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EXHIBIT 10.33
EXECUTION FORM
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▇▇▇▇▇▇▇-▇▇▇▇▇▇, INC.
$15,000,000
12% SENIOR NOTES DUE JUNE 22, 2006
TO COMBINED INSURANCE COMPANY OF AMERICA
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NOTE PURCHASE AGREEMENT
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DATED AS OF JUNE 22, 2000
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TABLE OF CONTENTS
PAGE
1. AUTHORIZATION OF NOTES AND WARRANTS.................................................1
2. SALE AND PURCHASE OF NOTES AND ISSUANCE OF WARRANTS.................................1
3. CLOSING.............................................................................2
4. CONDITIONS TO CLOSING...............................................................2
4.1. Representations and Warranties...............................................2
4.2. Performance; No Default......................................................2
4.3. Compliance Certificates......................................................3
4.4. Opinion of Counsel...........................................................3
4.5. Purchase Permitted By Applicable Law, etc....................................3
4.6. Sale of Other Notes; Issuance of Other Warrants..............................3
4.7. Payment of Processing Fee and Special Counsel Fees...........................3
4.8. Private Placement Number.....................................................4
4.9. Changes in Corporate Structure...............................................4
4.10. Evidence Regarding Pari Passu Ranking; Evidence Regarding Senior Ranking.....4
4.11. Agreement Regarding Covenant to Not Compete..................................4
4.12. Proceedings and Documents....................................................4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................5
5.1. Organization; Power and Authority............................................5
5.2. Authorization, etc...........................................................5
5.3. Disclosure...................................................................5
5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates.............6
5.5. Financial Statements.........................................................6
5.6. Compliance with Laws, Other Instruments, etc.................................7
5.7. Governmental Authorizations, etc.............................................7
5.8. Litigation; Observance of Agreements, Statutes and Orders....................7
5.9. Taxes........................................................................7
5.10. Title to Property; Leases....................................................8
5.11. Licenses, Permits, etc.......................................................8
5.12. Compliance with ERISA........................................................8
5.13. Private Offering by the Company.............................................10
5.14. Use of Proceeds; Margin Regulations.........................................10
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TABLE OF CONTENTS
(CONTINUED)
PAGE
5.15. Existing Indebtedness; Future Liens.........................................10
5.16. Foreign Assets Control Regulations, etc.....................................11
5.17. Status under Certain Statutes...............................................11
5.18. Environmental Matters.......................................................11
5.19. Capital Stock...............................................................11
5.20. Solvency....................................................................12
6. REPRESENTATIONS OF THE PURCHASER...................................................13
6.1. Purchase for Investment.....................................................13
6.2. Source of Funds.............................................................13
6.3. Subsequent Holders..........................................................14
7. INFORMATION AS TO COMPANY..........................................................14
7.1. Financial and Business Information..........................................14
7.2. Officer's Certificate.......................................................17
7.3. Inspection..................................................................18
7.4. Observer Rights.............................................................18
8. PREPAYMENT OF THE NOTES............................................................18
8.1. Required Prepayments - Change of Control or Material Change.................18
8.2. Optional Prepayments........................................................20
8.3. Maturity; Surrender, etc....................................................20
8.4. Purchase of Notes...........................................................20
9. AFFIRMATIVE COVENANTS..............................................................20
9.1. Compliance with Law.........................................................21
9.2. Insurance...................................................................21
9.3. Maintenance of Properties...................................................21
9.4. Payment of Taxes and Claims.................................................21
9.5. Corporate Existence, etc....................................................22
9.6. Key Man Insurance...........................................................22
10. NEGATIVE COVENANTS.................................................................22
10.1. Transactions with Affiliates................................................22
10.2. [Reserved]..................................................................22
10.3. Minimum Interest Coverage Ratio.............................................22
10.4. Maximum Leverage Ratio......................................................23
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TABLE OF CONTENTS
(CONTINUED)
PAGE
10.5. Maximum Investment in KWGT..................................................23
10.6. Maximum Direct Real Estate Investments......................................23
10.7. Liens.......................................................................23
10.8. Indebtedness................................................................25
10.9. Dividends...................................................................26
10.10. Asset Disposition...........................................................26
10.11. Affiliate Compensation......................................................26
11. EVENTS OF DEFAULT..................................................................26
12. REMEDIES ON DEFAULT, ETC...........................................................28
12.1. Acceleration................................................................28
12.2. Other Remedies..............................................................29
12.3. Rescission..................................................................29
12.4. No Waivers or Election of Remedies, Expenses, etc...........................30
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES......................................30
13.1. Registration of Notes.......................................................30
13.2. Transfer and Exchange of Notes..............................................30
13.3. Replacement of Notes........................................................31
14. PAYMENTS ON NOTES..................................................................31
14.1. Place of Payment............................................................31
14.2. Home Office Payment.........................................................31
15. EXPENSES, ETC......................................................................32
15.1. Transaction Expenses........................................................32
15.2. Survival....................................................................32
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.......................32
17. AMENDMENT AND WAIVER...............................................................33
17.1. Requirements................................................................33
17.2. Solicitation of Holders of Notes............................................33
17.3. Binding Effect, etc.........................................................33
17.4. Notes held by Company, etc..................................................34
18. NOTICES............................................................................34
19. REPRODUCTION OF DOCUMENTS..........................................................34
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TABLE OF CONTENTS
(CONTINUED)
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20. CONFIDENTIAL INFORMATION...........................................................35
21. SUBSTITUTION OF PURCHASER..........................................................35
22. MISCELLANEOUS......................................................................36
22.1. Successors and Assigns......................................................36
22.2. Payments Due on Non-Business Days...........................................36
22.3. Severability................................................................36
22.4. Construction................................................................36
22.5. Counterparts................................................................36
22.6. Governing Law...............................................................37
22.7. Consent to Jurisdiction and Venue...........................................37
22.8. Waiver of Jury Trial........................................................37
22.9. eProperty, Inc. and ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Japan, K.K...............................37
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▇▇▇▇▇▇▇-▇▇▇▇▇▇, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
12% Senior Notes due June 22, 2006
As of June 22, 2000
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
▇▇▇▇▇▇▇-▇▇▇▇▇▇, Inc., a Delaware corporation (the "COMPANY"),
agrees with you as follows:
1. AUTHORIZATION OF NOTES AND WARRANTS.
(a) The Company has duly authorized the issuance and sale of
$15,000,000 aggregate principal amount of its 12% Senior Notes due June 22, 2006
(the "NOTES", such term to include any such notes issued in substitution
therefor pursuant to Section 13 of this Agreement or the Other Agreements (as
hereinafter defined)). The Notes shall be substantially in the form set out in
Exhibit 1(a), with such changes therefrom, if any, as may be approved by you and
the Company. Certain capitalized terms used in this Agreement are defined in
Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.
(b) The Company has also duly authorized the issuance of its
warrants to the Purchasers of the Notes, which will entitle the holders thereof
to purchase from the Company at any time on or after the date of issuance
thereof and subject to the terms and conditions of such warrants, 79,718 shares
of Common Stock of the Company at an exercise price of $6.25 per share (such
warrants, together with all warrants delivered in substitution or exchange
therefor, being referred to herein as the "WARRANTS"). The Warrants shall be
substantially in the form set out in Exhibit 1(b), with such changes therefrom,
if any, as may be approved by you and the Company.
2. SALE AND PURCHASE OF NOTES AND ISSUANCE OF WARRANTS.
(a) Subject to the terms and conditions of this Agreement, the
Company will issue and sell to you and you will purchase from the Company, at
the Closing provided for in Section 3, Notes in the principal amount specified
opposite your name in Schedule A at the purchase price of 100% of the principal
amount thereof. Contemporaneously with entering into this Agreement, the Company
is entering into separate Note Purchase Agreements (the "OTHER AGREEMENTS")
identical with this Agreement with each of the other purchasers named in
Schedule A (the "OTHER PURCHASERS"), providing for the sale at such Closing to
each of the Other Purchasers of Notes in the principal amount specified opposite
its name in Schedule A. Your obligation hereunder and the obligations of the
Other Purchasers under the Other Agreements are several and not joint
obligations and you shall have no obligation under any
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Other Agreement and no liability to any Person for the performance or
non-performance by any Other Purchaser thereunder.
(b) In connection with your purchase of the Notes, the Company
will issue to you at the Closing provided for in Section 3, Warrants for the
purchase of the aggregate number of shares of Common Stock specified opposite
your name in Schedule A.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the
Other Purchasers and the issuance of the Warrants shall by delivery of the
closing documents to the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at a closing (the "CLOSING") on June 22,
2000 or on such other Business Day thereafter as may be agreed upon by the
Company and you and the Other Purchasers. At the Closing the Company will
deliver to you the Notes to be purchased by you in the form of a single Note (or
such greater number of Notes in denominations of at least $100,000 as you may
request) and a single Warrant each dated the date of the Closing and registered
in your name (or in the name of your nominee), against delivery by you to the
Company or its order of immediately available funds in the amount of the
purchase price therefor by wire transfer of immediately available funds for the
account of the Company to account number 8100-0424 at East-West Bank, ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ABA# ▇▇▇-▇▇▇-▇▇▇, for the
benefit of ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Operating Account. If at the Closing the Company shall
fail to tender such Notes and Warrants to you as provided above in this Section
3, or any of the conditions specified in Section 4 shall not have been fulfilled
to your satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to
you at the Closing and to accept the Warrant is subject to the fulfillment to
your satisfaction, prior to or at the Closing, of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this
Agreement shall be correct when made and at the time of the Closing.
4.2. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements
and conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and after giving effect to the issue and
sale of the Notes (and the application of the proceeds thereof as contemplated
by Schedule 5.14) and the issuance of the Warrants no Default or Event of
Default shall have occurred and be continuing. Neither the Company nor any
Subsidiary shall have entered into any transaction since the date of the
Memorandum that would have been prohibited by Sections 10.1, 10.7, 10.8, 10.9 or
10.10 hereof had such Sections applied since such date.
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4.3. COMPLIANCE CERTIFICATES.
(a) Officer's Certificate. The Company shall have delivered to you
an Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to
you a certificate certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery of
the Notes, the Warrants and the Agreements.
4.4. OPINION OF COUNSEL.
You shall have received opinions in form and substance
satisfactory to you, dated the date of the Closing from White & Case, LLP,
counsel for the Company, covering the matters set forth in Exhibit 4.4 and
covering such other matters incident to the transactions contemplated hereby as
you or your counsel may reasonably request (and the Company hereby instructs its
counsel to deliver such opinion to you).
4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (i) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the New
York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (ii) not
violate any applicable law or regulation (including, without limitation,
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and (iii) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.6. SALE OF OTHER NOTES; ISSUANCE OF OTHER WARRANTS.
Contemporaneously with the Closing the Company shall (a) sell to
the Other Purchasers and the Other Purchasers shall purchase the Notes to be
purchased by them at the Closing as specified in Schedule A, and (b) issue to
the Other Purchasers the Warrants to be issued to them at the Closing as
specified in Schedule A.
4.7. PAYMENT OF PROCESSING FEE AND SPECIAL COUNSEL FEES.
(a) The Company shall have paid to you on or before the Closing a
one time, non-refundable processing fee in connection with this Agreement in an
amount equal to two percent (2%) of the aggregate principal amount of the Notes
to be purchased by you at the Closing (such fee, the "PROCESSING FEE").
(b) Without limiting the provisions of Section 15.1, the Company
shall have paid on or before the Closing the fees, charges and disbursements of
your special counsel,
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP to the extent reflected in a statement of
such counsel rendered to the Company at least one Business Day prior to the
Closing.
4.8. PRIVATE PLACEMENT NUMBER.
A Private Placement number issued by Standard & Poor's CUSIP
Service Bureau (in cooperation with the Securities Valuation Office of the
National Association of Insurance Commissioners) shall have been obtained for
the Notes.
4.9. CHANGES IN CORPORATE STRUCTURE.
Except as specified in Schedule 4.9, the Company shall not have
changed its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 5.5.
4.10. EVIDENCE REGARDING PARI PASSU RANKING; EVIDENCE REGARDING SENIOR RANKING.
The Company shall provide evidence in form and substance
satisfactory to the holders of the Notes that (a) the Indebtedness evidenced by
the Notes shall be pari passu with the Indebtedness of the Company arising under
(i) that certain Credit Agreement, dated as of July 9, 1999 between the Company
and East-West Bank (as amended and as further amended, restated or otherwise
modified from time to time, the "EAST-WEST BANK CREDIT AGREEMENT") and (ii) that
certain Revolving Loan Agreement dated as of July 2, 1999 between the Company
and Tokai Bank of California (as amended, restated or otherwise modified from
time to time, the "TOKAI BANK LOAN AGREEMENT"); and (b) the Indebtedness
evidenced by the Notes shall be senior to the ▇▇▇▇▇▇▇-▇▇▇▇▇▇, Inc. Convertible
Subordinated Note due 2006 dated April 15, 1999 made by the Company and payable
to (i) ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Strategic Partners Fund, L.P. in the original principal
amount of $7,106,000 and (ii) Strategic Associates, L.P. in the original
principal amount of $394,000 (collectively, the "▇▇▇▇▇▇ CONVERTIBLE SUBORDINATED
NOTE").
4.11. AGREEMENT REGARDING COVENANT TO NOT COMPETE.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall have entered into an agreement regarding
covenant not to compete (the "Non-Compete Agreement"), in form and substance
satisfactory to the holders of the Notes, whereby ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall
agree that at all times during his employment with the Company, he will not
compete with, solicit business from, or solicit personnel from, the Company.
4.12. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation, and is
duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The Company has the corporate power and authority to
own or hold under lease the properties it purports to own or hold under lease,
to transact the business it transacts and proposes to transact, to offer, issue,
sell and deliver (as applicable) the Notes and the Warrants, to execute and
deliver this Agreement, the Other Agreements, the Notes and the Warrants and to
perform the provisions hereof and thereof.
5.2. AUTHORIZATION, ETC.
This Agreement, the Other Agreements, the Notes and the Warrants
have been duly authorized by all necessary corporate action on the part of the
Company, and this Agreement constitutes, and upon execution and delivery thereof
each Note and Warrant will constitute, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.3. DISCLOSURE.
The Company, through its agent, Chase Securities Inc., has
delivered to you and each Other Purchaser a copy of a Private Placement
Memorandum, dated February 2000 (the "MEMORANDUM"), relating to the transactions
contemplated hereby. The Memorandum fairly describes, in all material respects,
the general nature of the business and principal properties of the Company and
its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the
Memorandum, the documents, certificates or other writings delivered to you by or
on behalf of the Company in connection with the transactions contemplated hereby
and the financial statements listed in Schedule 5.5, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Memorandum
or as expressly described in Schedule 5.3, or in one of the documents,
certificates or other writings identified therein, or in the financial
statements listed in Schedule 5.5, since December 31, 1999, there has been no
change in the financial condition, operations, business, properties or prospects
of the Company or any Subsidiary except changes that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
There is no fact known to the Company that could reasonably be expected to have
a Material Adverse Effect that has not been set forth herein or in the
Memorandum or in the other documents, certificates and other writings delivered
to you by or on behalf of the Company specifically for use in
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connection with the transactions contemplated hereby. The Company makes no
representations as to the projections of the Company set forth in the
Memorandum, other than that such projections are based on information that the
Company believes to be accurate and were calculated in a manner the Company
believes to be reasonable.
