Exhibit 4.5
CONVERTIBLE LOAN AGREEMENT
DATED JULY 19, 2001
BY AND AMONG
▇▇▇▇▇▇ CORP.
AS BORROWER
AND
BFSUS SPECIAL OPPORTUNITIES TRUST PLC
AND
RENAISSANCE US GROWTH & INCOME TRUST PLC
AS LENDER
AND
RENAISSANCE CAPITAL GROUP, INC.
AS AGENT FOR THE LENDER
TABLE OF CONTENTS
Page
ARTICLE I. - DEFINITION OF TERMS ............................................ 1
SECTION 1.01 DEFINITIONS .................................................... 1
SECTION 1.02 OTHER DEFINITION PROVISIONS .................................... 7
ARTICLE II. - LOAN PROVISIONS ............................................... 7
SECTION 2.01 THE LOAN ....................................................... 7
SECTION 2.02 USE OF PROCEEDS ................................................ 8
SECTION 2.03 INTEREST RATE AND INTEREST PAYMENTS ............................ 8
SECTION 2.04 MATURITY ....................................................... 8
SECTION 2.05 MANDATORY PRINCIPAL REPAYMENT .................................. 8
SECTION 2.06 REDEMPTION ..................................................... 8
SECTION 2.07 CONVERSION ..................................................... 8
SECTION 2.08 FEES AND EXPENSES .............................................. 9
SECTION 2.09 FINDER'S FEES .................................................. 9
SECTION 2.10 TAXES .......................................................... 9
ARTICLE III. - CLOSING CONDITION ............................................ 10
SECTION 3.01 DOCUMENT REQUIREMENTS .......................................... 10
SECTION 3.02 OTHER CONDITIONS ............................................... 11
ARTICLE IV. - REPRESENTATIONS AND WARRANTIES OF BORROWER .................... 11
SECTION 4.01 ORGANIZATION AND GOOD STANDING ................................. 11
SECTION 4.02 AUTHORIZATION AND POWER ........................................ 11
SECTION 4.03 No CONFLICTS OR CONSENTS ....................................... 11
SECTION 4.04 ENFORCEABLE OBLIGATIONS ........................................ 11
SECTION 4.05 No LIENS ....................................................... 12
SECTION 4.06 FINANCIAL CONDITION ............................................ 12
SECTION 4.07 No DEFAULT ..................................................... 12
SECTION 4.08 MATERIAL AGREEMENTS ............................................ 12
SECTION 4.09 NO LITIGATION .................................................. 12
SECTION 4.10 TAXES .......................................................... 13
SECTION 4.11 CAPITALIZATION ................................................. 13
SECTION 4.12 USE OF PROCEEDS ................................................ 13
SECTION 4.13 EMPLOYEE MATTERS ............................................... 13
SECTION 4.14 EMPLOYEE BENEFIT PLANS ......................................... 14
SECTION 4.15 COMPLIANCE WITH LAWS ........................................... 15
SECTION 4.16 LICENSES AND PERMITS ........................................... 15
SECTION 4.17 CONTRACTS ...................................................... 15
SECTION 4.18 SHARES ISSUABLE UPON CONVERSION ................................ 15
SECTION 4.19 INSIDER ........................................................ 15
SECTION 4.20 ADVICE OF ATTORNEY AND ACCOUNTANT .............................. 16
SECTION 4.21 SUBSIDIARIES ................................................... 16
SECTION 4.22 CASUALTIES ..................................................... 16
SECTION 4.23 INVESTMENT COMPANY ACT ......................................... 16
SECTION 4.24 SUFFICIENCY OF CAPITAL ......................................... 16
SECTION 4.25 CORPORATE NAMES ................................................ 17
SECTION 4.26 INSURANCE ...................................................... 17
SECTION 4.27 INTELLECTUAL PROPERTY .......................................... 17
SECTION 4.28 REAL PROPERTY .................................................. 17
SECTION 4.29 ENVIRONMENTAL .................................................. 18
SECTION 4.30 SURVIVAL OF REPRESENTATIONS AND WARRANTIES ..................... 20
SECTION 4.31 FULL DISCLOSURE ................................................ 20
ARTICLE V. - AFFIRMATIVE COVENANTS OF BORROWER .............................. 20
SECTION 5.01 FINANCIAL STATEMENTS. REPORTS AND DOCUMENTS .................... 20
SECTION 5.02 PREPARATION OF BUDGETS ......................................... 21
SECTION 5.03 PAYMENT OF TAXES AND OTHER INDEBTEDNESS ........................ 21
SECTION 5.04 MAINTENANCE OF EXISTENCE AND RIGHTS; CONDUCT OF BUSINESS ....... 21
SECTION 5.05 SEC FILINGS .................................................... 22
SECTION 5.06 NOTICE ......................................................... 22
SECTION 5.07 COMPLIANCE WITH LOAN DOCUMENTS ................................. 22
SECTION 5.08 COMPLIANCE WITH MATERIAL AGREEMENTS ............................ 22
SECTION 5.09 OPERATIONS AND PROPERTIES ...................................... 22
SECTION 5.10 BOOKS AND RECORDS; ACCESS ...................................... 22
SECTION 5.11 COMPLIANCE WITH LAW ............................................ 23
SECTION 5.12 INSURANCE ...................................................... 23
SECTION 5.13 AUTHORIZATIONS AND APPROVALS ................................... 23
SECTION 5.14 ERISA COMPLIANCE ............................................... 23
SECTION 5.15 FURTHER ASSURANCES ............................................. 23
SECTION 5.16 INDEMNITY BY BORROWER .......................................... 23
SECTION 5.17 RESERVATION OF SHARES; SHAREHOLDER APPROVAL .................... 24
SECTION 5.18 OWNERSHIP OF SUBSIDIARIES ...................................... 24
SECTION 5.19 RETENTION OF STOCK OWNERSHIP ................................... 25
ARTICLE VI. - NEGATIVE COVENANTS OF BORROWER ................................ 25
SECTION 6.01 LIMITATION ON INDEBTEDNESS .................................... 25
SECTION 6.02 LIMITATION ON LIENS ........................................... 25
SECTION 6.03 FISCAL YEAR AND ACCOUNTING METHOD ............................. 25
- SECTION 6.04 LIQUIDATION .................................................. 25
SECTION 6.05 MATERIAL AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS .... 25
SECTION 6.06 EXECUTIVE COMPENSATION ........................................ 25
SECTION 6.07 RESTRICTED PAYMENTS ........................................... 26
SECTION 6.08 CONSOLIDATION OR MERGER ....................................... 26
ARTICLE VII. - COVENANTS OF MAINTENANCE OF FINANCIAL STANDARDS .............. 26
SECTION 7.01 FINANCIAL RATIOS .............................................. 26
ARTICLE VIII. - EVENTS OF DEFAULT ........................................... 26
SECTION 8.01 EVENTS OF DEFAULT .............................................. 26
SECTION 8.02 REMEDIES UPON EVENT OF DEFAULT ................................. 28
SECTION 8.03 PERFORMANCE BY THE LENDER ...................................... 28
SECTION 8.04 PAYMENT OF EXPENSES INCURRED BY THE LENDER ..................... 28
ARTICLE IX. - REGISTRATION RIGHTS ........................................... 29
SECTION 9.01 SHELF REGISTRATION ............................................ 29
ARTICLE X. - BOARD OF DIRECTORS ............................................. 29
SECTION 10.01 BOARD REPRESENTATION OR ATTENDANCE BY OBSERVER ............... 29
SECTION 10.02 LIMITATION OF AUTHORITY OF PERSONS DESIGNATED AS OBSERVER ..... 29
SECTION 10.03 NONLIABILITY OF THE LENDER .................................... 29
ARTICLE XI. - AGENCY PROVISIONS ............................................. 30
SECTION 11.01 THE LENDER'S REPRESENTATIONS AND WARRANTIES TO AGENT .......... 30
SECTION 11.02 WAIVER OF LOAN PROVISIONS OR INTEREST OR PRINCIPAL PAYMENTS ... 30
SECTION 11.03 AGENCY ........................................................ 30
ARTICLE XII. - MISCELLANEOUS ................................................ 32
SECTION 12.01 STRICT COMPLIANCE ............................................. 32
SECTION 12.02 WAIVERS AND MODIFICATIONS ..................................... 32
SECTION 12.03 LIMITATION ON LIABILITY ....................................... 32
SECTION 12.04 CHOICE OF FORUM; CONSENT TO SERVICE OF PROCESS AND JURISDICTION 32
SECTION 12.05 INVALID PROVISIONS ............................................ 33
SECTION 12.06 MAXIMUM INTEREST RATE ......................................... 33
SECTION 12.07 PARTICIPATIONS AND ASSIGNMENTS OF THE DEBENTURE ............... 34
SECTION 12.08 CONFIDENTIALITY ............................................... 34
SECTION 12.09 BINDING EFFECT ................................................ 35
SECTION 12.10 No THIRD PARTY BENEFICIARY .................................... 35
SECTION 12.11 ENTIRETY ...................................................... 35
SECTION 12.12 HEADINGS ...................................................... 35
SECTION 12.13 SURVIVAL ...................................................... 35
SECTION 12.14 MULTIPLE COUNTERPARTS ......................................... 35
SECTION 12.15 KNOWLEDGE OF BORROWER ......................................... 35
SECTION 12.16 NOTICES ....................................................... 36
SECTION 12.17 GOVERNING LAW ................................................. 37
THIS AGREEMENT, dated as of July 19, 2001, by and among ▇▇▇▇▇▇ Corp.,
a New York corporation ("Borrower"), and Renaissance US Growth & Income Trust
PLC, a public limited company registered in England and Wales (individually
referred to as "Renaissance PLC") and BFSUS Special Opportunities Trust PLC, a
public limited company registered in England and Wales ("BFSUS") (Renaissance
PLC and BFSUS, together with any permitted assignees or successors in interest
referred to as the "Lender") and Renaissance Capital Group, Inc., a Texas
corporation, as agent for the Lender (the "Agent"). All references herein to
Borrower shall include the Subsidiaries, unless the context otherwise requires.
WITNESSETH:
WHEREAS, Borrower seeks to borrow a total of Five Hundred Thousand
Dollars($500,000) from the Lender; and
WHEREAS, Borrower has requested that the Lender provide such loan as
herein provided, and that the Lender is willing to furnish such to Borrower upon
the terms and subject to the conditions and for the considerations hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other valuable consideration, receipt and sufficiency of which
is acknowledged, the parties hereto agree as follows:
ARTICLE I. - DEFINITION OF TERMS
Section 1.01 Definitions.
------------------------
For the purposes of this Agreement, the following terms shall have the
respective meanings assigned to them in this Article I or in the section or
recital referred to below:
"Affiliate" with respect to any Person shall mean a person
that directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person.
"Asset-Backed Acquisition or Operations Indebtedness" shall
mean secured Indebtedness of Borrower or a Subsidiary incurred in connection
with, or to provide all or any portion of the funds or credit support utilized
to consummate the transaction or series of related transactions pursuant to
which such Subsidiary became, or becomes, a Subsidiary or was, or is, acquired
by Borrower or for operations.
"BFSUS" shall mean BFSUS Special Opportunities Trust PLC, a
public limited company registered in England and Wales.
"Capital Expenditure" shall mean an expenditure for assets
that is properly classifiable as a capital expenditure in accordance with GAAP.
"Capital Lease" shall mean any lease of property, real or
personal, which would be properly classifiable as a capital lease in accordance
with GAAP.
"Common Stock" shall mean Borrower's common stock, $.10
per share.
"Consolidated Trailing Twelve Months Free Cash Flow" shall
mean for any Person, for the immediately preceding twelve-month period on such
date, Net Income of such Person for such twelve-month period, plus (a) all
deferred income tax expense of such Person and its Subsidiaries for such
twelve-month period, (b) all depreciation expense of such Person and its
Subsidiaries for such twelve-month period, and (c) all amortization expense of
such Person and its Subsidiaries for such twelve-month period, less capital
expenditures of such Person and its Subsidiaries for such twelve-month period.
"Conversion" or "Conversion Rights" shall mean exchange of, or
the rights to exchange, the Principal Amount of the Loan, or any part thereof,
for fully paid and nonassessable Common Stock on the terms and conditions
provided in the Debenture.
"Current Assets" shall mean, for any Person as of any date,
the assets of such Person and its consolidated Subsidiaries which would be
reflected as current assets on a consolidated balance sheet for such Person and
its Subsidiaries prepared as of such date in accordance with GAAP.
"Current Liabilities" shall mean, for any Person as of any
date, the liabilities of such Person and its consolidated Subsidiaries which
would be reflected as current liabilities on a consolidated balance sheet for
such Person and its subsidiaries prepared as of such date in accordance with
GAAP. For purposes of calculating compliance with any covenant contained in this
Agreement or any other Loan Document, the principal amount of Current
Liabilities shall include any balance under any revolving credit facility of the
Borrower, regardless of whether such revolving credit facility would be
reflected as a current liability in accordance with GAAP.
"Current Ratio" shall mean, for any Person as of any date, the
ratio of such Person's current assets to current liabilities as of such date.
"Debenture" shall mean the Debenture executed by Borrower and
delivered pursuant to the terms of this Agreement, together with any renewals,
extensions or modifications thereof
"Debtor Laws" shall mean all applicable liquidation,
conservatorship, bankruptcy, moratorium, arrangement, receivership, insolvency,
reorganization or similar laws from time to time in effect affecting the rights
of creditors or debtors generally.
"Default" or "Event of Default" shall mean any of the events
specified in Article VIII.
"Dividends," in respect of any corporation, shall mean (i)
cash distributions or any other distributions on, or in respect of, any class of
capital stock of such corporation, except for distributions made solely in
shares of stock of the same class, and (ii) any and all funds, cash and other
payments made in respect of the redemption, repurchase or acquisition of such
stock, unless such stock shall be redeemed or acquired through the exchange of
such stock with stock of the same class.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, together with all rules and regulations issued pursuant
thereto.
