Exhibit 10.8
NOTE AND WARRANT PURCHASE AGREEMENT
by and among
UNITED SHIPPING & TECHNOLOGY, INC.,
UST DELIVERY SYSTEMS, INC.
(f/k/a CORPORATE EXPRESS DELIVERY SYSTEMS, INC.),
THE OTHER LOAN PARTIES SIGNATORY HERETO
and
BAYVIEW CAPITAL PARTNERS LP
Dated as of September 24, 1999
TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS 1
1.01 Certain Definitions 1
ARTICLE 2 PURCHASE AND SALE OF SECURITIES 6
2.01 Purchase and Sale 6
2.02 The Closing 7
2.03 Use of Proceeds 7
2.04 Closing Fee 7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES 7
3.01 Organization, Standing and Qualification of the Loan Parties 7
3.02 Subsidiaries and Investments 7
3.03 Execution, Delivery and Performance of Agreement; Authority 8
3.04 Financial Statements 8
3.05 Warrant and Warrant Securities 9
3.06 Capitalization 9
3.07 No Material Adverse Change 10
3.08 Litigation 10
3.09 Compliance with Laws and Other Instruments 10
3.10 Title to and Liens on Properties 10
3.11 Solvency 11
3.12 Permits and Licenses 11
3.13 Taxes 11
3.14 Intellectual Property Rights 11
3.15 Margin Securities 12
3.16 Not an Investment Company 12
3.17 Securities Laws 12
3.18 Environmental Protection 13
3.19 Product Liability 13
3.20 Insurance 13
3.21 Employment or Severance Agreements 13
3.22 Software and Information Systems 14
3.23 Disclosure 14
3.24 Acquisition Documents 14
3.25 Contracts 14
3.26 Use of Proceeds; Restrictions under the SBIA 15
3.27 Small Business Concern 15
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 16
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4.01 Partnership Existence and Power 16
4.02 Authorization 16
4.03 Litigation 16
4.04 Investment Intent 16
ARTICLE 5 CLOSING CONDITIONS 17
5.01 Representations and Warranties True 17
5.02 Compliance with Agreement 17
5.03 No Event of Default 17
5.04 Documents Required for the Closing 17
5.05 Proceedings Satisfactory 19
ARTICLE 6 AFFIRMATIVE COVENANTS OF THE COMPANY AND CEDS 19
6.01 Payment of Notes 19
6.02 Reporting 19
6.03 Books and Records; Inspection and Examination 21
6.04 Compliance with Laws 22
6.05 Maintenance of Properties 23
6.06 Insurance 23
6.07 Payment of Taxes and Claims 23
6.08 Maintenance of Corporate Existence 23
6.09 Financial Covenants 24
6.10 Board of Directors 29
6.11 Replacement of Certificates 29
6.12 Retirement Plans 29
6.13 Filing of Reports 30
6.14 [Intentionally Omitted] 30
6.15 SBIA Information 30
6.16 SBIA Compliance 30
6.17 Environmental Matters 31
6.18 Other Agreements 31
6.19 Certificates of Incorporation 32
ARTICLE 7 NEGATIVE COVENANTS OF THE COMPANY AND CEDS 32
7.01 Liens 32
7.02 Fixed Indebtedness 33
7.03 Guaranties 34
7.04 Investments and Loans 34
7.05 Dividends; Distributions 35
7.06 Sale of Assets 35
7.07 Consolidation and Merger; Acquisitions 35
7.08 Sale and Leaseback 35
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7.09 [Intentionally Omitted] 35
7.10 Restrictions on Nature of Business 35
7.11 Accounting 36
7.12 [Intentionally Omitted] 36
7.13 [Intentionally Omitted] 36
7.14 Conflicts of Interest 36
7.15 Transactions with Affiliates 36
7.16 Modification of Senior Credit Agreement 36
7.17 Inconsistent Agreements 36
7.18 Rental Obligations 36
7.19 Modification of Seller Notes 37
7.20 Certificates of Incorporation 37
ARTICLE 8 INDEMNIFICATION 37
8.01 Indemnification by the Company 37
8.02 Indemnification by the Purchaser 37
8.03 Notice 37
8.04 Defense 38
ARTICLE 9 EVENTS OF DEFAULT 38
9.01 Events of Default 38
9.02 Remedies 40
ARTICLE 10 MISCELLANEOUS 41
10.01 Survival of Representations and Warranties 41
10.02 Expenses 41
10.03 Governing Law 41
10.04 Notices 41
10.05 Entire Agreement 42
10.06 Amendments; Consents; Waivers 42
10.07 Severability of Invalid Provision 43
10.08 Successors and Assigns 43
10.09 Rules of Construction 43
10.10 Counterparts 43
10.11 Cumulative Remedies 43
10.12 Press Releases 43
10.13 Time is of the Essence 43
10.14 Consent to Jurisdiction; Jury Waiver 44
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EXHIBITS AND SCHEDULES
Exhibit A - Form of Note
Exhibit B - Form of Warrant
Exhibit C - Form of Security Agreement
Exhibit D - Form of Guaranty
Exhibit E - Form of Opinion of the Company's Legal Counsel
Exhibit F - Compliance Certificate
Disclosure Schedule
iv
NOTE AND WARRANT PURCHASE AGREEMENT
This Agreement (the "Agreement") is made as of September 24, 1999 by
and between UNITED SHIPPING & TECHNOLOGY, INC., a Utah corporation (the
"Company"), UST DELIVERY SYSTEMS, INC., a Delaware corporation f/k/a Corporate
Express Delivery Systems, Inc. ("CEDS"), THE OTHER LOAN PARTIES SIGNATORY HERETO
and BAYVIEW CAPITAL PARTNERS LP, a Delaware limited partnership ("Bayview" or
the "Purchaser").
BACKGROUND
A. The Company and CEDS have entered into that certain Merger
Agreement dated as of September 8, 1999 by and among CEX Holdings, Inc., CEDS,
the Company, and United Shipping & Technology Acquisition Corp. (the
"Acquisition Agreement") pursuant to which CEDS has become a wholly-owned
subsidiary of the Company.
B. CEDS, as a wholly-owned subsidiary of the Company, will benefit
from the transactions described in this Agreement.
C. The Purchaser is willing to provide certain funds through a
senior subordinated loan which, along with funds provided by the Senior Lender
and Seller (as each such term is defined below), will be used to carry out the
transactions contemplated by the Acquisition Agreement.
D. The Company will issue the Warrant (as defined below) to the
Purchaser as additional consideration for providing the subordinated loan to the
Company and CEDS.
E. The Company, CEDS, and the Purchaser wish to specify in this
Agreement the terms on which the Company and CEDS will sell and the Purchaser
will purchase the Note (as defined below) and the Warrant and the terms which
are applicable to the shares of the Company's capital stock that are issuable
upon exercise of the Warrant.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises set forth below, the parties agree as follows:
ARTICLE 1 DEFINITIONS
1.01 Certain Definitions. As used herein, the following terms have
the meanings indicated:
"Acquisition" means the Merger (as defined in the Acquisition
Agreement).
"Acquisition Documents" means the Acquisition Agreement, together
with all other agreements and instruments delivered pursuant to the Acquisition
Agreement.
"Affiliate" means (i) any Person which directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Company, (ii) any Person of which five percent (5%) or
more of the equity interest is held beneficially or of record by the Company or
a Subsidiary, or (iii) a spouse of any shareholder of the Company or any
business of which such spouse is a director, officer, employee or equity holder.
Control for purposes of this definition means the possession, directly or
indirectly, of the power to influence the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Ancillary Agreements" means all the agreements and instruments
executed and delivered by the Loan Parties to the Purchaser at the Closing,
including without limitation the Note, the Warrant, the Security Agreements, and
the Guaranties.
"Balance Sheet Date" has the meaning set forth in Section 3.04.
"CEDS" means UST Delivery Systems, Inc., a Delaware corporation
f/k/a Corporate Express Delivery Systems, Inc., a wholly-owned subsidiary of the
Company and a co-obligor under the Note.
"Change of Control" means any of the following: (a) any Person or
group of Persons (within the meaning of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) acquires beneficial ownership (withing the meaning
of Rule 13d-3 promulgated by the Commission under the Exchange Act) of twenty
percent (20%) or more (on a fully diluted basis) of the issued and outstanding
shares of capital stock of the Company having the right to vote for the election
of directors of the Company under ordinary circumstances, excluding any such
Person or group of Persons who holds, as of the Closing Date, such beneficial
ownership of ten percent (10%) or more (on a fully diluted basis) of the issued
and outstanding shares of capital stock of the Company having the right to vote
for the election of directors of the Company under ordinary circumstances; (b)
during any period of twelve (12) consecutive calendar months, individuals who at
the beginning of such period constituted the board of directors of the Company
(together with any new directors whose election by the board of directors of the
Company or whose nomination for election by the stockholders of the Company was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of such period or whose elections or
nomination for election was previously so approved) cease for any reason other
than death or disability to constitute a majority of the directors then in
office; (c) the Company ceases to own and control all of the economic and voting
rights associated with all the outstanding capital stock of CEDS; (d) CEDS
ceases to own and control all of the economic and voting rights associated with
all of the outstanding capital
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stock of any of its Subsidiaries; or (e) any Person or group of Persons (within
the meaning of the Exchange Act) who holds, as of the Closing Date, beneficial
ownership (withing the meaning of Rule 13d-3 promulgated by the Commission under
the Exchange Act) of ten percent (10%) or more (on a fully diluted basis) of the
issued and outstanding shares of capital stock of the Company having the right
to vote for the election of directors of the Company under ordinary
circumstances acquires such beneficial ownership of thirty percent (30%) or more
(on a fully diluted basis) of the issued and outstanding shares of capital stock
of the Company having the right to vote for the election of directors of the
Company under ordinary circumstances.
"Closing" and "Closing Date" have the meanings set forth in Section
2.01.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations adopted pursuant thereto.
"Commission" means the U.S. Securities and Exchange Commission.
"Common Stock" means the common stock, $.004 par value per share, of
the Company authorized by its Articles of Incorporation, any additional Common
Stock which may be authorized in the future by the Company, and any stock into
which such Common Stock may be converted.
"Company" means United Shipping & Technology, Inc., a Utah
corporation.
"Disclosure Schedule" means the disclosure schedule prepared by the
Company and CEDS attached to this Agreement which sets forth the exceptions to
the representations and warranties contained in Article 3 and certain other
information called for by the Agreement.
"Environmental Laws" has the meaning set forth in Section 3.18.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations adopted pursuant thereto.
"Event of Default" has the meaning set forth in Section 9.01.
"Financial Statements" has the meaning set forth in Section 3.04.
"Fixed Indebtedness" means, without duplication (i) all indebtedness
for borrowed money, (ii) all indebtedness secured by any mortgage, pledge,
security interest or lien existing on property owned subject to such mortgage,
pledge, security interest or lien whether or not the indebtedness secured
thereby shall have been assumed, (iii) all amounts representing the
capitalization of rentals in accordance with GAAP and (iv) all guarantees,
endorsements and
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other contingent obligations with respect to liabilities of a type described in
any of clauses (i) through (iii) above.
"GAAP" means United States generally accepted accounting principles
consistently applied with prior periods.
"Guaranties" means the Guaranties made and given by the Guarantors
to and for the benefit of the Purchaser, substantially in the form attached as
Exhibit D.
"Guarantors" means, individually and collectively, Corporate Express
Delivery Systems - Intermountain, Inc., Corporate Express Delivery Systems -
Mid-Atlantic, Inc., Corporate Express Delivery Systems - Mid-West, Inc.,
Corporate Express Delivery Systems - New England, Inc., Corporate Express
Delivery Systems - Northeast, Inc., Corporate Express Delivery Systems -
Southeast, Inc., Corporate Express Delivery Systems - Southwest, Inc., Corporate
Express Delivery Systems - West Coast, Inc., Corporate Express Delivery Leasing
- Intermountain, Inc., Corporate Express Delivery Leasing - Mid-Atlantic, Inc.,
Corporate Express Delivery Leasing - Mid-West, Inc., Corporate Express Delivery
Leasing - New England, Inc., Corporate Express Delivery Leasing Northeast, Inc.,
Corporate Express Delivery Leasing - Southeast, Inc., Corporate Express Delivery
Leasing - Southwest, Inc., Corporate Express Delivery Leasing - West Coast,
Inc., Corporate Express Delivery Systems - Air Division, Inc., Air Courier
Dispatch of New Jersey, Inc., Midnite Express International Courier, Inc.,
Tricor America, Inc., New Delaware Delivery, Inc., Corporate Express Delivery
Administration, Inc., American Delivery System, Inc., Corporate Express
Distribution Services, Inc., Sunbelt Courier, Inc.
"Hazardous Materials" means (a) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act of 1976, as amended from time to
time, and regulations promulgated thereunder; (b) any "hazardous substance" as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended from time to time, and regulations promulgated
thereunder, (c) any substance, the presence of which on any property now or
hereafter owned, acquired or operated by any Loan Party or any Subsidiary is
prohibited by any Environmental Law; and (d) any other substance which any
Environmental Law requires special handling in its collection, storage,
treatment or disposal.