5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its Capital Stock outstanding owned by the
Company and each other Subsidiary, (ii) of the Company's Affiliates, other than
Subsidiaries, and (iii) of the Company's directors and senior officers.
(b) All of the outstanding shares of Capital Stock of each
Subsidiary shown in Schedule 5.4 as being owned by the Company and its
Subsidiaries have been validly issued, are fully paid and nonassessable and are
owned by the Company or another Subsidiary free and clear of any Lien (except as
otherwise disclosed in Schedule 5.4).
(c) Each Material Subsidiary is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization, and is duly qualified as a foreign corporation
or other legal entity and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Each such
Material Subsidiary has the corporate or other power and authority to own or
hold under lease the properties it purports to own or hold under lease and to
transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements listed
on Schedule 5.15 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of Capital Stock of such Subsidiary.
5.5. FINANCIAL STATEMENTS.
The Company has delivered to each Purchaser copies of the
financial statements of the Company and its Consolidated Subsidiaries. All of
said financial statements (including in each case the related schedules and
notes) fairly present in all material respects the consolidated financial
position of the Company and its Consolidated Subsidiaries as of the respective
dates specified in such Schedule and the consolidated results of their
operations and cash flows for the respective periods so specified and have been
prepared in accordance with GAAP consistently applied throughout the periods
involved except as set forth in the notes thereto (subject, in the case of any
interim financial statements, to normal year-end adjustments).
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5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement, the Other Agreements, the Notes and the Warrants does not (i)
contravene, result in any breach of, or constitute a default under, or result in
the creation of any Lien in respect of any Property of the Company or any
Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, corporate charter or by-laws, or any other agreement or
instrument to which the Company or any Subsidiary is bound or by which the
Company or any Subsidiary or any of their respective properties may be bound or
affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or (iii) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary, the failure
to comply with any of clauses (i), (ii) and (iii) could reasonably be expected
to have a Material Adverse Effect.
5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing
or declaration with, any Governmental Authority is required in connection with
the execution, delivery or performance by the Company of this Agreement, the
Notes or the Warrants.
5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in Schedule 5.8, there are no actions,
suits or proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company or any Subsidiary or any Property of the
Company or any Subsidiary in any court or before any arbitrator of any kind or
before or by any Governmental Authority that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.9. TAXES.
The Company and its Subsidiaries have filed all tax returns that
are required to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable on such returns and all other taxes and assessments
levied upon them or their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent, except for any taxes and assessments (i) the amount of
which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Company has not received any written notices from any tax authority relating
to any issue that could lead to an assessment with respect to taxes. The
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charges, accruals and reserves on the books of the Company and its Subsidiaries
in respect of Federal, state or other taxes for all fiscal periods are adequate.
The Federal income tax liabilities of the Company and its Subsidiaries have been
reported to the Internal Revenue Service and paid for all fiscal years up to and
including the fiscal year ended December 31, 1998.
5.10. TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.
5.11. LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 5.11,
(a) The Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others which
could reasonably be expected to have a Material Adverse Effect;
(b) To the best knowledge of the Company, no product of the
Company infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, service ▇▇▇▇, trademark, trade name or other
right owned by any other Person where such infringement could reasonably be
expected to have a Material Adverse Effect; and
(c) To the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its Subsidiaries
with respect to any patent, copyright, service ▇▇▇▇, trademark, trade name or
other right owned or used by the Company or any of its Subsidiaries.
5.12. COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in Section 3 of ERISA), and no event, transaction or condition
has occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as could not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect.
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(b) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans), determined as of the end of
such Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Plan's most recent actuarial
valuation report, did not exceed the aggregate current value of the assets of
such Plan allocable to such benefit liabilities. The term "BENEFIT LIABILITIES"
has the meaning specified in Section 4001 of ERISA and the terms "CURRENT VALUE"
and "PRESENT VALUE" have the meaning specified in Section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under Section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that could, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.
(d) The expected postretirement benefit obligation (determined as
of the last day of the Company's most recently ended fiscal year in accordance
with Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and its Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the issuance
and sale of the Notes hereunder will not constitute or result in any non-exempt
prohibited transaction under Section 406 of ERISA or any transaction in
connection with which a tax could be imposed pursuant to Section
4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first
sentence of this Section 5.12(e) is made in reliance upon and subject to the
accuracy of your representation in Section 6.2 as to the sources of the funds
used to pay the purchase price of the Notes to be purchased by you and with
respect to any transferee, the accuracy of any representation made by such
transferee pursuant to Section 6.2(b) as to the source of the funds to be used
to pay the purchase price of the Notes.
(f) The Company and each ERISA Affiliate have performed all of
their respective Material obligations under all Plans.
(g) No statement, either written or oral, has been made by the
Company or by any ERISA Affiliate to any Person with regard to any Plan that was
not in accordance with the Plan that could have a Material adverse economic
consequence to the Company or to an ERISA Affiliate.
(h) Except for an individual employee's medical condition of which
the Company or an ERISA Affiliate have no knowledge, no event has occurred or
circumstance exists that could result in a Material increase in costs of any
Plan.
(i) Other than claims for benefits submitted by participants or
beneficiaries, no claim or legal proceeding that could have a Material adverse
economic consequence to the Company or to an ERISA Affiliate, is pending or, to
the best knowledge of the Company of an ERISA Affiliate, is threatened.
(j) Each qualified retirement Plan of the Company is qualified in
form and operation under IRC Section 401(a); each trust for each such Plan is
exempt from federal income tax
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under IRC Section 501(a), and every voluntary employees beneficiary association
under Code Section 501(c)(9) is exempt from federal income tax. No event has
occurred or circumstance exists that will or could give rise to disqualification
or loss of tax-exempt status of any such Plan or trust.
5.13. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered
the Notes, the Warrants or any similar securities for sale to, or solicited any
offer to buy any of the same from, or otherwise approached or negotiated in
respect thereof with, any person other than you, the Other Purchasers and not
more than 70 other Institutional Investors, each of which has been offered the
Notes at a private sale for investment. Neither the Company nor anyone acting on
its behalf has taken, or will take, any action that would subject the issuance
or sale of the Notes or the issuance of the Warrants to the registration
requirements of Section 5 of the Securities Act.
5.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes to
pay transaction fees and other closing expenses not to exceed $1,000,000, and
thereafter to refinance certain of the Company's existing Indebtedness as set
forth in Schedule 5.14. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220). Margin stock does not constitute more than 25% of the value of the
consolidated assets of the Company and its Subsidiaries and the Company does not
have any present intention that margin stock will constitute more than 25% of
the value of such assets. As used in this Section, the terms "MARGIN STOCK" and
"PURPOSE OF BUYING OR CARRYING" shall have the meanings assigned to them in said
Regulation G.
5.15. EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Except as described therein, Schedule 5.15 sets forth a
complete and correct list of all outstanding Indebtedness of the Company and its
Subsidiaries as of the date hereof since which date there has been no Material
change in the amounts, interest rates, sinking funds, installment payments or
maturities of the Indebtedness of the Company or its Subsidiaries. Neither the
Company nor any Subsidiary is in default and no waiver of default is currently
in effect, in the payment of any principal or interest on any Indebtedness of
the Company or such Subsidiary and no event or condition exists with respect to
any Indebtedness of the Company or any Subsidiary that would permit (or that
with notice or the lapse of time, or both, would permit) one or more Persons to
cause such Indebtedness to become due and payable before its stated maturity or
before its regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor
any Subsidiary has agreed or consented to cause or permit in the future (upon
the happening of a contingency or otherwise) any of its Property, whether now
owned or hereafter acquired, to be subject to a Lien not permitted by Section
10.7.
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5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its use
of the proceeds thereof will violate the Trading with the Enemy Act, as amended,
or any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17. STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation
under the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended or the Federal Power Act, as amended.
5.18. ENVIRONMENTAL MATTERS.
Neither the Company nor any Subsidiary has knowledge of any claim
or has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of any
facts which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring on or
in any way related to real properties now or formerly owned, leased or operated
by any of them or to other assets or their use, except, in each case, such as
could not reasonably be expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or operated
by any of them and has not disposed of any Hazardous Materials in a manner
contrary to any Environmental Laws in each case in any manner that could
reasonably be expected to result in a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance with
applicable Environmental Laws, except where failure to comply could not
reasonably be expected to result in a Material Adverse Effect.
5.19. CAPITAL STOCK.
(a) The authorized Capital Stock of the Company consists of: (i)
50,000,000 shares of Common Stock, par value $.01 per share (the "COMMON STOCK")
which is Voting Stock and which is vested with all the voting rights to elect
directors of the Company, of which 9,100,162 shares are issued and outstanding;
and (ii) 5,000,000 shares of Preferred Stock, par value $.01 per share (the
"PREFERRED STOCK" and collectively with the Common Stock, the "STOCK"), zero
shares of which are issued and outstanding. All such outstanding shares have
been duly authorized, validly issued and are fully paid, nonassessable and free
of preemptive
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rights. No shares of Stock are held in the treasury of the Company. The Company
has duly authorized and reserved for issuance the Common Stock of the Company
issuable upon exercise of the Warrants.
(b) The Company has reserved 1,781,000 shares of Common Stock for
issuance to officers, directors, employees and consultants of the Company
pursuant to its Stock Option Plans duly adopted by the Board of Directors and
will reserve an additional 54,160 shares of Common Stock on or before December
31, 2000 (the "Stock Plans"). Of such reserved or to be reserved shares of
Common Stock, 264,500 shares have been issued pursuant to exercised options,
1,570,660 shares have been reserved for issuance pursuant to options which have
been granted and zero shares of Common Stock remain available for issuance to
officers, directors, employees and consultants pursuant to options which have
not yet been granted under the Stock Plans.
(c) Except for outstanding options issued pursuant to the Stock
Plans, and as listed in Schedule 5.19, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal or similar rights) or agreements, orally or in writing, for the purchase
or acquisition from the Company of any shares of its Capital Stock. No shares of
the Company's Capital Stock are held in trust. To the Company's knowledge, there
are no shareholder agreements with respect to the voting of any shares of the
Company's Capital Stock, except as described in Schedule 5.19.
(d) Except as described in Schedule 5.19, the Company has not
granted or agreed to grant any registration rights, including piggyback rights,
to any person or entity.
5.20. SOLVENCY.
The Company and each of its Material Subsidiaries is and,
immediately after giving effect to the issuance and sale of the Notes, the
issuance of the Warrants and the consummation of the other transactions
contemplated by this Agreement, will be, Solvent.
For purposes of this Section 5.20, the term "Solvent" shall mean,
with respect to any Person, that:
(a) the assets of such Person, at a fair valuation, exceed the
total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such Person;
(b) based on current projections, which are based on underlying
assumptions which provide a reasonable basis for the projections and which
reflect such Person's reasonable judgment based on present circumstances of the
most likely set of conditions and such Person's most likely course of action for
the period projected, such Person reasonably believes it has sufficient cash
flow to enable it to pay its debts as they mature;
(c) such Person does not have an unreasonably small capital with
which to engage in its anticipated business; and
(d) the obligations of such Person, if any, are not in default as
to principal and interest.
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6. REPRESENTATIONS OF THE PURCHASER.
6.1. PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes and acquiring the
Warrants for your own account or for one or more separate accounts maintained by
you or for the account of one or more pension or trust funds and not with a view
to the distribution thereof, provided that the disposition of your or their
Property shall at all times be within your or their control. You understand that
neither the Notes nor the Warrants nor the shares issuable upon exercise of the
Warrants have been registered under the Securities Act or securities laws of any
other applicable jurisdiction and may be resold only if registered pursuant to
the provisions of the Securities Act or if an exemption from registration and
qualification is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes or the Warrants nor the shares issuable upon
exercise of the Warrants. You represent that you are an "accredited investor" as
such term is defined in Rule 501 of Regulation D promulgated under the
Securities Act.
6.2. SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "SOURCE") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) you are an insurance company and the Source is an "insurance
company general account" as defined in Department of Labor Prohibited
Transaction Class Exemption ("PTCE"), issued July 12, 1995, and in respect
thereof you represent that there is no "employee benefit plan" (as defined in
Section 3(3) of ERISA and Section 4975(e)(1) of the Code, treating as a single
plan all plans maintained by the same employer or employee organization or
affiliate thereof) with respect to which the amount of the general account
reserves and liabilities of all contracts held by or on behalf of such plan
exceed ten percent (10%) of the total reserves and liabilities of such general
account (exclusive of separate account liabilities) plus surplus, as set forth
in the NAIC Annual Statement filed with your state of domicile; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTCE 90-1 (issued January 29, 1990), or (ii) a
bank collective investment fund, within the meaning of the PTCE 91-38 (issued
July 12, 1991) and, except as you have disclosed to the Company in writing
pursuant to this paragraph (b), no employee benefit plan or group of plans
maintained by the same employer or employee organization beneficially owns more
than 10% of all assets allocated to such pooled separate account or collective
investment fund; or
(c) the Source constitutes assets of an "investment fund" (within
the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM
Exemption), no employee benefit plan's assets that are included in such
investment fund, when combined with the assets of all other employee benefit
plans established or maintained by the same employer or by an affiliate (within
the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of the total
client assets
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managed by such QPAM, the conditions of Section I(c) and (g) of the QPAM
Exemption are satisfied, neither the QPAM nor a person controlling or controlled
by the QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity of
such QPAM and (ii) the names of all employee benefit plans whose assets are
included in such investment fund have been disclosed to the Company in writing
pursuant to this paragraph (c); or
(d) the Source is a governmental or church plan that is neither
covered by ERISA nor Section 4975 of the Code and neither the purchase of, nor
the subsequent holding of, the Notes will result in, arise from, constitute or
involve a transaction that is prohibited under applicable state or local law; or
(e) the Source is the assets of one or more Benefit Plans which
are managed by an "in-house asset manager", as that term is defined in PTCE
96-23 (issued April 10, 1996), and your purchase and holding of the Notes is
exempt under PTCE 96-23.
(f) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to this
paragraph (e); or
(g) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
6.3. SUBSEQUENT HOLDERS.
You, and each subsequent holder of any Note, covenant that you
will not dispose of the Notes to be purchased or any interest therein
(including, without limitation, any transfer by a change in the capacity in
which you hold your investment in such Notes) to any Person unless such Person
shall make all of the representations and warranties contained in Sections 6.1
and 6.2.
