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Exhibit 4.10
EXECUTION COPY
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
dated as of April 16, 1998
Among
NATIONAL RECORD MART, INC.,
as Issuer
THE GUARANTORS
FROM TIME TO TIME PARTY THERETO,
THE PURCHASERS
FROM TIME TO TIME PARTY THERETO,
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ INC.,
as Agent
--------------------------
$7,500,000
Senior Subordinated Notes
due 2001
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TABLE OF CONTENTS
PAGE
RECITALS .........................................................................................................1
ARTICLE I
DEFINITIONS AND INTERPRETATION...........................................................................2
Section 1.01. Certain Defined Terms..................................................................2
Section 1.02. Computation of Time Periods...........................................................17
Section 1.03. Accounting Terms......................................................................17
Section 1.04. References to this Agreement..........................................................17
Section 1.05. Miscellaneous Terms...................................................................18
ARTICLE II
THE SUBORDINATED NOTES..................................................................................18
Section 2.01. Sale and Purchase of Subordinated Notes...............................................18
Section 2.02. Registration of Subordinated Notes....................................................18
Section 2.03. Transfer and Exchange of Subordinated Notes...........................................19
Section 2.04. Replacement of Subordinated Notes.....................................................20
Section 2.05. Payments on Subordinated Notes........................................................20
Section 2.06. Mandatory Offers to Repurchase the Subordinated Notes.................................21
Section 2.07. Call Right............................................................................22
Section 2.08. Purchases of Subordinated Notes.......................................................22
Section 2.09. Tender of Subordinated Notes to Pay Warrant Exercise Price............................23
ARTICLE III
GUARANTEE OF SECURED NOTES..............................................................................23
Section 3.01. Agreement of Guaranty.................................................................23
Section 3.02. Guaranty Irrevocable..................................................................23
Section 3.03. Certain Waivers.......................................................................24
Section 3.04. Limitations on Subrogation............................................................25
Section 3.05. Contribution..........................................................................25
Section 3.06. Certain Mergers and Consolidations....................................................26
Section 3.07. Release of Guaranty under Certain Circumstances.......................................26
Section 3.08. Subordination of Certain Indebtedness.................................................27
Section 3.09. Guarantors' Indemnity.................................................................27
Section 3.10. No Duty of Inquiry....................................................................27
Section 3.11. No Duty to Provide Data to Guarantors.................................................27
Section 3.12. Rights Cumulative.....................................................................27
Section 3.13. Continuation of Guaranty..............................................................28
Section 3.14. Continuing Guaranty...................................................................28
ARTICLE IV
CLOSING.................................................................................................28
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Section 4.01. Closing of Purchase and Sale of Subordinated Notes....................................28
Section 4.02. Additional Conditions to Closing......................................................29
ARTICLE V
REPRESENTATIONS AND WARRANTIES..........................................................................31
Section 5.01. Representation and Warranties of the Obligors.........................................31
Section 5.02. Representations of the Purchasers.....................................................38
ARTICLE VI
REPORTING AND AFFIRMATIVE COVENANTS.....................................................................39
Section 6.01. Financial and Business Information....................................................39
Section 6.02. Officer's Certificate.................................................................41
Section 6.03. Compliance with Law...................................................................42
Section 6.04. Insurance.............................................................................42
Section 6.05. Maintenance of Properties.............................................................42
Section 6.06. Payment of Taxes and Claims...........................................................43
Section 6.07. Corporate Existence, etc..............................................................43
Section 6.08. Maintenance of Books and Records......................................................43
Section 6.09. Maintenance of Line of Business.......................................................43
Section 6.10. Private Placement Numbers.............................................................43
Section 6.11. Liens.................................................................................43
Section 6.12. Rule 144..............................................................................44
Section 6.13. Use of Proceeds.......................................................................44
Section 6.14. Further Assurances....................................................................44
Section 6.15. Additional Wholly-Owned Subsidiaries..................................................44
ARTICLE VII
NEGATIVE COVENANTS......................................................................................44
Section 7.01. Limitation on Certain Transactions Between the Issuer and Related
Persons........................................................................................44
Section 7.02. Merger, Consolidation, etc............................................................45
Section 7.03. Limitation on Asset Sales.............................................................45
Section 7.04. Restricted Payments and Restricted Investments........................................45
Section 7.05. Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries...................................................................................46
Section 7.06. Limitation on Additional Indebtedness.................................................46
Section 7.07. Limitation on Creation of Liens.......................................................47
Section 7.08. Creation of Subsidiaries; Additional Guarantors.......................................47
Section 7.09. Receivables...........................................................................47
Section 7.10. Intentionally Omitted.................................................................47
Section 7.11. Fiscal Year...........................................................................47
Section 7.12. Tax Consolidation.....................................................................47
Section 7.13. Restrictions on Sale and Issuance of Capital Stock....................................47
Section 7.14. Limitation on Security Interest Restrictions..........................................48
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Section 7.15. Minimum Adjusted Tangible Net Worth...................................................48
Section 7.16. Minimum Cash Flow.....................................................................48
Section 7.17. Amendments to the Fleet Facility......................................................48
Section 7.18. Interest Rate Contract................................................................48
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES..........................................................................48
Section 8.01. Events of Default.....................................................................48
Section 8.02. Remedies on Event of Default, Etc.....................................................51
ARTICLE IX
THE AGENT...............................................................................................53
Section 9.01. Appointment...........................................................................53
Section 9.02. Nature of Duties......................................................................53
Section 9.03. Rights, Exculpation, Etc..............................................................54
Section 9.04. Reliance..............................................................................55
Section 9.05. Indemnification.......................................................................55
Section 9.06. Successor Agents......................................................................55
Section 9.07. Relations Among Holders...............................................................56
Section 9.08. Concerning the Note Documents.........................................................56
ARTICLE X
MISCELLANEOUS...........................................................................................56
Section 10.01. Expenses, etc...........................................................................56
Section 10.02. Survival of Representations and Warranties; Entire Agreement............................57
Section 10.03. Amendment and Waiver....................................................................57
Section 10.04. Notices.................................................................................59
Section 10.05. Reproduction of Documents...............................................................60
Section 10.06. Confidential Information................................................................60
Section 10.07. Transfers of Subordinated Notes.........................................................61
Section 10.08. Agent's Consent.........................................................................61
Section 10.09. Interpretation..........................................................................62
Section 10.10. Successors and Assigns..................................................................62
Section 10.11. Severability............................................................................62
Section 10.12. Construction............................................................................62
Section 10.13. Counterparts............................................................................62
Section 10.14. Governing Law...........................................................................62
Section 10.15. Waiver of Right to Trial by Jury........................................................63
Section 10.16. Indemnification.........................................................................63
Section 10.17. Maximum Rate............................................................................64
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SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
THIS SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT (as the same
may be amended, supplemented or otherwise modified from time to time, this
"AGREEMENT") is entered into as of April 16, 1998 by and among (i) NATIONAL
RECORD MART, INC., a Delaware corporation (the "ISSUER"), (ii) SENECA CAPITAL
L.P., a Delaware limited parnership, and/or its designees ("SENECA"), (iii)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ INC., a Delaware corporation, and/or its designees ("▇▇▇▇▇▇▇" and
with Seneca, the "PURCHASERS"), (iv) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ INC., a Delaware
corporation, in its capacity as agent for the Holders (as defined below) (in
such capacity, the "AGENT"), and (v) THE GUARANTORS FROM TIME TO TIME PARTY
HERETO.
RECITALS
WHEREAS, the Issuer desires to sell and the Purchasers desire
to purchase in each case on the terms and conditions set forth in this
Agreement, notes issued by the Issuer in an aggregate principal amount of
$7,500,000, which notes shall be in substantially the form of EXHIBIT A attached
hereto and made a part hereof (together with any such notes issued in
substitution or replacement therefor pursuant to SECTIONS 2.03 and 2.04,
respectively, of this Agreement, the "SUBORDINATED NOTES");
WHEREAS, the Purchasers have required as a condition, among
others, to their purchase of the Subordinated Notes that each Wholly-Owned
Subsidiary as of the date hereof, and each other Person that becomes a
Wholly-Owned Subsidiary of Issuer after the date of this Agreement
(collectively, the "GUARANTORS") unconditionally guarantee the prompt and
complete payment and performance of the Issuer's obligations under the
Subordinated Notes, this Agreement and the other Note Documents; and
WHEREAS, concurrently with the issuance of the Subordinated
Notes, the Issuer has agreed to issue to the Purchaser warrants to purchase
200,000 shares of the Issuer's common stock (the "WARRANTS") on substantially
the terms set forth in the Warrant Agreement of even date herewith by and among
the Issuer, the Purchaser and the other parties thereto (the "WARRANT
AGREEMENT");
NOW, THEREFORE, in consideration of the foregoing and each of
the representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
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ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.01. CERTAIN DEFINED TERMS. As used herein, the
following terms have the respective meanings set forth below or set forth in the
Section hereof following such term:
"ACCOUNTS" means all accounts, contract rights, chattel paper,
instruments and documents, whether now owned or hereafter created or acquired by
Borrower or in which Borrower now has or hereafter acquires any interest.
"ADJUSTED NET EARNINGS FROM OPERATIONS" means, with respect to
any fiscal period, the net earnings after provision for income taxes for such
fiscal period of the Obligors, all as reflected on the financial statement of
the Issuer supplied to each Holder pursuant to SECTION 6.01 hereof, but
excluding: (i) any gain or loss arising from the sale or other disposition of
capital assets other than in the ordinary course of business; (ii) any gain
arising from any write-up of assets; (iii) earnings of any Subsidiary accrued
prior to the date it became a Subsidiary; (iv) earnings of any corporation,
substantially all of the assets of which have been acquired in any manner by the
Issuer, realized by such corporation prior to the date of such acquisition; (v)
net earnings of any business entity (other than a Subsidiary) in which Issuer
has an ownership interest unless such net earnings shall have actually been
received by Issuer in the form of cash distributions; (vi) any portion of the
net earnings of any Subsidiary which for any reason is unavailable for payment
of dividends to the Issuer; (vii) the earnings of any Person to which any assets
of Issuer shall have been sold, transferred or disposed of, or into which the
Issuer shall have merged, or been a party to any consolidation or other form of
reorganization, prior to the date of such transaction; (viii) any gain or
non-cash loss arising from the issuance or acquisition of any Securities of the
Issuer; and (ix) any gain or non-cash loss arising from extraordinary items.
"ADJUSTED TANGIBLE ASSETS" means all assets except: (i) any
surplus resulting from any write-up of assets subsequent to March 27, 1993; (ii)
deferred assets, other than prepaid items in the ordinary course such as
insurance and prepaid taxes; (iii) patents, copyrights, trademarks, trade names,
non-compete agreements, franchises and other similar intangibles; (iv) good
will, including any amounts, however designated on a consolidated balance sheet
of a Person and its Subsidiaries, representing the excess of the purchase price
paid for assets or stock over the value assigned thereto on the books of such
Person; (v) Restricted Investments; (vi) unamortized debt discount and expense;
(vii) assets located and notes and receivables due from obligors outside of the
United States of America; and (viii) Accounts, notes and other receivables from
Affiliates or employees.
"ADJUSTED TANGIBLE NET WORTH" means, at any date, a sum equal
to: (i) the net book value (after deducting related depreciation, obsolescence,
amortization, valuation, and other proper reserves) at which the Adjusted
Tangible Assets of a Person would be shown on a balance sheet at such date in
accordance with GAAP, PLUS (ii) the then outstanding principal balance of
Subordinated
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Debt, minus (iii) the amount at which such Person's liabilities (other than
capital stock and surplus) would be shown on such balance sheet in accordance
with GAAP, and including as liabilities all reserves for contingencies and other
personal liabilities.
"AFFILIATE" means, at any time, and with respect to any
Person, any other Person that at such time: (i) directly or indirectly through
one or more intermediaries Controls, or is Controlled by, or is under common
Control with, such Person; (ii) beneficially owns or holds 5% or more of any
class of the Voting Stock of any Obligor; or (iii) 5% or more the Voting Stock
(or in the case of Person which is not a corporation, 5% or more of the Equity
Interest) of such Person is beneficially owned or held by any Obligor. As used
in this definition, "CONTROL" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. Remsen Partners, Ltd. and AlarMax Distributors, Inc. shall be
considered Affiliates for purposes of this Agreement.
"AGENT" is defined in the preamble to this Agreement.
"AGREEMENT" is defined in the preamble to this Agreement.
"ASSET SALE" means, with respect to a Person, in one
transaction or a series of related transactions, directly or indirectly (or
having the effect, result or consequence of) (a) any conveyance, sale, lease,
transfer, assignment or other disposition of, any of its property, business or
assets or (b) any issuance sale, assignment, transfer or other disposition of
shares of Capital Stock of a Subsidiary (other than to Issuer or a Wholly Owned
Subsidiary) PROVIDED, HOWEVER, that the Obligors shall not be deemed to have
made an Asset Sale to the extent that: (i) in the ordinary course of business,
any Obligor shall convey, sell, lease, transfer, assign or otherwise dispose of
any asset acquired and held for resale or lease in the ordinary course of
business; (ii) any Obligor shall sell damaged, worn out or other obsolete
property in the ordinary course of business; (iii) any Obligor shall convey,
sell, transfer, assign or otherwise dispose of assets to Issuer or any
Subsidiary; or (iv) any Obligor shall convey, sell, lease, transfer, assign or
otherwise dispose of assets or rights if the aggregate proceeds to the Obligors
from all such actions in this clause do not exceed $150,000 in any transaction
or series of related transactions and the total proceeds from all transactions
in any Fiscal Year do not exceed $300,000. The conveyance, sale, lease,
transfer, assignment or other disposition of all or substantially all of the
assets of Issuer and its Subsidiaries, taken as a whole, shall be governed by
the provisions of SECTION 7.02 hereof, as applicable, and shall not constitute
an Asset Sale.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11
U.S.C.Sections.101 ET SEQ.). -- ---
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"BUSINESS DAY" means any day other than a Saturday, a Sunday
or a day on which commercial banks in New York, New York are required or
authorized to be closed.
"CAPITAL EXPENDITURES" means expenditures made and liabilities
incurred for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the total principal portion of Capital Leases.
"CAPITAL LEASE" means, at any time, a lease with respect to
which the lessee is required concurrently to recognize the acquisition of an
asset and the incurrence of a liability in accordance with GAAP.
"CAPITAL STOCK" means, with respect to any Person, any and all
shares, interests, participations, rights or other equivalents (however
designated) of capital stock of such Person (if a corporation) or any and all
similar ownership interests in a Person (other than a corporation) whether now
outstanding or issued after the date of this Agreement.
"CASH FLOW" means, for any period, an amount equal to (i)
Adjusted Net Earnings from Operations of the Obligors, PLUS (ii) amounts
attributable to depreciation and amortization which were deducted in determining
Adjusted Net Earnings from Operations for such fiscal period; PLUS (iii) cash
amounts contributed to the equity of the Issuer by non-Obligors during such
fiscal period; PLUS (iv) any subordinated loans or advances made to the Issuer
by non-Obligors during such fiscal period, MINUS (v) any non-financed Capital
Expenditures made during such fiscal period, MINUS (vi) all Distributions paid
during such fiscal period, MINUS (vii) scheduled repayments of principal on
Indebtedness for Money Borrowed other than the Fleet Facility.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events after the date hereof:
(a) a sale, lease, license, transfer, conveyance or other
disposition, in one or a series of related transactions, of all or substantially
all of the assets of Issuer and its Subsidiaries, taken as a whole, to any
Person or group (as such term is used in Section 13(d)(3) of the Exchange Act);
(b) a sale, lease, license, transfer, conveyance, proxy or
other disposition, in one or a series of related transactions, of all or
substantially all of the total voting power of all issued and outstanding Equity
Interests of the Issuer owned by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ or any of his Affiliates to
any Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act), PROVIDED, HOWEVER, that a pledge or grant of security interest shall not,
in and of itself, constitute a disposition for purposes of this CLAUSE (B)
unless a proxy or other transfer of voting control has been granted to the
secured party or the secured party forecloses on such pledge or grant of
security interest;
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(c) the dissolution or liquidation of Issuer or any of its
Subsidiaries, or Issuer or any of its Subsidiaries or its directors or
stockholders shall take any action to dissolve or liquidate Issuer or any of its
Subsidiaries;
(d) the acquisition by any Person or group (within the meaning
of Rule 13d-5 under the Exchange Act, as in effect on the Closing Date) of
beneficial ownership, directly or indirectly, through a purchase, merger,
consolidation or other acquisition transaction of 50% or more of the equity or
total voting power of all issued and outstanding shares of the Equity Interest
(i) of the Issuer entitled to vote generally in the election of directors or
(ii) of the surviving Person (if the Issuer is not the surviving entity in a
merger permitted by SECTION 7.02) entitled to vote in the election of directors,
managers or trustees of such other Person; or
(e) the election or appointment within any consecutive twelve
(12) month period of directors constituting a majority of the board of directors
who were not directors at the beginning of such period, except for changes in
the composition of the board of directors which are effectuated with the
approval, authorization or consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ or any of his
Affiliates.
"CLOSING" is defined in SECTION 4.01.
"CLOSING DATE" is defined in SECTION 4.01.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time.
"COLLATERAL AGENT" means Fleet or any of its successors or
assigns as Collateral Agent for the benefit of holders of Senior Debt.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means (i) the common shares of the Issuer,
$0.01 par value, as set forth in the certificate of incorporation of the Issuer
and (ii) any securities issued in respect of or exchange for the securities
described in clause (i) pursuant to a stock dividend, stock split,
recapitalization, merger or reclassification.
"CONFIDENTIAL INFORMATION" is defined in SECTION 10.06.
"CURRENT ASSETS" shall mean at any date the amount at which
all of the current assets of a Person would be properly classified as current
assets on a balance sheet at such date in accordance with GAAP except that
amounts due from Affiliates and Investments in Affiliates shall be excluded
therefrom.
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"DEFAULT" means an event or condition the occurrence or
existence of which would, with the lapse of time or the giving of notice or
both, become an Event of Default.
"DEFAULT RATE" means that rate of interest that is 1.4792% per
month.
"DISTRIBUTION" means, in respect of any corporation, means and
includes (i) the payment of any dividends or other distributions on capital
stock of the corporation (except distributions in such stock) and (ii) the
redemption or acquisition of Securities unless made contemporaneously from the
net proceeds of the sale of Securities.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local,
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"EQUITY INTEREST" means the legal or beneficial ownership of
all or a portion of the equity of a Person, including but not limited to
preferred or common stock, options, warrants or rights to acquire stock,
interests in a limited liability company, trusts, interests in a general or
limited partnership or interests in other Persons, however denominated.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with any Obligor
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in SECTION 8.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXTRAORDINARY FUNDING" means any disbursement to Issuer or
any Wholly-Owned Subsidiary in connection with the incurrence of Indebtedness or
the procurement of equity financing by such entity except those arising from the
following: (a) the issuance of Indebtedness permitted by SECTION 7.06 ; (b) the
issuance of stock, or options or warrants to purchase stock, of the Issuer to
any employee, officer or director of the Issuer or the Guarantors pursuant to
Plans or compensation arrangements entered into in the ordinary course of
business and approved by the Board of Directors of the Issuer or such Guarantor,
or payments, contributions or transactions relating to the purchase or exercise
thereof; or (c) the exercise of warrants, on or before August 5, 1998, to
purchase 90,000 shares and 60,000 shares of Common Stock by Ladenburg, ▇▇▇▇▇▇▇▇
& Co. and Advest, respectively, issued in connection with the Issuer's initial
public offering.