"Hazardous Materials Contamination" means the contamination (whether
presently existing or occurring after the date of this Agreement) by Hazardous
Materials of any property owned, operated or controlled by any Loan Party or any
Subsidiary or for which any Loan Party or any Subsidiary has responsibility,
including, without limitation, improvements, facilities, soil, ground water, air
or other elements on, or of, any property now or hereafter owned, acquired or
operated by any Loan Party or any Subsidiary, and any other contamination by
Hazardous Materials for which any Loan Party or any Subsidiary is, or is claimed
to be, responsible.
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"Indebtedness" means, without duplication, (i) all Fixed
Indebtedness, and (ii) all items not otherwise included in Fixed Indebtedness
which, in accordance with GAAP, would be included on the liability side of a
balance sheet as of the date such Indebtedness is to be determined, excluding
capital stock, surplus, capital and earned surplus.
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service ▇▇▇▇ rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, designs, methodologies, computer programs (including all source codes)
and related documentation, technical information, manufacturing, engineering and
technical drawings, know-how and all pending applications for and registrations
of patents, trademarks, service marks and copyrights.
"Intercreditor Agreement" means those certain Intercreditor
Agreements among the Company, CEDS, the Purchaser, the Senior Lender and the
Seller dated the date hereof.
"Interim Period Financial Statements" has the meaning set forth in
Section 3.04.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, restriction on transfer or encumbrance of any kind in
respect of such asset.
"Loan Party" means each of the Company, CEDS, and each Guarantor.
"Material Adverse Effect" means, with respect to any Person, any
effect or series of effects that, in the aggregate, have a material adverse
effect on (a) the business, properties, financial condition, operations, or
performance of such Person and its subsidiaries or affiliates, taken as a whole,
or (b) the ability of such Person to perform its obligations under this
Agreement or the Ancillary Agreements.
"Note" means the Senior Subordinated Note in the aggregate principal
amount of Five Million Dollars ($5,000,000), substantially in the form attached
as Exhibit A, to be issued by the Company and CEDS to the Purchaser.
"Obligations" means all liabilities and obligations of the Loan
Parties created under or existing pursuant to this Agreement and each of the
Ancillary Agreements.
"Permitted Liens" has the meaning set forth in Section 7.01.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government, or any agency or political
subdivision thereof.
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"Plan" means an employee benefit plan or other plan maintained for
employees of the Company and governed by Title IV of ERISA.
"Reportable Event" has the meaning assigned to that term in Title IV
of ERISA.
"SBA" means the U.S. Small Business Administration.
"SBIA" means the Small Business Investment Act of 1958, as amended,
and the regulations adopted pursuant thereto.
"SBIC" means a small business investment company licensed under the
SBIA.
"Securities" means, collectively, the Warrant and the Note.
"Securities Act" means the Securities Act of 1933, as amended, and
the regulations adopted pursuant thereto.
"Security Agreements" means the Security Agreements made and given
by CEDS and the Guarantors to and for the benefit of the Purchaser,
substantially in the form attached as Exhibit C.
"Seller Notes" means (a) that certain Long-Term Subordinated
Promissory Note in the aggregate principal amount of $8,400,000, (b) that
certain Short-Term Subordinated Promissory Note in the aggregate principal
amount of $7,500,000, and (c) that certain Convertible Subordinated Promissory
Note in the aggregate principal amount of $3,600,000, each issued as of the date
hereof by CEDS to the Seller.
"Seller" means CEX Holdings, Inc., a Colorado corporation.
"Senior Credit Agreement" means the Credit Agreement among the Loan
Parties and the Senior Lender dated the date hereof.
"Senior Indebtedness" means all indebtedness of CEDS to the Senior
Lender and all other Lenders (as defined in the Senior Credit Agreement)
provided for under the Senior Credit Agreement.
"Senior Lender" means General Electric Capital Corporation, a New
York corporation.
"Subsidiary" means any corporation of which an aggregate of 50% or
more of the outstanding voting stock is at any time directly or indirectly owned
by the Company or CEDS,
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by one or more of their Subsidiaries, or by the Company or CEDS and one or more
of their Subsidiaries.
"Warrant" means the warrant to be issued by the Company to the
Purchaser to purchase 1,366,220 of shares of Common Stock, substantially in the
form attached as Exhibit B.
"Warrant Securities" means the Common Stock or other securities
issued upon exercise of the Warrants.
ARTICLE 2 PURCHASE AND SALE OF SECURITIES
2.01 Purchase and Sale. Subject to the terms and conditions of this
Agreement, the Company and CEDS hereby agree to sell to the Purchaser, and the
Purchaser hereby agrees to purchase from the Company and CEDS at the closing
contemplated by this Agreement (the "Closing"), the Note, and the Company hereby
agrees to issue to the Purchaser and the Purchaser agrees to purchase from the
Company, the Warrant, for an aggregate purchase price of $5,000,000 (the
"Purchase Price").
2.02 The Closing. The Closing will occur at the offices of Faegre &
▇▇▇▇▇▇ LLP in Minneapolis, Minnesota on September 24, 1999 ( the "Closing Date")
or such later date as all of the conditions precedent stated in Article 5 have
been satisfied. At the Closing, the Purchaser will deliver to the Company and
CEDS payment of the Purchase Price by wire transfer to an account designated by
the Company and CEDS in writing.
2.03 Use of Proceeds. The Company and CEDS will apply the proceeds
of the sale of the Securities first to the payment of the fees and expenses
associated with the transactions contemplated under this Agreement. The Company
and CEDS will use the proceeds of the sale of the Securities only in accordance
with Section 3.26 and Section 6.16.
2.04 Closing Fee. At the Closing the Company and CEDS will pay
Bayview Capital Management LLC a closing fee of $100,000.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES
Each Loan Party jointly and severally represents and warrants to the
Purchaser as of the Closing Date, except as expressly indicated on the
Disclosure Schedule which exceptions are deemed to be representations and
warranties as if made within this Article 3, as follows:
3.01 Organization, Standing and Qualification of the Loan Parties .
Each Loan Party is a corporation duly organized, validly existing and in good
standing under the laws of the state of
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its incorporation. Each Loan Party has all requisite corporate power and
authority to carry on its business as now being conducted and proposed to be
conducted and to own, lease or operate its properties as and in the places where
such business is now conducted or proposed to be conducted and such properties
are now owned, leased or operated. Each Loan Party is duly qualified and in good
standing as a foreign corporation authorized to carry on its business in the
states where the nature of the activities conducted or proposed to be conducted
by such Loan Party, or the character of the properties owned, leased or operated
by such Loan Party require such qualification except where the failure to be so
qualified would not have a Material Adverse Effect on such Loan Party.
3.02 Subsidiaries and Investments. Except as contemplated by the
Acquisition or as set forth on the Disclosure Schedule, no Loan Party has any
Subsidiary or investment, equity or ownership interest (whether controlling or
not) of any kind in any other Person. No Loan Party is engaged in any joint
venture or partnership with any other Person.
3.03 Execution, Delivery and Performance of Agreement; Authority.
(a) The execution, delivery and performance of this Agreement and
the Ancillary Agreements (to which they are a party) by the Loan Parties have
been duly authorized by all necessary corporate action on the part of each Loan
Party's Board of Directors and stockholders and do not conflict with, result in
a default, right to accelerate, or loss of rights under, or result in the
creation of any Lien pursuant to, any provision of the Articles or Certificate
of Incorporation or Bylaws of any Loan Party, or any agreement, law, rule or
regulation, or any order, judgment or decree to which any Loan Party is a party
or by which any Loan Party, or their respective properties are bound or affected
(except for any Lien created under this Agreement or the Ancillary Agreements).
No consent is required to be obtained or made by any Loan Party in connection
with the execution and delivery by the Loan Parties of this Agreement or the
Ancillary Agreements.
(b) Each Loan Party has full power and authority to enter into this
Agreement and the Ancillary Agreements and to carry out the transactions
contemplated hereby. This Agreement has been duly executed and delivered on
behalf of the Loan Parties, as applicable, and constitutes, and the Ancillary
Agreements when executed and delivered will constitute, valid and binding
obligations of the Loan Parties enforceable in accordance with their respective
terms, except to the extent that enforcement may be limited by applicable
bankruptcy, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and subject to general equitable
principles which may limit the right to obtain equitable remedies.
3.04 Financial Statements.
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(a) The Company and CEDS have delivered to the Purchaser the
following financial statements (collectively, the "Financial Statements"): (a)
the Company's unaudited balance sheet as of June 30, 1999 (the "Balance Sheet
Date") and related statements of income for the twelve (12) month period then
ended which are attached as part of the Disclosure Schedule (the "Company
Interim Period Financial Statements"); (b) CEDS' unaudited balance sheet as of
July 3, 1999, and related statements of income for the five (5) month period
then ended which are attached as part of the Disclosure Schedule (the "CEDS
Interim Period Financial Statements", and collectively with the Company Interim
Period Financial Statements, the "Interim Period Financial Statements"); (c) the
Company's audited financial statements for the fiscal years ended June 30, 1998
and June 30, 1997; and (d) CEDS' audited financial statements for the fiscal
year ended January 31, 1999, the eleven (11) month period ended January 31,
1998, and the fiscal year ended March 1, 1997. All of the Financial Statements
have been prepared from the books and records of the Company and CEDS in
accordance with GAAP and fairly present in all material respects the financial
condition of the Company and CEDS as of their respective dates and the results
of operations for the periods covered thereby. The income statements included in
the Financial Statements do not contain any material items of special or
nonrecurring income or any other material income not earned in the ordinary
course of business except as expressly specified therein, and the Financial
Statements include all material adjustments, which consist only of normal
recurring accruals, necessary for such fair presentation, subject in the case of
the Interim Period Financial Statements to normal year-end adjustments.
(b) Attached to the Disclosure Schedule is a forecasted pro forma
consolidated and consolidating balance sheet (the "Pro Forma Balance Sheet") of
the Company and its Subsidiaries as of August 28, 1999, giving effect to the
transactions contemplated by this Agreement, the Acquisition Agreement, and the
Senior Credit Agreement. The Pro Forma Balance Sheet fairly presents, in all
material respects, a reasonable forecast on a pro forma basis of the financial
condition of the Company and its Subsidiaries at the date thereof and giving
effect to such transactions.
3.05 Warrant and Warrant Securities. The Warrant, when issued and
paid for pursuant to the terms of this Agreement, will be validly issued, fully
paid and nonassessable. The Warrant Securities have been reserved for issuance
and, when issued upon exercise of the Warrant, will be validly issued, fully
paid and nonassessable. The Warrant and the Warrant Securities will be issued by
the Company to the Purchaser in a transaction exempt from registration and
qualification under applicable federal and state securities laws.
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3.06 Capitalization.
(a) As of the date of this Agreement, the authorized capitalization
of the Company consists of 75,000,000 shares of Common Stock, of which
10,941,848 shares are issued and outstanding and 25,000,000 shares of preferred
stock, $.004 par value, of which no shares are issued and outstanding. All such
outstanding shares are validly issued, fully paid and nonassessable.
(b) Except for the Warrant or as set forth on the Disclosure
Schedule, there are no rights, options or warrants of any kind outstanding to
purchase or acquire Common Stock or any other ownership interest in the Company,
nor are there other securities, obligations, agreements or rights of any kind
outstanding which are exercisable for, convertible into or exchangeable for any
Common Stock or any other ownership interests in the Company or under the terms
of which the parties thereto have the right to purchase or acquire Common Stock
or any other ownership interests in the Company. The issuance by the Company of
the Warrant and the Warrant Securities is not subject to any preemptive or
similar right of any Person pursuant to statute, contract or understanding.
(c) Except as provided in this Agreement or the Warrant, neither the
Company nor any of its Subsidiaries is subject to any obligation to repurchase
or otherwise acquire or retire any shares of capital stock. There are no
commitments of the Company to distribute to holders of any class of its capital
stock any evidences of indebtedness or assets, or to pay any dividend or make
any other distribution in respect thereof.
(d) Except as provided in this Agreement or the Warrant, no Person
has a contractual right to demand or other right to cause the Company to file
any registration statement under the Securities Act relating to any securities
for the Company or any right to participate in any offering of the Company's
securities. There are no agreements between or among the Company's shareholders
or buy-sell agreements of any kind affecting the Company's securities.
3.07 No Material Adverse Change. Since the Balance Sheet Date there
has been no event or occurrence which has had or is reasonably likely to have a
Material Adverse Effect on any Loan Party.
3.08 Litigation. Except as described on the Disclosure Schedule,
there is no claim, legal action, suit, arbitration, governmental investigation
or other legal or administrative proceeding, nor any order, decree or judgment,
pending or threatened against (i) any Loan Party, (ii) any Loan Party's
officers, directors or employees for acts or omissions relating to such Loan
Party, (iii) any Loan Party's properties, assets or business, or (iv) the
transactions contemplated by this Agreement, which, with respect to clauses
(i)-(iii), has a reasonable risk of being determined adversely to any such
party, properties, assets or business and which, if so
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determined, could reasonably be expected to have a Material Adverse Effect on
any Loan Party, and the Company and CEDS have no knowledge of any basis for any
of the foregoing.