7. INFORMATION AS TO COMPANY.
7.1. FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes that is an
Institutional Investor the following:
(a) Quarterly Statements -- within 45 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the last
quarterly fiscal period of each such fiscal year), duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Consolidated Subsidiaries as at the end of such quarter, and
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(ii) consolidated statements of income (including a
detailed breakdown by each business segment of the Company), changes in
shareholders' equity and cash flows of the Company and its Consolidated
Subsidiaries, for such quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in all material
respects, the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified above of
copies of the Company's Quarterly Report on Form 10-Q prepared in compliance
with the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section 7.1(a);
(b) Annual Statements -- within 90 days after the end of each
fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Consolidated Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income (including a
detailed breakdown by each business segment of the Company), changes in
shareholders' equity and cash flows of the Company and its Consolidated
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied
A) by an opinion thereon of independent certified
public accountants of recognized national standing, which opinion
shall state that such financial statements present fairly, in all
material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and
have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted
auditing standards, and that such audit provides a reasonable
basis for such opinion in the circumstances, and
(B) a certificate of such accountants stating that
they have reviewed this Agreement and stating further whether, in
making their audit, they have become aware of any condition or
event that then constitutes a Default or an Event of Default as a
result of the Company's failure to comply with the financial
covenants set forth in Sections 10.3 or 10.4, and, if they are
aware that any such condition or event then exists, specifying the
nature and period of the existence thereof (it being understood
that such accountants shall not be liable, directly or indirectly,
for any failure to obtain knowledge of any Default or Event of
Default unless such accountants should have obtained knowledge
thereof in making an audit in accordance with generally accepted
auditing standards or did not make such an audit),
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provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year (together with the
Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3
under the Exchange Act) prepared in accordance with the requirements therefor
and filed with the Securities and Exchange Commission, together with the
accountant's certificate described in clause (B) above, shall be deemed to
satisfy the requirements of this Section 7.1(b);
(c) Annual Budget - as soon as practicable, and in no event later
than 30 days after the commencement of each fiscal year of the Company, a copy
of the Company's business plan and budget for the upcoming fiscal year as
approved by the Company's Board of Directors, in such form and substance
reasonably acceptable to the Required Holders;
(d) SEC and Other Reports -- promptly upon their becoming
available, one copy of (i) each financial statement, report, notice or proxy
statement sent by the Company or any Subsidiary to public securities holders
generally, and (ii) each regular or periodic report, each registration statement
that shall have become effective (without exhibits except as expressly requested
by such holder), and each final prospectus and all amendments thereto filed by
the Company or any Subsidiary with the Securities and Exchange Commission and of
all press releases and other statements made available generally by the Company
or any Subsidiary to the public concerning developments that are Material;
(e) Notice of Default or Event of Default
(i) Promptly, and in any event within five days after a
Responsible Officer becoming aware of the existence of any Default or
that any Person has given any notice or taken any action with respect to
a claimed default hereunder or that any Person has given any notice or
taken any action with respect to a claimed default of the type referred
to in Section 11(f), a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes to
take with respect thereto; and
(ii) Promptly, and in any event within five days after a
Responsible Officer becoming aware of the existence of any Event of
Default or that any Person has given any notice or taken any action with
respect to a claimed default hereunder or that any Person has given any
notice or taken any action with respect to a claimed default of the type
referred to in Section 11(f), a written notice specifying the nature and
period of existence thereof and what action the Company is taking or
proposes to take with respect thereto;
(f) ERISA Matters -- promptly, and in any event within five days
after a Responsible Officer becoming aware of any of the following, a written
notice setting forth the nature thereof and the action, if any, that the Company
or an ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in effect on
the date hereof; or
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(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan; or
(iii) any event, transaction or condition that could result
in the incurrence of any liability by the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of
the Code relating to employee benefit plans, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if
such liability or Lien, taken together with any other such liabilities or Liens
then existing, could reasonably be expected to have a Material Adverse Effect;
(g) Notices from Governmental Authority -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the Company or
any Subsidiary from any Federal or state Governmental Authority relating to any
order, ruling, statute or other law or regulation that could reasonably be
expected to have a Material Adverse Effect; and
(h) Requested Information -- with reasonable promptness, such
other data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes and the Warrants as from time to time
may be reasonably requested by any such holder of Notes and Warrants.
7.2. OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.3 through Section 10.6 and
Section 10.8 hereof, inclusive, during the quarterly or annual period covered by
the statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum amount,
ratio or percentage, as the case may be, permissible under the terms of such
Sections, and the calculation of the amount, ratio or percentage then in
existence); and
(b) Event of Default -- a statement that such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his or her
supervision, a review of the transactions and conditions of the Company and its
Subsidiaries from the beginning of the quarterly or annual period covered by the
statements then being furnished to the date of the certificate and that such
review shall not have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of Default or, if any
such condition or event existed or exists (including, without limitation, any
such event or condition resulting from the failure of the Company or any
Subsidiary to comply with any Environmental Law),
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specifying the nature and period of existence thereof and what action the
Company shall have taken or proposes to take with respect thereto.
7.3. INSPECTION.
The Company shall permit the representatives of each holder of
Notes that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists,
at the expense of such holder and upon reasonable prior notice to the Company,
to visit the principal executive office of the Company, to discuss the affairs,
finances and accounts of the Company and its Subsidiaries with the Company's
officers, and (with the consent of the Company, which consent will not be
unreasonably withheld) its independent public accountants, and (with the consent
of the Company, which consent will not be unreasonably withheld) to visit the
other offices and properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at
the expense of the Company to visit and inspect any of the offices or properties
of the Company or any Subsidiary, to examine all their respective books of
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers and independent public accountants (and by this
provision the Company authorizes said accountants to discuss the affairs,
finances and accounts of the Company and its Subsidiaries), all at such times
and as often as may be requested.
7.4. OBSERVER RIGHTS.
So long as the Notes are outstanding, then a representative
designated to the Company in writing of each holder of Notes that is an
Institutional Investor holding Notes (alone or together with other Institutional
Investors) in an aggregate principal amount equal to or greater than $5,000,000:
(a) shall have the right, at the expense of such holder or group of holders, to
attend all Company Board of Director meetings as observers (including special
meetings and meeting (both regular and special) held via teleconference or by
any other means), (b) shall be entitled to all notices of the same; and (c)
shall be entitled to receive all other information made generally available to
the members of the Board of Directors. Upon the request of the Company, each
holder or group of holders of Notes that has a representative observing such
meetings shall execute a confidentiality agreement, in form and substance
reasonably satisfactory to the Company, whereby such holder or group of holders
shall agree to keep the content of each such meeting confidential in accordance
with Section 20.
8. PREPAYMENT OF THE NOTES.
8.1. REQUIRED PREPAYMENTS -- CHANGE OF CONTROL OR MATERIAL CHANGE.
(a) Notice of Change of Control or Material Change. The Company
will, within 5 Business Days after any Responsible Officer has knowledge of the
occurrence of any Change of Control or Material Change, give written notice
thereof to each holder of Notes unless
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notice in respect of such Change of Control or Material Change shall have been
given pursuant to Section 8.1(b). If a Change of Control or Material Change has
occurred, such notice shall contain and constitute an offer to prepay Notes as
described in Section 8.1(c) and shall be accompanied by the certificate
described in Section 8.1(g).
(b) Condition to Company Action. The Company will not take any
action that consummates or finalizes any Change of Control or Material Change
unless (i) at least 25 days prior to such action it shall have given each holder
of Notes written notice containing a constituting an offer to prepay Notes as
described in Section 8.1(c), accompanied by a certificate described in Section
8.1(g) and (ii) contemporaneously with such action, it prepays all Notes
(together with the Prepayment Premium, if any) required to prepaid in accordance
with this Section 8.1.
(c) Offer to Prepay Notes. The offer to prepay Notes contemplated
by Section 8.1(a) and Section 8.1(b) shall be an offer to prepay, in accordance
with and subject to this Section 8.1, all, but not less than all, of the Notes
held by each holder (in this case only, "holder" in respect of any Note
registered in the name of a nominee for a disclosed beneficial owner shall mean
such beneficial owner) on the date specified in such offer (the "PROPOSED
PREPAYMENT DATE"). If such Proposed Prepayment Date is in connection with an
offer contemplated by Section 8.1(a), such date shall not be less than 25 days
and not more than 30 days after the date of such offer (if the Proposed
Prepayment Date shall not be specified in such offer, the Proposed Prepayment
Date shall be the thirtieth day after the date of such offer).
(d) Acceptance. A holder of Notes may accept the offer to prepay
made pursuant to this Section 8.1 by causing a notice of such acceptance to be
delivered to the Company at least 5 Business Days prior to the Proposed
Prepayment Date. A failure by a holder of Notes to timely respond to an offer to
prepay pursuant to this Section 8.1 shall be deemed to constitute a refusal of
such offer by such holder.
(e) Prepayment. Prepayment of the Notes to be prepaid pursuant to
this Section 8.1 shall be at 100% of the principal amount of such Notes,
together with (i) interest on such Notes accrued and unpaid on such date and
(ii) the Prepayment Premium (if any).
(f) Deferral Pending Change of Control or Material Change. The
obligation of the Company to prepay Notes pursuant to the offers required by
Section 8.1(b) and accepted in accordance with Section 8.1(d) is subject to the
occurrence of such Change of Control or Material Change in respect of which such
offers and acceptances shall have been made. In the event such Change of Control
or Material Change does not occur on the Proposed Prepayment Date in respect
thereof, the prepayment shall be deferred until and shall be made on the date on
which such Change of Control or Material Change occurs. The Company shall keep
each holder of the Notes reasonably and timely informed of (i) any such deferral
of the date of prepayment, (ii) the date on which such Change of Control or
Material Change and the prepayment are expected to occur, and (iii) any
determination by the Company that efforts to effect such Change of Control or
Material Change have ceased or been abandoned (in which case the offers and
acceptances made pursuant to this Section 8.1 shall be deemed rescinded).
(g) Officer's Certificate. Each offer to prepay the Notes pursuant
to this Section 8.1 shall be accompanied by a certificate, executed by a
Responsible Officer and dated
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the date of such offer, specifying: (i) the Proposed Prepayment Date; (ii) that
such offer is made pursuant to this Section 8.1; (iii) the principal amount of
each Note offered to be prepaid; (iv) the interest that would be due on each
Note offered to be prepaid, accrued to the Proposed Prepayment Date; (v) the
amount of the Prepayment Premium (if any); and (vi) in reasonable detail, the
nature and date or proposed date of the Change of Control or Material Change.
8.2. OPTIONAL PREPAYMENTS.
The Company may, at its option, upon notice as provided below,
prepay in full all, but not less than all, of the Notes; provided, however, that
no prepayment shall occur hereunder prior to the second anniversary of the
Closing; and provided, further, that if any such prepayment occurs after the
second anniversary of the Closing but prior to the fifth anniversary of the
Closing, such prepayment shall be accompanied by payment of the Prepayment
Premium with respect to such principal amount. The Company will give each holder
of Notes written notice of each optional prepayment under this Section 8.2 not
less than 30 days and not more than 60 days prior to the date fixed for such
prepayment. Each such notice shall specify such date, the aggregate principal
amount of the Notes to be prepaid on such date, the principal amount of each
Note held by such holder to be prepaid, and the interest and Prepayment Premium
(if any) to be paid on the prepayment date with respect to such principal amount
being prepaid.
8.3. MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section
8, the principal amount of each Note to be prepaid shall (subject to Section
8.1(f)) mature and become due and payable on the date fixed for such prepayment,
together with interest on such principal amount accrued to such date and the
applicable Prepayment Premium, if any. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest and Prepayment Premium, if any, as aforesaid,
interest on such principal amount shall cease to accrue. Any Note paid or
prepaid in full shall be surrendered to the Company and cancelled and shall not
be reissued, and no Note shall be issued in lieu of any prepaid principal amount
of any Note.
8.4. PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate to
purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of
the outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
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9.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.2. INSURANCE.
The Company will and will cause each of its Subsidiaries to
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
9.3. MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Subsidiaries to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section shall not prevent
the Company or any Subsidiary from discontinuing the operation and the
maintenance of any of its properties if such discontinuance is desirable in the
conduct of its business and the Company has concluded that such discontinuance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
9.4. PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to file
all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claims if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
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9.5. CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Sections 10.2, the Company will at
all times preserve and keep in full force and effect the corporate existence of
each of its Subsidiaries (unless merged into the Company or a Subsidiary) and
all rights and franchises of the Company and its Subsidiaries unless, in the
good faith judgment of the Company, the termination of or failure to preserve
and keep in full force and effect such corporate existence, right or franchise
could not, individually or in the aggregate, have a Material Adverse Effect.
9.6. KEY MAN INSURANCE.
The Company will at all times maintain, with financially sound and
reputable insurers, a policy of life insurance upon the life of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ in an amount of not less than $5,000,000, and naming the Company as
assignee thereof.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1. TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any Subsidiary to enter
into directly or indirectly any Material transaction or Material group of
related transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate (other than the Company or another Wholly-Owned Subsidiary), except
pursuant to the reasonable requirements of the Company's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company or
such Subsidiary than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate.
10.2. [RESERVED].
10.3. MINIMUM INTEREST COVERAGE RATIO.
The Company will not permit its Interest Coverage Ratio at any
time during any 12 month period specified below to be less than the ratio set
forth opposite such period:
Period Ratio
------ -----
Twelve month period ending
on each of (i) June 30, 2000, (ii) September
30, 2000, (iii) December 31, 2000, (iv) March
31, 2001, (v) June 30, 2001, (vi) September
20, 2001 and December 31, 2001 2.5 to 1.0
Twelve month period ending
on March 31, 2002 and on each June 30,
September 30, December 31 and
March 31 thereafter 3.0 to 1.0
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10.4. MAXIMUM LEVERAGE RATIO.
The Company will not permit its Leverage Ratio to be greater than
2.0 to 1.0 at the end of any fiscal quarter.
10.5. MAXIMUM INVESTMENT IN KWGT.
The Company will not permit the book value of its
technology-related investments (including without limitation, all investments
made in KWGT), determined in accordance with GAAP to exceed at any time more
than twenty percent (20%) of the Company's Consolidated Net Worth at such time.
For purposes of calculating the net book value of technology-related
investments, any Non-Recourse Indebtedness incurred in connection with such
investments shall be excluded.
10.6. MAXIMUM DIRECT REAL ESTATE INVESTMENTS.
The Company will not permit the book value of its Direct Real
Estate Investments determined in accordance with GAAP to exceed at any time more
than thirty percent (30%) of the Company's Consolidated Net Worth at such time.