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"FAIR MARKET VALUE" means, with respect to any asset of the
Issuer or any of its Subsidiaries, the value of the consideration obtainable in
a sale of such asset in the open market, assuming a sale by a willing seller to
a willing purchaser dealing at arm's length and arranged in an orderly manner
over a reasonable period of time, each having reasonable knowledge of the nature
and characteristics of such asset, neither being under any compulsion to act,
determined by the Issuer in good faith, PROVIDED, that if the book value of the
assets being sold is in excess of $100,000 and such sale is not made in the
ordinary course of business of the applicable Person, such determination shall
be evidenced by a resolution of the board of directors of the Issuer.
"FISCAL YEAR" means the fiscal year of the Issuer ending on
the date which is the Saturday in late March or early April of each year that is
consistent for such fiscal year with the 4-5-4 retail method of accounting.
"FLEET" means Fleet Capital Corporation.
"FLEET FACILITY" means that certain Loan and Security
Agreement dated June 11, 1993 between Fleet and the Issuer, as the same has been
heretofore and may be, subject to SECTION 7.17, hereafter amended, supplemented
or modified, for a $28,000,000 revolving credit facility including all
guaranties and security agreements relating thereto.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America, as applied by the
Issuer and its Subsidiaries on a consistent basis.
"GOVERNING DOCUMENTS" means , with respect to any corporation,
limited liability company or partnership (a) the articles/certificate of
incorporation (or the equivalent formation documents) of such corporation or
limited liability company, (b) the partnership agreement executed by the
partners in the partnership, (c) the by-laws (or the equivalent organizational
documents) of the corporation, limited liability company or partnership and (d)
any document setting forth the designation, amount and/or relative rights,
limitations and preferences of any class or series of such corporation's capital
stock or such limited liability company's or partnership's equity or ownership
interests.
"GOVERNMENTAL AUTHORITY" means (a) the government of (i) the
United States of America or any State or other political subdivision thereof, or
(ii) any jurisdiction in which any Obligor conducts all or any part of its
business, or which asserts jurisdiction over any properties of such Obligor, or
(b) any entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government.
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"GUARANTOR" and "GUARANTORS" is defined in the recitals to
this Agreement; PROVIDED, HOWEVER, that no Person shall be a Guarantor after
such time as it has been released from its guaranty of the Subordinated Notes
pursuant to the provisions of this Agreement.
"GUARANTOR SECURITY AND PLEDGE AGREEMENT" means the Guarantor
Security and Pledge Agreement of even date herewith among the Guarantors and the
Secured Note Agent, as the same may be amended, supplemented or otherwise
modified from time to time.
"GUARANTY OBLIGATION" means, with respect to any Person, any
obligation (except the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person guaranteeing or
in effect guaranteeing any indebtedness, dividend or other obligation of any
other Person in any manner, whether directly or indirectly, including (without
limitation) obligations incurred through an agreement, contingent or otherwise,
by such Person: (a) to purchase such indebtedness or obligation or any property
constituting security therefor; (b) to advance or supply funds (i) for the
purchase or payment of such indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available funds
for the purchase or payment of such indebtedness or obligation; (c) to lease
properties or to purchase properties or services primarily for the purpose of
assuring the owner of such indebtedness or obligation of the ability of any
other Person to make payment of the indebtedness or obligation; or (d) otherwise
to assure the owner of such indebtedness or obligation against loss in respect
thereof. The amount of any Guaranty Obligation shall be deemed to be an amount
equal to the stated or determined amount of any primary obligation in respect of
which such Guaranty Obligation is made (or, if less, the maximum amount of such
primary obligation for which such Person may be liable pursuant to the terms of
the instrument evidencing such Guaranty Obligation) or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"GUARANTY" means, with respect to any Wholly-Owned Subsidiary
its guaranty of the Subordinated Notes and all of its obligations thereunder as
set forth in Article III hereof.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"HIGHEST LAWFUL RATE" means, at any given time during which
any Obligations shall be outstanding hereunder, the maximum nonusurious interest
rate that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the Obligations, under the laws
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of the State of New York (or the law of any other jurisdiction whose laws may be
mandatorily applicable notwithstanding other provisions of this Agreement and
the other Note Documents), or under applicable federal laws which may presently
or hereafter be in effect and which allow a higher maximum nonusurious interest
rate than under the laws of the State of New York (or such other jurisdiction's)
law, in any case after taking into account, to the extent permitted by
applicable law, any and all relevant payments or charges under this Agreement
and any other Note Documents executed in connection herewith, and any available
exemptions, exceptions and exclusions.
"HOLDER" means, with respect to any Subordinated Note, the
Purchaser thereof or any assignee of such Purchaser.
"INDEBTEDNESS" with respect to any Person means, at any time,
without duplication, (a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock; (b) its
liabilities for the deferred purchase price of Property acquired by such Person
(excluding accounts payable arising in the ordinary course of business but
including all liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such Property); (c) all
liabilities appearing on its balance sheet in accordance with GAAP in respect of
Capital Leases; (d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities); (e) all its liabilities in
respect of letters of credit or instruments serving a similar function issued or
accepted for its account by banks and other financial institutions (whether or
not representing obligations for borrowed money); (f) all monetary obligations
or liabilities owed by any Obligor under the Fleet Facility; and (g) any
Guaranty Obligation of such Person with respect to liabilities of a type
described in any of clauses (a) through (f) hereof.
"INSOLVENCY EVENT" means any of the events described in
paragraphs (h), (j) and (o) of SECTION 8.01.
"INTERCREDITOR AGREEMENT" means that certain Junior
Subordination Agreement of even date herewith among Fleet, the Agent and the
Secured Note Agent (in its capacity as agent under the Secured Note Agreement)
with respect to the subordination of the Subordinated Debt, as the same may be
amended, supplemented, or otherwise modified in accordance with the terms
thereof.
"INTEREST RATE AGREEMENT" means any interest rate protection
or hedge agreement, including without limitation, interest rate futures,
options, swap, floors and cap agreements.
"INVESTMENT" means, with respect to any Person, (i) any
purchase or other acquisition by that Person of securities, or of a beneficial
interest in securities, issued by any other Person, (ii) any purchase by that
Person of all or substantially all of the assets of a business conducted by
another Person, and (iii) any loan, advance (other than deposits with financial
institutions available
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for withdrawal on demand, prepaid expenses, accounts receivable, advances to
employees and similar items made or incurred in the ordinary course of business)
or capital contribution by that Person to any other Person, including all
Indebtedness owed to such Person arising from a sale of property by such Person
other than in the ordinary course of its business; PROVIDED, HOWEVER, that any
cash payments to Fleet required under the Fleet Facility shall not be deemed to
be an Investment. The amount of any Investment shall be the original cost of
such Investment, plus the cost of all additions thereto less the amount of any
return of capital or principal to the extent such return is in cash with respect
to such Investment without any adjustments for increases or decreases in value
or write-ups, write-downs or write-offs with respect to such Investment.
"ISSUER" is defined in the preamble to this Agreement.
"ISSUER SECURITY AND PLEDGE AGREEMENT" means the Issuer
Security and Pledge Agreement of even date herewith between the Issuer and the
Secured Note Agent, as the same may be amended, supplemented or otherwise
modified from time to time.
"LIEN" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest or title
of any vendor, lessor, lender or other secured party to or of such Person under
any conditional sale or other title retention agreement or Capital Lease, upon
or with respect to any property or asset of such Person (including in the case
of stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"LINE OF BUSINESS" means the retail sale of prerecorded home
entertainment products, including compact discs, audio cassettes, videos and
related accessories.
"MATERIAL" means material in relation to the business,
operations, financial condition, assets, properties or prospects of the Issuer
and its Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, financial condition, assets, properties or
prospects of the Issuer and its Subsidiaries taken as a whole, or (b) the
ability of any Obligor to perform its Material obligations under this Agreement,
the Subordinated Notes or the other Note Documents, or (c) the validity or
enforceability of this Agreement, the Subordinated Notes or the other Note
Documents.
"MONEY BORROWED" means, as applied to Indebtedness, (i)
Indebtedness for borrowed money; (ii) Indebtedness, whether or not in any such
case the same was for borrowed money, (A) which is represented by notes payable
or drafts accepted that evidence the extension of credit, (B) which constitutes
obligations evidenced by bonds, debentures, notes or similar instruments, or (C)
upon which interest charges are customarily paid (other than accounts payable)
or that was issued or assumed as full or partial payment for Property; (iii)
Indebtedness that constitutes a Capital Lease; (iv) Indebtedness for ticket
receipts which the Company receives and is obligated to remit to
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a promoter; and (v) Indebtedness under any Guaranty Obligation that would
constitute Indebtedness for Money Borrowed under clauses (i) through (iii)
above.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"NET CASH PROCEEDS" means, with respect to any Asset Sale or
Extraordinary Funding, the aggregate amount of cash consideration received by
the Issuer or any of its Subsidiaries in connection with such Asset Sale or
Extraordinary Funding after deduction of all reasonable and customary fees,
costs and expenses (including payment of unassumed liabilities relating to such
Asset Sale within thirty (30) days after such Asset Sale and any portion of the
proceeds which the Issuer determines should be reserved for post-closing
adjustments until such post-closing adjustment reserves are no longer reserved)
directly incurred by the Issuer or such Subsidiary in connection therewith.
"NOTE DOCUMENTS" means, collectively, this Agreement, the
Subordinated Notes, the Warrants, the Warrant Agreement, the Registration Rights
Agreement, the Intercreditor Agreement and all other documents, agreements,
instruments, opinions and certificates now or hereafter delivered in connection
herewith or therewith.
"OBLIGATIONS" means all present and future obligations and
liabilities of any Obligor arising under or in connection with any Note
Document, due or to become due to any Holder or any other Person entitled to
indemnification pursuant to SECTION 10.16, or (to the extent permitted by the
Note Documents) any of their respective successors, transferees or assigns, and
shall include, without limitation, (i) unpaid principal and interest under the
Subordinated Notes (including, whether or not allowed, amounts that would become
due but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code or a stay granted under Section 105 of the Bankruptcy Code, and
including interest accruing on or after the occurrence of an Insolvency Event,
whether or not allowed as a claim in any proceeding relating to the Insolvency
Event), (ii) fees, expenses and indemnification and expense reimbursement
obligations arising under any of the Note Documents, and (iii) the obligations
of the Guarantors arising under ARTICLE III of this Agreement.
"OBLIGOR" means the Issuer or any Guarantor and "OBLIGORS"
means the Issuer and all of the Guarantors.
"OFFICER'S CERTIFICATE" means a certificate of a Senior
Financial Officer or of any other officer of any Obligor whose responsibilities
extend to the subject matter of such certificate.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
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"PERMITTED LIENS" means (i) Liens at any time granted in favor
of ▇▇▇▇▇▇▇ as agent for the holders of Secured Notes (in such capacity, the
"Secured Note Agent"); (ii) Liens for taxes (excluding any Lien imposed pursuant
to any of the provisions of ERISA) not yet due or being contested as permitted
by SECTION 6.06 hereof; (iii) Liens securing the claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other like Persons
for labor, materials, supplies, or rentals incurred in the ordinary course of
the Obligor's business, but only if the payment thereof is not at the time
required and only if such Liens are junior to the Liens in favor of the Secured
Note Agent; (iv) Liens resulting from deposits made in the ordinary course of
business in connection with workmen's compensation, unemployment insurance,
social security and other like laws; (v) attachment, judgment and other similar
non-tax Liens arising in connection with court proceedings, but only if and for
so long as the execution or other enforcement of such Liens is and continues to
be effectively stayed and bonded on appeal in a manner satisfactory to the Agent
for the full amount thereof, the validity and amount of the claims secured
thereby are being actively contested in good faith and by appropriate lawful
proceedings and such Liens do not, in the aggregate, materially detract from the
value of the Property of the Obligor or materially impair the use thereof in the
operation of any Obligor's business; (vi) Purchase Money Liens securing Purchase
Money Indebtedness which is not incurred in violation of SECTION 7.06 of this
Agreement; (vii) reservations, exceptions, easements, rights of way, and other
similar encumbrances affecting real Property, provided that, in Agent's sole
judgment, they do not in the aggregate materially detract from the value of said
Properties or materially interfere with their use in the ordinary conduct of any
Obligor's business; (viii) Liens securing Indebtedness of a Subsidiary to Issuer
or another Subsidiary; (ix) Liens securing the Fleet Facility; (x) any Liens
held by the Collateral Agent; (xi) such other Liens as appear on SCHEDULE
5.01(T)(II); and (xii) such other Liens as Agent may hereafter approve in
writing.
"PERSON" means an individual, partnership, corporation,
limited liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section
3(3) of ERISA) that is or, within the preceding five years, has been established
or maintained, or to which contributions are or, within the preceding five
years, have been made or required to be made, by any Obligor or any ERISA
Affiliate or with respect to which any Obligor or any ERISA Affiliate may have
any liability.
"PREFERRED STOCK" means any class of capital stock of a
corporation that is preferred over any other class of capital stock of such
corporation as to the payment of dividends or the payment of any amount upon
liquidation or dissolution of such corporation.
"PROPERTY" or "PROPERTIES" means, unless otherwise
specifically limited, real or personal property of any kind, tangible or
intangible, ▇▇▇▇▇▇ or inchoate.
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"PURCHASE MONEY INDEBTEDNESS" means and includes (i)
Indebtedness for the payment of all or any part of the purchase price of any
fixed assets, (ii) any Indebtedness (other than the Obligations) incurred at the
time of or within ten (10) days prior to or after the acquisition of any fixed
assets for the purpose of financing all or any part of the purchase price
thereof, and (iii) any renewals, extensions or refinancings thereof, but not any
increases in the principal amounts thereof outstanding at the time.
"PURCHASE MONEY LIEN" means a Lien upon fixed assets which
secures Purchase Money Indebtedness, but only if such Lien shall at all times be
confined solely to the fixed assets the purchase price of which was financed
through the incurrence of the Purchase Money Indebtedness secured by such Lien.
"PURCHASERS" OR "PURCHASER" means collectively, as of the
Closing Date, the Person signatory hereto as Purchaser and, at any other given
time, each Person which is a party hereto as a Purchaser.
"REDEMPTION NOTICE" shall mean the Issuer's written notice to
redeem the Notes pursuant to SECTION 2.06(A), SECTION 2.06(B), or SECTION 2.07,
as applicable, and which shall be delivered to the Investors in accordance with
the notice provisions of SECTION 10.04 below.
"REDEMPTION PERCENTAGE" means the applicable percentage by
which the Unpaid Principal Amount of Notes is to be multiplied based on the
following schedule:
(i) if a Redemption Notice is given during a
Redemption Period, the Redemption Percentage shall equal:
---------------------------------------------------------------
REDEMPTION YEAR REDEMPTION PERCENTAGE
---------------------------------------------------------------
First Redemption Year 103%
---------------------------------------------------------------
Second Redemption Year 102%
---------------------------------------------------------------
Third Redemption Year 101%
---------------------------------------------------------------
(ii) if a Redemption Notice is given other than
during a Redemption Period, the Redemption Percentage shall
equal:
-------------------------------------------------------------
REDEMPTION YEAR REDEMPTION PERCENTAGE
-------------------------------------------------------------
First Redemption Year 105%
-------------------------------------------------------------
Second Redemption Year 104%
-------------------------------------------------------------
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---------------------------------------------
Third Redemption Year 103%.
---------------------------------------------
"REDEMPTION PERIOD" shall mean any thirty (30) calendar-day
period beginning the day following any Trading Period if at such time the shares
of Issuer's common stock (the "Common Stock") issuable upon exercise of the
Warrants are registered and available for immediate resale to the public.
"REDEMPTION YEAR" shall mean any one-year period commencing on
the Closing Date or any yearly anniversary thereof and extending to the day
before the next subsequent anniversary. By way of example, the second Redemption
Year shall be the one-year period commencing on a date twelve (12) months from
the Closing Date.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement of even date herewith between the Issuer and the Purchasers, as the
same may be amended, supplemented or otherwise modified from time to time.
"RELATED PERSON" means any Affiliate of the Issuer or any
officer, employee, director of the Issuer or any Affiliate or any stockholder
beneficially owning more than 5% of the equity of the Issuer or any "member of
the immediate family" of any of the foregoing (as such term is defined in Item
404 of Regulation S-K).
"REQUIRED HOLDERS" means, at any time, the Holders of more
than fifty percent in principal amount of the Subordinated Notes at the time
outstanding (exclusive of Subordinated Notes then owned by the Issuer or any of
its Related Persons).
"REQUIREMENT OF LAW" means (a) the Governing Documents of a
Person, (b) any law, treaty, rule, regulation, order or determination of an
arbitrator, court or other Governmental Authority or (c) any franchise, license,
lease, permit, certificate, authorization, qualification, easement, right of
way, right or approval binding on a Person or any of its property.
"RESPONSIBLE OFFICER" means any Senior Financial Officer and
any other officer of any Obligor with responsibility for the administration of
the relevant portion of this Agreement or any Note Document.
"RESTRICTED INVESTMENT" means any Investment in cash or by
delivery of Property to any Person, whether by the acquisition of stock,
Indebtedness or other obligation or security, or by loan, advance or capital
contribution, or otherwise, or in any Property except the following: (i)
Investments in one or more Subsidiaries of the Issuer; (ii) Property to be used
in the ordinary course of business; (iii) Current Assets arising from the sale
of goods and services in the ordinary course of business of the Obligors; (iv)
Investments in direct obligations of the United States of America, or any agency
thereof or obligations guaranteed by the United States of America, provided that
such
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obligations mature within one year from the date of acquisition thereof; (v)
Investments in certificates of deposit maturing within one year from the date of
acquisition issued by a bank or trust company organized under the laws of the
United States or any state thereof having capital surplus and undivided profits
aggregating at least $100,000,000; and (vi) Investments in commercial paper
given the highest rating by a national credit rating agency and maturing not
more than two hundred and seventy (270) days from the creation thereof.
"SECURED NOTE AGENT" means ▇▇▇▇▇▇▇, in its capacity as agent
for the "Holders" under (and as defined in) the Secured Note Agreement
"SECURED NOTE AGREEMENT" means that certain Senior
Subordinated Secured Note Purchase Agreement of even date herewith by and among
the Issuer, Guarantor, ▇▇▇▇▇▇▇ and/or its designees as Purchasers (the"Secured
Holders"), and ▇▇▇▇▇▇▇ in its capacity as Agent for the Secured Holders (as
those terms are defined therein), as the same may be amended, supplemented or
otherwise modified in accordance with the terms hereof and thereof, pursuant to
which Issuer sold to Secured Holders secured notes in the principal amount of
$7,500,000.
"SECURITIES" means the Subordinated Notes, the Warrants and
the Common Stock of the Issuer issuable upon exercise of the Warrants.
"SECURITIES ACT" means the Securities Act of 1933.
"SECURITY INTEREST RESTRICTION" means, as applicable,
"Security Interest Restriction" as defined in the Issuer Security and Pledge
Agreement or "Security Interest Restriction" as defined in the Guarantor
Security and Pledge Agreement.
"SENIOR DEBT" means, without duplication, (i) the principal of
and interest on (including, whether or not allowed, amounts that would become
due but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code or a stay granted under Section 105 of the Bankruptcy Code, and
including interest accruing on or after the occurrence of an Insolvency Event,
whether or not allowed as a claim in any proceeding relating to the Insolvency
Event) and all other amounts owing with respect to all Indebtedness under the
Fleet Facility, (ii) the principal of and interest on (including, whether or not
allowed, amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code or a stay granted under Section
105 of the Bankruptcy Code, and including interest accruing on or after the
occurrence of an Insolvency Event, whether or not allowed as a claim in any
proceeding relating to the Insolvency Event) and all other amounts owing with
respect to all Indebtedness under the Secured Note Agreement, and (iii)
guarantees by the Issuer of Indebtedness under, or the joint and several
obligations of the Issuer of any Indebtedness under, the Fleet Facility and the
Secured Note Agreement and the obligation to pay fees, expenses and other
amounts due to the lenders thereunder.