3.09 Compliance with Laws and Other Instruments. Each Loan Party is
in compliance, and has complied with all existing laws, rules, regulations,
ordinances, orders, judgments and decrees applicable to its business, properties
or operations except where the failure to so comply would not have a Material
Adverse Effect. Neither the ownership nor use of any Loan Party's properties nor
the conduct or currently proposed conduct of its business (i) conflicts with the
rights of any other Person or (ii) violates or (with or without the giving of
notice or the passage of time, or both) will violate, conflict with, or result
in a default, right to accelerate, or loss of rights under, any provision of the
Articles or Certificate of Incorporation or the Bylaws of such Loan Party, or
any Lien, lease, license, agreement, understanding, law, ordinance, rule,
regulation, zoning regulation, order, judgment or decree to which such Loan
Party is a party or by which it or its assets may be bound or affected except as
could not reasonably be expected to have a Material Adverse Effect.
3.10 Title to and Liens on Properties.
(a) The Disclosure Schedule contains a description of the real
property owned by each Loan Party and the real property leased by each Loan
Party (as lessee or lessor).
(b) Each Loan Party has good and marketable title (which is of
record as to any real estate) to all the properties and assets which its owns or
purports to own, including without limitation those properties and assets
reflected in the Interim Period Financial Statements as of the Balance Sheet
Date, except to the extent they have been sold or disposed of in the ordinary
course of business subsequent to the Balance Sheet Date. None of the properties
and assets are subject to any Lien, restriction, lease, license, easement,
liability or adverse claim of any nature whatsoever, direct or indirect, whether
accrued, absolute, contingent or otherwise, except: (i) those imperfections of
title and encumbrances, if any, which (A) are not substantial in character,
amount, or extent and do not so materially detract from the value of the
properties subject thereto so as to render them unmarketable, (B) do not
interfere with either the present and continued use of such property or the
conduct of normal operations, and (C) have arisen only in the ordinary course of
business; and (ii) Permitted Liens.
3.11 Solvency. After giving effect to the transactions contemplated
by this Agreement and the Ancillary Agreements each Loan Party will be solvent.
For purposes of this Section, "solvent" means, with respect to any Person on any
date of determination, that on such date (a) the fair market value of the assets
of such Person on a going concern basis is in excess of the total amount of its
liabilities (including, without limitation, contingent liabilities); (b) the
present fair saleable value of the assets of such Person is greater than its
probable liability on its existing debts as such debts become absolute and
matured; (c) such Person is able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as they
11
mature; and (d) such Person has capital sufficient to carry on its business as
presently conducted and as proposed to be conducted.
3.12 Permits and Licenses. Except as set forth on the Disclosure
Schedule, each Loan Party has all federal, state and local licenses and permits
required to be maintained in connection with and material to the operation of
its business, and all such licenses and permits are valid and fully effective in
all material respects.
3.13 Taxes. Except as set forth on the Disclosure Schedule, each
Loan Party has timely filed with the appropriate federal, state, local and
foreign taxing authorities all tax returns required to be filed by or with
respect to it on or before the Closing Date, and such tax returns are true,
correct and complete in all material respects. Each Loan Party has timely paid
all taxes that have become due pursuant to such tax returns and all other taxes
and assessments levied upon such Loan Party, or its properties, assets, income
or franchises, to the extent such taxes and assessments have become due and
payable and before they have become delinquent. No issue has been raised by any
federal, state, local or foreign taxing authority which could reasonably be
expected to result in a proposed deficiency for any Loan Party for any period
except for those not reasonably likely to cause a Material Adverse Effect on any
Loan Party. There is no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect on any Loan Party.
3.14 Intellectual Property Rights.
(a) The Disclosure Schedule lists (i) the federal registration
number and the date of registration of registered patents and trademarks and of
other registered marks, trade names, brand names or other trade rights currently
used by each Loan Party in the conduct of its business, (ii) all of the
copyrights and all applications for any of the items referred to in clause (i)
above, and (iii) all other material marks, trade names, brand names or other
trade rights currently used by each Loan Party in the conduct of its business
and whether such use is or will be pursuant to license, sub-license, agreement
or permission. The Company and CEDS have delivered to the Purchaser complete and
accurate copies of each material agreement, registration and other document
relating to the Intellectual Property set forth on the Disclosure Schedule.
(b) Each Loan Party owns or possesses adequate and enforceable
licenses or other rights to use (i) all Intellectual Property rights listed on
the Disclosure Schedule and (ii) all other patents, trademarks, service marks,
brand names and trade names, all applications for any of the foregoing, all
other trade secrets, designs, plans, specifications and other rights of every
kind related to all Intellectual Property used in, possessed by or necessary for
the conduct of such Loan Party's business. Entry into this Agreement and
consummation of the transactions contemplated hereby will not impair any Loan
Party's ownership or use of such Intellectual Property.
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(c) Except as set forth in the Disclosure Schedule, no Person has a
right to receive a royalty or similar payment in respect of any item of
Intellectual Property pursuant to any contractual arrangements entered into by
any Loan Party. No Loan Party has granted any license, sub-license or other
similar agreement relating in whole or in part to any Intellectual Property. No
Loan Party has received any notice that its or any third party's use of any item
of Intellectual Property is interfering with, infringing upon or otherwise
violating the rights of any Loan Party, or any third party in or to such
Intellectual Property, and no proceedings have been instituted against or
notices received by any Loan Party alleging that the use or proposed use of any
item of Intellectual Property by any Loan Party or any third party infringes
upon or otherwise violates any rights of any Loan Party or a third party in or
to such Intellectual Property, and, to the knowledge of each Loan Party, there
is no basis for such claim or proceeding. To the knowledge of each Loan Party,
no third party is interfering with, infringing upon, or otherwise violating the
rights of any Loan Party in any Intellectual Property.
3.15 Margin Securities. No Loan Party is engaged in the business of
extending credit for the purpose of buying or carrying margin securities, and no
part of the proceeds realized from the sale of the Securities will be used to
buy or carry any margin securities or be used in a manner inconsistent with the
provisions of Regulation T, U or X of the Board of Governors of the Federal
Reserve System.
3.16 Not an Investment Company. No Loan Party is an "investment
company," or a company "controlled" by an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended.
3.17 Securities Laws. No Loan Party nor any Person authorized or
employed by any Loan Party as agent, broker, dealer or otherwise, has offered or
will offer the Securities for sale to, or solicited any offers to buy any of the
Securities from, any Persons other than the Purchaser, and no Loan Party nor any
Person acting on any Loan Party's behalf has taken or will take any action which
might subject the offering, issuance or sale of the Securities to registration
under the Securities Act or violate the provisions of any securities or blue sky
law of any applicable jurisdiction.
3.18 Environmental Protection. Except as set forth in the
Disclosure Schedule, each Loan Party has obtained all material permits, licenses
and other authorizations which are required under federal, state and local laws
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, hazardous or toxic materials or wastes into ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
("Environmental Law"). Except as set forth in the Disclosure Schedule, each Loan
Party is in material compliance with all terms and conditions of such required
permits, licenses and authorizations and are also in material compliance with
all other limitations,
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restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any Environmental Law or contained in any
plan, order, decree, judgment or notice from any governmental authority. Except
as set forth in the Disclosure Schedule, no Loan Party is aware of, nor has
received notice from any governmental authority of, any events, conditions,
circumstances, activities, practices, incidents, actions or plans which
interfere with or prevent continued compliance or which give rise to any
liability under any Environmental Law.
3.19 Product Liability. No Loan Party has committed any act, and
there has been no omission, which could reasonably be expected to result in, and
there has been no occurrence that could reasonably be expected to give rise to,
any liability in connection with, arising out of, resulting from or incident to
any personal injury or property damage or adverse health effect or claim of any
personal injury or property damage or adverse health effect by a third party
arising out of the ownership, use, possession or physical contact with any
product manufactured, sold, leased or delivered or any services rendered by any
Loan Party, except for any such liability that could not reasonably be expected
to result in a Material Adverse Effect on any Loan Party.
3.20 Insurance. Set forth on the Disclosure Schedule is a complete
and accurate list of all primary, excess and umbrella policies, bonds and other
forms of insurance currently owned or held by or on behalf of and/or providing
insurance coverage to each Loan Party, its assets and properties, or any of its
directors, officers, salespersons, agents or employees. Each Loan Party has been
and is insured by financially sound and reputable insurers with respect to its
properties and the conduct of its business in such amounts and against such
risks as is sufficient for their business and compliance with law. All policies
of insurance are currently in full force and effect and no notice of
cancellation or termination has been received by any Loan Party with respect to
any such policies. All premiums due and payable on such policies have been paid.
3.21 Employment or Severance Agreements. Except for those listed on
the Disclosure Schedule, no Loan Party is a party to or bound by (i) any
collective bargaining agreement, (ii) any material agreement providing for a
term of employment or for any severance payment to any executive officer of any
Loan Party, or (iii) any material agreement providing any deferred compensation,
bonus or profit sharing payment to any executive officer of any Loan Party.
3.22 Software and Information Systems. The software and information
systems (including all management information and accounting systems) currently
used by each Loan Party are functioning properly and are adequate for such Loan
Party's business as currently conducted. Except as set forth in the Disclosure
Schedule, the software and information systems currently used by the Loan
Parties will not suffer any loss of functionality and will not have a Material
Adverse Effect due to the change in the date to the year 2000.
3.23 Disclosure. No representation or warranty by any Loan Party in
this Agreement or any of the Ancillary Agreements, nor any statement, document
or certificate furnished or
14
required to be furnished under the terms of this Agreement by the Loan Parties,
or their representatives to the Purchaser or the Purchaser's representatives in
connection with this Agreement or any of the Ancillary Agreements, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact necessary to make the facts stated therein not
misleading.
3.24 Acquisition Documents. The Company and CEDS have provided to
the Purchaser a true, complete and correct copy of the Acquisition Documents.
The Acquisition Documents have not been amended, supplemented or modified, and
they constitute the complete agreement among the parties thereto in respect of
the matters and transactions contemplated therein. The Acquisition Agreement and
the Acquisition Documents are the legal, valid and binding obligations of the
Company and CEDS, enforceable in accordance with their terms (except to the
extent that enforcement may be limited by applicable bankruptcy, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and subject to general equitable principles which may limit
the right to obtain equitable remedies), and there are no oral agreements or
understandings or other agreements modifying or waiving any of the provisions
thereof. The representations and warranties of the Company, CEDS and each of the
other parties thereto contained in the Acquisition Agreement are true and
correct in all material respects and may be relied upon by the Purchaser. All
conditions precedent to the closing provided for in the Acquisition Agreement or
the Acquisition Documents have been satisfied or waived as of the Closing Date.
3.25 Contracts.
(a) The Disclosure Schedule contains a true and complete list of
each of the following written or oral contracts, agreements or other
arrangements to which each Loan Party or any Subsidiary is a party or by which
any of their assets and properties is bound (and, to the extent oral, accurately
describes the terms of such contracts, agreements and arrangements) (the
"Scheduled Contracts"):
(i) all loan agreements, indentures, debentures, notes or
letters of credit relating to the borrowing of money or mortgaging, pledging or
otherwise placing a Lien on any material asset or material group of assets of
any Loan Party or any Subsidiary, other than the Senior Credit Agreement and the
Seller Notes;
(ii) all guarantees of any material obligation;
(iii) all material leases or agreements under which any Loan
Party or any Subsidiary is lessee or lessor of, or holds, or operates, any
property, real or personal, except for any lease under which the aggregate
annual rental payments do not exceed $250,000;
15
(iv) all commitments, contracts, sales contracts, purchase
orders or groups of related agreements with the same party or any group of
affiliated parties which require or may in the future require payment of
aggregate consideration to or by any Loan Party or any Subsidiary in excess of
$1,000,000 and cannot be terminated within sixty (60) days after giving notice
of termination without resulting in any cost or penalty to any Loan Party or any
Subsidiary; and
(v) all contracts or commitments that in any way materially
restrict any Loan Party or any Subsidiary from carrying on its business anywhere
in the world; and
(b) Each Scheduled Contract is in full force and effect and
constitutes a legal, valid and binding agreement, enforceable in accordance with
its terms, of each party thereto. Each Loan Party and each Subsidiary has
performed all of its material obligations under, and is not in violation or
breach of or default in any material respect under, any Scheduled Contract. To
the knowledge of the Company and CEDS, the other parties to any such contract,
agreement or arrangement are not in violation or breach of or default under any
Scheduled Contract. To the knowledge of the Loan Parties, none of the employees,
officers, or directors of any Loan Party or any Subsidiary is a party to any
oral or written contract or agreement prohibiting any of them from engaging in
such Loan Party's or Subsidiary's business as now operated.
(c) The Company and CEDS have provided to the Purchaser a true and
correct copy of each written Scheduled Contract, and a written description of
each oral Scheduled Contract.