"GAAP" shall mean United States generally accepted accounting
principles applied on a consistent basis, set forth in the Opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants or the Financial Accounting Standards Board or their successors,
which are applicable in the circumstances as of the date in question. The
requirement that such principles be applied on a consistent basis shall mean
that the accounting principles observed in a current period are comparable in
all material respects to those applied in a preceding period.
"Governmental Authority" shall mean any government (or any
political subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over Borrower or a Subsidiary or any
of its or their businesses, operations or properties.
"Guaranty" of any Person shall mean any contract, agreement or
understanding of such Person pursuant to which such Person in effect guarantees
the payment of any Indebtedness of any other Person (the "Primary Obligor") in
any manner, whether directly or indirectly, including, without limitation,
agreements: (i) to purchase such Indebtedness or any property constituting
security therefor; (ii) to advance or supply funds primarily for the purpose of
assuring the holder of such Indebtedness of the ability of the Primary Obligor
to make payment; or (iii) otherwise to assure the holder of the Indebtedness of
the Primary Obligor against loss in respect thereof, except that "Guaranty"
shall not include the endorsement by Borrower or a Subsidiary in the ordinary
course of business of negotiable instruments or documents for deposit or
collection.
"Holder" shall mean the registered holder of Registrable
Securities.
"Indebtedness" shall mean, with respect to any Person, without
duplication, the following indebtedness, obligations and liabilities of such
Person: (i) indebtedness for borrowed money; (ii) all obligations of such Person
in respect of any Guaranty; (iii) all obligations of such Person in respect of
any Capital Lease, (iv) all obligations, indebtedness and liabilities secured by
any lien or any security interest on any property or assets of such Person, but
only to the extent so secured; and (v) all preferred stock of such Person which
is subject, at the time of calculation of Indebtedness, to a mandatory
redemption requirement, valued at the greater of its involuntary redemption
price or liquidation preference plus accrued and unpaid dividends, and all
extensions, renewals, modifications and amendments thereto.
"Interest Coverage Ratio" means for any period, the ratio of
(a) Borrower's consolidated net income after taxes for such period (excluding
Borrower's after tax gains or losses on the sale of assets (other than the sale
of Inventory in the ordinary course of business) and excluding other after tax
extraordinary gains or losses), plus depreciation and amortization deducted in
determining net income for such period, plus interest expense for such period to
(b) interest expense for such period, all as determined on a consolidated basis
in accordance with GAAP.
"Investment" in any Person shall mean any investment, whether
by means of share purchase, loan, advance, capital contribution or otherwise, in
or to such Person, the Guaranty of any Indebtedness of such Person, or the
subordination of any claim against such Person to other Indebtedness of such
Person; provided however, that "Investment" shall not include (i) any demand
deposits in a duly chartered state or national bank or other cash equivalent
investments, (ii) any loans permitted by Section 6.12, or (iii) any acquisitions
of equity in any other Person.
"IRS Code" shall mean the Internal Revenue Code of 1986, as
amended, together with all rules and regulations issued thereunder.
"Lien" shall mean any lien, mortgage, security interest, tax
lien, pledge, encumbrance, conditional sale or title retention arrangement, or
any other interest in property designed to secure the repayment of Indebtedness,
whether arising by agreement or under any statute or law, or otherwise.
"Loan" shall mean the money lent to Borrower pursuant to this
Agreement, along with any accrued, unpaid interest thereon.
"Loan Closing" or "Loan Closing Date" shall mean the
disbursement of Loan funds, which shall occur within ten (10) days of the
execution and delivery of this Agreement.
"Loan Documents" shall mean this Agreement, the Debenture and
any other agreements or documents required to be executed or delivered by
Borrower pursuant to the terms of this Agreement (and any amendments or
supplements hereto or modifications hereof).
"Lock-Up Agreement" shall mean the "lock-up" agreements to be
executed by the executive officers, directors and principal shareholders of
Borrower pursuant to Section 5.19 of this Agreement.
"Majority Interest" shall mean the record holders, from time
to time, of Debentures representing a majority of the then outstanding principal
amount of all Debentures.
"Material Adverse Effect" or "Material Adverse Change" shall
mean (i) any change, factor or event that shall (a) have a material adverse
effect upon the validity or enforceability of any Loan Documents, (b) have a
material adverse effect upon the financial condition, results of operations,
business, properties, operations or assets of Borrower or its Subsidiaries taken
as a whole, or (c) have a material adverse effect upon the ability of Borrower
to fulfill its obligations under the Loan Documents, or (ii) any event that
causes an Event of Default or which, with notice or lapse of time or both, could
reasonably be expected to become an Event of Default.
"Net Income" shall mean, for any Person for any period,
consolidated net income of such Person and its consolidated Subsidiaries for
such period which would be reflected in accordance with GAAP, but excluding (a)
any gain or loss arising from the sale of capital assets, (b) any gain or loss
arising from any write-up or write-down of assets, (c) income or loss of any
Person, substantially all of the assets of which have been acquired by such
Person in any manner, to the extent that such earnings or losses were realized
by such other Person prior to the date of such acquisition, (d) income or loss
of any Person in which the Person has any ownership interests (other than
consolidated subsidiaries of such Person), unless such earnings have actually
been received or paid by the Person or its consolidated Subsidiaries in the form
of cash distributions or additional cash calls, (e) income or loss of any Person
to which assets of the Person or its consolidated subsidiaries shall have been
sold, transferred or disposed of, or into which the Person shall have merged, to
the extent that such earnings or losses of any other Person arise prior to the
date of such transaction, (f) any gain or loss arising from the acquisition of
any securities of the Person or any of its consolidated subsidiaries, and (g)
any extraordinary gain or loss realized by such Person or any of its
consolidated subsidiaries during such period.
"Obligation" shall mean: (i) all present and future
Indebtedness, obligations and liabilities of Borrower to the Lender arising
pursuant to this Agreement, regardless of whether such Indebtedness, obligations
and liabilities are direct, indirect, fixed, contingent, joint, several, or
joint and several; (ii) all present and future Indebtedness, obligations and
liabilities of Borrower to the Lender arising pursuant to or represented by the
Debenture and all interest accruing thereon, and reasonable attorneys' fees
incurred in the enforcement or collection thereof; (iii) all present and future
Indebtedness, obligations and liabilities of Borrower and any Subsidiary
evidenced by or arising pursuant to any of the Loan Documents; (iv) all costs
incurred by the Lender or Agent including, but not limited to, reasonable
attorneys' fees and legal expenses related to this transaction; and (v) all
renewals, extensions and modifications of the indebtedness referred to in the
foregoing clauses, or any part thereof
"Permits" shall have the meaning set forth in Section 4.16.
"Permitted Indebtedness" shall mean Indebtedness outstanding
as of the date hereof or incurred in compliance with Section 6.01 and the other
terms of this Agreement that constitutes (i) Senior Obligations, (ii)
obligations under Capital Leases, (iii) Subordinated Debt, (iv) purchase money
Indebtedness, (v) intercompany Indebtedness, (vi) Indebtedness under this
Agreement or the Debenture, (vii) trade payables and other obligations incurred
in the ordinary course of business payable on terms not to exceed 90 days, and
(viii) any refunding, refinancing or extension of any of the above.
"Permitted Liens" shall mean: (i) Liens (if any) granted for
the benefit of the Lender; (ii) Liens to secure the Permitted Indebtedness;
(iii) pledges or deposits made to secure payment of worker's compensation
insurance (or to participate in any fund in connection with worker's
compensation insurance), unemployment insurance, pensions or social security
programs; (iv) Liens imposed by mandatory provisions of law such as for
carriers', landlord's, materialmen's, mechanics', warehousemen's, vendors' and
other like Liens arising in the ordinary course of business, securing
Indebtedness whose payment is made within 30 days of the date such Lien arises,
or that are being contested in good faith by appropriate proceedings as to which
adequate reserves have been established to the extent required by GAAP; (v)
Liens for taxes, assessments and governmental charges or levies imposed upon a
Person or upon such Person's income or profits or property, if the same are not
yet due and payable or if the same are being contested in good faith and as to
which adequate cash reserves have been provided; (vi) Liens arising from good
faith deposits in connection with tenders, leases, bids or contracts (other than
contracts involving the borrowing of money), pledges or deposits to secure
public or statutory obligations and deposits to secure (or in lieu of) surety,
stay, appeal or customs bonds and deposits to secure the payment of taxes,
assessments, customs duties or other similar charges; (vii) encumbrances
consisting of zoning restrictions, easements, reservations, licenses, covenants
and other minor irregularities of title or other restrictions on the use of real
property (whether owned or leased), provided that such items do not materially
impair the intended use of such property, and none of which is violated by
Borrower's existing structures or land use; (viii) mortgages, financing
statements, equipment leases or other encumbrances incurred in connection with
the acquisition of property or equipment or the replacement of existing property
or equipment, provided that such liens shall be limited to the property or
equipment then being acquired; and (ix) Liens which secure Senior Obligations.
"Person" shall include an individual, a corporation, a joint
venture, a general or limited partnership, a trust, an unincorporated
organization or a government or any agency or political subdivision thereof.
"Plan" shall mean an employee benefit plan or other plan
maintained by Borrower for employees of Borrower and/or any Subsidiaries and
covered by Title IV of ERISA, or subject to the minimum funding standards under
Section 412 of the IRS Code.
"Principal Amount" shall mean, as of any time, the then
aggregate outstanding face amount of the Debenture after any conversions or
redemptions and after giving effect to any installment payments received by the
Lender.
"Registrable Securities" shall mean (i) the Common Stock
issuable upon Conversion of the Debenture, and (ii) any warrant, right or other
security that is issued with respect to the Common Stock by way of (a) a stock
dividend; (b) any other distribution with respect to, or in exchange for, or in
replacement of Common Stock; (c) a stock split; and (d) in connection with a
combination of shares, recapitalization, merger or consolidation excluding in
all cases, however, any Common Stock that is not a Restricted Security and any
Registrable Securities sold or transferred by a Person in a transaction in which
the rights under this Agreement are not assigned.
"Renaissance Group" shall mean Renaissance Capital Group,
Inc., a Texas corporation.
"Reorganization" shall mean the consummation of the
reincorporation of the Borrower as a Delaware corporation and the amendment of
its Certificate of Incorporation in connection therewith to effect a reverse
split of the Common Stock and an increase in the authorized capital of the
Borrower to 100,000,000 shares of Common Stock and 10,000,000 shares of
Preferred Stock.
"Restricted Security" shall mean a security that has not been
(i) registered under the 1933 Act or (ii) distributed to the public pursuant to
Rule 144 (or any similar provisions that are in force) under the ▇▇▇▇ ▇▇▇.
"SEC" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the 1933 Act and the 1934
Act.
"1933 Act" shall refer to the Securities Act of 1933, as
amended, or any similar federal statute and rules and regulations promulgated
thereunder, all as the same may be in effect from time to time.
"1934 Act" shall refer to the Securities Exchange Act of 1934,
as amended, or any similar federal statute and rules and regulations promulgated
thereunder, all as the same may be in effect from time to time.
"1940 Act" shall refer to the Investment Company Act of 1940,
as amended, or any similar federal statute and rules and regulations promulgated
thereunder, all as the same may be in effect from time to time.
"Senior Documents" shall mean all loan documents evidencing
the Senior Obligations, as each may now or hereafter be amended, modified,
supplemented, renewed or extended from time to time.
"Senior Obligations" shall mean one or more senior debt
facilities (including loans and other extensions of credit under the Senior
Documents) with banks or other institutional lenders providing for revolving
credit loans, term loans, asset-based secured loans, capital expenditure loans,
or letters of credit, or any other indebtedness senior to the Loan, as now
existing or hereafter incurred, and, in each case, as amended, restated,
modified, renewed or extended from time to time.
"Solvent" shall mean, with respect to any Person on a
particular date, that on such date: (i) the fair value of the assets of such
Person is greater than the total amount of liabilities of such Person; (ii) the
estimated present fair salable value, in the ordinary course of business, of the
assets of such Person is not less than the amount that will be required to pay
the probable liability of such Person on its debts as they become absolute and
matured; (iii) such Person is able to realize upon its assets and pay its debts
and other liabilities, contingent obligations and other commitments as they
mature in the normal course of business; (iv) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature; and (v) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"Subordinated Debt" shall mean any unsecured indebtedness of
Borrower, now existing or hereafter incurred, which indebtedness is, by its
terms, junior in right of repayment to the payment of the Debenture.
"Subsidiary" or "Subsidiaries" shall mean any or all
corporations or entities, whether now existing or hereafter acquired, of which
over 50% the Voting Shares or equity interests are owned, directly or
indirectly, by Borrower.
"Trailing Twelve Months EBITDA" shall mean for any Person, for
the immediately preceding twelve-month period on such date, Net Income of such
Person and its Consolidated Subsidiaries for such twelve-month period, plus (a)
all deferred income tax expense of such Person and its Consolidated Subsidiaries
for such twelve-month period, (b) all depreciation expense of such Person and
its Consolidated Subsidiaries for such twelve-month period, and (c) all
amortization expense of such Person and its Consolidated Subsidiaries for such
twelve-month period, less capital expenditures of such Person and its
Consolidated Subsidiaries for such twelve-month period.
"Voting Shares" of any corporation or business entity shall
mean shares of any class or classes (however designated) or other equity
interest having ordinary voting power for the election of at least a majority of
the members of the Board of Directors (or other governing bodies) of such
corporation, or business entity, other than shares having such power only by
reason of the happening of a contingency.
Section 1.02 Other Definition Provisions.
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(a) All terms defined in this Agreement shall have the above-defined
meanings when used in the Debenture or any other Loan Documents, certificate,
report or other document made or delivered pursuant to this Agreement, unless
the context therein shall otherwise require.
(b) Defined terms used herein in the singular shall import the
plural and vice versa.
(c) The words "hereof," "herein," "hereunder" and similar terms, when
used in this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
(d) References to financial statements and reports shall be deemed to
be a reference to such statements and reports prepared in accordance with GAAP.