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"SENIOR FINANCIAL OFFICER" means, with respect to any Obligor,
the chief financial officer, principal accounting officer, treasurer or
comptroller of such Obligor.
"SERIES A PREFERRED STOCK" means the Series A Preferred Stock
of the Issuer, as authorized in the Issuer's certificate of incorporation.
"SUBORDINATED DEBT" means, without duplication, (i) the
principal of and interest on (including, whether or not allowed, amounts that
would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code or a stay granted under Section 105 of the
Bankruptcy Code, and including interest accruing on or after the occurrence of
an Insolvency Event, whether or not allowed as a claim in any proceeding
relating to the Insolvency Event) and all other amounts owing with respect to
all Indebtedness under this Agreement, (ii) guarantees by the Issuer of
Indebtedness under, or the joint and several obligations of the Issuer of any
Indebtedness under, this Agreement and the obligation to pay fees, expenses and
other amounts due to the lenders thereunder and, whether or not allowed by law,
interest accruing thereunder after the filing of a petition initiating any
proceedings pursuant to or under any Bankruptcy Law, and any guarantees by the
Issuer of any Indebtedness or other obligations of any Subsidiary that is a
party to this Agreement and the obligation to pay fees, expenses and other
amounts due thereunder.
"SUBORDINATED NOTES" is defined in the recitals to this
Agreement.
"SUBSIDIARY" means, as to any Person, any corporation,
association or other business entity in which such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient
equity or voting interests to enable it or them (as a group) ordinarily, in the
absence of contingencies, to control or elect a majority of the directors (or
Persons performing similar functions) of such entity, and any partnership,
trust, limited liability company or joint venture if more than a 50% interest in
the profits or capital thereof is owned by such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries. Unless the
context otherwise clearly requires, any reference to a "Subsidiary" is a
reference to a Subsidiary of the Issuer.
"THRESHOLD PRICE" shall equal (i) during the first Redemption
Year: $6.00 per share of Common Stock; (ii) during the second Redemption Year:
$7.00 per share of Common Stock; and (iii) during the third Redemption Year:
$8.00 per share of Common Stock, with appropriate adjustments for stock splits,
dividends, reverse splits and similar events.
"TRADING PERIOD" shall mean any consecutive twenty (20)
trading days during which the Common Stock is actually traded on its principal
exchange as reported by such exchange and during which period the average
closing price of the Common Stock as reported by the principal exchange or
market on which such Common Stock is traded is equal to or in excess of the
Threshold Price. Should a Trading Period straddle a Redemption Year, the
Threshold Price shall be appropriately weighted and adjusted.
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"UCC" means the Uniform Commercial Code as in effect in the
State of New York on the date of execution of this Agreement.
"UNPAID PRINCIPAL AMOUNT" means, as to the Subordinated Notes
in the aggregate, $7,500,000 less the aggregate amount of all payments of
principal made by the Issuer on the Subordinated Notes (excluding payments made
as premium and payments made as interest). The Unpaid Principal Amount of each
Subordinated Note shall be similarly defined.
"VOTING STOCK" means securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
persons performing similar functions).
"WARRANT AGREEMENT" is defined in the recitals to this
Agreement.
"WARRANTS" is defined in the Recitals to this Agreement.
"WHOLLY-OWNED SUBSIDIARY" means NRM Investments, Inc. and any
other Subsidiary with respect to which one hundred percent (100%) of all of the
equity interests (except directors' qualifying shares) and voting interests are
owned by any one or more of the Issuer and the Issuer's other Wholly-Owned
Subsidiaries at such time.
SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement,
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding". Periods of days referred to in this Agreement
shall be counted in calendar days unless Business Days are expressly prescribed.
Any period determined hereunder by reference to a month or months or year or
years shall end on the day in the relevant calendar month in the relevant year,
if applicable, immediately preceding the date numerically corresponding to the
first day of such period, PROVIDED, that if such period commences on the last
day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month during which such period is to end),
such period shall, unless otherwise expressly required by the other provisions
of this Agreement, end on the last day of the calendar month.
SECTION 1.03. ACCOUNTING TERMS. For purposes of this
Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to them in conformity with GAAP.
SECTION 1.04. REFERENCES TO THIS AGREEMENT. The words
"hereof", "herein", "hereunder" and similar terms when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and article, section, subsection, clause,
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schedule and exhibit references herein are references to articles, sections,
subsections, clauses, schedules and exhibits to this Agreement unless otherwise
specified.
SECTION 1.05. MISCELLANEOUS TERMS. All terms defined in this
Agreement in the singular shall have comparable meanings when used in the
plural, and VICE VERSA, unless otherwise specified. The term "including" is by
way of example and not limitation. A Default or an Event of Default shall
"continue" or be "continuing" until such Default or Event of Default has been
waived in accordance with SECTION 10.03 or, subject to SECTION 6.01(H), cured
within ten (10) Business Days from the date of Default or the Event of Default.
A reference to a statute, ordinance, code or other Requirement of Law includes
rules, regulations or guidance promulgated thereunder and consolidations,
amendments, re-enactments or replacements of, or successors to, any of them. A
reference to a Person includes a reference to the Person's executors,
administrators, successors, substitutes and assigns.
ARTICLE II
THE SUBORDINATED NOTES
SECTION 2.01. SALE AND PURCHASE OF SUBORDINATED NOTES. Subject
to the terms and conditions of this Agreement, the Issuer will issue and sell to
the Purchasers and the Purchasers will purchase from the Issuer, at the Closing
provided for in SECTION 4.01, Subordinated Notes in the principal amount of
$7,500,000.
SECTION 2.02. REGISTRATION OF SUBORDINATED NOTES. The Issuer
hereby acknowledges and makes the Subordinated Notes a registered obligation for
United States withholding tax purposes. The Issuer shall be the registrar for
the Subordinated Notes (the "REGISTRAR") with full power of substitution. In the
event the Registrar becomes unable or unwilling to act as registrar under this
Agreement, the Issuer shall reasonably designate a successor Registrar. Each
Holder who is a foreign person, by its acceptance of its Subordinated Note(s),
hereby agrees to provide the Issuer with a completed Internal Revenue Service
Form W-8 (Certificate of Foreign Status) or a substantially similar form for
such Holder, participants or other affiliates who are holders of beneficial
interests in the Subordinated Notes. Notwithstanding any contrary provision
contained in this Agreement or any of the other Note Documents, neither the
Subordinated Notes nor any interests therein may be sold, transferred,
hypothecated, participated or assigned to any Person except upon satisfaction of
the conditions specified in this SECTION 2.02. Each Holder, by its acceptance of
its Subordinated Note(s), agrees to be bound by the provisions of this SECTION
2.02 and to indemnify and hold harmless the Registrar against any and all loss
or liability arising from the disposition by such Holder of the Subordinated
Notes or any interest therein in violation of this SECTION 2.02. The Registrar
shall keep at its principal executive office (or an office or agency designated
by it by notice to the last registered Holder) a ledger, in which, subject to
such reasonable regulations as it may prescribe, but at its expense (except as
specified below), it shall provide for the registration and transfer of the
Subordinated Notes. No sale, transfer, hypothecation, participation or
assignment of
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any Subordinated Note or any interest therein shall be effective for any purpose
until it shall be registered on the books of the Registrar to be maintained for
such purpose. In the event of a sale, transfer, hypothecation, participation or
assignment of any Subordinated Note or any interest therein, the Holder of such
Subordinated Note prior to such sale, transfer, hypothecation, participation or
assignment of such Subordinated Note or any interest therein shall provide
Issuer with notice of such transaction at the time of such transaction. The
Registrar shall record the transfer of the Subordinated Notes on the books
maintained for this purpose upon receipt by the Registrar at the office or
agency designated by the Registrar of (a) a written assignment of the
Subordinated Note(s) being assigned (or the applicable interest therein), (b)
funds sufficient to pay any transfer taxes payable upon the making of such
transfer as well as the cost of reviewing the documents presented to the
Registrar, and (c) such evidence of due execution as the Registrar shall
reasonably require. The Registrar shall record the transfer of the Subordinated
Notes on the books maintained for such purpose at the cost and expense of the
assignee.
SECTION 2.03. TRANSFER AND EXCHANGE OF SUBORDINATED NOTES.
(a) The Holders understand and agree that the Subordinated
Notes have not been registered under the Securities Act or the securities laws
of any state, and that they may be sold or otherwise disposed of only in one or
more transactions registered under the Securities Act or, where applicable,
pursuant to an exemption from the registration requirements of the Securities
Act and, where applicable, the securities laws of any state. The Holders
understand and agree that each Subordinated Note or certificate representing the
Subordinated Notes shall bear the following legends:
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS
(b) Subject to the requirements of clause (a) above, upon
surrender of any Subordinated Note at the principal executive office of the
Issuer for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer reasonably acceptable to the Issuer, duly executed by the
registered Holder of such Subordinated Note or its attorney duly authorized in
writing and accompanied by the address for notices of each transferee of such
Subordinated Note or part thereof), the Issuer shall execute and deliver, at the
Issuer's expense (except as provided below), one or more new Subordinated Notes
(as requested by the Holder thereof) in exchange therefor, in an aggregate
principal amount equal to the Unpaid Principal Amount of the surrendered
Subordinated Note. Each
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such new Subordinated Note shall be payable to such Person as such Holder may
request and shall be substantially in the form of EXHIBIT A. Each such new
Subordinated Note shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered Subordinated Note or dated the
date of the surrendered Subordinated Note if no interest shall have been paid
thereon. The Issuer may require payment of a sum sufficient to cover any stamp
tax or governmental charge imposed in respect of any such transfer of
Subordinated Notes. Subordinated Notes shall not be transferred in denominations
of less than $10,000, PROVIDED that if necessary to enable the registration of
transfer by a Holder of its entire holding of Subordinated Notes, one
Subordinated Note may be in a denomination of less than $10,000. Any Holder, by
its acceptance of a Subordinated Note registered in its name (or the name of its
nominee), shall be deemed to have made the representation set forth in SECTION
5.02 (other than SECTION 5.02(D)) to the extent applicable.
SECTION 2.04. REPLACEMENT OF SUBORDINATED NOTES. Upon receipt
by the Issuer of notice from any Holder of the ownership of and the loss, theft,
destruction or mutilation of any Subordinated Note held by such Holder, and
(a) in the case of loss, theft or destruction, a lost note
indemnity agreement reasonably satisfactory to the Issuer and the Holder, or
(b) in the case of mutilation, upon surrender and cancellation
thereof and, to the extent reasonably necessary, a lost note indemnity agreement
reasonably satisfactory to the Issuer and the Holder,
the Issuer at its own expense shall execute and deliver, in lieu thereof, a new
Subordinated Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Subordinated
Note or dated the date of such lost, stolen, destroyed or mutilated Subordinated
Note if no interest shall have been paid thereon.
SECTION 2.05. PAYMENTS ON SUBORDINATED NOTES.
(a) PLACE OF PAYMENT; SURRENDER. Payments of principal,
interest and other amounts becoming due and payable on the Subordinated Notes or
under the Note Documents shall be made by the method and to the address or
account specified with respect to any Holder by such method and at such address
or account as such Holder shall have from time to time specified to each Obligor
in writing for such purpose, without the presentation or surrender of such
Subordinated Note or the making of any notation thereon, except that upon
written request of any Obligor made concurrently with or promptly after payment
or prepayment in full of any Subordinated Note, the Holder of such Subordinated
Note shall surrender it for cancellation, reasonably promptly after any such
request, to the Obligors at the Issuer's principal executive office. Prior to
any sale or other disposition of any Subordinated Note by any Holder or its
nominee, such Holder will, at its election, either endorse thereon the amount of
principal paid thereon and the last date to which interest has
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been paid thereon or surrender such Subordinated Note to the Issuer in exchange
for a new Subordinated Note or Subordinated Notes pursuant to SECTION 2.03.
(b) PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
Agreement or the Subordinated Notes to the contrary notwithstanding, any payment
of principal of or interest on any Subordinated Note that is due on a date other
than a Business Day shall be made on the next succeeding Business Day without
including the additional days elapsed in the computation of the interest payable
on such next succeeding Business Day.
SECTION 2.06. MANDATORY OFFERS TO REPURCHASE THE SUBORDINATED
NOTES.
(a) OFFER TO PREPAY SUBORDINATED NOTES UPON A CHANGE OF
CONTROL. Promptly and in any event within five Business Days after the
occurrence of any Change of Control, the Issuer shall give written notice of
such transaction or event to each Holder, which notice shall state the date of
such Change of Control, shall describe such Change of Control in reasonable
detail and shall contain an offer to prepay all Subordinated Notes at the price
specified below on the date therein specified (the "CHANGE OF CONTROL PREPAYMENT
DATE"), which shall be a Business Day not less than 20 nor more than 30 days
after the date of such notice. Each Holder shall have the option to sell to the
Issuer, and the Issuer hereby agrees to repurchase as provided herein, any or
all of the Subordinated Notes then owned by such Holder, at a purchase price
equal to the Redemption Percentage of the Unpaid Principal Amount of
Subordinated Notes, together with the accrued interest thereon to and including
the Change of Control Prepayment Date. Such option may be exercised by each
Holder by written notice to the Issuer given not later than 10 days prior to the
Change of Control Prepayment Date, specifying the aggregate principal amount of
Subordinated Notes which such Holder intends to sell to the Issuer. On or before
the Change of Control Prepayment Date, each Holder which has accepted the
Issuer's offer to repurchase the Subordinated Notes shall deliver to the Issuer
the Subordinated Notes to be repurchased hereunder on such date against payment
by the Issuer in full in immediately available funds of the purchase price
therefor specified herein; PROVIDED that, notwithstanding its exercise of the
option herein provided, any such Holder may at any time prior to the Change of
Control Prepayment Date waive in whole or in part, by written notice to the
Issuer, its right to sell to the Issuer the Subordinated Notes to be repurchased
on such Change of Control Prepayment Date.
(b) OFFER TO PREPAY SUBORDINATED NOTES UPON AN ASSET SALE OR
OTHER EXTRAORDINARY FUNDING. Promptly and in any event within five Business Days
after the occurrence of any Asset Sale or Extraordinary Funding, the Issuer
shall give written notice of such transaction or event to each Holder, which
notice shall state the date of such Asset Sale or Extraordinary Funding, shall
describe such Asset Sale or Extraordinary Funding in reasonable detail and shall
contain an offer to prepay on the date therein specified such of the
Subordinated Notes as may be purchased with all of the Net Cash Proceeds of such
Asset Sale or Extraordinary Funding (a "SECTION 2.06(B) OFFER"); PROVIDED,
HOWEVER, that to the extent that a Section 2.06(b) Offer is prohibited by the
Fleet Facility or the Secured Note Agreement, (i) the Issuer shall, prior to the
consummation of the related Asset Sale or
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Extraordinary Funding, request that Fleet and the Secured Note Agent, as
applicable, consent to the making of such Section 2.06 (b) Offer, (ii) if Fleet
and the Secured Note Agent, as applicable, consent to the making of such Section
2.06(b) Offer, the Issuer shall comply with this SECTION 2.06(B) and (iii) if
Fleet or the Secured Note Agent does not consent to the making of such Section
2.06(b) Offer, the Issuer shall not be required to comply with this SECTION
2.06(B) solely with respect to the related Asset Sale or Extraordinary Funding.
Fleet's or the Secured Note Agent's refusal to consent to the making of any
Section 2.06(b) Offer shall not relieve the Issuer from its obligation to
request Fleet's and the Secured Note Agent's, as applicable, consent to the
making of any subsequent offer which, but for the prohibitions in the Fleet
Facility or the Secured Note Agreement, would be required to be made hereunder.
The date of the purchase (the "SECTION 2.06(B) PURCHASE DATE") shall be no
sooner than 20 nor later than 30 days after the Asset Sale or Extraordinary
Funding, as applicable. The purchase price shall equal the Redemption Percentage
of the Unpaid Principal Amount of the Subordinated Notes to be purchased,
together with accrued interest thereon to and including the Section 2.06(b)
Purchase Date, as may be purchased with such Net Cash Proceeds. Each Holder
shall have the option to sell to the Issuer, and the Issuer hereby agrees to
repurchase as provided herein, such of the Subordinated Notes then owned by such
Holder as may be purchased on the terms described herein.
Such option may be exercised by each Holder by written
notice to the Issuer given not later than 10 days prior to the Section 2.06(b)
Purchase Date, specifying the aggregate principal amount of Subordinated Notes
which such Holder intends to sell to the Issuer. On or before the Asset Sale
Purchase Date, each Holder which has accepted the Issuer's offer to repurchase
the Subordinated Notes shall deliver to the Issuer the Subordinated Notes to be
repurchased hereunder on such date against payment by the Issuer in full in
immediately available funds of the purchase price therefor specified herein;
PROVIDED that, notwithstanding its exercise of the option herein provided, any
such holder may at any time prior to the Section 2.06(b) Purchase Date waive in
whole or in part, by written notice to the Issuer, its right to sell to the
Issuer the Subordinated Notes to be repurchased. On the Section 2.06(b) Purchase
Date the Issuer shall pay to each such Holder in full in immediately available
funds the purchase price for such holder's Subordinated Notes specified herein.
Promptly following the Section 2.06(b) Purchase Date, the Issuer shall deliver
to each Holder electing to accept the Section 2.06(b) Offer a new Subordinated
Note equal in principal amount to any unpurchased portion of the Subordinated
Note surrendered by such Holder. To the extent the Section 2.06(b) Offer is not
fully subscribed to by holders of the Subordinated Notes, first such tendered
Subordinated Notes shall be paid for in full to the extent possible with the
available Net Cash Proceeds and then any remaining Net Cash Proceeds may be
retained by the Issuer or Subsidiary.
(c) ALLOCATION OF PARTIAL PREPAYMENTS. In the case of each
partial prepayment of the Subordinated Notes under SECTION 2.06(B), the
principal amount of the Subordinated Notes to be prepaid shall be allocated
among all of the Subordinated Notes at the time outstanding in proportion, as
nearly as practicable, to the respective Unpaid Principal Amounts of each Holder
thereof not theretofore called for prepayment, with adjustments, to the extent
practicable, to
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compensate for any prior payments not made exactly in such proportion, but so
that Subordinated Notes remaining outstanding after the prepayment are in the
authorized denominations specified in this Agreement.
SECTION 2.07. CALL RIGHT. The Issuer shall have the right to
redeem all, but not less than all, of the Subordinated Notes at the then
applicable Redemption Percentage times the Unpaid Principal Amount of the
Subordinated Notes, plus accrued interest, with such redemption to be completed
within fifteen (15) Business Days after the Redemption Notice is given.
SECTION 2.08. PURCHASES OF SUBORDINATED NOTES. No Obligor will
and will not permit any Affiliate to purchase, redeem, prepay or otherwise
acquire, directly or indirectly, any of the outstanding Subordinated Notes
except upon the payment or prepayment of the Subordinated Notes in accordance
with the terms of this Agreement and the Subordinated Notes (including any offer
to purchase the Subordinated Notes pursuant to SECTIONS 2.06 or exercise of a
call right pursuant to SECTION 2.07). Each Obligor will promptly cancel all
Subordinated Notes acquired by it or any Affiliate pursuant to any payment,
prepayment or purchase of Subordinated Notes pursuant to any provision of this
Agreement or otherwise and no Subordinated Notes may be issued in substitution
or exchange for any such Subordinated Notes (except to the limited extent set
forth in SECTION 2.06).
SECTION 2.09. TENDER OF SUBORDINATED NOTES TO PAY WARRANT
EXERCISE PRICE. Each of the Obligors agrees that the Subordinated Notes may be
used, and credited at the principal amount thereof (or portion surrendered for
this purpose) together with accrued interest to the date of exercise, by the
Holders in making payment of the exercise price of the Warrants in lieu of cash.