3.26 Use of Proceeds; Restrictions under the SBIA. The Company and
CEDS will use the proceeds from the sale of the Securities to fund the
consideration and expenses payable in connection with the Acquisition and for
general working capital purposes. No portion of the proceeds from the sale of
the Securities (a) will be used to provide capital to an SBIC, (b) will be used
outside the United States (except (i) to acquire materials and industrial
property rights abroad for a domestic operation or (ii) as may be transferred to
a controlled foreign subsidiary, so long as at least 51% of the assets and
activities of the Loan Parties and their Subsidiaries will remain within the
United States), or (c) will be used for any purpose "contrary to the public
interest (including but not limited to activities which are in violation of law)
or inconsistent with free competitive enterprise", within the meaning of 13 CFR
ss.107.720. No Loan Party's primary business activity involves, directly or
indirectly, providing funds to others, purchasing or discounting debt
obligations, factoring or long-term leasing of equipment with no provision for
maintenance or repair, and no Loan Party is classified under Major Group 65
(Real Estate) of the Standard Industrial Classification Manual prepared by the
Office of Management and Budget.
3.27 Small Business Concern. The Company is a "small business
concern" within the meaning of the SBIA. The information set forth in SBA Forms
480, 652 and Section A of Form 1031 regarding the Company is accurate and
complete. Copies of such forms will be completed
16
and executed by the Company. The Company does not presently engage in, and will
not engage in, any activities, and will not use directly or indirectly the
proceeds from the sale of the Securities for any purposes for which an SBIC is
prohibited from providing funds by the SBIA.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company and CEDS that:
4.01 Partnership Existence and Power. The Purchaser is duly
organized, validly existing and in good standing as a limited partnership under
the laws of the State of Delaware and has full power and authority to execute
and deliver this Agreement and the Ancillary Agreements to which it is a party
and to purchase the Securities as provided in this Agreement.
4.02 Authorization. All proceedings or partnership action required
to be taken by the Purchaser relating to its execution and performance of this
Agreement have been taken at or prior to the Closing.
4.03 Litigation. There is no legal action, suit, arbitration,
governmental investigation or other legal or administrative proceeding, nor any
order, decree or judgment in progress, pending or in effect, or to the knowledge
of the Purchaser threatened, against or relating to the Purchaser, in connection
with or relating to the transactions contemplated by this Agreement and the
Ancillary Agreements to which it is a party, and the Purchaser has no knowledge
of any basis for the same.
4.04 Investment Intent. The Purchaser is an "accredited investor",
as defined under Rule 501(a) of Regulation D of the Securities Act. The
Securities are being purchased for the Purchaser's own account and not with a
view to, or for resale in connection with, any distribution or public offering
within the meaning of the Securities Act. The Purchaser understands that the
Securities have not been registered under the Securities Act by reason of their
contemplated issuance in transactions exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section 4(2)
thereof, and that the reliance of the Company, CEDS, and others upon this
exemption is predicated in part upon this representation and warranty by the
Purchaser.
ARTICLE 5 CLOSING CONDITIONS
The Purchaser's obligations to purchase and pay for the Securities
are subject to the following conditions, any of which may be waived in whole or
in part by the Purchaser in writing:
17
5.01 Representations and Warranties True. The representations and
warranties of the Loan Parties in this Agreement are true and correct in all
material respects on and as of the Closing Date.
5.02 Compliance with Agreement. The Loan Parties have performed and
complied with in all material respects all agreements and conditions required by
this Agreement to be performed and complied with by them prior to or as of the
Closing Date.
5.03 No Event of Default. At the time of Closing no condition or
event exists or has occurred which would constitute an Event of Default or
which, after notice or lapse of time or both, would constitute an Event of
Default.
5.04 Documents Required for the Closing. The Loan Parties have
delivered to the Purchaser the following, duly executed as appropriate:
(a) this Note Purchase Agreement;
(b) the Note;
(c) the Warrant;
(d) the Security Agreements;
(e) the Guaranties;
(f) the Intercreditor Agreement;
(g) a certificate dated as of the Closing Date, signed by an officer
of the Company and an officer of CEDS certifying that the conditions specified
in Sections 5.01 through 5.03 are true and correct;
(h) a certificate dated as of the Closing Date from each of the
Company and CEDS, signed by the Secretary of such company and in form and
substance satisfactory to the Purchaser and its counsel, (i) certifying that
resolutions have been duly adopted by such company's Board of Directors (and to
the extent necessary, its shareholders) authorizing the execution of this
Agreement and the Ancillary Agreements, the issuance of the Securities, and all
of the other transactions to be consummated pursuant hereto, (ii) certifying as
to the names of the members of its Board of Directors and the names and
incumbency of its officers who are empowered to execute the foregoing documents
for and on behalf of such company, (iii) certifying the authenticity of attached
copies of the charter documents and Bylaws of such company, and (iv) certifying
the continued good standing of such company in its State of incorporation, as
evidenced by a reasonably current Certificate of Good Standing;
18
(i) a favorable opinion of the Company's and CEDS's legal counsel as
to matters and in form reasonably acceptable to the Purchaser;
(j) UCC-1 financing statements;
(k) a solvency certificate, in form reasonably acceptable to the
Purchaser;
(l) current searches from the offices of the Secretaries of State of
those states in which any Loan Parties conduct operations, showing that no
federal or state tax liens have been filed and remain in effect against any Loan
Party and that no financing statements have been filed and remain in effect
against any Loan Party other than financing statements set forth on the
Disclosure Schedule with respect to Section 3.10 above;
(m) all environmental reports and documents regarding the Loan
Parties which are requested by the Purchaser;
(n) documents, in form reasonably acceptable to the Purchaser,
evidencing the obtaining of all necessary releases, consents or approvals
requested by the Purchaser for the transactions contemplated by this Agreement;
(o) receipt by the Purchaser and by the Purchaser's counsel (as the
case may be) of payment of the fee referred to in Section 2.03 and the expenses
referred to in Section 10.02;
(p) a copy, certified by the Company and CEDS as true and correct,
of the executed Acquisition Documents;
(q) a copy, certified by the Company and CEDS as true and correct,
of the Senior Credit Agreement and the closing documents related thereto;
(r) three year pro forma projections for the Company and its
Subsidiaries with the first year of such projections being on a monthly basis;
(s) all SBA forms necessary for the transaction, including without
limitation, the Size Status Declaration on SBA Form 480 and the Assurance of
Compliance for Nondiscrimination on SBA Form 652, executed by the Company and
CEDS; and
(t) such other documents, certificates, instruments or opinions as
the Purchaser or their legal counsel may reasonably request, in form reasonably
satisfactory to the Purchaser.
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5.05 Proceedings Satisfactory. All proceedings to be taken in
connection with the transactions contemplated by this Agreement and all
documents incident to such transaction are satisfactory in form and substance to
the Purchaser and its counsel.
ARTICLE 6 AFFIRMATIVE COVENANTS OF THE COMPANY AND CEDS
The Company and CEDS covenant and agree that from and after the
Closing, so long as the Note or the Warrant remain outstanding, unless the
Purchaser otherwise consents in writing:
6.01 Payment of Notes. The Company and CEDS will pay the principal
of and interest on the Note at the time and place and in the manner specified in
the Note.
6.02 Reporting. The Company will furnish to the Purchaser:
(a) as soon as available, and in any event within ninety (90) days
after the end of each fiscal year of the Company, a copy of the annual audit
report of the Company and its Subsidiaries, which report is certified by an
independent certified public accountant who is selected by the Company and is
acceptable to the Purchaser, without qualification as to scope of audit or
opinion (except for the fiscal year ending June 30, 1999). Such annual report
will include a balance sheet of the Company and its Subsidiaries as of the end
of such fiscal year and the related statements of income, retained earnings and
cash flows of the Company and its Subsidiaries for the fiscal year then ended,
all in reasonable detail and all prepared in accordance with GAAP, together with
(i) a report signed by such accountants stating that in making the
investigations necessary for their opinion they obtained no knowledge, except as
specifically stated, of any Event of Default and all relevant facts in
reasonable detail to evidence, and the computations as to, whether or not the
Company is in compliance with the requirements set forth in Section 6.09; (ii)
any management letters from such accountants; (iii) a Compliance Certificate of
the chief executive officer and chief financial officer of the Company in
substantially the form of Exhibit F stating that such financial statements have
been prepared in accordance with GAAP and whether or not any of them has
knowledge of the occurrence of any Event of Default hereunder and, if so,
stating in reasonable detail the facts with respect thereto;
(b) within thirty (30) days after the end of each month, a balance
sheet, statement of income and statement of cash flows of the Company and its
Subsidiaries as of the end of and for such month and for the period
year-to-date, each prepared in accordance with GAAP except for the statement of
cash flows;
(c) within thirty (30) days after the end of each month, comparisons
of actual results with the budget for such month and for the period
year-to-date, and management's discussion of such variances, all in such detail
as the Purchaser may reasonably request;
20
(d) within forty-five (45) days after the end of each fiscal
quarter, a balance sheet, statement of income and statement of cash flows of the
Company and its Subsidiaries as of the end of such fiscal quarter and for the
period year-to-date, each prepared in accordance with GAAP, and a Compliance
Certificate signed by the Company's chief financial officer as to whether or not
he or she has any knowledge of the occurrence of any Event of Default and, if
so, stating in reasonable detail the facts with respect thereto and the
computations as to whether the Company is in compliance with the requirements of
Section 6.09;
(e) prior to the beginning of each fiscal year of the Company, an
annual plan for such year, which includes major operating goals and milestones,
monthly profit and loss projections, cash flow statements and monthly capital
and operating expense budgets, itemized in such detail as the Board of Directors
may reasonably request. Each annual plan will be modified as often as is
necessary in the judgment of the Board of Directors to reflect changes required
as a result of operating results and other events that occur, or may be
reasonably expected to occur, during the year covered by the annual plan, and
copies of each such modification will be provided to the Purchaser;
(f) to the extent not already delivered to the Purchaser, promptly
upon their distribution, copies of all financial statements, reports and proxy
statements which the Company delivers to its stockholders;
(g) promptly after the sending or filing thereof, copies of all
regular and periodic financial reports which the Company or its Subsidiaries
files with the Commission or any national securities exchange;
(h) immediately after the Company or CEDS receives notice of the
commencement or threatened commencement of any suit, legal or equitable, or of
any administrative, arbitration or other proceeding against the Company, CEDS,
their Subsidiaries, or their business, assets or properties, in each case
reasonably likely to have a Material Adverse Effect on the Company and its
Subsidiaries on a consolidated basis, written notice of the nature and extent of
such suit or proceeding;
(i) as promptly as practicable, but in any event not later than five
(5) days after an officer of the Company or CEDS obtains knowledge thereof,
notice of the occurrence of:
(i) any adverse development in any litigation, arbitration or
governmental investigation or proceeding previously disclosed by the
Company or CEDS to the Purchaser in each case reasonably likely to have a
Material Adverse Effect on the Company and its Subsidiaries on a
consolidated basis;
(ii) any event which constitutes an Event of Default; or
21
(iii) any condition or event regarding the business, properties,
condition or prospects (financial or otherwise) of the Company or CEDS
which has or may reasonably be expected to have a Material Adverse Effect;
together with a detailed statement by a responsible officer of the Company of
the steps being taken by the Company or CEDS to cure the effect of such
occurrence or event;
(j) as soon as possible and in any event within thirty (30) days
after the Company or CEDS knows or has reason to know that any Reportable Event
with respect to any Plan of the Company or its Subsidiaries has occurred, the
statement of the chief financial officer of the Company setting forth details as
to such Reportable Event and the action which the Company proposes to take with
respect thereto, together with a copy of the notice of such Reportable Event to
the Pension Benefit Guaranty Corporation;
(k) promptly with the sending or filing thereof, copies of all
reports and documents that the Company or CEDS sends or provides to any of its
material creditors, whether upon such creditors' request or otherwise, and
copies of all reports, audits and work papers, prepared by or for its creditors,
or their designees, whether during the course of a periodic audit or otherwise,
which examine the loans, collateral, controls, policies or procedures of the
Company or CEDS;
(l) immediately upon the receipt thereof from any creditor, copies
of any notices of default or other correspondence or information pertaining to
any alleged or actual default or noncompliance with any material ($500,000 or
more) credit facility maintained by the Company, CEDS, or any Subsidiary with
any creditor other than the Purchaser;
(m) upon the request of the Purchaser, as soon as available with
respect to each fiscal year of the Company ending after the Closing Date, a true
and correct copy of its consolidated federal income tax returns as filed and all
schedules thereto;
(n) prior written notice, as far in advance as reasonably practical
and not less than as required by the Company's Bylaws, of each meeting of the
Company's Board of Directors and copies of the minutes of all meetings of, and
written minutes of action taken by, the Board of Directors or the shareholders
of the Company, promptly after each such meeting or action is taken; and
(o) such other documents and information concerning the Company
which is reasonably requested by the Purchaser from time to time.