(e) Accounting terms not specifically defined above in this
Agreement shall be construed in accordance with GAAP.
ARTICLE II. - LOAN PROVISIONS
Section 2.01 The Loan.
---------------------
(a) Subject to the terms and conditions of this Agreement, and the
compliance with such terms and conditions by all parties, Lender agrees to
lend to Borrower, and Borrower agrees to borrow from the Lender, the total
Principal Amount of Five Hundred Thousand Dollars ($500,000).
(b) The Loan shall be disbursed at Loan Closing, subject to the
conditions provided hereunder, and shall be evidenced by the Debenture, in
the Principal Amount specified above. The Debenture shall rank pari passu
with all Indebtedness of Borrower, other than the Senior Obligations and
the Subordinated Debt.
(c) Unless otherwise mutually agreed, the Loan Closing shall be at the
offices of Renaissance Capital Group, Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇.
(d) If, within 10 days of the date of this Agreement, (i) Borrower has
failed to comply with the conditions precedent to the Loan Closing as
specified in Article III hereof (unless compliance with such conditions in
whole or in part has been waived or modified by the Lender its sole
discretion) or (ii) the Loan Closing has not occurred (unless the date of
such Loan Closing has been mutually extended), other than as a result of
any failure of Lender to comply with the terms of this Agreement, then, in
either such case, the obligations of the Lender under this Agreement shall
terminate; provided, however, that Borrower shall be obligated for payment
of the fees and expenses provided in Section 2.07 due and payable as of
such date of termination.
Section 2.02 Use of Proceeds.
------------------- --------
(a) Borrower intends to use the Loan proceeds in connection with the
acquisition of a Subsidiary.
(b) Borrower hereby acknowledges that the proceeds from the Loan shall
be of benefit to Borrower for the growth of its business by providing
capital not otherwise available from financial institutions which will
provide additional opportunities for Borrower.
Section 2.03 Interest Rate and Interest Payments.
------------------------------------------------
Interest on the Principal Amount outstanding from time to time shall
accrue at the rate of 8.00% per annum, with the first installment of accrued,
unpaid interest being due and payable on September 1, 2001 and subsequent
payments of accrued, unpaid interest being due and payable on the first day of
each month thereafter. Overdue principal and interest on the Debenture shall
bear interest at the maximum rate permitted by applicable law. Interest on the
Principal Amount of the Debenture shall be calculated, from time to time, on the
basis of the actual days elapsed in a year consisting of 365 days.
Section 2.04 Maturity.
---------------------
If not sooner redeemed or converted, the Debenture shall mature on
July 19, 2008, at which time all the remaining unpaid principal, interest and
any other charges then due under this Agreement shall be due and payable in
full. Unless the holders of a Majority Interest shall otherwise consent, the
Debenture shall be prepaid pro rata with any prepayments of Indebtedness, other
than Senior Obligations.
Section 2.05 Mandatory Principal Repayment.
------------------------------------------
The Debenture shall be subject to mandatory principal repayment as
provided in the Debenture.
Section 2.06 Redemption.
-----------------------
The Debenture shall be subject to redemption as provided in the
Debenture.
Section 2.07 Conversion.
-----------------------
The Debenture shall be subject to conversion as provided in the
Debenture.
Section 2.08 Fees and Expenses.
------------------------------
Upon Loan Closing, Borrower shall pay at Loan Closing to Agent, or at
its direction, a Closing Fee equal to 1.0% of the Loan proceeds as well as any
unpaid portion of the Commitment Fee, Closing Expense Fee and Due Diligence Fee,
all as set forth in the preliminary terms letter dated June 14, 2001, between
the Borrower and Renaissance Group.
Section 2.09 Finder's Fees.
--------------------------
Borrower represents to the Lender that, except as set forth in
Schedule 2.08, no placement fees, commissions, brokerage or finder's fees were
incurred by Borrower in connection with this Agreement or the Debenture.
Borrower shall be responsible for the payment of all such placement fees,
commissions, brokerage or finder's fees.
Section 2.10 Taxes.
------------------
(a) The Debenture shall be convertible into shares of Common Stock and
on such terms as are stated in the Debenture. Such conversion shall be made
without deduction for any present or future taxes, duties, charges or
withholdings, (excluding, in the case of the Lender, any foreign taxes, any
federal, state or local income taxes (or withholdings with respect thereto) and
any franchise taxes or taxes imposed upon it by the jurisdiction, or any
political subdivision thereof, under which the Lender is organized or are
qualified to do business), and all liabilities with respect thereto (herein
"Taxes") shall be paid by Borrower. If Borrower shall be required by law to
deduct any Taxes for which Borrower is responsible under the preceding sentence
from any sum payable hereunder to the Lender: (i) the sum payable shall be
increased so that after making all required deductions, the Lender shall receive
an amount equal to the sum it would have received had no such deductions been
made; (ii) Borrower shall make such deductions; and (iii) Borrower shall pay the
full amount deducted to the relevant taxing authority or other authority in
accordance with applicable law. Borrower shall be entitled to any refunds or
returns from any such taxing authority.
(b) Except as otherwise set forth in this Agreement or the other Loan
Documents, Borrower shall pay any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or under the Loan Documents or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or the other Loan Documents (hereinafter referred to as "Other
Taxes").
(c) Borrower shall indemnify the Lender for the full amount of Taxes
and Other Taxes reasonably paid by the Lender or any liability (including any
penalties or interest assessed because of Borrower's defaults) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. This indemnification shall be made within thirty (30) days
from the date the Lender makes written demand therefor. The Lender shall
subrogate any and all rights and claims relating to such Taxes and Other Taxes
to Borrower upon payment of said indemnification.
(d) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower in this Section
2.09 shall survive the payment in full of the Obligation.
(e) Borrower shall have no liability or obligation with respect to
taxes on income recognized by the Lender with respect to the Debenture.
ARTICLE III. - CLOSING CONDITIONS
Section 3.01 Document Requirements.
----------------------------------
The obligation of the Lender to advance funds at the Loan Closing Date
hereof is subject to the condition precedent that, on or before the date of such
advance, the Lenders shall have received the following:
(a) Debentures. Duly executed Debentures from Borrower each in the
Principal Amount of $250,000, styled "The Frost National Bank, Custodian
FBO Renaissance US Growth and Income Trust PLC, Trust No. W00740 100" and
"HSBC Global Custody Nominee (U.K.) Limited, Designation No. 896414," both
of which shall be in the form and substance acceptable to the Lender and
its counsel.
(b) CEO's Certificate. A certificate signed by the chief executive
officer of Borrower, in his capacity as such, and dated as of the Loan
Closing Date stating that: (i) all of the representations and warranties
contained in Article IV hereof and the other Loan Documents are true and
correct in all material respects as of the Loan Closing Date; and (ii) no
event has occurred and is continuing, or would result from the Loan, which
constitutes, or with notice or lapse of time or both would constitute, a
Default or an Event of Default.
(c) Secretary's Certificates. A signed certificate of the Secretary of
Borrower which shall certify (i) copies of the Articles of Incorporation
(or other organizational document) of Borrower and each Subsidiary and all
amendments thereto, certified by the Secretary of State of the state of
incorporation (or other appropriate authority) and dated within ten (10)
days prior to Loan Closing, a copy of the Articles of Incorporation (or
other organizational document) of each Subsidiary and all amendments
thereto, certified by the Secretary of Borrower as of the date of such
certification; (ii) a copy of the Bylaws of Borrower and each Subsidiary
and all amendments thereto certified by the Secretary of Borrower and each
such Subsidiary as of the date of such certification; (iii) copies of
resolutions, as adopted by Borrower's and each Subsidiary's Board of
Directors, approving the execution, delivery and performance, as
applicable, of this Agreement, the Debenture, and the other Loan Documents,
including the transactions contemplated herein, stating that such
resolutions have been duly adopted, are true and correct, have not been
altered or repealed and are in full force and effect; (iv) certificates of
good standing (or other similar instrument) for Borrower and each
Subsidiary issued by the appropriate official of the state of incorporation
of Borrower and each Subsidiary and certificates of qualification and good
standing for Borrower and each Subsidiary issued by the appropriate
official of each of the states for which Borrower and each Subsidiary is
required to be qualified to do business as a foreign corporation, dated
within ten (10) days prior to Loan Closing; and (v) the names of the
officers of Borrower and each Subsidiary authorized to sign the Loan
Documents to be executed by such officer, together with the true signatures
of each such officer. It is herewith stipulated and agreed that the Lender
may thereafter rely conclusively on the validity of this certificate as a
representation of the officers of Borrower and each Subsidiary duly
authorized to act with respect to the Loan Documents until such time as the
Lender shall receive a further certificate of the Secretary or Assistant
Secretary of Borrower and each Subsidiary canceling or amending the prior
certificate and submitting the signatures of the officers thereupon
authorized in such further certificate.
(d) Legal Opinion. Legal opinions from counsel to Borrower and the
Subsidiaries.
(e) "Lock-Up" Agreements. "Lock-Up" Agreements, in form and substance
satisfactory to the Lender and its counsel.
(f) Other Documents. Such other information, documents and agreements
as may reasonably be required by the Lender and the Lender's counsel to
substantiate Borrower's compliance with the requirements of this Agreement and
the Lender's compliance with the 1940 Act.
Section 3.02 Other Conditions.
-----------------------------
(a) The merger between the Company and United Expressline, Inc. shall
have been completed.
(b) The Borrower and the Lender shall have entered into a Registration
Rights Agreement.
ARTICLE IV. - REPRESENTATIONS AND WARRANTIES OF BORROWER
All references in this Article to Borrower shall include the
Subsidiaries, unless the context otherwise requires. To induce the Lender to
make the Loan hereunder, Borrower represents and warrants to the Lender that:
Section 4.01 Organization and Good Standing.
-------------------------------------------
Borrower is duly organized and existing in good standing under the
laws of the state of its incorporation, is duly qualified as a foreign
corporation and in good standing in all states in which failure to qualify would
have a Material Adverse Effect, and has the corporate power and authority to own
its properties and assets and to transact the business in which it is engaged
and is or will be qualified in those states wherein it proposes to transact
material business operations in the future.
Section 4.02 Authorization and Power.
------------------------------------
Borrower has the corporate power and requisite authority to execute,
deliver and perform the Loan Documents to be executed by Borrower. Borrower is
duly authorized to, and has taken all corporate action necessary to authorize,
execute, deliver and perform the Loan Documents executed by Borrower. Borrower
is and will continue to be duly authorized to perform the Loan Documents
executed by Borrower.
Section 4.03 No Conflicts or Consents.
-------------------------------------
Except as disclosed on Schedule 4.03, neither the execution and
delivery of the Loan Documents, nor the consummation of any of the transactions
therein contemplated, nor compliance with the terms and provisions thereof, will
contravene or materially conflict with any judgment, license, order or permit
applicable to Borrower, or any indenture, loan agreement, mortgage, deed of
trust, or other agreement or instrument to which Borrower is a party or by which
Borrower is or may become bound, or to which Borrower is or may become subject,
or violate any provision of the charter or bylaws of Borrower or trigger any
preemptive rights or rights of first refusal of any third party. No consent,
approval, authorization or order of any court or governmental authority or third
party is required in connection with the execution and delivery by Borrower of
the Loan Documents or to consummate the transactions contemplated hereby or
thereby except those that have been obtained.
Section 4.04 Enforceable Obligations.
------------------------------------
The Loan Documents have been duly executed and delivered by Borrower
and are the legal, valid and binding obligations of Borrower, enforceable in
accordance with their respective terms.
Section 4.05 No Liens.
---------------------
Except for Permitted Liens, all of the properties and assets owned or
leased by Borrower are free and clear of all Liens and other adverse claims of
any nature, and Borrower has good and marketable title to such properties and
assets. A true and complete list of all known or recorded liens for borrowed
money is disclosed on Schedule 4.05.
Section 4.06 Financial Condition.
--------------------------------
Borrower has delivered to the Lender the balance sheet of Borrower as
of December 31, 2000, and the related statement of income, stockholders' equity
and statement of cash flow for the year then ended, audited by its independent
certified public accountant. Borrower has also delivered to the Lender the
unaudited balance sheet of Borrower as of April 30, 2001 and the related
unaudited statement of income, stockholders' equity and statement of cash flow
for the three (3) months then ended. Such financial statements fairly present
the financial condition of Borrower as of such dates and have been prepared in
accordance with GAAP (except that unaudited financial statements omit certain
footnotes); and as of the date hereof, there are no obligations, liabilities or
Indebtedness (including contingent and indirect liabilities and obligations) of
Borrower which are (separately or in the aggregate) material and are not
reflected in such financial statements or otherwise disclosed herein or in the
Schedules. Since the date of the above-referenced year end financial statements,
there have not been, except as disclosed in Schedule 4.06: (i) any Material
Adverse Change; (ii) any Dividend declared or paid or distribution made on the
capital stock of Borrower or any capital stock thereof redeemed or repurchased;
(iii) any incurrence of long-term debt by Borrower; (iv) any salary, bonus or
compensation increases to any officers, key employees or agents of Borrower,
other than in the ordinary course of business and consistent with past practice;
or (v) any other material transaction entered into by Borrower, except in the
ordinary course of business and consistent with past practice.
Section 4.07 No Default.
-----------------------
No event has occurred and is continuing which constitutes, or, with
notice or lapse of time or both, would constitute, a Default or an Event of
Default under this Agreement.
Section 4.08 Material Agreements.
--------------------------------
Neither Borrower nor any Subsidiary nor any other party is in default,
and no event has occurred and is continuing which, with notice or lapse of time
or both, would constitute a default, under any contract, lease, loan agreement,
indenture, mortgage, security agreement, license agreement or other agreement or
obligation to which it is a party or by which any of its properties is subject
which could reasonably be expected to have a Material Adverse Effect, except as
described on Schedule 4.08. To the best knowledge of Borrower, it is not a party
to, or bound by, any contract or agreement, the faithful performance of which is
so onerous so as to create, or to likely create, a Material Adverse Effect on
the business, operations or financial condition of Borrower.