ARTICLE III
GUARANTEE OF SECURED NOTES
SECTION 3.01. AGREEMENT OF GUARANTY. In order to induce the
Purchasers to purchase the Subordinated Notes, the Guarantors hereby jointly and
severally irrevocably and unconditionally guarantee as primary obligors and not
merely as sureties, the due and punctual payment in full of all Obligations when
the same shall become due, whether at stated maturity, by acceleration, demand
or otherwise (including, whether or not allowed, amounts that would become due
but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code or a stay granted under Section 105 of the Bankruptcy Code, and
including interest accruing on and after the occurrence of an Insolvency Event,
whether or not allowed as a claim in any such proceeding relating to the
Insolvency Event). The term "Obligations" is used herein in its most
comprehensive sense and includes any and all obligations of Issuer now or
hereafter made, incurred or created, whether absolute or contingent, liquidated
or unliquidated, whether due or not due, and however arising under or in
connection with any Subordinated Note.
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SECTION 3.02. GUARANTY IRREVOCABLE. Each Guarantor agrees that
its obligations hereunder are irrevocable, absolute, independent and
unconditional and to the maximum extent permitted by applicable law, shall not
be affected by any circumstance which constitutes a legal or equitable discharge
of a guarantor or surety other than payment in full of the Obligations. In
furtherance of the foregoing and without limiting the generality thereof, each
Guarantor agrees to the maximum extent permitted by applicable law, as follows:
(a) this Guaranty is a guaranty of payment when due and not of collectibility;
(b) the Holders of Subordinated Notes may from time to time, without notice or
demand and without affecting the validity or enforceability of this Guaranty or
giving rise to any limitation, impairment or discharge of any Guarantor's
liability hereunder, (i) renew, extend, accelerate or otherwise change the time,
place, manner or terms of payment of the Obligations, (ii) settle, compromise,
release or discharge, or accept or refuse any offer of performance with respect
to, or substitutions for, the Obligations or any agreement relating thereto
and/or subordinate the payment of the same to the payment of any other
obligations, (iii) request and accept other guaranties of the Obligations and
take and hold security for the payment of this Guaranty or the Obligations, (iv)
release, exchange, compromise, subordinate or modify, with or without
consideration, any security for payment of the Obligations, any other guaranties
of the Obligations, or any other obligation of any Person (including any other
Guarantor) with respect to the Obligations, (v) enforce and apply any security
now or hereafter held by or for the benefit of the Holders of Subordinated Notes
in respect of this Guaranty or the Obligations and direct the order or manner of
sale thereof, or exercise any other right or remedy that the Holders of the
Subordinated Notes may have against any such security, as the Holders of the
Subordinated Notes in their discretion may determine consistent with any
applicable security agreement, including foreclosure on any such security
pursuant to one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable, and (vi) exercise any other
rights available to any of them under any of the Note Documents, at law or in
equity; and (c) this Guaranty and the obligations of Guarantors hereunder shall
be valid and enforceable and shall not be subject to any limitation, impairment
or discharge for any reason (other than payment in full of the Obligations),
including without limitation the occurrence of any of the following, whether or
not any Guarantor shall have had notice or knowledge of any of them: (i) any
failure to assert or enforce or agreement not to assert or enforce, or the stay
or enjoining, by order of court, by operation of law or otherwise, of the
exercise or enforcement of, any claim or demand or any right, power or remedy
with respect to the Obligations or any agreement relating thereto, or with
respect to any other guaranty of or security for the payment of the Obligations,
(ii) any waiver, amendment or modification of, or any consent to departure from,
any of the terms or provisions (including without limitation provisions relating
to events of default) of any of the Note Documents or any agreement or
instrument executed pursuant thereto, or of any other guaranty or security for
the Obligations, (iii) the Obligations, or any agreement relating thereto, at
any time being found to be illegal, invalid or unenforceable in any respect,
(iv) the application of payments received from any source to the payment of
indebtedness other than the Obligations, even though the Holders of the
Subordinated Notes might have elected to apply such payment to any part or all
of the Obligations, (v) any defenses, set-offs or counterclaims which any
Obligor may allege or assert against any Holder of Subordinated Notes in respect
of the Obligations, including but not limited to failure of consideration,
breach of warranty, payment, statute
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of frauds, statute of limitations, accord and satisfaction and usury, and (vi)
any other act or thing or omission, or delay to do any other act or thing, which
may or might in any manner or to any extent vary the risk of any Guarantor as an
obligor in respect of the Obligations.
SECTION 3.03. CERTAIN WAIVERS. Each Guarantor hereby waives to
the maximum extent permitted by applicable law, for the benefit of the Holders:
(a) any right to require the Holders, as a condition of payment or performance
by such Guarantor, to (i) proceed against the Issuer, any other guarantor
(including any other Guarantor) of the Obligations or any other Person, (ii)
proceed against or have resort to any balance of any deposit account or credit
on the books of any of the Holders in favor of the Issuer or any other Person,
or (iii) pursue any other remedy in the power of the Holders whatsoever; (b) any
defense arising by reason of the incapacity, lack of authority or any disability
or other defense of the Issuer including, without limitation, any defense based
on or arising out of the lack of validity or the unenforceability of the
Obligations or any agreement or instrument relating thereto or by reason of the
cessation of the liability of the Issuer from any cause other than payment in
full of the Obligations; (c) any defense based upon any statute or rule of law
which provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than that of the principal; (d) any
defense based upon the Holders' errors or omissions in the administration of the
Obligations, except behavior which amounts to bad faith; (e) (i) any principles
or provisions of law, statutory or otherwise, which are or might be in conflict
with the terms of this Guaranty and any legal or equitable discharge of such
Guarantor's obligations hereunder, (ii) the benefit of any statute of
limitations affecting such Guarantor's liability hereunder or the enforcement
hereof, and (iii) any rights to set-offs, recoupments and counterclaims; (f)
notices, demands, presentments, protests, notices of protest, notices of
dishonor and notices of any action or inaction, including acceptance of this
Guaranty, notices of default under this Agreement or the Subordinated Notes or
any agreement or instrument related thereto, notices of any renewal, extension
or modification of the Obligations or any agreement related thereto, notices of
any extension of credit to the Issuer and notices of any of the matters referred
to in the preceding paragraph and any right to consent to any thereof; and (g)
any defenses or benefits that may be derived from or afforded by law which limit
the liability of or exonerate guarantors or sureties, or which may conflict with
the terms of this Guaranty.
SECTION 3.04. LIMITATIONS ON SUBROGATION. Until the
Obligations shall have been paid in full, each Guarantor shall withhold exercise
of (a) any claim, right or remedy, direct or indirect, that such Guarantor now
has or may hereafter have against the Issuer or any of its assets in connection
with this Guaranty or the performance by such Guarantor of its obligations
hereunder, in each case whether such claim, right or remedy arises in equity,
under contract, by statute, under common law or otherwise and including without
limitation (i) any right of subrogation, reimbursement or indemnification that
such Guarantor now has or may hereafter have against the Issuer, and (ii) any
right to enforce, or to participate in, any claim, right or remedy that any
Holder of Subordinated Notes now has or may hereafter have against the Issuer,
and (b) any right of contribution such Guarantor may have against any other
guarantor (including any other Guarantor) of any of the Obligations. Each
Guarantor further agrees that, to the extent the agreement to
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withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation, reimbursement or indemnification such Guarantor may have against
the Issuer, and any rights of contribution such Guarantor may have against any
such other guarantor, shall be junior and subordinate to any rights the Holders
of Subordinated Notes may have against the Issuer, and to any right the Holders
of Subordinated Notes may have against such other guarantor.
SECTION 3.05. CONTRIBUTION. The Guarantors together desire to
allocate among themselves in a fair and equitable manner their Obligations
arising under this Guaranty. Accordingly, in the event any Guarantor shall,
pursuant to the terms of this Guaranty, make a payment (a "GUARANTOR PAYMENT")
of all or any portion of the Obligations which, taking into account all other
Guarantor Payments then previously or concurrently made by any of the other
Guarantors, exceeds the amount which such Guarantor would otherwise have paid if
each Guarantor had paid its proportionate share (as defined below) of the
aggregate Obligations satisfied by such Guarantor Payment, such Guarantor shall
be entitled to contribution and indemnification from each of the other
Guarantors, and each of the other Guarantors hereby agrees to reimburse such
Guarantor, in an amount equal to such other Guarantor's respective Proportionate
Share of such Guarantor Payment. "PROPORTIONATE SHARE" of any Guarantor means,
as of any date of determination, the percentage obtained by dividing (i) such
Guarantor's Allocable Amount (as defined below) in effect immediately prior to
the making of any Guarantor Payment by (ii) the aggregate Allocable Amounts of
all of the Guarantors in effect immediately prior to the making of such
Guarantor Payment. "ALLOCABLE AMOUNT" of any Guarantor means, as of any date of
determination, an amount equal to the maximum amount which could then be claimed
by the Agent and the Holders under this Guaranty without rendering such claim
voidable or avoidable under Section 548 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law. The Guarantors acknowledge that the rights
of contribution and indemnification under this SECTION 3.05 shall constitute an
asset in favor of any Guarantor to which such contribution or indemnification is
owing. This SECTION 3.05 is intended only to define the relative rights of the
Guarantors with respect to payments made by the Guarantors under the Guaranty,
and nothing set forth in the Guaranty is intended to or shall impair the
obligations of the Guarantors, jointly and severally, to pay any amounts to the
Agent and the Holders, as and when the same shall become due and payable in
accordance with the terms of the Guaranty.
SECTION 3.06. CERTAIN MERGERS AND CONSOLIDATIONS.
(a) Nothing contained in this Agreement or in any Subordinated
Note shall prevent any consolidation or merger of a Guarantor with or into the
Issuer or another Guarantor or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety, to the
Issuer or another Guarantor.
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(b) Except as permitted by SECTION 7.02, no Guarantor may
merge or consolidate with or into a corporation or corporations other than the
Issuer or another Guarantor or sell or convey its property as an entirety or
substantially as an entirety to a corporation other than the Issuer or another
Guarantor.
SECTION 3.07. RELEASE OF GUARANTY UNDER CERTAIN CIRCUMSTANCES.
Upon the sale or other disposition of all or substantially all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the Capital Stock of any Guarantor, to an entity which is
not a Guarantor and which sale or disposition is in compliance with SECTION 7.02
hereof, then such Guarantor (in the event of a sale or other disposition, by way
of a merger, consolidation or otherwise, of all of the Capital Stock of such
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all or substantially all of the assets of such Guarantor)
shall be released from and relieved of any obligations under this Guaranty
without any further action required on the part of the Holders of the
Subordinated Notes; PROVIDED, HOWEVER, that any such termination shall occur
only to the extent that all obligations of such Guarantor under all of its
guarantees of, and under all of its pledges of assets or other security
interests which secure, any other Indebtedness of the Issuer remaining
outstanding as a liability of the Issuer following such sale or disposition,
shall also terminate upon such release, sale or transfer; and PROVIDED, FURTHER,
that if such event constitutes an Asset Sale, the Net Cash Proceeds of such an
Asset Sale will be applied in accordance with SECTION 2.06 of this Agreement.
The Issuer shall deliver an appropriate instrument evidencing such release to
the Holders of the Subordinated Notes. Any Guarantor not so released remains
liable for the full amount of all Obligations.
SECTION 3.08. SUBORDINATION OF CERTAIN INDEBTEDNESS. Any
Indebtedness of the Issuer now or hereafter held by any Guarantor is hereby
subordinated in right of payment to the Obligations, and any such indebtedness
of the Issuer to such Guarantor collected or received by such Guarantor after an
Event of Default has occurred and is continuing shall be held in trust for the
Holders of the Subordinated Notes and shall forthwith be paid over to the
Holders of the Subordinated Notes to be credited and applied against the
Obligations.
SECTION 3.09. GUARANTORS' INDEMNITY. The Guarantors jointly
and severally agree to pay, or cause to be paid, on demand, and to save the
Holders of Subordinated Notes harmless against liability for, any and all costs
and expenses (including fees and disbursements of counsel and allocated costs of
internal counsel) incurred or expended by the Holders of Subordinated Notes in
connection with the enforcement of or preservation of any rights under this
ARTICLE III.
SECTION 3.10. NO DUTY OF INQUIRY. It is not necessary for the
Holders of Subordinated Notes to inquire into the capacity or powers of any
Guarantor or the Issuer or the officers, directors or any agents acting or
purporting to act on behalf of any of them.
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SECTION 3.11. NO DUTY TO PROVIDE DATA TO GUARANTORS. The
Holders of Subordinated Notes shall have no obligation to disclose or discuss
with any Guarantor its assessment, or any Guarantor's assessment, of the
financial condition of the Issuer. Each Guarantor has adequate means to obtain
information from the Issuer on a continuing basis concerning the financial
condition of the Issuer and its ability to perform its obligations under this
Agreement, the Subordinated Notes and the other Note Documents, and each
Guarantor assumes the responsibility for being and keeping informed of the
financial condition of the Issuer and of all circumstances bearing upon the risk
of nonpayment of the Obligations. Each Guarantor hereby waives and relinquishes
any duty on the part of the Holders of Subordinated Notes to disclose any
matter, fact or thing relating to the business, operations or conditions of the
Issuer now known or hereafter known by the Holders of Subordinated Notes.
SECTION 3.12. RIGHTS CUMULATIVE. The rights, powers and
remedies given to the Holders of Subordinated Notes by this Article III are
cumulative and shall be in addition to and independent of all rights, powers and
remedies given to the Holders of Subordinated Notes by virtue of any statute or
rule of law or in this Agreement, any Subordinated Note or any of the other Note
Documents between any Guarantor and the Holders of Subordinated Notes or between
the Issuer and the Holders of Subordinated Notes. Any forbearance or failure to
exercise, and any delay by the Holders of Subordinated Notes in exercising, any
right, power or remedy hereunder shall not impair any such right, power or
remedy or be construed to be a waiver thereof, nor shall it preclude the further
exercise of any such right, power or remedy.
SECTION 3.13. CONTINUATION OF GUARANTY. In the event that all
or any portion of the Obligations are paid by the Issuer, the obligations of the
Guarantors hereunder shall continue and remain in full force and effect or be
reinstated, as the case may be, in the event that all or any part of such
payment(s) are rescinded or recovered directly or indirectly from the Holders of
Subordinated Notes as a preference, fraudulent transfer or otherwise, and any
such payments which are so rescinded or recovered shall constitute Obligations
for all purposes under this ARTICLE III.
SECTION 3.14. CONTINUING GUARANTY. This Guaranty set forth in
this ARTICLE III is a continuing guaranty and shall be binding upon each
Guarantor and, except as expressly provided herein, its respective successors
and assigns, and each Guarantor hereby irrevocably waives any right to revoke
the Guaranty contained in this ARTICLE III as to future transactions giving rise
to any Obligations. If, not withstanding the foregoing, any Guarantor shall have
any right under applicable law to terminate or revoke its guaranty of the
Obligations, such Guarantor agrees that such termination or revocation shall not
be effective until a written notice of such revocation or termination,
specifically referring hereto, signed by such Guarantor, is actually received by
the Agent. Such notice shall not affect the right and power of any Holder or the
Agent to enforce rights arising prior to receipt thereof by the Agent. If the
Agent or any Holder grants loans or takes other action after such Guarantor
terminates or revokes this Guaranty but before the Agent receives such written
notice, the rights of such Holder with respect thereto shall be the same as if
such termination or
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revocation had not occurred. The Guaranty contained in this ARTICLE III shall
inure to the benefit of the Holders of Subordinated Notes and their respective
successors and assigns.
SECTION 3.15. SUBORDINATION. THIS AGREEMENT IS SUBJECT TO THE
SUBORDINATION AGREEMENT, DATED APRIL 16, 1998, AMONG THE COMPANY, FLEET CAPITAL
CORPORATION, THE SECURED NOTE AGENT AND THE AGENT, UNDER WHICH THIS AGREEMENT
AND THE COMPANY'S OBLIGATIONS HEREUNDER ARE SUBORDINATED IN THE MANNER SET FORTH
THEREIN PRIOR TO THE PAYMENT OF CERTAIN OBLIGATIONS TO THE HOLDERS OF SENIOR
INDEBTEDNESS AS DEFINED THEREIN.
ARTICLE IV
CLOSING
SECTION 4.01. CLOSING OF PURCHASE AND SALE OF SUBORDINATED
NOTES. The sale and purchase of the Subordinated Notes to be purchased by the
Purchasers shall occur at such place and time as the Issuer and the Purchasers
may mutually agree (the consummation of such sale and purchase being referred to
herein as the "CLOSING" and the date on which the Closing occurs being referred
to herein as the "CLOSING DATE"). At the Closing the Issuer will deliver to each
Purchaser the Subordinated Notes in the form of a single Subordinated Note (or
such greater number of Subordinated Notes in denominations of at least $10,000
as the Purchasers may request) dated the date of the Closing and registered in
each Purchaser's name (or in the name of such Purchaser's nominee), against
delivery by such Purchaser to each Obligor or its order of immediately available
funds in the amount of the purchase price therefor by wire transfer of
immediately available funds to an account or accounts specified by the Issuer in
a written notice to the Purchasers. If at the Closing the Issuer shall fail to
tender such Subordinated Notes to the Purchasers as provided above in this
SECTION 4.01, or any of the other conditions specified in SECTION 4.02 shall not
have been fulfilled to the Purchasers' sole and absolute discretion, the
Purchasers shall, at their election, be relieved of all further obligations
under this Agreement, without thereby waiving any rights the Purchasers may have
by reason of such failure or such nonfulfillment.
SECTION 4.02. ADDITIONAL CONDITIONS TO CLOSING. The
Purchasers' obligation to purchase and pay for the Subordinated Notes to be sold
to it at the Closing is subject to the fulfillment to the Purchasers' sole and
absolute discretion, prior to or at the Closing, of the following conditions:
(a) DELIVERY OF NOTE DOCUMENTS. The Purchasers shall have
received on or before the Closing Date all of the following, each duly executed
and acknowledged where appropriate and in form and substance satisfactory to the
Purchasers:
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(i) this Agreement and the Subordinated Notes, together with
all Schedules hereto which shall be true, complete and correct as of the Closing
Date;
(ii) the Warrants issued to the Purchasers, the Warrant
Agreement and the Registration Rights Agreement;
(iii) a flow of funds memorandum, including a "Statement of
Sources and Uses of the Proceeds of the Subordinated Notes";
(iv) the Intercreditor Agreement; and
(v) evidence of insurance as described in SECTION 6.04.
(b) DELIVERY OF CORPORATE DOCUMENTS. On or before the Closing Date, the
Purchasers shall have received:
(i) an Officer's Certificate of each Obligor, dated the
Closing Date, certifying that the conditions specified in SECTIONS 4.01, and
4.02 have been fulfilled; and
(ii) a certificate of the Secretary or Assistant Secretary of
each Obligor, certifying as to (A) the resolutions of the Obligor's board of
directors authorizing the execution, delivery and performance of the Note
Documents to which the Obligor is a party; (B) the names, incumbency, and
signatures of the officers of the Obligor, authorized to execute, deliver and
perform such documents, and (C) the accuracy and currency of such Obligor's
Governing Documents.
(c) OPINIONS OF COUNSEL. The Purchasers shall have received favorable
legal opinions from ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇, counsel for the Obligors, in form
acceptable to Purchasers (and the Obligors hereby instruct their counsel to
deliver such opinion to the Purchasers);
(d) NO MATERIAL ADVERSE CHANGE. No material adverse change shall have
occurred with respect to the business, operations, performance, assets,
properties, condition (financial or otherwise), or prospects of the Issuer taken
as a whole from March 31, 1997.
(e) Intentionally Omitted.
(f) Intentionally Omitted.