10.7. LIENS.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly create, incur, assume or permit to exist (upon the
happening of a contingency or otherwise) any Lien on or with respect to any
Property or asset (including, without limitation, any document or instrument in
respect of goods or accounts receivable) of the Company or any such Subsidiary,
whether now owned or held or hereafter acquired, or any income or profits
therefrom, or assign or otherwise convey any right to receive income or profits,
except:
(a) Liens for taxes, assessments or other governmental charges
which are not yet due and payable or the payment of which is not at the time
required by Section 9.4;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Liens, in each case,
incurred in the ordinary course of business for sums not yet due and payable or
the payment of which is not at the time required by Section 9.4;
(c) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business (i) in connection with workers'
compensation, unemployment insurance and other types of social security or
retirement benefits, or (ii) to secure (or to obtain letters of credit that
secure) the performance of tenders, statutory obligations, surety bonds, appeal
bonds, bids, leases (other than Capital Leases), performance bonds, purchase,
construction or sales contracts and other similar obligations, in each case not
incurred or made in connection with the borrowing of money, the obtaining of
advances or credit or the payment of the deferred purchase price of Property;
(d) any attachment or judgment Lien, unless the judgment it
secures shall not, within 60 days after the entry thereof, have been discharged
or execution thereof stayed pending appeal, or shall not have been discharged
within 60 days after the expiration of any such stay;
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(e) leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or encumbrances, in each
case incidental to, and not interfering with, the ordinary conduct of the
business of the Company or any of its Subsidiaries, provided that such Liens do
not, in the aggregate, materially detract from the value of such Property;
(f) Liens on Property or assets of the Company or any of its
Subsidiaries securing Debt owing to the Company or to any of its Wholly-Owned
Subsidiaries;
(g) Liens existing on the date of this Agreement and set forth on
Schedule 10.7;
(h) any Lien created to secure all or any part of the purchase
price, or to secure Indebtedness incurred or assumed to pay all or any part of
the purchase price or cost of construction, of Property (or any improvement
thereon) acquired or constructed by the Company or a Subsidiary after the date
of the Closing, provided that:
(i) any such Lien shall extend solely to the item or items
of such Property (or improvement thereon) so acquired or constructed and, if
required by the terms of the instrument originally creating such Lien, other
Property (or improvement thereon) which is an improvement to or is acquired for
specific use in connection with such acquired or constructed Property (or
improvement thereon) or which is real Property being improved by such acquired
or constructed Property (or improvement thereon);
(ii) the principal amount of the Indebtedness secured by
any such Lien shall not exceed an amount equal to the Fair Market Value (as
determined in good faith by the board of directors of the Company) of such
Property (or improvement thereon) at the time of such acquisition or
construction; and
(iii) any such Lien shall be created contemporaneously
with, or within 90 days after the acquisition or construction of such Property
(or improvement thereon);
(i) any Lien existing on Property of a Person immediately prior to
its being consolidated with or merged into the Company or a Subsidiary or its
becoming a Subsidiary, or any Lien existing on any property acquired by the
Company or any Subsidiary at the time such Property is so acquired (whether or
not the Indebtedness secured thereby shall have been assumed), provided that (i)
no such Lien shall have been created or assumed in contemplation of such
consolidation or merger or such Person's becoming a Subsidiary or such
acquisition of Property, and (ii) each such Lien shall extend solely to the item
or items of Property so acquired and, if required by the terms of the instrument
originally creating such Lien, other Property which is an improvement to or is
acquired for specific use in connection with such acquired Property;
(j) any Lien renewing, extending or refunding any Lien permitted
by clause (g) of this Section 10.7, provided that immediately after such
extension, renewal or refunding no Default or Event of Default would exist; and
(k) any Lien on Indebtedness permitted pursuant to Section
10.8(c).
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10.8. INDEBTEDNESS.
Neither the Company nor any of its Subsidiaries shall create,
incur, assume or suffer to exist any Indebtedness except for the following (each
of which shall be calculated without duplication):
(a) Indebtedness under the Notes;
(b) Non-Recourse Indebtedness;
(c) Recourse Indebtedness of the Company and its Subsidiaries
which is secured by Property of the Company or its Subsidiaries; provided,
however, that (i) as of the Closing through December 31, 2000, the aggregate
outstanding principal amount of such Recourse Indebtedness shall not exceed the
aggregate principal amount of such Recourse Indebtedness outstanding as of the
Closing; and (ii) after December 31, 2000, the aggregate outstanding principal
amount of such Recourse Indebtedness shall not exceed $15,000,000;
(d) Recourse Indebtedness of the Company and its Subsidiaries
which is not secured by Property of the Company or its Subsidiaries; provided,
however, that the aggregate principal amount of all such Recourse Indebtedness
shall not exceed $33,000,000 at any time;
(e) Indebtedness of a Subsidiary owed to the Company or any other
Subsidiary;
(f) Indebtedness arising in connection with Swaps entered into by
the Company or its Subsidiaries for the sole purpose of fixing or hedging (i)
interest rate risk with respect to any floating or fixed rate Indebtedness
permitted by the terms of this Agreement to be outstanding or (ii) the value of
foreign currencies purchased or received by the Company or its Subsidiaries in
the ordinary course of business, provided that all such arrangements are entered
into in connection with bona fide fixing or hedging operations and not for
speculation;
(g) Indebtedness of the Company and its Subsidiaries for trade
accounts payable, provided that (i) such accounts arise in the ordinary course
of business and (ii) no material part of such account is more than 90 days past
due (unless subject to a bona fide dispute for which adequate reserves have been
established);
(h) Indebtedness of the Company and its Subsidiaries arising under
workers' compensation, unemployment insurance and social security laws arising
in the ordinary course of business;
(i) Indebtedness of the Company arising under the Warrants; and
(j) Subordinated Indebtedness of the Company and its Subsidiaries
to any other Person.
With respect to the Recourse Indebtedness set forth in Section 10.8(d) above,
the Company will take, or cause to be taken, all actions necessary to ensure
that the obligations of the Company under the Notes are and continue to rank at
least pari passu in right of payment with such Recourse Indebtedness (including
without limitation (a) Indebtedness arising under the East
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West Bank Credit Agreement and (b) Indebtedness arising under the Tokai Bank
Loan Agreement).
10.9. DIVIDENDS.
Except as required pursuant to the Warrants, the Company shall not
(a) declare or pay any dividends, (b) purchase, redeem, retire, or otherwise
acquire for value any of its Capital Stock now or hereafter outstanding, (c)
return any capital to its stockholders as such, (d) make any distribution of
assets to its stockholders as such, or (e) permit any of its Subsidiaries to
purchase, redeem, retire, or otherwise acquire for value any stock of the
Company except for dividends paid solely in the Company's common stock;
provided, however, that the Company may purchase its Capital Stock so long as
the aggregate payments pursuant to such repurchases while the Notes are
outstanding do not exceed ten percent (10%) of the Company's Consolidated Net
Worth as determined as of the fiscal quarter immediately preceding the date of
any such repurchase.
10.10. ASSET DISPOSITION.
Except as permitted under Section 10.2, the Company will not, and
will not permit any of its Subsidiaries, to make any Asset Disposition unless in
the good faith opinion of the Company, the Asset Disposition is in exchange for
consideration having a Fair Market Value at least equal to the Property
exchanged and is in the best interest of the Company and such Subsidiary.
10.11. AFFILIATE COMPENSATION.
The Company will not, and will not permit any of its Subsidiaries,
to pay to any natural Person that is an Affiliate of the Company in the form of
compensation to such Affiliate in his or her capacity as an officer of the
Company if, as a result of such payment, the Company would breach one or more of
the covenants, obligations or agreements of the Company set forth herein or in
the Warrants.
In addition, the Company will maintain a compensation committee
composed of outside directors who are not employees of the Company or any of its
Subsidiaries. The compensation committee will review the annual salary, bonus,
stock options and other benefits of the Company's senior executives to ensure
that they are commensurate with the real estate service industry and competitive
factors.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following
conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Prepayment Premium, if any, on any Note when the same becomes due and payable,
whether at maturity or at a date fixed for prepayment or by declaration or
otherwise; or
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(b) the Company defaults in the payment of any interest on any
Note or in the payment with respect to any Warrant (so long as the Warrant is
held by a holder of a Note) for more than five Business Days after the same
becomes due and payable; or
(c) the Company defaults in the performance of or compliance with
any term contained in Sections 7.1(e)(ii), 8.1 or 10; or
(d) the Company defaults in the performance of or compliance with
any term contained herein or in the Warrant (other than those referred to in
paragraphs (a), (b) and (c) of this Section 11) and so long as the Warrant is
held by a holder of a Note such default is not remedied within 30 days after the
earlier of (i) a Responsible Officer obtaining actual knowledge of such default
and (ii) the Company receiving written notice of such default from any holder of
a Note (any such written notice to be identified as a "notice of default" and to
refer specifically to this paragraph (d) of Section 11); or
(e) any representation or warranty made in writing by or on behalf
of the Company or by any officer of the Company in this Agreement, the Note, the
Warrant or in any writing furnished in connection with the transactions
contemplated hereby proves to have been false or incorrect in any material
respect on the date as of which made; or
(f) (i) the Company or any Material Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Recourse Indebtedness that is
outstanding in an aggregate principal amount of at least $500,000 beyond any
period of grace provided with respect thereto, or (ii) the Company or any
Material Subsidiary is in default in the performance of or compliance with any
term of any evidence of any Recourse Indebtedness in an aggregate outstanding
principal amount of at least $500,000 or of any mortgage, indenture or other
agreement relating thereto, and as a consequence of such default such Recourse
Indebtedness has become, or has been declared, due and payable before its stated
maturity or before its regularly scheduled dates of payment, or (iii) as a
consequence of the occurrence or continuation of any event or condition based
upon such Person's conduct (other than the passage of time or the right of the
holder of Recourse Indebtedness to convert such Recourse Indebtedness into
equity interests) the Company or any Material Subsidiary has become obligated to
purchase or repay Recourse Indebtedness before its regular maturity or before
its regularly scheduled dates of payment in an aggregate outstanding principal
amount of at least $500,000; or
(g) the Company or any Material Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
an assignment for the benefit of its creditors, (iv) consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its Property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any of its
Material Subsidiaries, a custodian,
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receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its Property, or constituting an order
for relief or approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of any bankruptcy
or insolvency law of any jurisdiction, or ordering the dissolution, winding-up
or liquidation of the Company or any of its Material Subsidiaries, or any such
petition shall be filed against the Company or any of its Material Subsidiaries
and such petition shall not be dismissed within 60 days; or
(i) a final nonappealable judgment(s) or order(s) for the payment
of money aggregating in excess of $200,000 (exclusive of amounts which are
covered by insurance issued by an insurer satisfying the requirements set forth
in Section 9.2) shall be rendered against one or more of the Company and its
Material Subsidiaries and the same shall remain undischarged and unpaid (or,
with respect to any judgment which is subject to discharge by payment pursuant
to a settlement agreement, any such installment shall remain unpaid) for a
period of 60 days during which execution shall not be effectively stayed; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a waiver of
such standards or extension of any amortization period is sought or granted
under section 412 of the Code, (ii) a notice of intent to terminate any Plan
shall have been or is reasonably expected to be filed with the PBGC or the PBGC
shall have instituted proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have notified the
Company or any ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) the aggregate "amount of unfunded benefit liabilities"
(within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined
in accordance with Title IV of ERISA, shall exceed $200,000, (iv) the Company or
any ERISA Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) the Company or
any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company
or any Subsidiary establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase the
liability of the Company or any Subsidiary thereunder; and any such event or
events described in clauses (i) through (vi) above, either individually or
together with any other such event or events, could reasonably be expected to
have a Material Adverse Effect; or
(k) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ defaults in the performance of or
compliance with any term contained in the Non-Compete Agreement, or shall
revoke, or attempt to revoke, the Non-Compete Agreement.
As used in Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1. ACCELERATION.
(a) If an Event of Default with respect to the Company described
in paragraph (g) or (h) of Section 11 (other than an Event of Default described
in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by
virtue of the fact that such clause encompasses clause
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(i) of paragraph (g)) has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing,
any holder or of the Notes may at any time at its option, by notice or notices
to the Company and the other holders (if any), declare such holder's Notes then
outstanding to be immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Prepayment Premium determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of the Prepayment Premium by the Company in the event that the Notes are prepaid
or are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
12.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing,
and irrespective of whether any Notes have become or have been declared
immediately due and payable under Section 12.1, the holder of any Note at the
time outstanding may proceed to protect and enforce the rights of such holder by
an action at law, suit in equity or other appropriate proceeding, whether for
the specific performance of any agreement contained herein or in any Note, or
for an injunction against a violation of any of the terms hereof or thereof, or
in aid of the exercise of any power granted hereby or thereby or by law or
otherwise.
12.3. RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1, the holders of not less than 68%
in principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
the Company has paid all overdue interest on the Notes, all principal of and the
Prepayment Premium, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and the Prepayment Premium, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or decree has been
entered for the payment of any monies due pursuant hereto or to the Notes. No
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35
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right, power
or remedy conferred by this Agreement or by any Note upon any holder thereof
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 15, the
Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred in
any enforcement or collection under this Section 12, including, without
limitation, reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a
register for the registration and registration of transfers of Notes. The name
and address of each holder of one or more Notes, each transfer thereof and the
name and address of each transferee of one or more Notes shall be registered in
such register. Prior to due presentment for registration of transfer, the Person
in whose name any Note shall be registered shall be deemed and treated as the
owner and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
13.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of
the Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or his attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $500,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $500,000. Any transferee,
by its acceptance of a Note registered in its
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name (or the name of its nominee), shall be deemed to have made the
representation set forth in Sections 6.1 and 6.2.
13.3. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to
it of the ownership of and the loss, theft, destruction or mutilation of any
Note (which evidence shall be, in the case of an Institutional Investor, notice
from such Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note is, or
is a nominee for, an original Purchaser or another holder of a Note with a
minimum net worth of at least $10,000,000, such Person's own unsecured agreement
of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
14. PAYMENTS ON NOTES.
14.1. PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, Prepayment
Premium, if any, and interest becoming due and payable on the Notes shall be
made in New York, New York at the principal office of Hare & Co. for the benefit
of Combined Insurance Company of America in such jurisdiction. The Company may
at any time, by notice to each holder of a Note, change the place of payment of
the Notes so long as such place of payment shall be either the principal office
of the Company in such jurisdiction or the principal office of a bank or trust
company in such jurisdiction.
14.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note,
and notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
the Prepayment Premium, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or
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surrender such Note to the Company in exchange for a new Note or Notes pursuant
to Section 13.2. The Company will afford the benefits of this Section 14.2 to
any Institutional Investor that is the direct or indirect transferee of any Note
purchased by you under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 14.2.
15. EXPENSES, ETC.
15.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are
consummated, the Company will pay all costs and expenses (including reasonable
attorneys' fees of a special counsel and, if reasonably required, local or other
counsel) incurred by you and each Other Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes requested by, or
for the benefit of, the Company (whether or not such amendment, waiver or
consent becomes effective), including, without limitation: (a) the costs and
expenses incurred in enforcing or defending (or determining whether or how to
enforce or defend) any rights under this Agreement or the Notes or in responding
to any subpoena or other legal process or informal investigative demand issued
in connection with this Agreement or the Notes, or by reason of being a holder
of any Note, and (b) the costs and expenses, including financial advisors' fees,
incurred in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Company will pay, and
will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by you).
15.2. SURVIVAL.
The obligations of the Company under this Section 15 will survive
the payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive
the execution and delivery of this Agreement and the Notes, the purchase or
transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between you and the Company and
supersede all prior agreements and understandings relating to the subject matter
hereof.
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17. AMENDMENT AND WAIVER.
17.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of
any term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it
is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Prepayment Premium on, the Notes, (ii) change the percentage of the principal
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or
20.