Section 4.09 No Litigation.
--------------------------
Except as disclosed on Schedule 4.09, there are no actions, suits,
investigations, arbitrations or administrative proceedings pending or, to the
best knowledge of Borrower, threatened, against Borrower, and there has been no
change in the status of any of the actions, suits, investigations, litigation or
proceedings disclosed to the Lender which could reasonably be expected to have a
Material Adverse Effect on Borrower or on any transactions contemplated by any
Loan Document. Borrower has not received any claim that Borrower currently
violates any federal, state or local law, ordinance, rule or
regulation, which could have an adverse effect on its business and, to
the best of Borrower's knowledge, no such claim is or has been threatened; and,
except as disclosed on Schedule 4.09, there have been no developments adverse to
Borrower with respect to any pending or threatened claim, action or proceeding
of an administrative or judicial nature.
Section 4.10 Taxes.
------------------
All tax returns required to be filed by Borrower in any jurisdiction
have been filed and all taxes (including mortgage recording taxes), assessments,
fees and other governmental charges upon Borrower or upon any of its properties,
income or franchises now due have been paid, in each case, except where the same
are being contested in good faith by appropriate proceedings, as disclosed on
Schedule 4.10.
Except as disclosed on Schedule 4.10, Borrower has not received any
notice of deficiency or other adjustment from any taxing authority that is
unresolved as of the Loan Closing. No audit or examination, claim or proposed
assessment by any taxing authority is pending or, to the best knowledge of
Borrower, threatened against Borrower or any of its properties. All ad valorem
and other property taxes imposed on Borrower, or that may become a lien on
Borrower's assets and that are due and payable, have been paid in full. Borrower
has withheld or collected from each payment made to each of its U.S. employees
the amount of all taxes (including federal income taxes, Federal Insurance
Contributions Act ("FICA") taxes, and state and local income, payroll, and wage
taxes, among others) required to be withheld or collected.
Section 4.11 Capitalization.
---------------------------
The authorized capital stock of Borrower consists of 5,000,000 shares
of Preferred Stock, $0.00 1 par value, of which _________________ shares are
issued and outstanding as of the date hereof, and 40,000,000 shares of Common
Stock, $0.0001 par value, of which _______________ shares of Common Stock are
issued and outstanding as of the date hereof. All of such outstanding shares
have been duly authorized and validly issued, are fully paid and nonassessable,
and were not issued in violation of the preemptive rights or rights of first
refusal of any person. Schedule 4.11 sets forth all stock options, warrants,
conversion rights, subscription rights, preemptive rights, rights of first
refusal and other rights or agreements to acquire securities of Borrower and any
shares held in treasury or reserved for issuance upon exercise of such stock
options, warrants or conversion rights, subscription rights and other rights or
agreements to acquire securities. As of the Loan Closing Date, Borrower does not
have class of securities with respect to which a member of a national securities
exchange, broker or dealer may extend or maintain credit to or for a customer
pursuant to rules or regulations adopted by the Board of Governors of the
Federal Reserve System under Section 7 of the 1934 Act. Borrower has, and will
continue to have as long as the Debenture remains outstanding, authorized and
reserved an adequate number of shares of Common Stock to permit Conversion of
the Debenture.
Section 4.12 Use of Proceeds.
------------------- --------
Borrower intends to use proceeds from the Loan as disclosed in Section
2.02 hereof.
Section 4.13 Employee Matters.
-----------------------------
(a) Except as set forth on Schedule 4.13, Borrower is not a party to
any collective bargaining agreement and is not aware of any activities of
any labor union that is currently seeking to represent or organize its
employees;
(b) Borrower is in compliance with all material federal, state and
municipal laws respecting employment and employment practices, occupational
health and safety, and wages and hours, and is not engaged in any unfair
labor practice, and there are no arrears in the payment of wages or social
security taxes;
(c) there is no unfair labor practice complaint against Borrower
pending before the National Labor Relations Board or any state or local
agency;
(d) to the best knowledge of Borrower, there is no pending labor
strike or other material labor trouble affecting Borrower (including,
without limitation, any organizational drive);
(e) to the best knowledge of Borrower, there is no material labor
grievance pending against Borrower;
(f) there is no pending representation question respecting the
employees of Borrower before any local, state or federal agency;
(g) except as set forth on Schedule 4.13, there are no pending
proceedings arising out of or under any collective bargaining agreement to
which Borrower is a party, or to the best knowledge of Borrower, any basis
for which a claim may be made under any collective bargaining agreement to
which Borrower is a party; and
(h) there are no pending proceedings arising out of any employment
discrimination claim or any basis for which any such claim may be made.
Section 4.14 Employee Benefit Plans.
-----------------------------------
Schedule 4.14 lists (i) any "employee benefit plans" as described in
the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder ("ERISA") (other than a defined
contribution pension plan not requiring any contribution by Borrower, paid
time-off policy or vacation/holiday/sick leave policy, and employee group life
and health plans that are fully funded through commercial insurance); and (ii)
any defined benefit "employee pension benefit plans" (as defined in ERISA).
Neither Borrower nor, to the best knowledge of Borrower, any other person has
engaged in a transaction with respect to any employee benefit plan listed or
required to be listed on Schedule 4.14 which could subject any such plan,
Borrower or the Lender to a penalty under ERISA or a tax under the Internal
Revenue Code of 1986, as amended (the "Code"), except for those transactions
which could not reasonably be expected to have a Material Adverse Effect. Each
of the employee benefit plans listed, or required to be listed, on Schedule 4.14
has been operated and administered in accordance with applicable law, including
without limitation ERISA, except for any such failure which would not subject
Borrower or the Lender to any penalty or other liability and except for any such
failure which would not have an adverse effect upon the applicable plan or any
participant therein. Borrower has not incurred, nor presently expects to incur,
any liability under Title IV of ERISA that could result in liability to the
Lenders or Borrower. Each employee benefit plan listed or required to be listed
on Schedule 4.14 that is a group health plan within the meaning of Section
5000(b)(1) of the Code, is in compliance with the provisions of Section 4980B(f)
of the Code, except for any such non-compliance which would not subject Borrower
or the Lender to any penalty or liability and except for any such failure which
would not have an adverse effect upon the applicable plan or any participant
therein. There is not any pending or, to the best knowledge of Borrower,
threatened claim by or on behalf of any employee benefit plan, by any employee
covered under any such plan or otherwise involving any employee benefit plan
(other than routine non-contested claims for benefits).
Section 4.15 Compliance with Laws.
---------------------------------
Except as would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect, each of Borrower and the
Subsidiaries has all requisite licenses, permits and certificates including
without limitation, drug, environmental and health and safety permits from
federal, state and local authorities necessary to conduct its business and own
and operate its assets (collectively, the "Permits"). Except as would not
individually or in the aggregate reasonably be expected to have a Material
Adverse Effector as set forth on Schedule 4.15, neither Borrower nor any
Subsidiary is in violation of any law, regulation or ordinance relating to its
business, operations and properties which, individually or in the aggregate,
could have a Material Adverse Effect, and the business and operations of
Borrower or any Subsidiary do not violate, in any material respect, any federal,
state, local or foreign laws, regulations or orders. Except as set forth on
Schedule 4.15, Borrower and the Subsidiaries have not received any notice or
communication from any federal, state, local or foreign governmental or
regulatory authority or agency. Borrower and the Subsidiaries have not engaged
in any practices in violation of any antitrust law or regulation of any federal,
state, local or foreign Governmental Authority.
Section 4.16 Licenses and Permits.
---------------------------------
Borrower and the Subsidiaries have all licenses and franchises
relating to the operation of their respective businesses as are necessary and
required for such ownership and operation, all of which are in good standing
and, except as expressly set forth on Schedule 4.16, are not subject to renewal
within less than one (1) year.
Section 4.17 Contracts.
----------------------
Schedule 4.17 lists all contracts to which Borrower or the
Subsidiaries are a party involving obligations in respect of the business for
payment, performance of services or delivery of goods in excess of $100,000 or
which require Borrower to continue to perform for a period of longer than twelve
(12) months (the "Scheduled Contracts"). Borrower has made available to the
Lender true and correct copies of all the Scheduled Contracts. All of such
Scheduled Contracts are valid and binding obligations of Borrower or the
Subsidiaries, are in full force and effect, and, to the best knowledge of
Borrower or the Subsidiaries, are enforceable against the parties thereto in
accordance with their respective terms. Neither Borrower nor the Subsidiaries
has received any notice that the other parties to the Scheduled Contracts are
(i) in default under such Scheduled Contracts, or (ii) consider Borrower to be
in default thereunder. Except as expressly noted in Schedule 4.17, to the best
knowledge of Borrower or the Subsidiaries, no party to any of the Scheduled
Contracts intends to terminate or adversely modify its agreement(s) with respect
thereto or adversely change the volume of business done thereunder.
Section 4.18 Shares Issuable Upon Conversion.
--------------------------------------------
Subject to consummation of the Reorganization, the shares of Common
Stock of Borrower when issued to the Lender upon conversion of the Debenture,
will be duly and validly issued, fully paid and nonassessable and in compliance
with all applicable securities laws. Such issuance will not give rise to
preemptive rights, rights of first refusal or similar rights by any other
security holder of Borrower.
Section 4.19 Insider.
--------------------
(a) Neither Borrower, nor any Person having "control" (as that term is
defined in the 1940 Act or in the regulations promulgated pursuant thereto)
of Borrower is an "executive officer," "director," or "principal
shareholder" (as those terms are defined in the ▇▇▇▇ ▇▇▇) of any Lender.
(b) Borrower's SEC reports due prior to the date hereof disclose all
material transactions required to be disclosed therein.
(c) All agreements between Borrower and any of its officers, directors
and principal shareholders, including employment agreements, are disclosed
in the reports and filings made with the SEC or listed on Schedule 4.19.
Section 4.20 Advice of Attorney and Accountant.
---------------------- -----------------------
The Borrower has been advised by the Lender to seek the advice of an
attorney and an accountant in connection with the Loan, and the Borrower has had
the opportunity to seek the advice of an attorney and accountant of the
Borrower's choice in connection with the Loan.
Section 4.21 Subsidiaries.
-------------------------
(a) All of the Subsidiaries of Borrower are listed on Schedule 4.20.
Except as disclosed on Schedule 4.20, Borrower owns all of the outstanding
capital stock or other equity interests of the Subsidiaries, free and clear
of all adverse claims, other than Liens securing the Senior Obligations.
All of such outstanding capital stock of each Subsidiary has been duly and
validly authorized and issued and is fully paid and nonassessable. All such
Subsidiaries are duly organized and existing in good standing under the
laws of the respective jurisdictions of their incorporation or
organization, are duly qualified as foreign corporations and in good
standing in all jurisdictions in which failure to qualify would have a
Material Adverse Effect, and have the corporate power and authority to own
their respective properties and assets and to transact the business in
which they are engaged and are or will be qualified in those jurisdictions
wherein they propose to transact material business operations in the
future.
(b) Except as disclosed on Schedule 4.20, Borrower does not own any
equity or long-term debt interest in any other Person, or any right or
option to acquire any such interest in any such Person.
(c) There are no restrictions on the payment of dividends by or
advances from any Subsidiary to Borrower.
Section 4.22 Casualties.
-----------------------
Except as disclosed on Schedule 4.21, neither the business nor the
properties of Borrower is currently affected by any environmental hazard, fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or other casualty (whether or not covered
by insurance).
Section 4.23 Investment Company Act.
-----------------------------------
Borrower is not an "investment company," as defined in Section 3 of
the 1940 Act, nor a company that would be an investment company, except for the
exclusions from the definition of an investment company in Section 3(C) of the
1940 Act, and Borrower is not controlled by such a company.
Section 4.24 Sufficiency of Capital.
--------------------------- -------
Borrower is, and after consummation of this Agreement and giving
effect to all Indebtedness incurred and transactions contemplated in connection
herewith will be, Solvent.
Section 4.25 Corporate Names.
----------------------------
Borrower has not, during the preceding five (5) years, done business
under or used any assumed, fictitious or trade names, in its current businesses,
except as disclosed on Schedule 4.24.
Section 4.26 Insurance.
----------------------
All of the insurable properties of Borrower are insured for its
benefit under valid and enforceable policies issued by insurers of recognized
responsibility in amounts and against such risks and losses as is customary in
Borrower's industry. Schedule 4.25 sets forth all of Borrower's property
insurance policies.
Section 4.27 Intellectual Property.
----------------------------------
Borrower owns, or is licensed to use, all material trademarks, service
marks, trade names, patents and copyrights presently used to conduct its
business, except those for which the failure to obtain could not be reasonably
expected to have a Material Adverse Effect. To the best of its knowledge,
Borrower has the right to use such intellectual property rights without
infringing or violating the rights of any third parties. No claim has been
asserted by any person to the ownership of or right to use any such rights or
challenging or questioning the validity or effectiveness of any such license or
agreement. Borrower is not in default of any such license agreements in any
material respect, and no event has occurred and is continuing which, with notice
or lapse of time or both, would constitute a material default. Each license
agreement is enforceable in accordance with its terms and has not been canceled,
abandoned or terminated, nor has Borrower received notice thereof. There are no
claims for trademark or copyright infringement pending or threatened against
Borrower or the Subsidiaries or their respective officers or directors. Neither
Borrower nor any Subsidiary is currently using copyrightable material for which
Borrower or any Subsidiary needs, but does not have, a license to conduct its
existing business. Neither Borrower nor any Subsidiary is currently using any
trademarks for which Borrower or any Subsidiary needs, but does not have, a
valid character or trademark license to conduct its existing business.
Section 4.28 Real Property.
--------------------------
(a) Set forth on Schedule 4.27 is a list of the addresses of each
parcel of real property owned by or leased to Borrower, as indicated on the
Schedule.