(g) LITIGATION. Except as disclosed on SCHEDULE 4.02(H) hereof, no
litigation, inquiry, injunction or restraining order shall be pending, entered
or threatened which in the Purchasers' good faith judgment could reasonably be
expected to materially and adversely affect (i) the assets, operations, business
or condition (financial or otherwise) of the Issuer or its Subsidiaries
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as a whole, (ii) the ability of the Obligors to perform their respective
Material Obligations hereunder or (iii) the rights and remedies of the Holders.
(h) Intentionally Omitted.
(i) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Obligors in the Note Documents shall be correct when made and
at the time of the Closing.
(j) PERFORMANCE; NO DEFAULT. The Obligors shall have performed
and complied with all agreements and conditions contained in the Note Documents
required to be performed or complied with by it prior to or at the Closing and
after giving effect to the issue and sale of the Subordinated Notes (and the
application of the proceeds thereof as contemplated by SECTION 5.01(S)) no
Default or Event of Default shall have occurred and be continuing.
(k) NO LEGAL IMPEDIMENTS. No law, regulation, order, judgment
or decree of any Governmental Authority shall, and the Purchasers shall not have
received any notice that litigation is pending or threatened which is likely to,
enjoin, prohibit or restrain the consummation of the transactions evidenced by
the Note Documents.
(l) DUE DILIGENCE. The Purchasers shall have completed to
their satisfaction in their sole and absolute discretion their due diligence of
the Obligors.
(m) PAYMENT OF EXPENSES. The Issuer shall have paid to the
Purchasers on or before the Closing Date reasonable fees, charges and
disbursements of the Purchasers and the Purchasers' counsel to the extent
reflected in statements of the Purchasers and such counsel rendered to the
Obligors at least one Business Day prior to the Closing.
(n) FLEET FACILITY. The Fleet Facility shall have been
extended and continuing on terms satisfactory to the Purchasers.
(o) Intentionally Omitted.
(p) SECURED NOTES. The Secured Note Agreement and related
documents thereto shall have been executed and the notes issued pursuant to the
Secured Note Agreement shall have been purchased by the purchasers referred to
therein.
(q) OTHER DOCUMENTS. The Purchasers shall have received such
other documentation as the Purchasers may reasonably request.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. REPRESENTATION AND WARRANTIES OF THE OBLIGORS.
Each of the Obligors jointly and severally represents and warrants to the
Holders as follows:
(a) ORGANIZATION; POWER AND AUTHORITY. Each Obligor is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of formation, and is duly qualified as a foreign entity and
is in good standing in each jurisdiction in which such qualification is required
by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each Obligor has the
power and authority to own or hold under lease the properties it purports to own
or hold under lease, to transact the business it transacts and proposes to
transact, to execute and deliver the Note Documents to which it is a party and
to perform the provisions thereof.
(b) AUTHORIZATION, ETC. Each of the Note Documents has been
duly authorized by all necessary corporate action on the part of each Obligor
which is a party thereto, and such Note Documents constitute, and upon execution
and delivery thereof each Subordinated Note will constitute, a legal, valid and
binding obligation of such Obligor enforceable against such Obligor in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(c) DISCLOSURE. This Agreement, the Note Documents, the
documents, certificates or other writings delivered to the Holders by or on
behalf of the Obligors in connection with the transactions contemplated hereby
and the financial statements described in SECTION 5.01(G), do not contain any
Material misstatement or Material omission except such as have been corrected in
writing and delivered to the Holders. Except as described in SCHEDULE 5.01(C),
since September 27, 1997, there has been no change in the financial condition,
operations, business, properties, or prospects of any Obligor or any Subsidiary
except changes that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. The Obligors' projections and other
forward looking information provided to the Holders are the Obligors' best
estimate as of the Closing Date of the Obligors' future financial condition,
based on reasonable assumptions and have been prepared in good faith but are not
a warranty of actual performance. There is no fact known to any Obligor that
could reasonably be expected to have a Material Adverse Effect that has not been
set forth herein or in the other documents, certificates and other writings
delivered to the Holders by or on behalf of such Obligor specifically for use in
connection with the transactions contemplated hereby.
(d) DEFAULTS; AGREEMENTS.
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(i) Except as disclosed in SCHEDULE 5.01(D)(I), neither the
Issuer nor any of the Subsidiaries is in violation of its charter or by-laws or
in default in the performance, observance or fulfillment of any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any other agreement, indenture or instrument
Material to Issuer and its Subsidiaries, to which Issuer or any of its
Subsidiaries is a party or by which Issuer or any of its Subsidiaries or their
respective property is bound. There exists no condition that constitutes a
Default or Event of Default under any of the Note Documents.
(ii) SCHEDULE 5.01(D)(II) is a true and complete listing as of
the date of this Agreement of all "Material Agreements" which includes (A) all
agreements relating to Indebtedness of Issuer and its Subsidiaries, including
without limitation all credit agreements, indentures and other agreements
related to any Indebtedness for borrowed money of any of the Obligors other than
the Note Documents, (B) all Material joint venture, partnership or limited
liability company agreements to which any of the Obligors is a party, (C) all
agreements for the sale of goods or services to, or purchase of goods or
services from, the Issuer's ten largest suppliers (on a consolidated basis) for
1997, and (D) all other contractual arrangements which are Material to any
Obligor, including but not limited to, guaranties and employment agreements. The
Obligors have delivered or made available to the Purchasers a true and complete
copy of each Material Agreement described on SCHEDULE 5.01(D)(II), including all
exhibits and schedules. There exists no actual or threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship between the Obligors and any customer or any group of customers
whose purchases individually or in the aggregate are Material to the business of
the Obligors or any Material supplier, and there exists no present condition or
state of facts or circumstances which would create a Material Adverse Effect or
prevent any Obligor from conducting such business after the consummation of the
transaction contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted.
(e) PERMITS; LICENSES. Except as disclosed on SCHEDULE
5.01(E), the Issuer and each of its Subsidiaries (a) has all permits, licenses,
franchises and authorizations of governmental or regulatory authorities
("PERMITS"), including, without limitation, under any applicable Environmental
Laws, material to the ownership, leasing and operation of its properties and the
conduct of its business and (b) has fulfilled and performed all of its material
obligations with respect to such Permits and no event has occurred that allows,
or after notice or lapse of time would allow, revocation or termination thereof
or results or would result in any other material impairment of the rights of the
holder of any such Permit. Such Permits contain no restrictions that are
materially burdensome to Issuer or any of its Subsidiaries. In addition to the
disclosure required by the prior sentence, SCHEDULE 5.01(E) lists all Permits
which are Material to the Issuer and its Subsidiaries, and true and complete
copies of all such Permits have been made available to the Purchasers.
(f) Intentionally Omitted.
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(g) FINANCIAL STATEMENTS. The Obligors have delivered to the
Purchasers copies of (i) the final audited consolidated financial statements of
the Issuer and its Subsidiaries for the Fiscal Year ending ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇)
unaudited statements of the Issuer for the quarter ending September 27, 1997;
PROVIDED that no schedules or notes have been provided for the statement
referred to in item (ii) of this sentence. All of said financial statements
(including in each case the related schedules and notes) fairly present in all
material respects the consolidated financial position of the Issuer and its
Subsidiaries as of the respective dates specified in such Schedule and the
consolidated results of their operations and cash flows for the respective
periods so specified and have been prepared in accordance with GAAP consistently
applied throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year-end
adjustments).
(h) Intentionally Omitted.
(i) PLACES OF BUSINESS. The chief executive office of each
Obligor is, on the Closing Date, as set forth on SCHEDULE 5.01(I) hereto, which
offices in the United States are the places where each Obligor is "located" for
the purpose of the UCC and the Uniform Commercial Code in effect in any State in
which any Obligor is so located.
(j) COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The
execution, delivery and performance by each Obligor of the Note Documents to
which it is a party will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of such Obligor under, any indenture, mortgage, deed of trust,
loan, purchase or credit agreement relating to the borrowing of money, any
material lease or any other Material Agreement to which such Obligor is bound or
by which such Obligor or any of its properties may be bound or affected, (ii)
conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court, arbitrator or
Governmental Authority applicable to such Obligor or (iii) violate any provision
of any Requirement of Law (including, without limitation, laws regulating the
corporate practice of medicine) applicable to such Obligor.
(k) GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by any Obligor of this Agreement or the Subordinated Notes.
(l) LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND
ORDERS.
(i) Except as disclosed in SCHEDULE 4.02(G),
there are no actions, suits or proceedings pending or, to the knowledge of any
Obligor, threatened against or affecting such Obligor in any court or before any
arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
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(ii) Except as disclosed in SCHEDULE 5.01(D)(II),
none of the Obligors is in default under any term of any Material Agreement or
any other agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable Requirement of Law
(including without limitation Environmental Laws) of any Governmental Authority,
which default or violation.
(m) TAXES. Issuer's federal tax identification number is
▇▇-▇▇▇▇▇▇▇. The federal tax identification number of the Issuer's Wholly-Owned
Subsidiary, NRM Investments, Inc., a Delaware corporation, is ▇▇-▇▇▇▇▇▇▇. Each
Obligor has filed all tax returns that are required to have been filed in any
jurisdiction, and have paid all taxes shown to be due and payable on such
returns and all other taxes and assessments levied upon them or their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (i) the amount of which is not individually
or in the aggregate Material or (ii) the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which each Obligor, as the case may be, has established adequate
reserves in accordance with GAAP. No Obligor knows of any basis for any other
tax or assessment that could reasonably be expected to have a Material Adverse
Effect. The Federal income tax liabilities of each Obligor have been paid for
all fiscal years up to and including the fiscal year ended March 31, 1997.
(n) TITLE TO PROPERTY; LEASES. Each Obligor has good and
marketable title to its assets and properties that individually or in the
aggregate are Material, all of which are listed on SCHEDULE 5.01(N), in each
case free and clear of Liens (other than Liens permitted by this Agreement). All
leases that individually or in the aggregate are Material are valid and
subsisting and are in full force and effect in all material respects. No Obligor
owns any real property.
(o) SECURITY INTEREST RESTRICTION. SCHEDULE 5.01(o) accurately
sets forth (i) the Property of the Issuer and each Subsidiary, indicating the
Security Interest Restriction, if any, with respect to such Property.
(p) LICENSES, PERMITS, ETC. Except as disclosed in SCHEDULE
5.01(P), each Obligor owns or possesses the right to use all licenses, permits,
franchises, authorizations, patents, copyrights, service marks, trademarks and
trade names, or rights thereto, that individually or in the aggregate are
Material, without known conflict with the rights of others other than rights of
licensors with respect to those items that are subject to such licenses.
(q) COMPLIANCE WITH ERISA.
(i) Each Obligor and each ERISA Affiliate have
operated and administered each Plan in compliance with all applicable laws
except for such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect. No Obligor or any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the
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penalty or excise tax provisions of the Code relating to employee benefit plans
(as defined in Section 3 of ERISA), and no event, transaction or condition has
occurred or exists that could reasonably be expected to result in the incurrence
of any such liability by any Obligor or any ERISA Affiliate, or in the
imposition of any Lien on any of the rights, properties or assets of any Obligor
or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to
such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the
Code, other than such liabilities or Liens as would not be individually or in
the aggregate Material.
(ii) The present value of the aggregate benefit
liabilities under each of the Plans (other than Multiemployer Plans), determined
as of the end of such Plan's most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan's most recent
actuarial valuation report, did not exceed the aggregate current value of the
assets of such Plan allocable to such benefit liabilities. The term "BENEFIT
LIABILITIES" has the meaning specified in Section 4001 of ERISA and the terms
"CURRENT VALUE" and "PRESENT VALUE" have the meaning specified in Section 3 of
ERISA.
(iii) No Obligor or any ERISA Affiliates have
incurred withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are Material.
(iv) The expected post-retirement benefit
obligation (determined as of the last day of each Obligor's most recently ended
fiscal year in accordance with Financial Accounting Standards Board Statement
No. 106, without regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of each Obligor is not Material.
(v) The Obligors' execution and delivery of this
Agreement and the issuance and sale of the Subordinated Notes hereunder will not
involve any transaction that is subject to the prohibitions of section 406 of
ERISA or in connection with which a tax could be imposed pursuant to section
4975(c)(1)(A)-(D) of the Code.
(r) PRIVATE OFFERING BY EACH OBLIGOR. None of the Obligors or
anyone acting on their behalf has offered the Securities or any similar
securities for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, any person other
than institutional investors. None of the Obligors or anyone acting on its
behalf has taken, or will take, any action that would subject the initial
issuance or sale of the Securities to the registration requirements of Section 5
of the Securities Act.
(s) USE OF PROCEEDS; MARGIN REGULATIONS. The Obligors will
apply the proceeds of the sale of the Subordinated Notes to pay costs and
expenses incurred by the Obligors in connection with the Note Documents and for
working capital. No part of the proceeds from the sale of the Subordinated Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the
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Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve each Obligor in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). As used in
this Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall
have the meanings assigned to them in said Regulation G.
(t) EXISTING INDEBTEDNESS; FUTURE LIENS.
(i) SCHEDULE 5.01(T)(I) sets forth a complete
and correct list of all outstanding Indebtedness of each Obligor as of the
Closing Date. None of the Obligors is in default in the payment of any principal
or interest on any Indebtedness of such Obligor and no event or condition exists
with respect to any Indebtedness of such Obligor that would permit (or that with
notice or the lapse of time, or both, would permit) one or more Persons to cause
such Indebtedness to become due and payable before its stated maturity or before
its regularly scheduled dates of payment.
(ii) Except as disclosed in SCHEDULE 5.01(T)(II),
(A) none of the Obligors has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its property,
whether now owned or hereafter acquired, to be subject to a Lien other than a
Permitted Lien, and (B) there are no Liens on any of the property of the
Obligors.
(u) FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the sale
of the Subordinated Notes by the Issuer hereunder nor their use of the proceeds
thereof will violate the Trading with the Enemy Act, as amended, or any of the
foreign assets control regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto.
(v) STATUS UNDER CERTAIN STATUTES. None of the Obligors is
subject to regulation under the Investment Issuer Act of 1940, as amended, the
Public Utility Holding Issuer Act of 1935, as amended, the Interstate Commerce
Act, as amended, or the Federal Power Act, as amended. None of the Obligors is
an "investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
(w) ENVIRONMENTAL MATTERS. None of the Obligors has knowledge
of any claim or has received any notice of any claim, and no proceeding has been
instituted raising any claim against such Obligor or any of their respective
real properties now or formerly owned, leased or operated by any of them or
other assets, alleging any damage to the environment or violation of any
Environmental Laws. Except as otherwise disclosed to the Purchasers in writing,
(i) none of the Obligors has knowledge of any
facts which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment
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emanating from, occurring on or in any way related to real properties now or
formerly owned, leased or operated by any of them or to other assets or their
use; and
(ii) all buildings on all real properties now
owned, leased or operated by each Obligor is in compliance with applicable
Environmental Laws.
(x) LABOR MATTERS. There is (a) no unfair labor practice
complaint pending against any Obligor or, to the best knowledge of such Obligor,
threatened against it, before the National Labor Relations Board or any state or
local labor relations board, and no grievance or arbitration proceeding arising
out of or under any collective bargaining agreement is so pending against such
Obligor or, to the best knowledge of such Obligor, threatened against it and (b)
no strike, labor dispute, slowdown or stoppage pending against any Obligor or,
to the best knowledge of such Obligor, threatened against it, except for such
actions specified in clause (a) or (b) above which, singly or in the aggregate,
will have or could reasonably be expected to have a Material Adverse Effect.
(y) CERTIFICATE OF INCORPORATION AND BY-LAWS The Issuer has
heretofore furnished to Purchasers a complete and correct copy of its
Certificate of Incorporation and By-Laws as most recently restated and
subsequently amended to date. Such Certificate of Incorporation and By-Laws are
in full force and effect. The Issuer is not in violation of any of the
provisions of its Certificate of Incorporation or By-Laws.
(z) CAPITALIZATION The authorized capital stock of the Issuer
consists of (i) 9,000,000 shares of Common Stock and (ii) 2,000,000 shares of
Preferred Stock. As of February 28, 1998, (i) 4,844,624 shares of Common Stock
were issued and outstanding, all of which are validly issued, fully paid and
nonassessable, (ii) 193,292 shares of Common Stock were held in treasury, (iii)
no shares of Common Stock were held by Subsidiaries of the Issuer and (iv)
approximately 510,650 shares of Common Stock were reserved for future issuance
pursuant to outstanding stock options or warrants (collectively, the "ISSUER
STOCK PLANS"). As of the Closing, no shares of Preferred Stock were issued and
outstanding.
(aa) SOLVENCY. After giving effect to the transactions
contemplated by the Note Documents, (a) the assets of each Obligor, at a fair
valuation, are in excess of the total amount of its debts (including, without
limitation, contingent liabilities); (b) the present fair saleable value of the
assets of each Obligor is greater than its probable liability on its existing
debts as such debts become absolute and matured; (c) each Obligor is then able
and expects to be able to pay its debts (including, without limitation,
contingent debts and other commitments) as they mature; and (d) each Obligor has
capital sufficient to carry on its business as conducted and as proposed to be
conducted.
(bb) SURETY OBLIGATIONS. Issuer is not obligated as surety or
indemnitor under any surety or similar bond or other contract issued or has not
entered into any agreement to assure payment, performance or completion of
performance of any undertaking or obligation of any person.
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SECTION 5.02. REPRESENTATIONS OF THE PURCHASERS. Each
Purchaser represents and warrants to the Issuer as follows:
(a) NO REGISTRATION. The Securities are not registered under
the Securities Act or any state securities laws; it understands that the
offering and sale of the Securities are intended to be exempt from registration
under the Securities Act, by virtue of Section 4(2) and the provisions of
Regulation D promulgated thereunder, based, in part, upon the representations,
warrantees and agreements contained in this Agreement; and such Purchaser
understands that the Securities will bear a legend to that effect.
(b) ACCREDITED INVESTOR. With respect to the transaction
evidenced by this Agreement and the Securities, such Purchaser is an accredited
investor within the meaning of Regulation D under the Securities Act, and it has
such knowledge and experience in financial, tax and business matters so as to
enable it to utilize the information provided to it and other sources of
information (including this Agreement) to evaluate the merits and risks of an
Investment in the Securities and to make an informed investment decision with
respect thereto.
(c) PURCHASE FOR INVESTMENT; LEGEND. Such Purchaser is
acquiring the Securities solely for its own account for investment and not with
a view to resale or distribution. Such Purchaser acknowledges that a restrictive
legend substantially in the form set forth in SECTION 2.03 will be placed on the
security.
(d) AUTHORIZATION, ETC. This Agreement, the Warrant Agreement
and the Registration Rights Agreement have been duly authorized, executed and
delivered by such Purchaser.
(e) ERISA MATTERS. In connection with its purchase of the
Subordinated Notes and the Warrants, none of the funds being used by such
Purchaser to purchase the Subordinated Notes and the Warrants include "plan
assets" as such term is defined in ERISA.
ARTICLE VI
REPORTING AND AFFIRMATIVE COVENANTS
Each Obligor covenants that so long as any of the Subordinated
Notes are outstanding:
SECTION 6.01. FINANCIAL AND BUSINESS INFORMATION. The
Obligors shall deliver to the Agent or Holders, as applicable, of Subordinated
Notes:
(a) ANNUAL STATEMENTS. Within ninety (90) days after the close
of each Fiscal Year of the Issuer, the Holders shall receive duplicate copies of
the Issuer's Annual Report on Form 10-K for such fiscal year prepared in
accordance with the requirements therefor and filed with the
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Commission which shall include unqualified audited financial statements of the
Issuer and its Subsidiaries as of the end of such Fiscal Year certified by a
firm of independent public accountants of recognized national standing or
otherwise acceptable to the Agent (except for a qualification for a change in
accounting principles with which the independent public accountant concurs).