17.2. SOLICITATION OF HOLDERS OF NOTES.
(a) Solicitation. The Company will provide each holder of the
Notes (irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes or any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
17.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section
17 applies equally to all holders of Notes and is binding upon them and upon
each future holder of any Note and upon the Company without regard to whether
such Note has been marked to indicate such amendment or waiver. No such
amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon. No course of dealing between the Company and the
holder of any Note nor any delay in exercising any rights hereunder or under any
Note shall operate as a waiver of any rights of any holder of such Note. As used
herein, the term "THIS AGREEMENT" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
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39
17.4. NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other address as you
or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of the Company's Chief Financial
Officer, or at such other address as the Company shall have specified to the
holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may hereafter
be executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
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40
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION"
means information delivered to you by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature, provided that such
term does not include information that (a) was publicly known or otherwise known
to you prior to the time of such disclosure, (b) subsequently becomes publicly
known through no act or omission by you or any person acting on your behalf, (c)
otherwise becomes known to you other than through disclosure by the Company or
any Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (ii) your financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor
to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section
20), (v) any Person from which you offer to purchase any security of the Company
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (vi) any federal
or state regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates
as the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is
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so substituted as a purchaser hereunder and such Affiliate thereafter transfers
to you all of the Notes then held by such Affiliate, upon receipt by the Company
of notice of such transfer, wherever the word "you" is used in this Agreement
(other than in this Section 21), such word shall no longer be deemed to refer to
such Affiliate, but shall refer to you, and you shall have all the rights of an
original holder of the Notes under this Agreement.
22. MISCELLANEOUS.
22.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by
or on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
22.2. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Prepayment Premium or interest
on any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.
22.3. SEVERABILITY.
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4. CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.5. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
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22.6. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of New
York excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
22.7. CONSENT TO JURISDICTION AND VENUE.
The Company hereby irrevocably (i) agrees that any suit, action or
other legal proceeding arising out of or relating to this Agreement, any Note or
any Warrant may be brought in a court of record in the State of California or in
the courts of the United States of America located in such State, (ii) consents
to the jurisdiction of each such court in any such suit, action or proceeding,
and (iii) waives any objection which it may have to the laying of venue of any
such claim that any such suit, action or proceeding has been brought in an
inconvenient forum and covenants that it will not seek to challenge the
jurisdiction of any such court or seek to oust the jurisdiction of any such
court, whether on the basis of inconvenient forum or otherwise. The Company
irrevocably consents to the service of any and all process in any such suit,
action or proceeding by mail copies of such process to the Company at the
address of the Company for notices provided in Section 19. The Company agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. All mailings under this Section 22.7 shall be by
registered or certified mail, return receipt requested. Nothing in this Section
22.7 shall affect your right to serve legal process in any other manner
permitted by law or affect your right to bring any suit, action or proceeding
against any Obligor or any of its properties in the courts of any other
jurisdiction.
22.8. WAIVER OF JURY TRIAL.
The Company and you hereby, and each holder of a Note (by its
acceptance thereof), irrevocably waive trial by jury in any legal action or
proceeding relating to this Agreement, the Notes or the Warrants and for any
counterclaim related thereto.
22.9. ePROPERTY, INC. AND ▇▇▇▇▇▇▇-▇▇▇▇▇▇ JAPAN, K.K. .
Notwithstanding anything else in this Agreement, the Notes, the
Warrant or any exhibits or schedules hereto or thereto to the contrary, no
representation, warranty, covenant or agreement contained herein shall prevent,
restrict or otherwise affect the Company's ability to sell or otherwise dispose
of, or enter into negotiations or consultations with any advisor to sell or
otherwise dispose of, any interest it may have from time to time in eProperty
Inc., a California corporation or ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Japan, K.K., a Japanese
corporation or any of the Property of such Person.
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* * * * *
If you are in agreement with the foregoing, please sign the form
of agreement on the accompanying counterpart of this Agreement and return it to
the Company, whereupon the foregoing shall become a binding agreement between
you and the Company.
▇▇▇▇▇▇▇-▇▇▇▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Chief Financial Officer
44
The foregoing is hereby agreed to as of the date thereof.
COMBINED INSURANCE COMPANY OF AMERICA
By: /s/ ▇▇▇▇▇▇▇ ▇. LUREN
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Sr. Portfolio Mgr. Advisors, Inc
45
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
Combined Insurance Company of America $2,000,000
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(1) All payments by wire transfer of
immediately available funds to:
Bank of New York
ABA # ▇▇▇▇▇▇▇▇▇
IOC 363
Account No. 067750
For Account of: Combined Insurance Company of America
Reference: ▇▇▇▇▇▇▇-▇▇▇▇▇▇
(2) All notices of payments and
written confirmations of such wire transfers:
Attention: ▇▇▇▇▇ ▇▇▇▇
Aon Advisors, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Telephone:
▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(3) All other communications:
Aon Advisors, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(4) Tax Identification Number: ▇▇-▇▇▇▇▇▇▇
A-1
46
EXHIBIT 1(b)
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"AFFILIATE" means, at any time, and with respect to any Person,
(a) any other Person that at such time directly or indirectly through one or
more intermediaries Controls, or is Controlled by, or is under common Control
with, such first Person, (b) any Person beneficially owning or holding, directly
or indirectly, more than 10% of any class of voting or equity interests of the
Company or any Material Subsidiary, and (c) each of such Person's officers and
directors . As used in this definition, "CONTROL" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. Unless the context otherwise clearly requires, any
reference to an "Affiliate" is a reference to an Affiliate of the Company.
"ASSET DISPOSITION" means any Transfer except (a) any Transfer
from a Subsidiary to the Company or a Wholly-Owned Subsidiary and (b) any
transfer made in the ordinary course of business and involving only Property
that is either (i) inventory held for sale or (ii) equipment, fixtures, supplies
or materials no longer required in the operation of the business of the Company
or any of its Subsidiaries or that is obsolete.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a
day on which commercial banks in New York or California are required or
authorized to be closed.
"CAPITAL STOCK" of any Person shall mean (a) all common stock,
preferred stock, participations, shares, partnership interests or other equity
interests in such Person (regardless of how designated and whether or not voting
or non-voting) and (b) all warrants, options and other rights to acquire any of
the foregoing, other than convertible debt securities which have not been
converted into common stock, preferred stock, participations, shares,
partnership interests or other equity interests in any such Person.
"CAPITAL LEASE" means, at any time, a lease with respect to which
the lessee is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability in accordance with GAAP.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (a) the Board of Directors approves a proposal, or the Company
enters into an agreement, to (i) sell substantially all of its assets as an
entirety to any Person or group of affiliated Persons or (ii) merge,
consolidate, reorganize, issue securities or enter into any other transaction
the result of which is that any Person or group of affiliated Persons acquires
(x) 50% or more of the voting power of the Company, or the surviving corporation
or Voting Stock, or (y) the right to have elected or nominated a majority of the
Company's or the surviving corporation's Board of Directors, (b) the failure of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ to hold in the aggregate at least 10% of the shares of the
Company's Voting Stock outstanding; or (c) ▇▇▇▇▇▇▇
B-1
47
▇. ▇▇▇▇▇▇▇▇ shall cease to be the Chairman and Chief Executive Officer of the
Company for any reason other than his death or disability.
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder from time to
time.
"COMPANY" means ▇▇▇▇▇▇▇-▇▇▇▇▇▇, Inc., a Delaware corporation.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSOLIDATED EBITDA" means, with respect to the Company and its
Subsidiaries during any period, the sum, determined on a consolidated basis in
accordance with GAAP of (a) Consolidated Net Income of the Company and its
Subsidiaries for such period plus (b) all amounts deducted in the computation of
Consolidated Net Income for such period on account of (i) Consolidated Interest
Expenses, (ii) taxes imposed or measured by income and (iii) depreciation and
amortization.
"CONSOLIDATED INDEBTEDNESS" means, as of any date of
determination, the total of all Indebtedness of the Company and its Subsidiaries
outstanding on such date, after eliminating all offsetting debits and credits
between the Company and its Subsidiaries and all other items required to be
eliminated in the course of the preparation of consolidated financial statements
of the Company and its Subsidiaries in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSES" means, with respect to the
Company and its Subsidiaries, all amounts that are classified as interest
expense in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with reference to any period, the
net income (or loss) of the Company and its Subsidiaries for such period (taken
as a cumulative whole), as determined in accordance with GAAP, after eliminating
all offsetting debits and credits between the Company and its Subsidiaries and
all other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP.
"CONSOLIDATED NET WORTH" means, with respect to the Company and
its Subsidiaries, at any time (a) the total assets of the Company and its
Subsidiaries which would be shown as assets on the consolidated balance sheet of
the Company and its Subsidiaries as of such time prepared in accordance with
GAAP minus (b) the total liabilities of the Company and its Subsidiaries which
would be shown as liabilities on a consolidated balance sheet of the Company and
its Subsidiaries as of such time prepared in accordance with GAAP (provided,
however, that Subordinated Indebtedness in an amount not to exceed $15,000,000
shall be excluded from the determination of total liabilities).
"CONSOLIDATED SUBSIDIARIES" means, with respect to the Company,
all Subsidiaries of the Company which are consolidated with the Company for
financial reporting purposes in accordance with GAAP.
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48
"CONSOLIDATED TANGIBLE NET WORTH" means, with respect to the
Company and its Subsidiaries, the Consolidated Net Worth of the Company and its
Subsidiaries minus: (a) goodwill, organizational expenses, research and
development expenses, trademarks, trade names, copyrights, patents, patent
applications, licenses and rights in any thereof, and other similar intangibles,
(b) all prepaid expenses, deferred charges or unamortized debt discount and
expense, (c) all reserves carried and not deducted from assets, (d) all notes or
accounts receivable from any Affiliate of the Company or any officer of the
Company or any of the Company's Affiliates, (e) securities which are not readily
marketable, (f) cash held in a sinking or other analogous fund established for
the purpose of redemption, retirement or prepayment of Capital Stock or
Indebtedness, (g) any write-up in the book value of any asset resulting from a
revaluation thereof subsequent to the date of this Agreement and (h) any items
not included in clauses (a) through (g) above which are treated as intangibles
in accordance with GAAP.
"DEFAULT" means an event or condition the occurrence or existence
of which would, with the lapse of time or the giving of notice or both, become
an Event of Default.
"DEFAULT RATE" means that rate of interest that is 2% per annum
above the rate of interest stated in clause (a) of the first paragraph of the
Notes.
"DIRECT REAL ESTATE INVESTMENTS" means any investment by the
Company in either real estate or notes or other forms of Indebtedness, in either
case secured in whole or in part by real estate assets which have been held by
the Company for more than one hundred twenty (120) days and in which the Company
owns, directly or indirectly, ten percent (10%) or more of such investment or in
which closing or management fees scheduled to be earned by the Company within
the first twenty-four (24) months of the closing of such investment are less
than the amount so invested in such investment by the Company. For purposes
hereof, the "amount so invested" will be equal to the net equity investment made
by the Company in such investment minus any Non-Recourse Indebtedness. As of the
Closing, existing investments classified on the Company's most recent balance
sheet as "Real Estate Held For Sale" shall constitute "Direct Real Estate
Investments", and existing investments classified on the Company's most recent
balance sheet as "Notes Receivable", "Mezzanine Loans" and "Investments" shall
not constitute "Direct Real Estate Investments"; provided however, that if any
of the foregoing existing investments classified on the Company's most recent
balance sheet as "Notes Receivable", "Mezzanine Loans" and "Investments" remain
on the Company's December 31, 2001 balance sheet, such investments shall
thereafter constitute "Direct Real Estate Investments" if such investments
otherwise satisfy the criteria set forth in clauses (a) or (b) above, in which
case such investments shall be included in an amount (but only in an amount)
equal to the amount of the investment less closing or management fees earned on
such investment during the first twenty-four (24) month period; provided
further, that any investment of the Company which does not initially constitute
"Direct Real Estate Investments" but thereafter satisfies the criteria set forth
above shall thereafter constitute "Direct Real Estate Investments", in which
case such investments shall be included in an amount (but only in an amount)
equal to the amount of the investment less closing or management fees earned on
such investment during the first twenty-four (24) month period.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions,
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49
grants, franchises, licenses, agreements or governmental restrictions relating
to pollution and the protection of the environment or the release of any
materials into the environment, including but not limited to those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" means, at any time and with respect to any
Property, the sale value of such Property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or other political
subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts jurisdiction over any
properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"GUARANTY" means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any indebtedness, dividend or other obligation of any other Person
in any manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(a) to purchase such indebtedness or obligation or any Property
constituting security therefor;
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50
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any other
Person or otherwise to advance or make available funds for the purchase or
payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"INDEBTEDNESS" with respect to any Person means, at any time,
without duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of Property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including all liabilities created or arising under any
conditional sale or other title retention agreement with respect to any such
Property);
(c) all liabilities appearing on its balance sheet in accordance
with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any Property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account by
banks and other financial institutions (whether or not representing obligations
for borrowed money);
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51
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a
type described in any of clauses (a) through (f) hereof.
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a
Note, (b) any holder of a Note holding more than 25% of the aggregate principal
amount of the Notes then outstanding, and (c) any bank, trust company, savings
and loan association or other financial institution, any pension plan, any
investment company, any insurance company, any broker or dealer, or any other
similar financial institution or entity, regardless of legal form.
"INTEREST COVERAGE RATIO" means, with respect to the Company for
any period, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest
Expense.
"KWGT" means ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Global Technology Corporation, a
corporation to be formed in the State of Delaware.
"LEVERAGE RATIO" means, with respect to the Company for any
period, the ratio of (a) Consolidated Indebtedness of the Company constituting
Recourse Indebtedness to (b) Consolidated Tangible Net Worth.
"LIEN" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest or title
of any vendor, lessor, lender or other secured party to or of such Person under
any conditional sale or other title retention agreement or Capital Lease, upon
or with respect to any Property or asset of such Person (including in the case
of stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a)
the business, operations, affairs, financial condition, assets or properties of
the Company and its Subsidiaries taken as a whole, or (b) the ability of the
Company to perform its obligations under this Agreement and the Notes, or (c)
the validity or enforceability of this Agreement or the Notes.
"MATERIAL CHANGE" means the occurrence of any Prohibited Transfer
or Prohibited Merger.
"MATERIAL SUBSIDIARY" means (a) as of the Closing, each of K-W
Properties, a California corporation, ▇▇▇▇▇▇▇-▇▇▇▇▇▇ International, a California
corporation, ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Properties Ltd., a Delaware corporation and
▇▇▇▇▇▇▇-▇▇▇▇▇▇ Properties, Ltd., an Illinois corporation; and (b) at all times
after the Closing, each of the Subsidiaries set forth in clause (a) above
together with (i) for purposes of Section 8, Subsidiaries now owned or hereafter
formed or acquired (other than "special purpose" Subsidiaries that hold one
investment or less) the shareholders' equity of which represent 25% or more of
the Company's Consolidated Net Worth and (ii) for all other purposes,
Subsidiaries now owned or hereafter formed or acquired (other
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52
than "special purpose" Subsidiaries that hold one investment or less) the
shareholders' equity of which represent 10% or more of the Company's
Consolidated Net Worth).