(b) Borrower has delivered to the Lender true and correct copies of
all of its leases or subleases and all related amendments, supplements and
modifications and related documents (the "Scheduled Lease Documents"),
which require payments or contingent payments by Borrower of any of the
Subsidiaries subsequent to the date hereof in excess of $100,000. There are
no other agreements, written or oral, between Borrower and any third
parties claiming an interest in Borrower's interest in the Scheduled Leases
or otherwise relating to Borrower's use and occupancy of any leased real
property. All such leases are valid and binding obligations of the parties
thereto, are in full force and effect and enforceable against the parties
thereto in accordance with their terms; and no event has occurred
including, but not limited to, the executed, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
which (whether with or without notice, lapse of time or both) would
constitute a default thereunder. No property leased under any lease which
the Lender has agreed to assume is subject to any lien, encumbrance,
easement, right-of-way, building or use restriction, exception, variance,
reservation or limitation as might in any respect interfere with or impair
the present and continued use thereof in the usual and normal conduct of
Borrower's business.
(c) On the Loan Closing Date, Borrower will hold of record good,
marketable and insurable title to the property described in Schedule 4.27
free and clear of all title defects, liens, pledges, claims,
charges, rights of first refusal, security interests or other
encumbrances and not, in the case of the real property, subject to any
rights-of-way, building or use restrictions, exceptions, variances,
reservations or limitations of any nature whatsoever, except with respect
to all such properties, (i) matters set forth in Schedule 4.27, and (ii)
liens for current taxes and assessments not in default (collectively, the
"Permitted Encumbrances"). Notwithstanding the foregoing, Borrower's
representations and warranties regarding title defects with respect to the
real property is limited to defects arising by, through or under Borrower,
but not otherwise. Borrower and the Subsidiaries have adequate title
insurance coverage for such properties. All real property and structures
owned or leased by Borrower, and all equipment owned or leased by Borrower,
are in good operating condition and repair (ordinary wear and tear
excepted), taking into account their respective ages and consistent with
their past uses, and are adequate for the uses to which they are being put.
Except as set forth on Schedule 4.27, to Borrower's best knowledge, the
buildings and improvements owned or leased by Borrower are structurally
sound. Borrower has not received any notice of any violation of any
building, zoning or other law, ordinance or regulation in respect of such
property or structures or their use by Borrower. To Borrower's best
knowledge, there is no existing, proposed or contemplated plan to modify or
realign any street or highway or any existing, proposed or contemplated
eminent domain proceeding that would result in the taking of all or any
part of the real property or that would materially adversely affect the
current or planned use of the real property or any part thereof. The
facilities consisting of owned personal property are subject to no liens or
encumbrances except the security interests of record set forth on Schedule
4.27, which Schedule is a copy of a Uniform Commercial Code ("UCC") search
duly obtained by Borrower in the last thirty (30) days and which search
shows security interests of record relating to such facilities in the State
of Texas. Borrower agrees to remove all security interests reflected on
such UCC search, if any, prior to the Loan Closing (except those approved
by the Lender in writing) and to remove any other security interests filed
with respect to such facilities between the date of such UCC search and the
date of the Loan Closing. Schedule 4.27 also describes all construction
work, if any, which Borrower has contracted for and which is presently in
progress in respect of the business, and also contains a good faith
estimate, as of the date of this Agreement, of the cost and timetable to
complete each such project. Copies of the architect's and the contractor's,
if any, plans and specifications with respect to such construction in
progress have been delivered to the Lender.
Section 4.29 Environmental.
--------------------------
(a) Borrower is currently in compliance with all Environmental Laws
(as defined below) which compliance includes, but is not limited to, the
possession by Borrower of all permits and other governmental authorization
required under applicable Environmental Laws, and compliance in all material
respects with the terms and conditions thereof, except in any case where the
failure to be in compliance would not have a Material Adverse Effect.
(b) Except as set forth on Schedule 4.28, Borrower has not stored,
disposed of or arranged for disposal of any Materials of Environmental Concern
(as defined below) on any of the real property, except in compliance with
applicable Environmental Laws.
(c) Borrower has not received any communication (written or oral),
whether from a governmental authority, citizens group, employee or otherwise,
that alleges that Borrower is not in full compliance with Environmental Laws,
and there are no circumstances that may prevent or interfere with such full
compliance in the future. There is no Environmental Claim (as defined below)
pending or, to Borrower's best knowledge, threatened against, or which has been
made known to, Borrower.
(d) Except as set forth on Schedule 4.28, during the period the
facilities have been held by Borrower, its affiliates or, to Borrower's best
knowledge, its predecessors in interest, there have been no actions, activities,
circumstances, conditions, events or incidents including, without limitation,
the generation, handling, transportation, treatment, storage, release, emission,
discharge, presence or disposal of any Hazardous Substance (as defined below),
that could form the basis of any Environmental Claim against Borrower under any
Environmental Law in effect at, or at any time prior to, the Loan Closing.
(e) Without in any way limiting the generality of the foregoing to the
best knowledge of Borrower, (i) there are no underground storage tanks located
on the property owned or leased by Borrower or the Subsidiaries, (ii) there is
no asbestos contained in or forming part of any building, building component,
structure or office space owned or leased by Borrower or the Subsidiaries, and
(iii) no polychlorinated biphenyls ("PCBs") are used or stored at any property
owned or leased by Borrower or the Subsidiaries.
The following terms shall have the following meanings:
"Environmental Claim" means any claim, action, cause of
action, investigation or notice (written or oral) by any person or entity
alleging potential liability (including, without limitation, potential liability
for investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from (a) the presence, or release into the
environment, of any Hazardous Substances at any location, whether or not owned
or operated by Borrower, or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means the federal, state and local
environmental, health or safety laws, regulations, ordinances, rules and
policies and common law in effect on the date hereof and the Loan Closing Date
relating to the use, refinement, handling, treatment, removal, storage,
production, manufacture, transportation or disposal, emissions, discharges,
releases or threatened releases of materials of environmental concern, or
otherwise relating to protection of the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), as the same may be amended or modified to the date hereof and the Loan
Closing Date including, without limitation, the statutes listed below:
Federal Resources Conservation and Recovery Act of 1976, 42 U.S.C.
6901 et seq.
Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. 9601, et seq.
Federal Clean Air Act, 42 U.S.C. 7401, et seq.
Federal Water Pollution Control Act, Federal Clean Water Act of 1977,
33 U.S.C. 1251, et seq.
Federal Insecticide, Fungicide and Rodenticide Act, Federal Pesticide
Act of 1978, 7 U.S.C. 136 et seq.
Federal Hazardous Materials Transportation Act, 48 U.S.C. 1801, et
seq.
Federal Toxic Substances Control Act, 15 U.S.C. 2601, et seq.
Federal Safe Drinking Water Act, 42 U.S.C. 300f et seq.
"Hazardous Substances" means any toxic or hazardous waste,
pollutants or substances including, without limitation, asbestos, PCBs,
petroleum products and byproducts, substances defined or listed as "hazardous
substance," "toxic substance," "toxic pollutant" or similarly identified
substance or mixture, in or pursuant to any Environmental Law.
Section 4.30 Survival of Representations and Warranties.
------------------------ ------------------------------
All representations and warranties of Borrower herein shall survive
the Loan Closing and the delivery of the Debenture, and any investigation at any
time made by or on behalf of the Lender shall not diminish the Lender's right to
rely on Borrower's representations and warranties as herein set forth.
Section 4.31 Full Disclosure.
----------------------------
Neither the representations or warranties of Borrower, the schedules
to this Agreement, the financial statements referenced in Section 4.06, nor any
SEC registration statement, report or proxy statement filed by the Borrower
contains or will contain, as of the date thereon, any untrue statement of a
material fact or omits or will omit to state any material fact necessary to keep
the statements contained herein or therein from being misleading.
ARTICLE V. - AFFIRMATIVE COVENANTS OF BORROWER
So long as any part of the Debenture remains unpaid or has not been
redeemed or converted hereunder, and until such payment, redemption or
conversion in full, unless the Lender shall otherwise consent in writing,
Borrower agrees that:
Section 5.01 Financial Statements. Reports and Documents.
--------------------------------------------------------
(a) Borrower shall accurately and fairly maintain its books of account
in accordance with GAAP, retain such firm of independent certified public
accountants requested by Borrower and approved by the Lender, to make
annual audits of its accounts in accordance with generally accepted
auditing standards.
(b) Borrower shall provide the following reports and information to
Lender:
(i) As soon as available, and in any event within forty-five (45)
days after the close of each fiscal quarter, Borrower's quarterly
reports on Form 10-QSB with exhibits for said period. As soon as
available, Borrower's reports on Form 8-K with any exhibits.
(ii) As soon as available, and in any event within ninety (90)
days after the close of each fiscal year, Borrower's annual report on
Form 10-KSB with exhibits for said period.
(iii) Each fiscal quarter, concurrent with the periodic report
required above, a certificate executed by the Chief Financial Officer
or Chief Executive Officer of Borrower (A) stating that a review of
the activities of Borrower during such fiscal period has been made
under his supervision and that Borrower has observed, performed and
fulfilled each and every obligation and covenant contained herein and
is not in Default under any of the same or, if any such Default shall
have occurred, specifying the nature and status thereof, and (B)
stating that Borrower and the Subsidiaries are in compliance as of the
end of such fiscal quarter with the agreed minimum financial ratios
and standards set forth in Schedule 7.01 to this Agreement.
(iv) Promptly (but in any event within five (5) business days)
upon becoming aware of the existence of any condition or event which
constitutes a Default or which, with notice or the passage of time or
both would become a Default or an Event of Default, written notice
specifying the nature and period of existence thereof and the action
which Borrower is taking or proposes to take with respect thereto.
(v) Promptly (but in any event within five (5) business days)
upon the receipt thereof by Borrower or the Board of Directors of
Borrower, copies of all reports, all management letters and other
detailed information submitted to Borrower or the Board by independent
accountants in connection with each annual or interim audit or review
of the accounts or affairs of Borrower made by such accountants.
(vi) Promptly upon its becoming available, one copy of each
financial statement, report, press release, notice or proxy statement
sent by Borrower to stockholders generally, and of each regular or
periodic report, registration statement or prospectus filed by
Borrower with any securities exchange or the SEC or any successor
agency, and of any order issued by any Governmental Authority in any
proceeding to which Borrower is a party.
(vii) As soon as available, and in any event within fifteen (15)
days after the close of each fiscal quarter, a report setting forth
the number of stock options, and their respective prices and terms,
issued during such quarter and cumulatively.
Section 5.02 Preparation of Budgets.
--------------------------- -------
(a) Prior to the beginning of Borrower's fiscal year Borrower agrees
to prepare and submit to the Board and furnish to Lender a copy of an annual
plan for such year which shall include, without limitation, plans for expansion,
if any, plans for incurrences of Indebtedness and projections regarding other
sources of funds, quarterly projected capital and operating expense budgets,
cash flow statements, profit and loss statements and balance sheet projections,
itemized in such detail as the Board may request.
(c) Borrower agrees that it will review its operations with Agent.
Such operations reviews will be in such depth and detail as Agent shall
reasonably request and will be held as reasonably necessary, generally once a
fiscal quarter.
Section 5.03 Payment of Taxes and Other Indebtedness.
----------------------- ----------------------------
Borrower shall, and shall cause its Subsidiaries to, pay and discharge
(i) all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits, or upon any property belonging to it, before
delinquent, (ii) all lawful claims (including claims for labor, materials and
supplies) which, if unpaid, will give rise to a Lien upon any of its property,
other than a Permitted Lien, and (iii) all of its other Indebtedness in
accordance with their respective terms, except as prohibited hereunder;
provided, however, that Borrower and its Subsidiaries, if any, shall not be
required to pay any such tax, assessment, charge, levy or other claim if and so
long as the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings and appropriate accruals and
reserves therefor have been established in accordance with GAAP.
Section 5.04 Maintenance of Existence and Rights; Conduct of Business.
--------------------------- -------------------------------- --------
Subject to Section 6.13, Borrower shall, and shall cause its operating
Subsidiaries to, preserve and maintain their respective corporate existence and
all of their respective material rights and privileges necessary in the normal
conduct of their respective businesses, and to conduct their respective
businesses in an orderly and efficient manner consistent with good business
practices and in accordance with all
valid regulations and orders of any Governmental Authority. Borrower shall keep
its principal place of business within the United States.
Section 5.05 SEC Filings.
------------------------
So long as Borrower has a class of securities registered pursuant to
Section 12 of the 1934 Act, Borrower shall duly file, when due, all reports and
proxy statements required of a company whose securities are registered for
public trading under and pursuant to the 1934 Act and any rules and regulations
issued thereunder.
Section 5.06 Notice.
-------------------
Borrower shall promptly notify the Lender of (i) any Material Adverse
Change, (ii) any default under any Senior Obligations, other Indebtedness having
an aggregate principal amount in excess of $100,000, material agreement,
contract or other instrument to which it is a party or by which any of its
properties are bound, or any acceleration of the maturity of any Indebtedness
having an aggregate principal amount in excess of $100,000, if any, (iii) any
material adverse claim against or affecting Borrower or its Subsidiaries, if
any, or any of its properties, and (iv) the commencement of, and any
determination in, any material litigation with any third party or any proceeding
before any Governmental Authority.
Section 5.07 Compliance with Loan Documents.
-------------------------------------------
Borrower shall promptly comply with any and all covenants and
provisions of the Loan Documents.
Section 5.08 Compliance with Material Agreements.
------------------------------------------------
Borrower shall, and shall cause each of its Subsidiaries to, comply in
all material respects with all Senior Documents, material agreements,
indentures, mortgages or documents binding on it or affecting its properties or
business.
Section 5.09 Operations and Properties.
--------------------------------------
Borrower shall, and shall cause each of its Subsidiaries to, act
prudently and in accordance with customary industry standards in managing or
operating its assets, properties, business and investments. Borrower shall, and
shall cause each of its Subsidiaries to, keep in good working order and
condition, ordinary wear and tear excepted, all of its assets and properties
which are necessary to the conduct of its business.