Issuer shall also forward to the Holders a copy of the accountant's letter to
the Issuer's management that is prepared in connection with aforementioned
financial documents and shall also cause to be prepared and furnished to Holders
a certificate by the aforesaid independent public accountants certifying to
Holders that, based upon their examination of the financial statements of the
Issuer and its Subsidiaries performed in connection with their examination of
said financial statements, they are not aware of any Default or Event of Default
relating to SECTIONS 7.15 AND 7.16 hereof, or, if they are aware of such Default
or Event of Default, specifying the nature thereof. The Issuer's annual report
to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act
shall be delivered to the Holders concurrently with delivery to the
shareholders.
(b) MONTHLY STATEMENTS. Upon the Agent's written request,
unaudited interim consolidated financial statements of the Obligors as of the
end of the most recent fiscal month and of the portion of the Obligor's Fiscal
Year then elapsed, on a consolidated and consolidating basis, certified by the
principal financial officer of the Issuer as prepared in accordance with GAAP
and fairly presenting the consolidated financial position and results of
operations of the Obligors for such month-end period subject only to changes
from audit and year-end adjustment and except that such statements need not
contain notes;
(c) QUARTERLY STATEMENTS. Within forty-five (45) days after
the end of the first three quarters of each fiscal year, copies of the Issuer's
Quarterly Report on Form 10-Q prepared in compliance with the requirements
therefor and filed with the Commission.
(d) BOARD REPORTS. Upon the Agent's written request, copies of
all reports and analysis as Issuer provides to its Board of Directors or any
committee thereof or to its stockholders from time to time.
(e) MERCHANDISING PLAN. Upon the Agent's written request, a
merchandising plan for the next Fiscal Year.
(f) ANNUAL BUDGET. Upon the Agent's written request, a plan,
operating budget and financial forecast for the next succeeding Fiscal Year of
the Issuer, including, without limitation, (i) a forecasted consolidated and
consolidating balance sheet and statement of income of the Issuer and its
Subsidiaries and a consolidated and consolidating statement of cash flows of the
Issuer for each fiscal quarter and year, (ii) a consolidated and consolidating
forecasted statement of income and a balance sheet of the Issuer and its
Subsidiaries and a consolidated and consolidating statements of cash flows of
the Issuer and its Subsidiaries for each fiscal quarter of such Fiscal Year, and
(iii) the amount of forecasted capital expenditures for such Fiscal Year of the
Issuer and its Subsidiaries (except that consolidating financial information
will be delivered only to the extent and in the form
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customarily prepared and available to the Issuer). The budgets shall include
projected revenues, expenses, and earnings data and such other data as Holders
may request setting forth the breakdown between the Issuer and the other
business units of the Issuer, in a format similar to the monthly, quarterly and
annual reports provided to the Holders hereunder.
(g) SEC AND OTHER REPORTS. Within five (5) days after their
becoming available, each other financial statement, report, notice or proxy
statement sent by any Obligor to public securities Holders generally, and each
regular or periodic report, each registration statement (without exhibits except
as expressly requested by such Holder), and each prospectus and all amendments
thereto filed by such Obligor with the Commission and of all press releases and
other statements made available generally by such Obligor to the public
concerning developments that are Material to the Issuer;
(h) NOTICE OF DEFAULT OR EVENT OF DEFAULT. Promptly, and in
any event within five (5) Business Days after a Responsible Officer of any
Obligor becoming aware of the existence of any Default or Event of Default or
that any Person has given any notice or taken any action with respect to a
claimed default hereunder or that any Person has given any notice or taken any
action with respect to a claimed default of the type referred to in SECTION
8.01(G), a written notice specifying the nature and period of existence thereof
and what action such Obligor is taking or proposes to take with respect thereto;
(i) NOTICES FROM GOVERNMENTAL AUTHORITY. Promptly, and in any
event within five (5) days of receipt thereof, copies of any notice to any
Obligor from any Federal or state Governmental Authority relating to any order,
ruling, statute or other law or regulation that could reasonably be expected to
have a Material Adverse Effect; and
(j) OTHER REPORTS. Upon the Agent's written request, with
reasonable promptness, copies of any documents or reports to Fleet from Issuer;
(k) REQUESTED INFORMATION; INSPECTIONS. From time to time,
with reasonable promptness, such additional financial statements and information
with respect to the financial condition of the Issuer and its Subsidiaries as
the Agent may reasonably request, including, without limitation and without
further request, (i) any financial statements or reports (including comment
letters to management) furnished to the Issuer or its Subsidiaries by its
independent certified public accountants, and (ii) to the extent not already
furnished pursuant to this Agreement, all financial statements, certificates,
reports and other information furnished by the Issuer and its Subsidiaries to
any bank pursuant to any agreement. The Issuer shall also provide such
information concerning the operations of the Issuer and its Subsidiaries as the
Agent may from time to time reasonably request in writing, and upon reasonable
advance notice permit representatives of the Agent (x) such access during normal
business hours (and in a manner which will not be disruptive to the business and
operations of the Issuer) to the properties, books and records of the Issuer and
its Subsidiaries, and (y) to discuss the affairs, accounts and finances of the
Issuer and its Subsidiaries with the financial and
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management personnel of the Issuer and its Subsidiaries and with their
independent certified public accountants (and the Issuer authorizes such
independent public accountants to discuss the Issuer's or any Subsidiaries'
financial matters with the Agent and its representatives); PROVIDED, HOWEVER,
that the Issuer shall not be obligated to provide access to any information that
it reasonably considers to be a trade secret or similar confidential information
unless the Agent provide assurances in writing that they will maintain the
confidentiality of the information. The Agent will consult with the Issuer
regarding the strategy and logistics of their visits and inspections in order to
minimize the costs of, and disruptions arising from, such visits and
inspections. All such information shall be treated by the Agent and the Holders
as confidential.
SECTION 6.02. OFFICER'S CERTIFICATE. The documents delivered
to the Agent or Holders of Subordinated Notes pursuant to SECTION 6.01(A) and
SECTION 6.01(C) hereof shall be accompanied by a certificate of a Senior
Financial Officer of each Obligor setting forth:
(a) COVENANT COMPLIANCE. The information (including detailed
calculations) required in order to establish whether the Obligors were in
compliance with the requirements of SECTIONS 7.03, 7.06, 7.07, 7.15 THROUGH
7.17, inclusive, during the quarterly or annual period covered by the statements
then being furnished (including with respect to each such Section, where
applicable, the calculations of the maximum or minimum amount, ratio or
percentage, as the case may be, permissible under the terms of such Sections,
and the calculation of the amount, ratio or percentage then in existence); and
(b) EVENT OF DEFAULT. A statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made, under his
or her supervision, a review of the transactions and conditions of Obligors from
the beginning of the quarterly or annual period covered by the statements then
being furnished to the date of the certificate and that such review shall not
have disclosed the existence during such period of any condition or event that
constitutes a Default or an Event of Default or, if any such condition or event
existed or exists (including, without limitation, any such event or condition
resulting from the failure of any Obligor to comply with any Environmental Law),
specifying the nature and period of existence thereof and what action such
Obligor shall have taken or proposes to take with respect thereto.
SECTION 6.03. COMPLIANCE WITH LAW. Each Obligor will comply
with all Requirements of Law to which each of them is subject, including,
without limitation, Environmental Laws, and will obtain and maintain in effect
all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of its properties or to the conduct of
its business, in each case to the extent necessary to ensure that non-compliance
with such Requirements of Law or failures to obtain or maintain in effect such
licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
SECTION 6.04. INSURANCE. Each Obligor shall:
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(a) Keep its assets which are of an insurable character
insured (to the extent and for the time periods consistent with normal industry
practices) by financially sound and reputable insurers against loss, business
interruption, or damage by fire, explosion, theft or other hazards which are
included under extended coverage in amounts not less than the insurable value of
the property insured or such lesser amounts, and with such self-insured
retention or deductible levels, as are consistent with normal industry
practices;
(b) Maintain with financially sound and reputable insurers,
insurance against other hazards and risks and liability to Persons and property
to the extent and in the manner customary for companies in similar businesses;
and
(c) Upon the request of any Holder, will render to such Holder
a statement of insurance in such detail as such Holder may reasonably request as
to all such insurance coverage.
SECTION 6.05. MAINTENANCE OF PROPERTIES. Each Obligor will
maintain and keep, or cause to be maintained and kept, their respective
properties in normal working order and condition (other than ordinary wear and
tear) such that, in the reasonable judgment of such Obligor, the business
carried on in connection therewith may be properly conducted at all times,
PROVIDED that this Section shall not prevent such Obligor from discontinuing the
operation and the maintenance of any of its properties if such discontinuance is
desirable in the conduct of its business and such Obligor has concluded that
such discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
SECTION 6.06. PAYMENT OF TAXES AND CLAIMS. Each Obligor will
and will cause each of its Subsidiaries to file all tax returns required to be
filed in any jurisdiction and to pay and discharge all taxes shown to be due and
payable on such returns and all other taxes, assessments, governmental charges,
or levies imposed on them or any of their properties, assets, income or
franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent and all claims for which sums have become
due and payable that have or might become a Lien on properties or assets of any
Obligor, PROVIDED that none of the Obligors need pay any such tax or assessment
or claims if the amount, applicability or validity thereof is contested by such
Obligor on a timely basis in good faith and in appropriate proceedings, and such
Obligor has established adequate reserves therefor in accordance with GAAP on
the books of such Obligor or the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
SECTION 6.07. CORPORATE EXISTENCE, ETC. Each Obligor will at
all times preserve and keep in full force and effect its corporate existence.
Each Obligor will at all times preserve and keep in full force and effect the
corporate existence and all rights and franchises of such Obligor unless, in the
good faith judgment of such Obligor, the termination of or failure to preserve
and keep in full force and effect such corporate existence, right or franchise
could not, individually or in the aggregate, have a Material Adverse Effect.
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SECTION 6.08. MAINTENANCE OF BOOKS AND RECORDS. Each Obligor
will make and keep books, records and accounts in which full, true and correct
entries in accordance with GAAP and all Requirements of Law are made of all
dealings and transactions in relation to its business and activities.
SECTION 6.09. MAINTENANCE OF LINE OF BUSINESS. Each Obligor
will, and will cause its Subsidiaries to, devote substantially all of their
respective time to, and deploy substantially all of their respective Material
assets owned or used by such Obligor or Subsidiary in, the Line of Business as
conducted by the Obligors on the date of this Agreement and businesses
reasonably related thereto.
SECTION 6.10. PRIVATE PLACEMENT NUMBERS. At the request of any
Holder, the Issuer shall assist such Holder in obtaining a Private Placement
number ("CUSIP NUMBER") issued by Standard & Poor's CUSIP Service Bureau (in
cooperation with the Securities Valuation Office of the National Association of
Insurance Commissioners) for the Subordinated Notes. The costs of obtaining a
CUSIP Number following such request by any Holder shall be borne by the Issuer.
SECTION 6.11. LIENS. The Obligors shall defend its
Properties against any and all Liens howsoever arising, other than Permitted
Liens, and in any event defend against any attempted foreclosure.
SECTION 6.12. RULE 144. In order to permit the holders of
Subordinated Notes, Warrants and Warrant Shares (as defined in the Warrant
Agreement) to sell the same, if they so desire, pursuant to Rule 144 promulgated
by the Commission (or any successors to such rules), the Issuer will comply with
all rules and regulations of the Commission applicable in connection with the
use of Rule 144 (or any successors thereto), including the timely filing of all
reports with the Commission and the provision of any information regarding the
Issuer in order to enable such holders, if they so elect, to utilize Rule 144,
and the Issuer will cause any restrictive legends to be removed and any transfer
restrictions to be rescinded with respect to any sale of Subordinated Notes,
Warrants and Warrant Shares which is exempt from registration under the 1933 Act
pursuant to Rule 144. Upon the request of any Holder of Subordinated Notes,
Warrants and Warrant Shares, the Issuer will deliver to such holder a written
statement verifying that it has complied with such requirement.
SECTION 6.13. USE OF PROCEEDS. The Obligors will apply the
proceeds of the sale of the Subordinated Notes to pay costs and expenses
incurred by the Obligors in connection with the Note Documents and for working
capital. No part of the proceeds from the sale of the Subordinated Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve each Obligor in a violation of Regulation X of said Board (12 CFR 224)
or to involve any broker or dealer in a violation of Regulation T of said Board
(12 CFR 220).
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SECTION 6.14. FURTHER ASSURANCES. Upon the request of the
Holders, the Obligors shall duly execute and deliver, or cause to be duly
executed and delivered, at the cost and expense of the Obligors, such further
instruments as may be appropriate in the reasonable judgment of the Holders to
carry out the provisions and purposes of this Agreement and the other Note
Documents.
SECTION 6.15. ADDITIONAL WHOLLY-OWNED SUBSIDIARIES. Any
Wholly-Owned Subsidiary which is formed or acquired by any Obligor (as permitted
under the terms of this Agreement subsequent to the date hereof) shall become a
Guarantor hereunder and shall execute such documents in connection therewith as
shall be required by the Agent.
ARTICLE VII
NEGATIVE COVENANTS
Each Obligor covenants that so long as any of the Subordinated
Notes are outstanding:
SECTION 7.01. LIMITATION ON CERTAIN TRANSACTIONS BETWEEN THE
ISSUER AND RELATED PERSONS. The Issuer has not and shall not enter into, nor
permit any Subsidiary to enter into, directly or indirectly, any agreement
relating to any loan or other advance with any Related Person except for those
outstanding on the Closing Date and to the extent that such loans or other
advances are disclosed on SCHEDULE 7.01. In addition, the Issuer shall not enter
into any other agreement, and shall not renew or permit any Subsidiary to renew
any existing agreement, relating to the sale, purchase or lease of any assets,
property or services with any Related Person except in the ordinary course of
and pursuant to the reasonable requirements of the Issuer's or Subsidiary's
business and upon fair and reasonable terms which are fully disclosed to the
Holders and which are no less favorable to the Issuer or Subsidiary than would
be obtained in a comparable arm's length transaction with a Person not a Related
Person; PROVIDED, HOWEVER, that in no event shall the aggregate amount of
transactions with all Related Persons exceed $300,000 per annum.
SECTION 7.02. MERGER, CONSOLIDATION, ETC. The Issuer shall
not, in a single transaction or through a series of related transactions,
consolidate with or merge with or into any other Person or, sell, assign,
convey, transfer, lease or otherwise dispose of ("TRANSFER") all or
substantially all of its properties and assets to any other Person or group of
affiliated Persons or permit its Subsidiaries to enter into any such transaction
or transactions if such transaction or transactions, in the aggregate, would
result in a sale of all or substantially all of the assets of the Issuer and its
Subsidiaries; PROVIDED that so long as all Obligations are repaid in full at the
closing thereof (at the amounts set forth in SECTION 2.08) and as a condition
thereto in connection with such Transfer, such Transfer shall be permitted;
PROVIDED FURTHER that any Wholly-Owned Subsidiary may consolidate with or merge
with or into any other Wholly-Owned Subsidiary.
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SECTION 7.03. LIMITATION ON ASSET SALES. Neither the Issuer
nor any of its Subsidiaries shall make an Asset Sale unless:
(a) the applicable Obligor complies with the provisions of
SECTION 2.06;
(b) at least 80% of the consideration therefor shall be
cash; and
(c) the Asset Sale must be at Fair Market Value.
SECTION 7.04. RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS.
No Obligor shall, directly or indirectly, (a) make any Restricted Investments,
or (b) declare or pay any dividend on, or make any payment on account of, or set
apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of any
class of capital stock of any Obligor or any warrants, options or rights to
purchase any such capital stock, whether now or hereafter outstanding, or make
any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of an Obligor or any of its
Subsidiaries (each a "RESTRICTED PAYMENT"); PROVIDED, HOWEVER, that, to the
extent permitted by applicable law any Subsidiary of an Issuer may make
Restricted Payments to the Issuer; PROVIDED, FURTHER, that the Issuer may
purchase either assets or capital stock with Common Stock so long as no Default
or Event of Default shall have occurred and be continuing at the time, or shall
occur as a result of such purchase after giving PRO FORMA effect to such
purchase.
Notwithstanding the foregoing, the above limitation shall not
prevent (a) the purchase, redemption, acquisition or retirement of any shares of
capital stock of the Issuer in exchange for, or out of the net proceeds of the
substantially concurrent sale (other than to a Guarantor) of, other shares of
stock of the Issuer; and (b) purchases of common stock by the Issuer or a trust
pursuant to any employee stock ownership or similar employee benefit plan of the
Issuer that has been approved by the Board of Directors of the Issuer.
SECTION 7.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES. The Issuer will not, and will not cause or
permit any of its Subsidiaries to, directly or indirectly, create or otherwise
cause or permit to exist or become effective any encumbrance or restriction on
the ability of any Subsidiary to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances
or to pay any Indebtedness or other obligation owed to the Issuer or any other
Subsidiary; or (c) transfer any of its properties or assets to the Issuer or any
other Subsidiary .
SECTION 7.06. LIMITATION ON ADDITIONAL INDEBTEDNESS. No
Obligor shall, directly or indirectly, create, incur, issue, assume, guarantee
or in any other manner become liable for, contingently or otherwise, or become
responsible for (including through any merger or consolidation to which such
Obligor is a party or through any other acquisition of any Wholly-Owned
Subsidiary
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or of any Person thereby becoming a Wholly-Owned Subsidiary) the payment of
(collectively, an "incurrence"), any obligations in respect of any Indebtedness
or Guaranty, except (a) Indebtedness evidenced by the Secured Notes and the
Guarantors' Guaranty with respect thereto; (b) the Fleet Facility, PROVIDED,
HOWEVER, that the Maximum Senior Debt Amount (as defined below) shall be reduced
on a dollar for dollar basis as the commitment amount under the Revolving Loan
portion of the Fleet Facility is reduced; (c) Indebtedness evidenced by the
Subordinated Notes and any Guaranty Obligation with respect thereto; (d)
Indebtedness of any Obligor to any other Obligor, PROVIDED, HOWEVER that the
notes evidencing such Indebtedness are pledged to the Agent for the benefit of
the Agent and the Holders; (e) accounts payable to trade creditors which are not
aged beyond the normal business practices and current operating expenses which
are not more than sixty (60) days past due, in each case incurred in the
ordinary course of business and paid within such time period, unless the same is
actively contested in good faith and by appropriate and lawful proceedings and
the Obligors shall have set aside such reserves, if any, with respect thereto as
are required by GAAP and deemed adequate by the Obligors' independent
accountants; (f) Indebtedness that is set forth on Schedule 5.01(t)(i); (g)
Indebtedness under operating leases (i.e., leases that are not considered
Capital Leases); and (h) Purchase Money Indebtedness and total unsecured
Indebtedness incurred in connection with the purchase of fixed assets not to
exceed the sum of $500,000 in the aggregate at any time outstanding; and (i)
Indebtedness other than described in subsections 7.05(a)-(h) not in excess of
$50,000. Notwithstanding the foregoing sentence, the aggregate principal amount
of the obligations incurred in respect of any Indebtedness or Guaranty by all
Obligors which constitute Senior Debt shall not exceed the lesser of (i) the sum
of (A) 65% of Eligible Inventory PLUS (B) $9,000,000, and (ii) $50,000,000 (the
"MAXIMUM SENIOR DEBT AMOUNT"), and the aggregate principal amount of the
obligations incurred in respect of any Indebtedness or Guaranty by all Obligors
which constitute Subordinated Debt shall not exceed $7,500,000 (the "MAXIMUM
SUBORDINATED DEBT AMOUNT"), PROVIDED, HOWEVER, that the Maximum Subordinated
Debt Amount shall be reduced on a dollar for dollar basis by payments made by
Issuer which reduce the principal amount outstanding under the Subordinated
Notes.