6.03 Books and Records; Inspection and Examination.
(a) The Company and CEDS will keep, and will cause each Subsidiary
to keep, accurate books of record and account for itself in which true and
complete entries will be
22
made in accordance with GAAP and, upon request of the Purchaser, will give any
representative of the Purchaser access to, and permit such representative to
examine, audit, copy or make extracts from, any and all books, records and
documents in the Company's, CEDS' or any Subsidiary's possession, to inspect the
Company's, CEDS' or any Subsidiary's properties and to discuss the Company's,
CEDS' or any Subsidiary's affairs, finances and accounts with their principal
officers or independent accountants, all at such times during normal business
hours and as often as the Purchaser may reasonably request. The Company and CEDS
agree to reimburse the Purchaser for the reasonable fees and charges incurred in
connection with any such inspection or audit, including costs of personnel time
and out-of-pocket expenses, which is conducted after an Event of Default has
occurred and is continuing.
(b) Any information or document obtained by the Purchaser in any
examination, audit, inspection or discussion pursuant to this Section 6.03 will
be used by the Purchaser only for those purposes the Purchaser believes to be
appropriate to protect its interests under this Agreement and the Ancillary
Agreements or in obtaining payment of amounts owed pursuant to the Note,
provided that the foregoing shall not limit the Purchaser's use of such
information or document (i) if such information or document has become generally
available to the public through no fault of the Purchaser, (ii) if use of such
information or document is required or appropriate in any report, statement or
testimony submitted to any municipal, state or federal regulatory body having or
claiming to have jurisdiction over the Purchaser, (iii) if use of such
information or document may be required or appropriate in response to any
summons or subpoena or in connection with any litigation (provided that the
Purchaser provides advance written notice to the Company of such subpoena), (iv)
if such information or document is disclosed or given to the Purchaser in good
faith by a third party who had independent rights to such information or
document, (v) if such information or document is obsolete, (vi) if use of such
information or document is believed by the Purchaser to be appropriate in order
to comply with any law, order, regulation or ruling applicable to the Purchaser,
or (vii) if such information or document is disclosed or given to a prospective
transferee in connection with any contemplated transfer of any of the
Securities; provided, further, that in the case of proposed disclosures pursuant
to clauses (ii), (iii) or (vi) above the Purchaser will endeavor to give the
Company prior notice before complying with such request or order so as to give
the Company an opportunity to appear and contest the disclosure of such
information or document.
6.04 Compliance with Laws. The Company and CEDS will comply, and
will cause each Subsidiary to comply, with all applicable statutes, rules,
regulations, orders and restrictions of the United States of America, foreign
countries, states and municipalities and of any governmental department,
commission, board, regulatory authority, bureau, agency, and instrumentality of
the foregoing, and of any court, arbitrator or grand jury, in respect of the
conduct of its business and the ownership of its properties, except such as are
being contested in good faith or where the failure to so comply would not
reasonably be expected to have a Material Adverse Effect.
23
6.05 Maintenance of Properties. The Company and CEDS will keep and
maintain, and cause each Subsidiary to keep and maintain, its properties in good
repair, working order and condition, ordinary wear and tear excepted, and from
time to time make, or cause to be made, all reasonable repairs and renewals and
replacements which in the opinion of the Company and CEDS are necessary and
proper so that the business carried on in connection therewith may be properly
and advantageously conducted at all times. The Company and CEDS will maintain,
and cause each Subsidiary to maintain, or cause to be maintained back-up copies
of all valuable papers and software.
6.06 Insurance. The Company and CEDS will obtain insurance, for
itself and each Subsidiary, against loss or damage of the kinds customarily
insured against by corporations similarly situated, with reputable insurers, in
such amounts, with such deductibles and by such methods as shall be adequate,
and in any event in amounts not less than amounts generally maintained by other
companies engaged in similar businesses. Further, the Company and CEDS will
promptly provide to the Purchaser copies of all material notices of termination,
cancellation, or reduction in coverage received from or sent to any of its
insurers together with copies of all material correspondence related to such
insurance.
6.07 Payment of Taxes and Claims. The Company and CEDS will, and
will cause each Subsidiary to, duly pay and discharge, as the same become due
and payable, all taxes, assessments and governmental and other charges, levies
or claims levied or imposed, which are, or which if unpaid might become, a Lien
upon the properties, assets, earnings or business of the Company, CEDS or any
Subsidiary; provided, however, that nothing contained in this Section will
require the Company, CEDS or any Subsidiary to pay and discharge, or cause to be
paid and discharged, any such tax, assessment, charge, levy or claim so long as
the Company in good faith contests the validity thereof and sets aside on its
books adequate reserves with respect thereto. In the event the Company, CEDS or
any Subsidiary fails to satisfy its obligations under this Section, the
Purchaser may but is not obligated to satisfy such obligations in whole or in
part and any payments made and reasonable expenses incurred in doing so will
constitute, to the extent satisfied by the Purchaser, an obligation by the
Company and CEDS immediately due and payable to the Purchaser and such
obligation will be immediately paid by the Company and CEDS with interest at a
rate of fourteen percent (14%) per annum.
6.08 Maintenance of Corporate Existence.
(a) The Company and CEDS will, and will cause each Subsidiary to, at
all times do or cause to be done all things necessary to maintain, preserve and
renew its corporate charter and existence and its rights, patents and
franchises, and comply with all material laws applicable thereto; provided,
however, that nothing contained in this Section will (i) require the Company,
CEDS, or any Subsidiary to maintain, preserve or renew any right, patent or
franchise not necessary or desirable in the conduct of the business of the
Company, CEDS or such Subsidiary, (ii) prevent the termination of the corporate
existence of any Subsidiary if the Board
24
of Directors of the Company reasonably believes in good faith that such
termination is not disadvantageous to the Purchaser, or (iii) require the
Company , CEDS or any Subsidiary to comply with any law so long as the validity
or applicability thereof will be contested in good faith by appropriate
proceedings.
(b) The Company and CEDS will at all times maintain their corporate
offices at the addresses specified in Section 10.04 hereof to which notices,
presentations and demands to or upon the Company in respect of the Note may be
given or made; provided, however, that the Company or CEDS may change the
location of its corporate headquarters upon not less than thirty (30) days prior
written notice to the Purchaser.
6.09 Financial Covenants.
(a) Maximum Capital Expenditures. The Company and its Subsidiaries
on a consolidated basis will not make any Capital Expenditures during the
following periods that exceed in the aggregate the amounts set forth opposite
each such period:
--------------------------------------------------------------------
Maximum Capital
Period Expenditures per Period
------------------------------------------ -------------------------
Closing Date through June 30, 2000 $5,500,000
------------------------------------------ -------------------------
July 1, 2000 through June 30, 2001 $15,000,000
------------------------------------------ -------------------------
July 1, 2001 through June 30, 2002 $20,000,000
------------------------------------------ -------------------------
July 1, 2002 through June 30, 2003 $20,000,000
------------------------------------------ -------------------------
July 1, 2003 through June 30, 2004 and $20,000,000
each Fiscal Year thereafter
--------------------------------------------------------------------
(b) Minimum Fixed Charge Coverage Ratio. The Company and its
Subsidiaries shall have on a consolidated basis at the end of each Fiscal
Quarter set forth below, a Fixed Charge Coverage Ratio for the 12-month period
then ended (or with respect to the Fiscal Quarters ending on or before June 30,
2000, the period commencing on September 24, 1999 and ending on the last day of
such Fiscal Quarter) of not less than the following:
--------------------------------------------------------------------
Minimum Fixed Charge
Period Coverage Ratio
--------------------------------------------- ----------------------
Fiscal Quarter ending March 31, 2000 0.35
--------------------------------------------- ----------------------
Fiscal Quarter ending June 30, 2000 1.0
--------------------------------------------- ----------------------
Fiscal Quarter ending September 30, 2000 0.8
--------------------------------------------- ----------------------
Fiscal Quarter ending December 31, 2000 0.7
25
--------------------------------------------- ----------------------
Fiscal Quarter ending March 31, 2001 0.7
--------------------------------------------- ----------------------
Fiscal Quarter ending June 30, 2001 0.7
--------------------------------------------- ----------------------
Fiscal Quarter ending September 30, 2001 1.2
--------------------------------------------- ----------------------
Fiscal Quarter ending December 31, 2001 1.3
--------------------------------------------- ----------------------
Fiscal Quarter ending March 31, 2002 1.4
--------------------------------------------- ----------------------
Fiscal Quarter ending June 30, 2002 and 1.5
each Fiscal Quarter ending thereafter
--------------------------------------------------------------------
(c) Minimum EBITDA. The Company and its Subsidiaries on a
consolidated basis shall have, at the end of each Fiscal Quarter set forth
below, EBITDA for the 12-month period then ended (or with respect to the Fiscal
Quarters ending on or before June 30, 2000, the period commencing on September
24, 1999 and ending on the last day of such Fiscal Quarter) of not less than the
following:
--------------------------------------------------------------------
Period Minimum EBITDA
--------------------------------------------- ----------------------
Fiscal Quarter ending December 31, 1999 ($2,100,000)
--------------------------------------------- ----------------------
Fiscal Quarter ending March 31, 2000 $2,000,000
--------------------------------------------- ----------------------
Fiscal Quarter ending June 30, 2000 $9,000,000
--------------------------------------------- ----------------------
Fiscal Quarter ending September 30, 2000 $15,000,000
--------------------------------------------- ----------------------
Fiscal Quarter ending December 31, 2000 $16,000,000
--------------------------------------------- ----------------------
Fiscal Quarter ending March 31, 2001 $17,000,000
--------------------------------------------- ----------------------
Fiscal Quarter ending June 30, 2001 $18,000,000
--------------------------------------------- ----------------------
Fiscal Quarter ending September 30, 2001 $22,000,000
--------------------------------------------- ----------------------
Fiscal Quarter ending December 31, 2001 $22,000,000
and each Fiscal Quarter ending thereafter
--------------------------------------------------------------------
(d) The following terms used in this Section 6.09 shall be defined
as follows:
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life of
more than one (1) year and that are required to be capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease of
any property (whether real, personal or mixed) by such Person as lessee that, in
accordance
26
with GAAP, would be required to be classified and accounted for as a capital
lease on a balance sheet of such Person.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease of any Person, the amount of the obligation of the lessee thereunder that,
in accordance with GAAP, would appear on a balance sheet of such lessee in
respect of such Capital Lease.
"EBITDA" shall mean, with respect to any Person for any fiscal
period, an amount equal to (a) consolidated net income of such Person for such
period, minus (b) the sum of (i) income tax credits, (ii) interest income, (iii)
gain from extraordinary items for such period, (iv) any aggregate net gain (but
not any aggregate net loss) during such period arising from the sale, exchange
or other disposition of capital assets by such Person (including any fixed
assets, whether tangible or intangible, all inventory sold in conjunction with
the disposition of fixed assets and all securities), and (v) any other non-cash
gains which have been added in determining consolidated net income, in each case
to the extent included in the calculation of consolidated net income of such
Person for such period in accordance with GAAP, but without duplication, plus
(c) the sum of (i) any provision for income taxes, (ii) Interest Expense, (iii)
loss from extraordinary items for such period, (iv) the amount of non-cash
charges (including depreciation and amortization) for such period, (v) amortized
debt discount for such period, and (vi) the amount of any deduction to
consolidated net income as the result of any grant to any members of the
management of such Person of any Stock, in each case to the extent included in
the calculation of consolidated net income of such Person for such period in
accordance with GAAP, but without duplication. For purposes of this definition,
the following items shall be excluded in determining consolidated net income of
a Person: (1) the income (or deficit) of any other Person accrued prior to the
date it became a Subsidiary of, or was merged or consolidated into, such Person
or any of such Person's Subsidiaries; (2) the income (or deficit) of any other
Person (other than a Subsidiary) in which such Person has an ownership interest,
except to the extent any such income has actually been received by such Person
in the form of cash dividends or distributions; (3) the undistributed earnings
of any Subsidiary of such Person to the extent that the declaration or payment
of dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary; (4) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
income accrued during such period; (5) any write-up of any asset; (6) any net
gain from the collection of the proceeds of life insurance policies; (7) any net
gain arising from the acquisition of any securities, or the extinguishment,
under GAAP, of any Indebtedness, of such Person, (8) in the case of a successor
to such Person by consolidation or merger or as a transferee of its assets, any
earnings of such successor prior to such consolidation, merger or transfer of
assets, and (9) any deferred credit representing the excess of equity in any
27
Subsidiary of such Person at the date of acquisition of such Subsidiary over the
cost to such Person of the investment in such Subsidiary.
"Fiscal Quarter" shall mean any of the quarterly accounting periods
of the Company, ending on September 30, December 31, March 31 and June 30 of
each year.
"Fixed Charges" shall mean, with respect to any Person for any
fiscal period, (a) the aggregate of all Interest Expense paid or accrued during
such period, plus (b) scheduled payments of principal with respect to
Indebtedness during such period, plus (c) Capital Expenditures during such
period.
"Fixed Charge Coverage Ratio" shall mean, with respect to any Person
for any fiscal period, the ratio of EBITDA to Fixed Charges. In computing Fixed
Charges for any fiscal period, interest and principal payments that are due
within one week after the end of that fiscal period, without duplication, shall
be deemed to have been paid on the last day of that fiscal period.