Section 5.10 Books and Records; Access.
--------------------------------------
Borrower shall, and shall cause each of its Subsidiaries to, maintain
complete and accurate books and records of its transactions in accordance with
good accounting practices. Borrower shall give each duly authorized
representative of the Lender access during all normal business hours, upon
reasonable notice, to, and shall permit such representative to examine, copy or
make excerpts from, any and all books, records and documents in the possession
of Borrower and its Subsidiaries and relating to its affairs, and to inspect any
of the properties of Borrower and its Subsidiaries; provided that the Lender
agrees that any such inspection will be performed so as not to interfere with
Borrower's normal business operations. Borrower shall make a copy of this
Agreement, along with any waivers, consents,
modifications or amendments, available for review at its principal office by the
Lender or the Lender's representatives.
Section 5.11 Compliance with Law.
----------------------- --------
Borrower shall, and shall cause each of its Subsidiaries to, comply in
all material respects with all applicable laws, rules, regulations, ordinances
and all orders and decrees of any Governmental Authority applicable to it or any
of its properties, businesses or operations.
Section 5.12 Insurance.
----------------------
Borrower shall, and shall cause each of its Subsidiaries to, maintain
such worker's compensation insurance, liability insurance and insurance on its
properties, assets and business, now owned or hereafter acquired, against such
casualties, risks and contingencies, and in such types and amounts, as are
consistent with customary practices and standards of companies engaged in
similar businesses.
Section 5.13 Authorizations and Approvals.
-----------------------------------------
Borrower shall, and shall cause each of its Subsidiaries to, promptly
obtain, from time to time and at its own expense, all such governmental
licenses, authorizations, consents, permits and approvals as may be required to
enable it to comply with its obligations hereunder and under the other Loan
Documents.
Section 5.14 ERISA Compliance.
-----------------------------
Borrower shall, at all times, (i) make prompt payment of all
contributions required under all Plans, if any, and shall meet the minimum
funding standards set forth in ERLSA with respect to its Plans subject to ERISA,
if any, (ii) notify the Lender immediately of any fact in connection with any of
its Plans, which might constitute grounds for termination thereof by the Pension
Benefit Guaranty Corporation or for the appointment, by the appropriate United
States District Court, of a trustee to administer such Plan, together with a
statement, if requested by the Lender, as to the reason therefor and the action,
if any, proposed to be taken with respect thereto, and (iii) furnish to the
Lender, upon its request, such additional information concerning any of its
Plans as may be reasonably requested.
Section 5.15 Further Assurances.
-------------------------------
Borrower shall, and shall cause each of its Subsidiaries to, make,
execute or endorse, and acknowledge and deliver or file or cause the same to be
done, all such notices, certifications and additional agreements, undertakings,
transfers, assignments or other assurances, and take any and all such other
action as the Lender may, from time to time, deem reasonably necessary or proper
in connection with any of the Loan Documents, or the obligations of Borrower or
its Subsidiaries, if any, thereunder, which the Lender may request from time to
time.
Section 5.16 Indemnity by Borrower.
----------------------------------
Borrower shall indemnify, save and hold harmless the Lender and its
directors, officers, lenders, attorneys and employees (the "Indemnitee") from
and against (i) any and all claims, demands, actions or causes of action that
are asserted against any Indemnitee if the claim, demand, action or cause of
action, directly or indirectly, relates to this Agreement and the other Loan
Documents issued pursuant thereto, the use of proceeds of the Loans, or the
relationship of Borrower and the Lender under this Agreement or any transaction
contemplated pursuant to this Agreement, (ii) any administrative or
investigative proceeding
by any Governmental Authority, directly or indirectly, related to a claim,
demand, action or cause of action described in clause (i) above, and (iii) any
and all liabilities, losses, costs or expenses (including reasonable attorneys'
fees and disbursements) that any Indemnitee suffers or incurs as a result of any
of the foregoing; provided, however, that Borrower shall have no obligation
under this Section 5.16 to the Lender with respect to any of the foregoing
arising out of the gross negligence or willful misconduct of the Lender or its
assignees or the breach by Lender or its assignees of this Agreement or any
other Loan Document or other document executed in connection with any of the
aforesaid, the breach by the Lender or its assignees of any intercreditor or
participation agreement or commitment with other parties, the violation or
alleged violation of any law, rule or regulation by the Lender or its assignees,
or from the transfer or disposition by the Lender of any Debenture or the Common
Stock issued upon conversion of the Debenture. If any claim, demand, action or
cause of action is asserted against any Indemnitee, such Indemnitee shall
promptly notify Borrower, but the failure to so promptly notify Borrower shall
not affect Borrower's obligations under this Section unless such failure
materially prejudices Borrower's right or ability to participate in the contest
of such claim, demand, action or cause of action, as hereinafter provided or
materially increases Borrower's liability hereunder. In the event that such
Indemnitee `s failure to properly notify Borrower materially prejudices
Borrower's right or ability to participate in the contest of such claim, demand
action or cause of action or materially increases Borrower's liability
hereunder, then said Indemnitee shall have no right to receive, and Borrower
shall have no obligation to pay, any indemnification amounts hereunder. Borrower
may elect to defend any such claim, demand, action or cause of action (at its
own expense) asserted against said Indemnitee and, if requested by Borrower in
writing and so long as no Default or Event of Default shall have occurred and be
continuing, such Indemnitee (at Borrower's expense) shall, in good faith,
contest the validity, applicability and amount of such claim, demand, action or
cause of action and shall permit Borrower to participate in such contest. Any
Indemnitee that proposes to settle or compromise any claim or proceeding for
which Borrower may be liable, for payment to or on behalf of an Indemnitee
hereunder, shall give Borrower written notice of the terms of such proposed
settlement or compromise reasonably in advance of settling or compromising such
claim or proceeding and shall obtain Borrower's written concurrence thereto. In
the event that said Indemnitee fails to obtain Borrower's prior written consent
to any such settlement or compromise, said Indemnitee shall have no right to
receive, and Borrower shall have no obligation to pay, any indemnification
amounts hereunder. Each Indemnitee may employ counsel, which counsel shall be
reasonably acceptable to Borrower, in enforcing its rights hereunder and in
defending against any claim, demand, action or cause of action covered by this
Section 5.16; provided, however, that each Indemnitee shall endeavor in
connection with any matter covered by this Section 5.16 which also involves any
other Indemnitee, use reasonable efforts to avoid unnecessary duplication of
effort by counsel for all Indemnitees, including allowing Borrower to select one
lawyer for all parties, such selection to be subject to the approval of such
parties, which approval shall not be unreasonably withheld. Any obligation or
liability of Borrower to any Indemnitee under this Section 5.16 shall survive
the expiration or termination of this Agreement and the repayment of the
Debenture.
Section 5.17 Reservation of Shares; Shareholder Approval.
--------------------------- ----------------------------
From and after consummation of the Reorganization, Borrower shall, at
all times, reserve and keep available sufficient authorized and unissued shares
of Common Stock to effect the conversion of the Debenture. The Borrower will, in
connection with the Reorganization, obtain the approval of its shareholders to
issue to the Lender upon conversion of the Debenture all of the shares of Common
Stock to which it is then entitled.
Section 5.18 Ownership of Subsidiaries.
------------------------- ------------
Borrower shall own, at all times, not less than 80% of the capital
stock of, or other equity interests in, the Subsidiaries, except as disclosed on
Schedule 5.18.
Section 5.19 Retention of Stock Ownership.
------------------------- ---------------
(a) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ will execute and
deliver Lock-Up Agreements at the Loan Closing which shall provide that they
will not offer, sell or otherwise dispose of the shares of Common Stock
beneficially owned or controlled by them (including subsequently acquired shares
or securities exercisable or convertible into shares) for a period of twelve
(12) months following the Loan Closing.
ARTICLE VI. - NEGATIVE COVENANTS OF BORROWER
So long as any part of the Debenture has not been redeemed or
converted hereunder, and until such redemption or conversion in full, unless the
Lender shall otherwise consent in writing, Borrower agrees that:
Section 6.01 Limitation on Indebtedness.
---------------------------------------
At Loan Closing, Borrower and its Subsidiaries shall not have any
outstanding Indebtedness, except Indebtedness arising under this Agreement, the
Debenture or Permitted Indebtedness. Following the Closing, without the consent
of a Majority in Interest, Borrower will not incur or guarantee any Indebtedness
senior to or pari passu with the Debenture, without the consent of the Lender,
except for Senior Obligations, Asset-Backed Acquisition or Operations
Indebtedness or trade payables and other obligations incurred in the ordinary
course of business on terms not to exceed 90 days.
Section 6.02 Limitation on Liens.
--------------------------------
Borrower shall not, and shall not permit its Subsidiaries to, create,
cause, incur, permit or suffer to exist any Lien upon any of its properties or
assets, other than Permitted Liens.
Section 6.03 Fiscal Year and Accounting Method.
----------------------------------------------
Borrower shall not, and shall not permit its Subsidiaries to, change
its fiscal year or method of accounting, except as permitted by GAAP.
Section 6.04 Liquidation.
------------------------
Borrower shall not, and shall not permit its Subsidiaries to, (i)
dissolve or liquidate (except for dissolution or liquidation of inactive
Subsidiaries in the ordinary course of business), or (ii) enter into any other
transaction that has a similar effect.
Section 6.05 Material Amendments to Articles of Incorporation or Bylaws.
----------------------------------------------- -----------------------
Except as contemplated in the Reorganization, Borrower shall not amend
its Certificate or Articles of Incorporation (or other charter document) or
bylaws in any material respect, without the consent of the Lender.
Section 6.06 Executive Compensation.
-----------------------------------
(a) Borrower will not increase the salary, bonus, or other
compensation programs (whether in cash, securities or other property, and
whether payment is deferred or current) of its chief executive officer and chief
financial officer, unless such compensation increase is approved by a majority
of the
Board or a Compensation Committee of the Board, a majority of which Compensation
Committee shall be nonemployee Directors. Compensation to other senior executive
officers, including division managers, shall be consistent with the policies of
the Compensation Committee.
(b) Borrower shall not implement any bonus, profit sharing or other
incentive plans, until such plans are formally adopted by the majority of the
Board or a Compensation Committee of the Board, a majority of which Compensation
Committee shall be nonemployee Directors. Borrower's executive compensation
shall be consistent with the general compensation policies adopted by the
Compensation Committee of the Board.
Section 6.07 Restricted Payments.
--------------------------------
Borrower shall not (i) without the consent of the Lender, declare or
pay any Dividend (other than stock dividends) or make any other cash
distribution on any Common Stock or any Preferred Stock, (ii) purchase, redeem
or otherwise acquire any shares of Common Stock or any shares of Preferred
Stock, without the consent of the Lender, (iii) make any payments of
Indebtedness (other than Senior Obligations) which are pari passu or
subordinated to the Debenture, if at the time of such payment, Borrower is in
Default with respect to the Loan, or (iv) make any prepayments of Indebtedness
(other than Senior Obligations) which are pari passu or subordinated to the
Debenture, unless the Debenture is prepaid on a pro rata basis. Borrower shall
not permit its Subsidiaries to enter into any agreements restricting the payment
of dividends from the Subsidiaries to Borrower, without the consent of the
Lender.
Section 6.08 Consolidation or Merger.
------------------------------------
Borrower shall not consolidate with or merge into any other
corporation, unless the surviving corporation, after such merger or
consolidation, will not be in Default and the surviving corporation becomes a
party to this Agreement. Subsidiaries shall only consolidate with or merge into
Borrower or another Subsidiary; provided, however, that a Subsidiary may merge
or consolidate with any other entity as long as such Subsidiary is the surviving
corporation of such merger or consolidation, and Borrower is not in Default.
ARTICLE VII. - COVENANTS OF MAINTENANCE OF FINANCIAL STANDARDS
Section 7.01 Financial Ratios.
-----------------------------
So long as any of the Debenture has not been redeemed or converted
hereunder, and until such redemption or conversion has been made in full, or
unless the Lender shall otherwise consent in writing, Borrower, on a
consolidated basis, shall be in compliance with the agreed minimum financial
ratios and standards provided in Schedule 7.01, as of the end of each fiscal
quarter of Borrower and as set forth in its most recent quarterly compliance
certificates delivered pursuant to Section 5.01.
ARTICLE VIII - EVENTS OF DEFAULT
Section 8.01 Events of Default.