"MEMORANDUM" is defined in Section 5.3.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
"NON-RECOURSE INDEBTEDNESS" means Indebtedness as to which neither
the Company nor any of its Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise,
or (c) constitutes the lender, in each case, other than recourse provisions
which are effective only upon the fraud, gross misrepresentation, or other
improper acts or conducts by the obligor.
"NOTES" is defined in Section 1.
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"OTHER AGREEMENTS" is defined in Section 2.
"OTHER PURCHASERS" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in Section
3(3) of ERISA) that is or, within the preceding five years, has been established
or maintained, or to which contributions are or, within the preceding five
years, have been made or required to be made, by the Company or any ERISA
Affiliate or with respect to which the Company or any ERISA Affiliate may have
any liability.
"PREFERRED STOCK" means any class of Capital Stock of a
corporation that is preferred over any other class of Capital Stock of such
corporation as to the payment of dividends or the payment of any amount upon
liquidation or dissolution of such corporation.
"PREPAYMENT PREMIUM" means (a) with respect to any mandatory or
optional prepayment of the Notes occurring prior to the third anniversary of the
Closing, an amount equal to four percent (4.0%) of the outstanding principal
balance of the Notes; (b) with respect to any mandatory or optional prepayment
of the Notes occurring on or after the third anniversary of the Closing but
prior to the fourth anniversary of the Closing, an amount equal to three percent
(3.0%) on the outstanding principal balance of the Notes; and (c) with respect
to any mandatory
B-7
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or optional prepayment of the Notes occurring on or after the fourth anniversary
of the Closing but prior to the fifth anniversary of the Closing, an amount
equal to two percent (2.0%) on the outstanding principal balance of the Notes.
"PROHIBITED MERGER" means (a) with respect to the Company, the
Company shall consolidate with, or merge into, or permit any other Person to
consolidate with, or merge into, any other Person and the Company shall not be
the surviving corporation; and (b) with respect to any Material Subsidiary, such
Material Subsidiary shall consolidate with or merge into any other Person and
such Person is no longer controlled by, or under common control with, the
Company or any other Material Subsidiary.
"PROHIBITED TRANSFER" means, with respect to the Company or any
Material Subsidiary, any sale, lease, transfer or other disposition of all or
substantially all of such Person's Property in a single transaction or a series
of related transactions, whether now owned or hereafter acquired, outside the
ordinary course of such Person's business; provided, however, that such sales,
leases, transfers or other dispositions by the Company or any Material
Subsidiary to the Company, any other Material Subsidiary or any Person
controlled by, or under common control with the Company, shall not constitute a
Prohibited Transfer. As used in this definition, "CONTROL" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"PROPERTY" or "PROPERTIES" or "PROPERTY" or "PROPERTIES" means,
unless otherwise specifically limited, any interest in any kind of property or
asset, whether real, personal, tangible or intangible.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption
84-14 (issued March 13, 1984).
"RECOURSE INDEBTEDNESS" means all Indebtedness other than
Non-Recourse Indebtedness.
"REQUIRED HOLDERS" means, at any time, the holders of at least 67%
in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates).
"RESPONSIBLE OFFICER" means the Company's Chief Executive Officer,
President or any Senior Financial Officer.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"SUBORDINATED INDEBTEDNESS" means the ▇▇▇▇▇▇ Convertible
Subordinated Note and any other future subordinated Indebtedness which contains
subordination provisions no less
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favorable to the holders of the Notes than those currently contained in the
▇▇▇▇▇▇ Convertible Subordinated Note.
"SUBSIDIARY" means, as to any Person, any corporation, association
or other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
"SWAPS" means, with respect to any Person, payment obligations
with respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"TRANSFER" means, with respect to any Person, any transaction in
which such Person sells, conveys, transfers or leases (as lessor) any of its
Property.
"VOTING STOCK" means Capital Stock in any class or classes of a
corporation or other entity having power under ordinary circumstances to vote
for the election of members of the board of directors or such corporation, or
Persons performing similar functions (irrespective of whether or not at the time
Capital Stock of any of the class or classes shall have or might have special
voting power or rights by the reason of the happening of any contingency).
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Company and the Company's other Wholly-Owned Subsidiaries at such time.
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EXHIBIT 1(a)
[FORM OF NOTE]
▇▇▇▇▇▇▇-▇▇▇▇▇▇, INC.
12% SENIOR NOTE DUE JUNE 22, 2006
No. [ ] As of June 22, 2000
$[ ] PPN[ ]
FOR VALUE RECEIVED, the undersigned, ▇▇▇▇▇▇▇-▇▇▇▇▇▇, INC. (herein
called the "Company"), a corporation organized and existing under the laws of
the State of Delaware, hereby promises to pay to [ ], or registered assigns, the
principal sum of [ ] DOLLARS on [ , ], with interest (computed on the basis of a
360-day year and actual days elapsed) (a) on the unpaid balance thereof at the
rate of 12% per annum from the date hereof, payable quarterly, on the last day
of March, June, September and December in each year, commencing with the June
30, 2000, until the principal hereof shall have become due and payable, and (b)
to the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Prepayment Premium (as defined in the Note Purchase Agreements
referred to below), payable quarterly as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to 14%.
Payments of principal of, interest on and any Prepayment Premium
with respect to this Note are to be made in lawful money of the United States of
America at [ ] or at such other place as the Company shall have designated by
written notice to the holder of this Note as provided in the Note Purchase
Agreements referred to below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated as of June
22, 2000 (as from time to time amended, the "Note Purchase Agreements"), between
the Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreements and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note
Purchase Agreements, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
1(a)-1
56
This Note is subject to optional prepayment, in whole, at the
times and on the terms specified in the Note Purchase Agreements, but not
otherwise.
If an Event of Default, as defined in the Note Purchase
Agreements, occurs and is continuing, the principal of this Note may be declared
or otherwise become due and payable in the manner, at the price (including any
applicable Prepayment Premium) and with the effect provided in the Note Purchase
Agreements.
This Note shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.
▇▇▇▇▇▇▇-▇▇▇▇▇▇, INC.
By:
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Chief Financial Officer
1(a)-2
57
EXHIBIT 1(b)
[FORM OF WARRANT]
See attachment.
1(b)-1
58
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES
LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION
STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED
OR (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL
AUTHORITIES.
▇▇▇▇▇▇▇-▇▇▇▇▇▇ INC.
WARRANT TO PURCHASE SHARES
OF COMMON STOCK
THIS CERTIFIES THAT, for value received, Combined Insurance Company of
America, a purchaser (the "Purchaser") pursuant to the Note Purchase Agreement
(the "Agreement") between the purchasers listed in Schedule A thereto and
▇▇▇▇▇▇▇-▇▇▇▇▇▇ Inc., a Delaware corporation (the "Company"), dated as of the
date hereof, and its permitted assignees (collectively, the "Holders") are
entitled to subscribe for and purchase 79,718 shares of the fully paid and
nonassessable Common Stock (as adjusted pursuant to Section 4 hereof, the
"Shares"; the Shares, together with the Company's Common Stock issuable pursuant
to those certain warrants issued as of the date hereof pursuant to the Agreement
to Resource Life, Virginia Surety Company, Inc. and GATX Capital Corporation and
their permitted assignees are collectively referred to herein as the "Total
Shares") of the Company at the price of $6.25 per share (such price and such
other price as shall result, from time to time, from the adjustments specified
in Section 4 hereof is herein referred to as the "Warrant Price"), subject to
the provisions and upon the terms and conditions hereinafter set forth. As used
herein, (a) the term "Date of Grant" shall mean June 21, 2000 and (b) the term
"Other Warrants" shall mean any other warrants issued by the Company in
connection with the transaction with respect to which this Warrant was issued,
and any warrant issued upon transfer or partial exercise of this Warrant. The
term "Warrant" as used herein shall be deemed to include Other Warrants unless
the context clearly requires otherwise. This Warrant is issued in connection
with the Agreement.
1. Term. The purchase right represented by this Warrant is exercisable,
in whole or in part, at any time and from time to time from the Date of Grant
through June 21, 2008 at 5:00 p.m. Los Angeles time.
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the Holders hereof, in whole or in part and from time to time, at
the election of the Holders hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A-1
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a "Wire Transfer") of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased; (b) if in connection with a registered public offering of the
Company's securities, the surrender of this Warrant (with the notice of .
exercise form attached hereto as Exhibit A-2 duly completed and executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by certified or
bank check or by Wire Transfer from the proceeds of the sale of shares to be
sold by the Holders in such public offering of an amount equal to the then
applicable Warrant Price per share multiplied by the number of Shares then being
purchased; (c) exercise of the "net issuance" right provided
59
for in Section 10.2 hereof; or (d) exercise of the conversion right provided for
in Section 10.4 hereof. The person or persons in whose name(s) any
certificate(s) representing the Shares shall be issuable upon exercise of this
Warrant shall be deemed to have become the Holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the shares represented
thereby (and such shares shall be deemed to have been issued) immediately prior
to the close of business on the date or dates upon which this Warrant is
exercised. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of stock so purchased shall be delivered to
the Holders hereof as soon as possible and in any event within thirty (30) days
after such exercise and, unless this Warrant has been fully exercised or
expired, a new Warrant representing the portion of the Shares, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Holders hereof as soon as possible and in any event within such
thirty-day period.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance
pursuant to the terms and conditions herein, and payment therefor in accordance
herewith, be fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issue thereof (other than taxes resulting from a
transfer specified herein). During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of its
Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification or change
of securities of the class issuable upon exercise of this Warrant (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or in case of any
merger of the Company with or into another corporation (other than a merger with
another corporation in which the Company is the acquiring and the surviving
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall duly
execute and deliver to the Holders of this Warrant a new Warrant (in form and
substance satisfactory to the Holders of this Warrant), so that the Holders of
this Warrant shall have the right to receive, at a total purchase price not to
exceed that payable upon the exercise of the unexercised portion of this
Warrant, and in lieu of the shares of Common Stock theretofore issuable upon
exercise of this Warrant, (i) the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change or
merger by a holder of the number of shares of Common Stock then purchasable
under this Warrant, or (ii) in the case of such a merger or sale of all or
substantially all of the assets of the Company in which the consideration paid
consists all or in part of assets other than securities of the successor or
purchasing corporation, the securities of the successor or purchasing
corporation having a value at the time of the transaction equivalent to the
value of the Common Stock at the time of the transaction. Such new Warrant shall
provide for adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 4. The provisions of this
subparagraph (a) shall similarly apply to successive reclassifications, changes,
mergers and transfers.
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(b) Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased and the number of Shares issuable hereunder shall be
proportionately increased in the case of a subdivision and the Warrant Price
shall be proportionately increased and the number of Shares issuable hereunder
shall be proportionately decreased in the case of a combination.
(c) Stock Dividends and Other Distributions. If the Company at any time
while this Warrant is outstanding and unexpired shall (i) pay a dividend with
respect to Common Stock payable in Common Stock, then the Warrant Price shall be
adjusted, from and after the date of determination of shareholders entitled to
receive such dividend or distribution, to that price determined by multiplying
the Warrant Price in effect immediately prior to such date of determination by a
fraction (A) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(B) the denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution; or (ii) make any
other distribution with respect to Common Stock (except any distribution
specifically provided for in Sections 4(a) and 4(b)), then, in each such case,
provision shall be made by the Company such that the Holders of this Warrant
shall receive upon exercise of this Warrant a proportionate share of any such
dividend or distribution as though it were the holder of the Common Stock as of
the record date fixed for the determination of the shareholders of the Company
entitled to receive such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the Warrant
Price, the number of Shares purchasable hereunder shall be adjusted, to the
nearest whole share, to the product obtained by multiplying the number of Shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately prior to
such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter.
(e) Default Under Agreement. If the Company at any time while this
Warrant is outstanding and unexpired shall fail to make a payment as provided in
Sections 8 or 14 of the Agreement, then the Purchaser shall have the unfettered
option to deliver written notice to the Company at any time thereafter: (i)
informing the Company of such failure, and (ii) instructing the Company that it
has 30 days from the date of receipt of such notice to tender payment to the
Purchaser, of either (at the unfettered option of the Purchaser) the amount that
the Company failed to pay, or such other amount as is then due pursuant the
Agreement, including any accelerated amounts. In the event the Company fails to
make the payment within such 30 day period, the Warrant Price shall
automatically, and with no further action required by any party, be reduced to
$.01 per share. This Section 4(e) shall act independent of, and have no effect
on the rights and remedies provided in the Agreement. The Purchaser's failure to
exercise the right provided in this Section 4(e) shall in no way constitute a
waiver of this right or a waiver of any of its rights under the Agreement.
(f) Issuance of Additional Stock below Purchase Price. Except in the
event of a reduction as provided in Section 4(e) in which case this Section 4(f)
shall not apply, the Warrant Price shall be subject to adjustment from time to
time if the Company shall issue, after the Date of Grant any Additional Stock
(as defined below) without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of such
Additional Stock and less than the fair market value (as determined in
accordance with Section 10.2(c), the Warrant Price in effect immediately prior
to each such issuance shall automatically be adjusted as set forth in this
Section 4(f), unless otherwise provided in this Section 4(f).
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(A) Whenever the Warrant Price is adjusted pursuant to this
Section (4)(f), the new Warrant Price shall be determined by multiplying the
Warrant Price then in effect by a fraction, (x) the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance (the "Outstanding Common") plus the number of shares of Common Stock
that the aggregate consideration received by the Company for such issuance would
purchase at such Warrant Price; and (y) the denominator of which shall be the
number of shares of Outstanding Common plus the number of shares of such
Additional Stock. For purposes of the foregoing calculation, the term
"Outstanding Common" shall include shares of Common Stock deemed issued pursuant
to Section 4(f)(E) below.
(B) For purposes of this Section 4(f), "Additional Stock" shall
mean any shares of Common Stock issued (or deemed to have been issued pursuant
to Section 4(f)(E)) by the Company after the Date of Grant) other than:
(1) Common Stock issued pursuant to a registration
statement declared effective by the Securities Exchange Commission,
(2) Shares of Common Stock issuable or issued to employees,
consultants or directors of the Company or its subsidiaries and affiliates
directly or pursuant to a stock option plan or restricted stock plan approved by
the Board of Directors of the Company,
(3) Capital stock, or options or warrants to purchase
capital stock or securities exercisable for or exchangeable into capital stock,
issued to lenders or lessors in connection with commercial credit arrangements,
equipment financings or similar transactions; so long as the number of
securities so issued does not exceed five percent of the then outstanding
capital stock of the Company,
(4) Shares of Common Stock or Preferred Stock issuable upon
exercise of warrants outstanding as of the Date of Grant.
(5) Capital stock or warrants or options to purchase
capital stock or securities exercisable for or exchangeable into capital stock
issued in connection with bona fide acquisitions, mergers or similar
transactions, the terms of which are approved by the Board of Directors of the
Company, and
(6) Shares of Common Stock issued or issuable with the
consent of the Holders of 51% of the Total Shares on an as converted basis.