"Funded Debt" shall mean, with respect to any Person, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness and which by its terms matures more than one
(1) year from, or is directly or indirectly renewable or extendible at such
Person's option under a revolving credit or similar agreement obligating the
lender or lenders to extend credit over a period of more than one (1) year from
the date of creation thereof, and specifically including Capital Lease
Obligations, current maturities of long-term debt, revolving credit and
short-term debt extendible beyond one (1) year at the option of the debtor, and
also including, in the case of the Company, the Obligations and, without
duplication, Guaranteed Indebtedness consisting of guaranties of Funded Debt of
other Persons.
"Indebtedness" of any Person shall mean without duplication (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred six (6) months or more, but
excluding obligations to trade creditors incurred in the ordinary course of
business that are not overdue by more than six (6) months unless being contested
in good faith, (b) all reimbursement and other obligations with respect to
letters of credit, bankers' acceptances and surety bonds, whether or not
matured, (c) all obligations evidenced by notes, bonds, debentures or similar
instruments, (d) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (e) all Capital Lease Obligations and the present value (discounted
at the Index Rate as in effect on the Closing Date) of future rental payments
under all synthetic leases, (f) all obligations of such Person under commodity
purchase or option agreements or other commodity price
28
hedging arrangements, in each case whether contingent or matured, (g) all
obligations of such Person under any foreign exchange contract, currency swap
agreement, interest rate swap, cap or collar agreement or other similar
agreement or arrangement designed to alter the risks of that Person arising from
fluctuations in currency values or interest rates, in each case whether
contingent or matured, (h) all Indebtedness referred to above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property or other assets
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
and (i) the Obligations.
"Index Rate" shall mean, for any day, a floating rate equal to the
higher of (i) the rate publicly quoted from time to time by The Wall Street
Journal as the "base rate on corporate loans at large U.S. money center
commercial banks" (or, if The Wall Street Journal ceases quoting a base rate of
the type described, the highest per annum rate of interest published by the
Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate or its equivalent), and
(ii) the Federal Funds Rate plus fifty (50) basis points per annum.
"Interest Expense" shall mean, with respect to any Person for any
fiscal period, interest expense (whether cash or non-cash) of such Person
determined in accordance with GAAP for the relevant period ended on such date,
including, in any event, interest expense with respect to any Funded Debt of
such Person and interest expense for the relevant period that has been
capitalized on the balance sheet of such Person.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests or other equivalents (regardless of how designated) of or
in a corporation, partnership or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended).
(e) Unless otherwise specifically provided herein, any accounting
term used in this Agreement shall have the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed in accordance with GAAP consistently applied. That certain items or
computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing. If any "Accounting Changes"
(as defined below) occur and such changes result in a change in the calculation
of the financial covenants, standards or terms used in this Agreement or any
other Ancillary Agreement, then the Company and the Purchaser agree to enter
into negotiations in order to amend such provisions of this Agreement so as to
equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating the Company's and its
29
Subsidiaries' financial condition shall be the same after such Accounting
Changes as if such Accounting Changes had not been made. "Accounting Changes"
means (a) changes in accounting principles required by the promulgation of any
rule, regulation, pronouncement or opinion by the Financial Accounting Standards
Board of the American Institute of Certified Public Accountants (or successor
thereto or any agency with similar functions), (b) changes in accounting
principles concurred in by the Company's certified public accountants; (c)
purchase accounting adjustments under A.P.B. 16 and/or 17 and EITF 88-16, and
the application of the accounting principles set forth in FASB 109, including
the establishment of reserves pursuant thereto and any subsequent reversal (in
whole or in part) of such reserves; and (d) the reversal of any reserves
established as a result of purchase accounting adjustments. All such adjustments
resulting from expenditures made subsequent to the Closing Date (including
capitalization of costs and expenses or payment of pre-Closing Date liabilities)
shall be treated as expenses in the period the expenditures are made and
deducted as part of the calculation of EBITDA in such period. If the Company and
the Purchaser agree upon the required amendments, then after appropriate
amendments have been executed and the underlying Accounting Change with respect
thereto has been implemented, any reference to GAAP contained in this Agreement
or in any Ancillary Agreement shall, only to the extent of such Accounting
Change, refer to GAAP, consistently applied after giving effect to the
implementation of such Accounting Change. If the Company and the Purchaser
cannot agree upon the required amendments within thirty (30) days following the
date of implementation of any Accounting Change, then all financial statements
delivered and all calculations of financial covenants and other standards and
terms in accordance with this Agreement and the Ancillary Agreements shall be
prepared, delivered and made without regard to the underlying Accounting Change.
6.10 Board of Directors. The Purchaser will have the right to
designate one nominee for election as a director to the Company's Board of
Directors, which shall be comprised of no more than ten (10) directors. The
Company agrees to nominate any Person designated by the Purchaser to serve as a
member of the Board of Directors. In addition, the Purchaser has the right to
designate from time to time an observer to attend all meetings of the Company's
Board of Directors. The Company agrees to hold meetings of the Board of
Directors at least once each quarter where the Board of Directors will, at a
minimum, review historical financial results and consider other agenda items as
the members of the Board of Directors deem appropriate. If elected, the
Purchaser's designee on the Company's Board of Directors shall receive the same
compensation as the Company's other outside directors, and, in addition, the
Company agrees to pay for the reasonable expenses of the Purchaser's designee in
attending Board and Committee meetings.
6.11 Replacement of Certificates. Upon delivery of an affidavit in
a form reasonably satisfactory to the Company from the Purchaser as to the loss,
theft, destruction or mutilation of the Note or the Warrant, and upon receipt of
an indemnity reasonably satisfactory to the Company from the Purchaser, or in
the case of mutilation, upon surrender of the mutilated Note
30
or Warrant, the Company and CEDS will make and deliver a new Note or Warrant of
like tenor in lieu of such Note or Warrant.
6.12 Retirement Plans. The Company and CEDS will cause each
retirement plan in which any employees of the Company, CEDS, or any Subsidiary
participate that is subject to the provisions of ERISA, and the documents and
instruments governing each such plan, to be conformed to, when necessary, and to
be administered in a manner consistent with, those provisions of ERISA which
may, from time to time, become effective and operative with respect to such
plans. If requested by the Purchaser in writing from time to time, the Company
and CEDS will furnish to the Purchaser a copy of any annual report with respect
to each such plan that the Company, CEDS, or any Subsidiary files with the
Secretary of Labor pursuant to ERISA. At such time as such insurance is
available at rates deemed commercially reasonable by the Company or CEDS, the
Company and CEDS will maintain insurance against the contingent liability
against the net worth of the Company and CEDS imposed in respect of each such
plan by the provisions of ERISA.
6.13 Filing of Reports. The Company will make timely filing of such
reports as are required to be filed by it with the Commission so that Rule 144
under the Securities Act or any successor provision thereto will be available to
the security holders of the Company who are otherwise able to take advantage of
the provisions of such rule.
6.14 [Intentionally Omitted].
6.15 SBIA Information. The Company and CEDS will:
(a) as soon as reasonably practical, but in any event within twenty
(20) days after the request of the Purchaser, furnish to the Purchaser all
information necessary in order for the Purchaser to prepare and file SBA Form
468 and other information requested or required by any governmental authority
asserting jurisdiction over the Purchaser;
(b) as soon as reasonably practical after the written request of the
Purchaser, confirm the use of the proceeds as described in Section 3.26 above;
and
(c) with reasonable promptness, provide such information as from
time to time the Purchaser may request to enable the Purchaser to comply with
the SBIA.
31
6.16 SBIA Compliance.
(a) So long as the Purchaser is an SBIC (i) without the prior
written consent of the Purchaser, neither the Company nor CEDS will use the
proceeds from the sale of the Securities for any purpose other than as set forth
in Section 3.26 above, (ii) neither the Company nor CEDS will use the proceeds
from the sale of the Securities for any prohibited purposes outlined in the
second sentence of Section 3.26, (iii) neither the Company nor CEDS will change
its business activity in any manner which, by reason of such change in business
activity, would cause the Company or CEDS to fall within a different SIC Code
and thereby render it ineligible as a "small business concern" under the SBIA,
and (iv) the Company and CEDS will at all times comply with the
non-discrimination requirements of 13 CFR Parts 112, 113 and 117.
(b) The Company and CEDS will at all times permit the Purchaser and,
if necessary, a representative of the SBA, access to its records and the Company
and CEDS will provide such information as the Purchaser may request in order to
verify compliance with this Section 6.16 including, without limitation, an
officer's certificate indicating such compliance.
6.17 Environmental Matters.
(a) The Company and CEDS will give notice to the Purchaser
immediately upon acquiring knowledge of the presence of any Hazardous Materials
or any Hazardous Materials Contamination on any property owned, operated or
controlled by the Company, CEDS, or any Subsidiary or for which the Company,
CEDS, or any Subsidiary is, or is claimed to be, responsible (provided that such
notice shall not be required for Hazardous Materials placed or stored on such
property in accordance with Environmental Laws in the ordinary course of
business), with a full description thereof.
(b) The Company and CEDS will, and will cause each Subsidiary to,
promptly comply with any Environmental Law requiring the removal, treatment or
disposal of Hazardous Materials or Hazardous Material Contamination and, upon
request, provide the Purchaser with satisfactory evidence of such compliance.
(c) The Company and CEDS will provide the Purchaser, within thirty
(30) days after a demand by the Purchaser, with a bond, letter of credit or
similar financial assurance evidencing to the Purchaser's satisfaction that the
necessary funds are available to pay the cost of removing, treating, and
disposing of such Hazardous Materials or Hazardous Materials Contamination and
discharging any Lien which may be established as a result thereof on any
property owned, operated or controlled by the Company, CEDS, or any Subsidiary
or for which the Company, CEDS, or any Subsidiary is, or is claimed to be
responsible.
32
(d) The Company and CEDS will jointly and severally defend,
indemnify and hold harmless the Purchaser and its directors, officers,
employees, partners and agents from any and all third party claims which may now
or in the future (whether before or after the termination of this Agreement) be
asserted as a result of the presence of any Hazardous Materials or any Hazardous
Materials Contamination on any property owned, operated or controlled by the
Company, CEDS, or any Subsidiary for which the Company, CEDS, or any Subsidiary
is, or is claimed to be, responsible. The Company and CEDS acknowledge and agree
that this indemnification obligation will survive the termination of this
Agreement and the payment and performance of all Obligations.
6.18 Other Agreements. The Company and CEDS will, and will cause
each Subsidiary to, faithfully observe, perform and discharge in all material
respects all of their respective covenants, agreements, conditions and
obligations under any and all material agreements, whether now existing or
hereafter created or arising, to which it is a party or under which it has any
obligation (other than those covenants, agreements, conditions, or obligations
subject to a bona fide dispute).
6.19 Certificates of Incorporation. The Company and CEDS will, and
will cause each Subsidiary to, amend the Certificate of Incorporation of each
and every Loan Party that contains the provision permitted by Section 102(b)(2)
of the Delaware General Corporation Law (the "DCGL") to remove such provision
from each such Certificate of Incorporation within sixty (60) days of the
Closing Date.
ARTICLE 7 NEGATIVE COVENANTS OF THE COMPANY AND CEDS
The Company and CEDS covenant and agree that from and after the
Closing, so long as the Note or the Warrant remain outstanding, unless the
Purchaser otherwise consents in writing:
7.01 Liens. The Company and CEDS will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Liens on any of its
assets now owned or hereafter acquired, or assign or otherwise convey any right
to receive income or give its consent to the subordination of any right or claim
of the Company, CEDS, or any Subsidiary to any right or claim of any other
Person; excluding, however, the following ("Permitted Liens"):
(a) Liens for taxes or assessments or other governmental charges to
the extent not required to be paid by Section 6.07;
(b) Materialmen's, merchants', carriers', workmen's, repairmen's, or
other like liens arising in the ordinary course of business to the extent not
required to be paid by Section 6.07;
33
(c) Pledges or deposits to secure obligations under worker's
compensation laws, unemployment insurance and social security laws, or to secure
the performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases or to secure statutory obligations or surety or appeal
bonds, or to secure indemnity, performance or other similar bonds, in each case
arising in the ordinary course of business;
(d) Zoning restrictions, easements, licensees' restrictions on the
use of real property or minor irregularities in title thereto, which do not
materially impair the use of such property in the operation of the business or
the value of such property for the purpose of such business;
(e) Subject to Section 7.02, purchase money mortgages, liens, or
security interests (which term for purposes of this subsection includes
conditional sale agreements or other title retention agreements and leases in
the nature of title retention agreements) upon or in property acquired after the
date hereof, or mortgages, liens or security interests existing in such property
at the time of acquisition thereof, provided that (unless the Purchaser
otherwise consents in writing):
(i) no such mortgage, lien or security interest extends or will
extend to or cover any property of the Company, CEDS or any Subsidiary,
other than the property then being acquired and fixed improvements then or
thereafter erected thereon; and
(ii) the aggregate principal amount of Fixed Indebtedness secured by
mortgages, liens and security interests described in this subsection (e)
at the time of acquisition of the property subject thereto does not exceed
the lesser of (A) 100% of the cost of such property or (B) the then fair
market value of such property as reasonably determined in good faith by
the Board of Directors of the Company, CEDS, or such Subsidiary;
(f) Liens granted to the Purchaser under this Agreement and the
Ancillary Agreements;
(g) Liens granted to the Senior Lender under the Senior Credit
Agreement to secure the Senior Indebtedness;
(h) Liens granted to the Seller under the Acquisition Documents; and
(i) Liens arising out of a judgment against the Company, CEDS, or
any Subsidiary for the payment of money not exceeding $250,000 in the aggregate
with respect to which an appeal is being prosecuted and a stay of execution
pending such appeal has been secured.