---------------------- -------
An "Event of Default" shall exist if any one or more of the following
events (herein collectively called "Events of Default") shall occur and be
continuing:
(a) Borrower shall fail to pay when due (or shall state in writing an
intention not to pay or its inability to pay) any installment of interest
on or principal of, any Debenture or any fee, expense or other payment
required hereunder;
(b) Any representation or warranty made under this Agreement, or any
of the other Loan Documents, or in any certificate or statement furnished
or made to Agent pursuant hereto or in connection herewith or with the
Loans hereunder, or in any Subsidiary Document shall prove to be untrue or
inaccurate in any material respect as of the date on which such
representation or warranty was made;
(c) Default shall occur in the performance of any of the covenants or
agreements of Borrower or of its Subsidiaries contained herein, or in any
of the other Loan Documents or in any Subsidiary Document;
(d) Default shall occur in the payment of any Senior Obligations or in
the payment of any other Indebtedness having an aggregate principal amount
in excess of $100,000, or nonmonetary default shall occur in respect of any
note, loan agreement or credit agreement relating to any Indebtedness
having an aggregate principal amount in excess of $100,000, and such
default continues for more than the period of grace, if any, specified
therein or any Indebtedness having an aggregate principal amount in excess
of $100,000, shall become due before its stated maturity by acceleration of
the maturity, or any indebtedness having an aggregate principal amount in
excess of $100,000, shall become due by its terms and shall not be promptly
paid or extended;
(e) Any of the Loan Documents shall cease to be legal, valid and
binding agreements enforceable against Borrower in accordance with the
respective terms, or shall, in any way, be terminated or become or be
declared by any court or by Borrower or any Subsidiary in any legal
proceeding to be ineffective or inoperative, or shall in any way whatsoever
cease to give or provide the respective rights, titles, interests,
remedies, powers or privileges stated therein to be created thereby;
(f) Borrower or its Subsidiaries shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian, intervenor or liquidator of
itself, or of all or substantially all of such Person's assets, (ii) file a
voluntary petition in bankruptcy, admit in writing that such Person is
unable to pay such Person's debts as they become due or generally not pay
such Person's debts as they become due, (iii) make a general assignment for
the benefit of creditors, (iv) file a petition or answer seeking
reorganization or an arrangement with creditors or to take advantage of any
bankruptcy or insolvency laws, (v) file an answer admitting the material
allegations of, or consent to, or default in answering, a petition filed
against such Person in any bankruptcy, reorganization or insolvency
proceeding, or (vi) take corporate action for the purpose of effecting any
of the foregoing;
(g) An involuntary petition or complaint shall be filed against
Borrower or any of its Subsidiaries seeking bankruptcy or reorganization of
such Person or the appointment of a receiver, custodian, trustee,
intervenor or liquidator of such Person, or all or substantially all of
such Person's assets, and such petition or complaint shall not have been
dismissed within sixty (60) days of the filing thereof or an order, order
for relief, judgment or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition or complaint
seeking reorganization of Borrower or its subsidiary or appointing a
receiver, custodian, trustee, intervenor or liquidator of such Person, or
of all or substantially all of such Person's assets;
(h) Any final judgment(s) for the payment of money in excess of the
sum of [$100,000] in the aggregate shall be rendered against Borrower or
any Subsidiary and such judgment or judgments shall not be satisfied or
discharged prior to the date on which any of its assets could be lawfully
sold to satisfy such judgment; or
(i) Borrower shall fail to issue and deliver shares of Common
Stock as provided herein upon conversion of the Debenture.
Section 8.02 Remedies Upon Event of Default.
----------------------------------- -------
(a) If an Event of Default shall have occurred and be continuing,
then the Lender may exercise any one or more of the following rights
and remedies, and any other remedies provided in any of the Loan
Documents, as the Lender in its sole discretion may deem necessary or
appropriate:
(i) declare the unpaid Principal Amount (after application
of any payments or installments received by the Lender) of, and
all interest then accrued but unpaid on, the Debenture and any
other liabilities hereunder to be forthwith due and payable,
whereupon the same shall forthwith become due and payable without
presentment, demand, protest, notice of default, notice of
acceleration or of intention to accelerate or other notice of any
kind, all of which Borrower hereby expressly waives, anything
contained herein or in the Debenture to the contrary
notwithstanding;
(ii) reduce any claim to judgment; and
(iii) without notice of default or demand, pursue and
enforce any of the Lender's rights and remedies under the Loan
Documents and the Subsidiary Documents, or otherwise provided
under or pursuant to any applicable law or agreement, all of
which rights may be specifically enforced.
(b) In the event of a violation by Borrower of the negative covenants
set forth in Article VI, the Lender may, in its sole discretion, (i) waive
compliance with the covenants, provided Borrower is in compliance with
Section 7.01 hereof; or (ii) require Borrower to redeem the Debenture at
the higher of market value or the unpaid principal amount of the Debenture,
together with an amount equal to an 18% annual yield on the principal
amount through the Redemption Date, whichever is greater.
Section 8.03 Performance by the Lender.
--------------------------------------
Should Borrower or any Subsidiary fail to perform any covenant, duty or
agreement contained herein or in any of the other Loan Documents or in any
Subsidiary Document, Lender or Agent may perform or attempt to perform such
covenant, duty or agreement on behalf of Borrower. In such event, Borrower
shall, at the request of Lender or Agent, promptly pay any amount reasonably
expended by Lender or Agent in such performance or attempted performance to
Lender or Agent at its principal office, together with interest thereon, at the
interest rate specified in the Debenture, from the date of such expenditure
until paid. Notwithstanding the foregoing, it is expressly understood that
Lender or Agent assumes no liability or responsibility for the performance of
any duties of Borrower or any Subsidiary hereunder or under any of the other
Loan Documents or under any Subsidiary Document.
Section 8.04 Payment of Expenses Incurred by the Lender.
----------------------- -------------------------------
Upon the occurrence of a Default or an Event of Default, which
occurrence is not cured within the notice provisions, if any, provided herein,
Borrower agrees to pay and shall pay all costs and expenses (including
reasonable attorneys' fees and expenses) incurred by Lender or Agent in
connection with the preservation and enforcement of the Lender's rights under
this Agreement, the Debenture or any other Loan Document.
ARTICLE IX. - REGISTRATION RIGHTS
Section 9.01 Shelf Registration.
------------------ ------------
Borrower shall file a "shelf' registration statement on Form S-3 under
the 1933 Act (the "Shelf Registration") covering all of the Registrable
Securities within ____ days of the date of the Debenture or 60 days after the
Borrower becomes eligible to use Form S-3, whichever is later, and Borrower
shall use its best efforts to cause the Shelf Registration to be declared
effective and to keep the Shelf Registration continuously effective until all of
the Registrable Securities registered therein cease to be Registrable
Securities. The securities shall cease to be Registrable Securities (a) when the
Shelf Registration shall have become effective under the 1933 Act and such
securities shall have been disposed of pursuant to the Shelf Registration, or
(b) such securities shall have been sold as permitted by Rule 144 under the 1933
Act or the date on which the Registrable Securities may be sold pursuant to Rule
144(k), whichever is the first to occur. Borrower agrees, if necessary, to
supplement or amend the Shelf Registration, as required by the registration form
utilized by Borrower or by the instructions applicable to such registration form
or by the 1933 Act, and Borrower agrees to furnish to the holders of the
Registrable Securities copies of any such supplement or amendment prior to its
being used. The Borrower shall have all expenses of such registration.
ARTICLE X. - BOARD OF DIRECTORS
Section 10.01 Board Representation or Attendance by Observer.
------------------------------------------------------------
(a) Borrower herewith agrees that Agent shall have the right, from time
to time, to designate an observer, who shall be entitled to attend and
participate (but not vote) in all meetings of the Board of Directors and to
receive all notices, reports, information, correspondence and communications
sent by Borrower to members of the Board of Directors. All reasonable and
appropriate costs and expenses incurred in connection therewith by any such
designated Director or observer, or by Agent on behalf of such Director or
observer, shall be reimbursed by Borrower.
(b) Any such observer shall, if requested to do so, absent himself or
herself from the meeting in the event of, and so long as, the Directors are
considering and acting on matters pertaining to any rights or obligations of
Borrower or the Lender under this Agreement, the Debenture, the other Loan
Documents or the Subsidiary Documents.
Section 10.02 Limitation of Authority of Persons Designated as Observer.
--------------------------- -------------------------------------------
It is provided and agreed that the actions and advice of any person
while serving pursuant to Section 10.01 as an observer at meetings of the Board
of Directors shall be construed to be the actions and advice of that person
alone and not be construed as actions of the Lender as to any notice of
requirements or rights of Lender under this Agreement, the Debenture, the other
Loan Documents or the Subsidiary Documents nor as actions of the Lender to
approve modifications, consents, amendments or waivers thereof and all such
actions or notices shall be deemed actions or notices of the Lender only when
duly provided in writing and given in accordance with the provisions of this
Agreement.
Section 10.03 Nonliability of the Lender.
----------------------------------------
The relationship between Borrower and the Lender is, and shall at all
times remain, solely that of borrower and lender. The Lender neither undertakes
nor assumes any responsibility or duty to Borrower to review, inspect,
supervise, pass judgment upon or inform Borrower of any matter in connection
with
any phase of Borrower's business, operations or condition, financial or
otherwise. Borrower shall rely entirely upon its own judgment with respect to
such matters, and any review, inspection, supervision, exercise of judgment or
information supplied to Borrower by the Lender, or any representative or agent
of the Lender, in connection with any such matter is for the protection of the
Lender, and neither Borrower nor any third party is entitled to rely thereon.
ARTICLE XI. - AGENCY PROVISIONS
Section 11.01 The Lender's Representations and Warranties to Agent.
------------------------------------------------------------------
Lender represents and warrants to the Agent:
(a) It is legal for it to make the Loan, and the making of such Loan
complies with laws applicable to it;
(b) It has made, its own independent review (including any desired
investigations and inspections) of, and it accepts and approves, the Loan,
this Agreement and the associated documents and all other matters and
information which it deems pertinent. It acknowledges that the Loan
Documents and the Subsidiary Documents are a complete statement of all
understandings and respective rights and obligations between and among the
Lender, Subsidiaries and Borrower regarding the Loan;
(c) Lender has not made any express or implied representation or
warranty to any other lender with respect to this transaction;
(d) It will, independently and without reliance upon any other lender,
and based upon such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under this Agreement, and will
make such investigation as it deems necessary to inform itself as to the
Loan, the Loan Documents, the Subsidiary Documents, Borrower and any
collateral; provided, however, nothing contained in this Section shall
limit Agent's obligation to provide the Lender with the information and
documents Agent is expressly required to deliver under this Agreement;
(e) The Loan Documents executed by the Lender are valid and binding
obligations of the Lender.
(f) That the Lender is making the loan and acquiring the right to
acquire the Common Stock for investment purposes only and without a current
view to the further sale or distribution thereof. That the Lender is an
"accredited investor" as that term is defined in Rule 501 promulgated under
the 1933 Act and understands that the Debenture and the Common Stock to be
received upon conversion thereof are Restricted Securities as defined
therein and will bear on certificates representing such securities a legend
appropriate under applicable law and restricting transfer except in
compliance herewith.
Section 11.02 Waiver of Loan Provisions or Interest or Principal Payments.
----------------------- -------------------------------------------------
A waiver of an interest or principal payment, a declaration of a
Default or any amendment, modification or waiver of this Agreement or the
Debenture will require the consent of the Lender.
Section 11.03 Agency.
--------------------
(a) Lender hereby designates and appoints Renaissance Group as its
Agent under this Agreement and authorizes the Agent to take such action on its
behalf under the provisions of this
Agreement and the other Loan Documents and the Subsidiary Documents and to
exercise such powers as are set forth herein or therein, together with such
other powers as are reasonably incidental thereto. In performing its functions
and duties under this Agreement, the Agent shall act solely as agent of the
Lender and does not assume, and shall not be deemed to have assumed, any
obligation toward or relationship of agency or trust with or for Borrower. The
Agent may perform any of its duties under this Agreement, or under the other
Loan Documents or the Subsidiary Documents, by or through its agents or
employees.
(b) The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement, in the other Loan Documents or in the
Subsidiary Documents. Except as expressly provided herein, the duties of the
Agent shall be mechanical and administrative in nature. The Agent shall have,
and may use, its sole discretion with respect to exercising or refraining from
taking any actions which the Agent is expressly entitled to take or assert under
this Agreement, the other Loan Documents and the Subsidiary Documents. The Agent
shall not have, by reason of this Agreement, a fiduciary relationship with
respect to the Lender. Nothing in this Agreement, any of the other Loan
Documents or any of the Subsidiary Documents, express or implied, is intended to
or shall be construed to impose upon the Agent any obligations in respect of
this Agreement, any of the other Loan Documents or any of the Subsidiary
Documents except as expressly set forth herein or therein. If the Agent seeks
the consent or approval of the Lender to the taking or refraining from taking
any action hereunder, the Agent shall send notice thereof to the Lender. The
Agent may employ agents, co-agents and attorneys-in-fact and shall not be
responsible to the Lender or Borrower, except as to money or securities received
by it or its authorized agents, for the negligence or misconduct of any such
agents or attorneys-in-fact selected by it with reasonable care.
(c) Neither the Agent nor any of its officers, directors, employees or
agents shall be liable to the Lender for any action taken or omitted by it or
any of them under this Agreement, any of the other Loan Documents or any of the
Subsidiary Documents, or in connection herewith or therewith, except that no
Person shall be relieved of any liability imposed by law, intentional tort or
gross negligence. The Agent shall not be responsible to the Lender for any
recitals, statements, representations or warranties contained in this Agreement
or for the execution, effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of this Agreement, any of the other Loan Documents
or any of the Subsidiary Documents or any of the transactions contemplated
thereby, or for the financial condition of Borrower or the Subsidiaries. The
Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement, any of the other Loan Documents or any of the Subsidiary Documents or
the financial condition of Borrower, or the existence or possible existence of
any Default or Event of Default. Agent shall give the Lender notice of any
Default or Event of Default of which Agent has actual notice. The Agent may, at
any time, request instructions from the Lender with respect to any actions or
approvals which, by the terms of this Agreement, of any of the other Loan
Documents or of any of the Subsidiary Documents, the Agent is permitted or
required to take or to grant, and if such instructions are promptly requested,
the Agent shall be absolutely entitled to refrain from taking any action or to
withhold any approval and shall not be under any liability whatsoever to any
Person for refraining from any action or withholding any approval under any of
the Loan Documents or any of the Subsidiary Documents until it shall have
received such instructions from the Lender. Without limiting the foregoing, the
Lender shall not have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting under this Agreement, any
of the other Loan Documents or any of the Subsidiary Documents in accordance
with the instructions of the Lender.
(d) The Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone message
believed by it, in good faith, to be genuine and correct and to have been
signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement, any of the other Loan Documents or any of the
Subsidiary Documents and its duties hereunder or thereunder, upon advice of
counsel selected by it.
(e) To the extent that the Agent is not reimbursed and indemnified by
Borrower, the Lender will reimburse and indemnify the Agent for and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, advances or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of this Agreement, any of the other
Loan Documents, or any of the Subsidiary Documents or any action taken or
omitted by the Agent under this Agreement, any of the other Loan Documents or
any of the Subsidiary Documents. The obligations of the Lender under this
indemnification provision shall survive the payment in full of the Loans and the
termination of this Agreement.
ARTICLE XII. - MISCELLANEOUS
Section 12.01 Strict Compliance.