(C) No adjustment of the Warrant Price shall be made in an amount
less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
three years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of three years from the date of the
event giving rise to the adjustment being carried forward.
(D) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable
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discounts, commissions or other expenses allowed, paid or incurred by the
Company for any underwriting or otherwise in connection with the issuance and
sale thereof. In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
(E) Except as described in Section 4(f)(B), in the case of the
issuance (whether before, on or after the applicable Date of Grant) of options
to purchase or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock or options to purchase or
rights to subscribe for such convertible or exchangeable securities, the
following provisions shall apply for all purposes of this Section 4(f):
(1) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in Section
4(f)(D)) if any, received by the Company upon the issuance of such options or
rights plus the exercise price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common Stock
covered thereby.
(2) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange (assuming the satisfaction of any
conditions to convertibility or exchangeability, including, without limitation,
the passage of time, but without taking into account potential antidilution
adjustments) for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the Company for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the additional consideration, if any, to be
received by the Company (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the exercise
of any related options or rights (the consideration in each case to be
determined in the manner provided in Sections 4(f)(D)).
(3) In the event of any change in the number of shares of
Common Stock deliverable or in the consideration payable to the Company upon
exercise of such options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including, but not limited to, a change
resulting from the antidilution provisions thereof, the Warrant Price, to the
extent in any way affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
(4) Upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
Warrant Price, to the extent in any way affected by or computed using such
options, rights or securities or options or rights related to such securities,
shall be recomputed to reflect the issuance of only the number of shares of
Common Stock (and convertible or exchangeable
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securities which remain in effect) actually issued upon the exercise of such
options or rights, upon the conversion or exchange of such securities or upon
the exercise of the options or rights related to such securities.
(5) The number of shares of Common Stock deemed issued and
the consideration deemed paid therefor pursuant to Sections 4(f)(E)(1) and
4(f)(E)(2) shall be appropriately adjusted to reflect any change, termination or
expiration of the type described in either Section 4(f)(E)(3) or 4(f)(E)(4).
(G) Notwithstanding any other provisions of this Section (4)(f),
except to the limited extent provided for in Sections 4(f)(E)(3) and 4(f)(E)(4),
no adjustment of the Warrant Price pursuant to this Section 4(f) shall have the
effect of increasing the Warrant Price above the Warrant Price in effect
immediately prior to such adjustment.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the Holders of this Warrant at such Holder's last known address.
6. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value of
the Common Stock on the date of exercise as reasonably determined in good faith
by the Company's Board of Directors.
7. Compliance with Act; Disposition of Warrant or Shares of Common Stock.
(a) Compliance with Act. The Holders of this Warrant, by acceptance
hereof, agree that this Warrant, and the Shares to be issued upon exercise
hereof are being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Warrant, or any Shares except under
circumstances which will not result in a violation of the Securities and
Exchange Act of 1933, as amended (the "Act") or any applicable state securities
laws. Upon exercise of this Warrant, unless the Shares being acquired are
registered under the Act and qualified under any applicable state securities
laws or an exemption from such registration and qualification is available, the
Holders hereof shall confirm in writing that the Shares so purchased are being
acquired for investment and not with a view toward distribution or resale in
violation of the Act or applicable state securities laws and shall confirm such
other matters related thereto as may be reasonably requested by the Company.
This Warrant and all Shares issued upon exercise of this Warrant (unless
registered under the Act and any applicable state securities laws) shall be
stamped or imprinted with a legend in substantially the following form:
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAS
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE
SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i)
EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF
COUNSEL OR OTHER EVIDENCE, REASONABLY
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SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED OR
(iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL
AUTHORITIES.
Said legend shall be removed by the Company, upon the request of a Holder, at
such time as such Holder delivers to the Company, if requested by the Company,
an opinion of counsel reasonably acceptable to the Company, that the
restrictions on the transfer of the applicable security shall have terminated.
In addition, in connection with the issuance of this Warrant, the Holder
specifically represents to the Company by acceptance of this Warrant as follows:
(1) Each Holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The Holder is
acquiring this Warrant and the Shares issuable upon exercise hereof for its own
account for investment purposes only and not with a view to, or for the resale
in connection with, any "distribution" thereof in violation of the Act or
applicable state securities laws.
(2) Each Holder understands that neither this Warrant nor the shares
issuable upon exercise hereof have been registered under the Act and qualified
under any applicable state securities laws in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the Holder's investment intent as expressed herein.
(3) Each Holder further understands that this Warrant and the Shares
issuable upon exercise hereof must be held indefinitely unless subsequently
registered under the Act and qualified under any applicable state securities
laws, or unless exemptions from registration and qualification are otherwise
available. The holder is aware of the provisions of Rule 144, promulgated under
the Act.
(4) Each Holder is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated under the Act.
(b) Disposition of Warrant or Shares. With respect to any offer, sale or
other disposition of this Warrant or any Shares acquired pursuant to the
exercise of this Warrant prior to registration of such Warrant or Shares, each
Holder hereof agrees to give written notice to the Company 5 business days prior
thereto, describing briefly the manner thereof. Notwithstanding the foregoing,
this Warrant or such Shares may, as to such federal laws, be offered, sold or
otherwise disposed of in accordance with Rule 144 or 144A under the Act;
provided no such offer, sale or disposition shall be for less than at least 20%
of the Total Shares. For purposes of calculating 20% of the Total Shares in
connection with this Section 7(b), the Holder shall be permitted to aggregate
its Shares with the shares beneficially held by Virginia Surety Company, Inc.
and Resource Life.
(c) Applicability of Restrictions. The requirements of Section 7(b) above
shall not apply to any transfer or grant of a security interest in, this Warrant
(or the Common Stock obtainable upon exercise thereof) or any part hereof (i) to
a partner of the Holder if the Holder is a partnership or to a member of the
Holder if the Holder is a limited liability company, (ii) to a partnership of
which the Holder is a partner or to a limited liability company of which the
Holder is a member, or (iii) to any affiliate of the Holder if the Holder is a
corporation; provided, however, in any such transfer, if applicable, the
transferee shall on the Company's request agree in writing to be bound by the
terms of this Warrant as if an original Holder hereof.
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8. Rights as Shareholders; Information. No Holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Shares, nor shall anything contained herein be construed to confer upon the
Holder of this Warrant, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein. Notwithstanding the
foregoing, the Company will transmit to the Holders of this Warrant such
information, documents and reports as are generally distributed to the Holders
of any class or series of the securities of the Company concurrently with the
distribution thereof to the shareholders.
9. Registration Rights. The Company grants registration rights to the
Holders of this Warrant for any Common Stock of the Company obtained upon
exercise hereof, identical to the registration rights granted to the investors
in that certain Registration Rights Agreement between the Company and Colony
Investors III, L.P. (the "Registration Rights Agreement") determined as of the
date hereof.
The registration rights are freely assignable by the Holders of this
Warrant in connection with a permitted transfer of this Warrant or the Shares.
Each Holder, and any transferee of each Holder, by acceptance of the Warrant,
agrees to be bound by the terms and conditions of the Registration Rights
Agreement as if named a "Holder" therein.
10. Additional Rights.
10.1 Acquisition Transactions. The Company shall provide the Holders of
this Warrant with at least twenty (20) days' written notice prior to closing
thereof of the terms and conditions of any of the following transactions (to the
extent the Company has notice thereof): (i) the sale, lease, exchange,
conveyance or other disposition of all or substantially all of the Company's
property or business, or (ii) its merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary of the Company) where the
Company is not the Surviving Corporation, or (iii) any transaction (including a
merger or other reorganization) or series of related transactions, in which more
than 50% of the voting power of the Company is disposed of.
10.2 Right to Convert Warrant into Stock: Net Issuance.
(a) Right to Convert. In addition to and without limiting the rights of
the Holders under the terms of this Warrant, the Holders shall have the right to
convert this Warrant or any portion thereof (the "Conversion Right") into shares
of Common Stock as provided in this Section 10.2 at any time or from time to
time during the term of this Warrant. Upon exercise of the Conversion Right with
respect to a particular number of shares subject to this Warrant (the "Converted
Warrant Shares"), the Company shall deliver to the Holders (without payment by
the Holders of any exercise price or any cash or other consideration) that
number of shares of fully paid and nonassessable Common Stock as is determined
according to the following formula:
X= B-A
------
Y
Where: X = the number of shares of Common Stock that shall be issued to
the Holder
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Y = the fair market value of one share of Common Stock
A = the aggregate Warrant Price of the specified number of
Converted Warrant Shares immediately prior to the exercise of the
Conversion Right (i.e., the number of Converted Warrant Shares
multiplied by the Warrant Price)
B = the aggregate fair market value of the specified number of
Converted Warrant Shares (i.e. the number of Converted Warrant Shares
multiplied by the fair market value of one Converted Warrant Share)
No fractional shares shall be issuable upon exercise of the Conversion Right,
and, if the number of shares to be issued determined in accordance with the
foregoing formula is other than a whole number, the Company shall pay to the
Holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant. The
number of Shares which may be acquired upon exercise of the Warrant shall be
reduced by the number of Converted Warrant Shares.
(b) Method of Exercise. The Conversion Right may be exercised by each
Holder by the surrender of this Warrant at the principal office of the Company
together with a written statement (which may be in the form of Exhibit A-1 or
Exhibit A-2 hereto) specifying that the Holder thereby intends to exercise the
Conversion Right and indicating the number of shares subject to this Warrant
which are being surrendered (referred to in Section 10.2(a) hereof as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified therein (the
"Conversion Date"), and, at the election of the Holder hereof, may be made
contingent upon the closing of the sale of the Company's Common Stock to the
public in a public offering pursuant to a Registration Statement under the Act
(a "Public Offering"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of the
shares remaining subject to this Warrant, shall be issued as of the Conversion
Date and shall be delivered to the Holder within thirty (30) days following the
Conversion Date.
(c) Determination of Fair Market Value. For purposes of this Section
10.2, "fair market value" of a share of Common Stock as of a particular date
(the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the Securities and Exchange Commission, then the initial "Price to
Public" specified in the final prospectus with respect to such offering.
(ii) If the Conversion Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange, the fair market
value of the Common Stock shall be deemed to be the average of the
closing prices of the Common Stock on such exchange over the five trading
days immediately prior to the Determination Date;
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(B) If traded on the Nasdaq Stock Market or other
over-the-counter system, the fair market value of the Common Stock shall
be deemed to be the average of the closing bid prices of the Common Stock
over the five trading days immediately prior to the Determination Date;
and
(C) If there is no public market for the Common Stock, then
fair market value shall be determined by mutual agreement of the Holder
of this Warrant and the Company.
10.3 Exercise Prior to Expiration. To the extent this Warrant is not
previously exercised as to all of the Shares subject hereto, and if the fair
market value of one share of the Common Stock is greater than the Warrant Price
then in effect, this Warrant shall be deemed automatically exercised pursuant to
Section 10.2 above (even if not surrendered) immediately before its expiration.
For purposes of such automatic exercise, the fair market value of one share of
Common Stock upon such expiration shall be determined pursuant to Section
10.2(c). To the extent this Warrant or any portion thereof is deemed
automatically exercised pursuant to this Section 10.3, the Company agrees to
promptly upon written request of any Holder notify the Holders hereof of the
number of Shares, if any, the Holders hereof is to receive by reason of such
automatic exercise.
10.4 Debt and Interest Conversion Right.
(a) In addition to and without limiting the rights of the Purchaser under
the terms of this Warrant, the Purchaser shall have the right to convert this
Warrant or any portion thereof (the "Debt Conversion Right") into shares of
Common Stock as provided in this Section 10.4 at any time or from time to time
during the term of this Warrant. Upon exercise of the Debt Conversion Right with
respect to a particular number of shares subject to this Warrant (the "Debt
Converted Warrant Shares"), the Company shall deliver to the Purchaser (without
payment by the Purchaser of any exercise price or any cash or other
consideration except as specifically set forth in this Section 10.4) that number
of shares of fully paid and nonassessable Common Stock of the Company as equals
(i) up to that amount of debt and/or accrued interest the Company then owes the
Purchaser pursuant to the Agreement and which the Purchaser elects, in its sole
and absolute discretion, to allocate to this Debt Conversion Right as provided
in Section 10.4(b) below, divided by (ii) the Warrant Price. No fractional
shares shall be issuable upon exercise of the Debt Conversion Right, and, if the
number of shares to be issued determined in accordance with the foregoing
formula is other than a whole number, the Company shall pay to the Purchaser an
amount in cash equal to the fair market value of the resulting fractional share
on the Debt Conversion Date (as hereinafter defined). For purposes of Section 9
of this Warrant, shares issued pursuant to the Debt Conversion Right shall be
treated as if they were issued upon the exercise of this Warrant.
(b) Method of Exercise. The Debt Conversion Right may be exercised by the
Purchaser by the surrender of this Warrant at the principal office of the
Company together with a written statement (which may be in the form of Exhibit
A-1 or Exhibit A-2 hereto) specifying that the Purchaser thereby intends to
exercise the Debt Conversion Right and specifying the amount of debt and/or
accrued interest being allocated to such conversion and the number of shares
subject to this Warrant which are being surrendered (referred to in Section
10.4(a) hereof as the Debt Converted Warrant Shares) in exercise of the Debt
Conversion Right. Such conversion shall be effective upon receipt by the Company
of this Warrant together with the aforesaid written statement, or on such later
date as is specified therein (the "Debt Conversion Date"), and, at the election
of the Purchaser hereof, may be made contingent upon the closing of the sale of
the Company's Common Stock to the public in a public offering pursuant to a
Registration Statement under the Act (a
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"Public Offering"). Certificates for the shares issuable upon exercise of the
Debt Conversion Right and, if applicable, a new warrant evidencing the balance
of the shares remaining subject to this Warrant, shall be issued as of the Debt
Conversion Date and shall be delivered to the Purchaser within thirty (30) days
following the Debt Conversion Date.
10.5 Redemption.
(a) Redemption Date and Price. At any time after the earlier of the fourth
anniversary of the Date of Grant and the date on which the Notes are prepaid
under Section 8.1 or 8.2 of the Agreement (the "Note Redemption Date") and
continuing until the sixth anniversary of the Date of Grant, but on a date (a
"Redemption Date") within thirty (30) days after receipt by the Company of a
written request (a "Redemption Election") from the Purchaser that all or a
portion of the Shares beneficially owned by the Purchaser be redeemed, the
Company shall, to the extent it may lawfully do so, redeem the Shares specified
in the Redemption Election at a per share redemption price (the "Redemption
Price") equal to the higher of: (1) the Fair Market Share Price of the Common
Stock on the thirtieth day before such Redemption Date (the "Calculation Date"),
and (2) an amount equal to the quotient of (x) the product of (A) 6.00% per
annum on the average daily principal amount of outstanding Purchaser Notes from
and including the Date of Grant to but excluding such Redemption Date and (B)
the Redemption Ratio for that Redemption Date and (y) the number of Shares being
redeemed on such Redemption Date.