34
7.02 Fixed Indebtedness. The Company and CEDS will not, and will
not permit any Subsidiary to, incur, create, assume or permit to exist any Fixed
Indebtedness, except:
(a) Fixed Indebtedness evidenced by the Notes;
(b) the Senior Indebtedness in the amount not exceeding that amount
available under the Senior Credit Agreement as of the Closing Date;
(c) Fixed Indebtedness evidenced by the Seller Notes in the amount
not exceeding that existing on the Closing Date;
(d) Fixed Indebtedness incurred by CEDS to refinance the Short-Term
Subordinated Promissory Note issued to the Seller in the amount contemplated
therein;
(e) Fixed Indebtedness secured in the manner permitted by Section
7.01(e) above;
(f) Unfunded pension fund and other employee benefit plan
obligations and liabilities to the extent they are permitted to remain unfunded
under applicable law;
(g) Fixed Indebtedness consisting of intercompany loans and advances
made by CEDS to any other Loan Party that is both a Guarantor and a Subsidiary
of CEDS or by any Guarantor to CEDS;
(h) Fixed Indebtedness, other than that permitted under Sections
7.02(a)-(g) above, not to exceed $500,000 in aggregate; and
(i) Fixed Indebtedness existing as of the Closing Date and reflected
on the Interim Period Financial Statements or Section 3.25 of the Disclosure
Schedule.
7.03 Guaranties. Notwithstanding anything to the contrary in
Section 7.02, except for the Guaranties, the guaranty of the Seller Notes by the
Company entered into in accordance with the Acquisition Agreement, and the
guaranties of the Senior Indebtedness as contemplated by the Senior Credit
Agreement, the Company and CEDS will not, and will not permit any Subsidiary to,
assume, guarantee, endorse or otherwise become directly or contingently liable
in connection with any obligations of any Person, except endorsements of
negotiable instruments for deposit or collection in the ordinary course of
business.
7.04 Investments and Loans. The Company and CEDS will not, and will
not permit any Subsidiary to, purchase or hold beneficially any stock or other
securities or evidences of indebtedness of, make or permit to exist any loans or
advances to, or make any investment or acquire any interest whatsoever in, any
other Person, except:
35
(a) (i) investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations constitute
full faith and credit obligations of the United States of America having a
maturity of one year or less, (ii) commercial paper having a maturity of one
year or less issued by U.S. corporations rated "A-1" by Standard & Poors
Corporation or "P-1" by ▇▇▇▇▇'▇ Investors Service, (iii) certificates of deposit
or bankers' acceptances having a maturity of one year or less issued by members
of the Federal Reserve System having combined capital, surplus, and undivided
profits in excess of $300,000,000 and having a senior unsecured rating of "A" or
better by a nationally recognized rating agency (an "A Rated Bank"), (iv) time
deposits, maturing no more than thirty (30) days from the date of creation
thereof with A Rated Banks, and (v) mutual funds that invest solely in one or
more of the investments described in clauses (i) through (iv) above;
(b) advances in the ordinary course of business in the form of
commercially reasonable security deposits;
(c) expense advances to officers and employees in the ordinary
course of business in accordance with the Company's policy;
(d) each Loan Party's existing investment in its Subsidiaries as of
the Closing Date or any Fixed Indebtedness permitted under Section 7.02(g)
above; or
(e) with respect to CEDS only, notes payable, stock or other
securities issued by an account debtor to CEDS pursuant to negotiated agreements
with respect to settlement of such account debtor's accounts in the ordinary
course of business, so long as the aggregate amount of such accounts so settled
does not exceed $100,000.
7.05 Dividends; Distributions. Except for redeeming those
outstanding warrants of the Company described in the Acquisition Agreement as
contemplated by Section 4.3.2 of the Acquisition Agreement, the Company will not
declare or pay any dividends on any class of its stock or make any payment on
account of the purchase, redemption or other retirement of any shares of such
stock or make any distribution in respect thereof, either directly or
indirectly; provided, however, that the foregoing prohibition will not prevent
the Company from satisfying its obligations under this Agreement and the
Ancillary Agreements.
7.06 Sale of Assets. The Company and CEDS will not, and will not
permit any Subsidiary to, sell, lease, assign, transfer or otherwise dispose of
(whether in one transaction or in a series of transactions) all or a substantial
part of its assets to any Person; provided, however, that the restrictions
contained in this Section 7.06 will not apply to or prevent (i) the sale of
inventory in the ordinary course of business, (ii) the sale of assets or
properties which are obsolete or no longer used or useful in such Loan Party's
business, or (iii) the sale of assets or properties having a value of not more
than $100,000 in any single transaction or $500,000 in the
36
aggregate in any fiscal year of the Company. For purposes of this Section 7.06,
"substantial part" means a material amount of the assets of the Company, CEDS,
and their Subsidiaries taken as a whole.
7.07 Consolidation and Merger; Acquisitions. The Company and CEDS
will not, and will not permit any Subsidiary to, consolidate with or merge into
any entity or permit any entity to merge into it, or acquire (whether or not in
a transaction analogous in purpose or effect to a consolidation or merger) all
or substantially all of the assets or securities of another Person; provided,
that any Loan Party may merge with or into any other Loan Party (including the
Company or CEDS) so long as the Company and CEDS remain in existence after such
merger.
7.08 Sale and Leaseback. The Company and CEDS will not, and will
not permit any Subsidiary to, enter into any arrangement, directly or
indirectly, with any entity whereby it will sell or transfer any real or
personal property, whether now owned or hereafter acquired, and then or
thereafter rent or lease as lessee such property or any part thereof or any
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred.
7.09 [Intentionally Omitted].
7.10 Restrictions on Nature of Business. The Company, CEDS, and
their Subsidiaries, viewed as a consolidated entity, will not engage, directly
or indirectly, in any line of business materially different from or unrelated to
that engaged in prior to the Closing.
7.11 Accounting. The Company and CEDS will not, and will not permit
any Subsidiary to, adopt, permit or consent to any material change in accounting
principles other than as required by GAAP, except as permitted by GAAP and
expressly concurred with by certified public accountants selected by the Company
and acceptable to the Purchaser and, in the event of any material change in
accounting principles, the Company will, at the Purchaser's request, provide the
financial statements required by Section 6.02 hereof on a comparative basis
showing the financial condition and the results of operations of the Company
under both the prior accounting principle and the accounting principle as
changed, and the Company will comply with the financial covenants of Section
6.09 hereof under the prior principles. The Company will not adopt, permit or
consent to any change in its fiscal year or file a consolidated tax return with
any other unrelated Person.
7.12 [Intentionally Omitted].
7.13 [Intentionally Omitted].
7.14 Conflicts of Interest. The Company and CEDS will, and will
cause each Subsidiary to, conduct its business in such a manner that no officer
or director will have any
37
direct or indirect material equity interest in any entity which does business
with the Company, CEDS or any Subsidiary or in any property, asset or right
which is used by the Company, CEDS or any Subsidiary in the conduct of its
business, except for transactions upon fair and reasonable terms no less
favorable to the Company, CEDS, or such Subsidiary than would arise in a
comparable arm's length transaction with a third party.
7.15 Transactions with Affiliates. The Company and CEDS will not,
and will not permit any Subsidiary to, enter into or continue in effect any
transaction with any Affiliate or an officer or employee thereof except
transactions upon fair and reasonable terms no less favorable to the Company,
CEDS, or such Subsidiary than would arise in a comparable arm's length
transaction with a Person not an Affiliate.
7.16 Modification of Senior Credit Agreement. The Company and CEDS
will not, and will not permit any Subsidiary to, amend the Senior Credit
Agreement other than in accordance with the Intercreditor Agreement.
7.17 Inconsistent Agreements. The Company and CEDS will not, and
will not permit any Subsidiary to, enter into any agreement containing any
provision which would be materially violated or breached by this Agreement or by
the performance by the Company or CEDS of its obligations hereunder or under any
document executed pursuant hereto.
7.18 Rental Obligations. The Company and CEDS will not, and will
not permit any Subsidiary to, be or become liable for rentals under any leases
of real or personal property (other than leases (a) having a term of one year or
less which are not, according to their terms, extendible or renewable at the
lessee's option or (b) which constitute capitalized lease obligations) where the
total rents payable by the Company, CEDS, and their Subsidiaries in accordance
with such leases exceeds $500,000 on an annualized basis.
7.19 Modification of Seller Notes. The Company and CEDS will not,
and will not permit any Subsidiary to amend any Seller Note to (a) increase the
interest rate on such Seller Note, (b) change the dates upon which payments of
principal or interest are due on such Seller Note other than to extend such
dates, (c) change any default or event of default other than to delete or make
less restrictive any default provision therein, or add any covenant with respect
to such Seller Note, (d) change the redemption or prepayment provisions of such
Seller Note other than to extend the dates therefor or to reduce the premiums
payable in connection therewith, (e) except as permitted in this Agreement or
the Ancillary Agreements, grant any security or collateral to secure payment of
such Seller Note, or (f) change any other term if such change materially
increases the obligations of any Loan Party or confers additional material
rights to the holder of such Seller Note that are materially adverse,
individually or in the aggregate, to the Purchaser or any Loan Party.
38
7.20 Certificates of Incorporation. The Company and CEDS will not,
and will not permit any Subsidiary to, include within the Certificate of
Incorporation of any Loan Party the provision permitted by Section 102(b)(2) of
the DCGL.
ARTICLE 8 INDEMNIFICATION
8.01 Indemnification by the Company. The Company and CEDS, jointly
and severally, agree to defend, indemnify and hold harmless the Purchaser and
its directors, officers, employees, partners and agents from and against any and
all claims, causes of action, losses, costs, damages, deficiencies or expenses,
including reasonable attorneys' fees (collectively "Damages") sustained by the
Purchaser arising from or related to any and all misrepresentations or breach of
a representation, warranty or covenant of the Loan Parties set forth in this
Agreement, any of the Ancillary Agreements, or any certificate, financial
statement, document, instrument or other material furnished to the Purchaser as
required by this Agreement.
8.02 Indemnification by the Purchaser. The Purchaser agrees to
defend, indemnify and hold harmless the Company and CEDS from and against any
and all Damages sustained by the Company or CEDS arising from or related to any
and all misrepresentations or breach of a representation, warranty or covenant
of the Purchaser set forth in Article 4 of this Agreement.
8.03 Notice. Each party agrees to give the other prompt written
notice of any event or assertion of which it has knowledge concerning any
Damages or other obligation and as to which it may request indemnification
hereunder. A failure to give timely notice or to provide copies of documents or
to furnish relevant data in connection with any third party claim by a party who
suffers Damages will not constitute a defense (in part or in whole) to any claim
for indemnification by such party, except and only to the extent that such
failure shall result in material prejudice to the indemnifying party.
8.04 Defense. A party obligated to provide indemnification under
this Article 8 will be entitled to participate in any investigation of any
claim, action or proceeding involving any third party and, upon written notice
to the indemnified party, assume the investigation and defense of such claim,
action, or proceeding with counsel of its choice at its expense, provided that
such counsel is reasonably acceptable to the indemnified party.