-------------------------------
Any waiver by the Lender of any breach or any term or condition of this
Agreement, the other Loan Documents or the Subsidiary Documents shall not be
deemed a waiver of any other breach, nor shall any failure to enforce any
provision of this Agreement, the other Loan Documents or the Subsidiary
Documents operate as a waiver of such provision or of any other provision, nor
constitute nor be deemed a waiver or release of Borrower for anything arising
out of, connected with or based upon this Agreement, the other Loan Documents or
the Subsidiary Documents.
Section 12.02 Waivers and Modifications.
---------------------------------------
All modifications, consents, amendments or waivers (herein "Waivers")
of any provision of this Agreement, the Debenture, any other Loan Documents or
any Subsidiary Documents, and any consent to departure therefrom, shall be
effective only if the same shall be in writing by the Lender and then shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand given, in any case, shall constitute a waiver of the right to
take other action in the same, similar or other instances without such notice or
demand. No failure to exercise, and no delay in exercising, on the part of Agent
or Lender, any right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right. The rights of Lender hereunder,
under the other Loan Documents and under the Subsidiary Documents shall be in
addition to all other rights provided by law.
Section 12.03 Limitation on Liability.
-------------------------------------
The duties, warranties, covenants and promises arising from the Loan
Documents and the Subsidiary Documents of Lender or Agent to Borrower shall be
several and not joint, and Borrower shall have no legal or equitable cause of
action against Lender or Agent (or their successors or assigns) for any
liability of the other (or its successors or assigns).
Section 12.04 Choice of Forum; Consent to Service of Process and Jurisdiction.
----------------------- ---------------------------- ------------------------
Any suit, action or proceeding against Borrower with respect to this
Agreement or the Debenture or any judgment entered by any court in respect
thereof, may be brought in the courts of the State of Texas, County of Dallas,
or in the United States federal courts located in the State of Texas, as Lender
or Agent, in its sole discretion, may elect, and Borrower hereby submits to the
nonexclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding. Borrower hereby agrees that service of
all writs, process and summonses in any such suit, action or proceeding brought
in the State of Texas may be brought upon, and Borrower hereby irrevocably
appoints, CT Corporation System, Dallas, Texas, as its true and lawful
attorney-in-fact in the name, place and stead of Borrower to accept such service
of any and all such writs, process and summonses. Borrower hereby irrevocably
waives any objections which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this Agreement
or any Debenture brought in such courts, and hereby further irrevocably waives
any claim that any such suit, action or proceeding brought in any such court has
been brought in any inconvenient forum.
Section 12.05 Invalid Provisions.
--------------------------------
If any provision of any Loan Document is held to be illegal, invalid or
unenforceable under present or future laws during the term of this Agreement,
such provision shall be fully severable; such Loan Document shall be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of such Loan Document; and the remaining provisions of such
Loan Document shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance from such
Loan Document. Furthermore, in lieu of each such illegal, invalid or
unenforceable provision shall be added as part of such Loan Document a provision
mutually agreeable to Borrower and Lender as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and
enforceable. In the event Borrower and Lender are unable to agree upon a
provision to be added to the Loan Document within a period of ten (10) business
days after a provision of the Loan Document is held to be illegal, invalid or
unenforceable, then a provision acceptable to independent arbitrators, such to
be selected in accordance with the provisions of the American Arbitration
Association, as similar in terms to the illegal, invalid or unenforceable
provision as is possible and be legal, valid and enforceable shall be added
automatically to such Loan Document. In either case, the effective date of the
added provision shall be the date upon which the prior provision was held to be
illegal, invalid or unenforceable.
Section 12.06 Maximum Interest Rate.
-----------------------------------
(a) Regardless of any provision contained in any of the Loan Documents,
Lender shall never be entitled to receive, collect or apply as interest on the
Debenture any amount in excess of interest calculated at the Maximum Rate, and,
in the event that Lender ever receives, collects or applies as interest any such
excess, the amount which would be excessive interest shall be deemed to be a
partial prepayment of principal and treated hereunder as such; and, if the
principal amount of the Obligation is paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether or not the interest paid
or payable under any specific contingency exceeds interest calculated at the
Maximum Rate, Borrower and Lender shall, to the maximum extent permitted under
applicable law, (i) characterize any nonprincipal payment as an expense, fee or
premium rather than as interest, (ii) exclude voluntary prepayments and the
effects thereof, and (iii) amortize, pro rate, allocate and spread, in equal
parts, the total amount of interest throughout the entire contemplated term of
the Debenture; provided that, if the Debenture is paid and performed in full
prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence thereof exceeds interest calculated
at the Maximum Rate, Lender shall refund to Borrower the amount of such excess
or credit the amount of such excess against the principal amount of the
Debenture and, in such event, Lender shall not be subject to any penalties
provided by any laws for contracting for, charging, taking, reserving or
receiving interest in excess of interest calculated at the Maximum Rate.
(b) "Maximum Rate" shall mean, on any day, the highest nonusurious rate
of interest permitted by applicable law on such day that, at any time or from
time to time, may be contracted for, taken, reserved, charged or received on the
Indebtedness evidenced by the Debenture under the laws which are presently in
effect of the United States of America and the laws of any other jurisdiction
which are or may be applicable to the holder of the Debenture and such
Indebtedness or, to the extent permitted by law, under such applicable laws of
the United States of America and the laws of any other jurisdiction which are or
may be applicable to the holder of the Debenture and which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
Section 12.07 Participations and Assignments of the Debenture.
-------------------------------------------------------------
(a) Lender and the Agent shall have the right to enter into a
participation agreement with any other party or its Affiliates with respect
to the Debenture, or to sell all or any part of the Debenture, but any
participation or sale shall not affect the rights and duties of Lender or
the Agent hereunder vis-a-vis Borrower. In the event that all or any
portion of the Loan shall be at any time, assigned, transferred or conveyed
to other parties, any action, consent or waiver (except for compromise or
extension of maturity), to be given or taken by Lender or the Agent
hereunder (herein "Action"), shall be such action as taken by the holder of
a majority in amount of the Principal Amount of the Debenture then
outstanding, as such holder are recorded on the books of Borrower and
represented by the Agent as described in subsection (b) below.
(b) Assignment or sale of the Debenture shall be effective on the
books of Borrower only upon (i) endorsement of the Debenture, or part
thereof, to the proposed new holder, along with a current notation of the
amount of payments or installments received and net Principal Amount yet
unfunded or unpaid, and presentment of such Debenture to Borrower for issue
of a replacement Debenture, in the name of the new holder; and (ii)
delivery of an opinion of counsel, reasonably satisfactory to Borrower,
that transfer shall not require registration or qualification under
applicable state or federal securities laws.
(c) The Debenture may be sold, transferred or assigned only to
Affiliates of Lender or permitted transferees in multiples of $100,000.
(d) Any assignee or transferee of the Debenture shall as a condition
precedent to the consummation thereof execute and deliver to the Borrower
an investment representation letter containing the representations and
warranties provided for in Section 11.01 above, together with such other
representations and warranties as Borrower shall reasonably require in
connection with assuring that such transfer or assignment has been made in
compliance with applicable provisions of the 1933 Act, the 1934 Act and the
rules of any self regulatory body applicable to the Common Stock.
Section 12.08 Confidentiality.
-----------------------------
(a) All financial reports or information that are furnished to Lender
or Holders, or their respective director designees or other
representatives, pursuant to this Agreement or pursuant to the Debenture,
the other Loan Documents or the Subsidiary Documents shall be treated as
confidential unless and to the extent that such information has been
otherwise disclosed by Borrower, but nothing herein contained shall limit
or impair the Lender's or Holders' right to disclose such reports to any
appropriate Governmental Authority, or to use such information to the
extent pertinent to an evaluation of the Obligation, or to enforce
compliance with the terms and conditions of this Agreement, or to take any
lawful action which the Lender or Holders deem necessary to protect their
respective interests under this Agreement.
(b) Lender and the Agent shall use their reasonable efforts to protect
and preserve the confidentiality of such information, except for such
disclosure as shall be required for compliance by Lender or its respective
director designees with SEC reporting requirements or any administrative or
judicial proceeding or otherwise as a matter of law. The provisions of
Section 5.01 notwithstanding,
Borrower may refuse to provide information as required pursuant
thereto to an assignee or successor in interest to Lender, unless and until
such assignee or successor shall have executed an agreement to maintain the
confidentiality of the information as provided herein.
Section 12.09 Binding Effect.
----------------------------
The Loan Documents shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors, assigns and legal
representatives; provided, however, that Borrower may not, without the prior
written consent of Lender, assign any rights, powers, duties or obligations
thereunder.
Section 12.10 No Third Party Beneficiary.
----------------------------------------
The parties do not intend the benefits of this Agreement to inure to
any third party, nor shall this Agreement be construed to make or render Lender
liable to any materialman, supplier, contractor, subcontractor, purchaser or
lessee of any property owned by Borrower, or for debts or claims accruing to any
such persons against Borrower. Notwithstanding anything contained herein, in the
Debenture, in any other Loan Document or in any Subsidiary Document, no conduct
by any or all of the parties hereto, before or after signing this Agreement, any
other Loan Document nor any Subsidiary Document, shall be construed as creating
any right, claim or cause of action against Lender, or any of its respective
officers, directors, agents or employees, in favor of any materialman, supplier,
contractor, subcontractor, purchaser or lessee of any property owned by
Borrower, nor to any other person or entity other than Borrower.
Section 12.11 Entirety.
----------------------
This Agreement and the Debenture, the other Loan Documents, the
Subsidiary Documents and any other documents or instruments issued or entered
into pursuant hereto and thereto contain the entire agreement between the
parties and supersede all prior agreements and understandings, written or oral
(if any), relating to the subject matter hereof and thereof.
Section 12.12 Headings.
----------------------
Section headings are for convenience of reference only and, except as a
means of identification of reference, shall in no way affect the interpretation
of this Agreement.
Section 12.13 Survival.
----------------------
All representations and warranties made by Borrower herein shall
survive delivery of the Debenture and the making of the Loans.
Section 12.14 Multiple Counterparts.
-----------------------------------
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart.
Section 12.15 Knowledge of Borrower.
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As used herein or in any of the other Loan Documents, all references to
"Borrower's best knowledge" or "to the knowledge of Borrower" or words or
phrases of similar import (whether or not modified by any additional phrase)
shall in each case mean the knowledge of Borrower, the Subsidiaries or their
respective executive officers, directors and principal shareholders.
Section 12.16 Notices.
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Any notices or other communications required or permitted to be given
by this Agreement or any other documents and instruments referred to herein must
be (i) given in writing and personally delivered, mailed by prepaid certified or
registered mail or sent by overnight service, such as FedEx, or (ii) made by
telex or facsimile transmission delivered or transmitted to the party to whom
such notice or communication is directed, with confirmation thereupon given in
writing and personally delivered or mailed by prepaid certified or registered
mail.
If to Borrower to:
▇▇▇▇▇▇ Corp.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone:
Facsimile:
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender to:
BFSUS Special Opportunities Trust PLC
c/o Renaissance Capital Group, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇-▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Renaissance US Growth & Income Trust PLC
do Renaissance Capital Group, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇-▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Agent to:
Renaissance Capital Group, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇-▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice delivered personally in the manner provided herein will be
deemed given to the party to whom it is directed upon the party's (or its
agent's) actual receipt. Any notice addressed and mailed in the manner provided
herein will be deemed given to the party to whom it is addressed at the close of
business, local time of the recipient, on the fourth business day after the day
it is placed in the mail, or, if earlier, the time of actual receipt.
Section 12.17 Governing Law.
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THIS LOAN AGREEMENT HAS BEEN PREPARED, IS BEING EXECUTED AND DELIVERED,
AND IS INTENDED TO BE PERFORMED IN THE STATE OF TEXAS, AND THE SUBSTANTIVE LAWS
OF SUCH STATE AND THE APPLICABLE FEDERAL LAWS OF THE UNITED STATES OF AMERICA
SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND INTERPRETATION OF THIS
LOAN AGREEMENT.
[The remainder of this page is intentionally left blank; signature page
follows.]
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
executed and delivered, as of the date and year first above written.
BORROWER:
▇▇▇▇▇▇ CORP.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
LENDER:
BFSUS SPECIAL OPPORTUNITIES TRUST PLC
By: ____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Director
RENAISSANCE US GROWTH & INCOME TRUST PLC
By: ____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Director
AGENT:
RENAISSANCE CAPITAL GROUP, INC.
By: ____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President and CEO
SCHEDULES TO CONVERTIBLE LOAN AGREEMENT
Schedule 2.08 Schedule of Brokers/Finders
Schedule 4.03 Schedule of Conflicts or Consents
Schedule 4.05 Schedule of Permitted Liens
Schedule 4.06 Schedule of Material Adverse Change
Schedule 4.08 Schedule of Material Agreements
Schedule 4.09 Schedule of Litigation
Schedule 4.10 Schedule of Unpaid Taxes
Schedule 4.11 Schedule of Capitalization
Schedule 4.13 Schedule of Employee Matters
Schedule 4.14 Schedule of Employee Benefit Plans
Schedule 4.15 Schedule of Compliance Laws Matters
Schedule 4.16 Schedule of License and Permits
Schedule 4.17 Schedule of Contracts
Schedule 4.19 Schedule of Agreements between Borrower and any of
its officers, directors, and principal
shareholders, including employment agreements
Schedule 4.20 Schedule of Subsidiaries
Schedule 4.21 Schedule of Casualties
Schedule 4.24 Schedule of Corporate Names
Schedule 4.25 Schedule of Insurance
Schedule 4.27 Schedule of Real Property
Schedule 4.28 Schedule of Environmental Matters
Schedule 5.18 Schedule of Ownership of Subsidiaries
Schedule 6.01 Schedule of Limitation on Indebtedness
Schedule 6.05 Schedule of Transactions with Affiliates
Schedule 7.01 Schedule of Financial Ratios