If Purchaser Notes are outstanding on a Redemption Date, the Company
shall pay to the Purchaser in arrears on each Payment Date after such Redemption
Date an amount equal to the product of (1) 6.00% per annum on the average daily
principal balance of outstanding Purchaser Notes from and including that the
later of the Redemption Date or the preceding the Payment Date to but excluding
such Payment Date and (2) the Redemption Ratio for that Redemption Date;
provided that the Company may credit dollar for dollar against such payments
(commencing with the payment due on the first Payment Date after such Redemption
Date) the product of (x) the number of Shares redeemed on such Redemption Date
and (y) the amount, if any, by which the Fair Market Share Price for such
Redemption Date determined pursuant to clause (1) of the preceding paragraph
exceeds the amount calculated for such Redemption Date pursuant to clause (2) of
such paragraph.
For purposes of this Section 10.5(a), the following terms shall have the
following meanings:
"Fair Market Share Price" shall mean the fair market value of a share of
the Common Stock determined pursuant to Section 10.2(ii)(A)-(C) as if
references therein to "Determination Date" were to "Calculation Date."
"Payment Date" means each date on which interest is due and payable on
any Purchaser Note.
"Purchaser Notes" means, on any day, the Notes which were originally
issued to the Purchaser which remain outstanding and beneficially owned
by the Purchaser on that day.
"Redemption Ratio" means, in respect of any Redemption Date, a fraction,
the numerator of which is the number of Shares being redeemed on such Redemption
Date and the denominator of which is the total number of Shares subject to this
Warrant at the Date of Grant (as adjusted pursuant to Section 4).
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(b) Procedure. Within fifteen (15) days following its receipt of the
Redemption Election, the Company shall mail a written notice, first class
postage prepaid, to the Purchaser (at the close of business on the second
business day next preceding the day on which notice is given) at the address
last shown on the records of the Company for such Purchaser, notifying such
Purchaser of the redemption to be effected, specifying the number of shares to
be redeemed from such Purchaser, the Redemption Date, the applicable Redemption
Price, the place at which payment may be obtained and calling upon such
Purchaser to surrender to the Company, in the manner and at the place
designated, such Purchaser's certificate or certificates representing the shares
to be redeemed (the "Redemption Notice"). Except as provided in Section 10.5(c),
on or after the Redemption Date, the holder of Shares to be redeemed shall
surrender to the Company the certificate or certificates representing such
shares, in the manner and at the place designated in the Redemption Notice, and
thereupon the Redemption Price of such shares shall be payable to the order of
the person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be cancelled. In the event less
than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(c) Effect of Redemption; Insufficient Funds. From and after the
Redemption Date, unless there shall have been a default in payment of the
Redemption Price, all rights of the Purchaser shall cease with respect to such
Shares, and such Shares shall not thereafter be transferred on the books of the
Company or be deemed to be outstanding for any purpose whatsoever. If the funds
of the Company, to the extent available, for redemption of the Shares on any
Redemption Date are insufficient (the "Insufficiency") to redeem the total
number of Shares to be redeemed on such date, such available funds will be used
to redeem the maximum possible number of such Shares. The Company shall issue a
three year note to redeem the remaining Shares to the Purchaser in an amount
equal to the Insufficiency, with a rate of 18% per annum from the date of the
Redemption Notice, and to be substantially in the form set out in Exhibit 1(a)
of the Agreement.
10.6 Right to Maintain.
(a) "New Securities". For purposes of this Section 10.6, the term "New
Securities" shall mean shares of Common Stock, Preferred Stock or any other
class of capital stock of the Company, whether or not now authorized, securities
of any type that are convertible into shares of such capital stock, and options,
warrants or rights to acquire shares of such capital stock. Notwithstanding the
foregoing, the term "New Securities" will not include (a) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets, or other reorganization whereby the
Company owns not less than 51 % of the voting power of such corporation; (b)
shares of Common Stock (or related options) issued or issuable at any time to
officers, directors, employees or consultants of the Company, pursuant to any
stock grant, stock option plan or stock purchase plan or other stock incentive
agreement or arrangement approved by the Board of Directors (which figure shall
include any options outstanding on the date hereof) up to an aggregate of 25% of
the then outstanding Common Stock of the Company; (c) securities issued in
connection with equipment lease or working capital debt financings, so long as
the number of securities so issued does not exceed one percent of the then
outstanding capital stock of the Company; (d) shares of Common Stock or
Preferred Stock issued in connection with any stock split, stock dividend or
recapitalization by the Company; (e) Common Stock issued pursuant to a
registration statement declared effective by the Securities Exchange Commission;
and (f) securities issued in connection with joint ventures and strategic
alliances which, in the good faith determination of the Board of Directors, are
necessary for the prospects of the Company.
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(b) Grant of Rights. Subject to the terms specified in this Section 10.6,
the Company hereby grants to each Holder who retains 20% of the Total Shares the
right of first refusal to purchase a portion of any issue of New Securities
which the Company hereafter may from time to time propose to issue and sell as
shall maintain such Holder's pro rata percentage ownership of the Company's
capital stock; provided that such Holder holds, or has the right to exercise
for, at least 20% of the Total Shares at the time of such issuance. The "pro
rata" percentage ownership of a Holder is calculated by dividing (i) the total
number of shares of Common Stock issuable upon the exercise of all Warrants (or
acquired under Sections 10.2 and 10.4) then held by such Holder by (ii) the
total number of shares of Common Stock then outstanding. For purposes of
calculating 20% of the Total Shares in connection with this Section 10.6(b), the
Holder shall be permitted to aggregate its Shares with the shares beneficially
held by Virginia Surety Company, Inc. and Resource Life.
(c) Procedure. In the event the Company proposes to undertake an issuance
of New Securities, it shall give the Holder written notice of its intention,
describing the type of New Securities, the price and the material terms upon
which the Company proposes to issue the same. A Holder shall have 20 calendar
days from the date of receipt of any such notice to agree to purchase up to its
pro rata share of such New Securities for the price and upon the terms specified
in the Company's notice by giving written notice to the Company to such effect
and stating therein the quantity of New Securities to be purchased. In
exercising such right, the Holder shall have the unfettered option to convert
that amount of debt and/or accrued interest the Company then owes the Purchaser
pursuant to the Agreement and which the Holder elects, in its sole and absolute
discretion, to allocate to this right, divided by (ii) the price per share for
the New Securities.
If less than all of the New Securities are subscribed for after the
expiration of the 20 calendar day period, the Company shall have 90 days
thereafter to sell or enter into an agreement to sell any New Securities not
purchased by Holders exercising their rights at a price and upon terms no more
favorable to the purchaser than the terms specified in the Company's notice to
the Holders, after which 90 day period the Company shall not thereafter sell
such New Securities without first offering a portion to the Holders in
accordance with this Section 10.6.
10.7 Observer Rights. So long as the Purchaser holds the right to
exercise the Warrant for at least 20% of the Total Shares, then a representative
designated to the Company in writing of the Purchaser: (i) shall have the right,
at the expense of such Purchaser to attend all Company Board of Director
meetings as observers (including special meetings and meeting (both regular and
special) held via teleconference or by any other means), (ii) shall be entitled
to all notices of the same; and (iii) to receive all other information made
generally available to the members of the Board of Directors. Upon the request
of the Company, the Purchaser and its representative, if it has a representative
observing such meetings, shall execute a confidentiality agreement, in form and
substance reasonably satisfactory to the Company, whereby such Purchaser and its
representative shall agree to keep the content of each such meeting confidential
in accordance with Section 20 of the Agreement. For purposes of calculating 20%
of the Total Shares in connection with this Section 10.7(b), the Holder shall be
permitted to aggregate its Shares with the shares beneficially held by Virginia
Surety Company, Inc. and Resource Life; provided that, as between the Purchaser,
Virginia Surety Company, Inc. and Resource Life only one representative may be
designated for any meeting.
11. Representations and Warranties. The Company represents and warrants
to each Holder of this Warrant as follows:
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(a) This Warrant has been duly authorized and executed by the Company and
is a valid and binding obligation of the Company enforceable in accordance with
its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and the rules of law or principles at
equity governing specific performance, injunctive relief and other equitable
remedies;
(b) The Shares have been, and any additional Shares to be issued pursuant
to the adjustment provisions of this Warrant will be, duly authorized and
reserved for issuance by the Company and, when issued in accordance with the
terms hereof, will be validly issued, fully paid and non-assessable;
(c) The execution and delivery of this Warrant are not, and the issuance
of the Shares upon exercise of this Warrant in accordance with the terms hereof
will not be, inconsistent with the Company's Certificate of Incorporation, as
amended through the Date of Grant, a true and complete copy of which is attached
hereto as Exhibit B (the "Charter"), or by-laws, do not and will not contravene
any law, governmental rule or regulation, judgment or order applicable to the
Company, and do not and will not conflict with or contravene any provision of,
or constitute a default under, any indenture, mortgage, contract or other
instrument of which the Company is a party or by which it is bound or require
the consent or approval of, the giving of notice to, the registration or filing
with or the taking of any action in respect of or by, any Federal, state or
local government authority or agency or other person, except for the filing of
notices pursuant to federal and state securities laws, which filings will be
effected by the time required thereby;
(d) There are no actions, suits, audits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against the Company in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Company to perform its obligations under this Warrant; and
(e) The number of shares of Common Stock of the Company outstanding on
the date hereof, on a fully diluted basis (assuming the conversion of all
outstanding convertible securities and the exercise of all outstanding options
and warrants) does not exceed 12,688,514 shares.
12. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to a Holder hereof or the Company
shall be delivered, or shall be sent by certified or registered mail, postage
prepaid, to each such Holder at its address as shown on the books of the Company
or to the Company at the address indicated therefor on the signature page of
this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon the exercise or conversion of
this Warrant shall survive the exercise, conversion and termination of this
Warrant and all of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the Holder hereof.
15. Lost Warrants or Stock Certificates. The Company covenants to the
Holders hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation
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of this Warrant or any stock certificate and, in the case of any such loss,
theft or destruction, upon receipt of an indemnity reasonably satisfactory to
the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate, the Company will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
18. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the Holders hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the Holder(s) hereof contained
herein shall survive indefinitely until, by their respective terms, they are no
longer operative.
19. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the Holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
Holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Holder of this Warrant against impairment.
21. Severability. The invalidity or unenforceability of any provision of
this Warrant in any jurisdiction shall not affect the validity or enforceability
of such provision in any other jurisdiction, or affect any other provision of
this Warrant, which shall remain in full force and effect.
22. Recovery of Litigation Costs. If any legal action or other proceeding
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Warrant, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
23. Entire Agreement; Modification. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
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24. Restrictions. Purchaser shall not transfer any of the right and
obligations under Sections 10.4, 10.5 or 10.7 without the prior written consent
of the Company.
25. Counterparts. This Warrant may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
[The remainder of this page is intentionally left blank.]
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The Company has caused this Warrant to be duly executed and delivered as
of the Date of Grant specified above.
▇▇▇▇▇▇▇-▇▇▇▇▇▇ INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Address:
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-------------------------------------
ACCEPTED AND AGREED:
COMBINED INSURANCE COMPANY OF AMERICA
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Address:
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-17-
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EXHIBIT A-1
NOTICE OF EXERCISE
To: ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Inc. (the "Company")
1. The undersigned hereby:
[ ] elects to purchase ___ shares of Common Stock of the Company pursuant to
the terms of the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full, or
[ ] elects to exercise its net issuance rights pursuant to Section 10.2 of
the attached Warrant with respect to___ shares of Common Stock.
[ ] elects to exercise its conversion rights pursuant to Section 10.4 of the
attached Warrant with respect to___ Shares of Common Stock. Such
conversion shall be effected by converting [specify debt and/or accrued
interest to be converted] into such Shares of Common Stock.
2. Please issue a certificate or certificates representing___ shares in
the name of the undersigned or in such other name or names as are specified
below:
(Name)
-----------------------------------------------
(Address)
-----------------------------------------------
-----------------------------------------------
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities laws.
4. The undersigned is aware of the Company's business affairs and
financial condition, and has acquired information about the Company sufficient
to reach an informed and knowledgeable decision to exercise this Warrant. The
undersigned is acquiring the Shares for its own account for investment purposes
only and not with a view to, or for the resale in connection with, any
"distribution" thereof in violation of the Act or applicable state securities
laws.
5. The undersigned understands that the Shares have not been registered
under the Act and qualified under any applicable state securities laws in
reliance upon a specific exemption therefrom, which exemption depends upon,
among other things, the bona fide nature of the undersigned's investment intent
as expressed herein.
6. The undersigned further understands that the Shares must be held
indefinitely unless subsequently registered under the Act and qualified under
any applicable state securities laws, or unless exemptions from registration and
qualification are otherwise available. The undersigned is aware of the
provisions of Rule 144, promulgated under the Act.
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7. The undersigned is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated under the Act.
(Signature)
--------------------------
Date:
-------------------
-19-
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EXHIBIT A-2
NOTICE OF EXERCISE
To: ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Inc.(the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S, filed, 19, the undersigned hereby:
[ ] elects to purchase___ shares of Common Stock of the Company (or such
lesser number of shares as may be sold on behalf of the undersigned at
the Closing) pursuant to the terms of the attached Warrant, or
[ ] elects to exercise its net issuance rights pursuant to Section 10.2 of
the attached Warrant with respect to ___ Shares of Common Stock.
[ ] elections to exercise its conversion rights pursuant to Section 10.4 of
the attached Warrant with respect to ___ Shares of Common Stock. Such
conversation shall be effected by converting [specify debt and/or accrued
interest to be converted] into such Shares of Common Stock.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such___ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $__________ or, if less, the net proceeds
due the undersigned from the sale of shares in the aforesaid public offering. If
such net proceeds are less than the purchase price for such shares, the
undersigned agrees to deliver the difference to the Company prior to the
Closing.
(Signature)
--------------------------
Date:
-------------------
-20-
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EXHIBIT B
CHARTER
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EXHIBIT 4.4(b)
FORM OF OPINION OF SPECIAL COUNSEL
TO THE COMPANY
Matters To Be Covered In
Opinion of Special Counsel To the Company
1. Each of the Company and its Materials Subsidiaries being duly
incorporated, validly existing and in good standing and having requisite
corporate power and authority to issue and sell the Notes and to execute and
deliver the documents.
2. Each of the Company and its Material Subsidiaries being duly
qualified and in good standing as a foreign corporation in appropriate
jurisdictions.
3. Due authorization and execution of the documents and such
documents being legal, valid, binding and enforceable.
4. No conflicts with charter documents, laws or other agreements.
5. All consents required to issue and sell the Notes and to
execute and deliver the documents having been obtained.
6. No litigation questioning validity of documents.
7. The Notes not requiring registration under the Securities Act
of 1933, as amended; no need to qualify an indenture under the Trust Indenture
Act of 1939, as amended.
8. No violation of Regulations G, T or X of the Federal Reserve
Board.
9. Company not an "investment company", or a company "controlled"
by an "investment company", under the Investment Company Act of 1940, as
amended.
4.4-1