazardous Substance (including any losses, liabilities,
damages, injuries, penalties, fees, costs, expenses or claims asserted or
arising under any Environmental and Safety Requirement) regardless of whether
caused by, or within the control of, the WSI Parties. To the extent that the
foregoing undertaking by the WSI Parties may
63
be unenforceable for any reason, the WSI Parties shall make the maximum
contribution to the payment and satisfaction of each of the Liabilities which is
permissible under applicable law.
11.17 PAYMENT SET ASIDE. To the extent that the Company, the other
Borrowers or any Guarantor makes a payment or payments to the Purchaser or any
other holder of Securities hereunder or under the Note or the Purchaser or any
other holder of Securities enforces its rights or exercises its right of setoff
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, the other
Borrowers or any Guarantor, a trustee, receiver or any other Person under any
law (including any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
11.18 JURISDICTION AND VENUE. Each WSI Party and each holder of the
Securities hereby (i) submits to the non-exclusive jurisdiction of any state or
Federal court sitting in Columbus, Ohio in any legal suit, action or proceeding
arising out of or relating to this Agreement or the Financing Documents, and
(ii) agrees that all claims in respect of the action or proceeding may be heard
or determined in any such court. Each WSI Party and each holder of the
Securities hereby waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety or other
security that might be required of the other party with respect thereto. Any
party may make service on any other party by sending or delivering a copy of the
process to the party to be served at the address and in the manner provided for
the giving of notices in SECTION 11.12. Each WSI Party and each holder of the
Securities hereby agrees that a final judgment not subject to further appeal in
any action or proceeding so brought shall be conclusive and may be enforced by
suit on the judgment or in any other manner provided by law. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall limit the right of any party to bring proceedings against any WSI Party in
the courts of any other jurisdiction. The choice of forum for the WSI Parties
set forth in this SECTION 11.18 shall not be deemed to preclude the enforcement
by any party of any judgment obtained in any other forum or the taking by any
party of any action to enforce the same in any other appropriate jurisdiction.
11.19 WAIVER OF RIGHT TO JURY TRIAL. EACH WSI PARTY AND EACH HOLDER
OF THE SECURITIES HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS AGREEMENT OR THE FINANCING DOCUMENTS OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF. EACH
WSI PARTY AGREES THAT THIS SECTION 11.19 IS A SPECIFIC AND MATERIAL ASPECT OF
THIS AGREEMENT AND ACKNOWLEDGES THAT THE PURCHASER WOULD NOT PURCHASE THE
SECURITIES HEREUNDER IF THIS SECTION 11.19 WERE NOT PART OF THIS AGREEMENT.
64
11.20 CERTAIN WAIVERS. Each of the Borrowers hereby waives
diligence, presentment, protest and demand and notice of protest and demand,
dishonor and nonpayment of the Note, and expressly agrees that the Note, or any
payment thereunder, may be extended from time to time and that the holder
thereof may accept security for the Note or release security for the Note, all
without in any way affecting the liability of the Borrowers thereunder.
11.21 NATURE OF OBLIGATIONS. Other than the issuance and sale of the
Warrant and issuance of the Underlying Common Stock being the obligation solely
of the Company, the obligations of the WSI Parties hereunder and under all of
the Financing Documents to which any WSI Party is a party, including without
limitation in respect of the Note and Warrant, and in respect of all
representations, warranties, covenants and agreements of any WSI Party contained
in this Agreement or any of the other Financing Documents or any other
agreement, instrument notice, consent or other document delivered in connection
with the transactions contemplated by the Financing Documents, are joint and
several primary obligations, whether not so expressed in any Financing Document.
It shall not be necessary for any WSI Party to have expressly become a party of
any Financing Document in order for such WSI Party to be bound as a party
thereto. The obligations of each WSI Party under this SECTION 11.21 shall be
unconditional and absolute and, without limiting the generality of the foregoing
shall not be released, discharged or otherwise affected by the occurrence of any
act or omission to act or delay of any kind by another WSI Party, the Purchaser,
any holder of the Securities, or any other person or any circumstance whatsoever
which might, but for the provisions of this SECTION 11.21, constitute a legal or
equitable discharge of such WSI Party's obligations under this section or the
other provisions of any of the Financing Documents.
11.22 CONFIDENTIALITY. Each Purchaser and each other holder of the
Securities agrees, during the term of this Agreement and at all times
thereafter, to keep confidential any information furnished or made available to
it by any WSI Party pursuant to this Agreement that is marked confidential or
that is disclosed pursuant to written instructions from the WSI Party that the
confidentiality of such information must be maintained by a Purchaser or such
other holder; provided that nothing herein shall prevent any Purchaser or other
holder from disclosing such information (i) to any other Purchaser or other
holder of the Securities or any Affiliate of any Purchaser or other holder of
the Securities, or any officer, director, employee, agent or advisor of any
Purchaser or other holder of the Securities or Affiliate of any Purchaser or
other holder of the Securities; (ii) as required by any law, rule or regulation;
(iii) upon the order of any court or administrative agency; (iv) upon the
request or demand of any regulatory agency or authority; (v) that is or becomes
available to the public or that is or becomes available to any Purchaser or
other holder of the Securities other than as a result of a disclosure by any
Purchaser or other holder of the Securities prohibited by this Agreement; (vi)
in connection with any litigation to which such Purchasers or other holder of
the Securities or any of its Affiliates may be a party; (vii) to the extent
necessary in connection with the exercise of any right or remedy under this
Agreement or the other Financing Documents; (viii) subject to provisions
substantially similar to those contained in this SECTION 11.22, to any actual or
proposed assignee; and (ix) to the extent that the WSI Parties shall have
consented in writing to such disclosure. Nothing set forth in this SECTION 11.22
shall obligate any Purchaser or holder of the Securities to return any materials
furnished by the WSI Parties.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Note
and Warrant Purchase Agreement on the date first written above.
▇▇ ▇▇▇▇▇▇ LIMITED PARTNERSHIP
By: ▇▇ ▇▇▇▇▇▇ Corp., Its General Partner
Name:
-------------------------------------
Title:
------------------------------------
WORKSTREAM INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
▇▇▇▇▇▇▇▇ SORTER CO., INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
NEW MAVERICK DESK, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
BANC ONE MEZZANINE CORPORATION
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
66
LIST OF EXHIBITS
Exhibit A - Note
Exhibit B - Warrant
Exhibit C - Registration Agreement
Exhibit D - Loan Party Guaranty
Exhibit E - Security Agreement
Exhibit F-1 - Company Pledge Agreement
Exhibit F-2 - HSM Pledge Agreement
Exhibit F-3 - MSTP Pledge Agreement
Exhibit G-1 - Senior Intercreditor Agreement
Exhibit G-2 - Dessy Intercreditor Agreement
Exhibit H - Solvency Certificate
Exhibit I - Collateral Assignment of Insurance
Exhibit J - Company Balance Sheet
Exhibit K - HSM Balance Sheet
Exhibit L - Company Projections
Exhibit M - HSM Projections
67
LIST OF DISCLOSURE SCHEDULES
Liens Schedule
Use of Proceeds Schedule
Capitalization Schedule
Restrictions Schedule
Financial Statements Schedule
Liabilities Schedule
Developments Schedule
Assets Schedule
Taxes Schedule
Contracts Schedule
Employee Benefits Schedule
Intellectual Property Schedule
Litigation Schedule
Brokerage Schedule
Consents Schedule
Insurance Schedule
Environmental and Safety Matters Schedule
Affiliated Transactions Schedule
68