SECTION 7.07. LIMITATION ON CREATION OF LIENS. No Obligor
shall, directly or indirectly create, incur, assume or suffer to exist any Lien
in or on any right, title or interest to or in any of its properties or assets,
except for (a) Liens existing as of the date of this Agreement and expressly
identified and described in SCHEDULE 5.01(T)(II) hereto, and any renewals and
extensions thereof that secure Indebtedness not greater in amount than the
lesser of the amount of Indebtedness secured by such Liens on the date hereof or
on the date of such renewal or extension; (b) Liens granted after the date of
this Agreement on any assets or Capital Stock of an Obligor created in favor of
the Holders of the Secured Notes; and (c) Permitted Liens.
SECTION 7.08. CREATION OF SUBSIDIARIES; ADDITIONAL GUARANTORS.
Except as provided in SECTION 7.04, no Obligor shall, directly or indirectly,
form or acquire any Subsidiaries.
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SECTION 7.09. RECEIVABLES. None of the Obligors shall
sell, discount or otherwise dispose of notes, accounts receivable or other
obligations owing to any Obligor except for the purpose of collection in the
ordinary course of business.
SECTION 7.10. Intentionally Omitted.
SECTION 7.11. FISCAL YEAR. The Issuer shall not change,
or permit any of its Subsidiaries to change, its Fiscal Year, or permit any
Subsidiary to have a Fiscal Year different from that of the Issuer.
SECTION 7.12. TAX CONSOLIDATION. The Issuer shall not
file or consent to the filing of any consolidated income tax return with any
Person other than a Subsidiary.
SECTION 7.13. RESTRICTIONS ON SALE AND ISSUANCE OF CAPITAL
STOCK. None of the Guarantors shall issue any Capital Stock (except as otherwise
permitted by the Secured Note Agreement). In addition, neither the Issuer nor
any Subsidiary shall sell or issue, directly or indirectly, any Capital Stock of
any Subsidiary of the Issuer (other than to Holders), unless (a) such sale or
transfer satisfies all of the requirements for a valid Asset Sale under this
Agreement and (b) after giving effect to such sale or transfer, no Obligor
beneficially owns any Capital Stock of such former Guarantor.
SECTION 7.14. LIMITATION ON SECURITY INTEREST RESTRICTIONS. No
Obligor shall, directly or indirectly create, incur, assume or suffer to exist
any Security Interest Restriction on any right, title or interest to or in any
of its properties or assets, except for (a) the Security Interest Restrictions
existing as of the date of this Agreement and expressly identified and described
in SCHEDULE 5.01(O) hereto, and (b) Permitted Liens.
SECTION 7.15. MINIMUM ADJUSTED TANGIBLE NET WORTH. Commencing
with the Closing and at the end of each month thereafter, the Issuer shall not
permit its minimum Adjusted Tangible Net Worth to be less than $10,250,000
during the Fiscal Year ended March 31, 1998, which amount shall be increased by
$250,000 on the last day of such Fiscal Year and on the last day of each Fiscal
Year thereafter.
SECTION 7.16. MINIMUM CASH FLOW. Issuer shall not permit its
Cash Flow to be less than $250,000 for the aggregate of any fiscal quarter and
the preceding three fiscal quarters.
SECTION 7.17. AMENDMENTS TO THE FLEET FACILITY. Issuer shall
not agree to any amendment, modification, waiver, consent, renewal, replacement
or restatement of any of the provisions of the Fleet Facility which, in any way,
(i) increases the principal in excess of the amounts permitted by SECTION 7.06 ,
(ii) changes the financial covenants contained in the Fleet Facility, or (iii)
adversely affects the rights granted to the Holders hereunder, without the prior
written consent of the
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Holders. Issuer shall not amend, restate or otherwise modify any other
provisions of the Fleet Facility except in accordance with the terms and
conditions set forth in the Fleet Facility and unless Holders shall have
received notice pursuant to SECTION 10.04 at least five (5) Business Days prior
to the amendment, restatement or other modification.
SECTION 7.18. INTEREST RATE CONTRACT. Issuer shall not obtain
Interest Rate Contracts having an aggregate notional amount in excess of 50% of
the Issuer's exposure to an interest rate increase under the Fleet Facility.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01. EVENTS OF DEFAULT. An "EVENT OF DEFAULT"
shall exist if any of the following conditions or events shall occur and be
continuing:
(a) any Obligor defaults in the payment of any principal on
any Subordinated Note when the same becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise; or
(b) any Obligor defaults in the payment of any interest on any
Subordinated Note or any other amount due under this Agreement, for more than
five Business Days after the same becomes due and payable; or
(c) any Obligor defaults in the performance of or compliance
with any term contained in ARTICLE VII or in SECTIONS 6.04, 6.05, 6.08, 6.10,
6.14; or
(d) any Obligor defaults in the performance of or compliance
with any term contained in ARTICLE VI (other than those contained in SECTIONS
6.04, 6.05, 6.08, 6.10, 6.14) and such default is not remedied within 10
Business Days after the earlier of (i) a Responsible Officer of such Obligor
obtaining actual knowledge of such default and (ii) such Obligor receiving
written notice of such default from any Holder of a Subordinated Note (any such
written notice to be identified as a "notice of default" and to refer
specifically to this paragraph (c) of SECTION 8.01); or
(e) any Obligor defaults in the performance of or compliance
with any term contained herein (other than those referred to in paragraphs (a),
(b) (c) and (d) of this SECTION 8.01) and such default is not remedied within 30
days after the earlier of (i) a Responsible Officer of such Obligor obtaining
actual knowledge of such default and (ii) such Obligor receiving written notice
of such default from any Holder of a Subordinated Note (any such written notice
to be identified as a "notice of default" and to refer specifically to this
paragraph (d) of SECTION 8.01); or
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(f) any representation or warranty made in writing by or on
behalf of any Obligor or by any officer of any Obligor in any of the Note
Documents or in any writing furnished in connection with the transactions
contemplated hereby proves to have been false or incorrect in any material
respect on the date as of which made; or
(g) (i) any Obligor is in default (as principal or as
guarantor or other surety) in the payment of any principal of or premium or
make-whole amount or interest on any Indebtedness that is outstanding in an
aggregate principal amount of at least $50,000 beyond any period of grace
provided with respect thereto and as a consequence of such default such
Indebtedness has become, or has been declared (or one or more Persons are
entitled to declare such Indebtedness to be), due and payable before its stated
maturity or before its regularly scheduled dates of payment, or (ii) any Obligor
is in default in the performance of or compliance with any term of any evidence
of any Indebtedness in an aggregate outstanding principal amount of at least
$50,000 or of any mortgage, indenture or other agreement relating thereto or any
other condition exists, and as a consequence of such default or condition such
Indebtedness has become, or has been declared (or one or more Persons are
entitled to declare such Indebtedness to be), due and payable before its stated
maturity or before its regularly scheduled dates of payment, or (iii) as a
consequence of the occurrence or continuation of any event or condition (other
than the passage of time or the right of the Holder of Indebtedness to convert
such Indebtedness into equity interests), (x) any Obligor has become obligated
to purchase or repay Indebtedness before its regular maturity or before its
regularly scheduled dates of payment in an aggregate outstanding principal
amount of at least $50,000, or (y) one or more Persons have the right to require
any Obligor so to purchase or repay such Indebtedness; or
(h) there shall occur a cessation of a substantial part of the
business of the Obligors for a period which significantly affects the Obligors'
capacity to continue its business on a profitable basis; or Obligors shall
suffer the loss or revocation of any license or permit now held or hereafter
acquired by Obligors which is necessary to the continued or lawful operation of
their business; or Obligors shall be enjoined, restrained or in any way
prevented by court, governmental or administrative order from conducting all or
any Material part of its business affairs; or any Material lease or agreement
pursuant to which any Obligor leases, uses or occupies shall be canceled or
terminated prior to the expiration of its stated term; and, as to all of the
foregoing, the same shall have a Material Adverse Effect on the Obligors; or
(i) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ shall cease to be employed on a
full-time basis as Issuer's chief executive officer and a suitable replacement
of comparable experience and ability shall not have been employed in his place
within ninety (90) days of his departure.
(j) any Obligor (i) is generally not paying, or admits in
writing its inability to pay, its debts as they become due, (ii) files, or
consents by answer or otherwise to the filing against it of, a petition for
relief or reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other
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similar law of any jurisdiction, (iii) makes a general assignment for the
benefit of its creditors, (iv) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the purpose of
any of the foregoing; or
(k) any Note Document shall, for any reason, not be or shall
cease to be in full force and effect except as provided herein or therein or
shall be declared null and void; or
(l) any Obligor or its Affiliates shall challenge or contest
in any action, suit or proceeding the validity or enforceability of this
Agreement or any of the other Note Documents, the legality or enforceability of
any of the Obligations or the perfection or priority of any Lien granted to the
Agent; or
(m) Intentionally Omitted.
(n) any Obligor shall be criminally indicted or convicted
under any law that could lead to a forfeiture of any property of any Obligor; or
(o) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the applicable
Obligor, a custodian, receiver, trustee or other officer with similar powers
with respect to it or with respect to any substantial part of its property, or
constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of any Obligor, or any such petition
shall be filed against any Obligor and such petition shall not be dismissed
within 60 days; or
(p) a final judgment or judgments for the payment of money
aggregating in excess of $50,000 are rendered against one or more of the
Obligors and which judgments are not, within 60 days after entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged within 60
days after the expiration of such stay; or
(q) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a waiver of
such standards or extension of any amortization period is sought or granted
under section 412 of the Code, (ii) a notice of intent to terminate any Plan
shall have been or is reasonably expected to be filed with the PBGC or the PBGC
shall have instituted proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have notified any
Obligor or any ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) the aggregate "amount of unfunded benefit liabilities"
(within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined
in accordance with Title IV of ERISA, shall exceed $500,000, (iv) any Obligor or
any ERISA Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) any Obligor
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or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) any
Obligor establishes or amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would increase the liability
of such Obligor thereunder; and any such event or events described in clauses
(i) through (vi) above, either individually or together with any other such
event or events, could reasonably be expected to have a Material Adverse Effect.
As used in this SECTION 8.01(J), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in Section 3 of ERISA; or
(r) Intentionally Omitted.
(s) The Purchasers shall have received Series A Preferred
Stock certificates and evidence of the filing of a Certificate of Designation
pertaining thereto with the Office of the Secretary of State of the State of
Delaware by the close of business on Friday, April 17, 1998.
SECTION 8.02. REMEDIES ON EVENT OF DEFAULT, ETC.
(a) ACCELERATION.
(i) If an Event of Default with respect to any
Obligor described in paragraph (j) or (o) of SECTION 8.01 has occurred, all the
Subordinated Notes then outstanding shall automatically become immediately due
and payable.
(ii) If any Event of Default described in
paragraph (a) or (b) of SECTION 8.01 has occurred and is continuing, any Holder
or Holders of Subordinated Notes at the time outstanding affected by such Event
of Default may at any time, at its or their option, by notice or notices to each
Obligor, declare all the Subordinated Notes held by it or them to be immediately
due and payable.
(iii) If any other Event of Default has occurred and
is continuing, the Agent upon written request of the Required Holders may at any
time at its option, by notice or notices to each Obligor, declare all the
Subordinated Notes then outstanding to be immediately due and payable.
Upon any Subordinated Notes becoming due and payable under
this SECTION 8.02, whether automatically or by declaration, such Subordinated
Notes will forthwith mature and the entire Unpaid Principal Amount of such
Subordinated Notes times the applicable Redemption Percentage, plus all accrued
and unpaid interest thereon (to the full extent permitted by applicable law),
shall all be immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are hereby waived.
(b) ELECTION OF A MEMBER OF THE BOARD OF DIRECTORS. Upon
written request of the Holders, if any Default or Event of Default has occurred
the Issuer agrees to cause a designee of the
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Holders to be elected to the Issuer's board of directors. To the extent that the
Default or Event of Default is cured to the satisfaction of the Holders in their
sole and absolute discretion, the Holders' designee shall thereafter resign. The
Issuer's obligation to elect the Holders' designee during the period a Default
or Event of Default has occurred and is continuing is intended to be an ongoing
obligation of the Issuer and shall apply to any subsequent Default or Event of
Default. The Holders shall be entitled to have a designee attend and observe all
meetings of the board of directors during all other periods.
(c) OTHER REMEDIES. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Subordinated Notes
have become or have been declared immediately due and payable under SECTION
8.02(A), the Agent, pursuant to directions of the Required Holders, may proceed
to protect and enforce the rights of such Holder by an action at law, suit in
equity or other appropriate proceeding, whether for the specific performance of
any agreement contained herein or in any Subordinated Note, or for an injunction
against a violation of any of the terms hereof or thereof, or in aid of the
exercise of any power granted hereby or thereby or by law or otherwise.
(d) RESCISSION. At any time after any Subordinated Notes have
been declared due and payable pursuant to clause (a)(i) or (a)(ii) of SECTION
8.02, the Agent upon written request of the Required Holders, by written notice
to each Obligor, may rescind and annul any such declaration and its consequences
if (a) each Obligor has paid all overdue interest on the Subordinated Notes, all
principal of any Subordinated Notes that are due and payable and are unpaid
other than by reason of such declaration, all interest on such overdue principal
and (to the extent permitted by applicable law) any overdue interest in respect
of the Subordinated Notes, at the Default Rate, (b) all Events of Default and
Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
SECTION 10.03, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Subordinated Notes. No rescission and
annulment under this SECTION 8.02(C) will extend to or affect any subsequent
Event of Default or Default or impair any right consequent thereon.
(e) NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No
course of dealing and no delay on the part of any Holder of any Subordinated
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such Holder's rights, powers or remedies. No right, power
or remedy conferred by this Agreement or by any Subordinated Note upon any
Holder thereof shall be exclusive of any other right, power or remedy referred
to herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of each Obligor under SECTION
9.01, each Obligor will pay to the Holder of each Subordinated Note on demand
such further amount as shall be sufficient to cover all costs and expenses of
such Holder incurred in any enforcement or collection under this SECTION 8.02,
including, without limitation, reasonable attorneys' fees, expenses and
disbursements.
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ARTICLE IX
THE AGENT
SECTION 9.01. APPOINTMENT.
(a) Each Purchaser hereby designates and appoints ▇▇▇▇▇▇▇ as
the Agent of such Purchaser under this Agreement, and each Purchaser hereby
irrevocably authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and the Note Documents and to exercise such powers
as are set forth herein or therein together with such other powers as are
reasonably incidental thereto. The Agent agrees to act as such on the express
conditions contained in this ARTICLE IX.
(b) The provisions of this ARTICLE IX are solely for the
benefit of the Agent and the Holders and neither the Issuer nor any Subsidiary
of the Issuer shall have any rights to rely on or enforce any of the provisions
hereof (other than as expressly set forth in SECTION 9.06). In performing its
functions and duties under this Agreement, the Agent shall act solely as agent
of the Holders and does not assume and shall not be deemed to have assumed any
obligation or relationship of agency, trustee or fiduciary with or for the
Issuer or any Affiliate of the Issuer. The Agent may perform any of its duties
hereunder, or under the other Note Documents, by or through its agents or
employees.
SECTION 9.02. NATURE OF DUTIES. The Agent shall not have any
duties or responsibilities except those expressly set forth in this Agreement or
in the Note Documents. The duties of the Agent shall be mechanical and
administrative in nature. The Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Holder. Nothing in this Agreement or
any of the Note Documents, expressed or implied, is intended to or shall be
construed to impose upon the Agent any obligations in respect of this Agreement
or any of the other Note Documents except as expressly set forth herein or
therein. Each Holder shall make its own independent investigation of the
financial condition and affairs of the Issuer and Affiliates in connection with
the purchase of the Subordinated Notes hereunder and shall make its own
appraisal of the creditworthiness of the Issuer and Guarantors initially and on
a continuing basis, and the Agent shall not have any duty or responsibility,
either initially or on a continuing basis, to provide any Holder with any credit
or other information with respect thereto (except for reports required to be
delivered by the Agent under the terms of this Agreement). If the Agent seeks
the consent or approval of the Holders to the taking or refraining from taking
of any action hereunder, the Agent shall send notice thereof to each Holder. The
Agent shall promptly notify each Holder at any time that the Holder so required
hereunder has instructed the Agent to act or refrain from acting pursuant
hereto. As to any matters not expressly provided for by this Agreement
(including, without limitation, enforcement or collection of the Subordinated
Notes or any amount payable when due) or the other Note Documents, the Agent
shall not be required to exercise any discretion or take any action.
Notwithstanding the foregoing, the Agent shall be required to act or refrain
from acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Required Holders (unless the instructions
or consent of a greater percentage of Holders are required hereunder or
thereunder) and
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such instructions shall be binding upon all Holders of Subordinated Notes;
PROVIDED, HOWEVER, the Agent shall not be required to take any action which (i)
the Agent reasonably believes will expose it to personal liability unless the
Agent receives an indemnification satisfactory to it from the Holders with
respect to such action or (ii) is contrary to this Agreement, the other Note
Documents or applicable law. All payments, reports and notices to be made or
delivered by the Issuer shall be paid or delivered to the Holders and the Agent.
SECTION 9.03. RIGHTS, EXCULPATION, ETC.
(a) LIABILITIES; RESPONSIBILITIES. None of the Agent, any
Affiliate of the Agent, or any of their respective officers, directors,
employees or agents shall be liable to any Holder for any action taken or
omitted by them hereunder or under any of the Note Documents, or in connection
therewith, except that no Person shall be relieved of any liability imposed by
law for gross negligence or willful misconduct. The Agent shall not be liable
for any apportionment or distribution of payments made by it in good faith, if
any, and if any such apportionment or distribution is subse quently determined
to have been made in error the sole recourse of any Holder to whom payment was
due, but not made, shall be to recover from other Holders any payment in excess
of the amount to which they are determined to have been entitled. The Agent
shall not be responsible to any Holder for any recitals, statements,
representations or warranties herein or for the execution, effectiveness,
genuineness, validity, legality, enforceability, collectibility, or sufficiency
of this Agreement or any of the other Note Documents or the transactions
contemplated thereby, or for the financial condition of the Issuer or any of its
Affiliates or the Guarantors. The Agent shall not be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any of the other Note Documents or
the financial condition of the Issuer or any of its Affiliates or the
Guarantors, or the existence or possible existence of any potential Event of
Default or Event of Default.
(b) RIGHT TO REQUEST INSTRUCTIONS. The Agent may at any time
request instructions from the Holders with respect to any actions or approvals
which by the terms of any of the Note Documents the Agent is permitted or
required to take or to grant, and the Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Note Documents until it shall have
received such instructions from those Holders from whom the Agent is required to
obtain such instructions for the pertinent matter in accordance with the Note
Documents. Without limiting the generality of the foregoing, no Holder shall
have any right of action whatsoever against the Agent as a result of the Agent
acting or refraining from acting under the Note Documents in accordance with the
instructions of the Required Holders or, where required by the express terms of
this Agreement, a greater proportion of the Holders.
SECTION 9.04. RELIANCE. The Agent shall be entitled to
rely upon any written notices, statements, certificates, orders or other
documents or any telephone message believed by it in good faith to be genuine
and correct and to have been signed, sent or made by the proper Person, and with
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respect to all matters pertaining to this Agreement or any of the Note Documents
and its duties hereunder or thereunder, upon advice of legal counsel (including
counsel for the Issuer), independent public accountants and other experts
selected by it.
SECTION 9.05. INDEMNIFICATION. To the extent that the Agent is
required to be reimbursed and indemnified by the Issuer but is not reimbursed
and indemnified by the Issuer, the Holders will reimburse and indemnify the
Agent for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against it in any way relating to or arising out of the Note Documents or any
action taken or omitted by the Agent under the Note Documents, in proportion to
each Holders pro rata share of the Subordinated Notes; provided that Issuer
shall have no obligation to indemnify the Agent for any and all liabilities
described in this Section 9.05 which result from the gross negligence or willful
misconduct of the Agent. The obligations of the Holders under this SECTION 9.05
shall survive the payment in full of the Obligations and all other Obligations
and the termination of this Agreement.