ARTICLE 9 EVENTS OF DEFAULT
9.01 Events of Default. An "Event of Default" means any of the
following:
(a) Failure to pay principal owed under the Note when due; or
39
(b) Failure to pay any interest, fees or expenses or other amounts
due under the Note, this Agreement or any of the Ancillary Agreements, when due
and such failure continues for five (5) days with respect to interest or ten
(10) days with respect to fees, expenses or such other amounts; or
(c) Default by the Company, CEDS, or any Subsidiary in the
performance or observance of any respective covenant, condition, undertaking or
agreement applicable to such party contained in this Agreement or any of the
Ancillary Agreements (other than a default of a type specifically dealt with
elsewhere in this Section 9.01) and the continuance of such default for a period
of twenty (20) days after the Company, CEDS, or any Subsidiary has knowledge of
the occurrence thereof; or
(d) Any warranty, representation or other statement by or on behalf
of the Company, CEDS, or any Subsidiary contained in this Agreement or any of
the Ancillary Agreements, or in any instrument furnished in compliance with or
in reference hereto or thereto, is false or misleading and would not reasonably
be expected to have a Material Adverse Effect on such party; or
(e) Any event of default occurs under the Senior Credit Agreement if
the effect of such event of default is to cause such Senior Indebtedness to
become due prior to its stated maturity; or
(f) The Company, CEDS, or any Subsidiary: (i) files a petition
seeking relief for itself under the United States Bankruptcy Code, as now
constituted or hereafter amended, or files an answer consenting to, admitting
the material allegations of, or otherwise not controverting, or fails timely to
controvert a petition filed against it seeking relief under the United States
Bankruptcy Code, as now constituted or hereafter amended; or (ii) files such a
petition or answer with respect to relief under the provisions of any other now
existing or future applicable bankruptcy, insolvency or similar law of the
United States of America or any state thereof providing for the reorganization,
winding-up or liquidation of corporations or an arrangement, composition,
extension or adjustment with creditors; or
(g) An order for relief is entered against the Company, CEDS, or any
Subsidiary under the United States Bankruptcy Code, as now constituted or
hereafter amended, which order is not stayed; or upon the entry of an order,
judgment or decree by operation of law or by any court having jurisdiction in
the premises which is not stayed, adjudging it bankrupt or insolvent under, or
ordering relief against it under, or approving a properly filed petition seeking
relief against it under the provisions of any other now existing or future
applicable bankruptcy, insolvency or other similar law of the United States or
any state thereof providing for the reorganization, winding-up or liquidation of
corporations or any arrangement, composition, extension or adjustment with
creditors, or appointing a receiver, liquidator, assignee, sequestrator, trustee
or custodian of the Company, CEDS, any Subsidiary, or any substantial part
40
of its property, or ordering the reorganization, winding-up or liquidation of
its affairs, or upon the expiration of sixty (60) days after the filing of any
involuntary petition against the Company, CEDS, or any Subsidiary seeking any of
the relief specified in Sections 9.01(g) and (h) hereof without the petition
being dismissed prior to that time; or
(h) The Company, CEDS, or any Subsidiary: (i) makes a general
assignment for the benefit of creditors; (ii) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, sequestrator, trustee or
custodian of all or a substantial part of its property; (iii) admits its
insolvency or inability to pay its debts generally as such debts become due;
(iv) fails generally to pay its debts as such debts become due; or (v) takes any
action in furtherance of its dissolution or liquidation; or
(i) Default by the Company, CEDS, or any Subsidiary under any
covenant, provision or condition contained in any material ($500,000 or more)
bond, debenture, note or other evidence of Indebtedness for borrowed money
(other than the Note and the Senior Indebtedness) or under any indenture or
other instrument under which any such evidence of Indebtedness has been issued
or by which it is governed and the expiration of the applicable period of grace,
if any, specified in such evidence of Indebtedness, indenture or other
instrument; provided, however, that if such default under such evidence of
Indebtedness, indenture or other instrument shall be timely cured, or waived by
the holder of such Indebtedness, in each case as may be permitted by such
evidence of Indebtedness, indenture or other instrument, then the Event of
Default hereunder by reason of such default will be deemed likewise to have been
thereupon cured or waived; or
(j) A judgment for the payment of money in excess of $250,000 is
rendered against the Company, CEDS, or any Subsidiary and continues unsatisfied
for a period of thirty (30) days without a stay of execution; or
(k) Any Reportable Event, which the Purchaser determines in good
faith is likely to result in the termination of any Plan or for the appointment
by the appropriate United States District Court of a trustee to administer any
Plan, occurs and continues thirty (30) days after written notice to such effect
has been given to the Company by the Purchaser; or any Plan is terminated, or a
trustee is appointed by an appropriate United States District Court to
administer any Plan, or the Pension Benefit Guaranty Corporation institutes
proceedings to terminate any Plan or to appoint a trustee to administer any
Plan; or
(l) Any audit report referred to in Section 6.02 contains a
qualification as to scope or continuance as a going concern (except for the
fiscal year ending on June 30, 1999); or
(m) Any Change of Control occurs.
9.02 Remedies.
41
(a) Upon the occurrence of any Event of Default, the holder or
holders of at least a two-thirds of the unpaid principal amount of the Note at
the time outstanding will be entitled to:
(i) declare all indebtedness evidenced by the Note to be immediately
due and payable, and upon such acceleration the Note will thereupon become
forthwith due and payable without any presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived;
(ii) apply any and all amounts owed to the Company or CEDS by the
Purchaser or by the holder of the Note to the payment of the Note;
(iii) exercise and enforce their rights and remedies under this
Agreement or any of the Ancillary Agreements; and
(iv) proceed to protect and enforce their rights under applicable
law;
provided, that if a petition is filed by or against the Company, CEDS, or any
Subsidiary under the United States Bankruptcy Code, the entire unpaid principal
amount of the Note then outstanding, all interest accrued and unpaid thereon,
and all other amounts payable under this Agreement will be immediately due and
payable without presentment, demand, protest or notice of any kind.
(b) No course of dealing on the part of the Purchaser or any delay
or failure on the part of the Purchaser to exercise any right will operate as a
waiver of such right or otherwise prejudice the Purchaser's rights, powers and
remedies.
(c) The Company and CEDS will pay to the Purchaser such additional
amounts as are sufficient to cover the costs and expenses, including without
limitation, reasonable attorneys' fees, incurred by the Purchaser in collecting
any sums due on account of the Note or otherwise in enforcing its rights under
this Agreement or the Ancillary Agreements.
ARTICLE 10 MISCELLANEOUS
10.01 Survival of Representations and Warranties. The
representations, warranties, covenants and agreements set forth in this
Agreement (including the Disclosure Schedule), the Ancillary Agreements, or any
writing delivered by or on behalf of a party to this Agreement to another party
to this Agreement in connection with this Agreement, will survive the Closing
Date and the consummation of the transactions contemplated hereby and will not
be affected by any examination or knowledge, or the acceptance of any
certificate or opinion.
42
10.02 Expenses.
(a) At the Closing, the Company and CEDS will pay the reasonable
legal, accounting, environmental, travel and other out-of-pocket expenses of the
Purchaser relating to the Company, CEDS, this Agreement, and the Ancillary
Agreements.
(b) The Company and CEDS will pay all reasonable out-of-pocket
expenses incurred by the Purchaser after the Closing in connection with
monitoring the Company and CEDS, and the administration or enforcement of this
Agreement, the Ancillary Agreements or any of the instruments and documents
delivered and to be delivered hereunder or thereunder, including all reasonable
fees and out-of-pocket expenses of legal counsel retained by the Purchaser with
respect thereto. The Company and CEDS will also promptly reimburse the Purchaser
for all costs and expenses, as they are incurred, associated with any amendment,
waiver, extension or restructuring of the loans or agreements or covenants
contemplated herein.
10.03 Governing Law. This Agreement and the Ancillary Agreements
will be construed and enforced in accordance with the substantive laws of the
State of Minnesota without giving effect to its conflict of laws principles.
10.04 Notices. All notices, consents, requests, instructions,
approvals and other communications herein required will be validly given, made
or served if in writing and delivered personally, sent by certified mail
(postage prepaid), facsimile transmission, or by a nationally recognized
overnight delivery service, addressed as follows (or such other address as is
furnished in writing by either party to the other parties):
(a) If to Bayview:
Bayview Capital Partners LP
Attn: ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Suite 230
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.L.L.P.
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
43
(b) If to the Company or CEDS, addressed to the Company at:
United Shipping & Technology, Inc.
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Faegre & ▇▇▇▇▇▇ LLP
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
2200 Norwest Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
10.05 Entire Agreement. This Agreement and the Ancillary
Agreements, including the other documents referred to herein, contain the entire
understanding of the parties hereto with respect to the subject matter contained
herein. There are no restrictions, promises, warranties, covenants, or
undertakings, other than those expressly provided for herein. This Agreement and
the Ancillary Agreements supersede all prior agreements and undertakings between
the parties with respect to such subject matter.
10.06 Amendments; Consents; Waivers. The holder or holders of at
least two-thirds of the unpaid principal amount of the Note at the time
outstanding may by written agreement with the Company and CEDS amend this
Agreement, and any consent, notice, request, demand or waiver required or
permitted to be given by the Purchaser or the holders of the Note by any
provision hereof will be sufficient and binding on all holders of the Note if
given in writing by the holder or holders of at least two-thirds of the unpaid
principal amount of the Note at the time outstanding except that, without the
written consent of the holder or holders of all the Notes at the time
outstanding, no amendment to this Agreement will extend the maturity of any
Note, or alter the rate of interest or any premium payable with respect to any
Note, or affect the amount or timing of any required prepayments, or reduce the
proportion of the principal amount of the Note required with respect to any
consent. No waiver of any term or condition of this Agreement, in any one or
more instances, will constitute a waiver of the same term or condition of this
Agreement on any future occasion.
10.07 Severability of Invalid Provision. If any one or more
covenants or agreements provided in this Agreement should be contrary to law,
then such covenant(s) or agreement(s) will be null and void and will in no way
affect the validity of the other provisions of this Agreement, which will
otherwise be fully effective and enforceable.
44
10.08 Successors and Assigns. This Agreement and the various
instruments and agreements delivered in connection with the consummation of this
Agreement will be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, including one or more future
holders of the Notes; provided, however, that neither the Company nor CEDS may
assign any of their obligations hereunder without the prior written consent of
the Purchaser.
10.09 Rules of Construction. Section headings contained in this
Agreement are inserted only as a matter of convenience and in no way define,
limit, extend or describe the scope of this Agreement or the intent of any of
the provisions hereof. This Agreement and the Ancillary Agreements have been
negotiated on behalf of the parties with the advice of legal counsel and no
general rule of contract construction requiring an agreement to be more
stringently construed against the drafter or proponent of any particular
provision will be applied in the construction or interpretation of this
Agreement or the Ancillary Agreements.
10.10 Counterparts. This Agreement may be executed in one or more
counterparts, and will become effective when one or more counterparts have been
signed by each of the parties.
10.11 Cumulative Remedies. The rights, remedies, powers and
privileges provided in this Agreement are cumulative and not exclusive and will
be in addition to any and all other rights, remedies, powers and privileges
granted by law, rule, regulation or instrument.
10.12 Press Releases. The Company and CEDS agree not to issue any
press release or make any general public announcement or statement with respect
to the execution of this Agreement or the transactions hereunder unless the
same, including the content thereof, are approved by the Purchaser.
10.13 Time is of the Essence. Time is of the essence as to the
payment and performance of all obligations and agreements of the Company and
CEDS hereunder.
10.14 Consent to Jurisdiction; Jury Waiver. AT THE OPTION OF THE
PURCHASER, THIS AGREEMENT, THE NOTE AND THE ANCILLARY AGREEMENTS MAY BE ENFORCED
IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY; AND
THE COMPANY AND CEDS CONSENT TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND
WAIVE ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE
COMPANY OR CEDS COMMENCE ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY
TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT OR THE ANCILLARY AGREEMENTS, OR ALLEGING ANY BREACH OF
THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS, THE PURCHASER AT ITS OPTION
IS
45
ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES
DESCRIBED ABOVE, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE
LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE. THE COMPANY AND CEDS HEREBY
WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION BASED ON OR PERTAINING TO THIS
AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS.
* * * * *
46
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto on the day and year first above written.
UNITED SHIPPING & TECHNOLOGY, INC.
By: ______________________________
Name:
Title:
UST DELIVERY SYSTEMS, INC.
By: ______________________________
Name:
Title:
BAYVIEW CAPITAL PARTNERS LP
By: Bayview Capital Management LLC
Its: General Partner
By: ______________________________
Name:
Title:
1
CORPORATE EXPRESS DELIVERY SYSTEMS - INTERMOUNTAIN, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - MID-ATLANTIC, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - MID-WEST, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - NEW ENGLAND, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - NORTHEAST, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - SOUTHEAST, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - SOUTHWEST, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - WEST COAST, INC.
CORPORATE EXPRESS DELIVERY LEASING - INTERMOUNTAIN, INC.
CORPORATE EXPRESS DELIVERY LEASING - MID-ATLANTIC, INC.
CORPORATE EXPRESS DELIVERY LEASING - MID-WEST, INC.
CORPORATE EXPRESS DELIVERY LEASING - NEW ENGLAND, INC.
CORPORATE EXPRESS DELIVERY LEASING - NORTHEAST, INC.
CORPORATE EXPRESS DELIVERY LEASING - SOUTHEAST, INC.
CORPORATE EXPRESS DELIVERY LEASING - SOUTHWEST, INC.
CORPORATE EXPRESS DELIVERY LEASING - WEST COAST, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - AIR DIVISION, INC.
AIR COURIER DISPATCH OF NEW JERSEY, INC.
MIDNITE EXPRESS INTERNATIONAL COURIER, INC.
TRICOR AMERICA, INC.
NEW DELAWARE DELIVERY, INC.
CORPORATE EXPRESS DELIVERY ADMINISTRATION, INC.
AMERICAN DELIVERY SYSTEM, INC.
CORPORATE EXPRESS DISTRIBUTION SERVICES, INC.
SUNBELT COURIER, INC.
Each By: ____________________________________
Name:
Title:
2