SECTION 9.06. SUCCESSOR AGENTS.
(a) RESIGNATION. The Agent may resign from the performance of
all its functions and duties hereunder at any time by giving at least thirty
(30) Business Days' prior written notice to the Issuer and the Holders. Such
resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to this SECTION 9.06.
(b) APPOINTMENT BY REQUIRED HOLDERS. Upon any such notice of
resignation, the Required Holders shall have the right to appoint a successor
Agent selected from among the Holders which appointment shall be subject to the
prior written approval of the Issuer (which may not be unreasonably withheld,
and shall not be required upon the occurrence and during the continuance of an
Event of Default).
(c) APPOINTMENT BY RETIRING AGENT. If a successor Agent shall
not have been appointed within the thirty (30) Business Day period provided in
CLAUSE (A) of this SECTION 9.06, the retiring Agent, with the consent of the
Issuer (which may not be unreasonably withheld, and shall not be required upon
the occurrence and during the continuance of an Event of Default), shall then
appoint a successor Agent who shall serve as Agent until such time, if any, as
the Required Holders appoint a successor Agent as provided above.
(d) RIGHTS OF THE SUCCESSOR AND RETIRING AGENTS. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under this Agreement.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this ARTICLE IX shall inure to its
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benefit as to any actions taken or omitted to be taken by it while it was the
Agent under this Agreement.
SECTION 9.07. RELATIONS AMONG HOLDERS. Each Purchaser agrees
that it will not take any legal action, nor institute any actions or
proceedings, against the Issuer or any other Obligor hereunder, without the
prior written consent of the Required Holders. Without limiting the generality
of the foregoing, no Holder may accelerate or otherwise enforce its portion of
the Obligations, except in accordance with SECTION 8.02.
SECTION 9.08. CONCERNING THE NOTE DOCUMENTS.
(a) AUTHORITY. Each Purchaser authorizes and directs the Agent
to enter into the the Subordination Agreement (and other documents required to
be executed pursuant thereto) and any other Note Documents for the benefit of
the Holders. Each Purchaser agrees that any action taken by the Agent or the
Required Holders (or, where required by the express terms of this Agreement, a
greater proportion of the Holders) in accordance with the provisions of this
Agreement or the other Note Documents, and the exercise by the Agent or the
Required Holders (or, where so required, such greater proportion) of the powers
set forth herein or therein, together with such other powers as are reasonably
incidental thereto, shall be authorized and binding upon all of the Holders.
(b) Intentionally Omitted.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. EXPENSES, ETC. Whether or not the transactions
contemplated hereby are consummated, each Obligor agrees, jointly and severally
to pay all costs and expenses (including reasonable attorneys' fees of a special
counsel and, if reasonably required, local or other counsel) incurred by the
Holders of a Subordinated Note in connection with such transactions and in
connection with any amendments, waivers or consents under or in respect of this
Agreement or the Note Documents (whether or not such amendment, waiver or
consent becomes effective), including, without limitation: (a) the costs and
expenses incurred in enforcing or defending (or determining whether or how to
enforce or defend), including any expenses incurred in any appeals, any rights
under this Agreement or the Note Documents or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement or the Note Documents, or by reason of being a Holder of any
Subordinated Note, and (b) the costs and expenses, including financial advisors'
fees, incurred in connection with the insolvency or bankruptcy of any Obligor or
in connection with any work-out or restructuring of the transactions
contemplated hereby and by the Note Documents. Each Obligor will pay, and will
save each Holder harmless from, all claims in respect of any fees, costs or
expenses if any, of brokers and finders (other than those retained by such
Holder). The obligations of each Obligor under this SECTION 10.01 will survive
the payment or
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transfer of any Subordinated Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Note Documents, and the termination of this
Agreement and the Note Documents.
SECTION 10.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
ENTIRE AGREEMENT. All representations and warranties contained herein shall
survive the execution and delivery of this Agreement and the Note Documents, the
purchase or transfer by any Holder of any Subordinated Note or portion thereof
or interest therein and the payment of any Subordinated Note, and may be relied
upon by any subsequent Holder of a Subordinated Note, regardless of any
investigation made at any time by or on behalf of any Holder. All statements
contained in any certificate or other instrument delivered by or on behalf of
each Obligor pursuant to this Agreement shall be deemed representations and
warranties of each Obligor under this Agreement. Subject to the preceding
sentence, this Agreement and the Note Documents embody the entire agreement and
understanding between each Holder and each Obligor and supersede all prior
agreements and understandings relating to the subject matter hereof.
SECTION 10.03. AMENDMENT AND WAIVER.
(a) REQUIREMENTS.
(i) This Agreement, the Subordinated Notes and
the other Note Documents may be amended, and the observance of any term hereof
or thereof may be waived (either retroactively or prospectively), with (and only
with) the written consent of each Obligor and the Required Holders, except that
no amendment or waiver of any of the provisions of SECTIONS 2.01, 4.01, 4.02 OR
10.07 hereof, or any defined term relating to such sections (as it is used
therein), will be effective as to any Holder unless consented to by such Holder
in writing, and no such amendment or waiver may, without the written consent of
all Holders affected thereby, subject to the provisions of SECTION 8.02 relating
to acceleration or rescission, change the amount or time of any prepayment or
payment of principal of, or reduce the rate or change the time of payment or
method of computation of interest on, the Subordinated Notes, change the
percentage of the principal amount of the Subordinated Notes the Holders of
which are required to consent to any such amendment or waiver, or amend any of
SECTIONS 8.01(A), 8.01(B), 8.02, 10.03 OR 10.06.
(ii) Any amendment, modification, termination,
waiver or consent with respect to any of the following provisions of this
Agreement shall be effective only by a written agreement, signed by each Holder:
(A) release of any Guarantor of the
Obligations,
(B) waiver of any Event of Default described
in SECTION 8.01.
(b) AGENT AUTHORITY. The Agent may, but shall have no
obligation to, with the written concurrence of any Holder, execute amendments,
modifications, waivers or consents on
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behalf of that Holder. Notwithstanding anything to the contrary contained in
this SECTION 10.03, no amendment, modification, waiver or consent shall affect
the rights or duties of the Agent under this Agreement or the other Note
Documents, unless made in writing and signed by the Agent in addition to the
Holders required above to take such action.
(c) DELIVERY OF AMENDMENTS, WAIVERS, ETC. Each Obligor will
deliver executed or true and correct copies of each amendment, waiver or consent
effected pursuant to the provisions of this SECTION 10.03 to each Holder of
outstanding Subordinated Notes promptly following the date on which it is
executed and delivered by, or receives the consent or approval of, the requisite
Holders of Subordinated Notes.
(d) PAYMENT. Each Obligor will not directly or indirectly pay
or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any Holder of
Subordinated Notes as consideration for or as an inducement to the entering into
by any Holder of Subordinated Notes of any waiver or amendment of any of the
terms and provisions hereof unless such remuneration is concurrently paid, or
security is concurrently granted, on the same terms, ratably to each Holder of
Subordinated Notes then outstanding even if such Holder did not consent to such
waiver or amendment.
(e) BINDING EFFECT, ETC. Any amendment or waiver consented to
as provided in this SECTION 10.03 applies equally to all Holders of Subordinated
Notes and is binding upon them and upon each future Holder of any Subordinated
Note and upon each Obligor without regard to whether such Subordinated Note has
been marked to indicate such amendment or waiver. No such amendment or waiver
will extend to or affect any obligation, covenant, agreement, Default or Event
of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between each Obligor and the Holder of any
Subordinated Note nor any delay in exercising any rights hereunder or under any
Subordinated Note shall operate as a waiver of any rights of any Holder of such
Subordinated Note.
(f) SUBORDINATED NOTES HELD BY EACH OBLIGOR, ETC. Solely for
the purpose of determining whether the Holders of the requisite percentage of
the aggregate principal amount of Subordinated Notes then outstanding approved
or consented to any amendment, waiver or consent to be given under this
Agreement or the Subordinated Notes, or have directed the taking of any action
provided herein or in the Subordinated Notes to be taken upon the direction of
the Holders of a specified percentage of the aggregate principal amount of
Subordinated Notes then outstanding, Subordinated Notes directly or indirectly
owned by each Obligor or any of its Affiliates shall be deemed not to be
outstanding.
SECTION 10.04. NOTICES. All notices and communications
provided for hereunder shall be in writing and sent by telecopy if the sender on
the same day sends a confirming copy of such notice by a recognized overnight
delivery service (charges prepaid), or by registered or certified mail with
return receipt requested (postage prepaid), or by a recognized overnight
delivery service (with
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charges prepaid). Any such notice must be sent to the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this SECTION 10.04):
(a) if to any Obligor, to the care of:
National Record Mart, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Agent, to the care of:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Sidley & Austin
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to any other Holder, to its address shown on the
Subordinated Note register to be maintained by the Issuer, on behalf of the
Issuer, pursuant to SECTION 2.02.
Notices under this SECTION 10.04 will be deemed given only when actually
received.
SECTION 10.05. REPRODUCTION OF DOCUMENTS. This Agreement
and all documents relating thereto, including, without limitation, (a) consents,
waivers and modifications that may
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hereafter be executed, (b) documents received by the Purchasers at the Closing
(except the Subordinated Notes themselves), and (c) financial statements,
certificates and other information previously or hereafter furnished to any
Holder, may be reproduced by the Holders by any photographic, photostatic,
microfilm, microcard, miniature photographic or other similar process and each
Holder may destroy any original document so reproduced. Each Obligor agrees and
stipulates that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by any Holder in the
regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
SECTION 10.05 shall not prohibit each Obligor or any other Holder of
Subordinated Notes from contesting any such reproduction to the same extent that
it could contest the original, or from introducing evidence to demonstrate the
inaccuracy of any such reproduction.
SECTION 10.06. CONFIDENTIAL INFORMATION. For the purposes of
this SECTION 10.06, "CONFIDENTIAL INFORMATION" means information delivered to
any Holder by or on behalf of each Obligor in connection with the transactions
contemplated by or otherwise pursuant to this Agreement that is proprietary in
nature and that was clearly marked or labeled or otherwise adequately identified
when received by such Holder as being confidential information of each Obligor,
PROVIDED that such term does not include information that (a) was publicly known
to any Holder prior to the time of such disclosure, (b) subsequently becomes
publicly known through no act or omission by any Holder or any Person acting on
behalf of any Holder, (c) otherwise becomes known to any Holder other than
through disclosure by each Obligor or its representatives or (d) constitutes
financial statements delivered to any Holder under SECTION 6.01 that are
otherwise publicly available. Each Holder will maintain the confidentiality of
such Confidential Information in accordance with procedures adopted by such
Holder in good faith to protect confidential information of third parties
delivered to such Holder, PROVIDED that each Holder may deliver or disclose
Confidential Information to its (i) directors, officers, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by its Subordinated Notes),
(ii) financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with the
terms of this SECTION 10.06, (iii) any other Holder of any Subordinated Note,
(iv) any Person to which such Holder sells or offers to sell such Subordinated
Note or any part thereof or any participation therein (if such Person has agreed
in writing prior to its receipt of such Confidential Information to be bound by
the provisions of this SECTION 10.06), (v) any Person from which such Holder
offers to purchase any security of each Obligor (if such Person has agreed in
writing prior to its receipt of such Confidential Information to be bound by the
provisions of this SECTION 10.06), (vi) any federal or state regulatory
authority having jurisdiction over such Holder, (vii) any nationally recognized
rating agency that requires access to information about such Holder's investment
portfolio or (viii) any other Person to which such delivery or disclosure may be
necessary or appropriate (w) to effect compliance with any Requirement of Law
applicable to such Holder, (x) in response to any subpoena or other legal
process, (y) in connection with any litigation to which such Holder is a party
or (z) if an Event of Default has occurred and is continuing, to the extent such
Holder may reasonably determine such delivery and disclosure to be
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necessary or appropriate in the enforcement or for the protection of the rights
and remedies under such Holder's Subordinated Notes and this Agreement. Each
Holder of a Subordinated Note, by its acceptance of a Subordinated Note, will be
deemed to have agreed to be bound by and to be entitled to the benefits of this
SECTION 10.06 as though it were a party to this Agreement. On reasonable request
by each Obligor in connection with the delivery to any Holder of a Subordinated
Note of information required to be delivered to such Holder under this Agreement
or requested by such Holder (other than a Holder that is a party to this
Agreement or its nominee), such Holder will enter into an agreement with each
Obligor embodying the provisions of this SECTION 10.06.
SECTION 10.07. TRANSFERS OF SUBORDINATED NOTES. Subject to the
requirements of SECTION 2.02(A), the Purchasers and any subsequent Holder shall
have the right to transfer the Subordinated Notes held by any such Person to any
other Person, by written notice to each Obligor, which notice shall be signed by
both the Purchasers and such transferee, shall contain such transferee's
agreement to be bound by this Agreement and the Subordinated Notes shall contain
a confirmation by such transferee of the accuracy with respect to it of the
representations set forth in SECTION 5.02. As a condition to any transfer of a
Subordinated Note, the Issuer may require appropriate documentation to evidence
compliance with applicable securities laws, including an opinion of counsel with
respect thereto. Upon receipt of such notice, wherever the word "Purchaser" or
"Holder" is used in this Agreement (other than in this SECTION 10.07), such word
shall be deemed to refer to such transferee in lieu of the Purchaser or such
Holder, as the case may be. No transfer of any Subordinated Note shall relieve
the transferring Holder of its obligations under SECTION 10.06.
SECTION 10.08. AGENT'S CONSENT. Whenever the Agent's consent
is required to be obtained under this Agreement or any of the other Note
Documents as a condition to any action, inaction, condition or event, Agent
shall be authorized to give or withhold such consent in its sole and absolute
discretion and to condition its consent upon the payment of money or any other
matter.
SECTION 10.09. INTERPRETATION. No provision of this Agreement
or any of the other Note Documents shall be construed against or interpreted to
the disadvantage of any party hereto by any court or other governmental or
judicial authority by reason of such party having or being deemed to have
structured, drafted or dictated such provision.
SECTION 10.10. SUCCESSORS AND ASSIGNS. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent Holder of a Note) whether so
expressed or not.
SECTION 10.11. SEVERABILITY. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such
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prohibition or unenforceability in any jurisdiction shall (to the full extent
permitted by law) not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 10.12. CONSTRUCTION. Each covenant contained herein
shall be construed (absent express provision to the contrary) as being
independent of each other covenant contained herein, so that compliance with any
one covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant. Where any provision herein refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
SECTION 10.13. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.
SECTION 10.14. GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW
PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF A JURISDICTION OTHER THAN SUCH STATE. AS PART OF THE CONSIDERATION FOR
NEW VALUE THIS DAY RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR
PRINCIPAL PLACE OF BUSINESS OF THE OBLIGORS OR THE HOLDERS, OBLIGORS HEREBY
CONSENT AND AGREE THAT THE SUPREME COURT OF NEW YORK COUNTY, NEW YORK OR, AT
AGENT'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK SHALL HAVE THE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS
OR DISPUTES BETWEEN OBLIGORS AND AGENT PERTAINING TO THIS AGREEMENT OR ANY
MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. OBLIGORS EXPRESSLY SUBMIT
AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN
ANY SUCH COURT, AND OBLIGORS HEREBY WAIVE ANY OBJECTION WHICH ISSUER MAY HAVE
BASED ON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
AND HEREBY CONSENT TO THE GRANTING FOR SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT. OBLIGORS HEREBY WAIVE PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE
THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE OBLIGORS AT THE ADDRESS SET FORTH
IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETE UPON THE
EARLIER OF THE OBLIGOR'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT
IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO AFFECT THE RIGHT OF THE
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AGENT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO
PRECLUDE THE ENFORCEMENT BY THE AGENT OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME IN
ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
SECTION 10.15. WAIVER OF RIGHT TO TRIAL BY JURY. OBLIGORS AND
HOLDERS WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION (a) ARISING UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT
REFERRED TO HEREIN OR DELIVERED IN CONNECTION HEREWITH, OR (b) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE OBLIGORS AND THE
HOLDERS WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT
REFERRED TO HEREIN OR DELIVERED IN CONNECTION HEREWITH IN EACH CASE WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE, OBLIGORS AND HOLDERS AGREE AND
CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE OBLIGORS AND HOLDERS TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY. OBLIGORS AND HOLDERS ACKNOWLEDGE THAT THEY HAVE HAD THE OPPORTUNITY TO
CONSULT WITH COUNSEL REGARDING THIS SECTION THAT THEY FULLY UNDERSTAND ITS
TERMS, CONTENT AND EFFECT, AND THAT THEY VOLUNTARILY AND KNOWINGLY AGREE TO THE
TERMS OF THIS SECTION.
SECTION 10.16. INDEMNIFICATION. The Issuer hereby indemnifies
and agrees to defend and hold harmless each Holder and its directors, officers,
agents, employees and counsel from and against any and all losses, claims,
damages, liabilities, deficiencies, judgments or expenses incurred by any of
them (except to the extent that it is finally judicially determined to have
resulted from its own gross negligence or willful misconduct) arising out of or
by reason of (a) any actual or proposed use by any Issuer or any other Person of
the proceeds of the Subordinated Notes, (b) any litigation, investigations,
claims or proceedings which arise out of or are in any way related to the Note
Documents or the transactions contemplated hereby, including, without
limitation, amounts paid in settlement, court costs and the fees and
disbursements of counsel incurred in connection with any such litigation,
investigation, claim or proceeding or any advice rendered in connection with any
of the foregoing and (c) any remedial or other action taken by an Obligor or any
of the Holders in connection with compliance by any Obligor, or any of its
properties, with any federal, state or local environmental laws, acts, rules,
regulations, orders, directions, ordinances, criteria or guidelines. Without
limiting any provision of this Agreement, it is the express intention of the
parties hereto that each Person indemnified hereunder shall be indemnified and
held harmless against any and all losses, liabilities, claims or damages arising
out of or resulting from the sole or concurrent negligence of such Person.
Without prejudice to the survival of any other Obligations of the Obligors
hereunder and
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under the other Note Documents, the Obligations of each Obligor under this
SECTION 10.16 will survive the payment or transfer of any Subordinated Note, the
enforcement, amendment or waiver of any provision of this Agreement or the
Subordinated Notes, and the termination of this Agreement.
SECTION 10.17. MAXIMUM RATE. Notwithstanding anything to the
contrary contained elsewhere in this Agreement or in any other Note Document,
the Obligors and the Holders hereby agree that all agreements among them under
this Agreement and the other Note Documents, whether now existing or hereafter
arising and whether written or oral, are expressly limited so that in no
contingency or event whatsoever shall the amount paid, or agreed to be paid, to
any Holder for the use, forbearance, or detention of the money loaned to the
Issuer and evidenced hereby or thereby or for the performance or payment of any
covenant or obligation contained herein or therein, exceed the Highest Lawful
Rate. If due to any circumstance whatsoever, fulfillment of any provisions of
this Agreement or any of the other Note Documents at the time performance of
such provision shall be due shall exceed the Highest Lawful Rate, then,
automatically, the obligation to be fulfilled shall be modified or reduced to
the extent necessary to limit such interest to the Highest Lawful Rate, and if
from any such circumstance any Holder should ever receive anything of value
deemed interest by applicable law which would exceed the Highest Lawful Rate,
such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to the Issuer. All
sums paid or agreed to be paid to any Holder for the use, forbearance, or
detention of the Obligations and other Indebtedness of the Issuer to the
Holders, to the extent permitted by applicable law, shall be amortized,
prorated, allocated and spread throughout the full term of such Indebtedness,
until payment in full thereof, so that the actual rate of interest on account of
all such Indebtedness does not exceed the Highest Lawful Rate throughout the
entire term of such Indebtedness. The terms and provisions of this SECTION 10.17
shall control every other provision of this Agreement and all agreements among
the Obligors and the Holders.
* * *
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